Zedge (ZDGE) Q2 2025 earnings summary

Executive summary

• Revenue declined 10.2% year-over-year to $7 million, mainly due to industry-wide ad headwinds and TikTok's temporary removal from app stores, which impacted CPMs and user acquisition; GuruShots continued to weigh on growth and profitability.

• Subscription revenue grew 13.3% year-over-year, with a 22% increase in active subscribers to 791,000 and strong momentum in Zedge Premium, whose GTV rose 26.5%.

• Corporate restructuring included a 22% global workforce reduction, closure of the Norway office, and consolidation of operations in Lithuania and Israel, expected to save $4 million annually and improve profitability and free cash flow.

• GenAI initiatives, such as Paint 2.0 and upcoming AI audio features, are driving user engagement and expanding monetization opportunities.

• Cash and cash equivalents stood at over $20 million at quarter end, with working capital of $16.8 million.

Financial highlights

• Total revenue for Q2 was $7 million, down 10.2% year-over-year; net loss narrowed to $1.7 million from $9.2 million a year ago.

• Subscription revenue increased 13.3% year-over-year; active subscribers up 22% year-over-year and sequentially for the seventh straight quarter.

• Zedge Premium GTV reached $700,000, up 26.5% year-over-year.

• Adjusted EBITDA was negative $0.1 million, down from positive $1.5 million last year; non-GAAP net loss was $0.2 million compared to $0.5 million net income last year.

• Cash flow from operations was $0.7 million; free cash flow was $0.6 million.

Outlook and guidance

• Restructuring is expected to yield $4 million in annualized cost savings, with $1 million per quarter starting in Q3; cost savings will be fully realized in Q3, offsetting restructuring charges.

• Management expects restructuring benefits and TikTok's ad market rebound to improve results in the second half of fiscal 2025.

• New ad units and AI-driven features are anticipated to drive engagement and growth into fiscal 2026.

• Additional restructuring and impairment charges of approximately $1.1 million expected in Q3 and Q4.

• Cash and cash equivalents, plus cash flow from operations, are expected to meet anticipated needs through March 2026.