8-K
Zedge, Inc. (ZDGE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934
Date of Report (Date of earliest event reported):March 15, 2023
Zedge, Inc.
(Exact name of registrant as specified in itscharter)
| Delaware | 1-37782 | 26-3199071 |
|---|---|---|
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission File Number) | (IRS Employer<br><br> <br>Identification No.) |
| 1178 Broadway**, Ste. 1450 (3^rd^ Floor)**<br><br> <br>New York, NY | 10001 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code: (330) 577-3424
Not Applicable
(Former name or former address, if changed sincelast report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant<br>to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant<br>to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications<br>pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c)<br>under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on<br><br> <br>which registered |
|---|---|---|
| Class B common stock, par value $0.01 per share | ZDGE | NYSE American |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results ofOperations and Financial Condition
On March 15, 2023, Zedge, Inc. (the “Registrant”) issued a press release announcing its results of operations for its fiscal quarter ended January 31, 2023. A copy of the press release issued by the Registrant concerning the foregoing results is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
The Registrant is furnishing the information contained in this Report, including Exhibit 99.1, pursuant to Item 2.02 of Form 8-K promulgated by the Securities and Exchange Commission (the “SEC”). This information shall not be deemed to be “filed” with the SEC or incorporated by reference into any other filing with the SEC unless otherwise expressly stated in such filing. In addition, this Report and the press release contain statements intended as “forward-looking statements” that are subject to the cautionary statements about forward-looking statements set forth in the press release.
Item 9.01Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Document |
|---|---|
| 99.1 | Earnings Release, dated March 15, 2023, reporting the results of operations for Zedge, Inc.’s fiscal quarter ended January 31, 2023. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
1
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ZEDGE, INC. | |
|---|---|
| By: | /s/ Jonathan Reich |
| Name: | Jonathan Reich |
| Title: | Chief Executive Officer |
Dated: March 15, 2023
2
EXHIBIT INDEX
| Exhibit No. | Document |
|---|---|
| 99.1 | Earnings Release, dated March 15, 2023, reporting the results of operations for Zedge, Inc.’s fiscal quarter ended January 31, 2023. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
3
Exhibit 99.1
Zedge Announces Second Quarter Fiscal 2023 Results
New York, NY – March 15, 2023: Zedge, Inc. (NYSE AMERICAN: ZDGE), a leader in building marketplaces and games around digital content that enable self-expression, today announced results for its second quarter fiscal year 2023, ended January 31, 2023.
“Our second quarter was a mixed one as we navigated geopolitical, economic and industry-specific challenges, and we were not immune to the forces impacting gaming and other advertising-based business models,” said Jonathan Reich, chief executive officer. “Despite this, we saw nominal revenue growth, remained roughly break-even and generated positive Adjusted EBITDA, while seeing growth from Emojipedia and Zedge Premium.
“Due to the current environment, we are implementing a set of cost cutting initiatives designed to yield $2.5 - $3.0 million in annualized savings. We expect that this decision will allow us to remain at roughly break-even while positioning the business for profitable growth as conditions improve.”
