Summary of Dine Brands Conference Call Company Overview - **Company**: Dine Brands - **Brands**: Applebee's and IHOP Key Industry Insights - **Consumer Behavior**: The target demographic for both brands is households earning between $50,000 and $75,000 annually. Value remains a significant factor in dining decisions, but the definition of value has evolved due to inflation and economic conditions [1][2] - **Dining Experience**: Consumers are increasingly focused on the overall dining experience, including ambiance and service, alongside value for money [2] Applebee's Insights - **Value Proposition**: The "Two for $25" value platform, offering two entrees and an appetizer for $25, is a key strategy for 2026. This will be refreshed quarterly with new menu items [3][6] - **Market Position**: Applebee's has seen positive comparable sales in recent quarters, attributed to its focus on value and customer experience [6] - **Menu Innovation**: The introduction of the "Ultimate Trio" allows customers to choose three appetizers from a selection, catering to individual diners and social media trends [17][24] IHOP Insights - **Value Menu**: The "House Faves" $6 value menu has been successful, with a significant portion of checks (30%) initially attributed to it, though this has decreased to around 15% as the menu evolved [11][12] - **Consumer Research**: Feedback indicates that the $6 price point is perceived as better value than cooking at home, driving traffic to IHOP [5] - **Operational Focus**: IHOP is concentrating on food quality, service speed, and cleanliness, alongside value offerings [4] Dual-Brand Strategy - **Expansion Plans**: Dine Brands has opened 20 dual-brand locations (Applebee's and IHOP) in the U.S. and plans to reach 30 by year-end, with a target of 80 in the future [32][34] - **Revenue Impact**: Dual-brand locations are generating 1.5 to 2.5 times the revenue of standalone locations, with significantly higher profit margins [36] - **Market Opportunities**: There are 900 potential dual-brand locations identified, with 450 in areas without existing Applebee's or IHOP [37][38] Economic and Market Conditions - **Consumer Spending**: There is a noted softness in consumer spending as households balance dining out with other expenses, particularly during the holiday season [28] - **Franchisee Profitability**: Franchisee financials are improving, driven by healthier comparable sales and stabilization of commodity costs [67][68] - **Off-Premises Sales**: Off-premises sales account for 20% of IHOP's and 22-23% of Applebee's sales, with significant growth expected in this area [72][74] Commodity Costs and Inflation - **Cost Management**: The company anticipates low- to mid-single-digit inflation for commodity costs in the upcoming year, with a focus on stabilizing prices for key items like eggs, coffee, and beef [63][66] - **Supply Chain**: Approximately 85-90% of goods are sourced from the U.S., minimizing exposure to international tariffs [65] Future Outlook - **Catering and Off-Premises Growth**: IHOP plans to enhance its catering offerings, particularly for breakfast items, as part of its strategy for 2026 [71] - **Fuzzy's Taco Shop**: Dine Brands is refining the Fuzzy's Taco Shop brand, focusing on a new fast casual model that encourages longer customer stays and increased sales [76][78] Conclusion Dine Brands is strategically positioned to leverage its dual-brand model, enhance customer experience, and adapt to changing consumer preferences while navigating economic challenges. The focus on value, innovation, and operational efficiency is expected to drive growth in the coming years.

