06/13/2025 | Press release | Distributed by Public on 06/13/2025 14:16
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and our Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024 (the "2024 Form 10-K"), as filed with the U.S. Securities and Exchange Commission (the "SEC") on October 29, 2024.
As used below, unless the context otherwise requires, the terms "the Company," "Zedge," "we," "us," and "our" refer to Zedge, Inc., a Delaware corporation and its subsidiaries, GuruShots Ltd., Zedge Europe AS and Zedge Lithuania UAB, collectively.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words "believes," "anticipates," "expects," "plans," "intends," and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from future results. Factors that may cause such differences include, but are not limited to: (1) economic, geopolitical and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price; (2) delay or failure to realize the expected synergies and benefits of the GuruShots acquisition; (3) Russia's invasion of Ukraine, and the international community's response; and (4) recent attack by Hamas and other terrorist organizations from the Gaza Strip and Lebanon and Israel's war against them. For further information regarding risks and uncertainties associated with our business, please refer to Item 1A to Part I "Risk Factors" in the 2024 Form 10-K. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including the 2024 Form 10-K.
Trends and Uncertainties
Current Economic Conditions
The majority of our users and employees are located outside of the United States exposing us to a range of economic factors and regulations including foreign exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally. We believe these macroeconomic conditions coupled with the global political climate and unrest, including the ongoing wars between Ukraine and Russia and Israel and Hamas, may negatively impact our performance.
The Israel-Hamas and Israel-Hezbollah Conflicts
Given our operations in Israel, the impact of economic, political, geopolitical, and military conditions in the region directly affects us, including conflicts involving missile strikes, infiltrations, and terrorism. Notably, on October 7, 2023, Hamas launched attacks in southern Israel, resulting in casualties and military engagement. In addition, Hezbollah, another terrorist organization based in Lebanon has been indiscriminately shelling Israel since October 8, 2023, the Houthi rebels based in Yemen have also launched ballistic missiles and kamikaze drones at Israel and the Islamic Republic of Iran has on two occasions attacked Israel with a barrage of ballistic missiles. Although a temporary ceasefire is in place, it is unclear if it is sustainable. The extent and duration of this conflict remains uncertain. Israel's response to Hamas' unprecedented attack led to the mobilization of IDF reservists, affecting our workforce. Prior to this, changes in Israel's judicial system had already raised concerns about the business environment, compounded by recent events, potentially impacting foreign investment, currency fluctuations, credit ratings, interest rates, and security markets. Furthermore, regional political unrest and threats from extremist groups, notably Iran, pose additional risks. Management and our Board of Directors are closely monitoring the situation in Israel to address potential business disruptions and implications.
Overview
Zedge builds digital marketplaces and friendly competitive games around content that people use to express themselves. Our leading products include Zedge Ringtones and Wallpapers, which we refer to as our "Zedge App," a freemium digital content marketplace offering mobile phone wallpapers, video wallpapers, ringtones, and notification sounds as well as 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 are part of the 'Creator Economy,' which Goldman Sachs estimates is worth $250 billion globally.1 According to Linktree, over 200 million individuals identify as creators, people who use their influence, skill, and creativity to amass an audience and monetize it.2 Furthermore, Influencer Marketing Hub reports that out of 2,000 surveyed creators, 44.9% identify as full-time creators,3 and Exploding Topics reports that 10% of influencers earn more than $100,000 per year.4 We view the Creator Economy as an opportunity for Zedge to expand our business, especially as we execute by connecting our gamers with our marketplace.
Our Zedge app (which is named "Zedge Wallpapers" in the App Store) offers a wide array of mobile personalization content including wallpapers, video wallpapers, ringtones, and notification sounds, and is available both in Google Play and the App Store. As of April 30, 2025, our Zedge App had been installed nearly 707 million times since inception and, over the past eight fiscal quarters, has had between 22.1 million and 30.1 million monthly active users ("MAU"), ending with 22.1 million MAU as of April 30, 2025. MAU is a key performance indicator ("KPI") for our Zedge app that captures the number of unique users that used our Zedge App during the final 30 days of the relevant period. Our platform allows creators to upload content to our marketplace and avail it to our users either for free or, via 'Zedge Premium,' the section of our marketplace where we offer premium content for purchase. In turn, our users utilize the content to personalize their phones and express their individuality.
In fiscal 2023, we introduced pAInt, a generative AI wallpaper maker in the Zedge App. A generative AI wallpaper maker is an implementation of artificial intelligence software that can create images from text descriptions. To interface with a generative AI image maker, a user enters a text description of the image they want to create, and the software generates an image based on that description. In addition, we upgraded Zedge+, our paid subscription offering by bundling together an ad-free experience with value adds making the offering more compelling.
We often refer to our freemium ringtones and wallpapers, our subscription offering, the functionality for creators to market their products and ancillary offering and features both in our Zedge App and website, as our Zedge Marketplace.
