ZDGE - Earnings call transcript Q2 2021

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Operator

Good afternoon, and welcome to Zedge's Second Quarter 2021 Earnings Conference Call.

During management's prepared remarks, all participants will be in a listen-only mode. [Operator Instructions] After today's presentation by Zedge's management, there will be an opportunity to ask questions. [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 three months period that ended on January 31, 2021. 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. include, disclosed not Zedge in with U.S. uncertainties risks to, files and the uncertainties and the risks but limited are specific periodically These reports that Securities Exchange Commission. and statements make or they update either update obligation results no cause that forecast. to have from to assumes may any differ the Zedge materially forward-looking or made that may to actual factors they that those the that website. Investor earnings available Relations of Zedge release Please the on note Zedge page the is on filed a X-K earnings release been The also SEC. the Form has with I like to to would turn now the over conference Mr. Reich. Jonathan

Jonathan Reich

a long an margin, net ago highs from provide is operating record of joining income, operator, ever, increase reported today. operating EPS, our for revenue second you, XXX% additional more was and earnings Reich, we content cash system, and Thank earlier thank our is when also performance. for to operations quarter EBITDA. our completed year management app results we quarter for Chief $X another awaited QX with you Zedge, than iOS. financial fiscal afternoon. the Financial Zedge's into delivering Officer, million new encouraging conference rolled will And flow Operationally, income, all for the me which new anticipated. year to compared to out We of the who insights and I'm Jonathan CEO than us surpassed Zedge. on Welcome time call. XXXX in Good quarter migration first Yi and Tsai, icons

half we strong positioned are whole, to hope be of we fiscal second a our as what year. well Taken a for

Zedge entertainment. developer on that you mobile are phone story, is leading a app and of focusing those personalization newer to For the

the of being quality personalization wallpapers, ringtones, wallpapers, is one of array offering sounds. on video leading heritage mobile Our and high consumers, a rich in providers rooted focused notification content of

or phone is for and and XX personalization, Wallpapers for organic millions Zedge app identity the To celebrities a paid The has Premium mobile world-class enables users installs ranging hub and it display subscriptions, content date, has creators and to emerging popular from Ringtones million Zedge seeking self-expression sell acts users. their currently fandom to active content artists app as MAU. art. XXX all a digital personal flagship marketplace, generates social monthly about of to combination Our which surpassed revenue and advertising, market and app million our and our from content

to well Active to second seasonal MAU Moving from second XX%. with ad performed both rate optimizing and our inventory of net subscriptions continued growth also additions, XXX,XXX pricing. approximately we ad in quarter benefiting renewal and performance, our strength year

strong year we As these earned a renewals rates, recall, maintain for margin and XX%. fee we to user over need content expect experience you drops two to continue will fluctuate to Google's higher by the provide may as which time. We renewal

to introducing community and Turning system and content the initiatives. features search many for needed that door and new especially improve our product. engagement start features for expect of will new we to retention, management the enhancements We milestone This in us rollout opened completed in the December. out will we're foundation tested re-imagining rolled including be and these and on and social accounts, Currently, user overhaul discovery. markets, focused accounts, our of and well-developed user These iteratively.

handle remember to to collections, and features follow community QX and new users expect create about offering even will to followers and share and start in zedge.me/jonathanreich. that We easy Zedge’s this introducing users complete content, thereafter an shortly notify other and like redesign new artists users enable

XXXX. are out offering We that be subscription can enhancements our fiscal scoping offered product also bolster paid to in

for marketplace in artists Our continues. our investment Zedge Premium,

professional content marketplace be a artist that the of users, an artist the customers. of to this business. important artists number base. new our sign simply position’s for ad-supported lead as much part rewarded as as relevant designs to up that a of would responsibility seeking with is they using increasing process can We report identifying will ad-free of Zedge our Those in distribution per model, and users happy growing to use well I'm This better revenue testing Shortz platform, experience product available growing average watching by our as the now increase are to the ads. the dedicated enabling content paid by consume and display, users we In hiring are manager a the to as subscription. premium an beta meantime, like

at version to ad the set and increased base for stage of We the increase customer top subscriptions the supported the expect the sales funnel overtime.

