Zedge, Inc. Q1 FY2026 earnings call

• Continued execution against stated priorities with discipline and focus.
• Zedge Marketplace had mid-single-digit revenue growth, subscriptions at record 1.1 million (up over 50% YOY), and average revenue per monthly active user increased.
• DataSeeds saw growing interest from world-class companies, received a second order from an AI sector leader, with a robust pipeline and DPC asset for producing custom datasets.
• Tapedeck pilot progressing with positive artist feedback.
• Reddit's licensing agreements reinforced market opportunity for DataSeeds.
• SG&A decreased due to restructuring savings, partially offset by investment in DataSeeds and Tapedeck.
• Repurchased 240,000 Class B shares and paid first quarterly dividend.

Total revenue for the first quarter was $7.6 million, up 5.8% from last year. Zedge Marketplace revenue was up, driven by strong advertising CPMs and subscription revenues. Zedge Plus subscription revenue increased 29% year-over-year, with net active subscriber base growing 54% to nearly 1.1 million. Deferred revenue, primarily subscription-related, reached $5.7 million. Advertising revenue was up 6%, offsetting lower ad revenue at Emojipedia. Zedge Premium GTV was down 3.7% YOY. Cost of revenue was 7.3%, up from 6.4% last year. SG&A decreased about 13% to $5.9 million. GAAP income from operations was $0.9 million. Cash flow from operations was $0.8 million and free cash flow was $0.6 million. DataSeeds had very little revenue in the quarter, but interest from world-class companies is growing with a robust pipeline.

• Fiscal 2026 expected to be a year defined by growth, innovation, and expanding operating leverage.
• Continued progress with DataSeeds, Tapedeck, and product innovation pipeline.

• Risks and uncertainties disclosed in Zedge's periodic SEC filings.
• Potential further declines in Emojipedia due to Google's copy-paste feature and AI overviews.
• Uncertainties in DataSeeds sales process conversion.
• GuruShots still incurring losses with part attributed to DataSeeds ramp-up.

Q: Could you help us understand how DataSeeds gets recognized as revenue?

A: Yi Tsai said DataSeeds revenue is recognized when products are delivered and accepted, grouped under digital goods and services.

Q: What's the general framework for converting DataSeeds opportunities?

A: Jonathan Reich said it's early, with operational steps like contract negotiation, and will need a couple of quarters for clarity.

Q: How is GuruShots tied to DataSeeds?

A: Jonathan Reich said GuruShots has facets like using existing catalog and competitions, with work in progress for custom content. Yi Tsai said GuruShots operating losses include DataSeeds costs, legacy business stabilized at ~$150k per month.

Q: Impact of Emojipedia and if it will stabilize?

A: Jonathan Reich said need another quarter to see Google's impact and industry developments, hoping protection activities slow decline.

Q: Quantify restructuring costs impact and reinvestment?

A: Yi Tsai said $330k withholding taxes from restructuring impacted free cash flow, with intention to reinvest in innovation, DataSeeds, etc.

Q: How much left in share buyback program?

A: Yi Tsai said $600,000 remains available under current $5 million buyback authorization.