The Zedge Marketplace's monetization stack consists of advertising revenue generated when users view advertisements when using the Zedge App (and the related functionality under the zedge.net website), the in-app sale of Zedge Credits, our virtual currency, that is used to purchase Zedge Premium content, and a paid-subscription offering that provides an ad-free experience to users that purchase a monthly, annual or lifetime subscription. In April 2023, we introduced a subscription tier in the iOS version of the app. As of April 30, 2025, we had approximately 896,000 active subscribers.
In April 2022, we acquired GuruShots Ltd, a recognized category leader focused on gamifying the photography vertical. GuruShots offers a platform spanning iOS, Android, and the web that provides a fun, educational and structured way for amateur photographers to compete in a wide variety of contests showcasing their photos while gaining recognition with votes, badges, and awards. We estimate that the total addressable market of amateur photographers using their smartphones to take and publicly share artistic photos is 30-40 million people per month and that the market is still in its infancy. Every month, GuruShots stages more than 300 competitions that result in players uploading in excess of 550,000 photographs and casting close to 3.0 billion "perceived votes," which are calculated by multiplying the number of votes that each player casts by a weighting factor based on various factors related to that user.
GuruShots utilizes a 'Free-to-Play' business model and generates revenue through in-app purchases of virtual currency. Players can use this currency to unlock competitions or gain an edge by purchasing resources and participating in additional gameplay. Over the past nine years, the monthly average paying player spend has increased in excess of 6.2% annually to more than $40.9 per player.
1 | https://www.latimes.com/business/story/2024-01-08/creator-influencer-economy-2024-predictions-social-media-stars |
2 | https://linktr.ee/creator-report |
3 | https://influencermarketinghub.com/creator-earnings-benchmark-report |
4 | https://explodingtopics.com/blog/creator-economy-stats# |
In fiscal 2024, we revamped GuruShots' customer onboarding experience by guiding new players through simplified photo competitions of limited size and duration. The upgrade was designed to enhance the gaming experience for new players by increasing their potential for winning and providing immediate gratification. The new onboarding has shown improvements in engagement, retention, and revenue from new users. In addition, we migrated to a coin-based economy with multiple currencies in order to enable more players to earn and spend their currency on in-game resources.
Since the acquisition, GuruShots has faced challenges in growth and profitability and its revenue has declined. As such the Company is cutting costs as part of the restructuring implemented in January 2025 and materially scaling back on paid user acquisition, or PUA, in order to approach breakeven. In parallel, we are developing a plan, that we refer to as GuruShots 2.0, to revamp GuruShots' offering in order to put it on a growth trajectory and unlock the potential value in this asset. Our strategy focuses on attracting new users and converting them into recurring, paying players. To date, we introduced a fun and comprehensive onboarding experience to draw new users into the gameplay with ease and migrated to a coin-based in-game economy to enable more possibilities to reward and monetize players. We also launched Missions, a set of tasks that players need to complete in exchange for earning rewards, and Duels, a fast-paced, real-time player-versus-player game mechanic that adds an exciting competitive layer to GuruShots.
Historically, we marketed GuruShots to prospective players, primarily via PUA channels. We utilize a host of creative formats including static and video ads in order to promote the game. As a part of the restructuring plan mentioned above, we have materially reduced PUA for GuruShots and do not expect to ramp up until we finalize the GuruShots 2.0 plan.
Beyond our commitment to growing both the Zedge App and GuruShots on a standalone basis, we believe that there are untapped opportunities that we can capitalize on to unlock additional value. Specifically, we plan to enable GuruShots players the ability to sell their content both in the Zedge Marketplace and elsewhere. In addition, we are benefitting from the experience that the GuruShots team possesses in gamifying the Zedge App. Longer term, we believe that there are complementary content verticals that lend themselves to gamification.
We own and operate Emojipedia, the world's leading authority dedicated to providing up-to-date and well-researched emoji definitions, information, and news, as well as World Emoji Day and the annual World Emoji Awards. In April 2025, Emojipedia received approximately 46.3 million monthly page views and has approximately 10.9 million monthly active users as of April 30, 2025 of which approximately 49.7% are located in well-developed markets. It is the top resource for all things emoji, offering insights into data and cultural trends. As a member of the Unicode Consortium, the standards body responsible for approving new emojis, Emojipedia works alongside major emoji creators including Apple, Google, Meta, and X, formerly known as Twitter.
We believe that Emojipedia provides growth potential to the Zedge App, and it was immediately accretive to earnings post acquisition in August 2021. In the past year, we have made many changes to Emojipedia including overhauling its backend, redesigning the Emojipedia website, and introducing new entertainment-focused features to the site. We will continue to enhance this offering and are exploring additional new features which use artificial intelligence, some of which will be released before the end of the calendar year.
Critical Accounting Policies
Our unaudited condensed consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our significant accounting policies are described in Note 1 to the consolidated financial statements included in the 2024 Form 10-K. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting policies are those that require application of management's most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies include those related to revenue recognition, intangible assets, goodwill, capitalized software and technology development costs, stock-based compensation and income taxes. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For additional discussion of our critical accounting policies, see our Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2024 Form 10-K.
