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spk02: Hello, everyone. Good morning and welcome to Adcore's investor update conference call. All attendees are on mute and in a listen only mode for the duration of this conference. On today's call, the company CEO Omri Brill, who will provide a management declaration. Subsequently, AbCore CFO Amit Kanforti will present a financial overview of the company's Q4 2023 and a full year 2023 financial statement. We will then address pre-assent questions and, time permitting, take questions from participants. Before we proceed further, I want to ensure your attention to the safe harbor statement applicable to our discussion. It is important that you take a few minutes to read the statement carefully. The statement will also be viewable on our website once the call is finished. Please take a moment to review the statement on your screen. I will now turn the call over to Adcore's CEO, Omri Brew.
spk01: Thank you very much, Tara, and welcome everyone for today's earning call. It's my pleasure to present our Q4 2023 numbers and the full year 2023 numbers, and obviously discuss the strategic initiative the company will take, already taken in 2024. So let me share my presentation, please. Second. Okay. So Q4 2023 and the entire year of 2023 was a period of strong performance for Edco, marked by significant achievement and positive growth. So all in all, we are very pleased and happy with the result we achieved in Q4 and obviously for the full year of 2023. And let's dive into some numbers. So if we look at the Q4 top line revenue, it was 9 million compared to 8.8 million in the previous year. And total gross profit was 3.7 for this quarter. So all in all, quarterly, we achieved 3% year-on-year growth. And full year, we achieved a significant 17% year-on-year growth in top line revenue. And when we talk about quality growth KPI, and we mentioned historically or 2023, two main KPIs, we talk about gross margin and we talk about North America revenue. Then if we talk about gross margin, ideally we want them to be 40% or higher, and we can definitely see it. during the entire year, both Q1, Q2, Q3, and Q4, it was 40% or higher. So 40% in Q1, Q2 was 43, Q3 was 40, and Q4 was 41 as well. So this is exactly where we want them to be. And this is a positive indication for the company that basically we have quality growth, not only growing, but also growing in terms of the quality of the growth. And if you talk about North America revenue, which is a strategic market for the company, then we can definitely see that we achieve a very nice growth in top line revenue over there as well. Q1 was, sorry, Q4 2023 was 2.1 million. And we saw a nice increase quarter over quarter growth between Q4 and Q3 as well. So again, we're very pleased with the result in this important market of us. Okay. If we talk in Amfi, then we can clearly see that the investment in Amfi is declining. This is according to the strategic decision the company is taking. So if the peak of this investment was Q2 and Q3 2022, which was around 100K Canadian dollar monthly, it was down to 27 or 25K in Q4 2023. all of the every R&D and they have investment in Amphi, I can clearly says that we completed it. So basically, moving forward 2024, we estimate it to be a very, I would say, low maintenance investment of around 10K. It's not going to be significant to the company anymore. So basically, most of the investments that we put in Amphi is already behind us, and that's the positive news. So Amphi Invest is not going to be any longer a burden on the company financial result, which is positive as far as the company is concerned. So just to sum up some of the report highlights and yearly, we're talking again, 17% year-on-year growth, which is impressive. APAC revenue grew by 14% year-on-year. EMEA revenue grew by 20% year-on-year and North America revenue grew by 18%. So we can see that we have a positive growth across all region in 2023, which is a very positive sign as far as the company concerned. Gross profit increased by 1.2 million. And again, gross profit and gross margin is a very important KPI for the company in 2023. Quarterly numbers, revenue grew by 3% year on year. North America revenue grew by 11% year on year. Operating profit grew by 22%. And I think this was the first quarter in a long time that we also was net profit. net profit as well. Amit can discuss it in more detail in his section of this earning call. And cash and cash equivalent grew as well, 7% quarter over quarter. So also the balance sheet looked positive for the company. And so throughout any quarter in 2023, we mentioned that we have a few targets in 2023 that we want to achieve, and I'm glad to report to our shareholders we achieved all of them. So maintain a strong balance sheet. Again, a cash position is strong, and basically the balance sheet look very positive. Second KPI was keep the gross margin above 40%, which we managed to do. So the target was to achieve that double-digit gross revenue, gross profit, and operating profit as well. We achieved all of that in 2023. Top line grew, middle line grew, and bottom line grew as well. All of them are double-digit growth. Number four, expand our global footprint in North America as well. We saw a nice year-on-year growth in this important region. Number five was setting the strategic partnership to drive mutual growth and market share. So we solidified a few important strategic partnerships in 2023. with key players like Criteo and other besides the existing partnerships that we already have and basically managed to maintain with Google and Microsoft advertising. And number six is invest in research and