Zedge, Inc. (NYSE MKT:ZDGE) today announced results for the
second quarter of its fiscal year 2017, the three months ended
January 31, 2017.
Second Quarter FY 2017 Operational and
Financial Highlights(Results are for the 2nd quarter FY
2017 and are compared to the 2nd quarter FY 2016 except where
otherwise noted.)
- MAU (Monthly Active Users) for the last
30 days of the quarter increased 5.7% from the prior quarter to
33.4 million, and decreased 0.6% compared to Q2 FY2016
- Total installs increased 30.2%
year-over-year to 246.3 million at January 31, 2017
- Revenue increased 7.9% from the prior
quarter to $2.6 million, and decreased 27.1% compared to Q2
FY2016
- Average revenue per MAU, or ARPMAU,
increased 1.7% compared to the prior quarter to $0.0237 and
decreased 26.6% compared to Q2 FY2016
- Loss from operations was $338 thousand
compared to income from operations of $1.3 million
- Net loss per diluted share of $0.03
compared to diluted EPS of $0.12
- Working capital – current assets less
current liabilities - increased 48.2% to $5.8 million at January
31, 2017 from $3.9 million at January 31, 2016
Management Remarks
“Zedge made significant strides in the past quarter on our path
towards sustained growth, investing in expansion of our user base
and improving engagement by focusing on content, the currency of
our business. To that end, we leveraged machine learning and
artificial intelligence to improve our users’ ability to discover
content from within our catalog; we started making search more
powerful and intuitive; and we increased our investment in content
creation. In addition, we continued building our distribution
platform by enhancing “Collections” – previously referred to as
“Stories” – with the inclusion of video and additional content
types like icons and widgets. Publishers including Sports
Illustrated and various Hollywood studios have embraced Zedge’s
platform in order to get their brands in front of consumers,” said
Tom Arnoy, co-founder and CEO. “Over time we believe that these
initiatives will translate into increased user loyalty, enhanced
engagement and additional revenue streams. This past quarter, MAU,
which is one of our most important KPIs, grew sequentially by close
to 6% to 33.4 million. This is the second consecutive quarter of
sequential MAU growth albeit with growth in the emerging markets
outpacing that of the well-developed economies. This growth results
from our investment in content discovery and user engagement and
highlights the need for continued investment in the business to
realize sustained user and revenue growth in the long term.”
Jonathan Reich, CFO and COO of Zedge, added, “Our second quarter
results reflect our commitment to MAU expansion and content
investment, which bodes well for user engagement and retention over
time. Going into the third quarter we have started testing new
monetization layers in addition to introducing new ad formats that
are yielding encouraging results. Although we reported a loss from
operations this past quarter, the results are consistent with our
objective of sustaining growth by accelerating the product
development cycle across both Android and iOS, yielding more users
and ultimately, opening up new monetization opportunities. This
investment is essential to stay ahead of the curve and unlock the
value in Zedge. In closing I am pleased to welcome Todd Feldman as
a member of our board. Todd is a highly regarded and experienced
technology banker who serves as a managing director at Mooreland
Partners LLC, a leading independent investment bank providing
M&A and private capital advisory services to the global
technology industry. With Todd joining, MT Carney is stepping down.
MT has been very helpful to us in formulating our value proposition
and I want to thank her for being a friend to the company over the
past couple of years.”
Financial Results
by Quarter (in thousands of USD)
Change
Q2 FY2017 Q1 FY2017 Q2
FY2016
2Q16 to 2Q17
Revenues $2,572 $2,383 $3,530 (27.1%)
Direct cost of revenue $412 $367 $310
+32.9% SG&A $2,314 $1,756 $1,781
+29.9% Depreciation & amortization $184 $138
$156 +17.9% Write-off of software and technology
development costs - $9 - - (Loss)
income from operations $(338) $113 $1,283
$(1,621) Net (loss) gain from FX and other $(10)
$51 ($104) +$95 Benefit from (provision for)
income taxes $22 ($1) $(67) $(89) Net
(loss) income $(326) $163 $1,111
($1,437) (Loss) earnings per diluted share $(0.03)
$0.02 $0.12 ($0.15) Total current assets less total
current liabilities $5,807 $6,196 $3,919
+48.2%
Earnings Conference Call
Zedge’s management will host an earnings conference call today
beginning at 5:00 PM Eastern. Management’s presentation of the
results, outlook and strategy will be followed by Q&A with
investors.
To participate in the call, please dial toll-free 1-888-317-6003
(from the U.S.) or 1-412-317-6061 (outside the U.S.) at least five
minutes before the 5:00 PM Eastern start, ask for the Zedge
earnings conference call, and enter the conference ID: 7433192.
Following the call and continuing through March 23, 2017, a
replay will be available through the Zedge investor relations
website and by calling 1-877-344-7529 (US toll free) or
1-412-317-0088 (international) and entering the Replay Access Code:
10101816.