Recently Issued Accounting Pronouncements
Please see Note 1 to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
Key Performance Indicators (KPIs)
Zedge App-MAU and ARPMAU
The presentation of our results of operations related to our Zedge App includes disclosure of two key performance indicators - Monthly Active Users (MAU) and Average Revenue Per Monthly Active User (ARPMAU). MAU is a key performance indicator that we define as the number of unique users that used our Zedge App during the previous 30-day period, which is important to understanding the size of our active user base which is a main driver of our revenue. Changes and trends in MAU are useful for measuring the general health of our business, gauging both present and potential users/customers' experience, assessing the efficacy of product improvements and marketing campaigns and overall user engagement.
ARPMAU is defined as (i) the total revenue derived from Zedge App in a monthly period, divided by (ii) MAU in that same period. ARPMAU for a particular time period longer than one month is the average ARPMAU for each month during that period. ARPMAU is valuable because it provides insight into how well we monetize our users and, changes and trends in ARPMAU are indications of how effective our monetization investments are.
MAU decreased 20.2% in the three months ended April 30, 2025 when compared to the same period a year ago. As of April 30, 2025, users in emerging markets represented about 76.5% of our MAU, as compared to 78.3% from the same period a year ago.
ARPMAU for the three months ended April 30, 2025 increased 32.7% when compared to the same period a year ago, primarily due to the increase in price per advertising impression from the same period a year ago, which was driven by increased competition for our ad inventory as well as strong year-over-year subscription revenue growth. Subscription revenue and subscription billings for the three months ended April 30, 2025 increased 13.4% and 22.9%, respectively, when compared to the same period a year ago, as discussed below.
The following tables present the MAU - Zedge App and ARPMAU - Zedge App for the three months ended April 30, 2025 as compared to the same period in the prior year:
Three Months Ended April 30, |
||||||||||||
(in millions, except ARPMAU - Zedge App) | 2025 | 2024 | % Change | |||||||||
MAU- Zedge App | 22.1 | 27.7 | -20.2 | % | ||||||||
Developed Markets MAU - Zedge App | 5.2 | 6.0 | -13.3 | % | ||||||||
Emerging Markets MAU - Zedge App | 16.9 | 21.7 | -22.1 | % | ||||||||
Emerging Markets MAU - Zedge App/Total MAU - Zedge App | 76.5 | % | 78.3 | % | -2.4 | % | ||||||
ARPMAU - Zedge App | $ | 0.0985 | $ | 0.0742 | 32.7 | % |
The following charts present the MAU - Zedge App and ARPMAU - Zedge App for the consecutive eight fiscal quarters ended April 30, 2025:
GuruShots-MAPs and ARPMAP
The presentation of our results of operations related to our GuruShots segment includes disclosure of two key performance indicators as discussed below:
Monthly Active Payers ("MAPs"). We define a MAP as a unique active user on the GuruShots app or GuruShots.com in a month who completed at least one in-app purchase ("IAP") during that time period. MAPs for a time period longer than one month are the average MAPs for each month during that period. We estimate the number of MAPs by aggregating certain data from third-party attribution platforms. MAP is a key performance indicator because it shows the size of GuruShots' active paying user base which is a main driver of GuruShots' revenue. Changes and trends in MAP are useful for measuring the general health of GuruShots' business, gauging both present and potential users/customers' experience, assessing the efficacy of product improvements and marketing campaigns and overall user engagement.
Average Revenue Per Monthly Active Payer ("ARPMAP"). We define ARPMAP as (i) the total revenue from IAPs derived from GuruShots and GuruShots.com in a monthly period, divided by (ii) MAPs in that same period. ARPMAP for a particular time period longer than one month is the average ARPMAP for each month during that period. ARPMAP shows how efficiently we are monetizing each MAP.
MAP decreased 33.8% in the three months ended April 30, 2025 when compared to the same period a year ago, primarily attributable to Apple's App Tracking Transparence ("ATT") framework which impedes our ability to invest in paid user acquisition ("PUA") campaigns profitably in terms of return on ad spend or ("ROAS"). As such, we continued to scale back our PUA spend for GuruShots while testing new campaigns and creatives in order to unearth attractive ROAS scaling opportunities. As part of the restructuring implemented in January 2025, we expect to materially decrease PUA at least through the end of fiscal 2025.
ARPMAP decreased 17.1% to $44.1 in the three months ended April 30, 2025 from $53.2 in the same period a year ago. The following table shows our MAP and ARPMAP for the three months ended April 30, 2025 and 2024:
Three Months Ended April 30, |
||||||||||||
2025 | 2024 | % Change | ||||||||||
Monthly Active Payers | 3,578 | 5,408 | -33.8 | % | ||||||||
Average Revenue per Monthly Active Payer | $ | 44.1 | $ | 53.2 | -17.1 | % |
The following charts present the MAP and ARPMAP - GuruShots for the consecutive eight quarters ended April 30, 2025:
Our KPIs related to GuruShots are not based on any standardized industry methodology and are not necessarily calculated in the same manner that other companies or third parties may use to calculate these or similarly titled measures. The numbers that we use to calculate MAP and ARPMAP are derived from data that we generate internally. While these numbers are based on what we believe to be reasonable judgments and estimates for the applicable period of measurement, there are inherent challenges in measuring usage and engagement. We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy.