Second Quarter Highlights
Financial (fiscal 2023 compared to fiscal 2022)
| ● | Revenue increased 1.0% to $7.0 million; | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ● | Net income and earnings per share of $1.6<br>million and $0.11, respectively; | |||||||||||||||||
| --- | --- | |||||||||||||||||
| ● | Adjusted EBITDA of $1.4 million; | |||||||||||||||||
| --- | --- | |||||||||||||||||
| ● | Zedge Premium Gross Transaction Value (GTV)^2^increased 1.0% to $0.4 million. | |||||||||||||||||
| --- | --- | |||||||||||||||||
| Second Quarter Select Financial Metrics: FY23 versus FY22* | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (in $M except for EPS) | Q2 ’23 | Q2 ’22 | Change | FY23 YTD | FY22 YTD | Change | ||||||||||||
| Total Revenue | $ | 7.0 | $ | 6.9 | 1.0 | % | $ | 13.9 | $ | 12.9 | 7.3 | % | ||||||
| Advertising Revenue | $ | 4.6 | $ | 5.7 | -19.0 | % | $ | 9.1 | $ | 10.6 | -13.9 | % | ||||||
| Digital goods and services | $ | 1.2 | $ | 0.0 | nm | $ | 2.6 | $ | 0.0 | nm | ||||||||
| Subscription Revenue | $ | 0.9 | $ | 1.0 | -8.3 | % | $ | 1.8 | $ | 1.9 | -7.7 | % | ||||||
| Other Revenue | $ | 0.2 | $ | 0.2 | -5.3 | % | $ | 0.4 | $ | 0.4 | -3.0 | % | ||||||
| Operating Income | $ | 1.5 | $ | 3.1 | -53.0 | % | $ | 1.3 | $ | 5.7 | -77.9 | % | ||||||
| Operating Margin | 20.9 | % | 44.9 | % | 9.1 | % | 44.0 | % | ||||||||||
| Net Income | $ | 1.6 | $ | 2.3 | -30.9 | % | $ | 1.4 | $ | 4.4 | -67.2 | % | ||||||
| Diluted Earnings Per Share | $ | 0.11 | $ | 0.16 | -31.3 | % | $ | 0.10 | $ | 0.30 | -66.7 | % | ||||||
| Adjusted EBITDA | $ | 1.4 | $ | 3.9 | -63.1 | % | $ | 2.4 | $ | 7.3 | -67.3 | % | ||||||
| Cash Flow from Operations | $ | 0.0 | $ | 3.0 | -98.7 | % | $ | 1.1 | $ | 5.7 | -80.6 | % |
nm = not measurable/meaningful
| * | numbers may not add due to rounding | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Select Second Quarter Zedge App Metrics: FY23 versus FY22* | |||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||||||||
| (in MM except for ARPMAU and where noted) | Q2 ’23 | Q2 ’22 | Change | ||||||||||||||||||||||||
| Total Installs - Cumulative | 596.0 | 541.0 | 10.2 | % | |||||||||||||||||||||||
| MAU | 32.2 | 36.3 | -11.3 | % | |||||||||||||||||||||||
| Well-developed Markets | 7.4 | 8.5 | -12.9 | % | |||||||||||||||||||||||
| Emerging Markets | 24.8 | 27.8 | -10.8 | % | |||||||||||||||||||||||
| Active Subscriptions (in 000s) | 654 | 762 | -14.2 | % | |||||||||||||||||||||||
| ARPMAU | $ | 0.052 | $ | 0.060 | -13.0 | % | |||||||||||||||||||||
| Zedge Premium - Gross Transaction Value (GTV) | $ | 0.44 | $ | 0.43 | 1.0 | % | |||||||||||||||||||||
| * | numbers may not add due to rounding | ||||||||||||||||||||||||||
| --- | --- | ||||||||||||||||||||||||||
| ^1^ | Throughout this release, Adjusted EBITDA is a Non-GAAP financialmeasure intended to provide useful information that supplements Zedge’s results in accordance with GAAP. Please refer to the Reconciliationof Non-GAAP Financial Measure at the end of this release for an explanation of Zedge’s formulation of Adjusted EBITDA and reconciliationsto the most directly comparable GAAP measure. | ||||||||||||||||||||||||||
| --- | --- | ||||||||||||||||||||||||||
| ^2^ | We use the following business metrics in this release because we believe they are useful in evaluating Zedge as an investment. | ||||||||||||||||||||||||||
