Zoomd Technologies Ltd.

Today and welcome to the Zoom Technologies first quarter fiscal year 2022 update conference call. I would now like to turn the conference over to Ben Shambian with System Partners. Please go ahead, Ben.

Thank you for joining us today for Zoom's first quarter 2022 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 out 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 risks 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 measures. 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 Bohansky, founder and chairman of Zoom. Amit, please proceed.

Thank you, Ben, and good morning to all of you. I'll start with some highlights. Today, I'm going to provide an overview of our achievements for the first quarter of 2022, but more importantly, I'm excited to share with you the multiply revenue and profitability growth opportunities ahead of us in 2022 and beyond. The first year of 2022 was another strong quarter for Zoom, as we grew revenues 140% year-over-year to $16.2 million. We also achieved robust positive adjusted EBITDA of $1.9 million or 12% margin. The first quarter is the sixth consecutive quarter of growth in revenues on a year-over-year basis. Our strong revenue growth continues to stem from two points. First, securing new clients, and second, increasing our share of user acquisition budgets within our existing clients. I will discuss each of these avenues separately. First, regards to the new clients. Over the past two years, we have focused on diversifying our client base by securing new customers in hyper-growth sectors such as e-commerce, iGaming, gaming, education, and fintech. The list of our top clients now includes names such as Sony Entertainment, eToro, and shame. For those who are new to Zoom's story, I want to take a step back and speak about the evolution of our client base. During our early years before 2020, our largest customer sectors were sports and live events. At times, we have referred to those customers as legacy customers. With onset of the COVID-19 pandemic in 2020, and the shutting down of all the outdoor activities, including sports and live events, the advertising budget of these companies naturally dwindled. We at Zoom reacted quickly and decisively to acquire customers in sectors that were benefiting from the pandemic, including e-commerce, gaming, and fintech. As a result, we have achieved six straight quarters of growth, I'm excited to share with you that with the warning of the pandemic, we are beginning to see the budget of those legacy customers come back. Forecasters are expanding worldwide travel to rebound strongly in 2022 and 2023 due to the pent-up demand of consumers. With regards to sports, forecasters are expecting high growth rates. We are looking forward to the World Cup this year. Typically, the World Cup is held in July. However, this given that host country, Qatar, and quite hot in July, it will be held in November. As such, we're expecting to see the revenue bump from this category in the fourth year. We have also expanded our geographic footprint and burgeoning geographics such as Latin America, Asia, and North America. Although the emerging markets have been very strong for us, I'm excited to say that in recent months, the growth in North America has accelerated, driven by the fintech sector and our recent acquisition of performance revenues and Albert AI. We have been successful in providing our 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 multiple campaigns in one place, allowing for greater time saving and efficiency. Our platforms enable our customers to grow their user acquisition 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. They are seeing strong returns on their investments. we are seeing increasing allocation of advertising budgets to our platform and services. This is a testament to our unique technology and high-level service, which is driven from the key content 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. Now, I would like to speak a bit regarding privacy issues, which is a hot-button topic in the tech world. In 2021, Apple released iOS 15 with further strict privacy limitations and ad tracking restrictions. We are seeing minimum effect on us as our platform business logics is built in a model where we are indifferent to which integrated media source we should bid plus amount. We aren't tied up to any leading media giant. While we are happy with our current pace of growth, we believe that a good opportunity of revenue margin, additional client audiences, is also our self-serve, self-serve-based campaign management software. As such, This business model provides the transparency that our customers look for. In addition to our self-serve products, it can unlock our capacity to attract more small and mid-range organizations and customers. In March, we announced the acquisition of Albert, a U.S.-based artificial intelligence digital marketing platform for advertisers, driving fully autonomous digital campaigns for some of the world's leading brands. I want to take a minute to point out the strong synergies and benefits of this acquisition. Albert, at its core, it is a social media and search platform focused largely on Facebook and Google. Zoom is less focused on social and search media. As such, Albert allows Zoom to offer wider types of campaigns, including more solutions to our clients. While we are also releasing our products onto a self-serve mode and SaaS business models, Albert is a pure SaaS company which enhances our efforts immediately with additional offerings that cover branding and awareness needs. Furthermore, Albert comes with a great team of talented professionals. As you may know, the market for qualified talent especially in the West, is quite difficult. And we are fortunate to have the team members of Albert join the Zoom family. And finally, Albert has several Fortune 500 customers that will now be able to use our products and services. We have provided additional information regarding the acquisition in our financial statement and MD&A findings. Before I begin with my remarks regarding the details of the first quarter, I wanted to provide everyone a bit of an overview on our business. Zoom offers a mobile first user acquisition platform integrated with a majority of global digital media channels to app owners, focused on user acquisition to more efficiently manage their budget and deliver them paying customers and growing return of investments. In addition, we provide a site search engine to publishers, which also provides us valuable data. Our main unique selling proposition is that 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 new customers' acquisition campaigns. 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 strong return of investments and KPI results for our clients. Now, I will turn your attention to some highlights for the first quarter. The first quarter was another strong quarter for Zoom as we achieved revenue growth of 140% year-over-year. We are also focusing on the bottom line as we achieved $1.9 million in adjusted EBITDA. That's 12% margin for adjusted EBITDA of revenue, demonstrating the ability of our business leverage. Financial results. Now I will review the first quarter financial results in detail. For revenues, revenues in the first quarter increased 140% year-over-year to $16.2 million. The increase in revenue continues to be a result of onboarding of new clients in recent months growing existing accounts to the company's expansion into gross geographies such as Latin America, Asia, and North America. In addition, deployment of new services and features combined with the integration of our latest acquisitions has contributed to strong revenue growth during the quarter. We have been successful in attracting new clients in growing sectors such as e-commerce, iGaming, gaming, education, and fintech. Our recent engagement demonstrates the value and high returns on user acquisition investment 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 at infancy levels. Our new clients are in industries that are experiencing growth. Growth margins. Growth profit margin for fourth quarter was 30% compared to 35% for the same period in 2021, reflecting more social media advertising portion that is known to be with lower profit margin. R&D. Research and development expenses for three months ended March 31, 2022 were $1,234, a 17% increase year-over-year, primarily reflecting the capitalization of software development costs. SG&A. Selling general administrative expenses for three months ended March 31, 2022 with $2,633,000. 34% increase year-over-year, primarily reflecting increase in sale department bonuses as the result of increased revenues and as a result of some new employees joining to the company. 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 earning before interest, tax depreciation, and amortization, as adjusted for share-based payments and non-recurring operating expenses. We are pleased to have achieved positive adjusted EBITDA of $1.2 million, or 12% of revenues for the first quarter, comparing to adjusted EBITDA of just $63,000, for the same period in 2021. The increase in adjusted EBITDA was primarily attributed to the significant increase revenue growth. We expect the continually achieved adjusted EBITDA strong profitability going forward. A full reconciliation of adjusted EBITDA is available in our MDMA filing. Cash flow. We have $5 million in cash on the balance sheet as March 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. We remain very excited about our prospects in 2022. Our clients are continuing to increase their budget with us, and we have a strong pipeline of new clients. In addition to acquisition of Albert, which is adding strength and diversity to our product offering. And finally, we believe that many industries that were negatively impacted by COVID will make strong recoveries in 2022. While we have achieved tremendous growth from emerging industries, such as fintech and e-commerce in recent quarters, we are excited to see our business continue to grow from the legacy customers as well. Our visibility into revenues going forward is to remain our 2022 revenue guidance range of $73 million to $80 million, which represents up to approximately 50% year-over-year growth. I want to to thank to all our employees for their hard work and dedication, as well as to 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. Ben?

