Adcore Inc.

Good morning everyone and welcome to our investor update conference call. All callers are in a listen only mode. On the call this morning, the company's CEO, Omri Brill, will provide an update on the company's operations and strategy, followed by a financial review by Edgar's CFO, Yatir Sadat, of the company's Q1 2022 financial statements, after which we will answer pre-sent questions and take questions from participants. I would like to take a moment to remind participants of the Safe Harbor Statement. This conference call contains certain forward-looking statements, including statements about the company. Wherever possible, words such as may, will, should, could, expect, plan, intend, anticipate, believe, estimate, predict, or potential, or the negative or other variations of these words or similar words or phrases have been used to identify these forward-looking statements. These statements reflect management's current beliefs and are based on information currently available to management as of the date hereof. Forward-looking statements involve significant risk, uncertainties, and assumptions. Many factors could cause actual results, performance, or achievements to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully, and listeners should not place some due reliance on the forward-looking statements. Although the forward-looking statements contained in the conference call are based upon what management believes to be reasonable assumptions, the company cannot assure listeners that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this call, and the company assumes no obligation to update or revise them or reflect events or circumstances except as required by law. I will now turn the call over to Omri Vriel, ECRU CEO, to update you on the operations and strategy of the business.

Omri, the stage is yours. Thanks. Thanks, Ilana. Thanks.