Results of Operations
The following table summarizes our historical condensed consolidated statements of operations data:
Three Months Ended April 30, | Nine months Ended April 30, | |||||||||||||||||||||||
2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||
Revenues | $ | 7,757 | $ | 7,658 | 1.3 | % | $ | 21,930 | $ | 22,510 | -2.6 | % | ||||||||||||
Direct cost of revenues | 452 | 455 | -0.7 | % | 1,360 | 1,399 | -2.8 | % | ||||||||||||||||
Selling, general and administrative | 6,343 | 6,752 | -6.1 | % | 20,278 | 18,773 | 8.0 | % | ||||||||||||||||
Depreciation and amortization | 225 | 583 | -61.4 | % | 924 | 2,120 | -56.4 | % | ||||||||||||||||
Impairment of intangible assets | - | - | nm | - | 11,958 | nm | ||||||||||||||||||
Restructuring charges | 577 | - | nm | 1,058 | - | nm | ||||||||||||||||||
Impairment of capitalized software and technology development costs | - | - | nm | 827 | - | nm | ||||||||||||||||||
Income (loss) from operations | 160 | (132 | ) | -221.2 | % | (2,517 | ) | (11,740 | ) | -78.6 | % | |||||||||||||
Interest and other income, net | 154 | 188 | -18.1 | % | 507 | 434 | 16.8 | % | ||||||||||||||||
Net loss resulting from foreign exchange transactions | (41 | ) | (80 | -48.8 | % | (141 | ) | (223 | ) | -36.8 | % | |||||||||||||
Income taxes expense (benefit) | 88 | (137 | ) | nm | (318 | ) | (2,397 | ) | -86.7 | % | ||||||||||||||
Net income (loss) | $ | 185 | $ | 113 | 63.7 | % | $ | (1,833 | ) | $ | (9,132 | ) | -79.9 | % |
nm-not meaningful
Comparison of Our Results of Operations for the Three and Nine months Ended April 30, 2025 and 2024
Revenues
The following table sets forth the composition of our revenues for the three and nine months ended April 30, 2025 and 2024 (in thousands):
Three Months Ended April 30, |
% |
Nine Months Ended April 30, |
% | |||||||||||||||||||||
2025 | 2024 | Changes | 2025 | 2024 | Changes | |||||||||||||||||||
Zedge Marketplace | ||||||||||||||||||||||||
Advertising revenue | $ | 5,579 | $ | 5,461 | 2.2 | % | $ | 15,151 | $ | 15,882 | -4.6 | % | ||||||||||||
Paid subscription revenue | 1,272 | 1,122 | 13.4 | % | 3,687 | 3,186 | 15.7 | % | ||||||||||||||||
Other revenues | 431 | 206 | 109.2 | % | 1,357 | 710 | 91.1 | % | ||||||||||||||||
Total Zedge Marketplace revenue | 7,282 | 6,789 | 7.3 | % | 20,195 | 19,778 | 2.1 | % | ||||||||||||||||
GuruShots | ||||||||||||||||||||||||
Digital goods and services | 475 | 869 | -45.3 | % | 1,735 | 2,732 | -36.5 | % | ||||||||||||||||
Total revenue | $ | 7,757 | $ | 7,658 | 1.3 | % | $ | 21,930 | $ | 22,510 | -2.6 | % |
The following table summarizes our subscription revenue for the three and nine months ended April 30, 2025 and 2024:
Three Months Ended April 30, |
% |
Nine Months Ended April 30, |
% | |||||||||||||||||||||
2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||
(in thousands, except revenue per subscriber and percentages) | ||||||||||||||||||||||||
Subscription Revenue | $ | 1,272 | $ | 1,122 | 13.4 | % | $ | 3,687 | $ | 3,186 | 15.7 | % | ||||||||||||
Active subscriptions net increase | 105 | 6 | nm | 227 | 7 | nm | ||||||||||||||||||
Active subscriptions at end of period | 896 | 654 | 37.0 | % | 896 | 654 | 37.0 | % | ||||||||||||||||
Average active subscriptions during the period | 842 | 652 | 29.2 | % | 738 | 651 | 13.4 | % | ||||||||||||||||
Average monthly revenue per active subscription | $ | 0.50 | $ | 0.57 | -12.3 | % | $ | 0.56 | $ | 0.54 | 3.7 | % |
nm-not meaningful
The following table presents a reconciliation of subscription billings to the most directly comparable GAAP financial measures, for each of the periods indicated. We calculate subscription billings by adding the change in subscription deferred revenue between the start and end of the period to subscription revenue recognized in the same period. Subscription billings is a performance measure that we believe provides useful information to our management and investors as it allows us to better track the growth of the subscription-based portion of our business, which is a critical part of our business plan.
