Zoomd Technologies Ltd.

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 websites. Today's discussion will include adjusted financial measures, which are non-IFRS measures. These should be considered as a supplement to and not as a substitute for IFRS financial measures. Finally, today's event is being recorded and will be available for replay through the webcast information provided on the press release. With that said, let me now turn the call over to Amit Bahansky, founder and chairman of Zoomed. Amit, please proceed.

Thank you, Ben, and good morning to all of you. We are excited to speak with you today regarding our fourth quarter and fiscal year 2023 results. Today, I am going to provide an overview of our achievements for the fourth quarter and full year 2023, but more importantly, I would like to share with you the growth opportunities ahead of us. From a big picture standpoint, 2023 was a challenging year due to many macroeconomics headwinds. From a segment standpoint, one of the company's top segments in 2021 and 2022 was the cryptocurrency segment. That key area experienced a large decline. In response to these challenges, the company's management team undertook, in the end of the first half of 2023 fiscal year, a series of strategic actions aimed at mitigating the impact of the company's financial health and positioning the company for sustainable growth, including the following actions. The strategic decision to cease operations in certain business lines and refocus companies' efforts and own technology on core user acquisition activities. This decision was informed by the maturation and underperformance of several of companies' product development efforts, as well as shifts in niche markets where companies' search engine solutions for publishers operated. Implementation of substantial cost reduction measures across various areas of the company, aiming to streamline operations and improve efficiency. Initiatives to diversify the company's customer portfolio, both in terms of operational segments and geographic reach, to build a more resilient and robust business model. The financial results of these strategic decisions that have been taken on the second half of 2023 are multifaceted. The refocusing of our business combined with the broader macroeconomics contraction led to a decrease in revenue of approximately 16%, comparing the first half of 2023 physical year to the second half. However, when excluding revenues from cryptocurrency clients and operations deemed non-profitable, the company saw an approximate 3% increase in revenues compared to 2022. Moreover, Comparing the first half of 2023 to the second half, these strategic decisions enabled the company to reduce operating costs by 32%. Contributed to 110% growth in terms of adjusted EBITDA, and the company achieved a crucial financial milestone by transitioning the cash burning from operational activities of $0.7 million in the first half of 2023 fiscal year to cash generating from operational activities of $0.5 million in the second half, reflecting an improvement of $1.1 million from the first to the second half of the year. Following these points this morning, I would like to discuss three important areas for Zoom. These areas are our customers, the development of our product and service offering, and mid-year improvements to address market trends. I want to begin in our customer base. We are now focusing on growth sectors such as e-commerce, iGaming, transportation, and customer product goods, sectors known for their stable growth patterns and elevated profit margins. We have deepened our activity with current customers as well as expanding to new customers. Consequently, our revenues have risen in comparison to the corresponding period last year, excluding both cryptocurrency clients and non-profitable operations clients that have been discontinued. Now, I want to move to our product and service offerings. Our competitive advantage remains our 360-point view for digital performance, all focused on achieving the goals of our customers. We offer various products and services, all focused on digital and mainly mobile performance. We have the ability to provide our customers a holistic range of products and services for achieving their digital performance KPIs. Our main platform is integrated to hundreds of media sources, allowing us to promote customers' digital assets in multiple channels under one system, combining all data points into one point of view. Following the acquisition of Albert AI, Back in March 2022, we offer full-funnel social and search media AI campaign management, leveraging AI to the execution level of budget management, budget allocation, and KPIs achievements. We use DSP for programmatic media buying. The DSP is integrated to the biggest 30 mobile media exchanges which give our customers full range and reach for the mobile web and app performance needs. We save advertiser resources and maximize their advertising budget. There is no dependencies on specific media supplier or traffic channels. This not only saves valuable time and resources for the advertisers, but also provides enhanced clarity and consolidated insights. Additionally, our platform and products are designed for user-friendly operation, eliminating the need for a software development kit SDK implementation. In our perspective, positioned as a crucial layer within the ecosystem, the company is strongly in the industry. Beyond the world gardens of Google and Meta and et cetera, the marketing landscape is very fragmented. Zoom enable advertisers to leverage a wide range of various types of media channels from social programmatic, OEMs, SDK network and more. The KPIs are achieved on all channels together or as a mix. From our inception, our user acquisition services were exclusively tailored for apps. We have extended our services to encompass also standard web and mobile web traffic as well. Finally, I want to speak on the mid-year improvements to address market trends. During the end of the second quarter, under Mr. Almeny's leadership, the company decided to take actions aimed at improving financial performance and cash flow throughout its operations. The company announced its plans to implement cost-saving measures consisting primarily of discontinuance of non-profitable operations, the near-term termination of approximately 40% of its workforce, and certain other reductions in ongoing expenses. We already began to see the fruits of our actions in the second half of 2023 fiscal year, with massive improvement in the second half of 2023 results. The strategic refocusing and restructuring