Good afternoon, and welcome to Zedge’s Third 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 April 30, 2021. Any forward-looking statements made during this conference call, either in the prepared remarks or 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 they have 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. Jonathan Reich.

Thank you, operator, and thank you to all for joining us today. Good afternoon. Welcome to Zedge’s third quarter fiscal year 2021 earnings conference call. I’m Jonathan Reich, CEO of Zedge, and with me is our Chief Financial Officer, Yi Tsai, who will provide additional insights into our financial performance. Q3 was an excellent quarter for Zedge. We reported revenue of $5.3 million, our second highest quarter in the history of the Company. We also delivered our fourth consecutive quarter of net income, sixth consecutive quarter of positive EBITDA, and seventh consecutive quarter of positive cash flow from operations. We’re very proud of these achievements, especially in light of the seasonal nature of our business, with Q3 being historically weak, mostly from a drop in post year-end holiday ad budgets. For those of you that are newer to the story, Zedge is a leading app developer focusing on mobile phone personalization and entertainment. Our heritage is rooted in being one of the leading providers of mobile personalization content, focused on offering consumers a rich array of high quality wallpapers, video wallpapers, ringtones, and notifications apps. Our flagship app Zedge Wallpapers and Ringtones is all about personal identity. It acts as a popular hub for self-expression for millions seeking mobile phone personalization, social content, and fandom art. The app is rapidly approaching 500 million organic installs across Android and iOS, an outstanding achievement for any app. The app generates revenue from a combination of advertising, paid subscriptions, and our Zedge Premium Marketplace, which enables content creators ranging from world class celebrities, to emerging artists to display and market their digital content and sell it to our users. Zedge’s strong third quarter performance is a testament to the ongoing investments we are making in ad operations, paid subscriptions and MAU growth, the…

Thank you, Jonathan. I want to start by reminding those on our call that our fiscal year ends July 31st. Additionally, last quarter, we introduced the term active subscription to replace paid subscription as a metric. Due to the change in the calculation used by Google Play, they now include account hold, which is a subscription status that begins when the user’s form of payment fails, and a three days grace period has ended with our payment resolution. The account hold period lasts for up to 30 days, with the aim to reduce cancellation rate. Moving to the third quarter results. Monthly active users, or MAU, defined as a number of unique users that opened our app during last 30 days of the period, increased 20% to 34.5 million during April 2021 from 28.8 million during April 2020. Emerging market MAU expanded by nearly 30%. Total revenue in the third quarter increased 153% from last year to $5.3 million. While our growth was extremely impressive regardless, keep in mind that Q3 of 2020 is when CPMs bottoms out. So, this year, we saw the benefit of the work we are continually doing to improve our ad operations. Subscription revenue was up 98% from last year, still demonstrating strong growth, despite the slowdown in net additions. It is unclear how much of the slowdown in sequential new subscription growth was seasonal and how much was related to lower MAU in well-developed markets. But with our recent hires and product initiatives, we are working to reaccelerate growth in fiscal 2022. Zedge Premium’s gross transaction value, or GTV, that is the total sales volume transacted through our marketplace, was $250,000, up 68% compared to the year ago quarter and 19% sequentially. As Jonathan indicated, we are investing in growing this offering. Active subscription…

We will now begin the question-and-answer session. [Operator Instructions] Your first question is coming from Allen Klee with Maxim Group. Your line is live.

Good afternoon. Congratulations on continued excellent execution. One thing that -- lots of things were positive in the quarter, but the first thing I wanted to highlight to dig into was the strength in your users and your advertising rates. This was supposed to be a seasonally weaker quarter, which -- so what do you attribute to the strength that you saw in your monthly average users and the revenue that you were getting for them per user?

Hi Allen, it’s Jonathan. Thank you for the complement, and really credit goes to the team. And specific to your question, it is the hard work of our ad ops team that is really focused on optimizing the CPMs associated with our inventory. We think that that is a very, very significant part of the work that they continue to -- or the time that they continue to invest in generating more from the inventory and that involves everything from optimizing the inventory, optimizing the user experience, focusing on tools like header bidding, decreasing latency and so on and so forth. I’ll also add that I think that industry-wide CPMs have been holding up as the economy begins to open up. No question of a doubt that we are benefiting from that as well. I hope that helps?

That does. And then digging into what you said that you’re well-developed monthly -- the MAUs was down only 1%. Could you go into what you think was behind that? And maybe like have you been doing with some of the initiatives with Apple?

Yes. So, as you know, we are dominant on Android. And ongoing improvements that we are making in terms of the overall experience or user experience in the app is something that we are benefiting from. As I indicated in my comments, going into the summer, we have a lot of initiatives focused on what we expect will result in Tier 1 growth or the well-developed market growth specific to social and community features, personalized feeds, improving -- improved search and recommendations, and things like marketing automation, where we will send push notifications and so on and so forth to our users. And those will be rolled out incrementally. And as we see success, we will continue to go down the path of investing in the enhancements that are yielding that success. And the ones that are not, translating into improved engagement will be turned off accordingly.

Got it. If I move on to your subscription ad-free business, it looked to me like that’s continuing to grow sequentially. I’m not -- could you explain a little your comments of what you said that it was a little less than the prior quarter?

Right. So, let’s bifurcate between subscribers and revenue. You are correct that revenue continues to improve. And that is a function of new subscribers and then renewals from existing subscribers. Going into year two renewals, we’re seeing that approximately 45% of annual subscribers will renew for a second year, and then going into third year. Now that we’ve got a couple of months of third year renewals under our belt, we’re seeing that approximately 65% of the users that had renewed for a second year are indeed renewing for a third year. As such, the overall revenue increased, even though we did not have a net gain in terms of additions of 100,000 users, which had been the standard in previous quarters. Yi, do you want to add anything to that?