Financial Data and Key Metrics Changes - Total company sales for fiscal 2025 were flat compared to the prior year, with an operating loss of $16.2 million, which improved compared to fiscal 2024 [3][9] - Loss before income taxes for 2025 was $9.3 million, an improvement from a pre-tax loss of $29.9 million in fiscal 2024, primarily due to a prior year goodwill write-off and an increase in gross margin [9][10] - Gross margin for fiscal 2025 improved to 35.1%, up 1.2 points from the prior year [9][10] - Operating expenses decreased by 8%, or $20.2 million, from the prior fiscal year [10] Business Line Data and Key Metrics Changes - In the fishing segment, demand exceeded expectations for Humminbird's new Explore series and MEGA Live 2 fish finders, contributing to growth [4] - Camping and watercraft sales declined for fiscal 2025, primarily due to the closeout of Eureka inventory, but excluding this impact, the segment grew by 2% [4] - Diving sales increased for the fiscal year due to modest improvements in certain regional markets, with new product launches like the Hydros Pro 2 buoyancy control device receiving positive reception [5][6] Market Data and Key Metrics Changes - The overall watercraft marketplace is still struggling, but Old Town's fishing kayak line is performing well [5] - The company is focusing on strengthening its digital and e-commerce capabilities, which are seen as areas of opportunity for growth [7] Company Strategy and Development Direction - The company is committed to innovation as a key priority, focusing on consumer-driven products to drive future growth [4][16] - Cost savings programs remain a priority, with ongoing efforts to enhance operational efficiencies and manage product costs [7][10] - The company is optimistic about its strategic priorities and investments in innovation and digital capabilities to position itself for future success [8] Management's Comments on Operating Environment and Future Outlook - Management noted that while the outdoor recreation marketplace remains uncertain, there is positive momentum observed in the latter half of fiscal 2025 [3][8] - The company is cautious about declaring a market turnaround but is hopeful for a good season ahead [14] Other Important Information - The company maintained a debt-free balance sheet and a healthy cash position, indicating confidence in creating long-term shareholder value [11] Q&A Session Summary Question: Observations on fourth quarter revenue gain and momentum into early fiscal 2026 - Management expressed excitement about the growth in the third and fourth quarters, noting that market momentum is continuing, although it is still early in the year [14] Question: Insights on the new product pipeline for 2026 - Management highlighted ongoing momentum in product innovation across all business segments, emphasizing the importance of innovation in a competitive market [16] Question: Impact of pricing actions due to tariffs - Management confirmed that pricing adjustments were made strategically and have not negatively affected business so far [17] Question: Contribution of operational efficiencies to gross margin - Management indicated that operational improvements contributed over a point to gross margin and that cost-saving initiatives will continue into fiscal 2026 [18] Question: Expected effective tax rate for fiscal 2026 - Management expects the effective tax rate to return to a more normal range in the mid to high 20s [20]

Financial Data and Key Metrics Changes - Total revenue for the first quarter was $7.6 million, up 5.8% year-over-year [14] - Advertising revenue increased by 6% for the quarter, driven by strong growth in the Zedge marketplace [15] - GAAP income from operations was $0.9 million, compared to a loss of $0.5 million last year [17] - Non-GAAP net income was $0.9 million, with EPS of $0.07, compared to break-even last year [17] - Free cash flow was negatively impacted by approximately $350,000 due to tax withholding payments related to restructuring [18] Business Line Data and Key Metrics Changes - Zedge marketplace revenue increased significantly, supported by strong advertising CPMs and subscription revenues [14][15] - Zedge Plus subscription revenue rose by 29% year-over-year, with net active subscribers growing by 54% to nearly 1.1 million [15] - Deferred revenue reached $5.7 million, up 7% sequentially and 55% year-over-year, indicating future revenue potential [16] - Cost of revenue increased to 7.3% from 6.4% last year due to reduced partner discounts and new licensing fees [17] Market Data and Key Metrics Changes - The company is seeing a growing interest in its Data Seeds offering, with a robust pipeline of prospective customers [5][7] - The market for rights-cleared and high-quality datasets is expanding, as evidenced by significant licensing agreements in the industry [8] Company Strategy and Development Direction - The company aims to build products that resonate with users, scale successful ones, and allocate capital to enhance long-term shareholder