Adcore Inc.

Good morning. Welcome to AdCourse Q4 and year-end earnings call. Well, you will give guests another minute to join. So please just sit tight while we wait for our guests to join the call. Thank you all to have joined AdCourse Q4 and year-end earnings call. We're going to give investors another moment to join and we will begin shortly. Okay, thank you all for your patience and with that we'll begin the call and welcome to AdCourse Q4 and year-end earnings call for 2024. You might have seen the press release we put out this morning highlighting a very strong increase in revenue of 24% for Q4 and a record high $3.9 million in gross profit. Today we will review those results in more detail. On the call today, you have myself, Nick Campbell. I'm head of IR. You will have Omri Brill, AdCourse CEO and founder, and Amit Comforti, AdCourse CFO. For the call today, we'll begin with some forward-looking statements you should be aware of when listening to this call, followed by the CEO opening remarks, and then the CFO financial highlights, and concluding with a Q&A. If you do have a question during this call, I'll ask you to use the Submitted Chat feature in Zoom, and we will get to those at the end. Just before we begin, I will make everyone aware that today in this call we'll be making forward-looking statements. These statements are uncertain in nature, so please bear that in mind. I will give everyone about 15 to 30 seconds to review this information, and then we'll move on. Okay, and with that, I will pass the floor to Omri Brill for the CEO opening remarks. Omri, the floor is yours.