Three Months Ended April 30, |
% |
Nine Months Ended April 30, |
% | |||||||||||||||||||||
2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||
Subscription Revenue | $ | 1,272 | $ | 1,122 | $ | 3,687 | $ | 3,186 | ||||||||||||||||
Changes in subscription deferred revenue | 566 | 373 | 1,798 | 925 | ||||||||||||||||||||
Subscription Billings (Non-GAAP) | $ | 1,838 | $ | 1,495 | 22.9 | % | $ | 5,485 | $ | 4,111 | 33.4 | % |
The following table summarizes Zedge Premium gross and net revenue for the three and nine months ended April 30, 2025 and 2024:
Three Months Ended April 30, |
% |
Nine Months Ended April 30, |
% | |||||||||||||||||||||
2025 | 2024 | Changes | 2025 | 2024 | Changes | |||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||
Zedge Premium-gross revenue ("GTV") | $ | 615 | $ | 592 | 3.9 | % | $ | 1,975 | $ | 1,551 | 27.3 | % | ||||||||||||
Zedge Premium-net revenue | 430 | $ | 202 | 112.9 | % | $ | 1,354 | $ | 683 | 98.2 | % | |||||||||||||
Gross margin | 70 | % | 34 | % | 69 | % | 44 | % |
Three Months Ended April 30, 2025 Compared to Three Months Ended April 30, 2024
For the three months ended April 30, 2025, our advertising revenue increased 2.2% compared to the same period in the prior year primarily due to the increase in price per advertising impression paid by the advertisers on our platform when compared to the same period a year ago, which was driven by increased competition for our ad inventory.
For the three months ended April 30, 2025, our subscription revenue increased 13.4%, and our subscription billings increased 22.9% compared to the same period in the prior year primarily due to the introduction of our iOS subscription offering in April 2023 and the lifetime subscription product for Android users we rolled out in August 2023.
For the three months ended April 30, 2025, our other revenue increased 109.2% compared to the same period in the prior year primarily due to the increase in Zedge Premium net revenue. For the three months ended April 30, 2025, Zedge Premium net revenue increased 112.9% compared to the same period in the prior year primarily attributable to additional revenue from certain AI generative features we rolled out in our Zedge App in fiscal 2024 and the effect of the write-down of advanced royalties paid to certain content creators or owners in the prior period.
For the three months ended April 30, 2025, digital goods and services revenue declined 45.3% compared to the same period in the prior year primarily due to the 33.8% decrease in GuruShots' MAP coupled with 17.1% decrease in ARPMAP for the corresponding periods.
Nine months Ended April 30, 2025 Compared to Nine months Ended April 30, 2024
For the nine months ended April 30, 2025, our advertising revenue decreased 4.6% compared to the same period in the prior year primarily due to lower ad inventory resulting mainly from the decline in MAU partially offset by an increase in price per advertising impression paid by the advertisers on our platform when compared to the same periods a year ago, which was driven by increased competition for our ad inventory.
For the nine months ended April 30, 2025, our subscription revenue increased 15.7%, and our subscription billings increased 33.4% compared to the same period in the prior year primarily due to the introduction of our iOS subscription offering in April 2023 and the lifetime subscription product for Android users we rolled out in August 2023.
For the nine months ended April 30, 2025, our other revenue increased 91.1% compared to the same period in the prior year primarily due to the increase in Zedge Premium net revenue. For the nine months ended April 30, 2025, Zedge Premium net revenue increased 98.2% compared to the same period in the prior year primarily attributable to additional revenue from certain AI generative features we rolled out in our Zedge App in fiscal 2024.
For the nine months ended April 30, 2025, digital goods and services revenue declined 36.5% compared to the same period in the prior year primarily due to the decreases in both MAP and ARPMAP.
Direct cost of revenues. Direct cost of revenues consists primarily of content hosting and content delivery costs.
Three Months Ended April 30, |
Nine Months Ended April 30, |
|||||||||||||||||||||||
2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||
Direct cost of revenues | $ | 452 | $ | 455 | -0.7 | % | $ | 1,360 | $ | 1,399 | -2.8 | % | ||||||||||||
As a percentage of revenues | 5.8 | % | 5.9 | % | 6.2 | % | 6.2 | % |
Direct cost of revenues decreased 0.7% in the three months ended April 30, 2025 compared to the same period in the prior year primarily due to continued optimization of our backend infrastructure. As a percentage of revenue, direct cost of revenues in the three months ended April 30, 2025 decreased to 5.8% from 5.9% for the same period in the prior year.
Direct cost of revenues decreased 2.8% in the nine months ended April 30, 2025 compared to the same period in the prior year primarily due to continued optimization of our backend infrastructure. As a percentage of revenue, direct cost of revenues in the nine months ended April 30, 2025 was flat at 6.2% when compared to the same period in the prior year primarily due to the cost savings offset by lower revenue in the current year period.
Selling, general and administrative expense. Selling, general and administrative expense ("SG&A") consists mainly of payroll and benefits, stock-based compensation expense (as discussed below), PUA expenses, third-party payment processing fee relate to in-app purchases, marketing, consulting, professional fees, software licensing ("SaaS"), recruiting fees, facilities and public company related expenses.