have not only improved the company's financial standing, but also facilitated better internal alignment of teams and goals. Management is encouraged by early signs of improvement in the sales funnel for the company's offering. In conclusion, despite of the hand winds faced in the past year, the decisive actions taken by the management have laid solid foundation for Zoom's future and growth and stability. The company remains committed to adapting its strategies in response to evolving market conditions and opportunities, with steadfast focus and delivering of value to the company's stakeholders. Financial results. Now I will review the fourth quarter financial results in detail. Revenue. Revenues for the year were $32 million and $7.5 million for the fourth quarter, reflecting a 39%. and 30% decline respectively comparing to the same period in 2022. The decrease in revenues is primarily a result of global macroeconomics conditions that impact client advertising budgets in general and especially cryptocurrency. In addition, the company's decision to discontinue unprofitable operations in the second quarter of 2023 physically also contributed to the decrease in revenues. Gross margin. Cost of sales for the year were $20 million and $4.9 million for the fourth quarter, reflecting a 45% and 27% decline, respectively comparing the same period in 2022. The decrease in cost of sales in annual terms was higher than the reduction in revenues. This is attributed to the restructuring and the company's successful enhancement of gross profit margin, which increased by 6% for the year. R&D and SG&A. The mid-year improvement decision that has been taken by the company to address market trends already showing results as total operational expenses before other expenses decreased despite the cost of discontinuance of non-profitable operations. These expenses were decreased by 29% and 56% for the year and three months ended December 31, 2023, respectively, compared to the year and three months ended December 31, 2022. Adjusted 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 earning before interest, tax, depreciation, one-time payments, and amortization as adjusted for share-based payments, non-recurring operation expenses, and impairment of intangible assets. Adjusted EBITDA for the year is $1.7 million and $0.6 million for the fourth quarter reflecting a 55% decline of the year and 242% increase comparing to Q4 22. The increase in the quarterly terms is primarily attributable to the company's strategic decision to align its focus and resources towards profitable activities and solutions that fit the recent market dynamics. On the one hand, revenue decreased, but on the other hand, the profitability increased significantly. Our reconciliation of adjusted EBITDA is available in our MD&A filing. Cash. We have $2.6 million in cash on the balance sheet as of December 31, 2023, We believe that the company's recurring revenues, in addition to the existing cash and cash equivalents, and the fact that the company achieved a crucial financial milestone by transforming from cash burning from operational activities of negative $700,000 in the first half 2023 fiscal year to cash generating from operational activities of $400,000 in the second half reflecting an improvement of $1.5 million from the first to the second half of the year, will be significant to meet our working capital requirements and future growth plans. Overview. Now for those who may be unfamiliar with the Zoom story, I would like to provide an overview of our business. Zoom has developed and acquired a proprietary patent technology and targets the needs of various segments of a digital marketing industry. Zoom offers its services globally through its agents and other business partners all over the globe. As such, the company operates in collaboration with hundreds of publishers and global advertisers. The company aims to consistently provide significant added value to its customers. The company's services and technology stack development roadmap focuses on creating technology solutions that seamlessly integrate with a range of digital media sources. Through this integration, the company aims to consolidate these sources, allowing its customers to achieve optimal value for their investments. The primary focus of this effort is directed towards enhancing user acquisition and retention strategies, tailoring them to the unique requirements of each media source on any screen or platform. Furthermore, the company maintains an ongoing commitment to staying attuned to the market dynamics and the changing demands of its customers. The company activity evaluates the inclusion of novel distribution media channels into its platform. This adaptive approach ensures that the company remains responsive to the evolving needs of the customers, contributing to its reputation as a forward-thinking and customer-centric company. The company is focusing its efforts, which are based on long-term trends within the online advertising industry, in line with its basic strategies of providing customers with digital, mobile-focused advertising technologies, product and services for improving their media buying effectiveness, cost and cost measurement, and maximizing their user acquisition and retention costs. Enabling customers to manage their user acquisition campaign budget on multiple digital channels, screens, and platforms, including social networks, ad networks, exchanges, content discovery platforms, influencers, connected TV, CTV, all using data-driven KPI-based technology. Offering extra tools and features as part of its offering in an attempt to simplify campaign management tasks, such as extra tools and features include creative studio editing capabilities for quick adjustments, extra layers of user data from app stores, and unique optimization abilities for serving time and resources on campaign management tasks. Now for some concluding remarks. We remain optimistic about Zoom's long-term growth prospects. Our focus in the short term will be on healthy bottom line growth and improving cash flow, all while managing our balance sheet properly. we view this strategy as an important way to build shareholder value and weather a macroeconomics environment. Before I move to the questions, I want to thank to all our employees for their hard work and dedication, as well 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. First, given the notable impact of cryptocurrency market on your revenues during 2021 and 2022, how is Zoom currently positioned within the crypto sector and do you feel the market is more stable now?