| --- | --- | ||||||||||||||||||||||||||
| ● | Monthly active users, or MAU, capturesthe number of unique users that used our Zedge App during the previous 30-days of the relevant period, is useful for evaluating consumerengagement with our App which correlates to advertising revenue as more users drive more ad impressions for sale. It also allows readersand potential advertisers to evaluate the size of our user base. | ||||||||||||||||||||||||||
| --- | --- | ||||||||||||||||||||||||||
| ● | ZedgePremium Gross Transaction Value, or GTV, is the total dollar amount of transactions conducted through the Zedge Premium Marketplace.As Zedge Premium is an internal focus for growth, we believe that this metric will help investors evaluate the progress we are makingin growing this part of our business. | ||||||||||||||||||||||||||
| --- | --- | ||||||||||||||||||||||||||
| ● | Average Revenue Per Monthly Active User forour Zedge App, or ARPMAU, is a useful statistic in evaluating how well we are monetizing our user base. | ||||||||||||||||||||||||||
| --- | --- | ||||||||||||||||||||||||||
| ● | An Active Subscription is a subscriptionthat has commenced and not been canceled, including paused subscriptions, and subscriptions in free trials, grace periods, or accounthold. | ||||||||||||||||||||||||||
| --- | --- | ||||||||||||||||||||||||||
| ● | Total Installs - Cumulative is a measureof the cumulative number of times our Zedge App has been downloaded since inception. | ||||||||||||||||||||||||||
| --- | --- | ||||||||||||||||||||||||||
| Trended Financial Information* | |||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (in $M except for<br> EPS, ARPMAU, Paid Subscriptions) | Q122 | Q222 | Q322 | Q422 | Q123 | Q223 | FY 2021 | FY 2022 | FYTD<br>2023 | ||||||||||||||||||
| Total Revenue | $ | 6.0 | $ | 6.9 | $ | 6.2 | $ | 7.4 | $ | 6.9 | $ | 7.0 | $ | 19.6 | $ | 26.5 | $ | 13.9 | |||||||||
| Advertising<br> Revenue | $ | 4.9 | $ | 5.7 | $ | 4.8 | $ | 4.9 | $ | 4.5 | $ | 4.6 | $ | 15.7 | $ | 20.3 | $ | 9.1 | |||||||||
| Gaming Revenue | $ | 0.0 | $ | 0.0 | $ | 0.3 | $ | 1.4 | $ | 1.3 | $ | 1.2 | $ | 0.0 | $ | 1.7 | $ | 2.6 | |||||||||
| Subscription<br> Revenue | $ | 1.0 | $ | 1.0 | $ | 0.9 | $ | 0.9 | $ | 0.9 | $ | 0.9 | $ | 3.2 | $ | 3.7 | $ | 1.8 | |||||||||
| Other<br> Revenue | $ | 0.2 | $ | 0.2 | $ | 0.2 | $ | 0.2 | $ | 0.2 | $ | 0.2 | $ | 0.5 | $ | 0.8 | $ | 0.4 | |||||||||
| Operating<br> (Loss) Income | $ | 2.6 | $ | 3.1 | $ | 1.3 | $ | 4.8 | $ | (0.2 | ) | $ | 1.5 | $ | 7.8 | $ | 11.8 | $ | 1.3 | ||||||||
| Net (Loss) Income | $ | 2.1 | $ | 2.3 | $ | 0.8 | $ | 4.5 | $ | (0.2 | ) | $ | 1.6 | $ | 8.2 | $ | 9.7 | $ | 1.4 | ||||||||
| Diluted<br> (Loss) Earnings Per Share | $ | 0.14 | $ | 0.16 | $ | 0.05 | $ | 0.31 | $ | (0.01 | ) | $ | 0.11 | $ | 0.59 | $ | 0.65 | $ | 0.10 | ||||||||
| Adjusted EBITDA | $ | 3.3 | $ | 4.0 | $ | 2.9 | $ | 2.2 | $ | 1.0 | $ | 1.4 | $ | 9.9 | $ | 12.4 | $ | 2.4 | |||||||||
| Adjusted<br> EBITDA Margin | 54.7 | % | 57.6 | % | 46.0 | % | 30.0 | % | 13.8 | % | 20.5 | % | 50.7 | % | 46.6 | % | 17.2 | % | |||||||||
| Cash<br> Flow from Operations | $ | 2.7 | $ | 3.0 | $ | 5.6 | $ | 0.2 | $ | 1.1 | $ | 0.0 | $ | 10.1 | $ | 11.5 | $ | 1.1 | |||||||||
| MAU | 34.2 | 36.3 | 32.1 | 32.0 | 31.9 | 32.2 | nm | nm | nm | ||||||||||||||||||
