Zedge(US:ZDGE)2024-03-15 20:15User Engagement and Product Development - As of January 31, 2024, the Zedge App has been installed nearly 648 million times and had 28.8 million monthly active users (MAU)[102]. - In fiscal 2023, Zedge introduced pAInt, a generative AI wallpaper maker, and upgraded Zedge+ to enhance user experience[103]. - As of January 31, 2024, Zedge had approximately 648,000 active subscribers, following the introduction of a subscription tier in the iOS version of the app[105]. - GuruShots, acquired in April 2022, engages approximately 30-40 million amateur photographers monthly and hosts over 300 competitions, resulting in 700,000 uploaded photographs and 3.5 billion perceived votes each month[108]. - Emojipedia, acquired in August 2021, received approximately 32 million monthly page views and had 8.7 million MAU as of January 31, 2024[111]. - Zedge plans to enable GuruShots players to sell their photos as Zedge Premium artists, leveraging synergies between the two platforms[110]. - The company is developing a new mobile game, AI Art Master, currently in soft-launch, aimed at enhancing user engagement and retention[110]. - MAU for Zedge App decreased by 10.6% to 28.8 million compared to 32.2 million a year ago, with emerging markets representing 78.1% of total MAU[117][118]. Financial Performance - Total revenue for the three months ended January 31, 2024, increased by 11.3% to $7,771,000 compared to $6,983,000 in the prior year[124][125]. - Advertising revenue for Zedge increased by 18.4% to $5,482,000, attributed to a recovery in advertising prices[128]. - Subscription revenue increased by 24.3% to $1,088,000, driven by new iOS and Android subscription offerings[129]. - Subscription billings (Non-GAAP) increased by 78.0% to $1,477,000 compared to $830,000 in the same period last year[126]. - Zedge Premium gross revenue increased by 22.6% to $537,000, while net revenue increased by 21.0% to $277,000[126]. - For the three months ended January 31, 2024, other revenue increased by 22.6% year-over-year, driven by a 22.6% increase in Gross Transaction Value (GTV) on the Zedge Premium platform[130]. - Digital goods and services revenue declined by 26.4% year-over-year, primarily due to a 24.3% decrease in GuruShots' Monthly Active Users (MAP)[131]. - Advertising revenue increased by 14.3% for the six months ended January 31, 2024, attributed to a recovery in the price per advertising impression[132]. - Subscription revenue rose by 16.9% for the six months ended January 31, 2024, supported by new iOS subscription offerings and lifetime subscriptions for Android users, leading to a 57.6% increase in subscription billings[133]. Operational Efficiency - Direct cost of revenues decreased by 27.5% to $458,000, contributing to improved operational efficiency[124]. - Gross margin decreased to 50% for the six months ended January 31, 2024, down from 55% in the prior year, mainly due to lower breakage revenue[134]. - Direct cost of revenues decreased by 27.5% in the three months ended January 31, 2024, as a percentage of revenue, it declined to 5.9% from 9.1% year-over-year[137]. - Selling, general and administrative (SG&A) expenses increased by 11.1% in the three months ended January 31, 2024, with SG&A as a percentage of revenue at 83.9% compared to 84.1% in the prior year[140]. - Stock-based compensation expenses decreased by 13.3% in the three months ended January 31, 2024, primarily due to lower compensation expenses related to DSU grants[142]. Impairment and Losses - The company recorded an impairment of intangible assets of approximately $11.9 million for the GuruShots reporting segment for the three and six months ended January 31, 2024[148]. - The loss from operations related to GuruShots for the three months ended January 31, 2024, was $13.6 million, significantly higher than the $0.1 million loss in the same period last year, mainly due to an $11.9 million impairment loss on intangible assets[161]. - The loss from operations related to GuruShots for the six months ended January 31, 2024, was $14.9 million, compared to $1.7 million for the same period in the prior year, primarily due to the same $11.9 million impairment loss[163]. Cash Flow and Working Capital - As of January 31, 2024, the company had cash and cash equivalents of $18.1 million and working capital of $16.3 million, compared to $18.1 million and $15.8 million, respectively, at July 31, 2023[164]. - Cash provided by operating activities increased by $1.7 million to $2.8 million for the six months ended January 31, 2024, compared to $1.1 million in the same period last year[166]. - Gross trade accounts receivable increased by $0.5 million to $3.4 million at January 31, 2024, from $2.9 million at July 31, 2023, primarily due to higher revenue[167]. - Two customers represented 29% and 11% of the company's revenue for the six months ended January 31, 2024, compared to three customers representing 24%, 19%, and 10% in the same period last year[175]. - The company does not anticipate paying dividends on common stock until achieving sustainable profitability and retaining certain minimum cash reserves[173]. Geopolitical and Pandemic Impact - Zedge's management is closely monitoring geopolitical events, including the impact of the Israel-Hamas war and the Russia-Ukraine conflict, on its business operations[98][97]. - The company continues to assess the potential impacts of the COVID-19 pandemic on its financial condition, although it did not have a material impact in fiscal 2023[99].