Zedge, Inc. Q2 FY2026 earnings call

• Quality of monetization continues to improve leading to record results, with record revenue and average revenue per monthly active user in seasonally strongest quarter driven by advertising optimization, record active subscriptions, and record Zedge Premium GTV. - Innovation: Data seeds early stage, excited about market potential; appetite for AI training data insatiable; productizing offerings for model builders; building OTS catalog, production cloud; launched two more alpha products, halfway to six this fiscal year; first release under innovation framework didn't meet KPIs, development ceased. - Emojipedia faces structural headwinds, recorded non-cash impairment; business profitable, cost structure efficient. - Guru Shots stabilizing, operated conservatively after restructuring. - Generated solid free cash flow, cash strengthened to $19.1 million with zero debt, paying quarterly dividend, investing in innovation and repurchasing shares when right. - Priorities: Strengthen monetization in marketplace, build data seeds deliberately, expand innovation pipeline disciplined.

Total revenue for the second quarter was $8.3 million, up 18.3% from last year. Zedge Marketplace revenue was up over 21% year-over-year, driven by strong advertising CPMs and subscription revenue. Advertising revenue was up 18.3% for the quarter, offset by lower ad revenue at Emojipedia. Zedge Plus subscription revenue increased 33% year over year and net active subscriber base grew 49%, reaching nearly 1.2 million subscribers. Deferred revenue reached $6 million, up 5% sequentially and 39% year-over-year. Zedge Premium GTV was up 15.7% from the year-ago quarter and 47.6% overall. Cost of revenue was 6.8% of revenue, up from 6.4% last year. SG&A decreased about 6% to $6.7 million. Gap loss from operations was $2.9 million. Gap net loss and loss per share were $2.3 million and 18 cents. On a non-GAAP basis, net income was $0.8 million and EPS was 6 cents. Cash flow from operation was $0.9 million and free cash flow was $0.8 million. Adjusted EBITDA for the quarter was $1.1 million. Ended the quarter with $19.1 million in cash and cash equivalents and no debt.

• Last year had one-time revenue benefit from ad partner integration not repeating this year. - Expect data seed increases contribution in second half of fiscal 2026.

• Forward-looking statements subject to risks and uncertainties disclosed in ZEDGE's periodic SEC filings. - Non-GAAP measures used, need to see earnings release for explanation. - Mail contraction remains, need to focus on acquiring higher value users and monetizing audience more effectively. - Data seeds revenue lumpy at this stage, need to build infrastructure, supply depth, operational rigor to support larger opportunities without hurting profitability. - Not every initiative in innovation will make the cut, requires discipline to avoid getting attached to products. - Emojipedia faces structural headwinds leading to non-cash impairment.

Q: For data seeds, walk through how you think about time to deliver on a win, margin perspective when scaling, pipeline size.

A: Data seeds B2B, deal progression depends on proof of concept; margins attractive, off-the-shelf lower than custom, impacted by middlemen; refining process to invest in right areas.

Q: Last quarter mentioned looking at other data types, how thinking now?

A: Focus on multimodal data (images, audio, video); completed video proof of concept, speaking to prospects on audio.

Q: On alpha product launches, anything on the two new ones?

A: New ones built on evolving foundation for modular fashion, expanding monetization through subscription and advertising, refining selection through fake door tests, cohort analysis, goal to have fast turnaround foundation.

Q: On subscription revenues, anything different driving?

A: Ongoing investment in optimizing subscription offering to find prospective subscribers.

Q: On Zedge Marketplace, what's driving it?

A: Fiscal Q2 overlaps with year-end advertising spend, work on data science to better segment users and optimize monetization.

Q: On active users, strategy to increase?

A: Three tracks: influencer marketing, testing new product features (e.g., alarms), data science project to isolate prospective new users.

Q: On marketplace for independent music makers, progress?

A: KPIs trending right, slowing product development, shifting focus to expanding music catalog; discovery important, working with artists to promote app to fan base