Zedge, Inc. Q1 FY26 Results

Zedge delivered a solid start to fiscal 2026 with a return to topline growth even as we continued to navigate the anticipated headwinds at Emojipedia and GuruShots. The Zedge Marketplace demonstrated resilience and efficiency amid a broader digital ecosystem that continues to shift. Improved ARPMAU stood out as a key achievement of the quarter, driven by sustained CPMs, a core ad pricing metric, optimization and stronger subscription gains. These serve as strong signals that our core engine remains healthy. I’m excited by the traction we’re experiencing with DataSeeds. While the number of closed deals is still small, the opportunity is huge. AI models’ success depends on their ability to secure a critical mass of high-quality training data that meets unique techincal specifications. That’s where DataSeeds Production Cloud, our network of creative experts built to fulfill bespoke content requests, is experiencing a surge in demand. In Q1, we received our second order from an existing customer, a leader in the AI space, with an increased dollar size of roughly 25X from the customer’s first order. Furthermore, our pipeline is ripe with many six-figure revenue opportunities. It is still early, but our value proposition - mainly access to and experience with a coveted community of creators that can generate rights-cleared, ethically sourced content, at scale, is in great demand. Moreover, it’s not only the content that is fueling interest, but also our ability to deliver many other aspects of a customer brief with consistency and accuracy including unique naming and metadata conventions and search capabilities that set us apart. We are proceeding deliberately, for the most part using existing resources to execute. Turning to our financial results, I want to address free cash flow2 because the offsets this quarter were meaningful, but fully anticipated. Free cash flow reflected the impact of the timing of restructuring-related compensation tax payments, which are now largely behind us, as well as some quarter-specific timing in receivables and payables. We also chose to reinvest part of our restructuring savings into high-potential initiatives, including DataSeeds, Tapedeck and our product innovation initiative. These items temporarily reduced our free cash flow generation, but they do not change our long-term free cash flow expectations. Looking forward, we entered the second quarter of fiscal 2026, which is typically seasonally stronger, with a leaner operating structure, a stronger business engine and a growing portfolio of innovation bets. We are executing from a position of confidence, discipline and momentum, and will invest prudently based on where opportunity knocks.”