Excellent. Let me share my screen. Just one second. Okay, so good morning, everyone, and thank you so much for joining our Q4 earning call. Every earning call, I think it's an exciting moment for the company and opportunity, obviously, to speak with our shareholders. But end of year earning call is always more unique, and I think this quarter even more unique because of the results that we are about to display today. So we are very pleased from the company results in Q4 2024 and for the entire year as well. And let's jump to my presentation. So we had a record break in Q4 and here in 2024 financial results, very strong movement across the board, top line, middle line and bottom line as well. And if you look at top line revenue, we ended up Q4 in 11.2 million in top line revenue. That's a massive increase of almost 25% year on year from 9 million in revenues that we did in the previous year as well. By the way, that's the second strongest quarter in terms of top line revenue the company ever reported. And in terms of gross profit, actually, that's the biggest result that we've been able to show. $3.9 million in gross profit, and that represents 6% year-on-year growth as well. So quite impressive top line and middle line number. Another important KPI, then again, gross profit almost $4 million in Q4 2024, record in terms of what the company has been able to achieve up until now. Cash position spiked to almost $11 million in Q4 2024 compared to $8 million in the previous year. And that represents 34% year-on-year increase. So that's, again, a massive increase. Obviously, if you look quarter over quarter, it's even more impressive. We have like 6.7 million in cash and cash position in Q3 2024 and almost 11 million in Q4 2024. Oh, absolutely, there is seasonality attached to it. But let's say even when we take it into effect, the seasonality is still year-on-year, 34% increase. That's massive. So just to highlight some of the key results that we've been able to present in this quarter, revenue grew by 24% to a bit over $11 million. APAC revenue grew by almost 60%. That's an astonishing number, especially taking into consideration that APAC was challenging post-COVID in 2022 and also in the beginning of 2023. So we see a massive rebound from this important region. EMEA revenue actually that was challenging in the first part of the year grew by 14% this quarter. Net cash flow generated by operating activities spiked to $4 million almost this quarter compared to $1 million in the previous quarter. That represents an extreme growth in net cash flow. Gross profit, almost $4 million. And again, 6% grew year on year compared to the previous quarter. Operation profit grew by almost 300% to $0.4 million. this quarter compared to 0.1 million in the previous year. And adjusted EBITDA spike to 1.3 million compared to 0.5 million in Q4, 2023. So very impressive number across the board, top line, middle line, bottom line, everything moving in the right direction this quarter for us. And also if you look at the entire year, then in a sense Q4, make 2024 in the end of the day quite a positive year for us. If you bear in mind, we started 2024 a bit with some challenges and it was a slow start of the year. And then we saw like a big momentum build up in Q3 and Q4. Basically it was the best finish for this year that we can imagine. So all in all, Including Q4, revenue grew in 2024 by 4%. APAC revenue grew by 25%. That's impressive. North America revenue grew for the entire year by 14%. Net cash flow generated by operating activity grew to $3.3 million compared to $1.1 million in the previous year. Gross profit grew to $13.5 million. That's almost a $1 million increase or 6% increase year on year. Adjusted EBITDA grew to $1.6 million compared to $0.9 million in 2023. And cash and cash position grew by 20, by 34%, again, almost to 11 million. So even, let's say, quarterly, an amazing result. And also the year, all the metrics are positive, top line, bottom line, middle line, everything moving in the right direction for us this year as well. And that's actually a very interesting graph. We can see the company adjusted EBITDA build up throughout the different quarters, starting almost since the time the company went public in, let's say, it was mid-2019. But let's say this graph shows numbers since 2020. And we can see there was, let's say, a good moment to build up in adjusted EBITDA for the company around COVID 2020 and 2021. And all in all, the company being able to demonstrate, to achieve positive adjusted EBITDA in 20 quarters out of 22 quarters that we reported in this graph. And actually Q4 2024, with 1.3 almost million in adjusted EBITDA. It's the second strongest month quarter for us, sorry, in terms of adjusted EBITDA. So let's demonstrate how strong Q4 is for the company. And we can also see that the beginning of, let's say, 2023, the company is starting to rebuild momentum in adjusted EBITDA as well. So what slowly picked up in 2023 now become a bit more impressive, obviously, in the end of 2024 as well. So very interesting graph. And again, out of 2020 quarters that the company covered in this graph, only two quarters were negative and all the rest was with positive adjusted EBITDA. And I think end of year result, it's also a good opportunity not just to summarize 2024. And I think for 2024, the numbers speak for themselves, right? At the end of the day, everything is baked within the financial result of the company. But I would like to take the opportunity and also discuss the company growth strategy for 2025. and how can we continue accelerating our momentum, especially the momentum that we saw in the second part of 2024, in Q3 and Q4. So the company is aiming to achieve $40 million in revenue in 2025. In order to do that, we will need to grow our revenue base by 25% this year. So it's a big goal, but we are confident enough in order to put this goal over here and obviously work out in order to achieve that. In terms of striking our profitability, this is another goal that the company would like to take. We would like to see straight a quarter with positive adjusted EBITDA, so Q3, Q4 2024, and obviously all the quarters within 2025 as well. And obviously, continue to see positive cash flow from operating activity in 2025 as well. We would like to see AI-driven innovation for the company, so deep AI integration across our R&D department, across our marketing solution department, and most importantly, maybe across our different applications. So AI is already a game changer for us in the way we are able to do business. And in 2025, we would like to double down on it and basically deepen our AI integration across the board, basically. And we would like also to continue to see growth in our ARR across the different applications. And our goal is to achieve between 4 million to 5 million in AR across the different application in 2025. So we would like to see the continued momentum that we saw in 2024 in technology, sorry, in technology revenue continue to grow in 2025 as well. So a lot of AI, we're taking like big, big goals, you know, in terms of profitability and depth of revenue. And again, technology, I think if all of that's going to take place or even some of that's going to take place, 2025 should be even a better year than 2024 was for us. That's also a good opportunity to cover the current share price, which is 0.3. We did see like a very positive move in the share price in the last, I would say, two months or so, you know, from the low of around 0.3. or 14 cents or 15 cents. Now it's almost double up or more than double up to 30 cents. But we still believe, management still believe the share, the coin share price is deeply discounted and basically don't really reflect the true company valuation. We can also see if we look at the comparable company that is like a very big upside, still to go with the stock price. If you look at EV to gross profit, we're talking about 300, more than 300%. and even if you talk EV to EBITDA, then we still talk about around 70% upside from the current share price. So we continue to believe in the company's story. Edcore is actually regaining momentum in the second part of 2024. We had the strongest possible imagine end of 2024 in Q4, and we couldn't be more happy with the results we presented. And I think now for Amit to go over the result in more details.

