ZDGE Q4 FY2026 earnings call transcript, October 26, 2026

Good day, and welcome to ZEDGE's earnings conference call for the fourth quarter and end of fiscal year 2026. During management prepared remarks, all participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation by ZEDGE's management, there will be an opportunity to ask questions. To ask a question, please press star, then one on your touch-tone phone. To withdraw your question, please press star. Then two. I will now turn the call over to Brian Siegel.

Thank you, Operator. During today's call, Morris Berger, ZEDGE's newly appointed CEO, Jonathan Wright, ZEDGE's President and Chief Operating Officer, and Esai, ZEDGE's Chief Financial Officer, will discuss ZEDGE's financial and operational results that were reported today.

Any forward-looking statements made during this conference call, during the prepared remarks, or in the question-and-answer session, whether general or not. or specific in nature, are subject to risks and uncertainties that may cause actual results in the future to differ materially from those discussed on today's call. These risks and uncertainties include but are not limited to specific risks and uncertainties disclosed in ZEDGE's periodic SEC filings. ZEDGE assumes no obligation to update any forward-looking statements or to update the factors that may cause actual results to differ materially from those that they forecast. Please note that our earnings release is available on the Investor Relations page of the ZEDGE website and has also been to update the results of the ZEDGE program. ...on Form 8K with the SEC. Finally, on this call, we will use non-GAAP measures. Examples include non-GAAP EPS, non-GAAP net income, free cash flow, and adjusted EBITDA. Please see our earnings release for an explanation of our use of these non-GAAP measures. Now I'd like to turn the call over to Morris.

Thank you, Brian, and good afternoon, everyone. I am happy to be back at ZEDGE. For those who may not know my background, I was involved with ZEDGE very early in his... In fact, I was the person who found the company in Norway when it only had two employees, and I served as CEO for over four years. I've spent much of my career building and operating businesses across media and technology, including IDT Entertainment and Xenomedia. When Howard approached me about returning, what caught my attention was the opportunity for ZEDGE as a whole, and specifically what Jonathan and the team had identified and begun developing with DataSeeds.ai. ZEDGE has an established business that generates... ...a strong balance sheet, and a collection of assets and capabilities that can be applied to various growing markets. Through DataSeeds, we have already demonstrated an ability to turn some of those capabilities into a commercial offering, securing repeat business and expanding into new services. What I find particularly compelling is that we are building on a foundation that already exists within ZEDGE. We're not starting from scratch. We have established creator communities, experienced developing and operating digital platforms, and an infrastructure that can support specialized data production. Of course, DataSeeds is still early in its development, and there's considerable work ahead. My initial focus has been on getting to know the team and the business, understanding our customers, and identifying where additional investment can have the greatest impact. Howard's increased involvement and the recent capital investment give us additional resources to pursue the opportunity. I've worked with Howard before with much success, and I'm looking forward to working closely with him, Mishi, Jonathan, and the rest of the multinational

team. I believe we have an opportunity to build data seeds into a substantial business over time with high enterprise value, and I am looking forward to helping make that happen again. With that, I'll turn it over to Jonathan.

Thank you, Morris. It's great to be working together again, and good afternoon, everyone. I'll begin with a data seeds update, then review our fiscal 2026 performance, and then more about the opportunities we see across the company and our We'll be right back. Priorities for fiscal 2027. Data seeds is our primary growth initiative and the area where we see the largest opportunity to create additional value for ZEDGE stockholders over time. AI developers increasingly need specialized, purpose-built data tailored to particular models, applications, and edge cases. Much of that data cannot be scraped from the Internet or acquired from an existing library. It must be produced subject to a detailed technical brief. ZEDGE entered this market with meaningful advantages, including creator communities, content libraries, and extensive experience building technology that can attract, engage, and mobilize contributors. During fiscal 2026, we combined these assets with new production capabilities and enterprise workflows, enabling us to deliver data sets to leading technology companies. That foundation. Produced meaningful commercial traction, including repeat orders from existing customers, our first six-figure engagement, and an expansion into model evaluation. Revenue will likely remain uneven in fiscal 2027 because assignments vary in size and timing, and we are still in the early stages of this endeavor, but the early progress reinforces our conviction in the opportunity. Our ability to invest in data seeds is supported by the

