ZDGE - Earnings call transcript Q4 2020

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Operator

Good afternoon, and welcome to Zedge's Fourth Quarter and End of Fiscal Year 2020 Earnings Conference Call. [Operator Instructions]. In today's presentation, Jonathan Reich, Zedge's Chief Executive Officer; and Yi Tsai, Zedge's Chief Financial Officer, will discuss Zedge's financial and operational results for the 3-month period and close of fiscal year 2020, that ended on July 31, 2020. Any forward-looking statements made during this conference call in either 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 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. Commission. Exchange and Securities materially obligation made update to or may to factors no they that update forward-looking they that differ results actual have may cause those to assumes that any forecast. either statements the from Zedge make, or that is available Zedge page Investor on release website. Zedge the earnings note the Relations Please 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 Reich. Jonathan

Jonathan Reich

to Zedge’s you, And Welcome today. you Good XXXX for year all us quarter operator. joining fourth earnings Thank thank call. fiscal and afternoon. conference

our and ability providing loyal me Chief who his to positive Joining our net XX% another on first today insight delivered monetizing while for we income to base by grow provide Officer earnings year financial Tsai, our our call compelling user content Yi base. quarter as QX was our as effectively revenue strong new is performance. growth user into over Financial Zedge, successfully will due year

As video most wallpapers, of a high-quality is of the of notification rich array offering of Zedge personalization sounds. content, mobile you ringtones, consumers and know, wallpapers, leading providers one

or flagship and XX users, organic Zedge million MAU. installs app active monthly Our million has XXX

positive time cash in in users, long base profitability. our chairman, quarter growth sale. our with open sell for He a both Last Zedge XXXX Premium, goals monetize term while in flow at to where drive our invest and as the the articulated this I growth. licensed customers happy earning Our to of exchange fiscal of to at charged am fourth continuing Michael and time, can we a and artists are becoming in every marketplace, virtual Furthermore, investing our expect we selling subscriptions, us new growth positive through the accomplished were users which that quarter flow XX% and primarily years of year initiatives store Zedge identifying in in months ahead. fruit in content today advertising, report Jonas, the users to user while this percentage by we and well-developed of to of the their our cash bear consists these fiscal opportunities approximately We Android located economies. offering paid year.

result, the profile, liquidity a including a we than cash equivalents. with million year in cash As ended and strong $X more

the monetization On a fiscal launched a our January subscription flagship we was front Zedge option for -- year. banner XXXX app. XXXX, In

During were rate. fiscal expanded annual and surpassing materially renewal successful XXXX, a base we of our XX% subscribers, paid in

XXX,XXX. revenue quarter, this all growing During XXXX, alone Subscription the base exceeded to continue quarter subscriber fourth subscription initiative. fourth in progress sequentially revenue the our demonstrating in to XX% from make by grew fiscal we the of

the than you year us generates paid in we as a subscriber a generates two. As a fees an higher higher recall, drop margins for ad-supported user renewal even Google pay and margin

also inventory. steps of decline initiated and also MAU advertisers revenues, We as to for optimizing known “header thousand We in the our further took stack us ad industry, per CPMs improve pay to in increasing impressions, demand what a advertising waterfall, even increase by in overhauled in bidding” economies. our light our well-developed

are plan a geography by regions. all ad We also better monetize to working to customize on the across experience

economy. are its invest we Premium to expanding Zedge Finally, continuing and in token-based

short-form our entertainment base Shortz our promoting cross-sell and offerings. fiction ability like installs validates Chat our personalization evolution of -- of “Shortz rollout along more the of plus to rendered solidifying opportunities, diversify of our XX app, into provides we In from serialized, mobile the messaging text loyal a meaningful to December terms To world steps by XXX,XXX with with through Zedge” date, further service our customers. growth took our value app. beta In app. stories the in the million our format to long-term images. than XXXX, Zedge growth installed have been flagship Shortz there we This underscores Stories of the began the mainly

gains recovery rates, conversion progress, temporarily these currently and this COVID-XX While solid disrupted the ARPU initial strong are with results launch but -- in we churn, initial seeing in were weekly a trends.

