Good afternoon, and welcome to Zedge's fourth quarter and end of fiscal year 2021 earnings conference call. During management's prepared remarks, all participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation by Zedge's management, there will be an opportunity to ask questions. To ask a question, please press star, then one on your touch-tone phone. To withdraw your question, please press star then two. 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 fourth quarter and full fiscal year that ended on July 31st, 2021.
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 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 all for joining us today. Good afternoon. Welcome to Zedge's fourth quarter and fiscal year-end 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 insight into our financial performance. We will then be happy to take your questions. On today's call, I will address the company's amended 10-Q filing for the third quarter ended April 30th, 2021, and briefly review our fiscal 2021 results. I'll then conclude by discussing the next stage in our evolution. During our year-end audit, we came to the conclusion that we have a material weakness in disclosure controls and procedures related to the reporting of the valuation allowance against deferred tax assets, resulting from incorrectly attributing this as a Q4 benefit when it should have been recognized as a Q3 benefit.
The change has no impact on our full-year results, and we are working diligently with our auditors and tax advisor to promptly remediate the weakness and ensure that we do not face similar challenges going forward. Now, moving on to our business. For those of you that are new to the Zedge story, we own a portfolio of leading digital consumer brands that serve 43 million monthly active users around the globe. Our portfolio consists of Zedge Ringtones and Wallpapers, the leading mobile app used for mobile phone personalization, social content, and fandom art, Zedge Premium, a marketplace for artists, celebrities, and emerging creators to market their digital content to Zedge's users, Emojipedia, the leading source of all things emoji, and Shortz, a mobile entertainment app currently in beta, focused on short-form storytelling. We possess deep expertise in monetizing our digital real estate, whether through advertising, subscriptions, or content sales.
Our products appeal to a wide range of customer segments globally, and we have a strong user base in North America and Europe, as well as in emerging markets and India in particular. We finished fiscal 2021, which ended on July 31st, 2021, on a high note, reporting full-year revenue growth of 107%, $8.2 million in net income and over $9 million in EBITDA, and GAAP EPS of $0.59 versus a loss of $0.04 last year. Our business has tremendous operating leverage, which led to a 40% operating margin for the fiscal year, and we generated over $10 million in cash flow from operations. We closed the year with $25 million of cash on our balance sheet and almost no debt.
Advertising revenue was the biggest driver of this growth as we continuously optimized our technology to drive higher prices received for every 1,000 advertising impressions, also known as CPMs. Subscription revenue and active subscriptions increased 101% and 49%, respectively, for the year. Although we experienced a material slowdown in active subscription growth during the second half of the year, we have a set of growth initiatives underway that we believe will reverse this trend. On a positive note, even though Zedge isn't a must-have app, we nonetheless maintained healthy renewal rates of approximately 45% and 60% for second and third-year renewals, respectively. Turning to some key performance indicators for a moment. Monthly active users, or MAU, increased 8% in the fourth quarter, with emerging markets up 16%, driven mainly by demand in India.
Developed markets remained a challenge, with MAU declining in the low double digits over the year. Despite this, our MAU, our average revenue per monthly active user increased 76% versus last year, demonstrating our strength in monetizing users. Developed markets are a key area of focus for us as they impact both advertising and subscriptions, and I will detail what is being done to deliver growth in these markets shortly. As we look to the future, many investors have asked important questions about the size of our opportunity, target growth rates over a sustained period, and what a mature operating model will look like in three to five years. While we are not yet in a position to provide this information, we are expanding our business from a solid foundation of 43 million monthly active users from which we will continue to extract value.
We are looking at ways to further fuel growth in our existing products, as well as introduce new products that can yield outsized returns. We will do this in a disciplined fashion by managing our risks while also looking for opportunities that have optionality. In fiscal 2021, we made great strides in progressing our product organization, which I believe positions us well for continued success. Over the course of the year, we invested in product management and now have dedicated product managers for our freemium Zedge app, Zedge Premium, our Zedge+ subscription offering, and newer initiatives, including Shortz. With the leadership in place, we have started shifting to a full stack product team structure to improve efficiency and quality. With the foundation set, I will now talk to our strategic priorities for 2022 and beyond.
