We aim to be cash-flow positive by end of FY20: Zedge CFO Jonathan Reich

Zedge Inc (NYSE: ZDGE) probably needs no introduction. The firm’s mobile phone personalization app has been quite popular since the Symbian era. Zedge, which features regularly among the lists that collate the most popular apps, had around 34 million monthly active users (MAU) at the end of fiscal 2019.

With changing user preferences and the overlap of services in the industry, the New York-based firm has been on a mission to revamp its operations and services to better meet customer needs. In an exclusive interview with AlphaStreet, CFO and COO of Zedge, Jonathan Reich spoke about the company’s long-term strategy, profitability and MAU trends.

On Shortz

Zedge launched Shortz, an app that offers serialized short-form fiction stories, in December. While the CFO said it’s too early to share any meaningful results, he stated that the focus of the firm at the moment is to make sure that the app works fine.   

The company is hoping to closely observe the app in the first calendar quarter of this year, following which, it would strategize on the product development side, as well as marketing and revenue optimization. Geographically, Shortz will be targeted for the US, Canada, the UK, and Australia markets.  

On restructuring activities and cash position

“Our goal is to be cash-flow positive in the fiscal year 2020, which ends in July,” Reich stressed. The executive noted that the goal of being cash flow positive in fiscal 2020 excludes revenue contribution from Shortz.  “We have opted to be conservative in terms of how we reach that goal,” he said.

The company has been undergoing restructuring activities since earlier this year. Reich said, “One priority is on the revenue side and to that end, we have been making some progress. As of the end of November, we had 225,000 paying subscribers for the flagship Zedge wallpapers and ringtones app. And that’s from zero at the beginning of 2019. This has helped generate around a million dollars in revenue.”

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On new initiatives and long-term growth strategy

The executive alluded to making continued investments to its flagship app, stating strong demand on that side. Meanwhile, he sees immense potential in entertainment apps.  Shortz, which has a subscription-based model, marked an entry into this sphere.

It may be noted that this new app helps Zedge expand its influence among iOS users, as the flagship app, which deals with personalization services, is heavily weighted towards Android users.

On MAU trend

Zedge, which has been consistently reporting growth in MAU year-over-year, posted a decline of 2.8% to 33.8 million at the end of fiscal 2019, from 34.8 million in fiscal 2018. The CFO attributed this decline to a shift in MAU base from developed markets, which accounted for 20-25% of total users, to emerging markets.

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In the first quarter, the company’s MAU was once again hurt by a temporary suspension from the PlayStore, which resulted from a buggy code as part of the integration with an advertising partner. He said more details on how MAU has trended since then would be revealed when the company reports Q2 results.

On finding a permanent CEO   

The company’s co-founder Tom Arnoy had stepped down as the CEO of the firm in September. Reich said interim CEO Elliot Gibber is currently taking time to understand the company in depth. Once that is done, he will commence the work with the board on finding a new CEO.

(Written by Arjun Vijay)

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