Zoomd Technologies Ltd.

Good day, and welcome to the Zoom Technologies fourth quarter and fiscal 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 today for Zoom's fourth quarter of 2021 conference call. With us, represented company 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 the forward-looking statements that are based on current assumptions and subjects 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, 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 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, the 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 achievements for the fourth quarter and full year of 2021. and provide you with an update to 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 2022 and beyond. 2021 was a strong year for Zoom. we achieved record revenues of $53 million, an increase of 107% versus 2020. We also achieved record positive adjusted EBITDA of $5.8 million in 2021 versus negative adjusted EBITDA of $2.6 million in 2020. The fourth quarter is the fifth consecutive quarter of growth in both revenue and adjusted EBITDA. Our strong revenue growth is coming from two fronts, securing new clients and increasing our share of user acquisition budget within our existing client. I will discuss each of these venues separately. With regards 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. The list of our top clients now include names such as Sony Entertainment, eToro, and more international brands. We have also expanded our geographic footprint into Bergo joining geographics such as Latin America and Asia. We have been successful 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 multiple campaigns on a single system, allowing for greater time-saving and efficiency with real-time control. Our platform enabled our customers to grow their user acquisition with limited additional resources, giving the ability to scale immediately by demand. With regard to our existing customers, They are increasing their user acquisition budgets with us as they are seeing strong returns on their investments. We are seeing increasing allocation of advertising budgets in our platform and services. This is a testament of our unique technology, which is driven from the key concept of our platform, multiple media integration. All user acquisition campaigns under one place, saving precious time, testing many channels, considering efficient targeting for all media sources. In 2021, Apple released the iOS 15 with further strict privacy limitation and ad-strucking 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 source we should bid close amounts. We haven't tied up any of the leading media giants. We are getting bigger portion out of the budget. While we are happy with our current pace of growth, we believe that a good opportunity for revenue, margin, additional client audiences, and valuation expansion is our self-serve product. In 2021, we announced the soft launch of a self- serve-based campaign management software. That includes various business models as performance and transparent and SaaS-based business models. From performance, transparency, and annual SaaS-based business model, our self-serve product will unlock our capacity to attract more small and mid-range organizations and customers. In March 2022, we announced the acquisition of Albert, a U.S.-based artificial intelligence marketing platform for advertising, driving fully autonomous digital campaigns for some of the world's leading brands. While we are also releasing our products onto a self-service mode and SaaS business model, Albert enhances our efforts immediately with additional offerings that cover branding and awareness needs. In addition, Albert has a number of Fortune 500 customers that will now be able to use our products and services. We have provided additional information regarding the acquisition in our upcoming financial statements and MD&A filings. Before I begin with my remarks regarding the details of our record fourth quarter, I wanted to take a step back and provide everyone a bit of an overview of our business. Zoom offers a mobile-first acquisition platform integrated with a majority of global digital media channels to app owners focused on user acquisition. to more efficiently manage their budgets, their ad budgets, and deliver them, paying customers and growing return of investment. 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 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 intent based thus we do not need to do too 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 unlimited place, into unified place, offering advertisers a user acquisition control center for managing all new customer acquisition campaigns using a single platform. By unifying all these media sources onto a single platform, Zoom serves 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 operation. Our data platform concept has translated to strong return on investments and KPI results for our clients. And now I will turn to your attention to some highlights for the fourth quarter. The fourth quarter was another record quarter for Zoom as we achieved revenue growth of 183% year-over-year and acceleration from 141% year-over-growth we achieved in Q3 of 2021. We are also focusing on the bottom line as which achieved $2.7 million in adjusted EBITDA. That's 15% margin for adjusted EBITDA of revenues, demonstrating the ability of our business to leverage. Financial results. Now I will review the fourth quarter financial results in details. For revenues. Revenues in the fourth quarter increased 183% year over year to $18.7 million. The increase in revenues continues to be a result 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 success in attracting new clients in growing sectors, such as e-commerce, iGaming, gaming, and fintech. 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 those clients, our goal is to expand and grow these relationships, which are currently at infancy level. Our new clients are in industries that are experiencing robust growth. Gross margin. Gross profit margin for the fourth quarter was 30% compared to 33% for the same period of 2020, reflecting more social media advertising portion that is known to be with lower profit margin. The R&D. Research and development expenses for the fourth quarter were $970,000. a 16% decline compared with the same period last year, reflecting the capitalization of the R&D cost as the company reached its technical feasibility from the development of its SaaS platform. It is our view that capitalizing a portion of the R&D expenses is common industry practice within the technology sector. SG&A. Selling general and administrative SG&A expenses for the fourth quarter were $2.6 million, a 43% increase year over year, primarily reflecting increase in sales department bonuses as the result of increased revenues and the expenses incurred as a result of new employees joining the company, mainly after the acquisition of performance revenues. EBITDA. Adjusted EBITDA is used as a primary performance measure by the company's management to ensure it has the right structure to support fourth growth. We define adjusted EBITDA as net loss depreciation and amortization and share-based payment. We are pleased to have achieved positive adjusted EBITDA of $2.7 million, or 15.2% of revenue for the fourth quarter comparing a negative adjusted EBITDA of $144,000 for the same period of 2020. The increase in adjusted EBITDA was primarily attributed to strong revenues. We expect to continuously achieve adjusted EBITDA, strong profitability going forward. A full reconciliation of adjusted EBITDA is available in our MD&A filings. We have $5.2 million in cash of the balance sheet as of December 31, 2022. Given our expectation to remain adjusted EBITDA profits in 2022, we feel comfortable with the current cash balance. And now for some concluding remarks. While 2021 was a very strong year for Zoom, we are even more excited about our prospects in 2022. Our clients are continuing to increase their budgets with us, and we have strong pipelines of new customers. In addition, In March of 2022, we announced the acquisition of Albert, which adding strength and versity to our products, offering our visibility into revenues going forward has never been clearer, and that is why we are introducing our 2022 revenue guidelines range of $74 to $80 million, which represents up to approximately 50% year-over-year growth. 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.