A top priority is growing our customer base and improving engagement, particularly in well-developed markets. We've already started rolling out personalized recommendations, harnessing the machine learning algorithms that we successfully tested over the summer. Before the end of the calendar year, we plan to introduce social and community features which we will iterate on over time. Many of these initiatives are coming to fruition due to the foundational work we completed in fiscal 2021, including overhauling our content management system and unifying user accounts. We have also started testing and analyzing paid user acquisition campaigns, and we'll expand this effort as long as it proves to be accretive. Next, we will continue investing in the parts of our business that offer optionality. For Zedge Premium, this means introducing one-of-a-kind and limited edition content in a user and eco-friendly fashion developed through technology innovation.
One planned part of this new content offering will include introducing NFTs as a way for our artists and creators to offer protected, unique content. We will also test new content genres and audio implementations in Shortz, while expanding the user base with paid user acquisition and simultaneously deepening our understanding of the target demographic. Beyond personalization and short-form entertainment, we are evaluating several potential new product opportunities, but it is too early to provide further details at this time. We are also committed to enhancing our subscription offering by creating value-added bundles like exclusive content and enhanced features, as well as possibly introducing a multiproduct subscription offering. Unlocking Emojipedia's value is another priority. We are committed to growing Emojipedia's business beyond desktop and mobile web by opening it up to the world of native mobile apps.
Coupled with this is our interest in localizing Emojipedia and supporting other languages beyond English. Our team is also planning on improving monetization by enhancing the ad stack and possibly offering a subscription product. Finally, there's M&A, where we are searching for symbiotic opportunities that can benefit from access to our large user base, our expertise in monetization, our technical know-how, and our skill in managing a complex platform, amongst other benefits. Of course, I cannot assure you that any of these will come to fruition, but suffice it to say, we are actively looking, have engaged in some discussions, and have passed on others. In closing, we had an outstanding record year in fiscal 2021, but are not resting on our laurels and are working diligently to drive longer-term growth.
That said, given it is early in the year and we have some pretty tough comps to beat from fiscal 2021, we are starting the year guiding to top line growth of 25%-30%. At these levels, we expect continued net income growth, strong operating margins and cash flow, and strong EBITDA growth. Before handing the call over to Yi, I want to thank you, our investors, for your support. I also want to remind everyone that our success is a direct outcome of the outstanding team of talented and dedicated professionals who work at Zedge and who go above and beyond to execute our vision. Thank you. Now I'm going to turn the call over to Yi, who will provide details about our financial performance. Yi?
Thank you, Jonathan. I want to start by reminding those on the call that our fiscal year ended July 31st. Additionally, the term active subscription is a metric used by Google Play that now includes account hold, which is a subscription status that begins when the user's form of payment fails. If the three days grace period has ended without payment resolution. The cancel period lasts up to 30 days with the aim to encourage renewals and reduce the cancellation rate. Once an account goes past the 30-day grace period, it is no longer an active subscription. Moving to our fourth quarter results. MAU, defined as the number of unique users who open our app during the last 30 days of the period, increased 8% to 34.4 million during July, versus 31.9 million in July 2020.
Emerging markets now expanded by 16%. Total revenue in the fourth quarter increased 93% from last year to $5.2 million. This year, we benefited from our ongoing work to improve our ad operation. Subscription revenue were up 55% from last year, still demonstrating strong growth despite a slowdown in net addition during the second half of the year. Zedge Premium gross transaction value, or GTV, that is the total sales volume transacted through our marketplace, was about $274,000, up 45% compared to the year-ago quarter and 9% sequentially. As Jonathan indicated, this is the key focus for us going forward, as we believe the potential of the marketplace is still substantially untapped. Active subscription was up 49% versus last year.
