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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): March 15, 2022

 

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.)

 

1178 Broadway, Ste 1450 (3rd Floor), New York, NY   10001
(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 $0.01 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 March 15, 2022, Zedge, Inc. (the “Registrant”) issued a press release announcing its results of operations for its second fiscal quarter ended January 31, 2022. 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 March 15, 2022, reporting the results of operations for Zedge, Inc.’s second fiscal quarter ended January 31, 2022.
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

1

 

 

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: March 15, 2022

 

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EXHIBIT INDEX

 

Exhibit
Number

  Document
99.1   Earnings Release, dated March 15, 2022, reporting the results of operations for Zedge, Inc.’s second fiscal quarter ended January 31, 2022.
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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Exhibit 99.1

 

 

 

Zedge Announces Record Second-Quarter Fiscal 2022 Results

 

Reports 30% revenue growth to a record $6.9 million; Net income of $2.3 million; and record quarterly EBITDA1 of $3.4 million

 

New York, NY – March 15, 2022: Zedge, Inc. (NYSE AMERICAN: ZDGE), a global app publisher with a portfolio of leading digital consumer brands serving 44 million users across the portfolio in January 2022, today announced results for its second-quarter fiscal year 2022 ended January 31, 2022.

 

“In the second quarter, we executed on the priorities we laid out heading into fiscal 2022 and continued to see strong results despite the tougher comps,” said Jonathan Reich, chief executive officer. “Advertising revenue growth remained robust, while the Zedge App’s monthly active users (MAU)2 expanded to over 36 million with average revenue per MAU (ARPMAU)2 increasing to a record $0.06. In addition, Zedge Premium gross transaction value (GTV)2 increased by 106%.

 

“New product and feature development, especially those that we believe will drive growth in well-developed markets remains a central focus of ours, however, we did have to temporarily re-allocate resources to migrate to a new ad mediation platform following Applovin’s acquisition of and imminent closing down of the MoPub platform. We remain on track to finalize this migration by the end of the month, but some of the remaining social and community features in development will rollout slightly later than originally expected. Nonetheless, we continue forging forward with ‘NFTs Made Easy’ by focusing on expanding the offering to more artists and introducing additional features and capabilities to build out the ecosystem. In addition, we’re planning on reviewing the user-onboarding experience with the goal of improving engagement.

 

“Finally, as I’ve talked about previously, our Innovation Team is working on new product development, targeting up to three ‘proofs of concept’ per quarter. Some of these are expected to scale into full-fledged offerings in the future,” continued Reich.

 

Fiscal Second-Quarter Highlights (Fiscal 2022 versus Fiscal 2021)

 

Revenue increased 30.1% to $6.9 million versus $5.3 million;
Active subscriptions and subscription revenue increased 7.2% and 17.8%, respectively;
Operating income and operating margin of $3.1 million and 44.9% versus $2.5 million and 47.4%, respectively;
Net income and diluted EPS of $2.3 million and $0.16 versus $2.3 million and $0.17, respectively;
Cash flow from operations increased 31.3% to a record $3.0 million versus $2.3 million;
EBITDA increased 16.0% to $3.4 million versus $2.9 million;
MAU2 increased by 2.5%;
Zedge Premium GTV increased 105.7% to $0.43 million.

 

Select Financial Metrics: Q2 Fiscal  2022 versus Fiscal 2021 as of 1/31/22*
(in $M except for EPS)  Q2 ’22   Q2 ’21   Change   YTD 2022   YTD 2021   Change 
Total Revenue  $6.9   $5.3    30.1%  $12.9   $9.1    42.6%
Advertising Revenue  $5.4   $4.4    23.6%  $10.0   $7.4    35.5%
Subscription Revenue  $1.0   $0.8    17.8%  $1.9   $1.5    31.1%
Other Revenue  $0.5   $0.1    395.3%  $1.0   $0.2    341.4%
Operating Income  $3.1   $2.5    23.4%  $5.7   $3.6    57.7%
Operating Margin   44.9%   47.4%        44.0%   39.8%     
Net Income  $2.3   $2.3    2.0%  $4.4   $3.3    31.8%
Diluted Earnings Per Share  $0.16   $0.17    -5.9%  $0.29   $0.26    11.5%
EBITDA  $3.4   $2.9    15.9%  $6.4   $4.3    46.9%
Cash Flow from Operations  $3.0   $2.3    31.3%  $5.7   $3.8    51.0%
Zedge Premium - Gross Transaction Value (GTV)  $0.43   $0.21    105.7%  $0.76   $0.42    82.1%

