Zedge Swings to Profit on Strong Subscription, Ad Revenue Growth

TL;DR

**ZDGE is back in the black, showing strong operational leverage and revenue growth; time to buy the dip!**

AI Summary

Zedge, Inc. (ZDGE) reported a significant turnaround for the three months ended October 31, 2025, achieving a net income of $788,000, a substantial improvement from a net loss of $339,000 in the prior-year period. Total revenues increased by 5.8% to $7.61 million, up from $7.19 million in the same quarter last year. This growth was primarily driven by a 6.0% increase in Zedge Marketplace revenue to $7.14 million, with advertising revenue rising to $5.17 million from $4.87 million and paid subscription revenue growing to $1.52 million from $1.18 million. Operating income reached $914,000, reversing an operating loss of $457,000 in the comparable period. Selling, general and administrative expenses decreased by 12.9% to $5.93 million from $6.81 million, contributing to the improved profitability. The company also reduced its cash and cash equivalents slightly to $18.50 million from $18.61 million at July 31, 2025, while total assets increased to $35.96 million from $35.65 million. Strategic changes include the closure of Norway operations in January 2025, eliminating USD/NOK foreign exchange risk, and a decision not to enter into USD/EUR forward contracts beyond August 2025.

Why It Matters

Zedge's return to profitability and growth in both advertising and paid subscriptions signals a positive shift for investors, demonstrating effective cost management and revenue diversification. The 12.9% reduction in selling, general, and administrative expenses highlights operational efficiency, which is crucial in a competitive digital content market. For employees, this financial stability could mean greater job security and potential for growth within the company's evolving AI and digital marketplace segments. Customers benefit from continued investment in products like pAInt and DataSeeds.AI, enhancing content offerings and user experience. This performance positions Zedge more favorably against competitors in the mobile content and generative AI space, potentially attracting more users and creators.

Risk Assessment

Risk Level: medium — While Zedge achieved net income, cash and cash equivalents decreased slightly to $18.496 million from $18.609 million, and net cash provided by operating activities declined to $825,000 from $1.170 million year-over-year. The company also purchased $789,000 in treasury stock, indicating a continued capital allocation strategy that could impact liquidity if not managed carefully. The reliance on advertising revenue ($5.166 million out of $7.610 million total revenue) also exposes the company to market fluctuations in ad spending.

Analyst Insight

Investors should consider Zedge's improved profitability and revenue growth as a positive indicator, but monitor cash flow trends and the impact of share buybacks on liquidity. The strategic focus on AI-driven content creation and B2B offerings like DataSeeds.AI presents a growth opportunity, suggesting a 'hold' or 'buy' for those with a higher risk tolerance, especially given the reduced operating expenses.

Financial Highlights

debt To Equity

0.39

revenue

$7.61M

operating Margin

12.0%

total Assets

$35.96M

total Debt

$10.06M

net Income

$788K

eps

$0.06

gross Margin

92.7%

cash Position

$18.50M

revenue Growth

+5.8%

Revenue Breakdown

Key Numbers

• $7.61M — Total Revenues (Increased by 5.8% from $7.19M year-over-year)
• $788K — Net Income (Swung from a net loss of $339K in the prior year)
• $914K — Income from Operations (Reversed an operating loss of $457K in the prior year)
• $5.93M — Selling, General and Administrative Expenses (Decreased by 12.9% from $6.81M year-over-year)
• $5.17M — Zedge Marketplace Advertising Revenue (Increased from $4.87M year-over-year)
• $1.52M — Zedge Marketplace Paid Subscription Revenue (Increased from $1.18M year-over-year)
• $18.50M — Cash and Cash Equivalents (Slight decrease from $18.61M at July 31, 2025)
• $825K — Net Cash Provided by Operating Activities (Decreased from $1.17M year-over-year)
• $789K — Purchase of Treasury Stock (Capital allocation for share buyback program)
• 13,026 — Basic Weighted-Average Shares Outstanding (Decreased from 14,086 year-over-year, indicating share buybacks)

