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ZI

Zedge, Inc. (ZDGE)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue declined 10.2% year-over-year to $6.979M as industry CPMs fell amid TikTok’s temporary U.S. withdrawal; GAAP net loss narrowed to $(1.679)M and adjusted EBITDA was $(0.1)M .
  • Subscription revenue rose 13.3% to $1.2M with active subscriptions up 22% to 791K and ARPMAU up ~9% to $0.078, offsetting part of the ad softness; Zedge Premium GTV grew 26.5% to $0.68M .
  • Management launched a restructuring (22% workforce reduction) targeting $4M annualized savings ($1M/quarter run-rate starting Q3) and flagged improving ad demand as TikTok re-entered app stores; free cash flow was $0.6M and buybacks totaled ~245K shares in Q2 .
  • No formal numeric guidance; directional outlook calls for improved adjusted EBITDA and free cash flow in H2, continued AI feature rollouts (AI audio), and ongoing repurchases; consensus comparison is omitted due to unavailable S&P Global estimates data today .

What Went Well and What Went Wrong

What Went Well

  • Strong subscription momentum: +13.3% revenue to $1.2M, active subscriptions +22% to 791K, ARPMAU up ~9% to $0.078; CEO highlighted “material growth in revenue from rewarded video” and pAInt/Parallax features driving higher CPMs .
  • Zedge Premium progress: GTV rose 26.5% to $0.68M; call detailed rewarded video conversion and pAInt 2.0 traction with engagement metrics surging YoY in February .
  • Cost actions and capital allocation: Announced two-phase restructuring expected to save ~$4M annually and repurchased ~245K shares; management expects improved adjusted EBITDA and stronger free cash flow in H2 .

What Went Wrong

  • Advertising headwinds: Ad revenue fell 14.3% YoY to $4.7M due to TikTok’s pullback and lower MAUs, pressuring CPMs across the market; management cited industry-wide demand erosion .
  • GuruShots drag: Digital goods/services revenue down 33.0% YoY to $0.6M; management discussed reduced marketing and a plan to revamp “GuruShots 2.0” after restructuring .
  • Margin compression: Operating margin fell to -31.8% (from -153.5% last year, affected by prior impairments), with SG&A up on higher paid UA and restructuring/impairment charges in Q2 .

Financial Results

Key Metrics vs Prior Periods and Estimates

MetricQ2 2024Q1 2025Q2 2025Consensus (S&P Global)
Revenue ($USD Millions)$7.771 $7.194 $6.979 N/A (unavailable)
GAAP Diluted EPS ($USD)$(0.66) $(0.02) $(0.12) N/A (unavailable)
Non-GAAP Diluted EPS ($USD)$0.04 $(0.00) $(0.01) N/A (unavailable)
Operating Margin (%)-153.5% -6.4% -31.8% N/A (unavailable)
Adjusted EBITDA ($USD Millions)$1.5 $0.3 $(0.1) N/A (unavailable)
Cash Flow from Operations ($USD Millions)$1.6 $1.2 $0.7 N/A (unavailable)

Note: Consensus comparison omitted due to S&P Global data unavailability today.

Revenue Mix

Revenue Component ($USD Millions)Q2 2024Q1 2025Q2 2025
Advertising Revenue$5.5 $4.9 $4.7
Digital Goods & Services Revenue$0.9 $0.6 $0.6
Subscription Revenue$1.1 $1.2 $1.2
Other Revenue$0.3 $0.5 $0.4

KPIs and Operating Metrics

KPIQ2 2024Q1 2025Q2 2025
MAU (Millions)28.7 25.0 24.7
Active Subscriptions (000s)648 698 791
ARPMAU ($USD)$0.072 $0.077 $0.078
Zedge Premium GTV ($USD Millions)$0.54 $0.68 $0.68
Cash & Equivalents ($USD Millions)N/A$20.196 $20.054