high week, offering, which discussed In how our excited users $X completed. production are stories. the the million has we'll we that podcasts last that value short-form We're and can rolled bring analyzing last Shortz start our we with the to which our by audio at-the-market Shortcastz, content. now by product, On call, possibilities been this of addition, engaged

provide We to initiate acquisitions, value. expect in flexibility as a example, drive unlock to for balance $XX incremental million growth order to sheet opportunities maximum to imminently fortify and such incremental for to our pursue shareholder program new further potential growth

to mobile We mindfulness. video, social even in, to potential not consider acquisition gaming, expect but targets and limited

sheet. outstanding our out healthy to monetization, Our where user engineering acquisition and expertise seek strategy and we large opportunities leverage balance teams can base, is

We transpire, in say this selective. are do cautious being not but we will and that what suffice are and to early process it know

expect continued targets half half business. not during is the seasonality the do despite ad year portion supported growth to potential the second of on record or we there year-over-year publicly. specific also to of opportunities We something the until announce discussing the strong first closing, a report In in plan and had

between now we to XXXX year. to such, fiscal As for growth the top the believe when XX% previous compared line will XX% increase

solid In in EPS growth flow expect operations. cash addition, and from we in

to of you. outstanding also everyone of our call at want Zedge talented a outcome and work I thank Before and who Thank to vision. to who beyond success the Yi, that your execute on professionals want handing remind to for team investors go above the is our our support. over I you, direct

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

Yi Tsai

Thank on you, the to that our fiscal ends QX QX by our to QX be and year QX. those I in fiscal incremental that the be low stronger, tend with call want typically improvement sequential and tends Jonathan. XXst reminding to July start seasonally while seasonal

three-day quarter to that subscription The a account is hold a "Active ended lasts status Additionally, without we Google cancellation resolution. form replace to grace days a that now as payment metric begins hold, for of payment due has user's Subscriptions" in aim introduced a calculation and when period which change this used the Play by Subscriptions" to the XX period account reduce up "Paid rate. to includes fails term the with

Moving million of quarters to when period number the the all $XX.X X.X% of to the sequentially. while compared unique markets double-digit and XXXX. January January lower during contract, quarter app X.X% with from second increased the than however, during up a they growth, active four open strong to Emerging in XXXX results. showed last fiscal million in to our rates Monthly or MAU, users users, well-developed defined XXXX was XX-day in markets $XX.X continued

Total growth with to taking GTV value the ad drivers $X.X Zedge or quarter both for our in we quarter. ago ago the and on, Zedge were $XXX,XXX waterfall in Premium offering growth Premium. in subscription increase transacted growth, compared in to transaction X.X% market budget. are year of increased year-end markets ad revenue rates up gross total The an volume rates a compared quarter. to advertising that users for optimization enhance and sales main relating year our higher well-developed XXX% steps actively QX, to million through to is touched second Jonathan MAU As spur to

of As year-over-year want to users indicated, come. XXX% in be the sequential Jonathan the additional And quarters Premium XX% subscriptions rates. end increase will XXX,XXX growth feature and the position key Zedge basis. on Active account to as quarter, growth and the to of at we accelerating a exceeded a driver introduction

user as to a a paid Google, shows marketing you'd recall, will our purchase or a to XX% a subscription pay premium which convert in up user when SG&A fee expense. As subscription new

or with Google fee monthly to if annual XX a XX%. up months, subscription drops their the subscriber to renew However, a

to user is or subscription, monthly approximately the new XX%, as rates performance and considered advertising is revenue an renewal to continuing the record year-over-year in was average adding sequentially. improvement paid annual strong distribution growth optimization continue generally a per which Overall, ARPMAU benefits inventory $X.XXX, XX% see partners. within primarily and attributable XX% We The the from year-over-year of industry. increase

income in fully diluted Net the outstanding respectively containment was increased liquidity year. in no year. a as Our and XX% QX. debt. $XXX,XXX for X% Average basis. million XX% and operating versus the in prior a last increased margin position on second and a remain $X.XX versus standpoint, strong $X.X revenue This diluted year EBITDA shares strong and From $X.X last only $XXX,XXX XX.X million we SG&A cost last XX% cash versus EPS were reflects year. higher subscription net versus and $X.XX almost and million quarter, to

from equivalents, a year XXst, net operating flow QX $X.X and million combination compared and $X.X the cash driven the million we've January cash million during over we was to million and increase in of cash sequential of ago. ATM by increase of million quarter. $X.X an in a had a $XX.X As $XX.X proceeds increase cash The positive completed of

Moving to guidance for fiscal XXXX.

growth to due top mentioned, remain impacted on expectation traditionally is tougher in seasonally but with than I XX% expected our historically comp, back you QX, next of forward higher has to been QX in Operator, to to And hope be be Q&A. may last our been to that slowest Jonathan began business line to you safe. year. trajectory QX to that XX%. speaking keep increased again that each As QX, you due have relatively being COVID-XX a favorable comp our the negatively for XXXX. we I QX slightly has by call. growth look our quarter, the which mind

Operator

first is Maxim Klee coming Allen from [Operator question Instructions] with Your Group.