Key Players & Entities

• Zedge, Inc. (company) — Registrant
• ZDGE (company) — Ticker symbol
• IDT Corporation (company) — Former majority-owned subsidiary parent
• Activist Artist Management, LLC (company) — Consulting agreement partner
• National Retail Services, Inc. (company) — Revenue sharing agreement partner
• Western Alliance Bank (company) — Foreign Exchange Agreement counterparty
• GuruShots Ltd. (company) — Consolidated subsidiary
• Zedge Ringtones and Wallpapers (company) — Leading product
• Emojipedia (company) — Product offering
• DataSeeds.AI (company) — B2B offering

FAQ

Risk Factors

• Dependence on Key Products [medium — operational]: The company's performance is heavily reliant on its Zedge App and other digital marketplace products. A decline in user engagement or competition could negatively impact revenue and profitability.
• Foreign Exchange Risk [low — financial]: While the company has taken steps to mitigate foreign exchange risk by closing Norway operations, ongoing international transactions could still expose the company to currency fluctuations.
• Competition in Digital Content and Gaming [medium — market]: The digital content marketplace and skill-based gaming sectors are highly competitive. Zedge faces competition from numerous platforms and developers, which could pressure user acquisition and monetization.
• Data Privacy and AI Regulations [medium — regulatory]: As Zedge expands into AI-driven services like DataSeeds.AI, it becomes subject to evolving data privacy regulations (e.g., GDPR, CCPA) and potential future AI-specific regulations, requiring ongoing compliance efforts.

Industry Context

Zedge operates in the digital content marketplace and mobile gaming sectors, characterized by high user engagement and evolving monetization strategies. Key trends include the growth of AI-generated content, subscription models, and in-app advertising. The competitive landscape is crowded with both established players and emerging platforms vying for user attention and creator participation.

Regulatory Implications

The company must navigate evolving data privacy regulations globally, particularly concerning user data collection and AI model training. Compliance with advertising standards and platform policies is also crucial for maintaining revenue streams from advertising and marketplace activities.

What Investors Should Do

1. Monitor subscription revenue growth
2. Analyze SG&A expense control
3. Evaluate AI initiatives' impact
4. Assess share buyback program

Key Dates

• 2025-10-31: End of Q2 Fiscal Year 2026 — Reported net income of $788K on $7.61M revenue, a significant turnaround from the prior year.
• 2025-07-31: End of Fiscal Year 2025 — Previous fiscal year-end, balance sheet figures for comparison.
• 2025-01-01: Closure of Norway Operations — Eliminated USD/NOK foreign exchange risk and streamlined operations.
• 2025-08-01: Decision not to enter USD/EUR forward contracts beyond this date — Further strategic move to manage currency exposure.

Glossary

Accumulated Deficit

The total net losses of a company since its inception, minus any net profits. (Zedge has an accumulated deficit of $14.72M as of Oct 31, 2025, indicating historical unprofitability, though it swung to net income in the current quarter.)

Treasury Stock

Stock that a company has repurchased from the open market. (Zedge repurchased $789K of treasury stock in the quarter, reducing outstanding shares and potentially increasing EPS.)

Deferred Revenues

Revenue that has been received by the company but not yet earned. (Deferred revenues increased to $5.74M ($3.74M current + $2.00M non-current), suggesting future revenue streams from unearned payments.)

Weighted-average number of shares used in calculation of income (loss) per share

The average number of outstanding shares over a period, adjusted for shares issued or repurchased. (The decrease from 14,086 in the prior year to 13,026 basic shares indicates a reduction in share count, likely due to buybacks, boosting EPS.)

Comprehensive Income (Loss)

Includes net income or loss plus other comprehensive income or loss items like foreign currency translation adjustments. (Zedge reported total comprehensive income of $887K, higher than net income due to a positive foreign currency translation adjustment of $99K.)

Year-Over-Year Comparison

Zedge, Inc. has demonstrated a strong recovery compared to the prior year's comparable period. Total revenues increased by 5.8% to $7.61 million, driven by growth in both advertising and subscription revenue within the Zedge Marketplace. Most notably, the company swung from a net loss of $339,000 to a net income of $788,000, and from an operating loss to an operating income of $914,000. This improved profitability was aided by a significant 12.9% reduction in Selling, General and Administrative expenses. While cash reserves saw a slight decrease, the overall financial position appears strengthened by the return to profitability and operational efficiencies.

