- Revenue Growth: Total revenue increased 5.8% YoY to $7.6 million, driven by Zedge Marketplace and advertising revenue up 6%, with Zedge Plus subscriptions rising 29% to 1.1 million active subscribers.
- Active Subscribers & ARPU: Zedge Marketplace active subscriptions reached 1.1 million, with average revenue per monthly active user increasing due to higher CPMs, optimized ad stacks, and higher-value users.
- DataSeeds Traction: DataSeeds focuses on custom visual/audio datasets for clients, with a multi-quarter sales cycle and potential to address high-demand technical needs in AI/data markets.
- GuruShots & Emojipedia Losses: GuruShots incurred ~$150,000 monthly losses (stable), while Emojipedia declined, though offset by growth in other segments.
- Restructuring Costs & Buybacks: $350,000 restructuring costs impacted Q1 free cash flow, with $600,000 remaining in the $5 million share buyback program and $330,000 in severance taxes paid in July 2026.
Revenue Stream Analysis
The growth in revenue was largely driven by the Zedge Marketplace, with advertising revenue increasing by 6%. While Emojipedia and GuruShots experienced declines, the overall strength across the rest of the ecosystem offset these headwinds. Yi Tsai noted that GuruShots is still incurring losses, but has stabilized at around $150,000 per month. The company is exploring the potential evolution of GuruShots 2.0, indicating a proactive approach to addressing challenges.
DataSeeds Traction and Future Prospects
Jonathan Reich highlighted the traction gained by DataSeeds, a managed global network of professionals producing high-quality datasets. DataSeeds is focused on creating custom and structured visual and audio datasets that meet specific customer needs, positioning Zedge well for the current demand environment. The typical sales process for DataSeeds can take several quarters, indicating a potential for future revenue growth as leads convert.
Valuation and Future Estimates
With a P/E Ratio of -33.77 and a P/S Ratio of 1.43, the market's expectations for Zedge's future growth are evident. Analysts estimate next year's revenue growth at 4.1%. Considering the current valuation metrics, it appears that the market has priced in some level of growth, but the actual EPS beating estimates suggests a positive surprise. The company's share buyback program, with $600,000 remaining under the current $5 million authorization, also indicates a commitment to returning value to shareholders.
Restructuring Costs and Free Cash Flow Impact
The company incurred restructuring costs, including severance pay for two senior employees in Norway, resulting in a $330,000 impact on free cash flow due to withholding taxes. Yi Tsai explained that the company plans to reinvest some of the savings into new products, such as DataSeeds, and the innovation pipeline, indicating a focus on driving future growth. The Free Cash Flow Yield of 7.78% suggests a relatively healthy cash generation capability.