ZDGE - Earnings call transcript Q4 2017

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Operator

Good afternoon and welcome to Zedge’s Fourth Quarter and Full Year Fiscal 2017 Earnings Conference Call. [Operator Instructions] In today’s presentation, Tom Arnoy, Zedge’s Co-Founder and Chief Executive Officer and Jonathan Reich, Zedge’s Chief Financial Officer and Chief Operating Officer will discuss Zedge’s financial and operational results for the 3 and 12 months period ended July 31, 2017. Any forward-looking statements made during this conference call either in 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 to differ materially from those which the company anticipates. These risks and uncertainties include, but are not limited to specific risks and uncertainties disclosed in the reports that Zedge files periodically with the U.S. Securities & Exchange Commission. results either or any update may that cause obligation they statements the no from may made materially have make actual assumes to they forward-looking update that factors those Zedge that differ forecast. to or to the that is release page earnings Investor available website. the Zedge Zedge the Relations note Please on of The with the has been on filed also release SEC. earnings a X-K Form Mr. like turn over now the to would to I conference Arnoy.

Tom Arnoy

co-founder today. operator. CEO And all I the three the thank Welcome XX, am also Zedge’s of and fiscal us which of July XXXX to earnings Arnoy, you, Zedge. year. Thank conference XXXX for Tom months you quarter our ended end is joining recapping fourth call,

who reported would Joining numbers to into is me our one this to this earlier Chief quarter, today it be Reich, provide Officer that will the Jonathan we Operating If our activities word Financial select “realignment”. I afternoon. describe were insight Chief and

explain. me Let

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these addition, bring will who followers in users. In turn will become creators Zedge

business we profitability. Finally, - We other focus directly will revenue I and external - rationalize looking from great this our to at Need our offering. that growth, has opportunities potential? actively organic generate narrowed and our deliver say accelerate are

that for accelerate decided our and our to we’ve our need best ensure on help refocusing about past cutting the want back tasked more In am a profitability focus, both that quarters, are in to path the I in right that on cost our responsibly. us are overall fruit. to and as over are saw his Jonathan invest - investments initiatives that as remarks. that track alignment to well execute as as well marketplace some Board and the undertake will organization underscore with closing, I provide vision. term have we made details the targeted coupled to of and to of resources my with Going this doing Zedge yielding Management the rightsizing rebalancing longer a we managing prepared needed order to in finally strategic

results. turn for quarter’s financial the going a Thank Now, to call Reich to over discussion of Jonathan you. the I am

Jonathan Reich

you, on today XXXX. fourth remarks of My year key focus the our for operational and financial full and will Thank fiscal Tom! quarter results

expect with year, of October. our comprehensive earnings fiscal issued to Form our QX results, our for a entire discussion SEC and detailed the earlier file end which today the the and For and release please by read of XX-K we

or modest during questions quarter, comments, users to the will unique MAU any that is, increased million well-developed improvement growth countries. number may period year a the app, XX.X the open markets more over days reflects on corresponding in X.X% in of last decline have. basis. users, you year XX.X July MAU, call in The was opened million ago by flat my XXXX robust to emerging from year Monthly that our during the we thirty with active of a Following the sequential a but

are of basis; which the revenue on to bear fruit. focus Total a use, third-party’s fully quarter result the of primarily a at $X.X compared app of temporarily $XX that to generation revenue from MAU to quarter-to-date Store markets. well quarter frequency year in retention in able and from XXXX; from in command have adoption primarily managing prior to removed not less Revenue game the rates; a as app Android mid-April and a in resulted well-developed $XX.X to was related X, and which units with Smartphone we per growth As our declining our decision new the on rates basically on decline iTunes installs XXXX ad our revenue where million we a in to fiscal the Game where markets witnessed increased revenue are MAU in our as optimizing engagement, year-over-year from recovering we business. we X.X% higher in relevant for higher as by our became our February year emerging ago million X.X% being apps; starting million. Tom compared in inventory. paid desktop targeted from across mobile drop flat reduce advertising in In websites and The investment introduced advertising improvement which QX, and to in fourth is metrics XXXX, in app advertising commanded improved the mentioned, decreased quarter decline XXXX our install” Channel the fiscal “cost was our

it to point want year earlier. out flat XX% sequentially, However, I revenue when in that, app from to generated our by the compared period to increased Android close QX same was although a