Thank you, Amit. We have some questions for you. You talked about sectors such as sports, live events, and travel coming back in 2022. What are you seeing so far from your current clients or would-be clients?

So first, 2022 is the first year since 2019 that started with no lockdowns or major restrictions. All outdoor and physical social activities are back. With our current clients, we feel it mainly in sports and live events. We do see a rising and surprising category in the last few months, which is education. Language teaching, educational kids, applications are in the rise. People are back traveling a lot. More people became international e-workers. Parents are using mobile to teach their youngsters. That's a pure effect of COVID as part of the digitalization boost the world got in the last two years.

Thank you. With regards to privacy laws or the cookie law, how large tech companies are dealing with it? How does it affect Zoom?

Let's go back to the data. An advertiser wants to promote his product and for that he has an advertising budget. As we are in the digital advertising market, most of our customers advertise mainly on mobile to drive users to their apps. According to the digital advertising report in 2021 by Statista, ad spending in the digital advertising market is projected to reach $565 billion in 2022. It is known in the industry that Facebook and Google, DuPoly, hold the biggest part of these budgets, depending on the country. With the private exchanges that were rolled out mainly by Apple, advertisers have been suffering from growing costs for their acquisition campaigns, mainly on social. Targeting abilities they once had are gone. They still have their yearly budget that needs to be spent, and that causes them to seek for new channels for achieving their internal acquisition channels. Zoom offers them a very wide range of acquisition channels under one place, including social and search, but a lot more. New channels that prior to the privacy changes that didn't and maybe wouldn't even try. Our platform works agnostically. and isn't based on one or two main channels. It's focused on achieving KPIs, and we extend our customer budgets wherever the best results are, quality and quantity-wise.

Okay, thank you. Can you talk about the Albert acquisition? Has there been any interaction with Albert's clients, and what are you seeing there?

Albert primarily... primarily works on the Google and Facebook platforms, a fast-paced business model working on social and search. With Albert's solution, we are able to offer our clients wider abilities. Zoom platform is able to offer Albert's existing customers a huge variety of channels on top of the social and search. We are already seeing the potential starting realized in regards to cross-company clients, being able to offer existing clients more ability with the same teams they know. We are analyzing Google and Facebook data autonomously, considering and handling all regulation, privacy, and related issues, providing customers the ability to operate smoothly, also for higher in the marketing funnel activities such as branding and awareness. Objectives that Zoom didn't offer to clients while focusing on user acquisition.

Thank you. You spoke about your growth in North America. Why have you gained traction in North America and why are you so optimistic on this region?

Well, we are seeing growth in North America in year-over-year view. This is because of existing and new customers looking to activate working together in Northern America region after working with us in other regions.

All right.

Thank you so much for that. It looks like we are out of time. Many thanks to everyone for participating on today's call. We'll look forward to hopefully speaking with you all shortly soon.

Have a good day. This conference is now concluded. Thank you for attending today's event.