order the are initiative we token-based are ala by drive funnel. as well to further user current they SKUs free of Mini the messages, for Additionally, growth coming Podcasts” sales genres, the and actively and sound and to taking enhancements In features and Furthermore, with we marketing for subscription which pricing array to actors, new introduce expanding roll as as improve marketing an experience, product ad-supported segments an periods beta we different expanding - model with trial testing out new stories the initiatives including effects are the enter introducing top-notch sound Shortz carte beyond offering, engineering. additional voice in will months optimize “Shortcastz an iteratively a continue model. to into

had have the to year. strong a Looking to XXXX, start we fiscal

grow expect the have XX% by to at revenue and for We year. plans least fiscal exciting

to user are leading We our of one for particularly growth Zedge both in capabilities under centralized This unified the backend. content system, comprehensive impact content through retention, base. will a management content and our reinvigorate to our incremental user overhaul in open flagship well-developed markets, platform together to merging we generated positively door investing in that growth app and usage expect premium

like Specifically, and their set more easily of we a features, all curate across that they of various content to share artists, social favorite community enabling users best, platforms. to introduce and the social follow expect

Next, and overhauling accounts, them are user their features. value increasing product by coupling we with additional

drive with icons can we needle XX, exploring has of could which the in growth now personalized calendar Apple app ways even iPhone marginal in We needs are XXXX widgets move to enabled which iOS users the that and meet potential the in longer-term.

personalized to artists. help content which relevant, take turn, feeds will our in next through scaling generated Zedge that offering to Premium premium us we Finally, with together will mix user level recommendations content the content, also in

the some of in to iterating start items expect for aforementioned calendar calls and XXXX. migration the this end before we plan calendar early Our to be XXXX, completed project of

from product will our discovery product well-structured we now Shortz, efforts. Aside that have help personalization both our a in investment us app development prioritize methodology believe ongoing we and that

Our beta nine become release approximately goal of core to to part of a potential every our six new the apps, to product suite months. is with

currently exploring variety wide are We to options of creation a from content gaming.

quickly base Our to team differentiation, want analyzing positioning, monetization, From product technology our mention customer user to markets. to sizing, just speaking, existing a fit, drive is Generally market a adoption variables. acquisition, in we few well-developed leverage user and closing, fiscal an additional positioned offerings established outstanding for have we Zedge. standpoint, XXXX cost-effectively. built introduce technology to content our on and new year In and was platform, and of our we platform and are validated top

want light company. micro-cap co-workers of pandemic challenges work. not high being external appropriately but least, believe changes XXXX with not address for for the good and my expectations expertise space. have Keep by the prospects retained Last, we growth and firm in core and performance, operate We associated to this, structural and global especially up have I market. are performance To activities applaud with up in in the as a an our valued fiscal stepping the we our relations their outstanding how that the investor are

going details our who am to will Thank about you! performance. I financial turn provide call Now, to over the Yi

Yi Tsai

our making I point to I fiscal to are improve to also year metrics call Jonathan! by July to reminding the want changes you, transparency. ends we Thank those investors start want to we XXst. out some on that report the

will as continue Premium. ARPMAU, provide GTV to value We and or gross transaction MAU as well Zedge for

from to subscription out subscription growing the this data. we importance given last days markets. quarterly of to our or tables single year in by report app the Sequential digit opened earnings continuing by was XX.X in XXXX a of to additional QX XX%. well-developed the from of breaking recovery in unique fiscal The by optimization year-ago of markets. drivers The users driven increase mainly in Please our in year of in users, markets, defined quarter, end quarter advertising emerging sequentially. business, decline the QX our July and of refer increased during main from QX the release growth, our XXXX, $X.X well-developed number an ad Monthly XX.X waterfall compared as numbers. rates. active million XX nearly by to Total are over offset XX% X.X% were the to period, in during the driven fourth and was revenue revenue of while low Additionally, but subscription XXXX million the July advertising to that and our MAU, were decreased million for increase a XX% subscriber partially erosion increased emerging increases and up customers both

we - related year economic transacted business marketplace and the that to ago to to resilient, quarter. even Our sales we in $XXX The be total QX, the a Volume, result changes subscribers marketing or in the Transaction XX% XX% will over was GTV was up business Premium’s proven compared through and the thousand exceeding and Zedge to Gross last XX% growth of upcoming a have basis. Paid in of with materially believe we also product the end year -- and XXX% impact thousand XXX sequential GTV increased pandemic increase that easing along some at of the the encouraging, compared challenges COVID-XX. rebound navigate has in fiscal this on is quarter, our - quarter underway of that the continued year volume unprecedented as XXXX.