in quarter, ends XXst. Importantly, October is on it the at nice growing a which current clip

in per proud QX, active earlier user X.X% that investments. increased validates the ARPMAU constituted of period year was from and areas our to Zedge’s this XX% monthly the – or – by revenue our same X.XX of when a generated aggregate are and from to sequentially. average Android achievement fourth compared cents X.X% We up In quarter. focus over our overall derived app Revenue resource revenue apps

our As stated of rates. was introduction advertising majority ad the higher new earlier, by app commanded units increase Android driven the in this of that

in summer to additional larger and sequential also upcoming quarters. a relates when more with compared result made increase the rebuilding declines see the Finland and decreases of comparing associated to entire expense we increased fourth in Public overall investment increased $X.X to marketing X.X% expect the percentage days. from quarter. XX.X%. cost to SG&A in direct thousand, a same quarter year labor FY FY a period in less used was reflects capitalized to The campaigns, and FY primarily and the contributed quarter sequential in ago. hires When quarter SG&A experiencing increase revenue higher a the as a the costs XX% a holiday, offset and incremental when expenses decline of to compensation similar revenue to the SGA or we PR, XX% costs compared compared from the On declined that year fourth $XXX or infrastructure the X.X%, the to Norway, over spending Norway. Canada, when and ’XX ago benefit as in company primarily down unchanged investments are in Our The X.X% year of as to facility vacation by with to million in was sequential XXXX. our by ’XX, content acquisition result in relocation of year the it basis we backend in

thousand QX. in quarter period increased earlier. same compared basis, our in thousand from Our of a loss $XXX On of a in the a thousand from $XXX operations loss from operations loss fourth sequential loss a XX.X% was $XXX the to year

sheet at non-cash of connection sequential share, expense executive year extension, as quarter, related X primarily expenses in certain share bonuses due paid cents as from loss compensation a we well X In the to Our the reported ago option loss to unchanged per spin-off the year incurred remains reported IDT compared per and to Zedge’s cents quarter. diluted and public July quarter. equivalents At on in earlier the with solid we company Corporation XXXX. X, XXst, an in million balance and sequential is a million cash cash $X.X liquid. from independent $X June million $X.X as

to no less capital current $X.X-$X.X elaborate mentioned cost profitability, like ways liabilities million at Our current was ex Tom to XX, that our I costs by at compared by for can growth, process would extensive on Freeform. July aligning we cutting we reduce or earlier. – – million assets has the which $X.X – $X.X now initiatives an and XXXX. have productivity Zedge debt. undergone annually looking million healthy In working

efficiency least annually. Tom also cost savings not new $XXX,XXX our and at ease but brings infrastructure backend As only mentioned, of

we workforce going million. trim painful, generating – savings are consultants although and to approximately and addition of our In employees – annual $X.XX

and relationships, vendor discretionary renegotiated through savings spending additional controls. generate tighter to expect we Finally,

layoffs match the to This we say condition. expect being financial that this say staffing view Rather the and a that complete We as before execute plan in order are we aren’t to month a creation. our going QX team and the charge marketplace initiative. growth end this to that that of the and hire us a to customer the is recognize with fresh need our giving in directly investment will We restructuring marketplace growth to to we quarters. it is end expanding QX. to on be revenue coupled To months upcoming in the in start isn’t good

be of Let around The down deal with company deal structured efficiently little acquihire. Freeform by $XXX and a me talk and to to component a about with gears was the creditors. thousand sellers wind the the cash used shift

ongoing the Zedge. we its B who lock up. two-year will additional that have shares, addition, received restricted that shares be noteholders, which the that and Freeform four The satisfy with with to acquihire equal upon instalments marketplace their contingent Zedge employees came vest a in Class issued In annual an XXX,XXX XXX,XXX building used employment

dilution. firmly Although resulted employees -- outweigh approximately in assuming dilution that that the this stock X% earn award of -- their modest entire the believe deal we benefits the

a consummate on actively looking the may topic and While of are opportunities or we we debt equity financing we seek transaction. for to acquisitions, are

that be offer they criteria deals for accretive Our benefits. material strategic are and/or

for warranted improved you QX and and We publishing investing use, full To a Zedge. developments. engagement, update fiscal the state focus year grow increase if by our providing enhance up, will generally specifically redesigned and narrowed transition projects more of expand of experience. constituted We MAU, to - and We in efficiency our ’XX introduced of a the wrap the core revenue. user infrastructure improve retention backend cost savings, art app’s platform frequency period

these the concludes will in of been encouraged experienced that reverse trends in my remarks. result positive are efforts and these year as We fiscal investments of the a experiencing by and XXXX. are growth That current that we we the some results quarter have confident

will you I Tom take your questions. Now, Q&A. to to and back be for Operator, happy

