Zedge, Inc. (NYSE American:ZDGE) today announced results for the
fourth quarter and full fiscal year 2017, the three and twelve
months ended July 31, 2017.
Fourth Quarter and Full FY 2017
Operational and Financial Highlights
(Results are for the 4th quarter and full FY 2017 compared to
the 4th quarter and full FY 2016 respectively, unless otherwise
noted)
- MAU (Monthly Active Users) for the last
30 days of the quarter increased 1.9% to 31.7 million from 31.1
million in the comparable period of 2016, even as Q4 continued the
shift in our user base to emerging markets from more well-developed
countries. We have begun to see a reversal of the trend in Q1 of
fiscal 2018;
- Total installs at July 31, 2017
increased 26.5% to 273.7 million from 216.4 million at July 31,
2016;
- Quarterly revenue increased 3.9% to
$2.547 million from $2.452 million;
- Average revenue per MAU derived from
our apps (ARPMAU) increased for the third consecutive quarter,
rising 2.4% sequentially to $0.0255 from $0.0249;
- Full year revenue decreased 9.7% to
$10.0 million compared to $11.1 million;
- Loss from operations during the 4th
quarter of FY 2017 was $264 thousand compared to loss from
operations of $771 thousand;
- Full year loss from operations was $683
thousand compared to income from operations of $1.173 million;
- Net loss per diluted share of $0.02 in
the 4th quarter of FY 2017 compared to net loss per diluted share
of $0.08;
- Full year diluted loss per share of
$0.06 compared to diluted EPS of $0.11;
- Zedge Marketplace expected to launch in
late 2017;
- Instituting cost cutting initiatives
expected to yield $1.5 - $2.0 million annually, ex-Freeform. Some
of these savings will be used for initial funding of the Zedge
Marketplace initiative.
Management Remarks
“Zedge remains exceptionally committed to investing resources in
activities that will increase revenues, expand our user base,
improve frequency of use and retention while also managing our
costs,” said Tom Arnoy, CEO.
“Although Q4 was generally flat when compared to the year ago
quarter and to Q3 of FY ’17, our targeted focus is starting to bear
fruit as we are witnessing improved fundamentals, across revenue,
engagement and user growth, in the current quarter. Furthermore, we
have undertaken a set of cost cutting initiatives, including a
modest workforce reduction, reconfiguring key infrastructure for
better efficiency and lower cost, and instituting tighter
discretionary spending controls. We expect these actions to deliver
$1.5 - $2.0 million in annual savings. Additionally, Jonathan Reich
and I have opted to take voluntary salary cuts as a part of our
commitment to manage the company for sustained, long term,
growth.
“With the Freeform acquihire behind us, later this year we plan
on rolling out the Zedge Marketplace where artists will sell their
digital creations and help us in growing our user base, introducing
new revenue streams and improving engagement. Initial funding for
this promising endeavor will come from the savings that we generate
from the cost cutting steps we are implementing.”
Jonathan Reich, CFO and COO of Zedge, said, “During fiscal 2017,
we invested in several key infrastructure projects and product
enhancements that are now starting to pay off allowing us to
simultaneously scale our business and cut costs. We accomplished
the Freeform transaction with a structure that provides a
manageable risk profile for an initiative designed to drive new
user growth and revenue contribution and will only pay the full
price if success is achieved. We will continue to look at organic
and creative ways to grow our user base, expand revenue, contain
costs and unlock value.”
Financial Results by Quarter (in
thousands of USD)
Zedge, Inc.’s FY 2017 audit by its independent auditors is not
fully completed.
Q4FY '17 Q4FY '16
DELTA
%Change
Q4FY '17 Q3FY '17
DELTA
% Change
FY '17 FY '16 DELTA
% Change
Revenue $2,547 $2,452 $95 3.9% $2,547
$2,530 $17 0.7% $10,031 $11,113
($1,082) -9.7% Direct Cost of Revenue $381
$367 $14 3.8% $381 $406 ($25)
-6.2% $1,567 $1,299 $268 20.6% Total SG&A
$2,247 $2,439 ($192) -7.9% $2,247
$2,151 $96 4.5% $8,468 $7,755
$713 9.2% Depreciation & Amortization $156
$135 $21 15.6% $156 $166 ($10)
-6.0% $643 $605 $38 6.3% Write Off of Software
/ Tech Development $27 $281 ($254)
-90.4% $27 $0 $27 $36 $281
($245) -87.2% (Loss)/Income from Operations
($264) ($771) $507 -65.8% ($264) ($193)
($71) 36.8% ($683) $1,173 ($1,856)
-158.2% Net (Loss)/Gain from FX & Other $60
($17) $77 -452.9% $60 ($46) $106
-230.4% $56 ($47) $103 -219.1% (Benefit
From)/Provision For Income Taxes ($4) ($9) $5
-55.6% ($4) $0 ($4) $16
($143) $159 -111.2% Net (Loss)/Income ($208)
($780) $572 -73.3% ($208) ($239)
$31 -13.0% ($611) $983 ($1,594) -162.2%
Diluted (Loss)/Earnings Per Share ($0.02) ($0.08)
$0.06 -75.0% ($0.02) ($0.02) $0.00
0.0% ($0.06) $0.11 ($0.17) -154.5% MAU
(Million) 31.7 31.1 0.6 1.9% 31.7
31.7 0.0 0.0% 31.7 31.1 0.6
1.9% Total Installs (Million) 273.7 216.4