Three Months Ended April 30, |
Nine Months Ended April 30, |
|||||||||||||||||||||||
2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||
Selling, general and administrative | $ | 6,343 | $ | 6,752 | -6.1 | % | $ | 20,278 | $ | 18,773 | 8.0 | % | ||||||||||||
As a percentage of revenues | 81.8 | % | 88.2 | % | 92.5 | % | 83.4 | % |
SG&A expense decreased 6.1% in the three months ended April 30, 2025 compared to the same period in the prior year primarily due to lower compensation expenses resulting primarily from the corporate restructuring implemented in January 2025. As a percentage of revenue, SG&A expense in the three months ended April 30, 2025 was 81.8% compared to 88.2% for the same period in the prior year.
SG&A expense increased 8.0% in the nine months ended April 30, 2025 compared to the same period in the prior year primarily due to higher PUA, higher net compensation expenses (resulting primarily from lower capitalized software and technology development costs in the current year period) and higher platform fee paid to Google and Apple offset by lower discretionary spends and lower stock-based compensation expense. In the nine months ended April 30, 2025, we ramped up PUA for our Zedge App significantly but scaled back PUA spend for GuruShots as compared to the same period in the prior year. We expect to continue our investment in PUA for our Zedge App in the near term provided that the ROAS remains compelling while materially cutting back on PUA for GuruShots, at least through the end of the fiscal year. As a percentage of revenue, SG&A expense in the nine months ended April 30, 2025 was 92.5% compared to 83.4% for the same period in the prior year.
Global headcount as of April 30, 2025 totaled 96 (including 15 at GuruShots) compared to 100 (including 29 at GuruShots) as of April 30, 2024 with the majority of those employees based in Lithuania and Israel. In January 2025, we implemented a corporate restructuring and reduced our global headcount by approximately 22% which will reduce our headcount to about 80 at the end of our fiscal 2025. Details are more fully described in Note 14 Restructuring and Other Related Charges to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
The following table summarizes stock-based compensation expense included in SG&A expense for the three and nine months ended April 30, 2025 and 2024:
Three Months Ended April 30, |
Nine Months Ended April 30, |
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2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||||||
Stock-based compensation expense | $ | 603 | $ | 683 | -11.7 | % | $ | 1,308 | $ | 1,673 | -21.8 | % |
Stock-based compensation expenses decreased 11.7% in the three months ended April 30, 2025 compared to the same period in the prior year. The decrease was primarily attributable to lower aggregate fair value related to the DSUs granted in November 2024 compared to that of the DSUs granted in September 2021 which were being recognized on a graded vesting basis over the requisite service periods. Additionally, our stock-based compensation expense related to the portion of retention bonus to be paid in our Class B common stock in connection with the GuruShots acquisition have been fully recognized as of April 1, 2025, which contributed in part to the year over year decrease.
Stock-based compensation expenses decreased 21.8% in the nine months ended April 30, 2025 compared to the same period in the prior year. The decrease was primarily attributable to lower aggregate fair value related to the DSUs granted in November 2024 compared to that of the DSUs granted in September 2021 which were being recognized on a graded vesting basis over the requisite service periods. Additionally, our stock-based compensation expense related to the portion of retention bonus to be paid in our Class B common stock in connection with the GuruShots acquisition have been fully recognized as of April 1, 2025, which contributed in part to the year over year decrease.
Certain stock options, DSUs and restricted stock grants are more fully described in Note 7 Stock-Based Compensation to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
Depreciation and amortization. Depreciation and amortization consist mainly of amortization of intangible assets in connection with the GuruShots and Emojipedia acquisitions and capitalized software and technology development costs of our internal developers on various projects that we invested in specific to the various platforms on which we operate our service.
Three Months Ended April 30, |
Nine Months Ended April 30, |
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2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||
Depreciation and amortization | $ | 225 | $ | 583 | -61.4 | % | $ | 924 | $ | 2,120 | -56.4 | % | ||||||||||||
As a percentage of revenues | 2.9 | % | 7.6 | % | 4.2 | % | 9.4 | % |
Depreciation and amortization expenses decreased 61.4% in three months ended April 30, 2025 compared to the same period in the prior year primarily due to the $11.9 million impairment charge recorded in Q2 of fiscal 2024.
Depreciation and amortization expenses decreased 56.4% in nine months ended April 30, 2025 compared to the same period in the prior year also due to the $11.9 million impairment charge recorded in Q2 of fiscal 2024.
Impairment of intangible assets. For the nine months ended April 30, 2024, we recorded an approximately $11.9 million impairment of intangible assets of our GuruShots reporting segment, as more fully described in Note 5 Intangible Assets and Goodwill to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
Restructuring charges. For the three and nine months ended April 30, 2025, we recorded approximately $0.6 and $1.1 million, respectively, in restructuring charges primarily consisting of severance and employee benefits in connection with the global restructuring implemented in January 2025, as more fully described in Note 14 Restructuring and Other Related Charges to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
Impairment of capitalized software and technology development costs. For the nine months ended April 30, 2025, we wrote off approximately $0.8 million of GuruShots' capitalized software and technology development costs in connection with the global restructuring implemented in January 2025, as more fully described in Note 14 Restructuring and Other Related Charges to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
Interest and other income, net.