development. And I'm glad to report that just in 2023, we launched three new apps to the Adcore Marketing Cloud. So again, big investment in R&D as well from the company point of view. So again, check, check, check to cross all the six important KPIs. And another thing that I'm glad to report that if you were to look at the company share price lately, then you can definitely see we had a nice rebound in the share price. So from the dips that we have, which was around 17 cents just a few months ago, now we see a nice uptick in the stock price to 25.5 cents currently as of yesterday numbers. If you look at three months, the stock price grew by almost 40%, 38%. Six months, 16% increase, and even 12 months, we already flattened. So basically, finally, we see some very positive momentum within the stock. within the stock price, but as far as the company percent, this is just the very, very early beginning. So trust me, there's a lot of upside to see within the stock price and the following number will tell the exact same story. So if you look at comparables and we make a comparables with all, let's say, leading tech or multi-tech companies trading both on the Toronto Stock Exchange and in the US stock exchanges, then we can see an upside opportunity of 200% or even 1,000% if we talk about gross profit EV to gross profit. And again, we definitely believe that 25 cents, even 50% of $1 still not going to represent the true valuation of the company. So like I say, don't... don't cry that you didn't put it to 70 cents. There's still a money to be making in even in 25 cents and 50 cents. So price is the way the company believe. And if you look, that we put our money where our mouth is that basically the company continuing Q4 to buy purchase, purchase shares for Constellation. We purchased 70,000 shares for Constellation in Q4, 2023. And all in all in the past year and a half or two years, we purchased and costed more than 4 million shares. Obviously, Once we're going to have a positive momentum in stock price, and now we're starting to see one, then obviously the fact that the company can't set more than 4 million shares will definitely contribute to a more aggressive upside. That's the way the company believes, at least. So we discussed 2023, we discussed Q4 2023, the full year 2023, and we are very happy with the result we've been able to secure in this year. But equally important is what is ahead of us in 2024 and behind. And I want to talk about what the company identified as four strategic pillars for the company in 2024. and obviously behind 2024. So the first pillar is what we call technology and AI. And by technology and AI, we're not only talking about the proprietary technologies we are developing in our, so the AI implementation within our tools, but we're also talking about third-party technologies we can work with in the different ethical departments. So I would say usage of technology, whether we develop it ourself and usage of AI, is critical for the company's ability to grow in the future. And in 2024, we're going to put even more emphasis on these important metrics. Second one is focusing on enterprise and aggregator. By aggregator, we mean, for example, ad agencies that manage multiple advertisers and not only single advertisers the way we see it. If we have relationship with this type of clients, basically, The LTV and the overall, let's say, partnerships that we can get from this type of client is much more beneficial for Edco than if we have, let's say, a relationship with small or mid-sized clients. So for us, focusing on this type of clients is critical as well. The third pillar, strategic pillar, is basically self-service, or what we call do-it-yourself or low-touch type of offering. And the way we see it, And this type of, let's say, offerings that we have, which are self-servings, will allow us to scale faster and basically be more efficient as a company. So basically, the fact that we can offer all of our services and all of our technology and self-service as well, it's critical for the company to be able to be more efficient and basically grow faster. And last but not least is synergy between the different initiatives, the different offering, the different solutions that we have. Obviously, if we have some client, for example, start to use, let's say, Edco technology, and then we can scale him up or cross-sell some other solutions that Edco have, obviously creating a synergy by that. So we increase the LTV, we increase the value of each client, and that's critical for what the company is doing as well. Technology and AI, enterprise and large aggregators, low-touch, do-it-yourself type of offering and synergy, these are all very key and strategic pillars for us in 2024. And just to give you an example, so let's say now we're going to develop a new app to the Adcore Marketing Cloud, and this app going to target, let's say, enterprise type of clients and going to offer, let's say, self-service type of operation. Then we already touched four, sorry, out of the four strategic pillars. So we touch the technology and AI because we develop a new technology. we touch enterprise because let's say this app, for example, and a good example is one of the last apps that we developed is Feedito Plus that was designed for enterprise clients that have a very large feed. So obviously the audience is large large enterprise clients so over there checked as well and office obviously it's a self-service so self-service first as a solution offering then we touch a low touch and do it yourself as well so I think that's a good example how let's say an initiative that the company did a recent initiative the company did for example develop