NEW YORK, NY / ACCESSWIRE / March 15, 2024 / Zedge, Inc. (NYSE AMERICAN:ZDGE), a leader in building digital marketplaces and friendly competitive games around content that people use to express themselves, today announced results for its second quarter of fiscal 2024, ended January 31, 2024.

"I'm encouraged by the overall positive momentum we experienced during the second quarter as most of our businesses reported strong results," said Jonathan Reich, Zedge's chief executive officer. "Advertising revenue grew by over 18% from last year based on strong performance from the Zedge Marketplace. Additionally, Zedge+, the Zedge Marketplace's subscription offering, reported 11% sequential and 24% year-over-year revenue growth. The introduction of iOS subscriptions in late fiscal 2023, coupled with upgrading our Android subscription offering, has resulted in revenue and margin expansion as we attract new subscribers that monetize at a premium when compared to the ad-supported tier. Zedge Premium grew by 21% from last year, benefitting from increased pAInt use as we continued to expand the opportunity both for Zedge Marketplace users and introduced the functionality on the web. When taken together with the ongoing optimization of our advertising stack, these factors led to record ARPMAU1with 37% year-over-year growth.

Second Quarter Highlights (fiscal 2024 versus fiscal 2023)

(in $M except for EPS)

Total Revenue

Advertising Revenue

Digital goods and services

Subscription Revenue

Other Revenue

GAAP Operating Income (Loss)

Operating Margin

GAAP Net Income (Loss)

GAAP Diluted Earnings (Loss) Per Share

Non-GAAP Net Income

Non- GAAP Diluted Earnings Per Share

Adjusted EBITDA

Cash Flow from Operations

nm = not measurable/meaningful*numbers may not add due to rounding

(in MM except for ARPMAU and where noted)

Total Installs - Cumulative

MAU

Well-developed Markets

Emerging Markets

Active Subscriptions (in 000s)

ARPMAU

Zedge Premium - Gross Transaction Value (GTV)

*numbers may not add due to rounding

1 We use the following business metrics in this release because we believe they are useful in evaluating Zedge's operational performance.

2 Throughout this release, Non-GAAP Net Income, Non-GAAP EPS and Adjusted EBITDA are non-GAAP financial measures intended to provide useful information that supplement Zedge's results in accordance with GAAP. Please refer to the Reconciliation of Non-GAAP Financial measures at the end of this release for an explanation of Zedge's formulations of Non-GAAP Net Income, Non-GAAP EPS and Adjusted EBITDA and reconciliations to the most directly comparable GAAP measures.

(in $M except for EPS, ARPMAU, Paid Subscriptions)

Total Revenue

Advertising Revenue

Digital goods and services

Subscription Revenue

Other Revenue

GAAP Operating Income (Loss)

GAAP Net Income (Loss)

GAAP Diluted Earnings (Loss) Per Share

Non GAAP Net Income

Non-GAAP Diluted EPS

Adjusted EBITDA

Adjusted EBITDA Margin

Cash Flow from Operations

MAU

Well-developed Markets

Emerging Markets

Active Subscriptions (in 000s)

ARPMAU

Zedge Premium - GTV

nm = not measurable/meaningful*numbers may not add due to rounding

Fiscal 2024 Commentary

Reich continued, "We continue positioning Zedge to drive sustainable, profitable, long-term revenue growth. To this end, we have consolidated and centralized many functions throughout the Company, including marketing, data, analytics and design. We also consolidated the product teams managing the Zedge Marketplace and GuruShots. The goals of the Company-wide overhaul are to fuel future growth and simultaneously reduce costs. This plan also ties specifically into GuruShots, where our focus is to to stabilize the business, return it to growth and reduce its cost base. Although still early, we are seeing signs of improvement at GuruShots, and the rest of the Company is also benefitting from these changes.

"Diving into GuruShots, we upgraded the product management team over the past two quarters with subject matter experts in gaming emanating from some of the leading global mobile gaming publishers. This team has overhauled our product roadmap, focusing on innovation, which we believe can put GuruShots onto a growth trajectory, even while still facing the complicated marketing landscape resulting from Apple's ATT framework.