Thank you, Omri, and indeed very strong numbers across the board. We'll now move on to Amit for the CFO Financial Highlights. Amit, the floor is yours.

Okay, thank you. So thank you, Nick, and good morning, everyone. 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 amounts will be presented in Canadian dollar. We had a very strong first quarter with revenue increasing by 24% year over year. In addition, both growth, operating and profitability also improved. showing greater efficiency across the business. Let's review in more detail. For the three months ended December 31st, 2024, we delivered revenue of 11.2 million compared to 9 million in the same period last year, an increase of 2.2 million or 24%. Gross profit was 3.9 million compared to 3.7 million, an increase of 0.2 million or 6%. As for operational expenses, RMD expenses for the quarter were 0.7 million compared to 0.6 million in the prior year. SG&A expenses for the quarter were 2.8 million down from 3 million in the prior year. The decrease was mainly driven by lower sales and marketing costs. Operating profit for the three months ended December 31st, 2024 was 0.4 million compared to 0.1 million in the same period last year. Net profit for the three months and the December 31st, 2024 was 0.5 million compared to 0.1 million in the same period last year. Moving on to revenue and gross profitability. As shown on the left side of the slide, Revenue grew strongly in Q4 2024 compared to the same quarter last year. Gross profit also rose by 6% during this period. Looking at the full year results on the right side of the slide, we can also see a steady growth in both revenue and gross profitability over the years. As for geographical revenue breakdown for Q4 2024. APAC revenue saw a very strong year-over-year increase of 58%, primarily due to new client acquisition. EMEA revenue also increased by 14%, mainly due to higher activity from existing clients. North America revenue decreased by 14% in Q4. However, full-year revenue grew by 14%, continuing the positive momentum from previous years. Net cash from operating activities. In Q4 2024, we generated over three times more cash from operating activities than in Q4 2023. This strong improvement was driven by higher revenue, increased profitability, and better collections from clients. In terms of financial position, we had cash and cash equivalent of 10.8 million as of December 31st, 2024, compared to 8.1 million at December 31st, 2023. This is a significant increase of 2.7 million or 34%. Total assets amounted to 23.4 million compared to 19.1 million at December 31st, 2023. an increase of 4.3 million or 23%. As for the liability side of the financial position, we can see that this company is still debt-free. Moving on to adjusted EBITDA, the quarterly non-GAAP results reflect adjustments for the following items, depreciation and amortization, share-based payment, and other non-operational items. For the three months ended December 31st, 2024, adjusted EBITDA was 1.3 million compared to 0.5 million in 2023. This increase of 0.8 million or 164% highlights a significant improvement in the company's performance. With that, I will turn the call back to Nick.

Thank you, Amit. At this point, we will move over to the Q&A session. And starting with the first one here, Omri, looking at Q4, you know, record-breaking gross profit, strong cash flow. What specific drivers, whether it's operational, technological, or geographic, what would you say contributed most to this performance?

Actually, it's a very good question. I would say the following. If I need to look at, let's say, operational, geographical or technology, I would say everything contributed in a sense. Geographical, we saw a tremendous move in APAC, for example, almost 60% year-on-year growth in this specific quarter. So that's big and that's obviously contributed to the top-line revenue of the company. Technology-wise, we just recently announced reaching almost $2 million in AR in MediaPlus. This AR wasn't existing a year before. So obviously, technology is also a big contributor. And also efficiency, operational-wise, we can see the company is more efficient. SG&A is actually down by 6% in Q4 this year compared to the To the previous year, this means the company is putting more efforts in the second part of the year to be more efficient in terms of manpower, in terms of employment costs, and other operational costs. So that's from one side. And from the flip side, we can see the company generate almost $4 million in net cash flow from operational activity. So that means the company is growing and generating more cash as well. So I think like, yeah, everything worked for us in this quarter and you can definitely see it in the numbers.

Thank you, Omri. I want to focus on the APAC region, which impressive 58% growth in Q4. How do you plan to capitalize on this regional momentum in 2025 and for the future?

