ZDGE - AMEX

Good day, and welcome to

Thank you, operator. During today's call, Jonathan Reich,

Thank you, Brian, and good afternoon, everyone. It has only been about 6 weeks since our last call, but we have continued to demonstrably execute against our stated priorities with discipline, focus and a strong sense of momentum. The themes we outlined last quarter remain the same ones guiding us today and form the strategic foundation for fiscal 2026. The early results of this quarter reinforce that our approach is sound and that our operating model is gaining strength. Of course, we will modify our course if things change materially. We delivered a solid start to fiscal 2026 with a return to mid-single-digit revenue growth and continued progress across our strategic priorities. What stands out to me this quarter is the quality of that growth for the

Thank you, Jonathan. Total revenue for the first quarter was $7.6 million, up 5.8% from last year. There were a couple of items to note here. First,

[Operator Instructions] Our first question is coming from Derek Greenberg with Maxim Group.

Congrats on the quarter. My first question is just on the DataSeeds offering. I was wondering if you could help us understand how this gets recognized as revenue in terms of what line item that shows up in? And then just the structure of -- if you receive an order, is that recognized within that quarter or is it recognized over time? Or just how to think about these things?

Yi, do you want to handle that.

Yes. So DataSeeds, when we receive the order, we start production, we only recognize the revenue when the products are delivered and accepted. So it could be across quarter. For the time being, because the revenue is still insignificant, we just group it under digital goods and services, the same line as GuruShots legacy business. Did that answer your question, Derek?

Yes. That's helpful. And then in terms of just visibility or conversion, is there a general framework to think about how long it takes you to convert on some of these opportunities in the pipeline or what the typical sales process might look like? You had mentioned there's a ramp where the initial order was smaller and then it can scale from there. And I was wondering if you could just add any more details that might be helpful.

Derek, it's Jonathan. Thank you. At this point, not a lot more details other than to say we've got a robust pipeline. And from the point that we actually receive a lead, there are a lot of operational things that have to happen aside from the production of the content itself, including contract negotiation and the like. And we are investing a lot of time in terms of ensuring that from an operational perspective, we're being efficient. I think that we'll need another couple of quarters until we have the clarity as to what happens from the point that we receive an order until it actually is delivered and being able to qualify based upon what type of content, the magnitude of these orders and various time frames accordingly. I wish I could give you more now, but it's really still very early in the process.

Okay. Got it. That makes sense. Could you talk a little bit more about just GuruShots and how that product is tied to DataSeeds?

Sure. That's a great question. So there are a couple of facets to that answer. First of all, we have delivered content from both the existing catalog where users have opted in to have their content used for AI training as well as from launching competitions specific to meeting the prospects content needs. And in terms of something that we've talked about in the past, mainly GuruShots 2.0, what is the direction that we want to take the product. We have not -- and we said this last quarter, we've not made a decision as of yet. We're going to need to get more runway under us in order to determine whether or not we want the direction of the foundational photo competition game to be there for content acquisition or to heavily weight it towards the gaming aspects that it has existed as up until now.

Okay. That makes sense.

And then there's one sort of final piece there, and that is actually tapping into the creator community that exists to generate custom made or bespoke content needs that prospects have and that is a work in progress.

Okay. Got it. And then just in terms of where that segment is on an operating loss/income basis. I was wondering if you had that number on hand in terms of where GuruShots is operating at?

Yes, I can take that, Jonathan. Yes, so as we ramp in up DataSeeds, we incur certain fixed costs. And that, obviously, right now, it's not at breakeven. We still incur losses. So part of the GuruShots operating losses can be attributed to DataSeeds. And in terms of legacy business, right now, if you look at our financial, we're going to publish later this afternoon, it's stabilized at around $150,000 per month. It's just incurring some losses. We're still not at breakeven point yet. But as Jonathan mentioned, when we evolve GuruShots 2.0, it hopefully bring it up to the breakeven point. Does that answer your question, Derek?

Yes, that's very helpful. And then in terms of Emojipedia. You've previously called caught out some potential weakness there. [Technical Difficulty] I was wondering what the impact there looks like? And if you expect going forward further declines or if you think it has the potential to stabilize where it's at?

Yes. I'm sorry, my phone rang. Derek, can you repeat the question?

Yes. Just on Emojipedia, how that's doing in terms of if you anticipate further declines there, more of a stabilization?

Sure. I can't answer that as of now. I think we're going to need another quarter to see how Google continues to advance with the copy-paste feature and what's happening with AI overviews. But my hope is that some of the activities that we have underway to protect our property will translate into slowing or ceasing the impact that has happened up until now. And then separately, from an industry perspective, there has been a lot of banter around how do websites that have been impacted by these AI overviews, how are they ultimately compensated, and we are monitoring that closely to ensure that if there is a mechanism that comes up and is accepted by the industry that we are able to benefit from that.

Okay. That makes sense. And then just on the restructuring costs. You had mentioned free cash flow was impacted by a little bit of leftover restructuring costs. I was wondering if we could potentially quantify the impact of those costs? And then maybe I think you had mentioned you plan on reinvesting this amount maybe into new products. I was wondering if you could just talk about that a little bit?

Let me talk a little bit about the reinvestments and then Yi can get in and provide the actual dollar amount. So the intention is that we take a portion and depending on where we see opportunity to invest that in accelerating, whether it be the innovation track that we have, whether it be DataSeeds and so on and so forth, but doing so in a measured fashion such that we are monitoring our KPIs and that we are seeing tangible results from those investments. The innovation team itself, it's a little bit more nuanced because we will have likely many ideas that we test and that do not ultimately convert into full-fledged products. The idea there though is that we act quickly in order to move on to the next one if the ones that we select do not ultimately yield the results that we expect. And I just want to remind you about something that we said last quarter, and that is before we undertake the development of a new product, before we even code any of the programming needed, we are actually doing marketing feasibility tests as well as competitive research in order to substantiate that the opportunity is there. Once we've crossed those hurdles, then we are in a position where we WAT code and get an MVP, a lean MVP out in a contracted period of time and then begin to iterate from there with gating processes along the way. Yi, do you want to get into the numbers?

Yes. So at the end of July, we paid out the severance pay for 2 senior people in Norway. So associated with those severance payment, the company payroll tax is about 14%. And from an employee point of view, they need to withhold pay taxes about 45%. And then additionally, there was some option exercise. They have a large gain, and the company is responsible for up to 14%, again, payroll taxes and tax withholding. So at the end of July, we booked somewhere around $330,000 withholding taxes, which was paid out in October, and that impacted our free cash flow during Q1 '26.

Okay. Got it. That was really helpful. My last question is just on the share buyback program. I was wondering how much was left in that program?

Yes. There, we have $600,000 left under the current $5 million buyback authorization.