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 platform, and global leader in smartphone
personalization, with more than 250 million app installs and 33
million monthly active users. People use Zedge to make their
smartphones more personal - to express their emotions, tastes and
interests using wallpapers, icons, widgets, ringtones and more. The
Zedge platform enables brands, artists and creators to share their
smartphone personalization content with their fans in order to
extend their reach, reinforce their message and gain valuable
insight into how customers interact with their content.
ZEDGE, INC.
CONSOLIDATED BALANCE SHEETS
January 31,
July 31,
2017
2016
(Unaudited) (in thousands) Assets Current
assets: Cash and cash equivalents $ 5,604 $ 5,978 Trade accounts
receivable, net of allowance for doubtful accounts of $0 at January
31, 2017 and July 31, 2016 1,617 1,668 Prepaid expenses 192 210
Other current assets 326 107
Total current assets 7,739 7,963 Property and equipment, net 2,271
1,843 Goodwill 2,403 2,361 Other assets 262
266 Total assets $ 12,675 $ 12,433
Liabilities and stockholders’ equity Current
liabilities: Trade accounts payable $ 30 $ 36 Accrued expenses
1,824 1,487 Deferred revenue 1 15 Due to IDT Corporation 77
299 Total current liabilities
1,932 1,837 Commitments and
contingencies 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 January 31, 2017 and July 31, 2016 5 5 Class B
common stock, $.01 par value; authorized shares—40,000; 9,114 and
8,819 shares issued and outstanding at January 31, 2017 and July
31, 2016, respectively 91 88 Additional paid-in capital 21,294
21,045 Accumulated other comprehensive loss (758 ) (817 )
Accumulated deficit (9,889 ) (9,725 ) Total
stockholders’ equity 10,743 10,596
Total liabilities and stockholders’ equity $ 12,675 $
12,433
ZEDGE, INC.
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE (LOSS) INCOME
(Unaudited)
Three Months Ended
Six Months Ended
January 31,
January 31,
2017 2016 2017 2016
(in thousands, except per share data) Revenues $ 2,572 $
3,530 $ 4,955 $ 6,089 Costs and expenses: Direct cost of revenues
(exclusive of amortization of capitalized software and technology
development costs included below) 412 310 780 605 Selling, general
and administrative 2,314 1,781 4,070 3,466 Depreciation and
amortization 184 156 322 317 Write-off of capitalized software and
technology development costs — —
9 — (Loss) income from operations (338
) 1,283 (226 ) 1,701 Interest and other income 7 1 8 2 Net (loss)
gain resulting from foreign exchange transactions (17 )
(106 ) 33 (161 ) (Loss) income
before income taxes (348 ) 1,178 (185 ) 1,542 Benefit from
(provision for) income taxes 22 (67 )
21 (106 ) Net (loss) income (326 ) 1,111 (164
) 1,436 Other comprehensive (loss) income: Changes in foreign
currency translation adjustment (14 ) (68 ) 59
(159 ) Total other comprehensive (loss) income
(14 ) (68 ) 59 (159 )
Total comprehensive (loss) income $ (340 ) $ 1,043 $ (105 )
$ 1,277 (Loss) earnings per share attributable
to Zedge, Inc. common stockholders: Basic $ (0.03 ) $ 0.14 $
(0.02 ) $ 0.18 Diluted $ (0.03 ) $ 0.12 $
(0.02 ) $ 0.16 Weighted-average number of shares used
in calculation of (loss) earnings per share: Basic 9,413
8,161 9,337 8,161
Diluted 9,413 8,962 9,337
8,948
ZEDGE, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited)
Six Months Ended
January 31,
2017 2016 (in thousands) Operating
activities Net (loss) income $ (164 ) $ 1,436 Adjustments to
reconcile net (loss) income to net cash provided by operating
activities: Depreciation and amortization 322 317 Deferred income
taxes 5 — Stock-based compensation 143 9 Write-off of capitalized
software and technology development costs 9 — Change in assets and
liabilities: Trade accounts receivable 51 (728 ) Prepaid expenses
and other current assets (258 ) 60 Other assets (2 ) 6 Trade
accounts payable and accrued expenses 335 333 Due to IDT
Corporation (222 ) (5 ) Deferred revenue (14 ) —
Net cash provided by operating activities 205 1,428
Investing activities Capitalized software and technology
development costs and purchase of equipment (757 )
(344 ) Net cash used in investing activities (757 ) (344 )
Financing activities Proceeds from exercise of stock options
166 — Net cash provided by
financing activities 166 — Effect of exchange rate changes on cash
and cash equivalents 12 (61 ) Net
(decrease) increase in cash and cash equivalents (374 ) 1,023 Cash
and cash equivalents at beginning of period 5,978
2,170 Cash and cash equivalents at end of
period $ 5,604 $ 3,193
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Zedge, Inc.Jonathan Reichir@zedge.net
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