UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 10, 2020

 

ZEDGE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   1-37782   26-3199071
(State or other jurisdiction
of incorporation) 		  (Commission File Number)   (IRS Employer
Identification No.)

 

22 Cortlandt Street (11th Floor), New York, NY   10007
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (330) 577-3424 

 

Not Applicable

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol(s)   Name of each exchange on which registered
Class B common stock, par value $.01 per share   ZDGE   NYSE American

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

 

Item 2.02. Results of Operations and Financial Condition

 

On December 10, 2020, Zedge, Inc. (the “Registrant”) issued a press release announcing its results of operations for its fiscal quarter ended October 31, 2020. A copy of the press release issued by the Registrant concerning the foregoing results is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

 

The Registrant is furnishing the information contained in this Report, including Exhibit 99.1, pursuant to Item 2.02 of Form 8-K promulgated by the Securities and Exchange Commission (the “SEC”). This information shall not be deemed to be “filed” with the SEC or incorporated by reference into any other filing with the SEC unless otherwise expressly stated in such filing. In addition, this Report and the press release contain statements intended as “forward-looking statements” that are subject to the cautionary statements about forward-looking statements set forth in the press release.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No   Document
99.1   Earnings Release, dated December 10, 2020, reporting the results of operations for Zedge, Inc.’s fiscal quarter ended October 31, 2020.

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  ZEDGE, INC.
     
  By: /s/ Jonathan Reich
  Name:  Jonathan Reich
  Title: Chief Executive Officer

 

Dated: December 10, 2020

 

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EXHIBIT INDEX

 

Exhibit
Number 		  Document
99.1   Earnings Release, dated December 10, 2020, reporting the results of operations for Zedge, Inc.’s fiscal quarter ended October 31, 2020.

 

 

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Exhibit 99.1

 

 

Zedge Announces First Fiscal Quarter Revenue Growth of 85% and Record Overall Quarterly Financial Results

 

EPS of $0.08 and cash flow from operations of $1.5 million

 

New York, NY – Dec 10, 2020: Zedge, Inc. (NYSE AMERICAN: ZDGE), a leading global developer of mobile phone personalization and entertainment apps, today announced results for its fiscal first quarter ended October 31, 2020.

 

“The investments we made in fiscal 2020 continued bearing fruit in the first quarter, resulting in record quarterly results across several key financial metrics, including our fifth consecutive quarter of positive cash flow from operations,” said Jonathan Reich, chief executive officer. “Monthly active users, or MAU, returned to year-over-year growth, and our subscription offerings continued to gain traction with revenue growth of 214%. Together, these drove our average revenue per monthly active user, or ARPMAU, higher by 73% compared to last year.”

 

Fiscal First Quarter Highlights

 

● Revenue increased 85.0% to a record $3.8 million versus $2.0 million last year;
● Paid subscribers and subscription revenue increased 205% and 214%, respectively, versus last year;
● Record operating income and operating margin of $1.1 million and 29.1%, respectively, versus an operating loss of ($0.7) million and (36.6)%, respectively, last year;
● Record net income and diluted earnings per share of $1.0 million and $0.08, respectively, versus a net loss of ($0.8) million and a loss per share of ($0.08), respectively, last year;
● Cash flow from operations was positive for the 5th consecutive quarter and increased 322% to a record $1.5 million versus $0.4 million last year;
● EBITDA1 was $1.4 million versus ($0.3) million last year;
● Monthly active users (MAU) increased by 9.1% versus last year;
● Zedge Premium Gross Transaction Value (GTV) increased 8.3% versus last year.

 

 

 

 

1 Throughout this release, EBITDA is a Non-GAAP financial measure intended to provide useful information that supplements Zedge’s results in accordance with GAAP. Please refer to the Reconciliation of Non-GAAP Financial Measures at the end of this release for an explanation of Zedge’s formulation of EBITDA and reconciliations to the most directly comparable GAAP measure.