Yes. Allen, this quarter, we only added of 42,000 net addition to our pool of subscribers. And as Jonathan mentioned, as our pool gets bigger and bigger, you need to get new subscribers to offset the churn. So, as your base grows larger, it’s harder to find new subscription to offset the cancelled subscription. That’s why the net addition has been slowed down a bit when compared to last quarter.

And I just would like to -- I would like to add one more piece, which I touched upon in my comments. When looking at calendar year 2021 to date, we have really made a significant commitment towards growing our product management team and seeing to it that we have dedicated product managers focusing on our various products. So, we’ve got a dedicated product manager focusing on the premium portion of the Wallpaper and Ringtone app. We’ve got a brand-new dedicated product manager focusing on Zedge Premium or marketplace. We have another brand-new dedicated product manager focusing on subscriptions and what we can do in order to grow that business over time with value adds and things of that sort. And then, we have a product manager that we’ve replaced focusing on new initiatives. And at this point in time, that is primarily around Shortz, although we have other things going on under the hood in terms of new potential product opportunities that is also being looked into by that particular product manager.

In terms of your marketplace and you have a lot of initiatives that are going to launch this summer. Two things that I heard you say stood out to me as kind of new. One was including NFTs, and if could you explain maybe how that would work? Would people actually bid for them on your site or have to go -- they’d be created there? And then, second, you said that you might be able to start paid acquisition marketing? And if so, how do you think about what that would be targeted for? Thank you.

Sure. With respect to NFTs, non-fungible-tokens, we view NFTs as being a valuable utility that will be attractive to artists that exist in our marketplace. Our requirements for that, if you will, are we want to make sure that they’re affordable. And so far as getting the NFT out there, the artist is not going to be in a position where they have to pay so much money to mint these NFTs, that it is not valuable for them. Number two is that they are sustainable from an environmental perspective. And then, number three, we want to do everything possible to provide for ease of use. And in today’s world, missing an NFT for most people complicated. It requires having a crypto wallet. It requires a lot of knowhow on the NFT side. We’re really trying to lower that bar to make this utility, one which is accessible to a wide array of artists, many of whom do not have the technical knowhow needed to those NFTs. In terms of whether or not we will avail those on third-party sites remains to be seen. But, we certainly want to make sure that they are embedded in our creator platform. Turning to your second question of our paid user acquisition. We are looking at this very analytically. We want to know that if we market to a particular segment. However you define that segment by demographic, geography, content taste, gender, you name it, that we can measure the return on ad spend and understand did that user base, did that segment generate a positive ROI when taking a look at their LTVs or lifetime value. So,, we have invested in building the infrastructure so that we have "all of that" -- those connections available, such shat, we will understand from the point of attribution, all the way through and including the customer signing up and then interacting with our product. Whether or not that’s a segment that we can afford to bring on over the positive ROI. And that will take -- that process is one where we will proceed cautiously when we find and hopefully unearth segments that make a lot of sense. We’ll begin to spend more money on acquiring those segments accordingly. Until such time that we cross the threshold or we say, oh, financially, we can’t go beyond this amount of money for this particular segment. Does that answer your question?

Yes. That’s great. I just had a few housekeeping things, and I’m done. One is, so you’ve made some hires that should be positive on future growth. Is the way to -- I’m guessing that not all the cost of them was in this current quarter, or is this current quarter a good run rate, or it’s going to jump up from that level? Any color on that? Yes.

Well, some of these ads were brand new and were not part of our team this quarter. So I think that you will see some change. But on the flip side, there have been some people that have exited the Company. So, it’s really a balancing game. Yi, do you want to provide a little bit of color there?

Yes. Allen, so for the nine months until April 30th, we brought on about 13 developer, engineer, product managers and 6 of the 13 came onboard during Q3. And in terms of run rate, I mean, we are not done with the hiring yet. In Q4 we’re probably bringing on another two product managers. So, we’re probably going to -- if you’re looking for run rate, you probably need to factor into more hire -- or doing more hire.

That’s great. And then, just going back to seasonality, remind us -- I know you talked about it a little bit, but you did say that the July quarter, which is the next quarter, is typically higher on an absolute basis compared to the quarter you just had. But then I heard you say, I think that -- but your comparisons are getting tougher. But is there any reason that makes you think that there’s something about that -- or just something about the seasonality of how to think about the fourth quarter versus the third or just in general?

Yes. It’s probably too early in the quarter for us to be able to provide an educated answer there. But turning back to Q2 versus Q3, as you know, our Q2 is November, December, January. So, typically, we benefit from end of year ad spend, and then there’s a seasonal decline in the February, March, April timeframe, where ad budgets are cut back. And we then will begin to see that Q4 for us will be slightly above Q3. But, I think that is historical with all of the changes that we have going on in the app right now. It’s something that we’re not in a position to provide accurate guidance other than to say that overall, the business is holding up nicely.

Great. Thank you. My last question, just -- it’s a balance sheet, or it looks like you raised around $7.4 million in equity during the quarter. I’m guessing that it was from your -- from the $10 million ATM. Are you able to provide where that stands today and maybe where the share count is as -- it’s probably in your Q. I’m not sure if your Q came out yet? Thank you.

Yi, do you want to address that?

Yes. So, we raised about $7.4 million and we still have about $2.6 million -- or $2.7 of that, and we expect to complete the $10 million offering within the time. So, our current share count is somewhere around 14.2 million shares.

Excellent. Okay. Congratulations. Thank you so much.

Thank you, Allen.

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