Good afternoon and welcome to Zedge's Earnings Conference Call for Fiscal Fourth Quarter and End of Year 2023 Results. [Operator Instructions] I will now turn the call over to Brian Siegel. Sir, you may begin.

Thank you, operator. 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 operating results that we reported today. Any forward-looking statements made during this conference call during 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 in the future to differ materially from those discussed on today's call. These risks and uncertainties include but are not limited to, specific risks and uncertainties disclosed in the reports that Zedge periodically filed with the SEC. Zedge [ph] 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 website. The earnings release has also been filed on Form 8-K with the SEC. I would like to turn the call over to Jonathan.

Good afternoon. Thank you, Brian and thank you all for joining us today. I will start by briefly reviewing our fourth quarter results which were generally in line with our expectations. Q4 revenue decreased 10% from last year. While we encounter challenges stemming from the combination of geopolitical, economic and industry-specific issues, we observed ongoing stabilization in advertising with ad revenue remaining flat sequentially, even during the traditionally weaker Q4 period. Furthermore, in Q4 of fiscal year 2022, we had a onetime $4 million accounting benefit, skewing year-over-year earnings comparisons. Other positive highlights from the quarter included 7% sequential growth in subscription revenue as our new iOS and overhauled Android offerings contributed to positive momentum. Additionally, Zedge Premium's gross transaction value, or GTV, was up 14% year-over-year and down $26,000 sequentially, benefiting from paying users of pAInt, our generative AI wallpaper maker. All of this led to higher gross margin and sequential growth [ph]. Finally, Emojipedia continued to build on its momentum throughout the year with revenue up nearly 70% versus last year. Every year, we pick at least one company-wide area of focus to overhaul. In fiscal year '23, we address data and analytics and I'm happy to report that we achieved our goal of democratizing data. The improvements we made in our product, marketing, monetization, finance and executive teams to access accurate and granular data more quickly and run experiments in concert with one another to more easily and quickly make data-driven decisions. As a part of this overhaul, we expanded our data team and we are now very well positioned for continued evolution in a world that is ever dependent on data supremacy. In fiscal 2024, we are committed to building a full stack marketing team with capabilities spanning user acquisition, branding, creative creation, marketing analytics and…

Thank you, Jonathan. Starting with our fourth quarter results. Now for the Zedge marketplace defined as the number of unique users that opened the Zedge app during the last 30 days of the period. Decreased 3.4% from a year ago to $30.9 million. Now in well-developed markets and emerging markets were down 6.8% and 2.4%, respectively. Europe which contributes to both metrics continues to suffer on the Russian invasion of Ukraine and inflation. Total revenue in the fourth quarter was $6.6 million, down 10% from last year. Digital goods and services which encompasses revenue from GuruShots came in at $1 million, down 29% from last year. Similar to Q3, GuruShots revenue was negatively impacted by Apple's ATT framework, macroeconomic issues and the geopolitical situation. Subscription revenue for the quarter was down 3% versus last year. However, this metric was up sequentially as our active subscriber trend improved and higher-value IOS attrition and our new value-added Zedge Plus offering for Android, replaced lower cost legacy subscription which only removed ads. Net premium GDV grew 14.3% from last year to $384,000, reflecting incremental revenue generally from pAInt which offset a modest decline in other content sales. Average revenue per monthly active user of [indiscernible] and decrease of 5.5% year-over-year. Still, this metric was up 4% sequentially, reflecting stability in ad pricing and a positive impact of our new IOS and Android subscription. After backing out the onetime $4 million accounting benefit in Q4 of last year, operating expenses were flat year-over-year at $5.1 million. GAAP net income for Q4 was $0.2 million and EPS was $0.01. Adjusted EBITDA was $1.6 million versus $2.2 million in the prior year period. From a liquidity standpoint, we remain in a strong cash position with over $80 million in cash and cash equivalents and only $2 million in bank loans. We repurchased 72,000 Class B shares during the quarter at a weighted average price of $1.98 per share. In total, we bought back roughly 759,000 of our plus common stock during fiscal 2023. Thank you for listening to our fourth quarter earnings call and I look forward to speaking with you again on the next call in mid-December. Operator, back to you for Q&A.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is coming from Allen Klee from Maxim Group.