 

 

 

 

Select Financial Metrics: 1st Quarter Fiscal 2021 versus Fiscal 2020
(in $M except for EPS)   Q121     Q120     Change  
Total Revenue   $ 3.8     $ 2.0       85.0 %
Advertising Revenue   $ 3.0     $ 1.7       79.1 %
Subscription Revenue   $ 0.7     $ 0.2       214.0 %
Other Revenue   $ 0.1     $ 0.2       -20.8 %
Operating Income (Loss)   $ 1.1     $ (0.7 )     nm  
Operating Margin     29.1 %     -36.6 %     nm  
Net Income (Loss)   $ 1.0     $ (0.8 )     nm  
Diluted Earnings (Loss) Per Share   $ 0.08     $ (0.08 )     nm  
EBITDA   $ 1.4     $ (0.3 )     nm  
Cash Flow from Operations   $ 1.5     $ 0.4       322.4 %
Zedge Premium - Gross Transaction Value (GTV)   $ 0.21     $ 0.19       8.3 %
NM = not measurable/meaningful                        

 

Select Business Metrics: 1st Quarter Fiscal 2021 versus Fiscal 2020
(in MM except for ARPMAU and where noted)   Q121     Q120     Change  
Total Installs - Cumulative     465.2       409.0       13.7 %
MAU     32.4       29.7       9.1 %
Well-developed Markets     9.2       10.0       -8.0 %
Emerging Markets     23.2       19.7       17.8 %
ARPMAU   $ 0.036     $ 0.021       73.3 %
Paid Subscriptions (in 000s)     609       200       204.5 %

 

Trended Financial Information:
(in $M except for EPS, ARPMAU, Paid Subscriptions)   Q120     Q220     Q320     Q420     Q121     FY 2019     FY 2020     YTD
FY 2021 		 
Total Revenue   $ 2.0     $ 2.6     $ 2.1     $ 2.7     $ 3.8     $ 8.8     $ 9.5     $ 3.8  
Advertising Revenue   $ 1.7     $ 2.3     $ 1.5     $ 2.0     $ 2.986     $ 7.9     $ 7.4     $ 3.0  
Subscription Revenue   $ 0.2     $ 0.3     $ 0.5     $ 0.6     $ 0.650     $ 0.2     $ 1.6     $ 0.7  
Other Revenue   $ 0.2     $ 0.1     $ 0.1     $ 0.1     $ 0.1260     $ 0.7     $ 0.5     $ 0.1  
Operating Income (Loss)   $ (0.7 )   $ 0.1     $ (0.1 )   $ 0.4     $ 1.1     $ (2.9 )   $ (0.4 )   $ 1.1  
Net Income (Loss)   $ (0.8 )   $ 0.1     $ (0.3 )   $ 0.5     $ 1.0     $ (3.3 )   $ (0.6 )   $ 1.0  
Diluted Earnings (Loss) Per Share   $ (0.08 )   $ 0.01     $ (0.03 )   $ 0.04     $ 0.08     $ (0.33 )   $ (0.05 )   $ 0.08  
EBITDA   $ (0.3 )   $ 0.5     $ 0.0     $ 0.8     $ 1.4     $ (1.7 )   $ 1.0     $ 1.4  
Cash Flow from Operations   $ 0.4     $ 0.6     $ 0.7     $ 0.5     $ 1.5     $ 0.1     $ 2.1     $ 1.5  
Zedge Premium – GTV   $ 0.19     $ 0.20     $ 0.15     $ 0.19     $ 0.21     $ 0.49     $ 0.73     $ 0.21  
MAU     29.7       34.3       28.8       31.9       32.4       nm       nm       nm  
Well-developed Markets     10.0       11.3       9.0       9.6       9.2       nm       nm       nm  
Emerging Markets     19.7       23.0       19.8       22.3       23.2       nm       nm       nm  
ARPMAU   $ 0.021     $ 0.026     $ 0.022     $ 0.028     $ 0.036       nm       nm       nm  
Paid Subscriptions (in 000s)     200       298       399       504       609       134       504       609  
NM = not measurable/meaningful  

 

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Fiscal 2021 Commentary

 

Reich continued, “Our momentum has continued into the second quarter, and with the recent release of our new content management system, we are now in the position to develop new features, including social and community, that will allow us to provide more value to users and artists alike.”

