This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: Good day and welcome to the Zoom Technologies third quarter 2021 update conference call. I'd like to turn the call over to Ben Champsion with Latham Partners. Please go ahead.
spk00: Thank you for joining us today for Zoom's third quarter 2021 update conference call. With us on the call representing the company today is Amit Bahansky, 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 and 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 you can find on CDAR and Zoom's website. Today's discussion will include adjusted financial measures, which are non-IFRS measures. These should be considered as 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 Bohensky, founder and chairman of Zoom. Amit, please proceed.
spk01: Thank you, Ben, and good morning to all of you. Some highlights. Today, I'm going to provide an overview of our achievements for the third quarter of 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 and beyond. Q3 is the fourth consecutive quarter of growth in both revenue and adjusted EBITDA, achieving a revenue record per quarter of $16 million and a record revenue growth rate of 141% year-over-year. Our strong revenue growth is coming from two fronts, securing new clients and increasing our share of user acquisition budget within our existing clients. I will discuss each of these avenues separately. First, with regard to new clients, 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. A list of our top clients now include names such as Tony Entertainment, eToro, and more international brands. We have also extended our geographic footprint into well-going geographies such as Latin America and Asia. we have been successfully in providing these new clients increased channels of distribution for their apps, ultimately driving user acquisition. Our user acquisition platform has been integral in enabling these clients to manage their multiply campaigns through a single system, allowing for greater time savings and efficiency with real-time control. Our Macy's data platform which analyzes hundreds of millions daily events, has enabled our customers to grow greatly with limited additional resources, giving the ability to scale immediately by demand. With regards to our existing customers, they are increasing their user acquisition budget with us as they are seeing strong returns on their investment. We are seeing increasing allocation of advertising budgets in our platform and services. This is a testament to our unique technology, which is driving the key concept of our platform, which is multiply media integrations, all user acquisition campaigns under one place, saving precious time and having clear visibility of all media sources. While we are happy with our current pace of growth, we believe that a good opportunity for revenue, margin, additional client audience valuation extension is our self-serve SaaS product. In H1 2021, we announced the soft launch, which is a design partner phase of self-serve SaaS-based campaign management software. During Q3, we successfully finalized the design partner phase, embedding and implementing all important product insights taken into our partner. During the next month, we plan to onboard the first bunch of clients. From that milestone to fully publicity and open product to all. Executing the company's vision of automation and centralization via Salesforce products. These products will unlock our capacity to attract more small and mid-organizations and customers. Before I begin with my remarks regarding the details of our record third quarter, I wanted to take a step back and provide everyone a bit of an overview on our business. Zoom offers a mobile self-user acquisition platform integrated with a majority of global digital media channels to app owners focused on user acquisition to more efficiently manage ad budgets and deliver them paying customers and growing ROI. In addition, we provide a site search engine to publishers which also provide us valuable data. We have two main unique selling propositions. First, is our search data. Not only the quantity of the data that we have, but the quality. Because we also get our data via on-site search queries coming from our publishers, our queries are intensive, but we are not doing much guessing. Our second unique selling proposition is our platform. We act as a layer on the mobile media ecosystem, integrating and unifying hundreds of media sources into one unified place, offering advertisers a user acquisition control center for managing all your customer acquisition campaigns using a single platform. By unifying all these media sources into a single platform, Zoom saves advertisers significant resources that would otherwise be spent operating multiple advertising systems, consolidating data sources, thereby maximizing data collection and data insights while minimizing the resources spent on the operation. Our data platform concept has translated to stronger ROI and KPI results for our clients. And now, I will turn your attention to some highlights for the third quarter. The third quarter was another record quarter for Zoom as we achieved revenue growth of 141% year over year and 43% growth compared to Q2 2021. We are also focusing on the bottom line as we achieved $1.6 million in an improvement in adjusted EBITDA compared to minus $1.9 million adjusted EBITDA in Q3 2020, an improvement of $2.5 million and more than $5 million for the nine-month period ended 30 September 2021, compared to the same period in 2020. We generate $1.7 million in cash closed for operations compared to minus $1 million cash flow in Q3 2020. 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 our growth prospects are vast. And with more time and marketing, more companies will come to learn about our value proposition. Now let's speak about financial results. I will review the third quarter of the financial results in detail. Revenue. Revenue in the third quarter increased in 141% year-over-year to $16 million. The increase in revenue is primarily results of onboarding of new clients in recent months, growing existing accounts and the company's expansion 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 have being successful attracting new clients in growing sectors as e-commerce, iGaming, gaming, and fintech. Our recent engagement demonstrates that the value and high returns on user acquisition investment that we provide on 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 And at an infancy level, our new clients are in industries that are experiencing robust growth. During Q3, Apple released iOS 15 with further strict privacy limitations and ad tracking restrictions. We are seeing minimum effect on us as our platform business logic is built in a model where we are indifferent to which integrated media sources we should piece or plus amounts. We aren't tying up to any leading media giant. We are getting a bigger portion out of the budget. Close margins. Close profit margin was 29% compared to 31% for the same period in 2020, reflecting the typical lower margin achieved by starting phases of new client relationships. As for the R&D, research and development expenses for the third quarter were $1.2 million, a 27% decline compared with the same period last year. The decrease in research and development expenses mainly reflects the basic completion and launch of the company's SaaS product that during the quarter we capitalized roughly $0.4 million of R&D expenses. It is our view that capitalizing a portion of the R&D expenses in common industry practice within technology sector. SG&A, selling, general, and administrative expenses for the third quarter were $2.5 million, a 31% increase year over year, reflecting the expenses brought from the performance revenues acquisition, as well as increase in sales department bonuses as part of the significant growth in revenue. 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 adjusted EBITDA as net loss less than depreciation and amortization and share-based payment. We are pleased to have achieved a positive EBITDA of $1.6 million versus negative $0.9 million in Q3 of 2020. The increase in adjusted EBITDA was primarily attributed to strong revenues. We achieved an increase of $5.2 million for the nine-month end of September 30, 2021, compared to the same period in 2020, and anticipates a continuation of adjusted EBITDA's strong profitability. A full reconciliation of the adjusted EBITDA is available in our MD&A file. Cash flow wrap-up. We have $3.2 million in cash on the balance sheet as of September 30, 2021. In addition, we had trade receivables of $10.7 million versus $4.6 million for the same period last year. Given our expectation to remain adjusted EBITDA profit in 2021, we feel comfortable with the current cash balance. And 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 of additional clients, new products, new customers required via our recent acquisition of performance revenue, as well as potential for further M&A activities. We are also happy that we have turned dividend and cash flow positive in 2021. I want to thank to all our employees for their hard work and 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.