Operator

comes Performance [Operator of Brian ahead. Instructions] Warner go from first question Our Capital. Please

Brian Warner

Hi, guys. Thanks my taking for questions.

sort what stuff question am you percent now? can if rolling color if you about advertising just the And am can driving revenue I trends of shares And wondering to if inventory just the timeline that? Just in thinking along on am give your in us of questions. you X,XXX what’s and you just few bit me, give think a any Android a terms maybe you from guys a XX% you you with are a of sort of don’t are came of you monetizing of I implement that going curious you a a of then of bit sort a if on months hear the that artist I of in initiative. kind far maybe sort have you X that of quarter foot of and Did am little revenue I so Apple what’s the about wondering say anything give better on the color on how have next sort the on terms talked know little and I sort there? are you as little bit Another premium the of marketplace maybe I of initiatives the in you I revenue view little around color out. quarter. can me of the proposition model you maybe

Tom Arnoy

question iOS think investments done we I regards Hi, on iOS, second this first is and answer this Tom. on can then the one. haven’t I Jonathan the will to answer lately. In many

playing seen we that on modest role strategy. like have had have and the marketplace the we But the an like have us iOS apps there. We last a growth year is is important what’s important

marketplace. are we the on as So, in certainly part to going iOS invest of executing

we So, will hopefully, grow there.

can Jonathan answer maybe So, question. your second

Jonathan Reich

Hey, questions. Brian. for the Thanks

So, I because work said picked overall were advertising and introduced talk about when interface we ad our user have what you in improving has on of remarks we that premium up, actually new the think app. the units

that monetize continue the collections rather small those to as and major being the that which we in what we core and collections. of marketplace. provides of brands is overall process movie maybe generally is we referring and think artists or a have I started will you as to be iterate something is stream It collections of the That terms has studios to revenue more a cycle a the value participate in product Zedge part continued there the to said, sales of is the overall on which marketplace that part mine. with promoting something our portion sales lengthy working

monetize artists can and they get offer attraction do bunch professional to which have mature that In And is monetize way in which Today, ways they content. than us not that and this the say for detail attract of the which to that monetize we business for it’s model there. up that to semi will they can and the the a artists pros, marketplace, will creation a by by for by terms door into in community a can have of different means for completely other really their revenue them opens of us they Zedge. share amateur these level

Brian Warner

do artist you charge will to – of know product? going are you how you buyer the mean, And how Okay. you sort I

Tom Arnoy

say play have paying free to think what people of mechanisms is a try efforts to from I users, are freemium offer what the buttering into we lot ways people that’s actually and paying, at some Obviously, going those here, everything that the different videos of like right, but looking there idea the a is etcetera. users lot for to in are of to freemium are the several we paying and right, watching right model can a convert today are we payment I So, day. coming content

are we to of use So, but of to details. too ways it’s payments, provide course exact several going early

Brian Warner

guys will I we Maybe catch will and but you talk terrific. offline thank some Okay, you. up more, with

Tom Arnoy

thanks. Sure,

Operator

from Platinum Our next comes of Please Instructions] Securities. go Adelman question Dylan [Operator Global ahead.

Dylan Adelman

Hi.

related just the have users sort questions growth. So, also total a those to to MAU few to I and figures how of and relate then revenue

you So, now much in a you about XX% are mentioned growing but ago year, QX about a XXXX that flat. more that’s year MAU

So, I of how MAU this then of are a And about talked up you ARPMAU in growth? understand deceleration top year. am trying a what’s both bit lot on MAU to that, that and driving

you if and both also lower down could I up, that driving of how then curious those of still figures bit explain revenue those revenue So, what’s more with MAU sort what’s is being a am figures XX%. driving deceleration?

