• Filing Date: 2020-06-12
  • Form Type: 10-Q
  • Description: Quarterly report
9 Months Ended
Apr. 30, 2020
Revenue from Contract with Customer [Abstract]  

Note 2—Revenue


Revenue Recognition


The Company generates revenue from three sources: (1) advertising; (2) subscriptions and Zedge Premium; and (3) in prior periods, service. Most of the Company's revenue is generated from selling its advertising inventory ("Advertising Revenue") to advertising networks, advertising exchanges, and direct arrangements with advertisers. The Company also earns revenue from subscriptions and Zedge Premium ("Other Revenue") which were launched in January 2019 and March 2018, respectively. Prior to May 31, 2019, the Company generated service revenue by managing and optimizing the advertising inventory of a third-party mobile application publisher, as well as overseeing the billing, collections and reporting related to advertising for this publisher ("Service Revenue"). The contract with this publisher was terminated effective May 31, 2019.


The Company's current subscription offering allows users to pay a monthly or annual fee to remove unsolicited advertisements from the Zedge app. The Company is exploring adding additional features to its subscription offering. On the Zedge Premium platform, the Company retains 30% as fee revenue when users purchase licensed content using Zedge Credits or unlock licensed content by watching a video. Additionally, the Company earns revenue from breakage related to expired Zedge Credits.


The following table summarizes revenue by type of service for the periods presented:


   Three Months Ended   Nine Months Ended 
   April 30,   April 30, 
   2020   2019   2020   2019 
   (in thousands)   (in thousands) 
Advertising revenue  $1,501   $1,670   $5,428   $6,243 
Subscription and Zedge Premium revenue   578    63    1,328    95 
Service revenue   -    179    -    528 
Total Revenue  $2,079   $1,912   $6,756   $6,866 


Contract Balances


Deferred revenues


The Company records deferred revenues when users purchase or earn Zedge Credits. Unused Zedge Credits represent the value of the Company's unsatisfied performance obligation to its users. Revenue is recognized when Zedge App users use Zedge Credits to acquire Zedge Premium content or upon expiration of the Zedge Credits upon 180 days of account inactivity. As of April 30, 2020, and July 31, 2019, the Company's deferred revenue balance related to Zedge Premium was approximately $170,000 and $155,000, respectively. In the three months and nine months ended April 30, 2020, the Company recognized $62,000 and $124,000 in revenue from breakage upon expiration of Zedge Credits.


The Company also records deferred revenues related to the unsatisfied performance obligations with respect to subscription revenue. As of April 30, 2020, the Company's deferred revenue balance related to subscriptions was approximately $899,000, representing approximately 394,000 active subscribers. As of July 31, 2019, the Company's deferred revenue balance related to paid subscriptions was approximately $362,000, representing approximately 129,000 active subscribers. The amount of revenue recognized in the nine months ended April 30, 2020 that was included in the deferred balance at July 31, 2019 was $329,000.


Practical Expedients


The Company expenses the fees retained by Google Play related to subscription revenue when incurred as marketing expense because the duration of the contracts for which the Company pay commissions are less than one year. These costs are included in the selling, general and administrative expenses of the Consolidated Statements of Comprehensive Loss.