Thank you, Amit. We have some questions for you. First, you mentioned part of the strong revenue growth is coming from taking larger allocation of the client's user acquisition budgets. What are compelling clients to take resources from others and give it to Zoom?

Clients come 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 geography. As we keep achieving 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.

Great, thank you. How is Zoom getting ready and prepared for the future market changes?

Based on what we are seeing, feeling, and forecasting, We are perfectly positioned to the future because of these main reasons. One, privacy issues such as iOS 14, Zoom doesn't hold its own media. Our platform is a layer on all the media channels. Every change the media channel will do to support privacy changes, Zoom will enjoy it. If that channel stops performing, the platform will just move to the other channels to generate the needed performance. Transparency. The advertising world has been transparency area for the last two years. That means that advertisers want to know where the budget is going, to know exactly what publishers are displaying, where the publishers are displaying the ads, and how much did the view click conversion cost. This is compared to the situation where an advertiser pays only for results without knowing where the ad was displayed without knowing how much impression costs. They are paying just for results. We have the ability to provide and work in full transparency. Advertisers know exactly where the ad has been displayed and how much each part of the conversion funnel costs. And last, self-serve model. A growing amount of companies start prefer operating their campaigns and looking to manage all the digital advertising funnel internally. to pay the software or the results, but to operate internally. Our self-serve products were planned and built mainly to answer these next-to-direct advertisers.

Great. Can you talk about the Albert acquisition and what it brings to the table for Zoom?

Albert offers its clients fully autonomous digital campaigns, The Albert platform processes and analyzes audiences and tactical data at scale, thereby autonomously allocating budgets and optimizing creative and evolving campaigns across paid search and social media. Albert is focused higher on marketing funnel, more on branding and awareness side. With the acquisition of Albert, we will be able to offer our clients more digital channels to advertising, a wider reach of people and for more advertising objectives.

Thank you. Looking forward to 2022, what could you expand on and elaborate in regards to the company's growth plans?

Management is introducing its revenue outlook for 2022 and anticipates revenue growth from 53 to range of 74 to 80 million dollars. This reflects the following assumptions. New customers acquired primarily during the year of 2021 through the beginning of the year 2022, which are expected to increase their marketing spend as they become more familiar with the platform, the services, and the results. New customers that management expects to acquire as a result of newly launched self-serve projects, as well as from the Albert portfolio. Geographical expansion in Asia, Africa, and Latin America. The post-COVID-19. The year 2022 is the first year that is starting with a post-COVID-19 economic feeling. On a global level, Consumers have adapted to the digital changes in financial services, e-commerce, gaming, and more that were bought about the results of COVID-19, but are keen to get back to normal, with no social limitations and restrictions. This will positively affect categories such as travel, sports, events, lifestyles, and many more that after two years are starting the year with positive growth indicators. The FIFA World Cup will be held in 2022, and we expect that the sport category advertising budget will be boosted as a result. Category expansion to the upcoming rise of Web3, promoting dedicated metaverse digital assets for brands.

All right. Thank you, Amit. And many thanks to everyone for participating in today's call. We look forward to speaking with you shortly. Thank you, everyone.

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