the affiliate to AI app is basically touching Technology and AI touching enterprise and touching low touch do-it-yourself type of offering as well. And every day, single let's say solution or technology the companies is develop or offer basically we want to make sure that we have a very flexible offering around it so basically it can be either self-service the kind can go log into the app and do everything itself it could be many service so we can have ad core expert help the client to set up let's say the feed for example and optimize the feeds if needed. And this can be hybrid as well. So some of the activity maybe can be done by ad-core experts and some of the activity can be done by the client themselves. The part that we offer this flexible service packages basically give us more ability to win more clients and it's critical for the company. I don't know if you guys visited the Edco website recently, but in the last two months or so, we put a lot of effort rebuilding the company website. We launched a lot of new pages within this website to redo some of the web pages. and did a good restructuring of the company website. And the way the company now website is structured is similar to the way the company is structured, basically. So from one end, we have the Adcore Marketing Cloud. Under this cloud, we have all the different apps that the company developed, whether it's Feeditor Plus, Feeditor, Effortless Feed, Alert Air, Media Blast, semdoc and edcore views as well and basically all new apps that we're going to develop going to be sit under this section which is the edcore marketing cloud and under edcore marketing solution currently we offer a four different solution marketing solution the first one is brand and awareness that's a new activity the company enter into which is program automatic advertising, CTV, outdoor advertising as well. And we already had some very successful campaigns and case study around that. You can find it online in our website. The second one is performance marketing, more low-funnel type of activity, then data analytics. That's, again, a new initiative or a new marketing solution the company is offering. And last but not least is the studio and creative offering as well. much more technology, let's say, apps and offerings that we offer now, 2024, compared to what we had, let's say, have in the same period in last year, in 2023, and the same apply for marketing solutions as well. When we talk, what should be the key metrics for the company in 2024? So every time we report an earning result or earning call, we do an earning call for 2024. So do look on the following KPIs in order to see if the company is moving in the right direction. The first one, which was the same one as we have in 2023 as well, is still maintain a strong balance sheet with focus on increased cash reserves. So this remains to be a focus for the company. Keeping the gross margin above 40% is yet another KPI that we basically continue from 2023 to 2024. Achieve double-digit growth revenue-wise, top line, middle line, middle story line, And a bottom line as well, that's something we would like to achieve in 2024 as well. And we are very optimistic in the company ability to do so. So we had a very successful year in 2023 and the company is equally optimistic about what we can achieve in 2024 in that regard. And UKPI is expand our marketing technology and marketing solution offering. The more solution we have, the more technology we have, the higher the sales that we can do and the revenue we can generate. So a good quarterly earning report should have, let's say, a strong balance sheet, should have gross margin 40% or higher, should have a double-digit growth, top line, middle line, and bottom line as well, and should have, let's say, an expansion in the technology offering and the marketing solution offering of the company. And so let's say, hopefully we can achieve all of that in 2023 compared to the same achievements that we did in 2020, sorry, 2024 compared to the same achievement that we did in 2023 or even better. And last but not least, I want to talk a bit about the company's social responsibility. Keep On Riding, it's a very nice initiative the company took following the October 7 events in Israel. And basically, we decided to start an initiative basically to donate and repair bicycles for evacuated communities and kids, especially within these communities. And I already glad to report that we managed to deliver more than 800 pair of bicycle to the different communities. And we managed to raise more than 500 NIS. And under this initiative, some of this money come from the company and from managers and director within the company. But we had literally donors from all over the world. And two new initiative. is that we did recently under this very important project is we deliver the 105 new pairs of bikes to Kibbutz Miflasim kids. That was literally done one month ago. And we deliver two months ago, one of the 10 new bikes to Kibbutz Rahim. And again, in a very nice event, both of them. And I encourage everyone to visit the company, keep on writing, webpage or the social media pages related to this initiative. Take part, contribute. This is a very important initiative the company is taking. It's very dear to our heart as well. So we want to thank everybody that contributed to this initiative and we encourage you, if you didn't do so, to do so now. It's never too late. So thanks everyone. I'm going to end it now to Amit.
spk02: Thank you, Amri, for your performance insight. I will now pass over the call to AdCourse CFO, Amit Comforti, who will provide an overview of the Q4 2023 and a full year 2023 financial statements. Amit.