Beginning July 1st, 2021, Google updated its policy and reduced fee for the first 1 million of in-app purchase to 15%, which include subscription and token sales, and it then increased to a 30% fee thereafter. After 12 months, this fee dropped back down to 15% for annual and monthly subscription, they are renewed. This fee is accounted for as a marketing expense within SG&A. In Q4, we continue to see annual second renewal rate of approximately 45% and third-year renewal are coming in at 60%, which is generally considered to be a strong performance within the industry for a non-essential app.
The slowdown in net subscription growth in the second half of the year was basically due to the number of new subscriptions added being offset by our churn rate, which has remained a constant percentage, even as we grew to a higher base number of subscriptions. This is a common problem for consumer subscription as the subscriber base gets larger. As Jonathan mentioned, we are taking steps to return this number to a net positive. Overall, the ARPMAU was $0.05, an increase of 76% year-over-year, driven by the combination of better advertising performance and higher paid subscription number versus last year. Operating margin increased to 42% versus 14% last year, reflecting the continued revenue growth and strong operating leverage inherent in our business.
Net income and diluted EPS were $2.5 million and $0.17, respectively, versus net income of $500,000 and EPS of $0.04 in the prior year. Average shares outstanding for the full quarter was about 15 million on a diluted basis, with an increase representing the share issuance during the year as part of our now completed ATM, combined with option exercises. EBITDA was $2.7 million versus $830,000 last year. From a liquidity standpoint, we remain in a strong net cash position with almost no debt and nearly $25 million in cash and cash equivalents, a $20 million increase from last year, and flat sequentially, despite having put about $4.8 million in cash into escrow for the Emojipedia acquisition during Q4.
Now, I would like to provide some more color on the guidance Jonathan provided for fiscal 2022. As he said, we are initially providing guidance for revenue growth of 25%-30% for the year. Due to all of the new initiatives and future releases, seasonality, which usually peak in our second fiscal quarter, may not be typical this year. Internally, we are modeling sequential revenue growth each quarter. As we get into the year and have better visibility into the impact of our new initiative, we expect to provide updates as appropriate. Despite the increased level of investment, we currently believe that we should continue to report operating margin of at least 40% for the year. For modeling purpose, we expect to be a taxpayer this year at an expected rate of 21%.
As we use all of our NOL in fiscal 2021. I would also suggest using 15 million shares-15.4 million shares for calculating diluted EPS. Given the increases in the non-cash items, most significantly the tax rate, we expect this to be a drag on our EPS growth in fiscal 2022. However, as Jonathan stated, we anticipate continued net income growth with strong cash flow and EBITDA growth. For EBITDA, we are targeting a growth rate that is slightly higher than our revenue guidance. Thank you for listening to our fourth quarter earnings call, and I hope that each of you remain safe. I look forward to speaking with you again on the next call. Operator, back to you for Q&A.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Thank you. Our first question today is coming from Allen Klee at Maxim Group. Your line is live. You may begin.
Good afternoon. Great results. One area that stands out to me is Zedge Premium, where it looks like your efforts have, you know, you showed good traction with gross transactional value. Can you talk a little about kind of what you would attribute that to and how you think about what you're gonna do going forward that should hopefully continue this?
Hi, Allen. Thanks so much for the compliment and great question. As you recall, in 2020 and early 2021, we had a major overhaul of our content management system. We also had mentioned that we were doing optimizations in terms of what the page layout looked like. That has been certainly a contributor in that growth. The net result of the overhaul of the content management system is one which allows for us to co-mingle both freemium content together with premium content, making it more available and prominent to users across the board. The work on the user interface is ongoing. Those are certainly two ingredients that we've been using in order to drive that growth.
In terms of, you know, our future efforts, there is going to continue to be optimizations that we undertake. We also, as we've mentioned in previous calls, have a dedicated product manager that is now focusing on this area. We're going to be launching our NFT product in Zedge Premium as well. Our hope is that the combined efforts of improving the product, making it more visible, having artists promote their wares, as well as also bringing in potentially new content forms will all contribute to driving that part of the business. I'll close by saying that one of the goals that we have as well is to increase the artist community that participates in Zedge Premium today. More high quality artists is something that we have on our radar screen.