Yeah, so we glad to report and glad to see this region is moving fast for us. I would say we definitely growing the team. We growing the team in Hong Kong, we growing the team in Australia, and we building a backup team in Vietnam now that come with lower employment costs for us in this specific region. And I think that's, you know, part of, let's say, the efforts that we are doing. We're going to soon announce a very big client win, an important client win in this specific region as well. So stay tuned. So I think, like, we understand the opportunities there are for a company like Eto'o in this specific region, and we are doubling down on it. That's, I would say, the strategy for this specific region.

Thank you, Omri. And earlier in the call, you mentioned AI integration across R&D applications, the marketing solutions. Can you just elaborate on how AI is becoming a competitive advantage for Adcore in 2025?

Absolutely. Let's say I can almost not imagine our life without AI nowadays. And that's certainly, you know, like the level of integration that we already have using AI. I would say the following. A, if you look, let's say, at a team's efficiency and team able to scale up their activity, then I would say we more than double up our efficiency. So let's say development time. We can cut development time by more than 50% using AI. We can write more complex line of code. We can write better line of codes. So let's say whatever took us before, let's say six months to develop can take us in 2025, three months. So that's a game changer. And we see the same trend going to marketing solution as well, whether it's ad creative, ad copy, uh analyzing data you know everything that is related and as well ai is a big contributor as a contributor as well and i think if you're looking at let's say our application then we are deeply now integrating ai into different aspects of our application and there's a lot of very nice things coming your way you know from proposal for example and that's something we're definitely going to announce soon and going to release as well so i would say AI is a game changer. And whatever we saw in 2024, it's just the early beginning of AI in general and AI integration within EdCorp as well. And let's say it's a game changer for us and something that can basically accelerate the company growth moving forward.

Thank you, Omri. Moving over to the company's financial position today, sitting with $10.8 million in cash, strong free cash flow. What are the priorities for deploying capital in 2025? Is it M&A? Is it different investments or further geographic expansions?

Actually, a good question, I would say. I will start with the last one. GeoExpression, the company pretty much content with the current GeoExpression, bear in mind that it was already operating four different continent. So we have actually two offices or two location in North America, one in Toronto and one in the US. We have another two offices in China, one in Hong Kong and one in Shanghai. We have a very big team in Australia. We're actually building a backup team now in Vietnam as well. And we have the headquarters in Israel. So I think like geo-wise, we're pretty well spread. And I think like we already did most of the investment over there. So I don't see any big investment going to geographical investment in 2025. In terms of innovation, That's critical for us. And innovation and technology are going to continue to be there, you know, like what's leading the company growing the next coming years, and we're going to continue to invest over there. So that's something that we're definitely going to see more investment, but Again, it's not like we're not going to see a spike in investment. We're going to see a steady increase in investment as the company revenue grew. Also, the investment, the level of investment we allow ourselves to do in R&D is going to grow as well. Bear in mind that we can be more efficient with AI. So let's say That's compensated by the amount of investment we need to do in this specific sector. And I would say last but not least is M&A. M&A definitely needs to be an important tool or toolbox moving forward. I would say it's also very much dependent on the current market condition, right? If the stock price is going to be back again to where it should be and we see a positive momentum in the market, then I would say, yeah, definitely M&A should be very important assets for us and very important tool for us to utilize moving forward as well. So I would say no big investment. We can use most of the capital, as you know, just continue doing what we're doing. We can be more efficient now with AI and everything. No need to do any further geo investments. It's more about scaling up the activity. And if we can identify the interesting game and opportunities, that definitely should be on the company table moving forward.

Thank you, Omri. And moving over to MediaBlast. And earlier in the year, we shared an update on the Q4 performance. Can you give us an update on how the app has been performing year to date?

It's also a good question. I would say the following. A, comparing Q4 to Q1, it's a bit unfair because it's not exactly comparing apples to apples. Having said that, I can report that in Q1, let's say in February, which is a slow month with not a lot of days, we generate the same amount of revenues that we generate in December, which have more days than is the strongest month of the year. So that means this very strong momentum continues to be built into MediaBus. And I think in terms of active user in MediaBus, we are at all time high. So I think like the same momentum that we saw during 2024 carry well into 2025 as well.