spk00: Thank you, Atara, and good morning, everyone. Just one moment, I will share my screen. Okay, so before beginning the financial overview, I would like to remind you that the following discussion will include GAAP financial measures as well as non-GAAP results. All amount will be presented in Canadian dollars. In 2023, Edco had a successful year characterized by a significant revenue growth and significant increase in both profitability and cash flows. And now let's review in more detail. For the three months ended December 31st, 2023, we delivered revenues of $9 million compared to $8.8 million in the same period of 2022, an increase of $0.2 million or 3%. Gross profit was $3.7 million compared to $3.8 million, a decrease of $0.1 million or 3%. Regarding gross margins, for the three months ended December 31st, 2023, they were 41% compared to 43% in the same period last year. As for operational expenses, R&D expenses for the quarter were 0.6 million compared to 0.4 million in the prior year. The main reason for the increase is we started amortizing AMFI's intangible assets at the fourth quarter of 2023. SG&A expenses for the quarter were $3 million compared to $3.2 million in the prior year. Operating profit remained steady at $0.1 million, similar to prior year. Net profit was 0.1 million, which is a significant improvement from a net loss of 0.5 million last year. Moving on to total revenues and gross profits. On the left side of the slide, we can see a steady increase in profits in each of the quarters of 2023. We can also see that gross margin are staying in the target range of above 40%. On the right side of the slide, looking at the full year, we can see that revenue grew by 17% compared to the previous year. There is also a consistent growth in profits over the years with a significant 1.2 million increase in 2023. Revenue breakdown. As for the geographical revenue breakdown for the full year, we grew significantly in each of our regions. APA grew by 14% year over year, EMEA grew by 20% year over year, and North America grew by 18% year over year. Now let's discuss about net cash from operating activities. In 2023, the company generated 1.1 million in net cash from operating activity. This is a major improvement from the 3.2 million used for operating activities in 2022. This improvement in cash flow is mainly caused by improving collections from clients and securing better terms with suppliers. In terms of financial position, we had a cash and cash equivalent of 8.1 million as of December 31st, 2023, compared to 8.8 million at December 31st, 2022. Total working capital amounted to 7.6 million compared to 9.2 million at December 31st, 2022, a decrease of 1.6 million or 18%. The decrease in cash and working capital is mainly caused by the investment in AMFI and by the purchasing of shares through the NCIB plan. As for the liability side of the financial position, we can see that the company is still debt-free. Regarding the adjusted EBITDA, the quarterly non-GAAP results reflects adjustment for the following items, depreciation and amortization, share-based payment, and other non-operational items. For the three months ended December 31st, 2023, adjusted EBITDA was $483,000 compared to $605,000 for the same period in 2022. Adjusted EBITDA only for the ETEC activity was 580,000 for the same period. With that, I will turn the call back to Attara.
spk02: Thank you, Amit, for your informative overview. We will now move over to our pre-sent questions. The first question that was submitted was what are your capital strategies with the best use of the 8 million? Omri, would you like to answer?
spk01: Yeah, that's a fair question. I think we are still a bit conservative regarding the use of capital within the company. So obviously the company is all the time investing in a future initiative, whether it's proprietary technology that we're developing, recruiting new personnel in different offices that we have around the globe. But I think in terms of M&A, we don't want to do M&As before we know the markets are open And we can raise capital in the market as well. So I think for now, we are still a bit conservative, but I believe that 2024, we will see a shift in that regard as well. The company can start taking a bit more, let's say, aggressive moves, including the use of capital. So for now, conservative, but we'll see later down the road in 2024 as they develop.
spk02: Thank you. The next question, can you comment on what drove the 17% YYY growth in 2023?
spk01: So obviously we saw a very nice growth across all regions. So APOC were growing for us for the first time. And let's say if we need to compare 2022 compared to 2021, so APOC were growing, EMEA grew quite nicely, North America grew. So A, all regions were growing, which obviously was an important factor in the company overall ability to growing 70%. But I saw that's combined with new initiative and new technology, the company launched in 2023. basically set us on the right path to this growth and success.
spk02: All right, next question. What were the key factors in the GM drop by two points between 2022 and 2023? So I think
spk01: Two-point drop, it's not a very significant drop, right? It was, I think, drop between 43% to 41%. And as the company mentioned multiple times, as long as we are 40% or above, we're quite happy with this result. There's always a balance for a company in ethical size between how aggressive do we want to grow as a company and how, let's say, what should be the quality of this growth. So we need to maintain this balance. And as long as we are able to maintain this balance and have quality growth on one end, which is represented by, let's say, 40% or higher growth margin and ability to grow, let's say, almost 20% top like we did in 2023 compared to 2022, then we are very happy with these results.