user converts freemium a expense. subscriber, fee a as to into our which marketing a we you XX% SG&A shows when paid As a in Google up recall, pay --

in XX%. year revenue XX%, Overall, fee surpassing However, paid performance year-over-year was improvement are if a benefits in subscriber renews their we increase The the Google is ARPMAU primarily generally Currently, be XX% two XX% $X.XX drops within is advertising renewal an and attributable discussed -- the year the considered earlier. year over to seeing sequentially. nearly and subscriptions annual rates which to to industry. growth of strong subscription

quarter subscriptions, fixed As expected, realized sequentially. quarterly spend, hosting X% decrease which we to we discretionary forward. decrease took costs older year, lower loss of cloud We remain quarter. during cost $XXX and in loss us share liquidity. diluted decline $XXX technologies. believe of reported relates reductions the most continued the our the with of in a per a versus from to to compared the increases quarter. revenue will paid Income and actions moving fiscal $X.XX of strong in the thousand to in fourth a providers year-ago offset and quarter to Google of period the direct a cost fees was Sequentially, operations for due marketing million, thousand higher compensation lower by paid the increase the in and a of primarily acquisition $X.X fourth in XX% drove $XXX Shortz compared subscriber the content base year-over-year was in growth year-ago thousand have quarter to terms We income a year-ago to We SG&A Google. The fees of and of net in retirement a expense. switching including prior $X.XX provide loss cost position

cash for flow, Zedge operations from now we revolving As increase credit debt, compared to $XXX million access of increase primarily operating cash we and the in and positive have generated XX, no million over to quarters. in a four quarter if The had up $X.X of flow by million thousand cash increase facility has and to while outstanding $X.X was cash cash sequential equivalents, maintaining ago. almost prior $X.X driven consecutive a a a July needed. year positive

products detail market appropriate discussing at and fiscal features to the we to - time. hit you forward have to in with some XXXX Looking the more scheduled new and them we look exciting

that cash you Finally, we in top recovery a full-year and rates quarterly profitability growth both in and COVID-XX cost next I achieving from I have you safe of again continue In we and the implemented a of our forward quarterly flow and positive speaking saw targeting future at on XX%, flow. that the to and been by current plans excess in hope strong projects reduction allowed said our to parts business on we profitability us impacted of business operations negatively are XXXX, fiscal consistent looking as earlier, look positive with conclusion, line many Jonathan remain continued call. basis. in each had while cash to invest and

Operator

we've got from like [Operator with Klee And Securities. looks it question Allen National first our Instructions].

Allen Klee

Yes.

Just quarter a is this pleasure.

well? reasons just drill things, you why and much just different monthly think If metric there. numbers outperformed the of out the number through so kind what You job. the the on average from how came there other mix emerging how good and every into new go we or development developing I Can increase users did starting sales phone with markets Android of Or my extent any of increasing? and that or to down

Jonathan Reich

pleased Jonathan. we're Allen, Yes, well. much. ourselves quarter as very so Thanks with the it's

as the monthly We've in you users, of MAU, release, see a in was active the terms there emerging nice of coming uptick In markets. seen will very out India. growth press also

that recall, litigating well as you had apps app now against we our were prevailed, won other As benefits growth that quarter. well. we terms in a growth Tier music had case. we X, blocked there. overall, saw a X we We quarter-over-quarter, this lawsuit markets as in that entity to and of beginning nice having many see tremendous the And of as But Tier yes, a are past

sharing to things, X features, dependent hopefully to second social way our other year and take in in half the that fiscal fiscal of primary features, begin back doing we is be the on going One root the will put which and of is introducing plan amongst year. Tier upon on stream, goals the community growth in features, this that to

Allen Klee

that could opportunity Great. be more iOS. an fiscal be to could you next with your just you missed why that in I of then -- how And XXXX? Apple mentioned able in -- that might you that is into go kind do

Jonathan Reich

Sure.

as limiting Apple the operating users the recent at modify ourselves ability it's the feature most whether to to And to fiscal market XXXX, iOS would for time, around app personalization as for unbeknownst to their allow their is, the XX, picture marketing they icons. year where began widgets without Apple So customized big the a widgets, introduced upgrade system. they well released

not, view crack being it's been long is users it's from But as their very, user much we has where the iOS don't benefit as XXX this we we've that make selling we seamless. before platform we seamless sort into the As out of normal it very begin And personalization the the per of that a as are been $X calendar very Android calendar door And very will Apple around XX has has icon arduous a are the that a embedding be a a something what their part piece. for for early a days of styles process. widgets app different iOS year, XXXX, widgets year, that that embrace providers hope there as that beginning out, Zedge seen are different end across hope begin experience will the Zedge If also that of well. is, which of very offer somewhere of or term the long slight We the manual where sustainability that to short, if portfolio know demand in but to will seamless to we What iOS the Apple on of we expect we Apple Zedge turns release capabilities, this of in versus process. experience, that the that story to iOS that. where as and app. in is there iOS sensitive