Filing Documents

• ea0268775-10q_zedge.htm (10-Q) — 634KB
• ea026877501ex31-1_zedge.htm (EX-31.1) — 10KB
• ea026877501ex31-2_zedge.htm (EX-31.2) — 10KB
• ea026877501ex32-1_zedge.htm (EX-32.1) — 4KB
• ea026877501ex32-2_zedge.htm (EX-32.2) — 4KB
• image_001.jpg (GRAPHIC) — 22KB
• image_002.jpg (GRAPHIC) — 22KB
• image_003.jpg (GRAPHIC) — 20KB
• image_004.jpg (GRAPHIC) — 24KB
• 0001213900-25-121203.txt ( ) — 4315KB
• zdge-20251031.xsd (EX-101.SCH) — 40KB
• zdge-20251031_cal.xml (EX-101.CAL) — 40KB
• zdge-20251031_def.xml (EX-101.DEF) — 187KB
• zdge-20251031_lab.xml (EX-101.LAB) — 340KB
• zdge-20251031_pre.xml (EX-101.PRE) — 198KB
• ea0268775-10q_zedge_htm.xml (XML) — 383KB

Financial Information

PART I. Financial Information Item 1.

Financial Statements (Unaudited)

Financial Statements (Unaudited) 1 Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) 2 Condensed Consolidated Statements of Changes in Stockholders' Equity 3 Condensed Consolidated Statements of Cash Flows 4 Notes To Condensed Consolidated Financial Statements 5 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3.

Quantitative and Qualitative Disclosures About Market Risks

Quantitative and Qualitative Disclosures About Market Risks 27 Item 4.

Controls and Procedures

Controls and Procedures 27

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 28 Item 1A.

Risk Factors

Risk Factors 28 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28 Item 3. Defaults Upon Senior Securities 28 Item 4. Mine Safety Disclosures 28 Item 5. Other Information 28 Item 6. Exhibits 29

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Condensed Consolidated Financial Statements

Item 1. Condensed Consolidated Financial Statements ZEDGE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value data) October 31, July 31, 2025 2025 (Unaudited) Assets Current assets: Cash and cash equivalents $ 18,496 $ 18,609 Trade accounts receivable 3,322 3,164 Prepaid expenses and other current assets 638 671 Total Current assets 22,456 22,444 Property and equipment, net 1,377 1,290 Intangible assets, net 4,810 4,922 Goodwill 1,973 1,931 Deferred tax assets, net 4,823 4,823 Other assets 520 244 Total assets $ 35,959 $ 35,654 Liabilities and stockholders' equity Current liabilities: Trade accounts payable $ 1,451 $ 1,471 Accrued expenses and other current liabilities 2,656 2,867 Deferred revenues 3,735 3,425 Total Current liabilities 7,842 7,763 Deferred revenues--non-current 2,001 1,937 Other liabilities 221 53 Total liabilities 10,064 9,753 Commitments and contingencies (Note 9) Stockholders' equity: Preferred stock, $ .01 par value; authorized shares— 2,400 ; no shares issued and outstanding - - Class A common stock, $ .01 par value; authorized shares— 2,600 ; 525 shares issued and outstanding at October 31, 2025 and July 31, 2025 5 5 Class B common stock, $ .01 par value; authorized shares— 40,000 ; 15,103 shares issued and 12,479 outstanding at October 31, 2025 and 15,073 shares issued and 12,692 shares outstanding at July 31, 2025 151 151 Additional paid-in capital 49,664 49,768 Accumulated other comprehensive loss ( 1,410 ) ( 1,509 ) Accumulated deficit ( 14,717 ) ( 15,505 ) Treasury stock, and 2,624 shares at October 31, 2025 and 2,381 shares at July 31, 2025, at cost ( 7,798 ) ( 7,009 ) Total stockholders' equity 25,895 25,901 Total liabilities and stockholders' equity $ 35,959 $ 35,654 See accompanying notes to unaudited condensed consolidated