spk02: Thank you. Next question. Which regions do you expect to grow more in 2024?
spk01: It's an interesting question. If I need to, obviously I'm not, you know, we don't bet, but if I need to bet, I would say that probably we should see nice growth coming from North America. We put a lot of emphasis in this specific region and obviously it was already growing quite nicely for us in 2023 compared to 2022 and also 2022 compared to 2021. And we expect to see this positive trend to continue in 2024 as well.
spk02: What would you say is your biggest competitive edge over the competition?
spk01: That's a good question, actually. I would say at all the multiple competitive edges, I would say, first and foremost, we are quite a global company. So we have offices literally across the globe. Headquarters are in Tel Aviv, Israel, but we have offices in Toronto, Canada. In the US, Melbourne, Australia, two offices in China, one in Hong Kong and one in Shanghai. So if somebody want to work with global companies, basically speak multiple languages and can work literally around the clock for you, then Edco can be a good candidate to do so. So this is one edge. The proprietary technology that the company have, it's another edge. And the fact that we are full funnel marketing solution company, I would say it's another edge. So basically... global proprietary technology and basically cover all aspects within the marketing funnel.
spk02: All right, the last question in terms of pre-sent questions. Can you please elaborate on your utilization of AI for both your business and your application for customer usage?
spk01: So Literally, we use AI whenever we can, and that's not a slogan. It's something that we do on a daily basis and hourly basis. If we're talking about technology, just one second. So we use AI in multiple touch points. For example, we can use AI in order to enrich a client product feed. So AI can help us, let's say, take an existing title and enrich it and basically make it more compelling in terms of marketing-wise. That's one example. We can use AI, for example, to categorize product within a product feed, or we can use AI to analyze communication of user and understand if there's something that's flagged out or we need to put more attention into it. So literally, Almost in every aspect or every job that we do, whether it's technology or office-wise, we use AI nowadays in order to do it better, faster, smarter.
spk02: Great. So I see we have two Q&As in the comment section. The first question is, do you think you will be able to increase your margins this year into the higher part of your range?
spk01: That's a good question. Like I mentioned before, there's a balance for company in ethical size between how aggressive do we want to grow top line and how, let's say, how important is the quality of the growth for us. And for us, between 40% to 50% should be, let's say, the norm and something that we should be, let's say, happy with. So it's not a top priority for us to increase the, let's say, the gross margin because that can come on the expenses of top-line growth as well. So I would say if it's happen, great, but it should happen as long as we can grow top-line and basically be aggressive and continue growing double-digit. So it's not a major priority as long as it's above 40%.
spk02: All right, next question. What are your plans for share repurchase in the next year?
spk01: It's a good question. I would say a few things. A, because of the relatively low volume, we are very much limited on how many shares we can purchase within the markets. And that's something you already started to see in the second part of 2024. So I think we continue to, probably as long as the share price is going to be at least, I would say, below what the company think is a fair evaluation of the company, we'll probably continue to purchase shares within the market. But our ability to do it in a very large scale is limited because of the exchange limitations. So we continue to do it as long as we believe there's opportunity to do so.
spk02: All right, we're going to take one final question from the Q&A. Can you speak as to Amfi and its overall contribution to the company at the present time?
spk01: So as I mentioned before, we finished all the major development and investment within Amfi. So that spot is behind us. So in 2024, we shouldn't expect any large development or investment in Amfi. Currently, it's running on a, I would say, on a minimum maintenance mode and we are looking on a way we can monetize and do better use of whatever we have with Amphib, whether it's through partnerships we can establish or other initiative we can take, but currently it's not the focus area for the company and it's not gonna require any more resources from the company at this point.
spk02: All right, and with that, we are gonna conclude. Thank you very much everyone for joining us here today. Omri, would you like to make a concluding statement?
spk01: Yeah, absolutely. So we want to, again, thanks to everyone that joined this call today. I want to congratulate Amit for his first report. And it's a job well done. Amit, you took the responsibility and we already net profit. So you start affecting the right foot. But seriously, Amit did a tremendous job together with his team to put this report together. So thank you, Amit, for that. And I also want to thank Atara for being the host today and do a good job as well today representing the ethical case. So thank you, everybody. And we'll see you again in the next earning call of the company.
spk02: Thank you, everyone, for your participation. If there are any other questions, you're welcome to reach out to us personally. Thank you.
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