| Well-developed<br> Markets | 8.4 | 8.5 | 7.5 | 7.3 | 7.1 | 7.4 | nm | nm | nm | ||||||||||||||||||
| Emerging<br> Markets | 25.8 | 27.8 | 24.6 | 24.7 | 24.8 | 24.8 | nm | nm | nm | ||||||||||||||||||
| Active Subscriptions<br> (in 000s) | 763 | 762 | 713 | 692 | 674 | 654 | 752 | 713 | 654 | ||||||||||||||||||
| ARPMAU | $ | 0.053 | $ | 0.060 | $ | 0.052 | $ | 0.058 | $ | 0.054 | $ | 0.052 | nm | nm | nm | ||||||||||||
| Zedge Premium – GTV | $ | 0.33 | $ | 0.43 | $ | 0.41 | $ | 0.34 | $ | 0.31 | $ | 0.44 | $ | 0.95 | $ | 1.51 | $ | 0.75 |
nm = not measurable/meaningful
| * | numbers may not add due to rounding |
|---|
2
Fiscal 2023 Commentary
“In light of macroeconomic factors including inflation, recessionary fears, the ongoing war in Ukraine, supply chain disruptions resulting in a decline in new phone sales, the easing of Covid-19 restrictions and the resulting uptick in workers returning to the office and Apple’s App Transparency Tracking (ATT) framework making paid iOS user acquisition less efficient and more expensive, we are not anticipating a return to growth in the short-term.
“In addition to implementing the $2.5 - $3.0 million in cost-savings measures, we are focusing our efforts on initiatives that we believe can position us for sustainable growth as the market starts to improve. For the Zedge marketplace, our top priorities are iterating with pAInt, our generative AI wallpaper maker, in order to improve take rates and engagement, overhauling customer onboarding and upgrading Zedge+, our subscription offering. We continue scaling paid Android user acquisition as the ROI justifies the investment.
“We are also advancing GuruShots with the launch of the Battles feature, which provides a casual gaming experience that enables newbies to begin competing in short-duration photo competitions that are limited in size and built on a coin-based economy. Additionally, as we navigate the challenges introduced by Apple’s ATT framework, which has made it more expensive to acquire high-value iOS users, we are testing alternative acquisition channels in order to help drive new ROI-positive players to the game.
“As you know, generative AI art is exploding, and GuruShots recently conducted a soft launch for a standalone casual game focused on competitive AI art generation challenges that leverage the investment we have made in developing Battles. Although we are excited by the potential of where this game can take us, it will likely take several quarters to iterate, tune and scale.
“Finally, we plan to continue building on the momentum we are experiencing with Emojipedia and expect to release new features during the second half of our fiscal year.
“In all, we are focused on improving the things that we control and expect to come out of the current downturn in a stronger position than we have been in as a Company, with multiple avenues to exploit in order to deliver sustainable long-term profits and growth,” concluded Reich.
3
Earnings Announcement and Supplemental Information
Zedge’s earnings release will be filed on Form 8-K and posted on the Zedge investor relations website (investor.zedge.net) at approximately 4:10 p.m. Eastern on March 15, 2023. Management will host an earnings conference call beginning at 4:30 p.m. Eastern. Management’s presentation of the results, outlook and strategy will be followed by Q&A with investors.