financial statements

financial statements. 1 ZEDGE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in thousands, except for per share data) (Unaudited) Three Months Ended October 31, 2025 2024 Revenues $ 7,610 $ 7,194 Costs and expenses: Direct cost of revenues (excluding amortization of capitalized software and technology development costs which is included below) 555 461 Selling, general and administrative 5,925 6,809 Depreciation and amortization 216 381 Income (loss) from operations 914 ( 457 ) Interest and other income, net 153 181 Net loss resulting from foreign exchange transactions ( 46 ) ( 14 ) Income (loss) before income taxes 1,021 ( 290 ) Income tax expense 233 49 Net income (loss) $ 788 $ ( 339 ) Other comprehensive income (loss): Changes in foreign currency translation adjustment 99 ( 29 ) Total other comprehensive income (loss) 99 ( 29 ) Total comprehensive income (loss) $ 887 $ ( 368 ) Income (loss) per share attributable to Zedge, Inc. common stockholders: Basic $ 0.06 $ ( 0.02 ) Diluted $ 0.06 $ ( 0.02 ) Weighted-average number of shares used in calculation of income (loss) per share: Basic 13,026 14,086 Diluted 13,331 14,086 See accompanying notes to unaudited condensed consolidated financial statements. 2 ZEDGE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (in thousands) (Unaudited) Class A Common Stock Class B Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Treasury Stock Total Stockholders' Shares Amount Shares Amount Capital Loss Deficit Shares Amount Equity Balance – July 31, 2025 525 $ 5 15,073 $ 151 $ 49,768 $ ( 1,509 ) $ ( 15,505 ) 2,381 $ ( 7,009 ) $ 25,901 Stock-based compensation - - 30 - 104 - - - - 104 Purchase of treasury stock - - - - - - - 243 ( 789 ) ( 789 ) Dividend declared - - - - ( 208 ) - -

financial statements

financial statements. 3 ZEDGE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Three Months Ended October 31, 2025 2024 Operating activities Net income (loss) $ 788 $ ( 339 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 14 16 Amortization of intangible assets 112 112 Amortization of capitalized software and technology development costs 90 253 Stock-based compensation 104 379 Change in assets and liabilities: Trade accounts receivable ( 158 ) 193 Prepaid expenses and other current assets 33 ( 161 ) Other assets ( 19 ) 2 Trade accounts payable and accrued expenses ( 513 ) 123 Deferred revenues 374 592 Net cash provided by operating activities 825 1,170 Investing activities Capitalized software and technology development costs ( 168 ) ( 146 ) Purchase of property and equipment ( 17 ) ( 11 ) Net cash used in investing activities ( 185 ) ( 157 ) Financing activities Purchase of treasury stock in connection with share buyback program and stock awards vesting ( 789 ) ( 804 ) Net cash used in financing activities ( 789 ) ( 804 ) Effect of exchange rate changes on cash and cash equivalents 36 ( 11 ) Net (decrease) increase in cash and cash equivalents ( 113 ) 198 Cash and cash equivalents at beginning of period 18,609 19,998 Cash and cash equivalents at end of period $ 18,496 $ 20,196 Supplemental cash flow information: Cash paid for income taxes $ 36 $ 88 Non-cash operating and financing activities: ROU assets obtained in exchange for lease liabilities $ 286 $ 111 Dividend payable included in accrued expenses and other current liabilities (1) $ 208 $ - (1) Dividend payable was paid on November 7, 2025. See accompanying notes to unaudited condensed consolidated

financial statements

financial statements. 4 ZEDGE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1—Basis of Presentation and Summary of Significant Accounting Policies Description of Business Zedge builds digital marketplaces and friendly competitive games around content that people use to express themselves. Our leading products include Zedge Ringtones and Wallpapers, which we refer to as our "Zedge App," a freemium digital content marketplace offering mobile phone wallpapers, video wallpapers, ringtones, and notification sounds as well as pAInt, a generative AI wallpaper and ringtone maker, GuruShots, a skill-based photo challenge game, and Emojipedia, the #1 trusted source for all things emoji', and DataSeeds.AI, a B2B offering which creates ethically sourced and fully rights-cleared custom image, video, and audio datasets that companies use to train their AI systems. Our vision is to enable and connect creators who enjoy friendly competitions with a community of prospective consumers in order to drive commerce. Except where the context clearly indicates otherwise, the terms the "Company," "Zedge" "we," "us" or "our" refer to Zedge, Inc. and its consolidated subsidiaries. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Zedge, Inc. and its subsidiaries: GuruShots Ltd. ("GuruShots"); Zedge Europe AS; and Zedge Lithuania UAB (the "Company"), have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended October 3

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