Zedge (NYSEAMERICAN:ZDGE) reported fiscal third-quarter revenue growth and a return to GAAP profitability, while management highlighted stronger subscription trends, higher monetization per user and progress in emerging initiatives including DataSeeds.AI, Tapedeck and its AI product pipeline.
On the company’s earnings call, Chief Executive Officer Jonathan Reich said the quarter demonstrated the resilience of the core Zedge Marketplace business, despite a decline in overall monthly active users. He said the company is seeing improved engagement quality and better revenue generation from its user base.
Revenue Rises as Subscription Growth Continues
Chief Financial Officer Yi Tsai said total revenue for the third quarter was $8.0 million, up 3.0% from the prior year. Tsai noted that the third quarter has historically been Zedge’s seasonally weakest quarter.
Zedge Plus subscription revenue increased 31.9% year-over-year, while the company’s net active subscriber base grew 40.6% to nearly 1.3 million subscribers. Reich said active subscriptions have now posted nine consecutive quarters of year-over-year growth.
Deferred revenue, which Tsai said primarily reflects subscription-related revenue, rose 26% year-over-year to $6.2 million. Tsai said this metric is important because it reflects future revenue that “essentially carries a 100% gross margin.”
The company also reported that Zedge Premium gross transaction value increased 16.6% from the year-ago quarter. Average revenue per monthly active user rose 21.2% to $0.119, which Reich described as a record quarterly level.
Advertising revenue declined 4.0% in the quarter. Reich said the drop was entirely attributable to Emojipedia, which the company is managing for profitability and cash generation after structural changes Google made to its search results page. Within Zedge Marketplace, advertising revenue was essentially flat year-over-year, despite the prior-year period benefiting from a one-time integration bonus from an ad platform partner.
Reich also pointed to growth on iOS, saying iOS revenue increased 35% year-over-year and represented 6.5% of total Zedge Marketplace revenue, up from 5.1% a year earlier.
Profitability and Cash Flow Improve
Zedge reported GAAP operating income of $1.1 million, compared with $0.2 million in the prior-year period. GAAP net income was $0.9 million, or $0.07 per diluted share, compared with $0.2 million, or $0.01 per diluted share, a year earlier.
On a non-GAAP basis, net income was $1.0 million, or $0.07 per share, compared with $0.9 million, or $0.06 per share, in the prior-year quarter. Adjusted EBITDA was $1.3 million, up 1% from last year.
Free cash flow increased 55% year-over-year to $1.2 million for the quarter and was up 10% year-to-date. Zedge ended the quarter with $19.7 million in cash and cash equivalents and no debt.
Reich said the company increased its quarterly dividend by 25% to $0.02 per share during the quarter. Tsai added that after quarter-end, Zedge’s board added $2 million to its existing $5 million share repurchase authorization, bringing total available capacity to approximately $2.2 million. The company has repurchased about 1.5 million shares for roughly $4.8 million under the existing authorization.
DataSeeds.AI Delivers First Six-Figure Order
Management described the quarter as a milestone for DataSeeds.AI, the company’s business-to-business offering that provides multimodal datasets, including audio, video and images, to frontier model developers.
Reich said Zedge fulfilled its first six-figure order for DataSeeds.AI from an existing customer, described as a leading technology company. He said completing the project on specification and within tight time frames validated the company’s ability to handle larger and more complex orders.
During the question-and-answer session, Maxim Group analyst Derek Greenberg asked about DataSeeds.AI’s pipeline and the company’s approach to building the business. Reich said Zedge is focusing on “managed crowd content creation,” using creator communities from Zedge Marketplace and GuruShots to create content based on customer briefs.
Reich said the company has been working more heavily with aggregators rather than marketplaces, because aggregators appear to provide higher-quality leads. He also said Zedge has emphasized outbound sales efforts, including conference participation, and highlighted his attendance at the CVPR computer vision conference in Denver.
Asked about the frequency or size of future DataSeeds.AI deals, Reich said the company is not yet able to project revenue with certainty. He said revenue will remain lumpy as the offering matures, but added that Zedge has seen more prospects across multiple data types.
Reich said the company is focusing less on off-the-shelf content because model developers need new datasets for pre- and post-training. He said Zedge’s ability to create data at scale with compliance and ethical sourcing is the direction the company is pursuing.
Tapedeck Expands Catalog With New Agreements
Reich also discussed Tapedeck, Zedge’s marketplace for independent music, where artists earn royalties directly from fans. He said the company has been focused on expanding the music catalog and recently signed Sync Music, Tuff Gong Distribution and the BWL Entertainment catalog.
Reich said Sync’s roster includes artists such as Jason Derulo and T.I., while Tuff Gong was originally established by Bob and Rita Marley. BWL manages the estate of Betty Wright.
In response to Greenberg’s question about Tapedeck’s priorities, Reich said most of the company’s effort has been directed toward building the catalog and evaluating technology enhancements that could make the platform more attractive to independent artists.
Reich said Tapedeck is designed to support artists by paying for every listen, with a stated floor of $0.01 per listen. He contrasted that with other music platforms, saying many artists may not get paid until surpassing certain listen thresholds and may face less transparency around payments.
AI Product Pipeline Advances, MAU Efforts Continue
Zedge said its product innovation team released two additional alpha products during the quarter, bringing the total number of live alpha products to four. Reich said the company remains on track to launch six alpha products during fiscal 2026.
Reich said the company uses a framework that tests demand before writing code, builds quickly, measures products against defined performance indicators and either invests in promising products or shuts down those that do not meet targets.
During the Q&A session, Reich said SimCat, one of the previously announced products, did not meet the company’s thresholds for revenue, engagement and other key performance indicators. Of the other three apps, Reich said one is “trending in the right direction,” while the other two are too early to assess.
Greenberg also asked about Zedge’s efforts to stabilize and improve monthly active users. Reich said the company continues to invest in marketing, product features and data science. He said the quality of the user base is better than a year ago, with the company particularly focused on developed markets where advertising rates and disposable income are more favorable.
Looking ahead, Reich said Zedge’s priorities for the remainder of fiscal 2026 are to strengthen monetization in Zedge Marketplace, build DataSeeds.AI deliberately, execute on selected opportunities and advance the company’s innovation pipeline in a disciplined manner.
About Zedge (NYSEAMERICAN:ZDGE)
Zedge, Inc (NYSE American: ZDGE) is a digital media and technology company that operates a mobile personalization platform. Through its flagship Zedge app and website, the company provides consumers with a wide range of downloadable digital content, including wallpapers, ringtones, notification sounds, app icons and lock screens. The platform accommodates both free and premium content, enabling users to customize their smartphones and tablets according to personal taste.
The company’s platform features content created by independent designers and established media brands, and it supports multiple languages and regional preferences.