performance and cash generation of our established businesses. So let me turn to our fiscal 2026 results. Fiscal 2026 was a year of meaningful financial improvement following last year's restructuring activities. Consolidated revenue increased approximately 8%, subscription revenue grew nearly 30%, and we delivered substantial gains in profitability and free cash flow. You will provide a more detail. I'll review of our financial results shortly. ZEDGE Marketplace remains our principal source of profitability and cash flow. It also contributes a scaled creator community, and by nature of operating that business, we have developed expertise in user acquisition, creator onboarding, engagement, consent management, and payments that are critical for DataSeed's growth. In the fourth quarter, Marketplace average revenue per monthly active user increased year over year by more than 30% to $12.1, and active subscriptions increased 35% to approximately $1.3 million. Those gains more than offset the revenue impact of a 17% decline in monthly active users. Reversing the MAO downward trend remains a priority, while improving monetization across the audience, we retain. ZEDGE marketplace on iOS continues to perform well, supported by strong product acceptance, effective marketing, and subscription growth. Looking ahead, we expect to more tightly calibrate paid user acquisition spend with return on advertising spend, or ROAS. This may result in a more measured rate of marketplace growth while maintaining our disciplined approach to investment in user acquisition.

We continue to believe in the ZEDGE marketplace and are investing in product development. Over the past year, we introduced features designed to improve retention and engagement, including alarms and task-driven reward activities, and introduced new content verticals, including watch faces, dynamic wallpapers, and battery charge screens. Marketplace is a valuable asset, both on a standalone basis, and as a driver for data seeds, and maintaining its profitability and cash generation remains paramount. At Emojipedia, revenue continued to decline and weighed on our consolidated growth rate. The business nevertheless continues to generate very high margins because it has minimal fixed and variable operating costs. We will continue to manage Emojipedia for cash generation while evaluating opportunities to slow the decline without significant We will continue to manage Emojipedia for cash generation while evaluating Emojipedia for cash generation while evaluating Emojipedia for cash generation. GURU SHOTS and DATA SEEDS are now being managed as one business. GURU SHOTS contributes an established photography community, an extensive image catalog, and experienced visual contributors who can support DATA SEEDS collection, annotation, and evaluation work. We are also designing new consumer products with technology that can connect to DATA SEEDS, and we have redirected an innovation team to DATA SEEDS initiatives. These efforts

GURU SHOTS and DATA SEEDS. Create reusable technology and capabilities for the enterprise business. I will close by returning to DATA SEEDS and explaining how we plan to build on the foundation established during fiscal 2026. Depending on a customer's needs, we can use existing content, mobilize contributors through our communities, develop mission-specific data collection applications, or deploy professional resources through our DATA SEEDS production cloud. DATA SEEDS and DATA SEEDS. manage rights, consent, metadata, compliance, and quality assurance throughout the workflow. Combining these sourcing and production methods gives us flexibility to meet highly specific customer requirements without building every capability from scratch. The opportunity now extends beyond training data. DATA SEEDS began with rights-cleared image data sets and has expanded into multimodal data, including audio and video. We are also building services across annotation, enrichment, and model evaluation. Our first commercial model evaluation engagement with Bria demonstrates that expansion. Bria needed to assess subtle quality differences in AI-generated images that automated systems could not evaluate reliably. Through GuruShots, we mobilized experienced photographers who routinely evaluate and vote on images. Multiple evaluators independently reviewed the content DATA SEEDS. Using a process designed around Bria's requirements, demonstrating how expert human judgment can complement automated evaluation methods.

Our model evaluation offering combines an established community of visual evaluators with the workflow and quality controls required to produce consistent, usable enterprise results. On a demo for another client, we tested our evaluation capabilities on a customer's AI-generated images and found that our solution was able to provide value-added insights regarding the image quality of their model, particularly when judging for nuanced variables like dim lighting conditions. That result illustrates how data seeds can expand existing customer relationships and the synergies between guru shots and data seeds. Physical AI and robotics are another promising area. These applications require specialized video data sets that capture how people interact. with physical environments. That can include egocentric video recorded from a participant's perspective, exocentric video recorded from external viewpoints, and the associated synchronized sensor data. Much of this content must be collected specifically for the task being modeled. Our experience developing mobile applications and managing distributed contributors gives us a strong foundation. We are developing collection information. capabilities now, although this business remains early. In fiscal 2027, our priorities are to expand our technical and production capabilities, deepen customer relationships, broaden and grow the pipeline, and add the people and processes needed to manage larger, more complex engagements, all while remaining disciplined as we invest. Individual projects can vary considerably in size, scope, and timing, and our objective is to turn