 

*numbers may not add due to rounding

 

Select Business Metrics: 2nd Quarter Fiscal 2022 versus Fiscal 2021*
(in MM except for ARPMAU and where noted)  Q2 ’22   Q2 ’21   Change 
Total Installs - Cumulative   541.0    482.0    12.2%
MAU   36.3    35.4    2.5%
Well-developed Markets   8.5    9.5    -10.5%
Emerging Markets   27.8    25.9    7.3%
ARPMAU  $0.060   $0.049    22.2%
Active Subscriptions (in 000s)   762    711    7.2%

 

*numbers may not add due to rounding

 

1Throughout 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 Measure at the end of this release for an explanation of Zedge’s formulation of EBITDA and reconciliations to the most directly comparable GAAP measure.

 

2We use the following business metrics in this release because we believe they are useful in evaluating Zedge as an investment.

 

 

 

Monthly active users, or MAU, captures the number of unique users that used our Zedge App during the previous 30-days of the relevant period, is useful for evaluating consumer engagement with our app which correlates to advertising revenue as more users drive more ad impressions for sale. It also allows readers and potential advertisers to evaluate the size of our user base.
Zedge Premium Gross Transaction Value, or GTV, is the total dollar amount of transactions conducted through the Zedge Premium Marketplace. As Zedge Premium is an internal focus for growth, we believe that this metric will help investors evaluate the progress we are making in growing this part of our business.
Average Revenue Per Monthly Active User for our Zedge app, or ARPMAU, is a useful statistic in evaluating how well we are monetizing our user base.
An Active Subscriptions is a subscription that has commenced and not been canceled, including paused subscriptions, and subscriptions in free trials, grace periods, or account hold.
Total Installs - Cumulative is a measure of the cumulative number of times our Zedge app has been downloaded since inception.

 

Trended Financial Information*
(in $M except for EPS, ARPMAU, Paid Subscriptions)  Q121   Q221   Q321   Q421   Q122   Q222   FY 2020   FY 2021   YTD FY 2022 
Total Revenue  $3.8   $5.3   $5.3   $5.2   $6.0   $6.9   $9.5   $19.6   $12.9 
Advertising Revenue  $3.0   $4.4   $4.3   $4.2   $4.6   $5.4   $7.4   $15.7   $10.0 
Subscription Revenue  $0.7   $0.8   $0.9   $1.0   $1.0   $1.0   $1.6   $3.2   $1.9 
Other Revenue  $0.1   $0.1   $0.1   $0.2   $0.5   $0.5   $0.5   $0.5   $1.0 
Operating (loss) Income  $1.1   $2.5   $2.0   $2.2   $2.6   $3.1   $(0.4)  $7.8   $5.7 
Net (loss) Income  $1.0   $2.3   $2.4   $2.5   $2.1   $2.3   $(0.6)  $8.2   $4.4 
Diluted Earnings (Loss) Per Share  $0.08   $0.17   $0.17   $0.17   $0.14   $0.16   (0.05)  $0.59   $0.30 
EBITDA  $1.4   $2.9   $2.3   $2.7   $3.0   $3.4   $1.0   $9.3   $6.4 
Cash Flow from Operations  $1.5   $2.3   $4.0   $2.4   $2.7   $3.0   $2.1   $10.1   $5.7 
Zedge Premium – GTV  $0.21   $0.21   $0.25   $0.27   $0.33   $0.43   $0.73   $0.95   $0.76 
MAU   32.4    35.4    34.5    34.4    34.2    36.3    nm    nm    nm 
Well-developed Markets   9.2    9.5    8.9    8.5    8.4    8.5    nm    nm    nm 
Emerging Markets   23.2    25.9    25.6    25.9    25.8    27.8    nm    nm    nm 
ARPMAU  $0.036   $0.049   $0.049   $0.050   $0.053   $0.060    nm    nm    nm 
Active Subscriptions (in 000s)   609    711    753    752    763    762    504    752    762 

 

nm = not measurable/meaningful

*numbers may not add due to rounding

 

Fiscal 2022 Commentary

 

“Given the impending switch to a new ad mediation platform, we believe it is prudent to remain very conservative and reiterate our prior guidance of 25-30% revenue growth, operating margins above 40% and EBITDA growth in excess of revenue growth, even though our year to date numbers significantly exceed these rates. We expect to provide an update when we report third quarter earnings.