value [12] - The focus remains on innovation, with plans to introduce additional alpha products throughout fiscal 2026 [10] - The company is committed to a disciplined approach to capital allocation, including share repurchases and dividends [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's leaner cost structure and efficient operating model entering fiscal 2026 [11] - The company anticipates strong cash generation for the remainder of fiscal 2026, despite temporary pressures this quarter [11] - Management is optimistic about the growth potential in both consumer and enterprise markets [12] Other Important Information - The company repurchased 240,000 Class B shares during the quarter and paid its first quarterly dividend [12] - The restructuring actions taken earlier this year are expected to yield ongoing savings and operational efficiencies [11] Q&A Session Summary Question: How is Data Seeds recognized as revenue? - Revenue from Data Seeds is recognized when the product is delivered and accepted, currently grouped under digital goods and services [20][21] Question: What is the typical sales process for Data Seeds? - The sales process involves operational steps beyond content production, including contract negotiations, and clarity on timelines is expected in the coming quarters [24][25] Question: What is the current operating status of GuruShots? - GuruShots is currently incurring losses, with operating losses partially attributed to Data Seeds, and is stabilizing at around $150,000 per month [29][30] Question: What is the outlook for Emojipedia? - Management is monitoring the impact of AI Overviews on Emojipedia and hopes to stabilize its performance in the coming quarters [31] Question: What was the impact of restructuring costs on free cash flow? - Restructuring costs included approximately $330,000 in tax withholding payments, which impacted free cash flow during Q1 2026 [36] Question: How much is left in the share buyback program? - There is approximately $600,000 remaining under the current buyback authorization [37]

Financial Data and Key Metrics Changes - Total revenue for the first quarter was $7.6 million, up 5.8% year-over-year [14] - Advertising revenue increased by 6% for the quarter, while Zedge+ subscription revenue rose by 29% year-over-year [15] - Free cash flow was negatively impacted by approximately $350,000 due to tax withholding payments related to restructuring [18] Business Line Data and Key Metrics Changes - Active subscriptions reached a record 1.1 million, up more than 50% year-over-year [4] - Deferred revenue, primarily from subscriptions, reached $5.7 million, up 7% sequentially and 55% year-over-year [16] - Cost of revenue increased to 7.3% from 6.4% last year due to reduced partner discounts and new licensing fees [16] Market Data and Key Metrics Changes - The Zedge Marketplace showed strong growth, offsetting declines at Emojipedia and GuruShots [15] - Average revenue per monthly active user increased by 29.2%, indicating improved monetization efficiency [16] Company Strategy and Development Direction - The company is focused on building products that customers love and scaling successful ones while maintaining disciplined capital allocation [12] - DataSeeds is emerging as a key enterprise business, with a robust pipeline of prospective customers [6] - The company is investing in innovation and product development, with plans to introduce additional alpha products throughout fiscal 2026 [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's leaner cost structure and efficient operating model entering fiscal 2026 [11] - The company anticipates strong cash generation for the remainder of fiscal 2026, despite temporary pressures this quarter [11] - Management is monitoring the impact of AI advancements on Emojipedia and is hopeful for stabilization [30] Other Important Information - The company repurchased 240,000 Class B shares and paid its first quarterly dividend, reflecting confidence in long-term value creation [12] - The DataSeeds Production Cloud is a key asset that allows the company to deliver custom datasets for AI training [7] Q&A Session Summary Question: How is DataSeeds recognized as revenue? - Revenue from DataSeeds is recognized when the product is delivered and accepted, grouped under digital goods and services for now [20][22] Question: What is the typical sales process for DataSeeds? - The sales process involves operational steps beyond content production, and clarity on conversion timelines is expected in the coming quarters [24] Question: What is the current operating status of GuruShots? - GuruShots is currently incurring losses, with operating losses partially attributed to DataSeeds, but stabilization is expected [28] Question: What is the outlook for Emojipedia? - The future of Emojipedia is uncertain, with management needing more time to assess the impact of AI advancements [30] Question: What was the impact of restructuring costs on free cash flow? - Restructuring costs included approximately $330,000 in withholding taxes, impacting free cash flow for Q1 2026 [34] Question: How much is left in the share buyback program? - There is $600,000 remaining under the current buyback authorization [35]

