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01/11 07:56
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: while subscription growth and Zedge Premium performance are positive, overall revenue is down 10% YoY, and GuruShots faces significant challenges. Restructuring and increased SG&A expenses add to concerns. The Q&A reveals uncertainties about cost savings realization and restructuring impacts, with unclear management responses. Despite some positives, the negative factors outweigh, suggesting a likely stock price decline in the next two weeks.
Total Revenue $7 million, down 10% year-over-year due to advertising headwinds and challenges at GuruShots.
Subscription Revenue Up 13% year-over-year, reflecting effective monetization of the user base.
Active Subscribers Increased by 22% year-over-year, driven by higher value subscriptions and upselling legacy subscribers.
Zedge Premium GTV $700,000, up 27% year-over-year, attributed to feature and content offerings and monetization expertise.
ARPMAU Grew 9% year-over-year to $0.078.
GuruShots Revenue Down 33% year-over-year, but only 4% sequentially.
Cost of Revenue 6.4%, roughly flat year-over-year.
SG&A Expenses Increased by 9% to $7.1 million, driven by marketing expenses related to user acquisition.
GAAP Loss from Operations $2.2 million, compared to $12 million last year.
GAAP Net Loss $1.7 million, compared to $9.2 million last year.
Loss per Share $0.12, compared to $0.66 last year.
Non-GAAP Net Loss $0.2 million, compared to Non-GAAP net income of $0.5 million last year.
Cash Flow from Operations $0.7 million, down from last year.
Free Cash Flow $0.6 million, down from last year.
Adjusted EBITDA Negative $0.1 million, compared to positive $1.5 million last year.
Cash and Cash Equivalents Over $20 million at the end of the quarter.
Share Repurchase 245,000 shares bought back under a $5 million program.
Subscription Revenue Growth: Quarterly subscription revenue growth remained strong, increasing 13% year-over-year, reflecting success in monetizing the user base.
Zedge Premium GTV Growth: Zedge Premium's GTV grew 27% year-over-year, driven by feature and content offerings.
pAInt 2.0 Launch: The launch of pAInt 2.0 introduced new creation capabilities, gaining traction with increasing engagement metrics.
AI Audio Creator Expansion: Plans to expand Zedge Marketplace's gen AI capabilities by offering an AI audio creator to engage users.
AI Emoji Generator: Introduction of Emojipedia’s first AI feature, an AI emoji generator, allowing users to design custom emojis.
Ad Revenue Impact: Challenging macro environment negatively impacted ad revenue, with a 10% decline in total revenue to $7 million.
TikTok Market Positioning: TikTok's return to app stores is yielding encouraging results, with expectations of improved ad revenue.
Restructuring Plan: Announced restructuring to improve operational efficiency, profitability, and free cash flow, expecting to reduce annualized expenses by approximately $4 million.
Workforce Reduction: 22% reduction in global workforce, primarily affecting GuruShots team and closure of Norway office.
Cost Savings: Expected annualized cost savings of approximately $3 million in compensation-related expenses and $1.2 million from retention bonus expirations.
Focus on Monetization Strategies: Continued optimization of ad inventory and engagement-driven monetization strategies.
GuruShots Revamp: Plans to reimagine GuruShots 2.0, focusing on gameplay, content generation, and monetization.
Ad Revenue Decline: The unclear regulatory status of a TikTok ban led to TikTok reducing user acquisition spending, negatively impacting ad revenue across the industry. This resulted in a 10% decline in total revenue year-over-year to $7 million.
CPM Decrease: Due to reduced demand from high bidders, CPMs fell across the industry, although Zedge's optimization efforts helped to partially offset this decline.
Restructuring Costs: Zedge announced a restructuring plan to improve operational efficiency, which included a 22% reduction in workforce and is expected to incur approximately $1.1 million in additional restructuring and non-cash asset impairment charges in the upcoming quarters.
GuruShots Challenges: GuruShots faced a 33% decline in revenue year-over-year, indicating ongoing challenges in this segment, although a slight sequential revenue decline was noted.
Economic Environment: The macroeconomic environment presented challenges that affected advertising revenue, with expectations of continued monitoring of the situation regarding TikTok's market presence.
Increased SG&A Expenses: SG&A expenses increased by 9% to $7.1 million, driven by higher marketing expenses related to user acquisition and subscription model costs.
Restructuring Initiative: Zedge announced a restructuring to improve operational efficiency, profitability, and free cash flow, expecting to reduce annualized expenses by approximately $4 million.
Subscription Revenue Growth: Quarterly subscription revenue grew 13% year-over-year, with a 22% increase in active subscribers.
Gen AI Strategy Expansion: Zedge plans to expand its gen AI capabilities by introducing an AI audio creator, tapping into the demand for customizable audio content.
GuruShots Revamp: Zedge is reimagining GuruShots 2.0 to unlock value, focusing on gameplay, content generation, and monetization.
Emojipedia AI Feature: Introduction of an AI emoji generator, monetized with rewarded videos, to enhance user engagement.
Revenue Outlook: Zedge expects to see improvements in revenue as TikTok returns to the market, with cautious optimism that the worst of the ad revenue decline is behind them.
Cost Savings Impact: Restructuring savings are expected to positively impact financials starting in Q3 and culminating in Q4.
Share Buyback Program: Zedge plans to continue buying back shares under the existing $5 million authorization.
Future Financial Projections: Zedge anticipates improved cash flow and adjusted EBITDA in the third and fourth quarters as restructuring savings take effect.
Share Buyback Program: During the quarter, we bought back 245,000 shares under our $5 million share repurchase program that was announced in Q1.
The earnings report shows mixed signals: strong revenue growth and improved financial health, but challenges with early-stage initiatives and unclear guidance on key projects like DataSeeds and Emojipedia. The Q&A revealed management's avoidance of direct answers, particularly concerning conversion times and outlooks, raising uncertainties. While dividend payments and share repurchases are positives, dependency on specific platforms for ad revenue and losses in GuruShots pose risks. These factors collectively suggest a neutral sentiment, with potential for slight positive movement if uncertainties resolve favorably.
The earnings call presents a mixed picture: while subscription revenue and deferred revenue showed strong growth, significant declines in other areas like GuruShots and Emojipedia due to competitive pressures and cost-cutting measures are concerning. The Q&A session reveals some uncertainty in management's responses, particularly around strategic initiatives and addressing competitive challenges. Despite restructuring costs impacting financials, the company is reinvesting in growth areas and share repurchases. The overall sentiment remains neutral, as positive subscription trends are offset by operational losses and competitive pressures.
While Zedge has shown positive signs, such as subscription revenue growth and restructuring benefits, challenges like macroeconomic volatility and user acquisition issues persist. The Q&A revealed management's reluctance to provide specific guidance, raising concerns. The stock buyback program and restructuring savings are positive, but the lack of clear guidance and competitive pressures balance out the positives, leading to a neutral sentiment.
The earnings call presents a mixed picture with some positive developments like subscription growth and share repurchases. However, significant challenges include a 10% revenue decline, restructuring costs, and cash flow concerns. The Q&A revealed management's lack of clarity on restructuring charges and revenue forecasts, adding uncertainty. Despite optimistic guidance on future initiatives, these issues, coupled with macroeconomic and regulatory risks, suggest a negative short-term outlook.
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