 

“While users in Russia and Belarus are immaterial to our revenue, I want to commend our team in Lithuania for the outstanding effort they have made in the face of conflict since the invasion of Ukraine. They have remained strong and have regularly volunteered and assisted their neighbors impacted by the war, and we will continue to support their efforts, including changing our logo to the colors of the Ukrainian flag to reflect our opposition to the aggression. Finally, we developed a set of contingency plans to enable business continuity in the event hostilities spill over into or close to Lithuania. It is our sincere hope that a cease fire is agreed to imminently and that Ukrainians can resume a peaceful life,” concluded Reich.

 

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Earnings Announcement and Supplemental Information

 

Zedge’s earnings release will be filed on Form 8-K and posted on the Zedge investor relations website (https://investor.zedge.net) at approximately 4:10 p.m. Eastern on March 15, 2022. 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 Q&A with investors.

 

To participate in the call, please dial Toll Free: 877-545-0320 or International: 973-528-0002, at least five minutes before the 4:30PM Eastern start. Please ask for the Zedge earnings conference call with Participant Access Code: 244501

 

The call will also be webcast through the Zedge investor relations website: https://investor.zedge.net and will be available through March 15, 2023.

 

Following the call and continuing through Tuesday, March 29, 2022, a call replay will be available by dialing Toll Free: 877-481-4010 or International: 919-882-2331 and entering the replay access code: 44792

 

About Zedge

 

Zedge is an app publisher that owns a portfolio of leading digital consumer brands serving 44 million users globally in January 2022. Our portfolio consists of Zedge Ringtones and Wallpapers, the leading mobile app used for mobile phone personalization, social content, and fandom art; Zedge Premium, a marketplace for artists, celebrities, and emerging creators to market their digital content, to Zedge’s users; Emojipedia, the leading source of all things emoji; and Shortz, a mobile entertainment app in beta, focused on short-form storytelling. Zedge monetizes its content through ad-supported offerings, tokens, and subscriptions. 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 IRC, MBA

Senior Managing Director

Hayden IR

(346) 396-8696

ir@zedge.net

 

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CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value data)

 

   January 31,   July 31, 
   2022   2021 
Assets        
Current assets:        
Cash and cash equivalents  $30,016   $24,908 
Trade accounts receivable, net of allowance of $0 at January 31, 2022 and July 31, 2021   3,241    2,545 
Prepaid expenses   285    111 
Other current assets   108    49 
Total current assets   33,650    27,613 
Property and equipment, net   1,770    1,980 
Intangible assets, net   6,488    - 
Goodwill   2,228    2,262 
Deferred tax assets, net   527    477 
Other assets   318    5,145 
Total assets  $44,981   $37,477 
Liabilities and stockholders’ equity          
Current liabilities:          
Trade accounts payable  $417   $585 
Due to seller of Emojipedia   1,879    - 
Accrued expenses and other current liabilities   2,769    1,771 
Deferred revenues   1,782    1,821 
Total current liabilities   6,847    4,177 
Other liabilities   96    145 
Total liabilities   6,943    4,322 
Commitments and contingencies (Note 8)          
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, 2022 and July 31, 2021   5    5 
Class B common stock, $.01 par value; authorized shares—40,000; 13,949 shares issued and 13,875 shares outstanding at January 31, 2022, and 13,923 shares issued and 13,865 ouststanding at July 31, 2021   139    139 
Additional paid-in capital   42,479    41,664 
Accumulated other comprehensive loss   (1,077)   (997)
Accumulated deficit   (3,174)   (7,554)
Treasury stock, 74 shares at January 31, 2022 and 58 shares at July 31, 2021, at cost   (334)   (102)
Total Stockholders’ equity   38,038    33,155 
Total liabilities and Stockholders’ equity  $44,981   $37,477 