"More specifically, the team is focusing on several key areas, starting with feature development. Since its acquisition, GuruShots has not introduced any significant new features in the game. However, when new features were introduced in years past, many resulted in revenue growth jumps of 10% to 30%, and we are targeting these types of returns with the new feature roadmap, which we plan to roll out over time incrementally. A recent example was introducing the Turbo feature in January, which added more gameplay and raised average daily revenue by around 15%.

"We are also revamping the GuruShots game economy to drive improved revenue production from in-app purchases. To do this, we are migrating to a multiple currency, virtual coin-based economy, which will move the game away from today's current more rigid economy. This transition will also enable us to reward all players in a controlled and bespoke fashion, encouraging engagement and further driving purchases. Behind the scenes, our team can manage various currencies and rewards to optimize gameplay and satisfaction.

"Finally, we are creating a much more user-friendly onboarding experience to make it more inviting for newbies and open the top of the funnel. As part of this, we will also enable a more nuanced game progression, making it easier to segment users based on their experience and, therefore, leveling out the competition.

"Coupled with these product changes is marketing. Specifically, we will more closely align marketing spend with feature introductions. We have taken steps to increase the return on ad spend (ROAS) from GuruShots' paid user acquisition activities while also continuing to focus on app-store optimization (ASO), search engine optimization (SEO) and creative strategy and execution. We believe these items will help drive growth for GuruShots and create the value we envisioned when acquiring the business.

"In parallel to our strategy to turn the tide at GuruShots, we remain heavily invested in creating sustainable growth at the Zedge Marketplace and Emojipedia. For the former, while our investments in subscriptions, paid user acquisition, pAInt and other features have helped return the business to growth, we remain focused on reversing negative MAU trends to accelerate growth rates. For Emojipedia, we have a roadmap of new features and services that we plan to roll out over the next 12 months, including emoji mashups, emoticons, kaomojis and other user enhancements that we believe will drive new users, increase engagement and enable monetization growth."

Earnings Announcement and Supplemental Information

Management will host an earnings conference call beginning at 10:00 a.m. Eastern to discuss its second fiscal quarter 2024 results, outlook, and strategy, followed by a Q&A with investors.

Live Call-in Info:

Toll Free: 888-506-0062

International: 973-528-0011

Participant Access Code: 664424

Webcast URL: https://www.webcaster4.com/Webcast/Page/2205/50078

Replay:

Toll Free: 877-481-4010

International: 919-882-2331

Replay Passcode: 50078

About Zedge

Zedge builds digital marketplaces and friendly competitive games around content people use to express themselves. Our leading products include Zedge Ringtones and Wallpapers, a freemium digital content marketplace offering mobile phone wallpapers, video wallpapers, ringtones, notification sounds, and pAInt, a generative AI wallpaper maker; GuruShots, a skill-based photo challenge game; and Emojipedia, the #1 trusted source for ‘all things emoji'. Our vision is to enable and connect creators who enjoy friendly competitions with a community of prospective consumers in order to drive commerce. We serve 10's of millions of active users across our offerings every month. For more information, visit: investor.zedge.net

Forward-Looking Statements

All statements above that are not purely about historical facts, including, but not limited to, those in which we use the words "believe," "anticipate," "expect," "plan," "intend," "estimate," "target" and similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. While these forward-looking statements represent our current judgment of what may happen in the future, actual results may differ materially from the results expressed or implied by these statements due to numerous important factors. Our filings with the SEC provide detailed information on such statements and risks and should be consulted along with this release. To the extent permitted under applicable law, we assume no obligation to update any forward-looking statements.

