Zoomd Technologies Ltd.

Good day, and welcome to the Zoom Technology Second Quarter 2021 Update Conference Call. I would like to turn the call over to Ben Shamsian with Lithium Partners. Please go ahead, sir.

Thank you for joining us today for Zoom's Second Quarter 2021 Update Conference Call. With us on the call representing the company today is Amit Bohansky, Zoom's founder and chairman. At the conclusion of today's prepared remarks, Amit will answer some questions that were sent to us by investors and other questions we think are relevant to investors as well. Before we begin with prepared remarks, just a couple of comments. Today's call will contain forward-looking statements that are based on current assumptions and subject to risk and uncertainties that could cause actual results to differ materially from those projected a company undertakes The company undertakes no obligation to update these statements, except as required by law. Information about these risks and uncertainties are included in the company's filings, as well as periodic filings with regulators in Canada and the United States, which can be found on CDAR and on Zoom's websites. Today's discussion will include adjusted financial measures, which are non-IFRS measures. these should be considered a supplement to and not a substitute for IFRS financial measures. Finally, today's event is being recorded and will be available for replay through the webcast information provided in the press release. With that said, let me turn the call over to Amit Bahansky, founder and chairman of Zoom. Amit, please proceed.

Thank you, Ben, and good morning to all of you. Today, I'm going to provide an overview of our achievement for the second quarter and provide you an update on the opportunities that we believe will drive the growth in Zoom going forward. The hard work of our entire team has positioned Zoom well for revenue and profitability growth in 2021. Over the past year, we have focused on diversifying our client base by securing new customers in sectors such as e-commerce, iGaming, Gaming, and Fintech. The list of our top clients now includes names as Getir, a leading Turkish delivery company, Cyberstep, Tureba, the inventor of physical digital crane machine games, and Crypto.com, a leading global cryptocurrency app. We have been successful in providing these new clients increased channel of distribution for their apps, ultimately driving user acquisition. Our user acquisition platform has been integral in enabling these clients to manage their multiple campaigns on a single system, allowing for great efficiency and real-time control. Our massive data platform abilities has enabled our customers to grow greatly with limited additional resources. In Q1 of 2021, we announced the soft launch of our self-serve product, a SaaS-based campaign management software. This product, using very little human intervention, will unlock our capacity to attract and service more customers. As a service-based company, we expect to enjoy stronger gross margin. While it is early days, we are quite happy with the customer reaction thus far. We believe the industry is waiting for a product like this and the COVID has only accelerated this need. In February 2021, we announced the acquisition of performance revenues. a leading international mobile marketing and influencer company. We are excited about the great set of clients that Performance Revenue has, including private and publicly traded companies from all around the world with names like Sony Entertainment. Our engagement with Sony Entertainment is a great example of our ability to grow with our clients, providing them high returns on the user acquisition investment, in addition to relationships that demonstrate our ability to provide incremental value-added services to a single customer, a key component. Before I begin with my remarks regarding the record second quarter, I wanted to take a step back and provide everyone a bit of an overview on our business. Zoom offers a digital user acquisition platform integrated with a majority of global digital media channels to app owners, focused on user acquisition to more efficiently manage their ad budget and bring them paying customers and growing ROI. In addition, we provide a site search engine to publishers, which also provides us valuable data. We have two main unique selling propositions. First is our search data. Not only quantity of data that we have, but the quality, because we also get our data via on-site search queries coming from publishers. Our queries are intent-based, but we are not doing much guessing. Our second unique selling proposition is our platform. We act as a layer on the ecosystem, integrating and unifying to more than 600 media sources into one unified dashboard, offering advertisers a user acquisition control center for managing all new customer acquisition campaigns using a single platform. By unifying all these media sources into a single platform, Zoomed saves advertisers significant resources that would otherwise be spent consolidating data sources, thereby maximizing data collection and data insights while minimizing the resources spent on the exercise. Our data platform concept is translated to strong ROI and KPI results for our clients. And now, I will turn your attention to some highlights for Zoom the second quarter. In the second quarter, we continued our aim to return Zoom consistent top-line growth as we achieved revenue growth of 97% year-over-year, making Q2 of 2021 a record quarter. We also kept our focus more profitable business, thus expanding our gross margin 200 basis points year over year. As part of our emphasis on gross margins and profitability, in the fourth quarter of 2020, we began to decrease engagement level with some major customers that were not profitable. We are maintaining our 2021 revenue growth assumption of 30% to 40% that reflects a $33 to $36 million. Given our year-to-date performance and our current visibility, we view this guideline as quite conservative. I want to remind investors that we are a young company, publicly traded for about two years, and in our short life, our technology and products have been positively recognized by the industry. It is our belief that that our growth prospects are vast, and with more time and marketing, more companies will come to learn about our value proposition. Financial results. Now I will review the second quarter financial results in detail. For revenues. Revenues in the second quarter increased 97% year over year to 11.1%. The increase in revenues is primarily a result of onboarding of new clients in recent months, growing existing accounts and the company's expansions into gross geographies such as Latin America and Asia. In addition, deployment of new services and features combined with the integration of our latest acquisition has generated strong revenue growth during the quarter. On our previous calls, we noted that we had been successful in attracting new clients in growing sectors as e-commerce, delivery, iGaming, gaming, and fintech. In Q2, we added more new names to our top 10 customer list. Our recent engagements demonstrate the value and high returns on user acquisition investments that we provide to our clients. While we are enthusiastic about our ability to recruit these clients, our goal is to expand and grow these relationships which are currently in a fancy level. Our new clients are industries that are experiencing robust growth. Growth margins. Growth profit margin increased 200 basis points to 33% compared to 31% for the same period into 2020. As mentioned before, the increase in gross margin was primarily attributable to our decision to disengage from some of our non-profitable customers. We will continue to focus on profitability and expect to continue to achieve strong gross margin going forward. R&D. Research and development expenses for the second quarter were $1 million, a 37% decline compared with the same period last year. The decrease in R&D expenses mainly reflects the basis, completion, and launch of the company's self-serve product that during the quarter we capitalized roughly $0.4 million of R&D expenses. It is our view that capitalizing of a portion of R&D expenses is common industry practice with technology sector. SG&A. Selling general and administrative expenses for the three months ended June 30, 2021, were $2.03 million dollars. a 28% increase year-over-year, reflecting the expenses brought on from performance revenue acquisition as well as increased marketing expenses in line with company growth objectives. EBITDA. Adjusted EBITDA is used as a primary performance measure by the company's management to ensure it has the right structure to support future growth. We define EBITDA adjusted EBITDA as net loss less than the depreciation and amortization and share-based payments. We are pleased to have achieved a positive adjusted EBITDA of $1.3 million versus negative $760,000 in Q2 of 2020. This is more than $2 million improvement. The increase In adjusted EBITDA was primarily attributed to strong revenues and growth margins. We anticipated the continuation of that to continue with the adjusted EBITDA profitability also for the balance of 2021. A full reconciliation of adjusted EBITDA is available in our MDA filing. Cash flow and wrap-up. We have $2.5 million in cash on the balance sheet as June 30, 2021. Given our expectation to remain adjusted EBITDA positive in 2021, we feel comfortable with the current cash balance. Now for some concluding remarks. We remain excited about our prospects for revenue growth in 2021. steaming from increased budgets from our current clients, bringing on additional clients also via our new launch SaaS products, new customers acquired via recent acquisition from performance revenues, as well as potential for further M&A activity. We are also happy that we have turned EBITDA and cash flow positive in 2021. I want to thank all of you, all of our employees, for their hard work, dedication, as well as our investors who have supported us. With that said, I will answer some of our investor questions and some questions that may be of interest to our investors.

