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ZI

Zedge, Inc. (ZDGE)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 revenue increased 1.6% year-over-year to $7.2M while GAAP diluted EPS was -$0.02; Adjusted EBITDA was $0.3M as advertising headwinds and higher SG&A weighed on profitability .
  • Subscriptions and monetization were bright spots: Zedge Marketplace subscription revenue +21% YoY to $1.2M, ARPMAU +22% YoY to $0.077, and Zedge Premium GTV +61.6% YoY to $0.7M .
  • Management cited temporary advertising disruptions (coding bug, partner testing delay, new mediation integration) that were resolved by quarter-end and expects seasonal strength and operational fixes to drive improvement in Q2; CEO emphasized a commitment to being EBITDA-positive for the remainder of FY2025 absent outsized growth investments .
  • Capital allocation remains supportive: ~$20.2M cash and cash equivalents and a new $5M share repurchase authorization (prior program completed), with repurchases expected to commence in December .

What Went Well and What Went Wrong

What Went Well

  • Subscription momentum and monetization quality: “Zedge Marketplace continued to shine…subscription revenue growing 21% YoY…an impressive 22% increase in ARPMAU,” with iOS revenue up over 60% YoY .
  • Zedge Premium and AI features: GTV surged 62% YoY, driven by parallax wallpapers, rewarded video CPM optimization, and expansion of pAInt (AI image generator), showcasing the demand for personalized, AI-powered experiences .
  • Emojipedia strength: Record revenue +33% YoY, validating acquisition thesis and reinforcing its role as a portfolio growth driver; launched AI Emoji Generator beta on Cyber Monday to deepen engagement .

What Went Wrong

  • Advertising headwinds: A resolved coding error, an ad partner’s delayed testing, and complexities from adding a new mediation platform constrained ad revenue; management adopted a more conservative ROAS-focused UA approach that limited near-term top-line growth .
  • Profitability compression: GAAP operating loss of -$0.5M vs +$0.3M in prior year, Non-GAAP net at breakeven vs +$0.5M a year ago, and Adjusted EBITDA fell to $0.3M from $1.5M as SG&A rose 24% (marketing) and subscription accounting timing weighed on margins .
  • GuruShots drag: Digital goods and services revenue down 31.8% YoY with GuruShots in transition; management refrained from shutting it down, targeting engagement and monetization improvements to return to growth .

Financial Results

Core P&L vs Prior Year and Prior Quarter

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$7.1 $7.6 $7.2
GAAP Diluted EPS ($USD)$0.00 $0.00 -$0.02
Operating Margin (%)4.5% -0.9% -6.4%
Adjusted EBITDA ($USD Millions)$1.5 $0.8 $0.3

Revenue Mix

Revenue Category ($USD Millions)Q1 2024Q4 2024Q1 2025
Advertising$4.9 $5.2 $4.9
Digital Goods & Services$0.9 $0.7 $0.6
Subscription$1.0 $1.2 $1.2
Other$0.2 $0.5 $0.5

KPIs

KPIQ1 2024Q4 2024Q1 2025
MAU (Millions)28.5 26.1 25.0
Active Subscriptions (000s)648 669 698
ARPMAU ($USD)$0.063 $0.079 $0.077
Zedge Premium GTV ($USD Millions)$0.4 $0.6 $0.7

Actuals vs Wall Street Consensus (S&P Global)

Consensus estimates were unavailable via S&P Global at the time of request; estimate comparisons not included.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue trajectoryQ2 FY2025Not provided“Anticipate significant improvements…driven by traditional holiday seasonal strength and the resolution of key challenges from the first quarter” Qualitative positive
Adjusted EBITDARemainder FY2025Not providedManagement aims to be EBITDA-positive for the remainder of FY2025, barring outsized growth investments requiring near-term spend Qualitative commitment
User Acquisition / ROASFY2025Not providedConservative ROAS-focused approach; plan to accelerate ROAS-attractive UA, particularly in well-developed economies Emphasis on efficiency
Product roadmap (AI)FY2025Not providedContinued rollout of pAInt 2.0; imminent addition of AI audio capabilities; Emojipedia AI Emoji Generator beta; website redesign Innovation focus
Share repurchasesFY2025Prior program completedNew $5M authorization; expected to commence repurchases in December Increased buyback capacity