Financial Data and Key Metrics Changes - Total company sales for fiscal 2025 were flat compared to the prior year, with an operating loss of $16.2 million, which improved compared to fiscal 2024 [3][9] - Loss before income taxes for 2025 was $9.3 million, an improvement from a pre-tax loss of $29.9 million in fiscal 2024, primarily due to a prior year goodwill write-off and an increase in gross margin [9][10] - Gross margin for fiscal 2025 improved to 35.1%, up 1.2 points from the prior year [9][10] - Operating expenses decreased by 8%, or $20.2 million, from the prior fiscal year [10] Business Line Data and Key Metrics Changes - In the fishing segment, demand exceeded expectations for Humminbird's new Explore series and MEGA Live 2 fish finders, contributing to growth [4] - Camping and watercraft sales declined for fiscal 2025, primarily due to the closeout of Eureka inventory, but excluding this impact, the segment grew by 2% [4] - Jetboil's new fast boil cooking systems continued to outperform expectations, and Old Town's fishing kayak line performed well despite a struggling overall marketplace [5] - Diving sales increased due to modest improvements in certain regional markets, with the launch of the new Hydros Pro 2 buoyancy control device generating enthusiasm [6][7] Market Data and Key Metrics Changes - The outdoor recreation marketplace remains uncertain, with global macroeconomic challenges expected to continue [8] - The company is focused on expanding its digital and e-commerce capabilities, which are seen as areas of opportunity for growth [7][8] Company Strategy and Development Direction - The company is committed to innovation as a key priority, focusing on consumer-driven products to drive future growth [4][16] - Cost savings initiatives remain a priority, with efforts to enhance operational efficiencies and manage product costs [7][10] - The company aims to strengthen its digital footprint to make products easily accessible to consumers [7] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about market momentum continuing into early fiscal 2026, although it is too early to declare a market turnaround [8][14] - The company plans to continue investing in innovation and operational efficiencies to position itself for future success [8] Other Important Information - The balance sheet remains debt-free, and the company has a healthy cash position, indicating confidence in creating long-term shareholder value [11] Q&A Session Summary Question: Observations on fourth quarter revenue gain and momentum into fiscal 2026 - Management noted excitement about growth in the third and fourth quarters, with ongoing positive market momentum, though it is still early in the year [14] Question: Insights on the new product pipeline for 2026 - Management highlighted ongoing momentum in fishing and diving innovations, emphasizing that product launches span multiple years and innovation remains a key focus [16] Question: Impact of pricing actions due to tariffs and retailer reception - Management confirmed strategic pricing actions were taken, which have been well received by retail partners, with no negative impact on business observed so far [17] Question: Contribution of operational efficiencies to gross margin and future opportunities - Management indicated that operational improvements contributed over a point to gross margin, with ongoing cost savings initiatives planned for fiscal 2026 [18] Question: Expected effective tax rate for fiscal 2026 - Management expects the effective tax rate to return to a more normal range in the mid to high 20s, following the establishment of a deferred tax valuation reserve [20]

Financial Data and Key Metrics Changes - The negative EBITDA impact in Q4 from Monterrey challenges was $8 million, which was higher than the previously estimated $5 million [5] - EBITDA margins for the Hardware Solutions segment would have been around 16% without the negative impact [5] - A favorable cost roll impact in Q4 helped the Hardware Solutions segment [5] - SG&A is expected to be around $73 million in Q1, which is significantly higher than the previous year [34] Business Line Data and Key Metrics Changes - The Custom Solutions group may face impacts from tariffs, particularly in wood components, which could present opportunities to insource demand back into the U.S. [24] - Operational improvements are being seen in the Extruded Solutions group due to the sharing of best practices [25] Market Data and Key Metrics Changes - The company expects flat to down volumes with flat to up pricing in the upcoming year [9] - Demand for products is currently similar in both new residential and repair and remodel markets, with R&R expected to lead any recovery [52] Company Strategy and Development Direction - The company is focusing on paying down debt and balancing cash flow generation