Allen Klee

nicely. rates, advertising very On recovered that

mentioned way a reasonable being to actions think about one any why taken improve equal, of it's How do think Is that bunch there you've the reason other? going you now? stays, could it is You or at change Or rate that. the it to else all forward? at it reasons,

Jonathan Reich

the reading on rates know a unfold, global clearly how look that of you by have long made much our advertising optimizations clearly, advertising in that experienced that in unearthing depending certainly, the ways Zedge, improvement impacted you continue has don't the how pandemic we at which on additional platform, can Having is on relates a been we've So advertising to And focus that incremental we have in revenue. if will. stays when will negatively COVID. independent what said we we take in deliver and of we to full been press that, force, basis, additional

that where ad depending experiences, in the work things the And is there about of world. for you around there, then we advances is very, one with clearly although give revolve the very that still ongoing offering early are as And using well that. that different clarity additional app believe as is ad in on design Some potential platforms we're we to there on. focused tech the upside playing

Allen Klee

Well, then going you to momentum And this with keep as great. see that's the subscriptions. That's going do driver so well? what key been

Jonathan Reich

Sure.

will I as a of reaching the marketing lot So indicated in on attractive, annual in record that of that coming growth offering for to a There coupled more out with our there. relates part We a our broader is drive renewal we've that up this building begin hopefully, to audience, the in set second unknown. of earlier we're signed a XXXX features their for comments, this in incremental fiscal subscription-based extending subscriptions the my beginning much And focus rate progress year renewal annual make value-added users that and also what to and is optimizations. made January.

call, is early renewal second will during or some renewal, somewhere that around too will. that the predict mentioned add is the But year XX% but first still could annual rate additional what you if alpha, happen with As higher. to

Allen Klee

great. That's

be you your terms marketing Shortz. shifting marketplace, dollars In going basically to you said quarter, that of to last were

grew. gross declining you be and actually transactional value thought the that it So could marketplace

there? So but creating you of I'll I that. you the what about you And on is were this, everything would let expand grow key it just you value think, say interesting, for really how outperformance more mentioned factors the in could

Jonathan Reich

Sure.

So to no that. question

would Shortz. a that otherwise very refocusing inventory and offering that inventory doing of works in taking fortunate have being from on marketplace even their promoting a with job terms the participating been marketplace have are in We are our that our used artists good that

job across seriously factor very artists a to their important are really good platform and job the trying a and these optimize of it. that's doing taking that So

In more COVID I to to seen where in user more refer the a active and are we've what base that, online generally as regularly, growth factor play part addition as monthly a this. that all in will well people

forth. on greater once migration as really fiscal my value making indicated have artists the focus end reaching on focus comments, offering unlocking in and terms complete offering we that platform, can features bringing more marketplace to back opportunity on and a For so them of in begin a that we XXXX, this the we do for the base and sure customer so and community greater social into

be is a unfolds, to seen high that us. but remains for priority how clearly it So

Allen Klee

of Great. Shortz, how know much I sure And started couple first then if with broke out revenue I'm feel this learning are? kind what when going, it a not you things. you you'll do you as with were you with but moving? are about you experimenting were the that How where kind tweak is, of you do will think you of the that it, keep And things

Jonathan Reich

Sure.

So immaterial. from not contribution Shortz did revenue it is We break out.

set I is enhancements Shortz: that working the have in fiscal the opportunities. of And that future improvements focused really say all, year been a we product broadening things accomplish guess, I building monetization on XXXX on. as product We been have making of well product. there that are would really of as, a we whole couple sure First

allow have of optimize to A a that funnel, consuming and we there, la will it upon content token-based well forth. We with and users the how users the and carte at the we ad-supported version based way the look on more expect so this year. and they drive that then to are as opportunity top the so is ultimately, the increase in And rollout fiscal for that purchases in economy as will

expect the we that to XXXX can to we And addition roll is fictional very a in Shortcastz we and is stake the it's nascent set one market market podcast have our there. growing position In it will comes of Podcast in think that still hopefully calendar when year a storytelling, certainly leadership where ground that content. U.S. we short-form that, in this early that out

ongoing focus a with which to genres, another are iterations, underway groups So feel more attractive, that's as then more initiatives much terms the the got delivering set for in product done said of content direction things the of product that missing today. we've that earlier, customers us. make And them we've upon based that offering in I they

will So happen that iterative on an basis.