 

“We believe there are multiple paths for revenue growth moving forward and growing our user base beyond the current 32 million monthly active users is a key focus. We remain confident with our fiscal 2021 targets, mainly growing revenue in excess of 20% and generating both positive cash flow from operations and EPS on a quarterly basis.”

 

Earnings Announcement and Supplemental Information

 

Zedge’s earnings release will be filed on Form 8-K and posted on the Zedge investor relations website (http://investor.zedge.net) at approximately 4:10 p.m. Eastern on December 10, 2020. Zedge’s management will host an earnings conference call beginning at 4:30 p.m. Eastern. Management’s presentation of the results, outlook and strategy will be followed by a Q&A with investors.

 

To participate in the call, please dial Toll Free: 844-602-0380 or International: 862-298-0970 at least five minutes before the 4:30PM Eastern start and ask for the Zedge earnings conference call.

 

The call will also be webcast through the following link: https://www.webcaster4.com/Webcast/Page/2205/38596 and will be live through Wednesday, March 10, 2021.

 

Following the call and continuing through Thursday, December 24, 2020 a call replay will be available by dialing Toll Free: 877-481-4010 or International: 919-882-2331 and entering the replay access code: 38596

 

About Zedge

 

Zedge is a leading app developer focusing on mobile phone personalization and entertainment. With approximately 465 million organic installs and 32 million monthly active users, “Zedge Wallpapers and Ringtones” is all about personal identity. We’re the hub for self-expression used by millions for mobile phone personalization, social content and fandom art. Our app enables consumers to showcase who they are, what they like, and amplify their persona. Zedge Premium, our marketplace, enables content creators, ranging the gamut from world class celebrities to emerging artists, to display their talent and sell their content to our users. “Shortz – Chat Stories by Zedge” offers serialized, short-form fiction stories delivered as text-messaging conversations and soon to be available as mini-podcasts. Our apps run on our flexible and proven state-of-the-art digital publishing platform. For more information, visit https://www.zedge.net.

 

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.

 

Contact:

Brian Siegel

Managing Director

Hayden IR

 

ir@zedge.net

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ZEDGE, INC. 

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value data)

 

    October 31,     July 31,  
    2020     2020  
  (Unaudited)     (Audited)  
Assets            
Current assets:            
Cash and cash equivalents   $ 6,252     $ 5,111  
Trade accounts receivable, net of allowance for doubtful accounts of $0 at October 31, 2020 and July 31, 2020     1,961       1,407  
Prepaid expenses     261       123  
Other current assets     76       113  
Total current assets     8,550       6,754  
Property and equipment, net     2,436       2,584  
Goodwill     2,091       2,196  
Other assets     390       471  
Total assets   $ 13,467     $ 12,005  
Liabilities and stockholders’ equity                
Current liabilities:                
Trade accounts payable   $ 365     $ 290  
Insurance premium loan payable     142       -  
Accrued expenses and other current liabilities     1,198       1,210  
Deferred revenues     1,559       1,338  
Total current liabilities     3,264       2,838  
Loans Payable     218       218  
Other liabilities     3       64  
Total liabilities     3,485       3,120  
Commitments and contingencies (Notes 8 and 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, 2020 and July 31,  2020     5       5  
Class B common stock, $.01 par value; authorized shares—40,000; 11,827 shares issued and 11,769 shares outstanding at October 31, 2020, and 11,789 shares issued and 11,749 outstanding at July 31, 2020     118       118  
Additional paid-in capital     25,962       25,725  
Accumulated other comprehensive loss     (1,244 )     (1,085 )
Accumulated deficit     (14,757 )     (15,802 )
Treasury stock, 58 shares at October 31, 2020 and 40 shares at July 31, 2020, at cost     (102 )     (76 )
Total stockholders’ equity     9,982       8,885  
Total liabilities and stockholders’ equity   $ 13,467     $ 12,005  

 

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ZEDGE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)

(unaudited)

 

