NEW YORK, NY and TRONDHEIM, NORWAY / ACCESSWIRE / December 11, 2018 / Zedge, Inc. (NYSE American: ZDGE) today
announced results for the first quarter of its fiscal year 2019, the three months ended October 31, 2018.
First Quarter FY 2019 Operational and Financial Highlights
(Results are for the 1st quarter of FY 2019 and are compared to the 1st quarter of FY 2018 except
where otherwise noted.)
- MAU (Monthly Active Users) for the last 30 days of the quarter increased 3.6% to 34.6 million from 33.4 million in the
comparable period of fiscal 2018 driven primarily by strong growth in emerging markets; MAU fell 0.5% from July 2018 with the
majority of the decline attributable to well-developed markets;
- Total installs at October 31, 2018 increased 21.6% to 351.3 million from 288.8 million;
- Revenue decreased 10.5% to $2.38 million from $2.66 million;
- Average revenue per MAU derived from our apps (ARPMAU) declined 17.9% for the quarter to $0.0210 from $0.0256 primarily
because of the decline in MAU from well developed markets which command higher advertising rates than that of the emerging
markets
- Selling, General and Administration (SG&A) expense decreased 22.3% to $2.3 million from $3.0 million, primarily
attributable to the severance costs in the FY2018 period incurred in connection with a workforce reduction,the Freeform
transaction which closed in September 2017 and tighter discretionary spend;
- Loss from operations during the quarter was $581 thousand, compared to a loss of $842 thousand, after accounting for
depreciation and amortization of $303 thousand and $157 thousand, respectively;
- Zedge Premium's participation and conversion rates improve month-over-month and GTV, or gross transaction value, that is the
total sales volume transacting through the platform, was $41 thousand;
- Zedge's new Lithuanian development center is off to a solid start with 5 people on board and 3 more expected to start in
January;
- For the three months ended October 31, 2018, cash flow provided by operating activities was $921 thousand - an improvement of
$815 thousand compared to the same period last year; and
- Net loss per share of $0.07 compared to net loss per share of $0.08.
Management Remarks
"We see some really encouraging trends in Zedge Premium in Q1, are excited by the impact that the newly introduced sticker
functionality has had on usage patterns, and we have two teams up and running in our new development center in Vilnius," said Tom
Arnoy, co-founder and CEO of Zedge. "Zedge Premium continues growing nicely, and both the number of users that engage with the
marketplace and the number of monetizable transactions that these users execute are consistently increasing month-over-month. What
makes this even more significant is that we've only recently started promoting Zedge Premium to our almost 35 million MAU which we
believe portends even better results over time. Gross Transaction Value in Q1 totaled $41 thousand and is on track more than triple
in Q2. The majority of monetizable transactions relate to watching rewarded videos, a low revenue per item mechanism. However, we
are now focusing on introducing and promoting new ways of unlocking the content with higher unit pricing, like print-on-demand and
Zedge Credit purchases. We have seen that the segment of Android users in the U.S. that avail themselves of our newly introduced
sticker functionality is experiencing average session time approximately 10% higher when compared to an average U.S. user. We
believe that functionality, coupled with other changes that we've made in the app, are driving this encouraging trend. We are
accelerating further development and starting to market this functionality to existing and prospective users more aggressively.
Finally, we are happy with the pool of talent in Vilnius. By the end of January, we expect to have onboarded eight employees
focused on accelerating our delivery of new product innovations and monetization opportunities."
"While we see positive developments and encouraging signs, we continue to struggle with MAU demographic trends. Although MAU
increased by 3.4% on a year-over-year basis, we experienced a 12.6% decline in MAU in well-developed markets, negatively impacting
revenue due to the higher advertising rates that these markets command when compared to the emerging markets. We believe that our
focus on introducing new product that makes Zedge relevant to a broader cross section of mobile users seeking great personalized
digital content for use not only in phone customization but in social and messaging as well will help us turn the corner. It will
take time for our work to meaningfully impact trends but we are hopeful that our goal of being the 'everything you' of digital
mobile content resonates with our users."