the early traction into a larger, more diversified, and more consistent business. The investment Morris referenced gives us the flexibility to move faster and not miss out due to resource scarcity. Our focus now is to deploy those resources with discipline and align customer, technical, and organizational priorities that can build a durable business and deliver outside value. Our established businesses provide the cash flow, communities, and operating expertise behind this strategy. DataSeeds converts those advantages into an enterprise growth platform that we believe can become a meaningful growth driver for ZEDGE. We entered fiscal 2027 with commercial validation, expanding capabilities, and additional resources. We now need to execute, deliver for customers, convert the pipeline, and build the organization required to scale. With that, I'll turn the. All over to E for a detailed review of our financial results. E? Thank you, Jonathan, and good afternoon, everyone. I'll begin with our fourth quarter results, followed by our full year performance and our balance sheet. Total revenue for the fourth quarter was $7.8 million, an increase of 4% from the prior year. Advertising revenue declined 1.9% to 5.1%. Primarily reflecting the continued decline at Emojipedia. Subscription revenue increased 25.6% to $1.8 million, continuing the strong growth we've seen throughout fiscal 2026. Active subscriptions increased 35.3% year-over-year to approximately $1.3 million, while average revenue per monthly active user increased 30.5% to $12.1 cents.

Goods and Services revenue, which combines DataSeeds and Gurushots, was down approximately 2% to $0.4 million, compared to approximately $0.5 million in the prior year quarter, as the decline in traditional Gurushots gaming revenue was mostly offset by DataSeeds revenue. Other revenue increased 11.6% to $0.5 million. Turning to profitability, GAAP operating income was $0.3 million. compared to an operating loss of $0.7 million in the fourth quarter of fiscal 2025. GAAP net income was $0.4 million, or $0.03 per diluted share, compared to a net loss of $0.6 million, or a loss of $0.04 per share, in the prior year quarter. Non-GAAP net income was $0.5 million, or $0.04 per diluted share, compared to $0.1 million, or approximately $0.05 per share. break-even per share last year. Adjusted EBITDA increased 75.6% to $0.5 million, compared to $0.3 million in the prior year quarter. Turning to our full year results, total revenue increased 7.6% to $31.6 million. Subscription revenue increased 29.5% to $6.6 million, while advertising revenue grew 4.1% to $21.6 million. $2 million, despite the declines at Emojipedia. Digital goods and services revenue was $2.0 million, compared to $2.2 million in fiscal 2025, and other revenue increased 6.5% to $1.9 million. For the full year, our GAAP operating loss narrowed to $0.6 million from $3.2 million in fiscal 2025. Our GAAP net loss narrowed to $0.6 million.

compared to a net loss of $2.4 million last year. On a per share basis, the loss was $0.02 compared to $0.17 in fiscal 2025. Non-GAAP net income increased to $3.1 million, or $0.24 per diluted share, compared to $0.7 million, or $0.05 per diluted share, in fiscal 2025. Adjusted EBITDA increased 134.2% to $4.1 million, compared to $1.8 million last year. Turning to cash flow and liquidity, fourth quarter cash flow from operations increased to $1.7 million from $0.7 million in the prior year period. Free cash flow increased to $1.6 million from $0.5 million. For the full year, cash flow from operations increased to $4.6 million from $3.4 million, while free cash flow increased to $4.6 million from $3.4 million. Cash flow increased 46.6% to $4.2 million from $2.9 million. We ended fiscal 2026 with $20.3 million in cash and cash equivalents and no debt. During fiscal 2026, we repurchased approximately 686,000 shares and returned an aggregate of approximately $2.7 million to stockholders through share repurchases and dividends. Subsequent to fiscal year-end,

we completed the approximately $7.7 million insider-led financing discussed earlier in the call. That capital is not reflected in our July 31st cash balance, which, on a pro forma basis, stands at around $28 million. As previously disclosed, we suspended share repurchases in connection with the financing and expect to continue our quarterly dividend. That concludes my financial review. Operator, please open the line for questions.

Certainly. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and 2. At this time, we'll pause momentarily to assemble our roster. Thank you. Our first question is coming from Alan Klee from Maxim Group.

Okay. Your SG&A jumped up this quarter. Is that kind of – what was behind that, and is that kind of a good run rate going forward? E, do you want to take that?

Yeah, sorry, I was on mute. The SG&A went up, I think, because, you know, the net compensation went up. As you may know, Evan, the U.S. dollar depreciation again is really shuffled quite a bit, which is all about the common expenses.