Tom Arnoy

Yes.

but like so obviously is function MAU new right. far acquisition many So, of the important variable is a user here most variables,

that number of get users growth users you more When certain do need where a you have been the certainly level, like to viewing historically. we a lot that are get have everyday And to new need So, organic our increase I you on right. in order the out new while of mound continue on coming acquisition, think still flapping we we user to doing users are we new good – in, level growth.

also to acquire So, focus also our more keep more of – retain clearly more new to is the but users, acquire users users.

that sure is your that like it been if So, explaining has question, answered am why yes, not but out. I threatening

Dylan Adelman

around but million. sort usually right of now maybe total growing on to but $XX rate we historically, the of the flat growth MAU that been with are lining to $XX in range also in million seeing strong MAU consistently XX% is year, your that, guess I to tack downloads pretty has So, XX% a to

what’s guess because I like in looking that driving those figures, at it deteriorated has looks So, materially? retention, by retention change

Jonathan Reich

get exactly everyday, out, sale of churn I have amount a you if but at rate. new it users explaining was right, That’s what a will an Like if some given you it equal right. grow, point you like flatten will like make

So, that is sort of it. explaining

Dylan Adelman

Yes, It would grow of monthly user you year, total seems to continuing growth sort total downloads last but at as I in same which growth mean level least played didn’t I just out the to well. before. the the I expect guess that’s in would kick maintain had if you in active have its

my monthly active growing downloads those I not. is point is total growing users still at together substantially, So, grew point are just now but both not total together. guess And one they and

So, something there. there is

Jonathan Reich

There is churn right.

So, clearly usage keeping trying well and the to to make as use, are of our which focusing that’s and what users well is important. as trying improve we longer to as frequency really retention increase on trying –

things had in last that And that an forth. so have Tom’s we into said it’s earlier So, said such content we other interface and and put search was there there uptick that. not and the although QX, as been as in comments seeing on as are so of we lot work earlier well user has a recommendations, apparent

the seeing that of fruits that are business. fueled We various sort labor that across of the KPIs

in the talked what that about. In new sort calls, back around this of in is you search, that the MAU and doing we content. work conference you say around app overall, basics we We comprised that past UI, overall things have around and would lot right it bringing to went one call customers of a fueled what then really and is a the will work. work has new once work I to seem the that in So, are customer variables, two brought everything

revenue, respect infrastructure users completed impact to bringing pieces for of was been beginning back take advantage new now in new see we mobile a the platform, in a game whether positive much web, tie into because Those have where to made the with how in work and it that web better really year did well, channel, we Now on fiscal a historically new of are implementing stop and end. in content With it would be publishing discovery and we very fashion. tied prioritized, ways. all this to that that revenue of in the and which like. be decision transitional certain has store be investing many the terms year to the There advertising, XXXX had was the run conscious were become streams we whether much to

iTunes revenue we removed and fully had We And of from have haven’t in taken aggregate those a from the issue recovered that. with the chunk mix.

terms the lifting as and release flipside improved we in a have revenues we now undertaken have in And of seen what a by into overall in we metrics. January going January. had a when that I On we of more the in The lot obviously, said, summer XX% encouraged of in Android outcome the with in will increase heavy QX trends showing fashion detailed XXXX are – we are information earnings us. sometimes QX year-over-year

Tom Arnoy

as the and also about distribution bring along us the going to our million, they active I scheme the are does new well will that reason behind to open thinking up a to well XX that us as base. of it to XX the when increases to and content semi users, their marketplace us are monthly the reasons the available million as the participants pros to customer add one monetization going or for is pros that turn

we So, growth customers of in that and has both that great why potential. potential respect unlocking to because the with is this in pursue it revenue will of reason – terms we both terms think

Dylan Adelman

you said So, will be you maybe you on rolling that point side that because primarily are on the content like bringing was producers the that it ringtones. – it out, the understand music marketplaces new that on in of

have to going new are You content find correct. producers to

that getting existing base? from So, the those than user you how your about are producers acquisition rather of content just new thinking

Tom Arnoy

all, limited so at not first to are So, all. music we of

are contents. not of visual looking are sorts limiting And personalization all for content to ours We creators either. of we

details we are – more but prepared so interesting share verticals. So, that are now. to really not around There

do this how to we and content believe users that benefit a we of certainly have wants users lot this. consume and to the know like that us having For we of

Dylan Adelman

Thanks. great. Okay,

Operator

for today’s [Operator and concludes you call. conference question-and-answer our Instructions] This Thank presentation. session attending

You may disconnect. now

Zedge (ZDGE) 18 Oct 172017 Q4 Earnings call transcript