Live Call Information:
Toll Free: 888-506-0062
International: 973-528-0011
Participant Access Code: 748705
Webcast: https://www.webcaster4.com/Webcast/Page/2205/47829
Replay:
Toll Free: 877-481-4010
International: 919-882-2331
Replay Passcode: 47829
About Zedge
Zedge builds marketplaces and games around digital content that people use to express themselves. We monetize our user base through advertising, subscriptions, and a virtual token-based economy. Our leading products are the GuruShots photography game and Zedge’s freemium digital content marketplace, which today offers mobile phone wallpapers, video wallpapers, ringtones, and notification sounds. The synergy between the game and the marketplace unlocks additional engagement and enables our community to earn money from their artwork. We also own Emojipedia, a website that is the leading source of information about emojis. In May 2022, we served more than 40 million users. For more information, visit https://www.investor.zedge.net/
Forward-Looking Statements
All statements above that are not purely about historicalfacts, including, but not limited to, those in which we use the words “believe,” “anticipate,” “expect,”“plan,” “intend,” “estimate,” “target” and similar expressions, are forward-looking statementswithin the meaning of the Private Securities Litigation Reform Act of 1995. While these forward-looking statements represent our currentjudgment of what may happen in the future, actual results may differ materially from the results expressed or implied by these statementsdue to numerous important factors. Our filings with the SEC provide detailed information on such statements and risks and should be consultedalong with this release. To the extent permitted under applicable law, we assume no obligation to update any forward-looking statements.
Contact:
Brian Siegel IRC, MBA
Senior Managing Director
Hayden IR
(346) 396-8696
ir@zedge.net
4
CONDENSED CONSOLIDATED BALANCESHEETS
(in thousands, except parvalue data)
| July 31, | |||||
|---|---|---|---|---|---|
| 2022 | |||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | 17,459 | $ | 17,085 | ||
| Trade accounts receivable | 2,788 | 2,411 | |||
| Prepaid expenses and other receivables | 1,334 | 396 | |||
| Total current assets | 21,581 | 19,892 | |||
| Property and equipment, net | 1,933 | 1,660 | |||
| Intangible assets, net | 19,866 | 21,025 | |||
| Goodwill | 10,716 | 10,788 | |||
| Deferred tax assets, net | 828 | 861 | |||
| Other assets | 326 | 400 | |||
| Total assets | 55,250 | $ | 54,626 | ||
| Liabilities and stockholders’ equity | |||||
| Current liabilities: | |||||
| Trade accounts payable | 1,381 | $ | 1,180 | ||
| Deferred acquisition payment payable | - | 962 | |||
| Contingent consideration-current portion | - | 215 | |||
| Accrued expenses and other current liabilities | 3,174 | 2,898 | |||
| Deferred revenues | 2,805 | 3,402 | |||
| Total current liabilities | 7,360 | 8,657 | |||
| Term Loan, net of deferred financing costs | 1,983 | - | |||
| Contingent consideration-long term portion | - | 1,728 | |||
| Other liabilities | - | 53 | |||
| Total liabilities | 9,343 | 10,438 | |||
| Commitments and contingencies (Note 10) | |||||
| 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 January 31, 2023 and July 31, 2022 | 5 | 5 | |||
| Class B common stock, .01 par value; authorized shares—40,000; 14,674 shares issued and 14,152 shares outstanding at January 31, 2023, and 13,951 shares issued and 13,877 outstanding at July 31, 2022 | 147 | 139 | |||
| Additional paid-in capital | 44,979 | 43,609 | |||
| Accumulated other comprehensive loss | (1,498 | ) | (1,391 | ) | |
| Retained earnings | 3,597 | 2,160 | |||
| Treasury stock, 522 shares at January 31, 2023 and 74 shares at July 31, 2022, at cost | (1,323 | ) | (334 | ) | |
| Total stockholders’ equity | 45,907 | 44,188 | |||
| Total liabilities and stockholders’ equity | 55,250 | $ | 54,626 |
All values are in US Dollars.
5
ZEDGE,INC.
