Adcore (TSX:ADCO) Q4 2025 Earnings Call

0:01 Recording Good in morning and welcome to Adcore's Q4 and full year twenty twenty five conference call. We will give guests another moment to join. So I ask you to please sit back, relax and we will begin shortly. Thank you to all our new guests who have joined. The call will begin momentarily. We're just giving people another moment to join. Okay, very good. Let's begin.

0:51 Once again, good morning and thank you for joining Adcore's Q4 and twenty twenty five financial results earnings call. This morning, Adcore released its financial results and you might have seen we finished 2025 on a high note finishing with 8% increase in revenue compared to Q4 twenty twenty four. Today we'll be going over those results in detail and provide you an update on ongoing company initiatives. Today, you'll hear some familiar voices from myself, Nick Campbell, Head of Investor Relations here at Adcore. You'll hear from Omri Brill, Adcore CEO and Founder and Amit Komforti, Adcore CFO. The agenda for today before we begin, we'll go over some forward looking statements you should be aware of when listening to this call. Then it will be followed by the CEO opening remarks, followed by the CFO financial highlights, and finally Q and A. If you do have a question during this call, I'll ask you to use the submit a question feature in Zoom and that will be addressed at the end.

1:48 So before we begin, I'll give everyone a moment to review this, but just please be aware during this call, we will be discussing items that are forward looking and somewhat uncertain in nature. I'll give everyone thirty seconds to review this excerpt and then we will begin. Okay, very good. And with that, I am going to pass the mic to Omri for the CEO opening remarks. Omri, the floor is yours. Thank you very much, Nick, and good morning, everyone. Not every day that we have the chance to speak about the company results for Q4 twenty twenty five and full year of 2025.

2:36 It's only happened once a year, I guess. So today is a special day for us, and we're happy to be here. But I would say what I would like to cover today is obviously what we've been able to achieve in Q4 and the full year 2025. But equally important, maybe share with the shareholders some of the highlights of what we anticipate to see in 2026 because we already started 2026. I don't know if you noticed it or not, but I think like it's more important, you know, also forward looking and not just like backward looking. So let me share my screen and then we can jump right to it. One second. Okay, let's go. So like I mentioned, we ended 2025 with a strong note, 8% Q4 growth year on year, near record cash flow, correct me if I'm wrong, Amit, but I think that's the second biggest quarter in terms of cash flow generated from operational activity in Q4 twenty twenty five.

3:42 And we equally important, we are entering 2026 as an AI first company. We'll cover what exactly does it mean for us, for U. S. Shareholders. We entered with a very strong momentum with new partnerships that we're going to discuss and also with a strong balance sheet to basically fuel all the growth we anticipate to see in 2026 and beyond. So like I said, strong finish of 2025 and very strong start of 2026 as well and even accelerating the momentum in 2026. So if we talk about quarterly revenue result, total top line revenue amounted to a bit more than $12,000,000 12,100,000 to be accurate in Q4 twenty twenty five, that represent 8% year on year growth compared to Q4 twenty twenty four, sorry, which amended to a bit more than 11,000,000 Quality gross KPI gross profit in Q4 twenty twenty five was $3,800,000 almost equal to $3,900,000 that we achieved in Q4 twenty twenty four.

4:54 If we look at that cash and cash equivalents, so a bit more than $10,000,000 in Q4 twenty twenty five, very similar to the results that we've been able to achieve in Q4 twenty twenty four as well. So maintaining a very high level of cash and cash equivalent, it's a massive jump from 7.3 that we've been able to achieve in Q3 twenty twenty five. So more than 3%, 3,000,000, sorry, in Canadian dollar difference. So again, earning highlights for the highlights for the quarter, Q4 revenue up 8% year on year, APAC region exploded with almost 40% year on year growth Q4 twenty twenty five, Near record Q4 operating cash flow, 4,170,000, 9% year on year growth, very strong second growth strongest quarter for us in the company history in terms of cash flow. Q4 operating profit turned positive this quarter as we anticipated and shared with our shareholders as well. And positive adjusted EBITDA is actually the sixth consecutive quarter that we've been able to demonstrate to deliver a positive adjusted EBITDA, which is strong.

6:14 And some earnings growth highlights for full year 2025. So revenue growth for the entire year by 3% year on year to more than CAD 33,000,000. APAC revenue surged by 34% for the full year, which is big. Operation cash flow remained strongly positive $22,000,000 So even if we have negative quarter, we can definitely see that we still have full year positive operational cash flow and cash position reserve strong at $10,300,000 at the end of 2025. So all in all, like I say, strong finish of the year of 2025 and I would say strong result all in all in, I would say, full year 2025.