Jonathan Reich, CFO and COO of Zedge, said, "While revenue suffered as a result of the change in geographic composition of our
customer base, we're in the early stages of Zedge Premium monetization. Although still immaterial for the overall business, the
directional trends support our thesis and we are focused on improving pricing. Furthermore, the recent rollout of our Artist's
Portal, a self-serve platform that enables artists and brands with the ability to launch and manage their exclusive Zedge Premium
storefronts, opens the door for scaling our artist base. Additionally, we were successful in further reducing direct cost of
revenue on both a year-over-year and consecutive quarter basis by 5.9% and 15%, respectively. SG&A declined year-over-year by
22.3% as a result of higher spend in fiscal 2018 for severance and the Freeform transaction, along with tighter discretionary spend
measures. On a sequential quarter basis, SG&A increased by 26.3% primarily relating to the one-time adjustment we made in Q4'18
and the hiring needs for the Zedge Premium team in the U.S. which is now adequately staffed."
Financial Results by Quarter (USD in thousands, other than Loss per Share and
ARPMAU)
|
|
|
Q1 FY '19 |
|
|
Q1 FY '18 |
|
|
Delta |
|
|
% Change |
|
|
Q1 FY '19 |
|
|
Q4 FY '18 |
|
|
Delta |
|
|
% Change |
|
|
Revenues
|
|
$ |
2,381 |
|
|
$ |
2,659 |
|
|
$ |
(278 |
) |
|
|
-10.5 |
% |
|
$ |
2,381 |
|
|
$ |
2,579 |
|
|
$ |
(198 |
) |
|
|
-7.7 |
% |
|
Direct Cost Of Revenue
|
|
$ |
350 |
|
|
$ |
372 |
|
|
$ |
(22 |
) |
|
|
-5.9 |
% |
|
$ |
350 |
|
|
$ |
412 |
|
|
$ |
(62 |
) |
|
|
-15.0 |
% |
|
Total SG&A
|
|
$ |
2,309 |
|
|
$ |
2,972 |
|
|
$ |
(663 |
) |
|
|
-22.3 |
% |
|
$ |
2,309 |
|
|
$ |
1,828 |
|
|
$ |
481 |
|
|
|
26.3 |
% |
|
Depreciation & Amortization
|
|
$ |
303 |
|
|
$ |
157 |
|
|
$ |
146 |
|
|
|
93.0 |
% |
|
$ |
303 |
|
|
$ |
334 |
|
|
$ |
(31 |
) |
|
|
-9.3 |
% |
|
(Loss) Income From Operations
|
|
$ |
(581 |
) |
|
$ |
(842 |
) |
|
$ |
261 |
|
|
|
-31.0 |
% |
|
$ |
(581 |
) |
|
$ |
5 |
|
|
$ |
(586 |
) |
|
nm |
|
|
Net (Loss) Income From FX & Other
|
|
$ |
(122 |
) |
|
$ |
8 |
|
|
$ |
(130 |
) |
|
nm |
|
|
$ |
(122 |
) |
|
$ |
(37 |
) |
|
$ |
(85 |
) |
|
|
229.7 |
% |
|
Provision For (Benefit From) Income Taxes
|
|
$ |
3 |
|
|
$ |
(14 |
) |
|
$ |
17 |
|
|
|
-121.7 |
% |
|
$ |
3 |
|
|
$ |
229 |
|
|
$ |
(226 |
) |
|
|
-98.7 |
% |
|
Net Loss
|
|
$ |
(706 |
) |
|
$ |
(820 |
) |
|
$ |
114 |
|
|
|
-13.9 |
% |
|
$ |
(706 |
) |
|
$ |
(261 |
) |
|
$ |
(445 |
) |
|
|
170.5 |
% |
|
Diluted Loss Per Share
|
|
$ |
(0.07 |
) |
|
$ |
(0.08 |
) |
|
$ |
0.01 |
|
|
|
-16.9 |
% |
|
$ |
(0.07 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.04 |
) |
|
|
135.1 |
% |
|
Total Current Assets Less Total Current Liabilities
|
|
$ |
3,045 |
|
|
$ |
4,242 |
|
|
$ |
(1,197 |
) |
|
|
-28.2 |
% |
|
$ |
3,045 |
|
|
$ |
4,094 |
|
|
$ |
(1,049 |
) |
|
|
-25.6 |
% |
|
MAU (Million)
|
|
|
34.6 |
|
|
|
33.4 |
|
|
|
1.2 |
|
|
|
3.6 |
% |
|
|
34.6 |
|
|
|
34.8 |
|
|
|
(0.2 |
) |
|
|
-0.5 |
% |
|
Total Installs (Million)
|
|
|
351.3 |
|
|
|
288.8 |
|
|
|
62.5 |
|
|
|
21.6 |
% |
|
|
351.3 |
|
|
|
336.3 |
|
|
|
15.0 |
|
|
|
4.5 |
% |
|
ARPMAU
|
|
$ |
0.0210 |
|
|
$ |
0.0256 |
|
|
$ |
(0.005 |
) |
|
|
-17.9 |
% |
|
$ |
0.0210 |
|
|
$ |
0.0231 |
|
|
$ |
(0.002 |
) |
|
|
-9.1 |
% |
|
nm-not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Announcement and Supplemental Information
Zedge will host a conference call at 4:30 PM Eastern, December 11, 2018 beginning with management's discussion of results,
outlook and strategy followed by Q&A with investors. To participate in the call, please dial 877-407-8133 (U.S. toll free) or
201-689-8040 (International) at least five minutes before the 4:30 PM Eastern start and ask for the Zedge earnings conference
call.