Our thoughts are with your employees at GuruShots. I wanted to start with Apple's pricing rules now and the actions that big sites like Facebook are using. How do you think about how this is going to play out in terms of the potential timing of the effectiveness of the advertising to improve over time?

Allen, thank you for your thoughts. We appreciate that. In terms of timing, that's I think the $64,000 question but the $64 million question. As far as we're concerned, until platform is like Meta or Facebook have fully implemented a working version of Scan 4.0 [ph], it is going to be complicated to scale effective advertising without having new data there to drive better marketing decisions. I think that you know that Meta had rolled out a version of Scan 4.0 [ph] for almost probably around 1.5 months, 2 months ago and then quickly had to reverse Beta. Reading between the lines, it was likely not yet ready for prime time. And I can only imagine that this is amongst one of the highest priorities for their business. Having said that and as I described during the call, we are using other mechanisms in order to optimize, whether it be rapidly and materially increasing the number of creatives that we have, using all sorts of different creative styles. So as an example, UGC BDOs [ph] or promotional videos and things of that sort. Coupled with spending based upon where we are seeing an appropriate return on accident. I can assure you that as soon as Facebook is -- or Meta is ready to implement this at scale that we will jump on that bandwagon and begin to capitalize on the introduction of Scan 4.0 [ph]. I also think it's important to mention that we have become what I will call, managed account customers of both Meta and Google meaning that there are dedicated account managers with subject matter expertise that are overseeing our accounts, working closely with our team in terms of helping us expand the marketing initiatives that we have and an ROI or ROAS-positive fashion. And I would just underscore in light of the downsizing that Meta had undertaken this year. I view that as -- due to the fact that we are "have this managed the account status" that is indicative of how interested they are in our business and how we can scale with them. I hope that answers your question.

That was great. You mentioned a lot of initiatives for fiscal '24. What would you say are kind of the top ones that you think would potentially have an impact on '24 and '25 financials?

Sure. So let's take a look at each of the business units. The flagship Zedge [indiscernible] and wallpaper business unit, we are really investing a tremendous amount of effort in terms of improving our subscription offering. And as you know, financials associated with subscriptions are very attractive. Not only is the profit margin attractive but we also receive the cash upfront. Just the notion of having rolled out an iOS subscription is something which is having a meaningful impact. And I would note that in the U.S., the price point for an iOS subscription is around $20 per customer that is with the retail value, if you will, compared to Android which is around $5 per an annual subscription. So very, very significant increase. But it's more than simply price testing and coming up with the price that resonates with users, it's also the value adds and there's a whole bunch of work being done there in addition to marketing efforts. Then in respect to the flagship as well, we are continuing to invest in pAInt which is our Gen AI wallpaper maker, rolling that out on a global basis. And we may see some accelerated growth there in markets where we are early. Many of the Gen AI apps today that are in this space use a subscription business model which doesn't necessarily align well with many of the markets that are outside of United States, Canada, U.K., Australia as an example. So when you get into the more emerging market community, that is -- the notion of subscriptions is less palatable. So there's a lot of work going on in terms of making this available and continuing to improve the experience. So we may have some early mover advantage if we're successful there. And then, I'd mentioned that…

Thank you. In terms of -- last quarter, you mentioned that you were initiating a $2.5 million to $3 million cost-cutting initiative or that's what the benefit you would get annually, I think, is any -- has that happened already? Or any update on that?