Your line is live.

Allen Klee

based in the on ever terms highest I everything Starting to by you've the there. what it's seasonality congratulations are it's your very to rates and provided affected of on make you. quarter level results. advertising, monetization – is far that their subscribers. afternoon you in Good higher done advertising of you've $X.XXX the know a Thank in things that of for at strong But and rate And by like also with extent increase had, better? we

Jonathan Reich

it's one Allen, time? say higher question a I'm more your rate, sure I at Hi, Jonathan. whether we're understand not when you

Allen Klee

of I'm to just have rates changes you feel made kind the at a advertising your trying level? extent to you've understand what higher

Jonathan Reich

and pre-migration generating have migration changes benefiting both are per in that talked well made that active earlier from that pre-CMS monthly as more resulted your post-CMS is we've question? we've about changes answer that we So, migration. that we And revenue user. as the made, Does

Allen Klee

Could call what all up you? is to and want you just you sure that operator, end talk what after and follow for two for Sure. doesn't that maybe on make about questions? the the Could CMS does to about

Jonathan Reich

Sure.

our the content management that content the all in that manages CMS, is we app. Our system, the of of part the platform have

management retention. hope rolled we and we've out underway Those our incrementally end overhaul is whole of is of will the to year be end forth completed had account with and we've after ground and opens the we user social so major in our go QX, that content which features out and complete which job both features at the then out. that and of and And start the that features, impact out the a by system that community terms we in from into new us such rolling investors, together. premium to features on up, as which enhancements, revenue setup, completed more project we As will December from obviously, investment content so retention content of such April. was and roll do customer And expect door a will engagement base. to and translates would those and in improving house for of engagement Incrementally, our user-generated new our shared rebuilding positively it the better begin our fiscal

Allen Klee

– then traction you're in And Great. a you there? now what the you're countries and little said focus with you on and Apple about the could what improving seeing your well-developed that expand well-developed doing on with

Jonathan Reich

Absolutely.

of well-developed believe we've our said, our and growth is and that country that enhancements one the investing as are many we reverse So are trend. we base put on And in take user will of back to help features goals ones, trajectory. the which that

Moving to Apple.

personalization been vertical. a a phone it's highly app, the you done. you the up that ring to the system. crack, it's much personalization on you being the tone. that to opened Android, what Apple in like is by you wallpaper it just change mobile introduction iOS easy of And As baked and very into you're XX, know, just press background, door, with more available our of And their complex is whole a operating set Apple With That's or preview ecosystem. and way

are However, take, of on app is can today can specific icons XX% items Android user to iOS XX% out be you Those personalization our Apple's base. year. icons out app widgets on help widgets well of and just into customized give app if around that incremental end way or the roll as of iOS that be at we on-tray, now And IOS. have can customized. two we our by And on rolled around believe of generate from expect December world later users will, revenue this at the and fiscal as to reference,

Allen Klee

very you. what model, you of any done in metrics? the usage that of Got can has it. Thank just With that encouraging have give short, or of terms in amount of any ad-supported metrics terms type us you

Jonathan Reich

Allen. early, really it's Well,

data. day ad As that that and shorts very, two is terms is improved. the just specifically, week, and has preliminary last from mounds engagement data. of in seen more retention but of supported into rolled I've getting we mentioned, We'd out there premature have really be mounds very we What

some respect to what back can short- before the more and long-term. impact need we to we report overall with that think shareholders both this to is, I give time

Allen Klee

And How Okay. terms is be up you the think exciting. going it? And pretty what of that in that is? Shortcastz, set the monetizing and options sounds format to potential of the of