Our ability to avail that content to users, whether it be through search and discovery improvements that we have made and continue to invest in, will also be a part of driving growth in that part of the business.
Thank you. On the subscription side, a couple of things. Good year-over-year growth. It's slowing down sequentially. Talk a little about the actions you're looking to do to grow that. Is there a way to think about, with Google changing their policy to move to 15% take in the first year from 30% starting January 1st, how potentially meaningful that could help you guys?
Sure. In terms of subscriptions, we've got several different things that we're focusing on. One is overall improving the value of subscription by potentially offering whether it be content or other value adds that we can add to the subscription bundle. We also are seriously looking at rolling out subscriptions on iOS. We are looking at ways in which we can take advantage of NFTs in the subscription model. Although that is, you know, very, very early stage. I don't know if that will ultimately come to fruition, but nonetheless, something that we are looking at.
In terms of the benefit of both Google and Apple lowering the subscription commission from 30% down to 15%, that can benefit us to the tune of give or take around $150,000. In the event that we roll subscription out on iOS, there's that potential there. On the Google platform, that can be an incremental $150,000 that flows down to the bottom line.
That's great. With your area of focus on developed markets, which is a key area and a goal to grow that, could you talk a little about that slowed down in the last quarter, kind of what the areas of action are to try to increase developed market subscribers or, I mean, monthly active users?
Sure. As we've discussed in the past, we're expecting to roll out social features and community features before the end of the calendar year, and then incrementally improve upon those social and community features. Our expectation is that will result in engaging customers and drawing customers back. Features like Follow Me or you can follow a particular artist, just by way of example, are two features that we're going to begin to embed in the overall user experience. Coupled with that, we are investing in marketing automation, and you know, in a measured fashion, driving users into the app based upon sending them a push notification, and tying that to specific needs or interests that they have.
Items which I guess more generally would be described as gamification of the app. By way of example, if there's a new piece of content from a particular genre that you like or a particular style that you like, you would actually see a little, let's say, red dot on the app icon that sits on your phone. Our expectation is that it will translate into drawing users back into the app more regularly. Those are all actions that are very much focused on increasing engagement, and specifically, we are optimizing this for the Tier 1 markets accordingly. Separate and apart from that.
[crosstalk]
Yeah, separate and apart from that, we have started to invest in paid user acquisition campaigns, and those are solely focused on the Tier 1 markets. Our goal there is to, in a measured fashion, acquire users in these Tier 1 markets, in a fashion where those users are ROI positive. If we reach a threshold where you know, we're unable to bring a user on for a profit margin, then we will you know, trim back on that spend accordingly.
That's great. Emojipedia, now that you've had it under your belt for a little bit, a couple of months, not a couple of months, a couple of weeks, whatever. What's your impression now and your thoughts, you know, of how meaningful this could be to your company overall?
Sure. Still a little bit early to answer that question, and we're looking at several different possibilities with respect to product development and further enhancing what this property offers today. As I think you know, Emojipedia is likely the number one leader when it comes to anything and everything having to do with emojis. It is an ad-supported business today. In early 2022, I believe that we will begin to overhaul the ad portion of the business and potentially explore other ways in which we can actually monetize the site. At the same point in time, look for opportunities to expand the business across you know the world of native mobile apps.
Maybe that means embedding their content within the existing Zedge flagship app or actually, at some point in time, spinning out a separate standalone, Emojipedia type app. Those are all options that we are looking into today. I want to reiterate that the beauty of this acquisition is that Emojipedia on a standalone basis just continuing to do what it currently does is accretive to us, has outstanding gross margins, which really align with our flagship business and helps us in terms of increasing our monthly active user base to somewhere around 43 million monthly active users. As you can imagine, Emojipedia is also got a very strong user base in developed markets.