 

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ZEDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except per share data)

 

   Three Months Ended   Six Months Ended 
   January 31,   January 31, 
   2022   2021   2022   2021 
Revenues  $6,915   $5,314   $12,943   $9,076 
Costs and expenses:                    
Direct cost of revenues (excluding amortization of capitalized software and technology development costs which is included below)   342    313    652    617 
Selling, general and administrative   3,106    2,159    5,838    4,165 
Depreciation and amortization   360    324    758    683 
Income from operations   3,107    2,518    5,695    3,611 
Interest and other income, net   14    5    27    5 
Net (loss) gain resulting from foreign exchange transactions   (85)   74    (95)   34 
Income before income taxes   3,036    2,597    5,627    3,650 
Provision for income taxes   711    319    1,247    327 
Net Income   2,325    2,278    4,380    3,323 
Other comprehensive (loss) income:                    
Changes in foreign currency translation adjustment   (222)   365    (80)   206 
Total other comprehensive (loss) income   (222)   365    (80)   206 
Total comprehensive income  $2,103   $2,643   $4,300   $3,529 
Income per share attributable to Zedge, Inc. common stockholders:                    
Basic  $0.16   $0.18   $0.31   $0.27 
Diluted  $0.16   $0.17   $0.29   $0.26 
Weighted-average number of shares used in calculation of income per share:                    
Basic   14,297    12,633    14,289    12,412 
Diluted   14,971    13,431    15,007    12,949 

 

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ZEDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

   Six Months Ended 
   January 31, 
   2022   2021 
         
Operating activities        
Net income  $4,380   $3,323 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   758    683 
Stock-based compensation   808    389 
Deferred income taxes   (50)   - 
Change in assets and liabilities:          
Trade accounts receivable   (741)   (1,500)
Prepaid expenses and other current assets   (244)   156 
Other assets   1    36 
Trade accounts payable and accrued expenses   806    299 
Deferred revenue   (39)   375 
Net cash provided by operating activities   5,679    3,761 
Investing activities          
Capitalized software and technology development costs and purchase of equipment   (323)   (401)
Net cash used in investing activities   (323)   (401)
Financing activities          
Proceeds from sales of Class B Common Stock   -    5,000 
Payment of issuance costs   -    (215)
Repayment of insurance premium loan payable   -    (100)
Proceeds from exercise of stock options   7    396 
Purchase of treasury stock in connection with restricted stock vesting   (232)   (26)
Net cash (used in) provided by financing activities   (225)   5,055 
Effect of exchange rate changes on cash and cash equivalents   (23)   82 
Net increase in cash and cash equivalents   5,108    8,497 
Cash and cash equivalents at beginning of period   24,908    5,111 
Cash and cash equivalents at end of period  $30,016   $13,608 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION          
Cash payments made for income taxes  $309   $1 
Cash payments made for interest expenses  $-   $2 
           
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES          
Acquistion of Emojipedia through release of escrow funds of $4,776, due to seller of $1,923 and legal fee of $12  $6,711   $- 
Accounts receivable from certain Emojipedia websites collected by Seller  $45   $- 
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)  Q121   Q221   Q321   Q421   Q122   Q222   FY
2020
   FY
2021
   YTD FY 2022 
Net Income (Loss)  $1.0   $2.3   $2.4   $2.5   $2.1   $2.3   ($0.6)  $8.2   $4.4 
Excluding:                                             
Interest and other income (expense), net  $(0.0)  $(0.0)  $(0.0)  $(0.0)  $(0.0)  $(0.0)  $(0.0)  $(0.0)  $(0.0)
Provision for (benefit from) income taxes  $0.0   $0.3   $(0.5)  $(0.1)  $0.5   $0.7   $0.0   $(0.2)  $1.2 
Depreciation and amortization  $0.4   $0.3   $0.3   $0.3   $0.4   $0.4   $1.6   $1.3   $0.8 
EBITDA  $1.4   $2.9   $2.3   $2.7   $3.0   $3.4   $1.0   $9.3   $6.4 

 

*numbers may not add due to rounding

 

 

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