Okay, so good morning everyone and thank you so much for joining us today for the company Q1 earning call. Basically what I would like to do today in my statement is to give an overview of the way management read the report and what should we expect Erez Agmoni- A moving on a this year in 2022 and basically give some highlights regarding the company focus area in this year so. Erez Agmoni- Few remarks with regard to the company revenue in Q1 2022 so. Total revenue in Q1 2022 was 4.7 million, which is a decline compared to the 8.6 million we had in Q1 2022. But actually, if we deduct the cost of revenue, which were a big portion of the revenue in Q1 2021, then we can see that Gross profit for both remained the same, actually improved a bit in Q1, 2022. And that's exactly the same trend that we started to see in Q4, 2021. So again, declining top line revenue, but when we look at, when we deduct the cost of revenue from the total revenue and we look at gross profit, we see in Q4, 2021, actually an increase, a small increase in gross profit. This means that the company, is giving away less or lower emerging revenue in extent to higher emerging revenue. And basically, even though we had lost around 4 million revenue, the company is still doing the same gross profit or even better. so that's one thing to take into consideration so that's very important with at the company to deduct i would say the cost of revenue portion in order to see the true value of the company can bring to the to to the table so that's one remark and then when we look one layer down into the report. And we look at the gross profit, like I mentioned before, Q1 2022 was 2 million compared to 1.9 million in Q1 2021. And it's a slight increase in revenue, although we saw a large decrease in top line revenue. Equally important when you look at gross margin for Q1 2022, we see that the gross margin were 43% compared to 23% in Q1 2021. This represent almost 100% to 87% decrease in gross margin. That means the company is generating more quality revenue, and that's exactly where we would like, that's the direction the company would like to take moving forward. And we started to see this trend in Q4 2021 already. Now, if you're going to drill down one more step into the revenue, and then we can see that actually the two very important quality indicators that we spoke about in the last earning call, that indirect revenue, which are higher margin revenue for us, we can still see that it's growing in 160% year over year if you need to compare it to Q1 2021. And obviously Q4 was a bit higher, but we need to deduct seasonality because Q4 in advertising will always be a stronger quarter. And then when we look at North American revenue, which is again another quality indicator for us in terms of the quality of revenue, then still we see the revenue in Q1 2021 from North America growing almost 100% if you need to compare it to the previous quarter in the last year. And again, If you deduct seasonality that is quarter four related, then we can still see a strong increase in these two quality revenue streams. When we look at working capital, there was a slight decrease in working capital in Q1 2021. The main reason for the decrease is that we had investment related to AMFI in Q1 2021. So it wasn't in the report in 2021. And there was some, I would say, seasonality-related expenses, basically, in the migration between 2021 to 2022. And other things that the investor need to take into consideration is that historically, For us Q1 was almost the slowest quarter in the year. So the year actually for us picking up as the quarter moving along. So Q1 historically is the slowest quarter and then Q2 become a bit better, Q3 even better. And then obviously Q4 is where the real action is. So basically when we look at the report, bear in mind that Q1 is historically was a slow quarter for the company. When we look at the Amphi result, and we need to compare it to the way they did last year, then we can see a significant increase in all important parameters in Amphi activity, related activity. So total new classes that were added to Amphi in last quarter was 631. This represent almost 40% increase year over year. Total visitors to the Amphi website was almost 40,000. Again, almost 150% increase. Yochanan Shachmurove. sign up, this means new users and students that sign up to the platform almost 1,500 again more than 150% increase year-over-year and total transaction that's been class booked in Amphi. Up. Yochanan Shachmurove. Up in almost 80% so again it doesn't matter which parameter we look in the Amphi activity, we see a meaningful or significant improvement over there. So basically if we need to summary the Q1 2022 result and also give investor what would they need to expect next in 2022, I would highlight the following. A, Q1 2021 was a strong quarter for us in terms of client acquisition. The company announced 40 new clients acquisition across all regions of the company operating. Two of them actually were big brand names, Best and Less, which is a massive brand in Australia, and Cadelfox, again, an Australian and a UK-based operation for online earning as well. So very big acquisition for the company in Q1 2021, which obviously will start to bear fruit, or we can start to enjoy for them as they move along. tourism budget are back. So that's something that we started to see in Q1, 2022, but for sure now in Q2, 2022, because it's actually picking up and we can now fairly say that if we need to compare or to estimate the tourism budgets that were important part of the ethical activity up until 2019 or like 2019 for sure, but then 2020, 2021 will almost diminish because of COVID, then we can now estimate say with a lot of confidence that 2022 is going to look a lot different and more close to where we used to be in 2018 than where we were in 2020 and 2021 with regard to tourism budget and Edco manage very large and big brand tourism names. Some of them are Israeli travel ministry or tourism ministry, for example, that control a lot of budget. For us, that's actually very great, like big news for us. And other things that I would like to emphasize that the company took a strategic decision in the late part of 2021, that we would like to focus on quality over quantity. Obviously for the long run, we believe we can achieve them both. So we can believe we can achieve quality and quantity, but now the company decided that actually quality of revenue are more important for the companies that quantity of revenue. That's why we are focusing on higher gross margin. And we can see like two quarters in a row that we have steady improvement in the company gross margin. Now we are nearing where the company would like to be, which is between the 45% and the 55% range for the long run. We see a steady increase in the indirect revenue stream, which again comes with higher or better gross margin. And we see a steady improvement in revenues coming from North America, which us, we decided to be a strategic reason for us. If you look further down the road in 2022, and that's very important because there was a lot of shift in, let's say, the company focus and the way the reports move. Prior, I would say, to Q4 2021 and the way they are looking now, and maybe investors are a bit confused and asking themselves, you know, what should we expect moving forward? Then I would say the following. We believe that Q2 and Q3 2022 are going to behave similar to what we saw in Q4 and Q1. That means we're going to continue to see a decline in cost of revenue because the company is going to focus more on quality revenue. And we believe we can see an improvement in both gross profit and gross margin as well. So similar trend. For sure, I would say in Q2, but probably also into Q3 as well. Q4 2022, we'll compare better actually, because that's gonna be the first quarter that we can compare Apple to Apple. So that's the first quarter that we can say, okay, we shift strategy and Q4 2021 was already with the new strategy and our Q4 2022 gonna look like. So reports from Q4 2022, onward should look better and compare better to what they are comparing right now. So that's, again, positive news for the company and for investors. Like I stated before, the 2022 company goals, I would say, are to A, to achieve gross margin of over 40%. We believe that's a doable task. And again, we see a study improvement in this metric a quarter over quarter. And even though we are given away some lower managing revenue, we still would like to see in gross profit of at least 15% year over year. If you can achieve these two goals in 2022, that I can say that as far as management percent, 2022 gonna be a very successful year. And with regard to Amfi and people have some, you know, like a question regarding Amfi, where Amfi stand, where the company stand with the Amfi project, I would say the following. A, investor will need to bear in mind that Amphib was actually only incorporated in Q2, 2021. So the first quarter we started to report the report result with regards to Amphib was Q2, 2021. So we are only as a reporting, let's say company only three quarter into the cooperation. So that's not a long time in a company life. And before that Amphib I would say was still running on a beta mode. So that wasn't like a generate any significant number. we foresee or expect revenue to start increasing from the second part of H2 2022. So as far as we consent for the first four quarter, I would say Q2 2021 until Q2 2022, we're still going to be in the zero to one stage. This means that we are still developing the platform, still building, let's say, the platform in order to cater. And then once we can be sure that we have the right product offering, the right product to market fit, then we can start slowly to scale it up. Again, I wouldn't expect to see significant revenue coming from Amphi in 2022, but from the second part of 2022 and when we enter in 2023, Amphi should start generating more significant revenue as well. Bear in mind that until then, we're making sure to... Fadi Bardawil, Ph.D.: : Every good control of the fee expenses so basically the fee been read, we continue to like continue to be relatively low and that's under the company controls of the company believe we can. Fadi Bardawil, Ph.D.: : continue to invest in the after project and hope to see fruits from this investment in second part of the year, and obviously a for many years to come, but again do it reasonably with relatively low expenses as well.