Three Months Ended April 30, |
Nine Months Ended April 30, |
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2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||
Interest and other income, net | $ | 154 | $ | 188 | -18.1 | % | $ | 507 | $ | 434 | 16.8 | % | ||||||||||||
As a percentage of revenues | 2.0 | % | 2.5 | % | 2.3 | % | 1.9 | % |
In the three months ended April 30, 2025, interest and other income, net decreased by $34,000 compared to the same period in the prior year, primarily due to lower interest yield we received on our cash in the current year period.
In the nine months ended April 30, 2025, interest and other income, net increased by $73,000 compared to the same period in the prior year, primarily due to lower interest yield we received on our cash in the current year period, which was more than offset by $65,000 in interest expense related to the $2 million term loan which was repaid in November 2023 and the $50,000 impairment charge related to our investment in a privately held company of which the carrying value was reduced to $0 as of October 30, 2023.
Net loss resulting from foreign exchange transactions. Net loss resulting from foreign exchange transactions is comprised of gains and losses generated from movements in NOK and EUR relative to the U.S. Dollar, including gains or losses from our hedging activities.
Three Months Ended April 30, |
Nine Months Ended April 30, |
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2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||
Net loss resulting from foreign exchange transactions | $ | (41 | ) | $ | (80 | ) | -48.8 | % | $ | (141 | ) | $ | (223 | ) | -36.8 | % | ||||||||
As a percentage of revenues | -0.5 | % | -1.0 | % | -0.6 | % | -1.0 | % |
In the three months ended April 30, 2025, net loss resulting from foreign exchange transactions was $41,000 compared to a net loss of $80,000 for the same period in the prior year primarily due to unfavorable FX movement related to our NOK and EUR hedging activities in both current and prior periods.
In the nine months ended April 30, 2025, net loss resulting from foreign exchange transactions decreased by $82,000 from $141,000 to $223,000 when compared to the same period in the prior year primarily due to unfavorable FX movement related to our NOK and EUR hedging activities in both current and prior periods.
We recognized Mark to Market ("MTM") gains of $65,000 and losses of $51,000 from NOK and EUR hedging activities, respectively, as of April 30, 2025 and July 31, 2024, as more fully described in Note 4, Derivative Instruments, to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
Following closure of our Norwegian office, we do not anticipate further USD to NOK hedging activities.
Income taxes expense (benefit)
Three Months Ended April 30, |
Nine Months Ended April 30, |
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2025 | 2024 | % Change | 2025 | 2,024 | % Change | |||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||
Income taxes expense (benefit) | $ | 88 | $ | (137 | ) | nm | $ | (318 | ) | $ | (2,397 | ) | -86.7 | % | ||||||||||
As a percentage of revenues | 1.1 | % | -1.8 | % | -1.5 | % | -10.6 | % |
In the three months ended April 30, 2025, income taxes expense was $88,000 compared to an income tax benefit of $137,000 for the same period in the prior year, resulting primarily from the $273,000 pre-tax income in the current year period compared to the pre-tax loss of $24,000 in the prior period.
In the nine months ended April 30, 2025, income tax benefit decreased by $2.1 million compared to the same period in the prior year, resulting primarily from the $2.5 million increase in deferred tax assets related to the $11.9 million impairment loss on GuruShot's intangible assets recorded in the prior period offset by $0.2 million increase in deferred tax assets related to the impairment charge of GuruShot's capitalized software and technology development costs of $0.8 million recorded in the current year period.
Comparison of our Segment Results of Operations
The following table presents the results for our Zedge Marketplace and GuruShots segment income (loss) from operations for the three and nine months ended April 30, 2025 and 2024:
Three Months Ended April 30, |
Nine Months Ended April 30, |
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2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||||||
Segment income (loss) from operations: | ||||||||||||||||||||||||
Zedge Marketplace: | $ | 1,264 | $ | 1,197 | 5.6 | % | $ | 2,240 | $ | 4,532 | -50.6 | % | ||||||||||||
GuruShots: | (1,104 | ) | (1,329 | ) | -16.9 | % | (4,757 | ) | (16,272 | ) | -70.8 | % | ||||||||||||
Total | $ | 160 | $ | (132 | ) | -221.2 | % | $ | (2,517 | ) | $ | (11,740 | ) | -78.6 | % |
Three months Ended April 30, 2025 Compared to Three Months Ended April 30, 2024
For the three months ended April 30, 2025, our income from operations related to the Zedge Marketplace increased 5.6% to $1.3 million from $1.2 million for the same period in the prior year, primarily due to higher revenue coupled with lower personnel related expenses offset by the increase in user acquisition costs, restructuring charges and other expenses.
For the three months ended April 30, 2025, our loss from operations related to GuruShots decreased 16.9% to $1.1 million from $1.3 million for the same period in the prior year, primarily due to lower revenue more than offset by lower personnel expenses, lower users acquisition costs and lower platform fees.