CONDENSED CONSOLIDATED STATEMENTSOF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(in thousands, except pershare data)
| Three Months Ended | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| January 31 | January 31 | |||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Revenues, net | $ | 6,983 | $ | 6,915 | $ | 13,883 | 12,943 | |||||
| Costs and expenses: | ||||||||||||
| Direct cost of revenues (excluding amortization of capitalized software and technology development costs which is included below) | 632 | 342 | 1,264 | 652 | ||||||||
| Selling, general and administrative | 5,871 | 3,106 | 11,697 | 5,838 | ||||||||
| Depreciation and amortization | 815 | 360 | 1,608 | 758 | ||||||||
| Change in fair value of contingent consideration | (1,793 | ) | - | (1,943 | ) | - | ||||||
| Income from operations | 1,458 | 3,107 | 1,257 | 5,695 | ||||||||
| Interest and other income, net | 77 | 14 | 112 | 27 | ||||||||
| Net gain (loss) resulting from foreign exchange transactions | 160 | (85 | ) | 84 | (95 | ) | ||||||
| Income before income taxes | 1,695 | 3,036 | 1,453 | 5,627 | ||||||||
| Provision for income taxes | 89 | 711 | 16 | 1,247 | ||||||||
| Net income | $ | 1,606 | $ | 2,325 | $ | 1,437 | $ | 4,380 | ||||
| Other comprehensive income (loss): | ||||||||||||
| Changes in foreign currency translation adjustment | 152 | (222 | ) | (107 | ) | (80 | ) | |||||
| Total other comprehensive income (loss) | 152 | (222 | ) | (107 | ) | (80 | ) | |||||
| Total comprehensive income | $ | 1,758 | $ | 2,103 | $ | 1,330 | $ | 4,300 | ||||
| Income per share attributable to Zedge, Inc. common stockholders: | ||||||||||||
| Basic | $ | 0.11 | $ | 0.16 | $ | 0.10 | $ | 0.31 | ||||
| Diluted | $ | 0.11 | $ | 0.16 | $ | 0.10 | $ | 0.29 | ||||
| Weighted-average number of shares used in calculation of (loss) income per share: | ||||||||||||
| Basic | 14,087 | 14,297 | 14,208 | 14,289 | ||||||||
| Diluted | 14,259 | 14,971 | 14,440 | 15,007 |
6
ZEDGE, INC.
CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS
(in thousands)
| Six Months Ended | ||||||
|---|---|---|---|---|---|---|
| January 31, | ||||||
| 2023 | 2022 | |||||
| Operating activities | ||||||
| Net income | $ | 1,437 | $ | 4,380 | ||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||
| Depreciation | 30 | 23 | ||||
| Amortization of intangible assets | 1,158 | 224 | ||||
| Amortization of capitalized software and technology development costs | 420 | 511 | ||||
| Amortization of deferred financing costs | 1 | - | ||||
| Change in fair value of contingent consideration | (1,943 | ) | - | |||
| Stock-based compensation | 1,378 | 808 | ||||
| Deferred income taxes | 33 | (50 | ) | |||
| Change in assets and liabilities: | ||||||
| Trade accounts receivable | (377 | ) | (741 | ) | ||
| Prepaid expenses and other current assets | (938 | ) | (244 | ) | ||
| Other assets | 22 | 1 | ||||
| Trade accounts payable and accrued expenses | 497 | 806 | ||||
| Deferred revenue | (597 | ) | (39 | ) | ||
| Net cash provided by operating activities | 1,121 | 5,679 | ||||
| Investing activities | ||||||
| Final payments for asset acquisitions | (962 | ) | - | |||
| Capitalized software and technology development costs | (668 | ) | (305 | ) | ||
| Purchase of property and equipment | (53 | ) | (18 | ) | ||
| Net cash used in investing activities | (1,683 | ) | (323 | ) | ||
| Financing activities | ||||||
| Proceeds from term loan payable | 2,000 | - | ||||
| Payment of deferred financing costs | (18 | ) | - | |||