The years 2021 and 2022 marked significant periods of activity for us in the cryptocurrency sector. During the second half of 2023, we observed the resurgence in the crypto market. As we look ahead, our engagement in the cryptocurrency market continues, albeit with a landscape profoundly transformed by the comprehensive regulation implemented over the course of 2023. We believe that the introduction of formal cryptocurrency ETFs to the U.S. stock market has enhanced investor confidence, contributing to a perception of increased security of cryptocurrency investments. Currently, the market exhibits greater stability influenced by these regulatory and structural changes.

Okay. The third and fourth quarters financial reports exhibit numerous disparities when compared to the first and second quarters results. What, in your opinion, represents the primary change that most prominently reflects the mid-year improvements to address market trends that took place last year, the last quarters?

Identifying a single indicator proves challenging. There are numerous metrics that exhibit significant shifts when compared to the corresponding quarter. For instance, operating costs were reduced by 32% compared to the first to the second half of 2023 fiscal year, which contributed to a positive operating income for the first time in five consecutive quarters. The profitability increased significantly from first to the second half of 2023 fiscal year, resulting 4.1 million dollars decreased in net loss from $4.4 million in the first half of the year to an almost balanced bottom line in the second half. The company achieved a crucial financial milestone in the mentioned periods by transitioning from cash burning from operational activities in the first half to cash generating mode in the second half of the year.

Okay, thank you. Following strategic alignments implemented last year across the company's focus areas, personnel and business units, would you elaborate on distinct value propositions of your company offers in the current marketplace?

The company possesses a comprehensive suite of performance-based marketing solutions, designed to facilitate corporate growth for an international expansion, particularly for mid- to large-scale enterprises seeking to increase global user engagement without a necessity of establishing a full-scale marketing department. Our financial reports indicate that nearly half of our revenue originates from Asian-based clients, yet only approximately a third of media expenditure targets Asia. These clients predominantly leverage our services to broaden their market presence into Western regions, specifically North America and the European Union.

Okay. Well, those are all the questions we have today. My thanks to everyone for participating in today's call. We look forward to hopefully speaking with you all shortly again. Thank you.