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01/11 03:36
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Total Revenue $7.6 million, up 5.8% year-over-year. Growth driven by strong advertising CPMs and subscription revenues, offset by declines at Emojipedia and GuruShots.
Advertising Revenue Up 6% year-over-year. Growth in Zedge Marketplace offset by lower ad revenue at Emojipedia.
Zedge Plus Subscription Revenue Increased 29% year-over-year. Net active subscriber base grew 54%, reaching nearly 1.1 million subscribers. Benefits seen from optimized subscription plans.
Deferred Revenue $5.7 million, up 7% sequentially and 55% year-over-year. Reflects future revenue with nearly 100% gross margin.
Zedge Premium GTV Down 3.7% year-over-year. Average revenue per monthly active user increased 29.2%, indicating a shift toward higher-value users and improved monetization efficiency.
Cost of Revenue 7.3%, up from 6.4% last year. Increase due to reduced partner discounts from Google Cloud Services, Tapedeck licensing fees, and DataSeeds production costs.
SG&A Expenses Decreased 13% to $5.9 million. Reflects restructuring savings, partially offset by investments in DataSeeds and Tapedeck.
GAAP Income from Operations $0.9 million compared to a loss of $0.5 million last year. Improvement due to restructuring savings.
GAAP Net Income and EPS $0.8 million and $0.06, compared to losses of $0.3 million and negative $0.02 last year, respectively.
Non-GAAP Net Income and EPS $0.9 million and $0.07, compared to breakeven last year.
Cash Flow from Operations $0.8 million. Free cash flow was $0.6 million, negatively impacted by $350,000 in tax withholding payments related to restructuring and timing of accounts receivable/payable.
Adjusted EBITDA $1.2 million, up from $0.3 million last year.
Cash and Cash Equivalents $18.5 million with no debt. Sequential decrease due to share repurchase of approximately 240,000 shares.
DataSeeds: Interest from world-class companies is growing, with a second order from an AI sector leader being 25x the value of the original order. The DataSeeds Production Cloud (DPC) enables the creation of high-quality, rights-cleared datasets for AI model training, offering a unique and scalable solution.
Tapedeck: The pilot is progressing with positive feedback from artists. The service aims to provide independent artists with better economic models compared to traditional streaming platforms. Focus is on expanding the catalog, increasing listener engagement, and refining features.
Innovation Pipeline: The company is leveraging AI-driven development tools to accelerate product build cycles. Syncat was the first example, and additional Alpha products are expected in fiscal 2026. The approach emphasizes small, scalable concepts with low initial investment.
Subscription Growth: Active subscriptions reached a record 1.1 million, up more than 50% year-over-year. Average revenue per monthly active user increased by 29.2%, supported by healthy CPMs and higher-value users.
Advertising Revenue: Advertising revenue grew by 6%, driven by strong performance in the Zedge Marketplace, despite declines in Emojipedia.
Restructuring Savings: SG&A expenses decreased by 13% to $5.9 million, reflecting net savings from restructuring efforts.
Cash Flow: Free cash flow was $0.6 million, impacted by one-time tax withholding payments and timing of receivables and payables. Cash and cash equivalents stood at $18.5 million with no debt.
Capital Allocation: The company repurchased 240,000 Class B shares and paid its first quarterly dividend, reflecting confidence in long-term value creation.
Market Positioning: Zedge is focusing on both consumer and enterprise markets, with growth vectors including subscriptions, DataSeeds, and new product pipelines.
Emojipedia and GuruShots performance: Anticipated declines in performance at Emojipedia and GuruShots have created headwinds, though these were offset by strength in other areas.
Free cash flow pressures: Free cash flow was negatively impacted by restructuring-related compensation tax payments, reinvestments into initiatives like DataSeeds and Tapedeck, and quarter-specific movements in receivables and payables.
Cost of revenue increase: Cost of revenue increased due to reduced partner discounts from Google Cloud Services, Tapedeck licensing fees, and DataSeeds production costs.
Dependency on early-stage initiatives: Initiatives like DataSeeds and Tapedeck are in early stages, with limited revenue contribution and high investment requirements, posing risks if they fail to scale as expected.
Advertising revenue dependency: Advertising revenue growth is partially offset by declines in ad revenue at Emojipedia, indicating dependency on specific platforms for ad revenue.
Market competition and scalability: The company faces competition in providing rights-cleared datasets for AI training, and scalability of new products like Tapedeck and DataSeeds remains uncertain.
Revenue Growth: The company expects fiscal 2026 to be a year defined by growth, innovation, and expanding operating leverage. Revenue growth is anticipated to continue, supported by a strengthening marketplace and subscription engine.
Subscription Growth: Active subscriptions reached a record 1.1 million, up more than 50% year-over-year. The company continues to optimize subscription plans and expects further growth in subscription revenue.
DataSeeds Expansion: The company is focusing on expanding its DataSeeds business, with a robust pipeline of prospective customers and increasing order sizes. The DataSeeds Production Cloud is expected to provide a competitive advantage in delivering custom datasets for AI model training.
Tapedeck Development: The Tapedeck pilot is progressing, with plans to expand the catalog, increase listener engagement, and refine features. The company will evaluate performance metrics to determine the timing for broader expansion.
Product Innovation: The company plans to introduce additional Alpha products throughout fiscal 2026, focusing on small, scalable concepts that demonstrate early product-market fit.
Cash Flow Expectations: The company expects strong cash generation across the remainder of fiscal 2026, despite temporary pressures from restructuring-related payments and investments in high-potential initiatives.
Quarterly Dividend: Paid the first quarterly dividend during the quarter, reflecting confidence in the long-term value creation potential of the company.
Share Repurchase: Repurchased 240,000 Class B shares during the quarter, with approximately $600,000 remaining available under the current buyback authorization.
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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