Sure. So we had announced this -- was not last quarter. I think it was quarters ago. And yes, we had -- we had acted on that, including a host of different initiatives from SaaS infrastructure to staffing. As you know, we've got employees in different regions of the world, different price points and the like to our marketing investment and so on and so forth. And -- we have acted on that and we will continue to keep in mind, we want to be in a position where, ultimately, our cash position continues to grow and that we're not getting too far ahead of ourselves in terms of expanding the initiatives or seeing -- having SG&A grow at an unsustainable pace. I just want to underscore, I think it's very important when taking a look at SG&A to remember that within SG&A, we have both our marketing expense as well as the percentage that whether it be Google or Apple keeps when a user spends money on their platform. So SG&A is expected to grow but that is tied to marketing and that growth is something that we can expand or contract based upon ROAS. The other thing that I think it's important to talk about when considering marketing in our growth plan is the fact that marketing is a much different animal than it was 3, 4 years ago because of all the privacy stuff, whether it be AT&T with Apple or soon to be Google's Privacy Sandbox. And that will mean that it will take more time to get recurring results that one can then I'd say with confidence, hey, we can expand or this is not the right thing to optimize yet. However, as I have also mentioned in my recorded remarks, we have prioritized for the entire company, the notion of really building out this full stack marketing team and seeing to it that we address not only paid user acquisition expertise but also things like app store optimization, search engine optimization, branding, product marketing just to name a couple of those components. So that is what we believe to be critical for the growing success of our business.

For fiscal '24, I think historically, the first quarter is a seasonally slower quarter. Would you agree that, that's most likely? Maybe talk about just the seasonality, how that typically plays out in the quarters? And is there anything you wanted to comment on financial outlook or goals of just any type of financial goals for fiscal '24?

Sure. So we've historically not provided projections. I will say that seasonality because we have a very, very large percentage of revenue coming from advertising is tied to ad spend typically in the holiday season. So our fiscal Q2 which is November, December, January is typically the strongest quarter of the year. And then when you get into calendar, let's say, calendar Q2 -- or one, I should say, you begin to see a downturn. So although we're technically a month off, generally speaking, seasonality for ad spend aligns with what happens in a typical ad-driven business. And -- that generally hold up. It's not 100% the case but that generally is an indication of how our business is impacted. We are fortunate because we do have other diversification or we have diversification with the subscriptions in there and so on and so forth. And that subscription revenue, as you know, is amortized over the life of that subscription. So going back to my earlier comment, our ability to continue to have success with our overhaul subscription offering for Android or the newly introduced iOS subscription offering is something which is really a key part to our ability to diversify revenue and have some insulation there, if you will.

One of the other things you mentioned was -- as an initiative for fiscal '24 is building out your marketing capabilities. Could you maybe just expand a little more on that on what you meant by that?

Sure. Prior to the acquisition of GuruShots, Zedge's growth was primarily driven by organic installs where you know that we surpassed in aggregate over 600 million installs of our app on a global basis. And the acquisition of GuruShots introduced a new facet to marketing, where in the mobile gaming space, paid user acquisition is key growth driver. And in parallel with that, we had also started to part in the market with respect to paid user acquisition our flagships Zedge marketplace. And we have expanded that investment over time with what we believe to be attractive return on ad spend investment. Much different profile between the Zedge marketplace around Zedge App, page user acquisition versus GuruShots. But in order to be successful in our investment in marketing, we have many different areas that we are refining and we are investing in. So as I mentioned earlier, not only building out a seller user acquisition team that's focused on both paid and organic channels but touching upon the fiscal 2023 goal of overall in data and analytics, we need very, very precise reporting so that we can make good advertising decisions or user acquisition decisions, investing in things like app store optimization, search engine optimization, messaging and reengagement, marketing, content marketing and then also taking advantage of various forms of tech that can provide us with additional information or can help us in terms of content creation and things of that sort, all become critical to this investment that we're making. So that is -- I think the next -- one of the areas that when looking back in a year and 2 years from now, we're going to see just having a much more robust team. We started with one person. We have more than that clearly now and that is a critical part of our ability to grow the company.

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