We also believe that there is opportunity to grow that business in emerging markets, potentially by localizing Emojipedia and offering it in different languages, that will result in making it relevant to folks that are not English speakers accordingly. That's a potential new growth trajectory as well.
Is there a way to cross-sell to Emojipedia and Zedge users to try to get them to engage in the other products?
Absolutely. I just wanna let you know that we are looking at that. What we wanna be pretty careful about is maintaining the experience and the expectation that the core user base has in Emojipedia. And as a result, we are, you know, proceeding deliberately and slowly and monitoring changes that we make so that we don't inadvertently cause users to become frustrated and potentially look elsewhere for emoji-related content. Having said all of that, no question of a doubt, we have had several conversations internally about how we can do that and when we should do that.
Also, as I'd said, exploring other ways in which we can make the Emojipedia content viable, beyond the world of web, in native mobile apps, as well as potentially, incremental monetization opportunities, that can help further grow that business accordingly.
Thank you. For Shortz, could you provide an update of your strategy for this coming fiscal year?
Sure. Let's move back in time. Give or take around six months ago, we had brought in a new product manager to really take control of Shortz. He spent and invested a fair amount of time in making sure that we have all the tools and plumbing in place that would help us in terms of optimizing the experience as well as understanding what users were doing and what user segments were engaging with the app accordingly. We also started to roll out on a test basis, Shortcasts, which are audio versions of these stories.
Looking into fiscal year 2022, we expect to further expand that audio offering, and look at ways in which we can either create podcast narratives, or bring on influencers that will translate into driving users into the app, consuming the content, and giving them ubiquity so that they can either listen and/or read. We also are investing time in understanding better what are additional content channels or content genres that would resonate with various user segments accordingly. Finally, investing in paid user acquisition with the goal seeing to it that, you know, we've got a positive return on ad spend.
I'm happy to say that, you know, with the modest budget we've been investing in Shortz for the last couple of months, we have been able to achieve that result. All of those taken together are going to drive our investments in this app and in this overall content type, you know, for the foreseeable future. In the event that we come to a point where we see that return on ad spend is negative or that we cannot continue to engage users and improve monetization and engagement and so on and so forth, then, you know, we will update investors and sort of let them know what we wanna do at that point in time.
For now, it continues to be an area of innovation and development for us. We believe that there is an increasing demand for having great storytelling platforms, and we wanna be a part of that ecosystem, if you will. This will continue to, you know, get resource investment, you know, in the company.
That's great. A question on your average monthly revenue per monthly active user. That's been very strong year-over-year, up, you know, 77% or so. But is there any way to think, I mean, is it reasonable to think that the current rate is probably a reasonable assumption going forward, or is there any reason to think that there's opportunity for that rate to go up even higher?
Yeah. I think that I'm not able to provide you with a clear answer, but I can share with you that there are a couple of different forces that are playing in the business that could result in, you know, an improvement or potentially, you know, slow things down. On the improvement side, you know, we continue to invest time and resource in optimizing the app and seeing to it that we are committed to driving new users in and new users from Tier 1 markets.
If we are successful in achieving that goal, just by dint of the fact that users in well-developed markets monetize at a higher CPM than users in emerging markets, that could result in you know driving you know that number, that KPI, that key performance indicator up. At the same point in time, you know, it's important to note that MoPub, who has been our mediation platform, that is the platform where all of our inventory, ad inventory is available for sale, was recently acquired by AppLovin. AppLovin may disable the MoPub mediation platform at some point in the future. In the event that that happens, we will need to invest resource and see to it that we migrate to a new mediation platform.
There's always a risk. That's a major undertaking. There's always a risk that you know, we'll hit some air pockets there. Obviously, each mediation platform has its own secret sauce that, so to speak, needs to be learned in order to yield the greatest return accordingly. You know, those are just two potential areas that could help or potentially slow us down a little bit in terms of improving that rate.
That's great. Congratulations. Thank you.
Thank you.
Thank you. Our next question today is coming from Brian Warner, a private investor. Your line is live. You may begin.