Jonathan Reich

Sure. that made to monetize we not any you, to That's a decisions great yet. question. be of about And how have honest as with

can of Apple There's with goal more to these valuable. informed decision how the need being we is data there into mini being a short, that, Spotify, in engage then example based There's But to are quality syndicating can too subscriptions possibility or make by or understand also possibility having sort. things you a that of about base said, if high- use making for the still story bundling for subscriptions, to a great is like, possibilities. possibility that with different really then There's across an in With will, degrees upon in with long an interested Our the this monetize. engagement user third-party first that we And how see of users podcasts, we content. of podcast platforms, audio answer proceed early what ads clarity, to there. many question and from there. way that

Allen Klee

stock – And would I there the if Thanks. quarter the I think answer that think their and but you an rules data Could this that. then has not, privacy to is? you it if on Because your when changing that to Or I I this, why the related on mention think be hit explain, just Google of could was if had you? of during know some like some helpful gotten call. what tracked impact news be

Jonathan Reich

sensitive we clearly That's with were with until to their amount had to well decision which a protect Our I users had have SDK. collected with to in was that Google XXXX, the really to shared many that is the don't networks, not well, material making relatively we will back XXXX see which software apps by user are platform. of of amount about communicate at base temporarily because associated stock, store IDFA, third-party very other Overall, – August, about buggy should stock users some we that our challenges our the that of have. fixed. that allows remove mention privacy, unlike of had information Apple's small as respect of in Play And to know that privacy. small I code our because users' our late that sure impact advertiser way been advertiser's early – app from and we September Apple is with advertising hit we going problem of And are that a a banned

Allen Klee

the the then did just the the in and I next and seasonality that quarter? quarter maybe think we you will Thank is slowest, that touching the third And – in But mention magnitude the seasonally you. to a on seasonality, comps fourth tough quarter. know you fourth have about directionally, is there the think of way

Jonathan Reich

Yes.

continue it's I anywhere, XX% correct model. at the you tell If have this okay when historically, it's at to anything the in to that quarters. to you whether you not me, be I modeling, back a seems XX% can't add numbers that look look you that Yi, and front have previous year. there that to the that. But fall see back looking but case from likely And been of will off. how has of to most purpose directionally for don't want or your do affects

Yi Tsai

No.

summed you daily $XX,XXX $XX,XXX to got we COVID, $XX,XXX. think down $XX,XXX. to mean $XX,XXX recovered I I was our hit to when up $XX,XXX with slowly to And from revenue to we well.

$XX,XXX – So level. we, hopefully, daily can or maintain revenue $XX,XXX we a

Allen Klee

users, was And which, it your… which was then monthly your maybe Great. XX,XXX, active

Jonathan Reich

[Indiscernible]

Allen Klee

sorry. I'm yes. Yes,

about Sorry that.

mean the the while of strongest had, hitting a you're close this high had. of on you've while high So we've time of the kind isn't to that, economy I what ever ever a

attribute that you to? would what So

Jonathan Reich

Sure.

of say a would that I couple So things. are there

result the litigation. is to was with. time. well of able the our sales, we which sales litigation and made though, a we've our our of new nice improvements that, fact get sales over market, ultimately resume stay-at-home successfully from then with to locations retail removed, we to this Indian begin is that COVID when user where Where hope because India really to due begin there restored in one an because to to as that of is was the extent, the suffered they that in an the emerging in apps growth the sales when very And to content. new respect And growth aware and We they it. block of Prior in – material it phone the And common had that to retail in have case as of such, user and the some phones, new come really, the the in – India, you entire COVID our orders. throughout country Zedge, will of we've COVID. I increase company emerging And use out due we've and that simply entire the partake app were be been in capacity block want phone know, in mobile been, will prevailed available app some the digital slowdown also and would benefit in we we is to the markets. as app seen department patterns that as Telecommunications And and the have that growth as throughout buys to download screams we likely that in the able of retail personalize that since then. tunnel exiting seen the suddenly One very, Indian had making as seem you is to was well, very plaintiffs has say country. that, been As There's app. the Department recall, with

Allen Klee

tell your know you count kind now? of if question, what That’s great. could last you is as My to share happen of me just

Jonathan Reich

somewhere me is correct wrong, $XX.X if around I but I'm million. it Yi, believe

Yi Tsai

correct. is That

Allen Klee

you congratulations so much. Thank Well, execution. on Fantastic. excellent

Jonathan Reich

you. Thank

Operator

question-and-answer and Instructions] lines. from you our conference today's [Operator no session have questions further This the call. Thank for attending We concludes presentation.

disconnect. You may now

Zedge (ZDGE) 16 Mar 212021 Q2 Earnings call transcript