with stock repurchases [11][12] - The resegmentation is expected to yield mid- to long-term growth opportunities through process improvements and innovation [26] Management's Comments on Operating Environment and Future Outlook - Management has not observed irrational pricing in the market, indicating a focus on supply chain risk [20] - Commodity prices stabilizing may lead to pricing pressure in the future, but currently, there is no irrational pricing behavior [21] - The company is optimistic about operational efficiencies to offset increased costs as they move through the year [35] Other Important Information - The company has been proactive in addressing operational issues in its facilities, ensuring that similar risks are mitigated [32] - The first quarter is typically a low point for cash flow, but lower incentive payouts this year may help improve cash flow [59] Q&A Session Summary Question: Impact of Monterrey challenges on EBITDA - The negative EBITDA impact was confirmed to be $8 million, higher than expected, with a $3 million hit anticipated in Q1 [5][6] Question: Outlook for market volume and procurement synergies - The informal outlook suggests flat to down volumes with flat to up pricing, and less Mexico costs expected next year [9] Question: Clarification on SG&A increase - SG&A is expected to be around $73 million, reflecting higher benefit costs and inflationary measures [34][35] Question: Pricing and cost outlook for 2026 - Pricing increases are primarily driven by inflationary pressures, and the company believes it can maintain pricing due to justified cost increases [50][51] Question: Demand outlook for new residential vs. repair and remodel - Both markets are currently impacted similarly, but R&R is expected to lead any recovery [52][54]

Financial Data and Key Metrics Changes - The negative EBITDA impact in Q4 from Monterrey challenges was $8 million, which was higher than the previously estimated $5 million [5] - EBITDA margins for the Hardware Solutions segment would have been in the 16% range without the negative impact [5] - A $3 million hit is expected in the first quarter due to ongoing challenges [6] Business Line Data and Key Metrics Changes - The Hardware Solutions segment faced increased costs due to a shift to 24/7 operations and higher labor and freight costs [5] - The company anticipates a flat revenue outlook for the next year, with potential for improved EBITDA due to reduced costs from Mexico and additional synergies [9] Market Data and Key Metrics Changes - The company has not observed irrational pricing behavior in the market, indicating a stable demand environment [20] - Commodity prices are expected to stabilize, but there may be pricing pressure as they come down [21] Company Strategy and Development Direction - The company is focusing on operational improvements and sharing best practices across its divisions to enhance efficiency [25] - There is potential for insourcing demand in the Custom Solutions group to mitigate tariff risks [24] - The company is balancing cash flow generation, stock repurchases, and debt paydown, especially in the first quarter, which is typically a low cash flow period [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in their ability to manage costs and operational efficiency despite inflationary pressures [35] - The company is optimistic about the recovery in the repair and remodel market, which is expected to lead new construction recovery [54] Other Important Information - The company has been proactive in addressing operational issues in its facilities, ensuring that similar risks are mitigated [32] - SG&A expenses are expected to be around $73 million in Q1, reflecting higher costs due to inflation and benefits [34] Q&A Session Summary Question: Impact of Monterrey challenges on EBITDA - The negative EBITDA impact was confirmed to be $8 million, higher than expected, affecting margins in the Hardware Solutions segment [5] Question: Future outlook on market volume and procurement synergies - The informal outlook suggests flat volumes with flat pricing, but improved EBITDA due to reduced costs and synergies [9] Question: Concerns about stock repurchase limitations - The company focused on debt repayment over stock repurchases, but will be opportunistic in the future [11] Question: Competitive pricing behavior in the market - No irrational pricing has been observed, with supply chain risks being prioritized by customers [20] Question: Expected product performance in 2026 - The Custom Solutions group may see opportunities due to tariff impacts, while other segments are in a wait-and-see mode [24] Question: Benefits from resegmentation - Early operational improvements have been noted, with potential for mid- to long-term growth opportunities [26] Question: SG&A expense clarification - SG&A is expected to be higher due to inflation and benefit costs, but operational efficiency is a focus to offset these increases [35] Question: Pricing stability and cost outlook - Pricing is primarily driven by inflationary pressures, and the company expects to maintain pricing due to justified cost increases [50] Question: Demand outlook for new residential vs. repair and remodel - Both markets are currently impacted similarly, but repair and remodel is expected to lead the recovery [54] Question: Cash flow expectations for Q1 - Slightly negative free cash flow is possible in Q1, depending on volume and CapEx timing [55]

