Zedge, Inc.

Good morning, everyone. Please remain on the line. Your conference will begin at approximately two minutes after the hour. Please remain on the line. Your conference will begin at approximately two minutes after the hour. Thank you. © transcript Emily Beynon Thank you. Thank you. Good day and welcome to ZEDGE's earning conference call for the second fiscal quarter 2024 results. During management's prepared remarks, all participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation by ZEDGE's management, there will be an opportunity to ask questions. To ask a question, please press star then one on your touchtone phone. To withdraw your question, please press star two. I will now turn the call over to your host, Brian Siegel. The floor is yours.

Thank you, operator. In today's presentation, Jonathan Reich, ZEDRA's Chief Executive Officer at ESI, ZEDRA's Chief Financial Officer, will discuss ZEDRA's financial and operating results that were reported today, any forward-looking statements made during this conference call, during the prepared remarks, or in the question-and-answer session, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results in the future to differ materially from those discussed on today's call. These risks and uncertainties include but are not limited to specific risks and uncertainties disclosed in the reports that ZEDGE periodically files with the SEC. ZEDGE assumes no obligation to update any forward-looking statements or to update the factors that may cause actual results to differ materially from those that they forecast. Please note that our earnings release is available on the investor relations page on this website. The earnings release has also been filed on form 8K with the SEC. I would like to turn the call over to Jonathan.

Good morning. Thank you, Brian, and thank you all for joining us today. I will begin by briefly reviewing our second quarter results, demonstrating how our fiscal year 2023 investments have positioned us for sustainable long-term growth. Q2 revenue increased 11% from last year as we continued managing the geopolitical, macroeconomic, and industry-specific challenges spanning the landscape. One of the big stories this past quarter was continued momentum at the Zedge marketplace. Ad revenue was up 18% from last year. Zedge Plus, our marketplace subscription offering, delivered exciting results with revenue increasing 24% from last year with small net subscriber gains sequentially and less than 1% net subscriber loss year over year. And Zedge premium revenue driven by several improvements to content, monetization, and other back and front to end items was up 21%. These factors fueled a 37% increase in the average revenue per monthly active user or ARPMAU, to a record 7.2 cents. And this strength was not just on Android, as iOS revenue for the Zedge marketplace was up an impressive 46% sequentially. I should add that many of these trends are holding up at the halfway point of our fiscal third quarter. At the beginning of this fiscal year, we said building a full-stack marketing team would be our key corporate-wide initiative, similar to what we accomplished with data and analytics in fiscal 2023. We're well on our way here, and our efforts are starting to bear fruit, especially for the Zedge marketplace. Another important story this quarter relates to maturing our product development organization to drive innovation, accelerate product diversification, and consolidate resources to ensure long-term success. To that end, we have assembled an all-star team of seasoned gaming experts who are alumni of the leading mobile gaming publishers and have turned them loose on Guru Shots. Their mandate is to unleash the growth that was core to our investment thesis at the time of the acquisition. This team is already sprinting, having overhauled the product roadmap with four major focus areas. The first is feature development, which hasn't been given the attention it deserves since the acquisition. In the past, successful new features would yield a 10 to 30% jump in revenues with little or no downside when they didn't take hold. The updated product roadmap is full of new features designed to drive revenue and make GuruShots more accessible to an even broader audience. Next, our decision to focus on innovation will allow us to drive user growth by investing our marketing dollars more efficiently. Specifically, we will better couple Guru Shatz's UA spend with feature releases. In January, we introduced Turbo, a feature that expands the gameplay and improves game resource consumption. To date, it has yielded a 15% increase in average daily revenue, giving me confidence that we are on the right track. Additionally, we are about to release another new feature, Flash Challenges, a short-duration photo challenge that limits the number of participants per challenge and provides even more opportunities for users to win. We believe that this dynamic will drive up engagement and make GuruShots more accessible to a broader set of players, both existing and new. In parallel, the team is reinventing the game economy by converting to a coin-based economy supporting multiple currencies and foregoing the existing economy, which we believe is too rigid and limited in terms of the number of ways players can earn and spend in-game resources. This change will open an array of customer value adds. For example, we will be able to reward all players with game currency and manage resource consumption in a fashion that optimizes further coin purchases. Creating a comprehensive and inviting onboarding funnel is also a key focus area for the Guru Shots game. In short, onboarding will enable newbies to immediately experience gameplay in a simplified manner with a limited number of competitors, increasing the chances of winning. The funnel will allow players to progress with more features and increased complexity based on individual performance, enabling skill-based user segmentation, which will be a win for the user base. I want to add that we believe these efforts, taken in concert with one another, will help us deliver growth, which was one of the key theses of the acquisition. Guru Shots is the leading photo competition game, and more than 150 million photos have been used to play the game. Photography continues growing exponentially due to the ubiquity of mobile phones, and with the advent of AI enhancement, high-quality pictures are within everyone's reach. The gameplay is fun, and it touches on the human inner psyche where people like to have fun, compete, and win. With all the opportunities we have in the pipeline, I think we are at a turning point, and I look forward to sharing details as they unfold. Moving to the Zedge marketplace, our success in growing advertising revenue in recent quarters stems from our continuous optimization efforts combined with highly effective paid UA programs driving positive ROAS in 90 days or less. Additionally, over the past two quarters, we began improving our iOS monetization stack by optimizing ads and rolling out Zedge Plus for iOS, which, along with Paint, contributed to strong iOS revenue growth. Overall, the iOS ecosystem remains a largely untapped opportunity for us and we continuously look at ways, most recently AI, to unlock it and capitalize on our brand to drive growth. Emojipedia had another good quarter. Our previous investments in website redesign, localization, and technology upgrades continue to pay off and lay the foundation for the next phase of growth, with new features and content expected to be rolled out in the quarters to come. Taken together, we continue to believe that we have never been in a better position to create sustainable long-term profitable growth given the combination of market opportunity, our current product portfolio and roadmap, our marketing prowess, data capabilities, tech stack, and most importantly, our team. Furthermore, we are not just talking about AI. We have already integrated it throughout our business, including product, technology, and marketing. Now, I would like to turn the call over to E, who will review our financial results. E?