Good afternoon. Welcome to Zedge’s Earnings Conference Call for the Third Fiscal Quarter 2024 Results. During management's prepared remarks, all participants will be in listen-only mode. [Operator Instructions] After today's presentation by Zedge’s management, there will be an opportunity to ask questions. [Operator Instructions] I will now turn the call over to Brian Siegel.

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 operational results that were 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 files with the SEC. Zedge 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 Zedge website. The earnings release has also been filed on Form 8-K with the SEC. I would now like to turn the conference over to Jonathan.

Thank you, Brian. And thank you all for joining us today. I will start by briefly reviewing our third quarter results, which continued to show the positive impact of our investments in FY ’23 to set Zedge up for sustainable, long-term growth. After my remarks, Yi will provide a deeper dive into the quarter. Q3 revenue increased 14% from last year as we continued managing the geopolitical, macroeconomic, and industry-specific challenges spanning the landscape. The Zedge Marketplace was the driver of this performance, with ad revenue up 20% from last year and Zedge+, our marketplace subscription offering, boosting revenue by 35%, including the first jump in net subscriber gains in over seven quarters. Additionally, Zedge Premium's GTV, or gross transaction value, was up 44%, primarily driven by improvements to content and monetization. These factors resulted in average revenue per monthly active user, or ARPMAU, jumping 39% to a record $0.074. Let’s turn to our strategic priorities for the fourth quarter and the beginning of fiscal 2025. As you recall, one of our goals for this year was to build a full-stack marketing team. We’ve achieved much of our goal, as the core team now has dedicated SEO, ASO, user acquisition, and creative resources that are focused on unlocking growth. Going into fiscal ’25 we expect to address influencer marketing and also invest in product marketing. Furthermore, the additions and upgrades that we’ve made to our product development organization are resulting in innovation and product diversification while also driving cost efficiencies that we expect to propel revenue and profit growth in the years to come. Take Generative AI. We introduced pAInt in 2023 and, since January 2024 alone, our users have created close to 14 million wallpapers. pAInt led to the development of a standalone Gen AI creation app, WishCraft, which…

Thank you, Jonathan. Total revenue in the third quarter was $7.7 million, up 14% from last year. This growth comes despite decreases in MAU, which came in at $27.7 million for the month of April. Digital goods and services, which encompasses revenue from GuruShots, came in at $0.9 million, down 20% from last year. GuruShots’ revenue continues to be negatively impacted by Apple’s ATT framework, macroeconomic issues, and geopolitical unrest. Subscription revenue was up 35% versus last year. This metric was up sequentially for the fourth straight quarter as our net active subscriber trends continued to improve, and our higher value iOS subscriptions and value-added Zedge+ offering for Android replaced lower-cost legacy subscriptions, which only removed ads. Zedge Premium's GTV, which came in at a record $590,000 grew 45% from last year. ARPMAU was a record $0.074, up 40% year-over-year, reflecting stability in ad pricing and the positive impact of our new iOS and Android subscriptions. Cost of revenue declined by 9% and was 5.9% of revenue. SG&A increased by 35% to $6.8 million. This increase was driven mainly by marketing expenses related to an increase in paid user acquisition, which is helping to drive growth. As we scale, we expect to see operating leverage rebound. Additionally, the higher marketing expense reflects the growth in subscription revenue which means we receive cash upfront, but also pay higher upfront fees to Google and Apple. Note that revenue on these subscriptions is recognized over the life of the subscription, but at a 100% operating margin. GAAP loss from operations was $0.1 million versus a loss from operations of $8.4 million last year. Last year’s loss included an $8.7 million, non-cash, accounting write-down related to acquisitions. GAAP Net income and EPS for were $0.1 million and $0.01, versus a loss and loss per share of $7.7 million and $0.55, respectively, in the prior year. Last year’s loss reflected the tax-adjusted, non-cash, accounting write-off for acquisitions I just mentioned. Non-GAAP net income and non-GAAP diluted EPS for the quarter increased 60% and 54% to $0.5 million and $0.03 versus $0.3 million and $0.02 in the prior year, respectively. Adjusted EBITDA was $0.9 million versus $1.7 million in the prior year. Note that D&A decreased 35% versus last year primarily due to the impairment loss on intangible assets recorded in Q2. From a liquidity standpoint, we added nearly $2 million in cash to our balance sheet and finished the quarter with $19.9 million in cash and cash equivalents. We also bought back 60,000 shares of stock, as average daily trading volumes were lower and our buyback parameters were fixed ahead of the closed window period. When our window opens up in a few days, we plan to more aggressively buy back stock in the market. Thank you for listening to our third-quarter earnings call, and I look forward to speaking with you again on our year-end call in October. Operator, back to you for Q&A.

[Operator Instructions] The first question comes from Allen Klee with Maxim Group. Please proceed.

Yes, good afternoon. For GuruShots, could you -- I'm not sure if I caught -- what was the revenue for GuruShots in the quarter?

Sorry, Allen. It's $0.9 million.

That's what I thought I heard. And that shows up in the digital goods and services, right?

Correct.

Okay, so within GuruShots, I mean, you're doing really well pretty much everywhere else. I'm trying to understand a little, like new features that you said could cause a 10% to 30% jump in revenue, What is the plan for adding these new features?