spk00: Thank you, Amit. We have some questions for you. You mentioned part of a strong revenue growth is coming from taking larger allocation of clients' user acquisition budgets. What is compelling these clients to take resources away from others and giving it to Zoom?
spk01: Well, challenge comes to us for results, for acquiring new users to their business. Usually, they start with a test budget and grow from that point. We try to 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, category, or geolocation. As we keep archiving customer KPIs, they will grow and spend higher budgets with Zoom that can supply the demand. On top of that, as mentioned earlier, the new iOS changes have made us get a bigger portion of the budget as advertisers are seeking for new sources for acquiring new users.
spk00: Thank you. Can you talk about why you're so excited about the self-serve SaaS product?
spk01: The SaaS is based on our platform. It is our first self-serve product we are launching with recurring SaaS-based business model. It works in full transparency, integrated to the advertiser's ad account. We are focused on supplying a wide set of self-serve features providing valuable insights and abilities for maximizing their budget, saving them time by automating ongoing activities and optimization campaign management tasks.
spk00: Thank you. You mentioned Zoom was less hurt by the iOS 14 and 15 changes Apple has rolled out. Can you explain in simple words why Zoom isn't hurt as most digital media companies are?
spk01: Apple rolled out market-changing privacy limitation that has recently published costs, Facebook and other internet giants, 10 billions of billions of dollars only in Q3. Apple's updates are changing the way advertisers and media companies can and targeting potential users. It's hurting companies that hold their own media assets and inventory, such as Facebook and Google, as they are the biggest digital media companies globally. Since Apple changes advertisers and targets in less accurate ways, as Apple aren't disclosing the device and user identifiers, that means that the media channels can't know this is the user the advertiser is looking for. Zoom platform acts as a layer on the digital media ecosystem. It's integrated to hundreds of media sources as a layer on top of them. When running a user acquisition campaign for a customer of ours, the platform splits the budgets between the media channels. Apple's changes just caused the split on Zoom's platform to be different. Not to be less, but different. To focus on best performing sources that have changed and aren't changed automatically, Facebook, for example, as it was prior to the changes. This is also causing, in some cases, for our cut in the budget to grow as a customer. We are able to deliver results better and more in scale than other options. Taking into consideration that Zoom is integrated to all major media sources, It makes sense to manage the budget on Zoom platform as you aren't missing any media channel. Just saving time and focusing on the ones that work regardless to who these channels are.
spk00: Thank you, Amit. How is Zoom getting ready and prepared for the future market changes? Based on what we're seeing, feeling, and forecasting, what do you think about the future market changes?
spk01: Based on what we are seeing, feeling, and focusing, we are perfectly positioned to the future because of these main reasons. One, privacy issues such as iOS 14 doesn't hold its own media. Our platform is a layer on all media channels. Every change the media channel will do to support private changes, Zoom will enjoy it. Two, transparency. The advertising world has been the transparency area for the last two years. That means that advertisers want to know where their budget is going, to know exactly what publishers are displaying the ads and where, and how much did the view, clip, and conversion cost. This is, compared to a situation where the advertiser pays only for results, performance without knowing where the ad was displayed and without knowing how much that impression costs. They are paying just for results. Our self-serve products work in full transparency. Advertisers will know exactly where the ad spend has been displayed and how much each part of the conversion funnel costs. Three, self-serve models. A growing amount of companies prefer operating their campaigns by themselves. Advertisers are looking to manage all the digital advertising funnel internally to pay for the software, for all the results, but to operate it by themselves. Our self-serve products were planned and built mainly to answer this need, fit to direct advertisers and not only to agencies.
spk00: Thank you, Amit. That's the time, all the time we have today. My thanks to everyone for participating on today's call. We look forward to hopefully speaking with you all soon. Thank you.
spk02: Conference is now concluded. Thank you for attending today's presentation.
Disclaimer