Nine months Ended April 30, 2025 Compared to Nine months Ended April 30, 2024
For the nine months ended April 30, 2025, our income from operations related to the Zedge Marketplace decreased 50.6% to $2.2 million from $4.5 million for the same period in the prior year, primarily due to higher users acquisition costs and higher other expenses incurred in the current year period. Additionally, we recorded $0.7 million restructuring charges in the current year period which contributed in part to the decrease in the segment income from operation related to the Zedge Marketplace.
For the nine months ended April 30, 2025, our loss from operations related to GuruShots decreased 70.8% to $4.8 million from $16.3 million for the same period in the prior year, primarily due to lower revenue coupled with the $11.9 million impairment loss of intangible assets recorded in the prior period.
Liquidity and Capital Resources
General
At April 30, 2025, we had cash and cash equivalents of $20.4 million and working capital (current assets less current liabilities) of $17.5 million, compared to $20.0 million and $17.7 million, respectively, at July 31, 2024. We expect that our cash and cash equivalents on hand and our cash flow from operations will be sufficient to meet our anticipated cash requirements for the twelve-month period ending June 13, 2026. We maintain a revolving credit facility of $4 million, including a foreign exchange contract facility of up to $7.5 million with WAB, as discussed below under Financing Activities and in Note 10, Term Loan and Revolving Credit Facility, to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
The following tables present selected financial information for the nine months ended April 30, 2025 and 2024:
Nine Months Ended April 30, |
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(in thousands) | 2025 | 2024 | $ Changes | |||||||||
Cash flows provided by (used in): | ||||||||||||
Operating activities | $ | 2,748 | $ | 5,155 | $ | (2,407 | ) | |||||
Investing activities | (378 | ) | (1,028 | ) | 650 | |||||||
Financing activities | (2,030 | ) | (2,162 | ) | 132 | |||||||
Effect of exchange rate changes on cash and cash equivalents | 95 | (165 | ) | 260 | ||||||||
Increase in cash and cash equivalents | $ | 435 | $ | 1,800 | $ | (1,365 | ) |
Operating Activities
Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable.
Net cash provided by operating activities was $2.7 million for the nine months ended April 30, 2025, primarily consisting of a $1.8 million net loss, adjusted for certain non-cash items, which included a $0.6 million impairment charge (net of tax effect) of capitalized software and technology development costs, $0.9 million of amortization, depreciation, and write-offs, $1.3 million of stock-based compensation expense, and a net increase in operating assets and liabilities of $1.7 million, primarily from the deferred revenue associated with the lifetime subscriptions sold during the period.
Net cash provided by operating activities was $5.2 million for the nine months ended April 30, 2024, primarily consisting of $9.1 million of net loss, adjusted for certain non-cash items, which included a $9.3 million impairment charge (net of tax effect) of intangible assets, $2.2 million of amortization, depreciation, and write-offs, $1.7 million of stock-based compensation expense, and a net increase in operating assets and liabilities of $1.1 million.
Investing Activities
Cash used in investing activities in the nine months ended April 30, 2025 and 2024 consisted primarily of capitalized software and technology development costs related to various projects that we invested in specific to the various platforms on which we operate our service.
Financing Activities
On November 15, 2023, the Company voluntarily prepaid the entire principal amount of $2 million in accordance with the terms of the Amended Loan Agreement without incurring any prepayment penalty.
In the nine months ended April 30, 2025, we repurchased - in connection with the share repurchase program - 683,506 shares of our Class B common stock for approximately $2.0 million compared to 60,206 shares for approximately $152,000 in the prior period.
In the nine months ended April 30, 2025 and 2024, we purchased 6,903 shares and 6,328 shares, respectively, of our Class B common stock from certain employees for $22,000 and $13,000, respectively, to satisfy tax withholding obligations in connection with the vesting of DSUs.
We do not anticipate paying dividends on our common stock until we achieve sustainable profitability and retain certain minimum cash reserves. The payment of dividends in any specific period will be at the sole discretion of our Board of Directors.
Concentration of Credit Risk and Significant Customers
Historically, we have had very little or no bad debt, which is common with other platforms of our size that derive their revenue from mobile advertising, as we aggressively manage our collections and perform due diligence on our customers. In addition, the majority of our revenue is derived from large, credit-worthy customers, e.g. Google, Facebook, Vungle and AppLovin, and we terminate our services with smaller customers immediately upon balances becoming past due. Since these smaller customers rely on us to derive their own revenue, they generally pay their outstanding balances on a timely basis.
In the nine months ended April 30, 2025, one major customer represented 35% of our revenue. In the nine months ended April 30, 2024, two customers represented 31% and 10% of our revenue, respectively. At April 30, 2025, two customers represented 45% and 13% of our accounts receivable balance, respectively. At April 30, 2024, two customers represented 36% and 19% of our accounts receivable balance, respectively. All of these significant customers were advertising exchanges operated by leading companies, and the receivables represent many smaller amounts due from their advertisers.
Contractual Obligations and Other Commercial Commitments
Smaller reporting companies are not required to provide the information required by this item.
Off-Balance Sheet Arrangements
At April 30, 2025, we did not have any "off-balance sheet arrangements," as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.