Financial Data and Key Metrics Changes - Total company sales for fiscal 2025 were flat compared to the prior year, with an operating loss of $16.2 million, which improved compared to fiscal 2024 [3][9] - Loss before income taxes for 2025 was $9.3 million, an improvement from a pre-tax loss of $29.9 million in fiscal 2024, primarily due to a prior year goodwill write-off and an increase in gross margin [9][10] - Gross margin for fiscal 2025 improved to 35.1%, up 1.2 points from the prior year [9][10] - Operating expenses decreased by 8%, or $20.2 million, from the prior fiscal year [10] Business Line Data and Key Metrics Changes - In the fishing segment, demand exceeded expectations for Humminbird's new Explore series and MEGA Live 2 fish finders, contributing to growth [4] - Camping and watercraft sales declined for fiscal 2025, primarily due to the closeout of Eureka inventory, but excluding this impact, the segment grew by 2% [4] - Diving sales increased due to modest improvements in certain regional markets, with the launch of the new Hydros Pro 2 buoyancy control device receiving positive reception [5][6] Market Data and Key Metrics Changes - The overall watercraft marketplace is still struggling, but Old Town's fishing kayak line is performing well [5] - Digital and e-commerce capabilities are being strengthened, with ongoing efforts to expand the digital footprint fueling growth [6][7] Company Strategy and Development Direction - The company is focused on consumer-driven innovation and enhancing digital and e-commerce capabilities as key strategic priorities [8] - Cost savings programs remain a priority, with efforts to drive optimal product costs and enhance operating efficiencies continuing into fiscal 2026 [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about market momentum continuing into early fiscal 2026, although it is still too early to confirm a market turnaround [8][13] - The company is committed to innovation as a key focus, especially in a competitive environment where consumers are price-sensitive [15] Other Important Information - The company maintained a debt-free balance sheet and a healthy cash position, confident in its ability to create long-term value for shareholders [11] Q&A Session Summary Question: Has the revenue gain momentum continued into early fiscal 2026? - Management noted excitement about the growth in the third and fourth quarters, indicating that market momentum appears to be continuing, but it is too early to declare a market turnaround [13] Question: What is the outlook for the new product pipeline for 2026? - Management highlighted ongoing momentum in fishing and diving innovations, emphasizing that product innovation remains a key priority [15] Question: How have pricing actions related to tariffs been received by retail partners? - Management stated that pricing actions taken were strategic and have been well-received by retail partners, with no negative impact on business so far [16] Question: How much have operational efficiencies contributed to gross margin improvements? - Management indicated that operational efficiencies contributed over a point of gross margin improvement, with ongoing cost savings initiatives planned for fiscal 2026 [17] Question: What is the expected effective tax rate for fiscal 2026? - Management expects the effective tax rate to return to a more normal range, mid to high 20s, going forward [18]

Financial Data and Key Metrics Changes - The negative EBITDA impact from Monterrey challenges in Q4 was $8 million, higher than the previously estimated $5 million, affecting EBITDA margins for the Hardware Solutions segment [5][9] - The company paid down debt aggressively during the fiscal year and repurchased approximately $3 million in stock in Q4, despite shares being perceived as undervalued [10][12] Business Line Data and Key Metrics Changes - The Hardware Solutions segment faced challenges due to increased labor and expedited freight costs, but a favorable cost roll impact helped mitigate some losses [5][9] - The company expects a $3 million drag in Q1 from Monterrey issues but anticipates this will go to zero beyond the first quarter [6][9] Market Data and Key Metrics Changes - The company has not observed irrational pricing behavior in the market, indicating a focus on supply chain risk management among customers [19][20] - The Custom Solutions group may face impacts from tariffs, but there is potential for insourcing demand back into the U.S. to mitigate risks [21][23] Company Strategy and Development Direction - The company is focused on operational improvements and sharing best