Great question, Allen. So during the earlier part of the call, I had mentioned, we've got essentially three major areas that we are working on. First is onboarding, and that is the experience that a new user will have when they download the app for the first time and start planning. We've rolled out a new onboarding experience in beta to 25% of our Android audience. And what we're seeing is that deeper funnel events are generating more revenue for us. Deeper funnel events meaning a user that downloads the app, joins a competition, and then continues to second, third, fourth, and fifth competition by way of example. That onboarding process is one which we will optimize. And if we are successful in that endeavor, we believe that we will accomplish two goals. One is that we will attract more users to actively begin playing the game on a recurring basis. And number two is that we will retain those users, thus generating more revenue, as I described a couple of minutes ago. Secondary of changes with respect to our economy. Today the economy is a resource-based economy which is fueled by a user making in-app purchase for a specific game resource. We expect that later this month we are going to begin, or not begin, but we will turn on a brand new economy, which will be a coin-based economy that has multiple currencies. That opens up the door for many different possibilities. But by way of example, you have a new user, they begin playing the game, they haven't done super well because they're really trying to acclimate themselves and assimilate all the information that's being thrown before them. Nonetheless, we have the ability of rewarding them with different currencies in order to keep them motivated and ultimately…

Are there any new features that you'll be adding in the next three months?

Well, onboarding is -- I don't know what you mean by feature, but onboarding is, we're viewing that as being a feature-driven experience. If a new user downloads the app today and is not in the new onboarding experience, they are faced with a very, very complex user interface which they need to master. There's a steep learning curve there. The notion of onboarding is to incrementally add complexity to the gameplay with the goal of initially getting the user into a competition with access to fewer of the bells and whistles that they eventually will gain access to as they master the gameplay. So we are describing that as a feature enhancement as opposed to some, let's call it new feature like a new in-game resource or something like that.

Okay, great. Thank you. And you mentioned that SG&A, incremental SG&A is going into some paid marketing. Could you talk a little about where that paid marketing, what the focus is of the areas that you're trying to gain customers from?

Sure, so the paid marketing is for the meantime primarily focused on user acquisition for both Zedge and for GuruShots. And the focus there is not simply paid user acquisition, but it is focused around paid user acquisition tied to return on ad spend, as well as aligning our paid marketing spend with feature releases and improvements in the app. So when you take a look at the Zedge app, it is a utility, has a lower lifetime value than GuruShots, and engagement is not as frequent. Therefore, we target a faster payback period for that app and give or take somewhere around 90 days. So we spend a dollar on user acquisition today. Then we want to know that we are whole in around 90 days. With GuruShots, it is a longer payback period. Lifetime value is much higher when compared to Zedge, ringtones and wallpapers. And specific to GuruShots, because of the exercise that we have on onboarding and in the game economy, we are really trying to time the expansion of our marketing investment of our marketing investment with the maturation of onboarding and the economy rollout.

Okay, that makes sense. And then advertise, so you probably can't add this, but your monthly active users, thinking about like getting that number to stabilize, any thoughts on where you think that these actions will get that to kind of stabilize and then inflect positively?

Sure, so I can't give you timing on that. I can tell you that specific to Zedge ringtones and wallpaper, there is a lot of time and effort going into how do we grow this user base, what are the features that we are adding, how do we use product marketing in order to keep users engaged, and so on and so forth. And it is a very high priority and significant area of focus for literally everyone in the company. The product team is constantly looking at ways in which we can not only retain users, but grow that user base as well. And that will continue to be a major focus of pretty much all investment that we have in terms of the Zedge ringtone and wallpaper market, if you will.

That's great. And advertising has been very strong. Subscriptions are pretty solid. Could you maybe just comment a little on, I guess, advertising rates go up with subscriptions and you have more in the bundle with subscriptions now than you had in the past, so there's more value. And you're also rolling it out to iOS users. Are those the main things? Are there any other things that you should also be thinking about?

So we are not only -- not only have we bulked up on the subscription offer and we continue to look for additional value adds. And I think that over time we will see additional value adds bundled into the subscription. But we are also optimizing with different types of subscription plans. Testing one-week subscription, testing two-week subscriptions, testing one-month subscriptions, testing annual subscriptions, testing lifetime subscriptions, as well as testing subscriptions on a more localized basis. So not only testing pricing on a localized basis, obviously the cost of the subscription in India would be significantly different than what cost of subscription would be in the United States, but also localizing the experience so that the messaging that's used to draw or to convert a user into subscriber is highly, highly localized. So taken in concert with one another, we continue to see that growth. And that is apparent in the numbers that we shared with you today.

That's great. And I know you gave some information on pAInt, with good grading kind of a creator economy. How do we think about like the amount that people are using? Does it seem like the percent of people that are using pAInt that there's still a lot of opportunity for that to grow?

I mean our perspective is that our marketplace is the premium marketplace I should say is a growth opportunity for us. We do have several initiatives underway now that we are investing in in order to unlock incremental growth and see to it that as a part of the overall revenue pie that we have, that premium content is a larger portion of that pie. So there will be continued investments there. And as you mentioned, GTV had grown nicely due to several initiatives that we had delivered on in this past quarter.

Okay. And for Emojipedia, you mentioned there was a little bit of a step back on a website we designed. Do you view that as kind of a temporary thing, or how are you thinking about that?

We do view that as a temporary thing. And the approach that we had taken, we had tested and I guess at scale things did not ultimately reflect what our testing had indicated. So when we saw that the numbers were diverging, we pulled back. And in terms of new initiatives for Emojipedia, there are a whole set of initiatives around rolling out new product features, capabilities, and so on and so forth that will begin to come off the assembly [line] (ph) between now and the end of the calendar year.

Okay, great. Well that's it for me. Thank you so much.

Thank you.

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