Contact:

Brian Siegel, IRC, MBA

Senior Managing Director

Hayden IR

(346) 396-8696

ir@zedge.net

CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except par value data)

Assets

Current assets:

Cash and cash equivalents

Trade accounts receivable

Prepaid expenses and other receivables

Total current assets

Property and equipment, net

Intangible assets, net

Goodwill

Deferred tax assets, net

Other assets

Total assets

Liabilities and stockholders' equity

Current liabilities:

Trade accounts payable

Accrued expenses and other current liabilities

Deferred revenues

Total current liabilities

Term loan, net of deferred financing costs

Deferred revenues--non-current

Other liabilities

Total liabilities

Commitments and contingencies (Note 9)

Stockholders' equity:

Preferred stock, $.01 par value; authorized shares-2,400; no shares issued and outstanding

Class A common stock, $.01 par value; authorized shares-2,600; 525 shares issued and outstanding at January 31, 2024 and July 31, 2023

Class B common stock, $.01 par value; authorized shares-40,000; 14,756 shares issued and 13,917 shares outstanding at January 31, 2024, and 14,634 shares issued and 13,801 outstanding at July 31, 2023

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Treasury stock, 839 shares at January 31, 2024 and 833 shares at July 31, 2023, at cost

Total stockholders' equity

Total liabilities and stockholders' equity

ZEDGE, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (in thousands, except per share data)(Unaudited)

Revenues

Costs and expenses:

Direct cost of revenues (excluding amortization of capitalized software and technology development costs which is included below)

Selling, general and administrative

Depreciation and amortization

Impairment of intangible assets

Change in fair value of contingent consideration

(Loss) income from operations

Interest and other income, net

Net gain (loss) resulting from foreign exchange transactions

(Loss) income before income taxes

Income tax (benefit) provision

Net (loss) income

Other comprehensive gain (loss):

Changes in foreign currency translation adjustment

Total other comprehensive gain (loss)

Total comprehensive (loss) income

(Loss) income per share attributable to Zedge, Inc. common stockholders:

Basic

Diluted

Weighted-average number of shares used in calculation of income (loss) per share:

Basic

Diluted

ZEDGE, INC.CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(Unaudited)

Operating activities

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation

Amortization of intangible assets

Amortization of capitalized software and technology development costs

Amortization of deferred financing costs

Stock-based compensation

Impairment charge of intangible assets

Impairment of investment in privately-held company

Change in fair value of contingent consideration

Deferred income taxes

Change in assets and liabilities:

Trade accounts receivable

Prepaid expenses and other current assets

Other assets

Trade accounts payable and accrued expenses

Deferred revenue

Net cash provided by operating activities

Investing activities

Final payments for asset acquisitions

Capitalized software and technology development costs

Purchase of property and equipment

Net cash used in investing activities

Financing activities

Prepayment of term loan

Proceeds from term loan payable

Payment of deferred financing costs

Proceeds from exercise of stock options

Purchase of treasury stock in connection with share buyback program and stock awards vesting

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Use of Non-GAAP Measures

Adjusted EBITDA, defined as earnings (loss) before interest, taxes, depreciation and amortization, stock compensation expense, transaction-related expenses and other non-recurring expenses, Adjusted EBITDA Margin, and non-GAAP net income and EPS (which adjust out stock compensation expense, transaction-related expenses and other non-recurring expenses from GAAP net income and EPS), represent measures that we believe are customarily used by investors and analysts to evaluate the financial performance of companies in addition to the GAAP measures we present. Our management also believes these measures are useful in evaluating our core operating results. However, these are not measures of financial performance under GAAP and should not be considered an alternative to net income or operating income/margin as an indicator of our operating performance or to net cash provided by operating activities as a measure of our liquidity.

Reconciliation of Adjusted EBITDA to Net Income (Loss)

Net (Loss) Income

Excluding:

Interest and other income (expense), net

Provision for (benefit from) income taxes

Depreciation and amortization

EBITDA

Adjustments:

GuruShots acquisition related write-offs

Stock-based compensation

Transaction costs related to business combination

Adjusted EBITDA

numbers may not add due to rounding

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income

GAAP Net Income (Loss)

Adjustments:

GuruShots acquisition related write-offs

Stock-based compensation

Transaction costs related to business combination

Income tax effect on non-GAAP items

Non-GAAP Net Income

Non-GAAP basic earnings per share

Non-GAAP diluted earnings per share

Weighted average shares used to compute Non-GAAP basic earnings per share

Weighted average shares used to compute Non-GAAP diluted earnings per share

numbers may not add due to rounding

SOURCE: Zedge, Inc.

COMTEX_449299537/2457/2024-03-15T06:32:48