Zedge, Inc. Q4 FY2026 earnings call

• DataSeeds.ai Strategic Focus: Management identifies DataSeeds as the primary growth initiative, leveraging Zedge’s creator communities and content libraries to provide specialized, rights-cleared data for AI developers. The company has secured repeat business, its first six-figure engagement, and expanded into model evaluation services.
• Robotics and Multimodal Expansion: DataSeeds is expanding beyond image datasets into multimodal data, including audio, video, and sensor data critical for robotics training. They have developed an egocentric data capture app that synchronizes video with IMU, depth, and gyroscope data, addressing a market gap where such data does not exist publicly.
• Model Evaluation Capabilities: A new service offering combines expert human judgment with automated systems for model evaluation. Initial engagements, such as with BRIA, demonstrate the ability to assess nuanced quality differences in AI-generated images that automated tools miss.
• Legacy Business Stability: The Zedge Marketplace remains the principal source of cash flow and profitability. Despite a 17% decline in monthly active users (MAU), monetization improvements offset this drop. Management is focusing on stabilizing MAU through product enhancements (alarms, task-driven rewards) and disciplined user acquisition based on Return on Advertising Spend (ROAS).
• Innovation and Product Development: Six alpha products were launched during the year. Two are being further invested in, while the innovation team is being split: one pod focuses on building consumer apps, and the other supports DataSeeds catalog expansion and data capture.
• TapeDeck Music Platform: Investment continues in TapeDeck, particularly in the reggae vertical as a proof-of-concept. The platform offers both D2C opportunities and B2B solutions for music labels to monetize super fans through merchandise, ticket sales, and streaming.

Total revenue for the fourth quarter was $7.8 million, a 4% increase year-over-year. For the full fiscal year 2026, total revenue increased 7.6% to $31.6 million. Subscription revenue was the primary growth driver, increasing 29.5% to $6.6 million for the full year, driven by a 35% increase in active subscriptions to approximately 1.3 million and ARPU rising 30.5% to 12.1 cents. Advertising revenue grew 4.1% to $21.2 million for the full year, though it declined slightly in Q4 due to continued weakness at Emojipedia. Digital goods and services revenue (combining GuruShots and DataSeeds) decreased slightly to $2.0 million for the full year, as DataSeeds growth offset traditional GuruShots declines. Other revenue increased 6.5% to $1.9 million. Profitability improved significantly, with GAAP operating loss narrowing to $0.6 million from $3.2 million in FY2025, and Adjusted EBITDA increasing 134.2% to $4.1 million.

• DataSeeds Revenue Volatility: Management warns that DataSeeds revenue will likely remain uneven in fiscal 2027 due to the variable size and timing of assignments. However, they expect the pipeline to grow with both well-known tech leaders and venture-funded entrants.
• Investment Pace: With approximately $28 million in pro forma cash, management intends to scale DataSeeds responsibly over multiple quarters rather than spending capital all at once. They aim to maintain a cash cushion of around $20 million.
• User Acquisition Discipline: Future marketplace growth may be more measured as paid user acquisition spend is tightly calibrated against ROAS, prioritizing retention and monetization of existing users over aggressive top-line MAU growth.
• Expense Base: SG&A expenses saw increases due to compensation and currency fluctuations; however, management implies these investments are necessary to build out sales, marketing, and engineering talent for DataSeeds.

• DataSeeds Early Stage Risks: DataSeeds is still early in development, and revenue contribution may be inconsistent. There is execution risk in converting the pipeline into consistent, diversified, and larger engagements.
• Marketplace User Decline: Monthly active users have declined 17%, posing a risk to the core advertising and subscription revenue streams if monetization improvements do not fully offset the volume loss.
• Emojipedia Decline: Advertising revenue continues to suffer from the structural decline of the Emojipedia business, which weighs on consolidated growth rates.
• Regulatory and Legal Risks: Management highlights the importance of consent and provenance in their DataSeeds offering, noting ongoing lawsuits regarding content ownership and rights, which could impact industry standards or Zedge’s operations if not managed correctly.
• Integration Challenges: Merging GuruShots and DataSeeds operations requires managing distinct workflows and cultures, with risks associated in aligning technical and organizational priorities.

Q: How will the recent ~$7.7M insider financing be allocated to accelerate DataSeeds growth? / A: Funds will target three key areas: hiring sales/account executives with existing industry relationships to expand the pipeline; acquiring marketing talent to drive demand; and investing in engineering resources. Specific technical builds include enhancing quality assurance capabilities to ensure high customer acceptance rates and developing new features like video annotation tools and the model evaluation platform. This targeted investment aims to move the business off a "shoestring" budget and accelerate scaling.

Q: What is the strategic outlook for DataSeeds versus the legacy Marketplace business over a 3-5 year horizon? / A: DataSeeds represents a significant shift from low-value B2C transactions to high-value B2B enterprise orders, potentially creating substantial enterprise value. The two businesses are synergistic: the Marketplace provides the massive creator community, user acquisition expertise, and crucial consent/rights management infrastructure that ensures DataSeeds can deliver compliant, auditable data. Management does not intend to forego the Marketplace, as its assets are foundational to DataSeeds' unique value proposition and operational capability.

Q: Can you provide details on the current DataSeeds pipeline and specific demand drivers? / A: The pipeline is expanding with both established tech giants and well-capitalized venture-backed startups. Demand is particularly strong in robotics, where proprietary egocentric/exocentric video and synchronized sensor data are scarce and essential for training. Clients increasingly seek dedicated, owned datasets to prevent competitor access. Order sizes are growing, with several prospects discussing six-figure+ engagements, and repeat orders confirm the reliability of their delivery model.

Q: What is the status of the innovation team's output and the TapeDeck music platform? / A: All six alpha products launched last year, with two receiving continued investment pending performance clarity in the next few months. The innovation strategy is shifting from volume to quality, leveraging a scalable harness to test ideas quickly. Regarding TapeDeck, the reggae vertical serves as a proof-of-concept with strong brand ambassadorship. The platform offers B2B solutions for labels to monetize super fans via merch and tickets, with management expecting greater clarity on its trajectory in H1 2027.