Hi, guys. Congratulations on a good year. I got a couple of clarifications and then a question or two if I could. On the clarification, did I hear correctly that for the year, we should be thinking about a tax rate for reporting purposes of about 21%? Is that a fair assumption for cash taxes as well? Another question. Did I hear correctly that in December, you're going to start to introduce some of the social features on the app? Just wanted to confirm that. You've got about $25 million, and you spoke about potentially going into a couple of new products or different products, and you also spoke about potential, you know, sort of an acquisition.
I don't know if funnel is the right word, but I'm just wondering if you can give a little bit more color on sort of what would be on your acquisition wish list, including how large a deal you're more likely to make, you know, or give us a sense of what the range might look like if you could.
Hey, Brian. Thanks so much for the comment. What I'll do is I will take the social features and M&A question, and then I'll hand over to Yi who can provide you with feedback on the tax-related question. You are correct. What we have said is that we are going to begin to roll out social and community features in give or take December of this year. Those will continue to roll out on an iterative basis going forward. We also had mentioned that we are going to launch NFTs before the end of the calendar year. We will launch with one-of-a-kind content to start with.
In calendar 2022, we will begin to improve upon that by offering limited edition and potentially auctions and drop dates and a trading platform. All those features are ones that we are looking at closely based upon what we see in the use and consumption of NFTs that will drive where we invest and how we roll out and enhance that NFT offering. Turning to M&A for a second, you know, I don't want to get into too much detail because we are trying to be smart about potentially how we put that money to work.
Sure.
At the same point in time, we are looking at, I would say generally speaking, opportunities that can help in growing either our existing business or would complement our existing business in a, you know, meaningful fashion. We've had some opportunities that, you know, we've had lengthy diligence underway, and for one reason or another, ultimately had, you know, walked away. We're keeping our ears close to the ground in terms of properties and apps and assets that can either help us in terms of growing our customer base and revenue base and/or ones which, you know, have a strategic value in terms of accelerating our growth accordingly.
Got you. One just a quick follow up before I forget. You had mentioned one of the benefits of overhauling your app is you're able to get a, if I understood correctly, more sort of premium products in sort of the general ecosystem, so it has more exposure. I guess I'm wondering whether that same benefit will accrue to you with the NFTs, if I understood this correct.
Sure. I think, yeah, what you're saying definitely, you know, it definitely aligns with our thought process. The foundation for having overhauled the content management system was precisely to avail content to users in a fashion which made it much more available and prevalent to them.
Mm-hmm.
That is manifested across so many different ways in which users interact with the app, whether that means that they're just scrolling through, you know, the homepage, whether that's through, you know, search, whether that's through discovery.
Sure.
Taking advantage of the benefits of, let's say, machine learning in order to serve up the right content. Our fundamental belief is that, when a user enters the Zedge app, their first and most important goal is to see to it that they are being served the content which is relevant to them. If that is content which is free content or if that's content which is premium content, if it's relevant, we think that will serve us a great advantage in terms of ultimately driving revenue from that customer. With that in mind, that has helped in terms of our expansion of GTV. Our hope and expectation is that as we roll out NFTs, that will also contribute to the purchase of the NFTs in our platform. Yi, do you wanna handle the tax question?
Yes, I would be happy to, Brian. For fiscal 2021, we expect to use up our [ audio distortion], which is about $5.6 million. Going to fiscal 2022, we, you know, for budgeting purpose, we use 21% tax rate, which would be also a cash pay. We'll be obviously making quarterly payment, depending on how profitability outlook is.
Mm-hmm.
In terms of state taxes, we still have NOL available in California, in New York, and Connecticut. We don't expect to be a net taxpayer on the state level. I hope that answered your question.
Yeah, that does. Exactly. Thank you so much.
Thank you.
We'll be in touch.
Thank you, Brian.
Thank you. Our next question today is coming from William Vaughan at RegentAtlantic Capital. Your line is live. You may begin.