| Proceeds from exercise of stock options | - | 7 | ||||
| Purchase of treasury stock in connection with share buyback program and restricted stock vesting | (989 | ) | (232 | ) | ||
| Net cash provided by (used in) financing activities | 993 | (225 | ) | |||
| Effect of exchange rate changes on cash and cash equivalents | (57 | ) | (23 | ) | ||
| Net increase in cash and cash equivalents | 374 | 5,108 | ||||
| Cash and cash equivalents at beginning of period | 17,085 | 24,908 | ||||
| Cash and cash equivalents at end of period | $ | 17,459 | $ | 30,016 | ||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||
| Cash payments made for income taxes | $ | 711 | $ | 309 | ||
| Cash payments made for interest expenses | $ | 31 | $ | - | ||
| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||
| Acquistion of Emojipedia through release of escrow funds of $4,776, plus additional amounts due to seller of $1,923 and legal fees of $12 | $ | - | $ | 6,711 | ||
| Accounts receivable from certain Emojipedia websites collected by Seller | $ | - | $ | 45 |
7
Use of Adjusted EBITDA as a Non-GAAP Measure
Adjusted EBITDA is defined as earnings (loss) before interest, taxes, depreciation and amortization, stock compensation expense, transaction-related expenses and other non-recurring expenses. This metric represents a measure that we believe is customarily used by investors and analysts to evaluate the financial performance of companies in addition to the GAAP measures that we present. Our management also believes that this measure is useful in evaluating our core operating results. However, Adjusted EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America and should not be considered an alternative to net income or operating income as an indicator of our operating performance or to net cash provided by operating activities as a measure of our liquidity.
| Reconciliation of<br> Adjusted EBITDA to Net (Loss) Income | Q122 | Q222 | Q322 | Q422 | Q123 | Q223 | FY<br> 2021 | FY<br> 2022 | YTD <br><br>FY<br>2023 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net<br> (Loss) Income | $ | 2.1 | $ | 2.3 | $ | 0.8 | $ | 4.5 | $ | (0.2 | ) | $ | 1.6 | $ | 8.2 | $ | 9.7 | $ | 1.4 | ||||||||
| Excluding: | |||||||||||||||||||||||||||
| Interest and other income<br> (expense), net | $ | (0.0 | ) | $ | (0.0 | ) | $ | (0.0 | ) | $ | (0.0 | ) | $ | (0.0 | ) | $ | (0.1 | ) | $ | (0.0 | ) | $ | (0.0 | ) | $ | (0.1 | ) |
| Provision for (benefit from)<br> income taxes | $ | 0.5 | $ | 0.7 | $ | 0.4 | $ | 0.2 | $ | (0.1 | ) | $ | 0.1 | $ | (0.2 | ) | $ | 1.9 | $ | 0.0 | |||||||
| Depreciation<br> and amortization | $ | 0.4 | $ | 0.4 | $ | 0.4 | $ | 0.8 | $ | 0.8 | $ | 0.8 | $ | 1.3 | $ | 2.0 | $ | 1.6 | |||||||||
| EBITDA | $ | 3.0 | $ | 3.4 | $ | 1.6 | $ | 5.5 | $ | 0.5 | $ | 2.4 | $ | 9.3 | $ | 13.5 | $ | 2.9 | |||||||||
| Change in fair value of contingent<br> consideration | $ | 0.0 | $ | 0.0 | $ | 0.0 | $ | (4.0 | ) | $ | (0.2 | ) | $ | (1.8 | ) | $ | 0.0 | $ | (4.0 | ) | $ | (1.9 | ) | ||||
| Stock-based compensation | $ | 0.3 | $ | 0.5 | $ | 0.5 | $ | 0.6 | $ | 0.6 | $ | 0.8 | $ | 0.7 | $ | 1.9 | $ | 1.4 | |||||||||
| Transaction<br> costs related to business combination | $ | 0.0 | $ | 0.1 | $ | 0.7 | $ | 0.0 | $ | 0.0 | $ | 0.0 | $ | 0.0 | $ | 0.9 | $ | 0.0 | |||||||||
| Adjusted EBITDA | $ | 3.3 | $ | 4.0 | $ | 2.9 | $ | 2.2 | $ | 1.0 | $ | 1.4 | $ | 9.9 | $ | 12.4 | $ | 2.4 | |||||||||
| * | numbers may not add due to rounding | ||||||||||||||||||||||||||
| --- | --- |
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