• Total Revenue: $7 million, down 10% year-over-year.
• Subscription Revenue: Increased 13% year-over-year.
• Active Subscribers: Up 22% year-over-year.
• Zedge Premium GTV: Approximately $700,000, up 27% year-over-year.
• 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% for the quarter, roughly flat year-over-year.
• SG&A Expenses: Increased by 9% to $7.1 million.
• Restructuring Charges: $0.5 million.
• Non-Cash Asset Impairment Charges: $0.8 million.
• GAAP Loss from Operations: $2.2 million.
• GAAP Net Loss: $1.7 million, or $0.12 per share.
• Non-GAAP Net Loss: $0.2 million, or $0.01 per share.
• Cash Flow from Operations: $0.7 million.
• Free Cash Flow: $0.6 million.
• Adjusted EBITDA: Negative $0.1 million.
• Cash and Cash Equivalents: Over $20 million.
• Share Repurchase: 245,000 shares bought back.

• Warning! GuruFocus has detected 4 Warning Signs with ZDGE.

Release Date: March 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Zedge Inc (ZDGE) reported a 13% year-over-year increase in subscription revenue, reflecting effective monetization of its user base.
• The company achieved a 22% increase in active subscribers, driven by upselling legacy subscribers to higher value plans.
• Zedge Premium's Gross Transaction Value (GTV) grew 27% year-over-year, indicating strong momentum in premium offerings.
• The launch of pAInt 2.0 on iOS and Android introduced new creation capabilities, significantly boosting engagement metrics.
• Zedge Inc (ZDGE) is implementing a restructuring plan expected to yield annualized cost savings of approximately $4 million, enhancing operational efficiency and profitability.

Negative Points

• Total revenue declined 10% year-over-year to $7 million, primarily due to advertising headwinds and challenges at GuruShots.
• The unclear regulatory status of TikTok led to a temporary removal from app stores, negatively impacting ad revenue.
• GuruShots revenue decreased by 33% year-over-year, highlighting ongoing challenges in this segment.
• Adjusted EBITDA for the quarter was negative $0.1 million, compared to positive $1.5 million in the prior year.
• The company incurred restructuring charges of $0.5 million and non-cash asset impairment charges of $0.8 million during the quarter.

Q & A Highlights

Q: Could you clarify the expected restructuring charges for the third and fourth fiscal quarters? A: Jonathan Reich, CEO, explained that due to accounting rules, certain severance and termination benefits can't be accrued until communicated to impacted employees, which occurred in February (Q3). Impairment costs related to office space in Shanghai will be recorded in either Q3 or Q4, depending on sub-tenant negotiations.

Q: What are the expected annualized cost savings from restructuring, and when will these savings be realized? A: Jonathan Reich, CEO, stated that the restructuring is expected to yield $3.9 million to $4.1 million in annualized cost savings, approximately $1 million per quarter. These savings should start reflecting in the third quarter.

Q: How is the company addressing the challenges with GuruShots and monthly active users? A: Jonathan Reich, CEO, mentioned that the focus is on optimizing revenue performance and reducing ad spend for GuruShots. They are in the ideation phase for GuruShots 2.0, aiming to improve the game and unlock its value. For monthly active users, the strategy involves product innovation, subscription growth, and optimizing ad inventory.

Q: What is the status of the AI audio feature and other AI initiatives? A: Jonathan Reich, CEO, indicated that the AI audio feature is expected to be added to the Zedge marketplace in the next couple of months, likely in Q3 or early Q4. Other AI initiatives like WishCraft and AI Art Master are still in beta, with decisions on their future expected by the end of Q3.

Q: How does the company plan to manage the potential impact of lifetime subscriptions on revenue? A: Jonathan Reich, CEO, explained that the company has a large influx of new users regularly, allowing room to maneuver with different subscription tiers. They aim to segment users to yield the best outcomes, offering annual, monthly, and lifetime subscriptions, alongside free tiers and rewarded video interactions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.