Thank you, Omar. And a question from an attendee on the call asks, you know, our SaaS solutions, are these customers typically acquired through, you know, our agency services or how does the company go about looking for clients for some of our software solutions?

It's a good question. I would say it's an hybrid effort, right? Like a lot of inbound, a lot of clients that can be self-activated using the company website. So basically you can go online, register to the tool you want to test, maybe do a quick trial and basically take it from there. But I would say if it's a bigger client, if it's more enterprise type of client, we also have sales teams that can help them onboard it. So I would say it's an hybrid approach.

Thank you, Omri. And on the SaaS front, earlier in the year, we shared an exciting update about our newest app, Proposely. Can you just share an update on how the development's going and what's the updates there?

Okay, so I think Proposely is moving along Quite good. I would say it's developed to be a very robust solution for us. Again, when we talk about Proposly, actually, bear in mind, we're talking about two different apps, right? We're talking about the back-end CRM for the company to manage all of the sales flow, and we're talking about client portal, the portal that the clients can log in and basically get everything, get the price quote. the agreement, the payment, the project update, and everything like that. I would say we're still in the very early stages of the beta release of this product, but we anticipate to still be on track of, let's say, looking at full release in the early part of the second part of 2025. Very promising, a lot of AI, very interesting and exciting AI integration that we're going to announce soon also related to Proposely. So there's a lot to wait for proposal, I would say. I'm personally very excited about this opportunity, to be honest.

Me too, Omri. And additionally, this is more of a macro question. You know, there's been a lot of news about tariffs and how they will affect different businesses. Can you just provide some color on how tariffs might affect Adcor and its U.S. business or global business?

That's a fair question. Maybe Amit, you would like to comment on this one. I don't consider myself a tariff expert nor a political expert, to be honest. I'm just like an humble CEO.

I don't think there will be much of an impact from the tariff side on our activity. we sell less of a product, so I believe it will have much less impact on us, so.

Yeah, we don't really dig all from the ground or shift cars from one side of the border to another. So we sell, even if it's software, we sell software as a service, obviously, or just like a marketing solution. So I think like for the company like Edco, that's not actually going to impact us so much. Also bear in mind that we're quite a global company. So we have like subsidiaries around the globe and we can act locally in each market almost.

Okay, thank you, Omri. I think we got one more question here. It's management previously talked about aiming for 10% net profit margin over time. Is this kind of still the goal for the company or can you share some information there?

Again, sorry?

The company has previously discussed aiming for a 10% profit margin, you know, in their financials. Is that still the goal today or what's kind of the goal for the company and the financials?

Yeah, I mean, we still very much stand behind this profitability target. I think like already, let's say in Q4, which was one of the best quarter, if not the best quarter the company ever reported. We can see, you know, like a positive operational profit, very positive adjusted EBITDA, a record in gross profit as well. So I think like, yeah, that's the type of numbers we would like to report from one end, from the other end. Bear in mind that Edco is still a young, relatively, let's say as a public company, a young company, and we still very much would like to focus on growth as well. So we need to almost find the balance between how, let's say, operational efficient we are and how much we would like to be aggressive in growing as well. So again, that's a fine balance, but we believe we're doing a good job so far finding this balance.

Thank you, Omri. That concludes the Q&A session for today. I want to thank Omri and Ami for your contributions on this call. And thank you, our investors and attendees, for joining. Omri, I'll let you finish off the call with any ending thoughts you might have.

No, I mean, I can only wish every quarter that we're going to report is going to be as robust as this quarter. And I'm very excited about what's going on, you know, in the company, both in the tech front and the momentum we see in the different markets as well. And I believe that if everything is going to go according to our plans, 2025 can be even a better year than what we had in 2024. end up to be so i'm very excited about what about to achieve in 2025 and i want to thank everyone who participated in today call as well thank you again omri and be sure to follow closely thank you all for joining and have a great rest of your day thanks guys