The call will also be webcast through this URL:
http://www.investorcalendar.com/event/41071 thru 3/11/19.
Starting approximately two hours after the call and continuing through 12/25/18, a recording of the call will be available by
dialing 877-481-4010 (U.S. toll free) or 919-882-2331 (International) and entering the replay access code: 41071
Forward Looking Statements
All statements above that are not purely about historical facts, including, but not limited to, those in which we use the words
"believe," "anticipate," "expect," "plan," "intend," "estimate," "target" and similar expressions, are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. While these forward-looking statements represent our
current judgment of what may happen in the future, actual results may differ materially from the results expressed or implied by
these statements due to numerous important factors. Our filings with the SEC provide detailed information on such statements and
risks, and should be consulted along with this release. To the extent permitted under applicable law, we assume no obligation to
update any forward-looking statements.
About Zedge
Zedge is a content discovery and creation platform with a global audience of close to 35 million monthly active users. We aspire
to be the "everything you" destination that people turn to when seeking digital content that expresses their essence,
individuality, and taste. Professional artists, individual creators, and brands use Zedge to market, distribute and sell their
content. We have a rich and diverse library with more than a million images audio clips and digital stickers.
Contact:
Jonathan Reich
ir@zedge.net
ZEDGE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
October 31, |
|
|
July 31, |
|
|
|
|
2018 |
|
|
2018 |
|
|
|
|
(in thousands, except par value) |
|
|
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
3,561 |
|
|
$ |
3,408 |
|
|
Trade accounts receivable, net of allowance for doubtful accounts of $0 at October 31, 2018 and July 31, 2018
|
|
|
1,236 |
|
|
|
1,777 |
|
|
Prepaid expenses
|
|
|
247 |
|
|
|
316 |
|
|
Other current assets
|
|
|
134 |
|
|
|
302 |
|
|
Total current assets
|
|
|
5,178 |
|
|
|
5,803 |
|
|
Property and equipment, net
|
|
|
3,483 |
|
|
|
3,344 |
|
|
Goodwill
|
|
|
2,363 |
|
|
|
2,447 |
|
|
Other assets
|
|
|
372 |
|
|
|
125 |
|
|
Total assets
|
|
$ |
11,396 |
|
|
$ |
11,719 |
|
|
Liabilities and stockholders' equity
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$ |
350 |
|
|
$ |
280 |
|
|
Accrued expenses
|
|
|
1,770 |
|
|
|
1,428 |
|
|
Due to IDT Corporation
|
|
|
13 |
|
|
|
1 |
|
|
Total current liabilities
|
|
|
2,133 |
|
|
|
1,709 |
|
|
Total liabilities
|
|
|
2,133 |
|
|
|
1,709 |
|
|
Commitments and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value; authorized shares-2,400; no shares issued
|
|
|
- |
|
|
|
- |
|
|
Class A common stock, $.01 par value; authorized shares-2,600;525 shares issued and outstanding at October 31, 2018 and
July 31, 2018
|
|
|
5 |
|
|
|
5 |
|
|
Class B common stock, $.01 par value; authorized shares-40,000; 9,786 shares issued and outstanding at October 31, 2018
and July 31, 2018
|
|
|
98 |
|
|
|
98 |
|
|
Additional paid-in capital
|
|
|
22,629 |
|
|
|
22,508 |
|
|
Accumulated other comprehensive loss
|
|
|
(833 |
) |
|
|
(702 |
) |
|
Accumulated deficit
|
|
|
(12,605 |
) |
|
|
(11,899 |
) |
|