57.3 26.5% 273.7 260.4 13.3 5.1%
273.7 216.4 57.3 26.5% ARPMAU $0.0255
$0.0244 $0.0011 4.5% $0.0255 $0.0249
$0.0006 2.4% $0.0244 $0.0269 ($0.0025)
-9.3%
Earnings Announcement and Supplemental
Information
Zedge will host a conference call at 5:00 PM ET today, October
18th, beginning with management’s discussion of results, outlook
and strategy 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: 7596341
The conference call will also be webcast and can be accessed
both live and for three months following the call through this URL:
http://services.choruscall.com/links/zdge171018C8rjqToL.html
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 273 million app installs and 32
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
(in thousands)
July 31,
2017 2016
ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 4,580 $ 5,978 Trade accounts receivable, net of
allowance for doubtful accounts of $0 at July 31, 2017 and 2016
1,712 1,668 Prepaid expenses 315 210 Other current assets
427 107
TOTAL CURRENT ASSETS
7,034 7,963 Property and equipment, net 2,678 1,843 Goodwill 2,518
2,361 Other assets 301 266
TOTAL ASSETS $ 12,531 $ 12,433
LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT
LIABILITIES: Trade accounts payable $ 33 $ 36 Accrued expenses
1,840 1,487 Deferred revenue — 15 Due to IDT Corporation 36
299
TOTAL CURRENT LIABILITIES
1,909 1,837
TOTAL
LIABILITIES 1,909 1,837
Commitments and contingencies (Note 8) STOCKHOLDERS’
EQUITY: Preferred stock, $0.01 par value; authorized
shares—2,400; no shares issued — — Class A common stock; $0.01 par
value; authorized shares—2,600; 525 shares issued and outstanding
at July 31, 2017 and 2016 5 5 Class B common stock; $0.01 par
value; authorized shares—40,000; 9,123 and 8,819 shares issued and
outstanding at July 31, 2017 and 2016, respectively 91 88
Additional paid-in capital 21,446 21,045 Accumulated other
comprehensive loss (584 ) (817 ) Accumulated deficit (10,336
) (9,725 )
TOTAL STOCKHOLDERS’ EQUITY
10,622 10,596
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY $ 12,531 $ 12,433
ZEDGE, INC.
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE (LOSS) INCOME
(in thousands, except per share
data)
Year ended July 31,
2017
2016 REVENUES
$
10,031
$ 11,113
COSTS AND EXPENSES: Direct cost of revenue
(exclusive of amortization of capitalized software and technology
development costs included below) 1,567 1,299 Selling, general and
administrative 8,468 7,755 Depreciation and amortization 643 605
Write-off of capitalized software and technology development costs
36 281
(LOSS) INCOME FROM
OPERATIONS (683 ) 1,173 Interest and other income 19 2 Net gain
(loss) resulting from foreign exchange transactions 37
(49 )
(LOSS) INCOME BEFORE INCOME TAXES
(627 ) 1,126 Benefit from (provision for) income taxes 16
(143 )
NET (LOSS) INCOME (611 ) 983
Other comprehensive income (loss): Changes in foreign currency
translation adjustment 233 (162 )
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) 233
(162 )
TOTAL COMPREHENSIVE (LOSS) INCOME $
(378 ) $ 821 (Loss) earnings per share
attributable to Zedge, Inc. common stockholders: Basic $ (0.06 )
$ 0.12 Diluted $ (0.06 ) $ 0.11
Weighted-average number of shares used in
calculation of (loss) earnings per share:
Basic 9,467 8,346 Diluted
9,467 9,279
ZEDGE, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
Year ended July 31,
2017
2016 OPERATING ACTIVITIES Net (loss) income
$
(611
)
$ 983 Adjustments to reconcile net (loss) income to net cash (used
in) provided by operating activities: Depreciation and amortization
643 605 Deferred income taxes (28 ) (26 ) Write-off of capitalized
software and technology development costs 36 281 Stock-based
compensation 275 166 Change in assets and liabilities: Trade
accounts receivable (45 ) (46 ) Prepaid expenses and other current
assets (481 ) (94 ) Other assets (8 ) (7 ) Trade accounts payable
and accrued expenses 400 39 Due to IDT Corporation (263 ) (70 )
Deferred revenue (15 ) 11 Net cash
(used in) provided by operating activities (97 ) 1,842
INVESTING
ACTIVITIES Capitalized software and technology development
costs and purchase of equipment (1,506 )
(1,006 ) Net cash used in investing activities (1,506 ) (1,006 )
FINANCING ACTIVITIES Proceeds from exercise of stock options
166 9 Sale of equity prior to the Spin-Off —
3,000 Net cash provided by financing activities
166 3,009 Effect of exchange
rates on cash and cash equivalents 39
(37 ) Net (decrease) increase in cash and cash equivalents (1,398 )
3,808 Cash and cash equivalents at beginning of year 5,978
2,170 Cash and cash equivalents at end
of year $ 4,580 $ 5,978
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION Cash
payments made for income taxes $ — $ 112
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Receivable for exercise of stock options $ —
$ 56 Reclassification of mezzanine equity
— $ 100
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ZedgeJonathan Reichir@zedge.net
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