Zedge(US:ZDGE)2025-10-28 20:15User Engagement and Growth - Zedge's Zedge App had 23.3 million monthly active users (MAU) as of July 31, 2025, with a range of 22.1 million to 28.7 million MAU over the past two fiscal years [314]. - The Zedge Marketplace generated approximately 984,000 active subscribers as of July 31, 2025, following the introduction of a subscription tier in the iOS version of the app in April 2023 [317]. - GuruShots, acquired in April 2022, engages around 30-40 million amateur photographers monthly, with over 300 competitions staged each month resulting in more than 550,000 photographs uploaded [320]. - The average monthly spend per paying player in GuruShots has increased by over 6.2% annually to more than $40.9 per player [321]. - Emojipedia, acquired in August 2021, received approximately 48.4 million monthly page views and had about 8.9 million MAU as of July 31, 2025 [325]. - Zedge introduced pAInt, a generative AI wallpaper maker, in fiscal 2023, enhancing user engagement through text-to-image and other creative functionalities [315]. Revenue Generation - Zedge's revenue is primarily generated from advertising, paid subscriptions, and Zedge Premium, with a significant portion coming from advertising inventory sales [332]. - Zedge Premium allows content owners to earn 70% of revenue after a 30% fee from Google Play or the App Store, with users able to purchase content using Zedge Credits [339]. - GuruShots generates most of its revenue from virtual tokens, with players purchasing in-game goods and services, reflecting a strong engagement model [340]. - Revenue from virtual goods is recognized upon sale, with consumable virtual goods leading to repeat purchases only after existing balances are depleted [343]. - GuruShots reports revenue on a gross basis as it acts as the principal in transactions, controlling the content and pricing of virtual goods [347]. - Zedge records revenue from Zedge Premium on a net basis, accounting for a 30% platform fee and sharing 70% of gross revenue with content providers [349]. Financial Performance - Total revenues for the fiscal year ended July 31, 2025, were $29.398 million, a decrease of 2.3% from $30.091 million in the previous year [384]. - Subscription revenue increased by 17.1% to $5.093 million for the fiscal year ended July 31, 2025, primarily due to growth in lifetime subscriptions [389]. - Zedge Premium net revenue grew by 48.7% to $1.778 million for the fiscal year ended July 31, 2025, with a gross margin of 68% compared to 56% in the previous year [390]. - Subscription billings increased by 29.0% to $7.360 million for the fiscal year ended July 31, 2025, from $5.705 million in fiscal 2024 [387]. - The company experienced a net loss of $2.392 million for the fiscal year ended July 31, 2025, a significant improvement from a net loss of $9.171 million in the previous year, reflecting a 73.9% reduction [384]. - Digital goods and services revenue decreased by $1.3 million, or 37.1%, primarily due to a 27.0% decrease in GuruShots' MAP year over year [391]. Cost Management - Direct costs of revenues decreased slightly by 1.0% to $1.841 million for the fiscal year ended July 31, 2025 [384]. - Direct cost of revenues decreased by $18,000, or 1.0%, compared to fiscal 2024, remaining relatively flat at about 6.2% of revenues [392]. - Selling, general and administrative (SG&A) expenses increased by $1.6 million, or 6.1%, with SG&A as a percentage of revenues rising to 92.5% from 85.2% [393]. - Stock-based compensation expense decreased by $0.7 million, or 32.5%, primarily due to lower fair value related to deferred stock units granted [397]. - Depreciation and amortization expense decreased by $1.3 million, or 53.2%, primarily due to an $11.9 million impairment charge recorded in Q2 of fiscal 2024 [399]. - The company recorded approximately $1.6 million in restructuring charges related to global restructuring implemented in January 2025 [401]. Cash Flow and Assets - Cash and cash equivalents at July 31, 2025, were $18.6 million, down from $20.0 million at July 31, 2024 [416]. - Operating activities generated cash flows of $3.4 million, a decrease of $2.4 million from $5.9 million in fiscal 2024 [417]. - Net cash provided by operating activities was $3.4 million for the fiscal year ended July 31, 2025, with a net loss of $2.4 million adjusted for non-cash items [419]. - Cash collections for fiscal 2025 were $30.0 million, compared to $29.2 million in fiscal 2024 [421]. - The company repurchased 1,104,142 shares of Class B Common Stock for approximately $3.6 million under the 2024 Share Repurchase Plan during fiscal 2025 [426]. - The company had remaining authorization of approximately $1.4 million for future share repurchases under the 2024 Repurchase Plan as of July 31, 2025 [426]. Market Conditions and Risks - Current economic conditions, including foreign exchange fluctuations and geopolitical unrest, may negatively impact the company's performance [369]. - As of July 31, 2025, Monthly Active Users (MAU) for the Zedge App declined by 11.1% year-over-year to 23.3 million, primarily due to attrition in emerging markets [374]. - Average Revenue Per Monthly Active User (ARPMAU) for the Zedge App increased by 16.9% to $0.0925 for the three months ended July 31, 2025, driven by higher advertising rates and subscription revenue [375]. - Monthly Active Payers (MAP) for GuruShots decreased by 26.4% to 3,326 for the three months ended July 31, 2025, compared to 4,521 in the same period a year ago [380]. - Average Revenue Per Monthly Active Payer (ARPMAP) for GuruShots decreased by 17.1% to $43.5 for the three months ended July 31, 2025 [380]. Impairment and Valuation - The company recorded $11.9 million in impairment charges in Q2 of the fiscal year ending July 31, 2024, indicating potential asset recoverability issues [351]. - A $0.8 million impairment of capitalized software and technology development costs was recorded due to a strategic reassessment of GuruShots' operations [363]. - The company recognizes deferred tax assets and liabilities based on temporary differences, with a valuation allowance applied when realization is uncertain [366]. - The net loss resulting from foreign exchange transactions decreased by $39,000 to $151,000 in fiscal 2025 from $190,000 in fiscal 2024 [406]. Shareholder Returns - The company declared a dividend of $0.01615 per share to be paid on or around November 7, 2025, reflecting operational improvements and positive cash flow [430]. - The two largest customers represented 37% and 6% of revenue in fiscal 2025, compared to 31% and 9% in fiscal 2024 [432]. - The maximum principal amount of the term loan was reduced from $7 million to $2 million as of May 11, 2023, and fully prepaid on November 15, 2023 [424]. - The revolving credit facility was renewed for another four-year term on October 28, 2024 [425].