Zedge, Inc.

Good day and welcome to ZEDGE's earnings conference call for the fourth quarter and end of year fiscal 2025 results. During management's prepared remarks, all participants will be in 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 2. I will now turn the call over to Brian Siegel.

Thank you, Operator. During today's call, Jonathan Wright, ZEDGE's Chief Executive Officer, and Isai, ZEDGE's Chief Financial Officer, will discuss ZEDGE's financial and operational results that were reported today. Any forward-looking statements made during this conference call during the prepared marks 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 calls. These risks and uncertainties include, but are not limited to, specific risks and uncertainties disclosed in ZEDGE's periodic SEC filings. 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 of the Zedge website, and it has also been filed on Form 8K of the SEC. Finally, on this call, we will use non-GAAP measures. Examples include non-GAAP EPS, non-GAAP net income, and adjusted EBITDA. Please see our earnings release for an explanation of our use of these non-GAAP measures. Now I would like to turn the call over to Jonathan.

Thank you, Brian, and good afternoon, everyone. Fiscal 2025... was a year of transition in which we reshaped Zedge to be more efficient, financially disciplined, and positioned it for scalable and sustainable innovation. During the year, we completed a major restructuring aimed at positioning Zedge for sustainable, profitable growth. This included closing operations in Norway and a targeted rightsizing of guru shots. These actions When combined with the completion of the Guru Shat's retention program that was implemented at the time of the acquisition in 2022, are expected to reduce our gross annualized expenses by about $4 million. We also incurred approximately $1.5 million in cash restructuring costs and $1 million in non-cash charges, which E will discuss in more detail shortly. Fortunately, As we enter fiscal year 26, the vast majority of these charges and cash expenditures are behind us, providing greater operating flexibility. This leaner cost base enables us to reinvest selectively in initiatives that offer the highest return potential, focusing on accelerating growth, improving margins, and enhancing free cash flow generation. Operationally, business performance was mixed in Q4. Our Zedge Marketplace, which includes Zedge Premium, subscriptions, and advertising performed well, while Guru Shots appears to be plateauing. Separately, subscription revenue increased 21% year over year, and we ended the year at record levels with nearly 1 million active subscribers, an increase of 47% compared with Q4 of fiscal 24. We also saw continued growth in Zedge Premium's GTV. Fourth quarter, Zedge Marketplace ad revenue grew year over year, but total ad revenue for the company was softer than expected due to a decline at Emojipedia from the competitive impact of AI search. Going into Q1, Google introduced a change to its search engine results page, whereby users can now directly copy and paste emojis from the search page. Although Emojipedia still ranks first or second across search, Google's change is diverting traffic away from the site. We are actively testing strategies to mitigate this outcome and strengthen Emojipedia's performance. We also made advances with Dataseeds.ai, our platform for providing rights-cleared, ethically-sourced datasets for AI training. Since launching earlier this year, Dataseeds has secured contracts from several leading AI customers underscoring the value and credibility of our approach. What makes DataSeeds uniquely positioned for success is our community of skilled photographers and graphic artists. Collectively, this group has produced a large and diverse image library of close to 30 million assets, which can be licensed for AI training. We can also leverage our creator community to generate customized on-demand datasets tailored to specific customer requirements. By launching themed GuruShots competitions aligned with client objectives, we can rapidly produce a critical mass of high-quality, rights-clear data that directly supports each customer's unique AI training needs. In parallel, we have started building the DataSeeds Production Cloud, a managed global production network that mobilizes domain experts including professional photographers, videographers, and graphic artists to deliver highly unique and specific data sets at scale that don't lend themselves to photo competitions. This creates a scalable and differentiated advantage for data seeds in this fast-emerging and explosive market. Turning to capital allocation, we repurchased approximately 640,000 shares in the fourth quarter, and a total of 1.3 million shares for the full year using cash generated from operations. For the fourth quarter, our more aggressive share repurchases along with restructuring and retention-related payouts temporarily reduced our cash position. We ended the year with approximately $19 million in cash and cash equivalents reflecting our decision to strategically deploy capital where we see the greatest long-term value. These actions also underscore our confidence that Zedge's intrinsic value is not fully reflected in its current share price. In fact, following the end of the quarter, we also announced the initiation of our first quarterly dividend of 1.6 cents per share, further reinforcing our confidence in the strength of the company's cash flow generation and balance sheet. The share repurchase and dividend reflect a disciplined, balanced capital allocation strategy focused on returning value to shareholders while preserving the flexibility to invest in high-impact innovation and future growth opportunities. Fiscal 26 is going to be a year where we invest in growth and innovation. Our strategy is centered around five key areas of focus. First, expand and diversify our revenue base. For our core products, we plan to continue to innovate new features and optimize our monetization strategies. Late in fiscal 25, we integrated audio AI capabilities into the paint suite, and we intend to further expand those creative tools in 26. We are also evaluating how best to evolve GuruShots. One of the biggest questions we are working through is do we focus on making the game more engaging or do we more closely couple it with DataSeeds as a massive content acquisition platform or both? It's too early to commit to a specific direction, but it's fair to say that we are monitoring performance and opportunity closely. Second is to accelerate product innovation. Our product innovation team has adopted a model that launches test marketing campaigns to measure interest before writing one line of code and then capitalizes on the benefits that AI, vibe coding, and automations offer to accelerate the development of the new potential winners. SyncAt, our recently introduced app that turns still photos into fun and potentially viral video clips, was the first example of this new strategy. This approach allows us to build smaller, more focused products rapidly, test them against define key performance indicators, and scale those that show promise. We call these early stage launches alphas, and we expect to introduce at least six new alphas in fiscal 26 under this framework. Third, scale tape deck and data seeds.ai. In September, we launched Tape Deck in the U.S. on iOS. Tape Deck is a music platform dedicated to indie artists and designed to allow them to make a living from their music by offering transparency and fairness to them. The tape deck pilot started with approximately 500,000 tracks and allows artists, labels, and distributors to set their own pricing and keep 80% of each sale or stream. In addition, it allows their fans the ability to pay extra or tip their favorite artists directly. Although it's too early to comment about performance, Our goal is to expand to Android, web, and international markets during fiscal 26. Similar to all Zedge products, TapedX expansion will be tied to performance, and we plan to refine its creator tools and explore additional monetization models. For data seeds, our priorities center on expanding the creator ecosystem, expanding the pipeline of qualified enterprise prospects, and converting prospects into customers. Our focus remains on delivering bespoke, rights cleared, and ethically sourced data sets that meet the rigorous standards and evolving needs of the AI industry. Fourth is improving operational efficiency. Fiscal 26 will begin to show the full benefit of our restructuring efforts. We'll continue to reallocate resources to the most attractive opportunities, improve process automation, through the implementation of AI across the company and reinvest savings into projects with measurable returns. And fifth, execute a balanced capital allocation strategy. We will continue returning capital to shareholders through buybacks and dividends while maintaining the flexibility to invest in initiatives that enhance our long-term value. In summary, we enter fiscal 26 with positive momentum. We have three early-stage products, DataSeeds, TapeDeck, and SynCat, that are evolving, and the completed restructuring positions us for improved cash flow and profitability. Combined with our innovation pipeline, these initiatives give us confidence that Fiscal 26 will mark the next stage in Zedge's evolution, one which is focused, creative, and financially disciplined. Now I'll turn the call over to E...