Zedge's Q4 2025: Contradictions Emerge on MAU Strategy, Advertising Revenue, TikTok Impact, and Financial KPIs

Date of Call: None provided

Financials Results

• Revenue: $7.1M, up 3% YOY
• EPS: GAAP net income and EPS were nil, versus a net loss of $0.1M and loss per share of $0.01 in the prior year

Business Commentary:

* Revenue Growth and Marketplace Performance: - Zedge reported a 3% increase in revenue for Q1 2024 compared to the previous year. - The growth was driven by improved performance in Zedge Marketplaces and a 62% increase in Emojipedia revenue.

• Subscription Growth and Average Revenue per MAU:
• Subscription revenue for the quarter was up 10% year-over-year, with sequential active subscriber growth for the second quarter in a row.

• Average revenue per monthly active user (ARPMAU) increased by $0.063 (17% year-over-year) due to the introduction of new iOS and Android subscriptions.

• GuruShots Challenges and Product Innovation:

• GuruShots' revenue was down 29% year-over-year, negatively impacted by Apple's ATT framework and macroeconomic issues.

• The company mitigated these challenges by introducing new features like Battles and AI Art Master to stabilize and position the platform for growth.

• pAInt Integration and Generative AI Expansion:

• The integration of pAInt, a generative AI feature, contributed to Zedge's growth by providing a new revenue stream and attracting users.
• The company plans to release a standalone AI app in early 2024 to further capitalize on the growing generative AI market.

Sentiment Analysis:

Overall Tone: Positive

• Management called results "primarily encouraging": "Q1 revenue increased 3% from last year," ARPMAU was up 17% YOY, Adjusted EBITDA rose to $1.5M from $1.0M, and GAAP income from operations returned to $0.3M.

Q&A:

• Question from Allen Klee (Maxim Group): On MAU decline, what are you working on to potentially stabilize that?
  Response: Everything in the product roadmap plus organic and paid marketing initiatives are targeted to stabilize and grow MAU (currently just under 30M).

• Question from Allen Klee (Maxim Group): What are you hearing about timing for Meta/Facebook implementing SKAdNetwork 4.0 and when it might become effective?
  Response: No firm timing from Meta; they rolled out then rolled back SKAdNetwork 4, so meanwhile we're using Facebook's AEM, scaling creative, and doing internal data work to improve UA until SKAdNetwork 4 is stable.

• Question from Allen Klee (Maxim Group): How do you think pAInt will drive adoption?
  Response: pAInt is global, uses rewarded-video monetization (no token/subscription barrier), plus store optimization, marketing automation and a planned standalone Gen AI app to broaden adoption.

• Question from Allen Klee (Maxim Group): For AI Art Master, what's the marketing strategy to accelerate and ramp the game?
  Response: Multi-channel approach: SEO/website to drive organic, light paid UA in soft-launch markets, leverage the ~30M user base, and execute app-store optimization; paid UA will scale later.

• Question from Allen Klee (Maxim Group): Can you recap new Emojipedia features you're rolling out?
  Response: Planned features include an emoji translator, new content types like emoticons, emoji mash-ups, print-on-demand merchandising, and testing a subscription tier.

• Question from Allen Klee (Maxim Group): Any commentary on seasonality and which financial metrics you're prioritizing?
  Response: Q2 (Nov-Jan) is historically the strongest; primary KPIs are cash, click ratio and ARPMAU to ensure runway and financial health.

• Question from Allen Klee (Maxim Group): ARPMAU was up 17% — what will drive its direction going forward?
  Response: ARPMAU improvements stem from product (ad stack/monetization), higher-priced iOS subscriptions, Zedge Premium Marketplace pricing, and continued subscription growth.

Contradiction Point 1

Monthly Active Users and Growth Strategy

It highlights inconsistencies in the company's strategy and expectations regarding monthly active users and growth, which are crucial for revenue generation and user engagement.

What steps are you taking to stabilize or increase monthly active users despite the decline? - Allen Klee (Maxim Group)

2024Q1: Our product road map and marketing initiatives are focused on stabilizing and potentially growing the monthly active user base. - Jonathan Reich(CEO)

Which specific steps have contributed to the sequential increase in monthly active users? - Allen Klee (Maxim Group LLC, Research Division)

2025Q4: monthly active users increased slightly sequentially as we made progress in refining our marketing spend and product strategy. - Jonathan Reich(CEO)

Contradiction Point 2

Advertising Revenue and Financial KPIs

It involves changes in the company's focus on financial KPIs and their impact on financial performance.

What are the key financial KPIs and seasonal factors you're focusing on? - Allen Klee (Maxim Group)

2024Q1: Our business is heavily weighted towards advertising revenue, with Q2 being historically the strongest quarter. Key financial KPIs include cash, click ratio, and ARPMAU. - Jonathan Reich(CEO)

Your SG&A was flat year-over-year but increased sequentially. Is this quarter's level a reasonable run rate moving forward? - Allen Klee (Maxim Group LLC, Research Division)

2025Q4: As you know, we are a media and mobile software company, and the vast majority of our revenue comes from advertising. - Jonathan Reich(CEO)

Contradiction Point 3

Advertising Revenue Optimization

It involves the company's approach to optimizing advertising revenue, which is a significant source of income.

What is the timing for Facebook implementing Apple's privacy rules, and how will that impact your strategy? - Allen Klee (Maxim Group)

2024Q1: We speak to Facebook regularly. They've prioritized SKAd 4 implementation. We're leveraging new Facebook features like AEM for improved performance. - Jonathan Reich(CEO)

Can you rank the components of advertising revenue by impact? - Allen Robert Klee (Maxim Group LLC, Research Division)

2025Q3: Zedge pursues advertising comprehensively, focusing on optimizing cost per impressions. The main factors include an outstanding team for optimizing CPMs, the reentry of TikTok into the market, and a focus on users in well-developed economies. - Jonathan Reich(CEO)

Contradiction Point 4

Impact of TikTok Unavailability

It highlights differing views on the impact of TikTok's unavailability, which could affect user acquisition and advertising revenue.

Did you mention revenue growth for Q3? - Allen Klee(Maxim Group)

2024Q1: While our fiscal Q2 is our strongest quarter seasonally, we believe the challenge from TikTok being unavailable has passed, and its return has positively impacted CPMs and user acquisition. A political resolution might help sustain this improvement. - Jonathan Reich(CEO)

Did you discuss the impact on the business due to TikTok's unavailability? - Allen Klee(Maxim Group)

2025Q2: The decrease in Q2 mobile app ad spend in China was primarily due to the unavailability of TikTok, which is a market leader in mobile app ad spend. - Jonathan Reich(CEO)

Contradiction Point 5

MAU Stabilization and Growth Strategy

It involves differing perspectives on the strategy to stabilize and grow the monthly active user base, which is crucial for the company's revenue and user engagement.

With monthly active users declining, what steps are you taking to stabilize or grow the number? - Allen Klee(Maxim Group)

2024Q1: Our product road map and marketing initiatives are focused on stabilizing and potentially growing the monthly active user base. We're slightly below 30 million MAUs, and with smartphone sales stabilization, we expect to resume growth. Market opportunities, product portfolio, marketing prowess, and team are key to this. - Jonathan Reich(CEO)

How do you plan to address declining MAUs and GuruShots challenges? - Allen Klee(Maxim Group)

2025Q2: Addressing MAU challenges involves continued product innovation, optimizing ad inventory, and investing in marketing. For GuruShots, restructuring provides runway for redesign, with potential improvements in product and marketing investment. - Jonathan Reich(CEO)