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 FY2024)Current Period (Q1 FY2025)Trend
AI/technology initiativesEmphasis on pAInt 2.0 expansion beyond text-to-image; planning AI audio; innovation to drive engagement Continued integration of generative AI; pAInt 2.0 launched; AI audio capabilities imminent; Emojipedia AI Emoji Generator beta Improving
Advertising stack & CPMsOngoing optimization; strong momentum in Q3/Q4 with record ARPMAU and GTV Temporary disruptions (coding bug, partner testing delay, mediation integration); all resolved; expect rebound Temporarily challenged, recovering
iOS tractionHockey-stick growth in FY2024; iOS subscription revenue up >11% sequentially in Q3 iOS revenue up >60% YoY in Q1; strategic focus continues Improving
Subscription model & lifetime subsStrong subscription growth in Q3/Q4 Lifetime subs accelerated; accounting recognizes revenue over ~2.5 years; higher platform fees near-term Mixed near-term margin, positive LTV
EmojipediaPlans to expand “Emoji Playground” and revamp site Record +33% YoY revenue; AI Emoji Generator beta launched; website redesign planned Improving
GuruShotsTransition roadmap: onboarding, coin economy, Missions; PvP targeted for holidays Duels (PvP) rollout; focus on new-user acquisition and monetization; near-term revenue drag persists Early progress, still a drag
Capital allocationTerm loan repaid; buybacks; strong cash generation in FY2024 ~$20.2M cash; new $5M buyback; intent to repurchase aggressively Supportive

Management Commentary

  • “We are encouraged by the underlying trends…subscription revenue growing 21% year-over-year…Zedge Premium’s GTV surged by 62%…and an impressive 22% increase in ARPMAU…iOS growth…revenue up over 60% in the quarter.” — Jonathan Reich, CEO .
  • “We anticipate significant improvements in our second quarter driven by traditional holiday seasonal strength and the resolution of key challenges from the first quarter…ongoing integration of generative AI…planned imminent addition of AI audio capabilities.” — CEO .
  • “Subscription revenue was up 21%…ARPMAU still grew 22%…SG&A increased by 24%…[GAAP] loss from operations was $0.5M…On a non-GAAP basis, we will break even…Adjusted EBITDA…$0.3M.” — Yi Tsai, CFO .
  • “We will be back in EBITDA positive territory for the remainder of this fiscal year,” barring outsized investment opportunities — CEO .

Q&A Highlights

  • GuruShots strategy: Management does not plan to shut it down; transformation actions (onboarding, coin economy, Missions, Duels) aim to widen the funnel, improve engagement/retention, and monetize new users while minimizing cash burn .
  • Advertising issues: Coding bug, partner testing delays, and mediation integration were one-offs and have been resolved; management did not quantify the impact publicly .
  • Profitability focus: Strong commitment to EBITDA positivity for the rest of FY2025, unless exceptional growth opportunities require accelerated marketing spend .
  • Lifetime subscription economics: Revenue amortized over ~2.5 years based on average subscriber lifetime; customers value “pay once” with minimal post-term maintenance costs; positive for UA, revenue, and cash .
  • MAU trajectory and engagement drivers: Focus on Tier 1 users with attractive ROAS; product enhancements (pAInt 2.0, AI audio) expected to increase recurring engagement .
  • Zedge Premium drivers: Platform attractiveness to artists, efficient operations, expanding content types (video/parallax), and enabling online purchases beyond the app .
  • Buybacks: No repurchases during the closed quarter; new $5M plan in place with purchases expected when window opens .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 FY2025 could not be retrieved at the time of request; estimate comparisons are therefore not included.

Key Takeaways for Investors

  • Monetization quality is improving despite softer top-line: ARPMAU +22% YoY and subscription +21% YoY underpin Q1 resilience; watch for advertising normalization and seasonal Q2 strength to lift revenue and margins .
  • Near-term catalysts: Resolution of ad stack issues, holiday seasonality, iOS momentum, and AI feature rollouts (audio; Emojipedia AI Emoji Generator) should support sequential improvement into Q2 .
  • Profitability path: Management’s EBITDA-positive stance for the remainder of FY2025, combined with disciplined ROAS-focused UA, points to improving cash generation and operating leverage as scale returns .
  • Capital return and balance sheet: ~$20.2M cash and the $5M buyback authorization provide downside support and potential EPS accretion; repurchases expected to commence post window reopening .
  • GuruShots is a swing factor: Execution on Duels/PvP, onboarding, and monetization will determine how quickly the segment pivots from drag to contributor; monitor feature adoption and UA efficiency .
  • AI-driven product innovation: Continued investment in pAInt 2.0, audio personalization, and Emojipedia’s creative tools positions Zedge in the creator economy, potentially expanding TAM and deepening engagement .
  • Watch Q2 prints closely: With ad disruptions resolved and seasonal tailwinds, Q2 is a litmus test for the recovery in advertising revenue and the earnings trajectory; management commentary indicates confidence in sequential improvement .