Good afternoon, and welcome to Zedge's Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. In today's presentation, Elliot Gibber, Zedge's Interim 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-month period that ended on April 30, 2020. Any forward-looking statements made during this conference call, either in 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. Securities and Exchange Commission. Zedge assumes no obligation either to update any forward-looking statements that have been made or may make or to update the factors that may cause actual results to differ materially from those that they forecast. Please note that the Zedge earnings release is available on the Investor Relations page of the Zedge website. The earnings release has also been filed on a Form 8-K with the SEC. I would now like to turn the conference over to Mr. Elliot Gibber.

Thank you, operator. And thank you all for joining us today. Welcome to Zedge’s third quarter fiscal 2020 earnings conference call, recapping the three months ended April 30, 2020. Joining me today is Jonathan Reich, our Chief Financial and Chief Operating Officer, who will provide additional insight into the numbers that we reported earlier this afternoon. For those of you who are new to Zedge, I’ll take a moment to tell you a little about the company. We are one of the leading providers of mobile personalization content, focused on offering consumers a rich array of high-quality wallpapers, video wallpapers, ringtones, and notification sounds. Our flagship app, Zedge Wallpapers and Ringtones, has more than 436 million organic installs and 29 million monthly active users. We monetize by selling in-app advertising, offering paid subscriptions, and through Zedge Premium, our marketplace which enables license holders to sell their digital content to our customers. Our user base consists mostly of Android users and approximately 31% of our users are located in well-developed economies. In December 2019, we completed the rollout of a new standalone entertainment focused app, “Shortz – Chat Stories by Zedge,” which we expect to help us in extend our presence into the world of entertainment. Today, Shortz provides serialized, short-form fiction stories rendered in a text messaging like format. It goes without saying that fiscal Q3 was atypical in many ways. We started the quarter on a great note, with improving metrics and steady progress in several areas, including the rollout of the Shortz beta. In early March, as the impact of the pandemic and the related restrictions grew, our business started facing many challenges. Initially, advertising rates dropped precipitously as budgets were cut. At the same time, a rapid decline in new handset sales fueled a decrease in MAU.…

Thank you, Elliot! My remarks today will focus on our key operational and financial results for the third quarter of our fiscal year 2020. For a comprehensive and detailed discussion of our results, please read our earnings release which we issued earlier today and our Form 10-Q, which we expect to file with the SEC tomorrow. Following my comments, we will open the call to any questions that you may have. Throughout my remarks, the ‘third quarter’ refers to February through April 2020 and comparisons are to the corresponding period in 2019 or our “second quarter” which was November 2019 through January 2020. Monthly active users, or MAU, that is, the number of unique users that opened our app during the last 30 days of the quarter, decreased 15.4% to 28.8 million during April 2020 from 34 million in the corresponding period a year ago. We believe that part of this decline is directly correlated to the drop in smartphone sales resulting from Covid-19. It is common for consumers to install and engage with Zedge after purchasing a new handset. This accelerated the drop of MAU in well-developed and emerging markets by 28.7% and 7.6% in Q3 of fiscal 2020, respectively. Total revenue in the third quarter increased 8.7% to $2.1 million compared to the year-ago quarter and declined 21.4% when compared to the prior quarter. The sequential drop was primarily impacted by advertising budgets being pulled due to the pandemic, partially offset by growth in paid subscriptions. Zedge Premium’s Gross Transaction Volume, or GTV - that is the total sales volume transacted through the platform - was $150 thousand in Q3 compared to $159 thousand a year ago and $197 thousand last quarter. GTV fell by 5.7% on a year-over-year basis and declined by 24% on a sequential quarter…

[Operator Instructions]. The first question comes from Allen Klee with National Securities Corporation.

Yes. So obviously, we're in unprecedented times. But with the opening of the economy, I don't know if you're comfortable just saying if you've seen anything subsequent to the quarter end in terms of anything different in terms of advertising and monthly average users?

Allen, thanks for the question. Yes, so the opening economy at this point has not been something that we have been able to measure specific to our business. As I indicated in my comments, one of the user patterns for Zedge is that when a consumer purchases a new phone, that one of the early things that they do is download the app. And with retail sales down, those new phone purchases have been pushed out into the future. Having said that, what we are seeing early into Q4, which we're in the middle of right now, is that there has been a shift in advertising. Clearly, there has been a significant pullback from brand advertisers whether it be from travel, hospitality, all the normal ones that you would expect are going to pull back because of the travel restrictions and the like and the impact on retail. Having said that, we've seen an uptick in terms of performance-based advertisers. These are essentially direct marketers that are focused on acquiring customers that will download apps. And we have to see whether or not that holds up through the summer accordingly. In terms of monthly active users, really hard to say at this point because part of that equation relates to new phone sales. So as the economy opens up, in a more tangible way with respect to retail shopping, we'll have greater clarity around that.

Shortz seems like it could be a very good opportunity long term. We understand that some of the temporary delays. Have you ever said anything? Or are you comfortable saying anything about kind of the measure -- how it was tracking? What performance indicators you were looking at? And maybe how you think about what the opportunity could be?

Sure. So we haven't gone into that in the past. Having said that, we're looking at conversions, we're looking at revenue per user, and we're looking at churn as those are the sort of three key performance indicators that will help us in terms of measuring the health of the business. In terms of what we see with the business, we're really trying to build a comprehensive ecosystem here, focused around short-form content. And I guess, the best metaphor would be to look at this as being a 3-legged stool. Leg 1 is short-form content delivered in-app via text. And the implementation that we have today is through a chat interface, but we're not limited to that. It could be just regular written pros, but again, serialized short form, fictional and the like. Leg 2 will be taking this content and availing it in an audio format, what we call Shortcastz. And we will avail that content, both in-app as well as syndicate across third-party platforms. And obviously, if you've been watching the world of podcasting, it has experienced some very, very healthy growth over the course of the last year. And the notion of short-form fictional podcasting is in its very, very early stages. So we think that if we have some great content that could position us in a really, really good spot for both consumption as well as user growth. And then leg 3 of that 3-legged stool metaphor is availing this content as short-form video. And that will be something that we will talk about and move forward with presumably in 2021. But the least common denominator is ultimately providing ubiquity so that a user can consume this content independent of where they are and what they're doing. So if they get up in the morning and read an episode and then they hop on their bike to ride to work, well, they've got their headset on, they can listen to the second episode in that series. And if they're enjoying lunch or a drink after work and want to watch the next episode, we avail it to them accordingly. So we're pretty excited about where we think this can go. And then there are other opportunities in the event that this content begins to trend, that opens up the door potentially for further exploitation, whether it be a television, movie, book, game, whatever the case may be. But again, that sort of forward thinking and we're working right now on really making sure that the next leg is the podcasting piece for what we call the Shortcastz.

No. That's great. I'm a big fan of podcasts. My last question, you've been doing very well with your subscription offerings. How do you think about what penetration -- what's a reasonable assumption of the penetration of your users that might take up subscription?

It's a good question. We haven't shared that number yet. And we have several product initiatives underway that we expect will improve our position from where we are today, even though we're really happy about where we are. But I would say, later this year, we can begin to get more specific about where that goes and how the numbers sort of back into that from a modeling perspective.

[Operator Instructions]. This concludes our question-and-answer session and conference call. Thank you for attending today's presentation. We thank you for your participation. You may disconnect your lines at this time, and have a great day.