Allen Klee

Great.

or XX%. that is, SG&A? a that? your grow My revenue how at think your How lower Okay. like to higher operating guidance expenses grow we than of gave about -- aspiration in do would you question should at last so Is XX that XXXX or fiscal rate or likely -- least similar

Jonathan Reich

it's that, think high grow are of there. in don't couple as a to unknowns I and Yes. pegged as there

grows very be subscription well which means if higher than a growing First it expense, of of SG&A, could because our that, is very, that all, that it business being very marketing well.

what of So We that hires call point. would screen. our on that's set are have I radar good a do a

to to for However, we on ROI all, delivered. we being barring bring Certainly, to yes, take that order growth in going loss that materially. going we to just people actually in remain fiscal the would is profitable. it planned short-term accelerate seeing that are to XXXX, we we where in some a growth without not see want have we're all incredible say, And opportunity

Allen Klee

to base that this was you even important strikes quarter -- me That seeing really last question. user lot large better. we're Okay. beginning have, a the my and the to breakout try really this kind of done and the quarter as something where you've of monetize hopefully, that feel was a like I

again. congratulations So

Jonathan Reich

are to Thank to it see with you we're and agreement very much. aspirations you, continue that the our Yes. Certainly, can momentum. we in

Operator

West Joe go Old [Operator next, Instructions]. And to Investment. we Boskovich with

Joseph Boskovich

couple me. had questions some asked I there questions, of are a before but good

seems of not noticed you noticed advertising I heavily app. be within I've the And as was just once least launch But days, In short-form most the was it were Legacy I user the them very AVOD into early Zedge and advertised asked. one of the about to acquisition was I regards know, did. entry the as SVOD Shortz the -- entertainment, in strategies excited at it to that because and thought as So Shortz, Shortz that you space. or

for going I about was strategy user that of kind just So acquisition forward. wondering Shortz

Jonathan Reich

Sure.

user Zedge wallpapers So ringtones material no of part our question to in of existing growth and Shortz doubt, our a still a promoting base is strategy.

indicated see to earlier user Until not as And COVID, be the on that the only was KPIs where getting that so the base revenue of focused trajectory continued existing we a as driving we're seen and result, derailed. However, forth. time is installing sort such various with but of we've the trying that Shortz, usage and and ultimately, ROI. on so we're contribution

that, very In early addition to very, stage.

We have enough then acquisition. been ultimately, order other poking really cost trying is piece and drive attractive around can in a this a at in initiatives to a product looking per typically we if will, that at that unlock barter in inorganic valuable And looking that is generate channels as come acquisition we user have known channels co-market to can is call install, user of cost the they acquisition we have. acquisition I channels, that CPI, will what's per where, to ROI. inventory, point what partners sense, where And for you we them the final can a to

of So we're And to in that closely. the is being very which head. general very, is going each direction monitored those

yet campaigns. of cost in money We per any amount material have acquisition not invested

known also products that, identify to drive that right that we make which what want do and to based groups attribution we we that so technology so it across platform, measure really upon what then as in the after sure place can go we where generating we and user Before have what's growth to actions can that needs dollar have that every be, accordingly. spent, the is us, we it to

Joseph Boskovich

the subscribers, subscriber figure number? does get Okay. And that had Great. you've I noticed XXX,XXX the you Shortz? of That number Premium does for plus of Or that Premium? Is Zedge Zedge app. earlier then you include installs mentioned Shortz just XXX,XXX, that that

Jonathan Reich

No, not Shortz. include that does

Joseph Boskovich

Okay.

of would you part XXX,XXX plus subscribers XXX,XXX that total both offerings. So have be for that some

Jonathan Reich

Zedge So and ringtone strictly the XXX,XXX ad-free wallpaper plus users. is

Joseph Boskovich

Okay. impressive from in XXX Well, go great. one XXX,XXX pretty That's subscribers year. to subscribers to

congrats. So

Operator

presentation. attending call. question-and-answer Thank This today's conference concludes and session you for our

disconnect may You now lines. your

Zedge (ZDGE) 22 Oct 202020 Q4 Earnings call transcript