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Annualized cost savingsFY 2025 run-rateN/A~$4M annualized; ~$1M per quarter run-rate starting Q3 New
Restructuring/impairment chargesQ3–Q4 2025N/A~$1.1M additional expected in Q3–Q4 New
Advertising environment/CPMsQ3 2025 outlookN/A“Rebound” as TikTok re-enters; higher CPMs; new ad unit performing well Improving (directional)
Adjusted EBITDA & Free Cash Flow2H FY 2025N/AExpect improvement as restructuring savings flow through Improving (directional)
AI audio launch (pAInt suite)Q3–early Q4 2025N/ATargeted launch “next couple of months” (Q3 or beginning of Q4) New
Share repurchasesOngoing$5M authorizationContinued aggressive repurchases; ~245K shares bought in Q2 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Current Period (Q2 2025)Trend
AI/technology initiativespAInt 2.0 rollout; iOS revenue +60% YoY; modular development platform emphasis pAInt engagement up; planning AI audio creator; rewarded video monetization strengthened Strengthening (feature velocity/engagement)
Advertising CPMs/macro/regulatoryQ1 ad stack challenges; conservative paid UA; optimization plans TikTok withdrawal depressed CPMs; reentry improving demand; cautious optimism Improving (directional)
Subscriptions/product performanceSubscription +21% YoY; ARPMAU +22% YoY; lifetime subs strategy Subscription +13% YoY; active subs +22%; ARPMAU +9% YoY; lifetime mix impacts deferrals Positive (growth, mix)
Zedge Premium monetizationGTV +62% YoY; content expansion (Parallax, video) GTV +27% YoY; rewarded video conversions; web expansion Sustained growth
GuruShotsTransition; new features (Duels); live ops focus Continued YoY revenue pressure; restructuring; ideation for “GuruShots 2.0” Stabilizing cost base; revenue still soft
EmojipediaRecord revenue; AI emoji generator beta; site redesign plans Roughly flat YoY; AI emoji rewarded videos; site modernization underway Mixed near-term; improving engagement
Capital allocationNew $5M buyback authorization Active buybacks; cash >$20M; continued repurchases Ongoing discipline

Management Commentary

  • “This quarter’s 10% year-over-year revenue decline was primarily driven by…TikTok’s U.S. ad spend…lower MAU and the ongoing drag from GuruShots…we saw material growth in revenue from rewarded video…pAInt AI image generator and Parallax 3-D wallpapers…13% growth in subscription revenue…27% rise in Zedge Premium’s GTV…nearly $600 thousand in free cash flow…[and] the first phase of a two-stage strategic restructuring…expected to…save approximately $4 million in annualized costs” .
  • “Looking ahead…we are cautiously optimistic…currently seeing a rebound in advertising due to TikTok’s reentry…higher CPMs…as well as solid performance from a new ad unit” .
  • “Our underlying business metrics were robust…Active subscribers reached an all-time high…subscription revenue increased…deferred revenue…increased…Zedge Premium’s revenue…more than doubled” (Q3 release reference for trajectory) .
  • CFO: “We had restructuring charges of $0.5M and noncash asset impairment charges of $0.8M…GAAP loss from operations was $2.2M…Non-GAAP net loss…$0.2M…Cash flow from operations $0.7M and free cash flow $0.6M…Adjusted EBITDA…negative $0.1M…finished the quarter with over $20M in cash…bought back 245,000 shares” .

Q&A Highlights

  • Cost savings cadence: ~$1M per quarter run-rate savings from Q3, with full $1M visible in Q3 (offset by restructuring charges in SG&A normalization) .
  • ARPMAU dynamics: Ad decline partially offset by subscription and premium growth; ARPMAU sequentially higher despite lower MAU base .
  • GuruShots roadmap: Current focus on optimizing revenue and ROAS; “GuruShots 2.0” in ideation/design; beta projects (Wishcraft, AI Art Master) under review post-restructuring .
  • AI audio timing: Expected launch within “next couple of months,” aiming for Q3 or beginning of Q4 within pAInt suite (not a separate app) .
  • Seasonality and outlook: Q2 is seasonally strongest; while TikTok’s re-entry supports CPMs and paid UA, management did not guide Q3 revenue above Q2 .

Estimates Context

  • Wall Street consensus (S&P Global/Capital IQ) for Q2 2025 EPS and revenue was unavailable today due to a request limit, so beat/miss vs estimates cannot be assessed this quarter. Management provided directional outlook (CPM rebound, cost savings) but no formal numeric guidance, suggesting potential for upward revisions to H2 profitability expectations if ad trends hold and restructuring savings materialize .

Key Takeaways for Investors

  • Near-term revenue pressure was driven by external ad-market shocks (TikTok withdrawal) rather than internal execution; management indicates CPMs are improving with TikTok’s reentry .
  • Subscription growth and ARPMAU strength demonstrate resilient monetization despite lower MAUs, supporting a mix shift toward higher-value users .
  • Restructuring (22% workforce reduction) and ~$4M annualized savings should lift adjusted EBITDA and free cash flow beginning Q3, even as GuruShots remains a drag near term .
  • Zedge Premium continues to benefit from rewarded video and pAInt; AI audio launch in Q3/Q4 adds a differentiated creator feature set with potential cross-over into DataSeeds.AI longer term .
  • Strong liquidity and active buybacks (>$20M cash; ~245K shares repurchased in Q2) provide downside support and signal confidence in intrinsic value .
  • Watch for Q3/Q4 execution: visibility on $1M quarterly cost savings, any stabilization/improvement in ad revenue, and progress on GuruShots 2.0 roadmap .
  • Absence of numeric guidance and unavailable consensus data heighten the importance of tracking CPM trends, subscription mix (lifetime vs annual), and deferred revenue growth to gauge trajectory .