practices across segments, particularly in the extruded solutions group [24][25] - The resegmentation is expected to yield mid- to long-term growth opportunities, with a focus on innovation and process improvements [25] Management Comments on Operating Environment and Future Outlook - Management noted that both residential repair and remodel (R&R) and new construction markets are currently experiencing similar impacts, with R&R expected to lead any recovery [51][53] - The company anticipates stable material costs but expects continued inflationary pressure in specific areas, particularly oil-based products [35][36] Other Important Information - The company is balancing cash flow generation, stock repurchases, and debt paydown, with Q1 typically being a low cash flow period [12][56] - Incentive payouts for the executive team were lower than usual, which may positively impact cash flow in Q1 [57] Q&A Session Summary Question: Impact of Monterrey challenges on EBITDA - The negative EBITDA impact was confirmed to be $8 million, affecting margins in the Hardware Solutions segment [5] Question: Competitive response in the market - Management indicated no irrational pricing behavior has been observed, with supply chain risks being prioritized [19] Question: Expectations for product performance in 2026 - The Custom Solutions group may see impacts from tariffs, but there is potential for insourcing demand [21][23] Question: SG&A changes and outlook - SG&A is expected to be around $73 million, reflecting higher benefit costs and inflationary measures [33][34] Question: Pricing and cost outlook for 2026 - Pricing increases are primarily driven by inflationary pressures, with a strong ability to maintain prices due to cost support [48][50] Question: Cash flow expectations for Q1 - Slightly negative free cash flow is possible in Q1, depending on December and January performance [54][56]

Financial Data and Key Metrics Changes - Total revenue for the first quarter was $7.6 million, up 5.8% year-over-year [14] - Advertising revenue increased by 6% for the quarter, driven by strong growth in the Zedge marketplace [14] - GAAP net income was $0.8 million, compared to a loss of $0.3 million last year, with EPS of $0.06 [17] - Free cash flow was negatively impacted by approximately $350,000 due to restructuring-related tax payments [18] Business Line Data and Key Metrics Changes - Zedge marketplace revenue increased significantly, supported by strong advertising CPMs and subscription revenues [14] - Zedge Plus subscription revenue rose by 29% year-over-year, with net active subscribers growing 54% to nearly 1.1 million [15] - Deferred revenue reached $5.7 million, up 7% sequentially and 55% year-over-year, indicating future revenue potential [16] Market Data and Key Metrics Changes - The core business remains healthy and resilient, with a strong subscription engine scaling effectively [12] - The Data Seeds initiative is gaining traction, with a robust pipeline of prospective customers [6][12] Company Strategy and Development Direction - The company is focused on building products that customers love, scaling successful ones, and allocating capital to enhance long-term shareholder value [12] - The strategy includes a disciplined approach to capital allocation, with share repurchases and dividends reflecting confidence in long-term value creation [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory for fiscal 2026, emphasizing innovation and expanding operating leverage [12] - The company is monitoring the impact of AI developments on its products, particularly regarding Emojipedia [31] Other Important Information - The company has a leaner cost structure and a more efficient operating model entering fiscal 2026 [11] - The Data Seeds Production Cloud is a key asset that allows for the delivery of high-quality datasets for AI training [8] Q&A Session Summary Question: How is Data Seeds recognized as revenue? - Revenue from Data Seeds is recognized when the product is delivered and accepted, currently grouped under digital goods and services [21] Question: What is the typical sales process for Data Seeds? - The sales process involves operational steps beyond production, including contract negotiations, and clarity on timelines will develop over the next few quarters [25] Question: What is the operating status of GuruShots? - GuruShots is currently incurring losses, with stabilization around $150,000 per month, and efforts are underway to evolve it towards break-even [29] Question: What is the outlook for Emojipedia? - The future of Emojipedia is uncertain, with management needing more time to assess the impact of AI developments on its performance [31] Question: What was the impact of restructuring costs on free cash flow? - Restructuring costs included approximately $330,000 in tax withholding payments, which impacted free cash flow for the quarter [35] Question: How much is left in the share buyback program? - There is approximately $600,000 remaining under the current buyback authorization [37]