In India, Guru Shop and some of our employees have led. Does that answer your question? Okay, thank you. And where, can you tell me where the share count is today? Or when your queue is expected to come out? The queue is supposed to come out on Wednesday night. We have our... $10 million in Class B and half a million in Class A. Okay. And when you talked about for the equity raise that you're looking to put that towards data seeds, is there anything more detailed about what you're going to be doing? To grow that? I mean, to build it out? I'm sorry, Alan. Repeat the question. I didn't hear it. You have more money to invest in data seeds. So, like, what is the priorities of how you're going to use that money? Sure. So, I focus on a couple of different areas. One is sales talent. So, sales account executives, SDR. that have an existing book of business are, you know, deep in the space. The other is some marketing talent and then technology slash engineering talent. And to give you a little bit of color, when we receive orders, the customer can choose to refuse if we do not meet the content standards that they expect. So we've built a whole set of capabilities to ensure that we have a very high acceptance rate, that we meet the quality standards. In addition to that, we built

the eval platform that we described earlier in the call. We're beginning to focus on video annotations. Those are all areas which require engineering support. And obviously on the sales and marketing side, we've been running the business really on a shoestring budget. And we believe that bringing on some industry veterans that have played in the space and have existing relationships will help us accelerate the pace by which we grow.

Okay, thank you. I'll pass it over. On to Derek. Thank you. Thank you. Our next question is coming from Derek Greenberg from Maxim Group. Your line is live.

That's very helpful. And then I was wondering if you could maybe provide color, maybe talk about how the pipeline is progressing, maybe in terms of the number of opportunities you see, sizing or whatever. Whatever data you have that you can share. Sure. So we have seen the pipeline continue to fill in both with well-known technology and AI leaders, companies that you and our investors would all recognize, as well as new entrants in the space that are venture funded and have ample capital reserves to invest, whether it be in multimodal, egocentric or exocentric data, as well as pursue evals, which we rolled out around a week and a half ago. And we are beginning to see, as well, order sizes increasing. We've got a couple of we've got a couple of prospects in the pipeline now that are speaking to us about six digit. Plus. Orders, we have started to deliver in the robotic space and the opportunity coming out of the robotic space is significant because that data does not exist for the most part. It's not version 1.0 of AI where many developers were able to scrape information. Off of the web to begin to populate their models in the world of robotics that data does not exist. Generally speaking, what we see is that the prospects really want to have dedicated data sets that they can own soup to nuts without leaving the door open for that data to be used.

By their competition. And we're excited about where we can go with this. We've developed our own egocentric data capture app. And let me explain a little bit more about that. So egocentric data is data that is used to train robot robots. Typically, the. The way that that's collected is that a human subject will wear a camera on their forehead or will wear a camera on some sort of a necklace and begin filming themselves doing any number of tasks. Those could be residential items like doing the laundry or washing the dishes. Or those can be.

Activities in a factory or in some sort of commercial setting and. It's not simply capturing the video, but it's a matter of capturing the video and in parallel capturing the various sensor data that exists on a phone. So that can be the IMU, it can be depth sensors, it could be gyroscope, et cetera. In order to see to it that the robot is calibrating not only its movement, but everything else that's needed in order to ultimately deliver on a service. So one can imagine if one is worth. Working with a robot model that is being trained to wash the dishes, if the pressure that's applied to a dish is too strong, they're going to crack the dish. If when putting the dish into the closet, the velocity of the arm is not calibrated properly, they'll break the dish and so on and so forth. We now have the ability of delivering one unified and converged data set that has the video. Along with all of the sensor data, which we believe bodes well for our ability to provide robotics customers with the sort of data that they are looking for through both our managed crowd offering as well as DataSeed's production cloud, depending on the level of complexity involved in capturing that data.

All right, great. That was a super helpful color. Thank you. I'm curious just in terms of on the pipeline still or just general interest. If you're seeing like more interest in specific areas, say like in robotics and developing out that capability evaluation, kind of see it like broadly across most use cases.

Yeah, so we are definitely seeing a lot of interest coming out of the robotics space. And going back to what I said earlier, that really relates to the fact that that data just doesn't exist. So there's a tremendous demand as the robotics space is accelerating. And the only way that robots will be effective is that they've got the data. But separate and apart from that, in the space that we've played up until now in multimodal, we're also seeing a lot of varied needs from technology companies that we are really well positioned to deliver off. And we, as I said earlier, are seeing that there are orders coming in for, you know, six digit or six digit plus type of engagements. And what we have also seen is that we are getting repeat orders from existing customers. The ability to deliver consistently at scale with the quality requirements that a customer has really puts us in a unique class where these customers know that if they give an order to us, we can deliver on spec at time and meet their needs. And that really is something which is proving to be very valuable in terms of establishing our beachhead, if you will, in the space overall.