    Three Months Ended  
    October 31,  
    2020     2019  
Revenues   $ 3,762     $ 2,033  
Costs and expenses:                
Direct cost of revenues (exclusive of amortization of capitalized software and technology development costs included below)     304       328  
Selling, general and administrative     2,006       1,945  
Depreciation and amortization     359       505  
Income (loss) from operations     1,093       (745 )
Interest and other income (expense), net     1       -  
Net loss resulting from foreign exchange transactions     (41 )     (56 )
Income (loss) before income taxes     1,053       (801 )
Provision for income taxes     8       -  
Net Income (loss)     1,045       (801 )
Other comprehensive loss:                
Changes in foreign currency translation adjustment     (159 )     (143 )
Total other comprehensive loss     (159 )     (143 )
Total comprehensive income (loss)   $ 886     $ (944 )
Income (loss) per share attributable to Zedge, Inc. common stockholders:                
Basic   $ 0.09     $ (0.08 )
Diluted   $ 0.08     $ (0.08 )
Weighted-average number of shares used in calculation of loss per share:                
Basic     12,191       10,196  
Diluted     12,496       10,196  

 

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ZEDGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

(unaudited)

 

    Three Months Ended  
    October 31,  
    2020     2019  
             
Operating activities            
Net income (loss)   $ 1,045     $ (801 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
Depreciation and amortization     359       505  
Stock-based compensation     237       98  
Change in assets and liabilities:                
Trade accounts receivable     (554 )     68  
Prepaid expenses and other current assets     80       207  
Other assets     19       (13 )
Trade accounts payable and accrued expenses     80       192  
Deferred revenue     221       96  
Net cash provided by operating activities     1,487       352  
Investing activities                
Capitalized software and technology development costs and purchase of equipment     (215 )     (213 )
Net cash used in investing activities     (215 )     (213 )
Financing activities                
Repayment of insurance premium loan payable     (40 )     (31 )
Purchase of treasury stock in connection with restricted stock vesting     (26 )     (22 )
Net cash used in financing activities     (66 )     (53 )
Effect of exchange rate changes on cash and cash equivalents     (65 )     (36 )
Net increase in cash and cash equivalents     1,141       50  
Cash and cash equivalents at beginning of period     5,111       1,609  
Cash and cash equivalents at end of period   $ 6,252     $ 1,659  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                
Cash payments made for interest expenses   $ 1     $ 1  
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES                
Note payable issued for insurance premium financing   $ 181     $ -  

 

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Use of EBITDA as a Non-GAAP Measure

 

EBITDA is defined as earnings (loss) before interest, taxes, depreciation and amortization. EBITDA represents a measure that we believe is customarily used by investors and analysts to evaluate the financial performance of companies in addition to the GAAP measures that we present. Our management also believes that EBITDA is useful in evaluating our core operating results. However, EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America and should not be considered an alternative to net income or operating income as an indicator of our operating performance or to net cash provided by operating activities as a measure of our liquidity.

 

Reconciliation of EBITDA to Net Income (Loss)
(in $M)   Q120     Q220     Q320     Q420     Q121     FY 2019     FY 2020     YTD
FY 2021 		 
Net Income (Loss)   $ (0.8 )   $ 0.1     $ (0.3 )   $ 0.5     $ 1.0     $ (3.3 )   $ (0.6 )   $ 1.0  
Excluding:                                                                
Interest and other income (expense), net   $ 0.0     $ (0.0 )   $ (0.0 )   $ (0.0 )   $ (0.0 )   $ 0.2     $ (0.0 )   $ (0.0 )
Provision for income taxes   $ 0.0     $ 0.0     $ 0.0     $ 0.0     $ 0.0     $ 0.0     $ 0.0     $ 0.0  
Depreciation and amortization   $ 0.5     $ 0.4     $ 0.3     $ 0.4     $ 0.4     $ 1.4     $ 1.6     $ 0.4  
EBITDA   $ (0.3 )   $ 0.5     $ 0.0     $ 0.8     $ 1.4     $ (1.7 )   $ 1.0     $ 1.4  

 

 

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