Treasury stock, 14 shares at October 31, 2018 and 0 shares at July 31, 2018, at cost
|
|
|
(31 |
) |
|
|
- |
|
|
Total stockholders' equity
|
|
|
9,263 |
|
|
|
10,010 |
|
|
Total liabilities and stockholders' equity
|
|
$ |
11,396 |
|
|
$ |
11,719 |
|
ZEDGE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
|
|
|
Three Months Ended |
|
|
|
|
October 31, |
|
|
|
|
2018 |
|
|
2017 |
|
|
|
|
(in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
2,381 |
|
|
$ |
2,659 |
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
Direct cost of revenues (exclusive of amortization of capitalized software and technology development costs included
below)
|
|
|
350 |
|
|
|
372 |
|
|
Selling, general and administrative
|
|
|
2,309 |
|
|
|
2,972 |
|
|
Depreciation and amortization
|
|
|
303 |
|
|
|
157 |
|
|
Loss from operations
|
|
|
(581 |
) |
|
|
(842 |
) |
|
Interest and other income
|
|
|
7 |
|
|
|
9 |
|
|
Net loss resulting from foreign exchange transactions
|
|
|
(129 |
) |
|
|
(1 |
) |
|
Loss before income taxes
|
|
|
(703 |
) |
|
|
(834 |
) |
|
Provision for (benefit from) income taxes
|
|
|
3 |
|
|
|
(14 |
) |
|
Net loss
|
|
|
(706 |
) |
|
|
(820 |
) |
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
Changes in foreign currency translation adjustment
|
|
|
(131 |
) |
|
|
(137 |
) |
|
Total other comprehensive loss
|
|
|
(131 |
) |
|
|
(137 |
) |
|
Total comprehensive loss
|
|
$ |
(837 |
) |
|
$ |
(957 |
) |
|
Loss per share attributable to Zedge, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$ |
(0.07 |
) |
|
$ |
(0.08 |
) |
|
Weighted-average number of shares used in calculation of loss per share:
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
10,025 |
|
|
|
9,658 |
|
ZEDGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Three Months Ended |
|
|
|
|
October 31, |
|
|
|
|
2018 |
|
|
2017 |
|
|
|
|
(in thousands) |
|
|
Operating activities
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(706 |
) |
|
$ |
(820 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
303 |
|
|
|
157 |
|
|
Deferred income taxes
|
|
|
- |
|
|
|
1 |
|
|
Stock-based compensation
|
|
|
121 |
|
|
|
73 |
|
|
Stock issued to FreeForm noteholders
|
|
|
- |
|
|
|
242 |
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
541 |
|
|
|
(186 |
) |
|
Prepaid expenses and other current assets
|
|
|
238 |
|
|
|
170 |
|
|
Other assets
|
|
|
3 |
|
|
|
4 |
|
|
Trade accounts payable and accrued expenses
|
|
|
408 |
|
|
|
438 |
|
|
Due to IDT Corporation
|
|
|
13 |
|
|
|
27 |
|
|
Net cash provided by operating activities
|
|
|
921 |
|
|
|
106 |
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Capitalized software and technology development costs and purchase of equipment
|
|
|
(445 |
) |
|
|
(488 |
) |
|
Investment in TreSensa
|
|
|
(250 |
) |
|
|
- |
|
|
Net cash used in investing activities
|
|
|
(695 |
) |
|
|
(488 |
) |
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock in connection with restricted stock vesting
|
|
|
(31 |
) |
|
|
- |
|
|
Net cash used in financing activities
|
|
|
(31 |
) |
|
|
- |
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(42 |
) |
|
|
(35 |
) |
|
Net increase (decrease) in cash and cash equivalents
|
|
|
153 |
|
|
|
(417 |
) |
|
Cash and cash equivalents at beginning of period
|
|
|
3,408 |
|
|
|
4,580 |
|
|
Cash and cash equivalents at end of period
|
|
$ |
3,561 |
|
|
$ |
4,163 |
|
SOURCE: Zedge, Inc.