Thank you, Amin. We have some questions for you. In the last couple of quarters, you have been successful in acquiring some great customers in growth segments such as e-commerce, fintech, and gaming. But more importantly, these clients, in a short period of time, have increased their budgets with Zoom. What are they seeing that is compelling them to spend more money with you?

Well, each client comes to us for results, for acquiring new users. They start with a test budget and grow from that point. we achieve our customers' KPIs using our platform. As it's integrated to hundreds of media sources, we have the needed ad inventory for almost any budget. As we keep achieving customer KPIs, they will grow and spend higher budgets with Zoom that can supply the demand.

Thank you. Can you talk about the whole ad tech or mark tech industry in general? It seems to have a renewed resurgence. in the last nine months, what is changing here and what is causing the growth?

Indeed, the industry is in a growth and high adoption rate, digital adoption. First, COVID gave the digital world a huge boost. A lot became digital more or less overnight. All these new existing digital assets need to be promoted via digital media. Another main catalyst is mobile screen time that grew in more than 25% because of the pandemic. That means people are downloading more and are a lot more engaged prior to the pandemic.

Thank you. Can you talk about the performance revenues acquisition? What benefits have you seen so far?

The benefits in the acquisition of performance revenues are divided mainly to these two. One, new customers. Prior to the acquisition of performance revenues, we worked mainly with gaming companies that post-acquisition became Zoom customers. In some cases, we were able to increase revenues drastically. In Sony Entertainment's case, revenues have increased dramatically comparing prior to the acquisition. Employees. Performance revenue employees are highly experienced in the industry, and especially in the gaming, content, and influencers industry. Adding employees with this expertise to Zoom teams gave us an extra advantage of diversified talent as part of Zoom.

Thank you. The performance revenue acquisition has thus far been successful, and you have talked about more M&As. What kind of companies are you looking at and what parameters are you interested in?

We are always looking for great companies that can join Zoom family and share our vision. We are looking for companies that act in the SaaS arena, focused on user acquisition, analytics media, buying, and predictions. Vertical targeted media or analytical solutions are also an area we are looking to expand our offering by M&A.

Great. Many thanks to everyone for participating in today's call. We look forward to speaking with you all again shortly.

The conference has now concluded. Thank you for attending today's presentation.