Yeah, that makes sense. And then, obviously, it's still early stages, but I was wondering, you know, if we go out three to five years, I was wondering how you think about the opportunity from data seeds versus the legacy business, just in terms of maybe the size this segment could scale to or how you view that split.

As we've said, you know, data seeds is a major growth focus of ours. There's a, as you know, significant difference between what a customer order can be on data seeds versus what a customer generates for us in the Zedge marketplace. So in the Zedge marketplace, you know, lots of users, but relevant. Relatively small amounts of revenue in the data seeds market, B2B customers that can have very significant orders. And what we believe is that the two really feed off of each other. Our ability to deliver well on data seeds is partially dependent on our Zedge marketplace having access to this massive creative community. And all of the experience that we have in terms of the consumer mobile app space, whether it be knowing how to do effective user acquisition, onboarding, consent management. Consent is really important. As we know, there are a lot of lawsuits going on right now with content owners saying, hey, content was acquired without proper rights. Our offering has built into it all of the consent that can provide for provenance and auditability and the like so that customers are protected. And then we've got all of the QA pieces that we've built into the experience that we're delivering the content to the customers at spec. And the creators are able to get paid. So we've got micropayments down. We know how to deliver them. We know how to keep people incentivized. We know how to see to it that there is gamification of many of the creation tasks.

So we think that there will be significant growth coming out of data seeds, but that's not to say that we are going to forego the focus that we have on the ZDGE marketplace because that focus has put us in the place where we are right now. In order to capitalize on this incredible opportunity.

Okay, got it. And then just a couple of quick ones on the legacy business. It sounds like the innovation team has been moved to data seeds to focus more on that opportunity. But I was wondering, just with the goal of six alpha products this year, you had last mentioned that you had launched. For those, I was wondering if the other two were launched and if you could maybe talk about the performance of those alpha projects and if you see any potential there. Sure. So we've launched all six products. And let me just slightly modify what you've said. What we are looking to do with the innovation team is we've got two innovation groups, if you will, or pods. One, we're going to set loose on delivering innovation products that will help us in terms of building out our catalog, as well as capturing data and the like for data seeds. And then the other is going to continue to focus on building maybe, well, consumer products, but maybe products that are not simply what we describe internally as being AI. Wrappers using AI in order to deliver some sort of content. Of the six that were delivered, we have two that we are still investing in, in a both resource, meaning developer perspective, as well as marketing perspective. And I think that over the course of the next, you know, three months or so, we'll have some clarity as to whether those go to the next stage. I want to sort of provide a little bit of

color to what we accomplished with the innovation track this year. Basically, a year ago, we didn't have anything. We started from scratch. We built a very scalable harness that allows for us to spin up apps in a relatively short period of time, benefiting from the world of AI and being able to repurpose certain elements and expertise that we have in order to test that we have in order to get to the next stage. And then if those ideas are working out well, we take them to the next level. We, as I said earlier, had delivered six apps. And one of the things that we're looking at for this year is it may not be volume as much as it will be around building a more filled, expanded product by benefiting from the skill set that we have mastered over the course. of, you know, the last year.

Okay, great. And then last one for me, just on tape deck as well, if you could maybe give us an update on that. On tape deck, sure. So we have continued investing in tape deck. We have been doing a lot of work in. The reggae vertical, both in terms of building out our customer base, the reggae vertical is being used almost as a test case slash proof of concept, how this can scale. And it turns out that, you know, the reggae vertical is interesting because there is a critical mass of. Users both in Jamaica, as well as the expat Jamaican population, both here in the United States and the UK, that make this very relevant. We've got a very, very strong brand ambassador with a well-known reggae star. And that is definitely catching the interest of people in the music space. And then we are also pitching. To various music labels. And that is both a combination of a direct-to-consumer opportunity where we can partner with them, expand our catalog, generate more revenue for them, more sales of record and music downloads and things of that sort. As well as a B2B offering where we can offer labels solutions that. They would be able to plug into a suite of services that it will allow for them to monetize both from streaming as well as other mechanisms by which they can monetize artists, whether it be merchandise, whether it be unique ticket sales and a whole slew of other items that.

Are focused on the super fan base. That is, is to our belief, a very, very critical part of music growth. And we've got the best of both worlds in terms of tape deck. And we expect that, you know, we'll have much more clarity about this in the first half of 2027. Yeah, that's great. Well, thanks, guys. I appreciate you taking the questions. Thank you, Derek.

Thank you. And once again, everyone, if you have any questions or comments, please press star then one on your phone at this time. Please hold while we pull for questions. Thank you. This concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.