Hey, guys. Congratulations on the good quarter. My question relates to Zedge Premium. You mentioned that as a non-essential app, there's a lot of churn. Do you expect that churn to continue at the same rate as a non-essential app, or do you think over time, as the community grows and the flywheel expands, that churn will eventually get lower? What are some ways and initiatives that you think you'd be able to achieve that?
Sure. William, thanks so much for the comments. Let's just go back to what we said. What we had said is correct. You know, if you take Zedge and compare it to a Waze or to a Netflix, you know, by way of example, we're sort of classifying those as you gotta have those apps on your phone. If you drive, everyone uses Waze or some sort of mapping app. If you're consuming you know, movies, chances are, you know, you're a Netflix subscriber. It's you know, in contrast to that, we mean non-essential.
With respect to churn, what we had said was, in our paid subscription business, we're seeing what we believe to be rather healthy renewal rates, in you know, first and second year renewals, even though we are quote-unquote a non-essential app. I would say that, you know, in terms of the broader question that you had, our investment in things like social and community features are specifically geared towards improving engagement, and driving users back into the app on a you know, more regular basis, and engaging with the content that they find appealing and of interest to them. That is no question of a doubt an area of focus for us.
It's one that we've been investing resource into for a while, and, you know, I won't say the finishing line is near, but the starting line of being able to roll those features out is, you know, going to take place in calendar year 2021. We will continue to invest in that on a iterative basis, rolling out enhancements, and other features within that set of opportunities on an ongoing basis. The ones that are working, we will double down on. The ones that aren't working, we'll have to see, hey, why isn't it working? Is it because we have not, you know, rolled it out in the best possible way, or is there some other factor in there that, you know, we need to be sensitive to?
Yeah. Thank you for the clarification on the renewal rates. That's good color. I'll follow up. What do you think are the main drivers that are bringing artists and creators to the Zedge Premium app? You know, what are the main ways of adding value, and what are ways that you're thinking of adding more value to get more creators into that ecosystem?
Sure. First of all, Zedge Premium is not an app. Zedge Premium is a marketplace that is embedded into our existing Zedge Ringtone and Wallpaper app or Zedge Wallpaper app on iOS. What we have been, you know, I would say religious about from day one is seeing to it that we've, you know, have built a marketplace by artists that is, you know, geared to artists. We wanna make sure that artists understand and it's very intuitive to them what they are capable of doing within Zedge. Artists are attracted to our platform because they know they have access to 35, give or take, 35 million monthly active users that can find their art and can then make a decision as to whether or not they want to purchase that art.
In addition to that, artists are making money off of that. So you can imagine that, you know, there's a nature photographer that is doing this in order to enhance their income. We're a very fair platform, and they have the potential of generating revenue from their, you know, art form accordingly. Separate and apart from that, as many of you know, in the past, we've had relationships with mega artists, whether they be musicians or Hollywood studios and the like.
For revenue growth of 25%-30%. I wanna get a little bit more color on the assumptions there. You mentioned coming off of, you know, a really tough base in the last year. Is that being conservative in terms of revenue growth based on, you know, what you already have sort of in the app and in the platform, or how much of, you know, your new strategic growth initiatives and different things like social pieces on the app are factored into that?
Sure. That number really includes, you know, an analysis from what we believe we know, across any and all aspects of the business, today. You know, time will tell if we've been, you know, too conservative or, if we've been too aggressive in, proving those numbers out. I can say that the overall, you know, budgeting process is one which is very thorough. We get all of our product managers involved. You know, they go through several iterations providing their assumptions. Those assumptions are vetted.
We also need to see to it that those assumptions align with resource investments so that, you know, if a product manager expects to roll out a particular feature set in a particular period of time, and that will impact revenue, we wanna make sure that that aligns with what our resource availability allows for and that we've accounted for those resources and contingencies, you know, accordingly.
All right, awesome. Yeah, thanks for answering my questions. Congrats once again on a great quarter.
Really appreciate it. Thank you.
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