7:01 But equally important, like I mentioned before, 2025 result is a thing of the past. We also want to talk about the future and what 2026 is going to look like, what we anticipate. Sorry to see in 2026 and let's jump right to it. So we call 2026 the era of acceleration. We see like a fast acceleration in almost every different department or things that we do in ADCO and this give us a lot of confidence that basically this can be a breakthrough for the company. If you look at ADCO, there's a lot of, I would say, history and a lot of experience build up in this company. So we have twenty years of digital marketing expertise, which is massive.

7:50 Actually in June this year in 2026, going to mark our twenty years of anniversary. So that's a big milestone for a company. We have more than fifty years in software development. So experience, a lot of tools that we develop already over the years and ten years of strategic partnership with all the major platform. But what we see now with AI, it's AI is like the spark that ignite fast acceleration across all these different department, whether it's digital marketing and services solution, software development for sure. AI is the king over there and also strategic partnership, everything tied together and everything now is accelerating, thanks to AI. And we're going to discuss how AI affecting the company and how Adcore going to look like a very different company. I would say similar, it's very different company in 2026 and beyond.

8:42 So just to give you some numbers and metrics beyond what we when we say acceleration, what do we mean? So let's talk about Australia, for example. You know, a key region Australia represent, Amit, like 50% of the entire APAC region to date? Yeah. Yeah. Usually. Okay. So so I think, like and we already reported that Australia, the record, the January, you know, you usually, January should be slower than, I would say, December and November because of end of year sales. But, actually, we see this region or specific Australia accelerating. And what is more exciting over here, you know, obviously we're excited about the record a month for us that 40% of the net revenue generated in Australia actually come from services that wasn't even exist in the beginning of twenty twenty five, like AI studio that we already discussed in the previous earning calls, a top of funnel activity, SEO, for example.

9:36 So all of that wasn't exist in the beginning of 2025 and we see like very fast adoption of new services and solution in this specific branch. And I think that's a good reflection to what we're about to see in other branches as well. We're going to discuss it as we move along. But again, we are introducing more services and solution. We see like good market fit, fast adoption in Australia in a sense leading the way to what you're about to see with other branches as well, because other branches obviously will follow and introduce more services and solution as 2026 unfolds as well. So we already see similar trend happening in Tel Aviv, for example, which is the biggest part of the EMEA region. And I think North America to follow as well. And in 2026, we're going to become an AI first company.

10:25 An AI first company, that means that we are going to be a very different company that, you know, the traditional, I would say, companies that ADCO used to be. And few things to take into account for shareholders. A, to date, we are coding three times faster than we've been able to quote, I would say, one year ago, for sure, two years ago, for example. And this is massive, but it's only not only, you know, how fast can we code, but it's also the level of sophistication and the deep of, you know, the features that we can develop. So we code three times faster, but also, I would say, three times deeper. And we can develop now things and tools that up until I would say even six months ago, we can only imagine how we can develop such a thing. And now it's becoming a reality and this is massive.

11:15 Can you hear me, Amit? Yeah. Okay. So a lot of acceleration in software development. We're going to launch a new line of AI agent. That's the first lines of AI agent the company plan to launch in the in the first part is going to be, you know, towards the half of the year. And this is big, you know, AI agent is going to be the wave of the fish of the future. This is new type, I would say, of software tools, you know, AI software tools and Adcore plan to, you know, to be there and basically dominate the, I would say, at least the market of, let's say, marketing related AI agents. So stay tuned about exciting news in this front as well. And last but not least is cost efficiency.

12:01 AI help us, you know, like to cost three times faster. This means that we can code with less people in a sense and still achieve like big result. And we believe that this type of level of efficiency will enable us, you know, grow the company, grow our service, grow our lines, you know, of two lines, but maintain the headcount more reasonable. And this is something that wasn't able before. So in 2026, we we think we can already see some fruits of, you know, this efficiency, but for sure 2027 and 2028 should be big impact, you know, of how many people we need in order to operate, you know, our business and this is massive. Still to date for Adcore, you know, the single biggest line item, you know, in our book for expenses is salaries, of course. Amit, am I am I wrong?

12:49 No. Go ahead. So salary is a big thing. Right? And with AI, salary can reduce a lot or at least not continue to grow in the phase that's been growing up until now, which is huge by itself. And so we discuss, you know, new services and solution. We discuss their effect or, you know, like the tremendous effect of, you know, branch like Australia, for example, we discussed, you know, becoming an AI first company and how it's actually affecting not as a slogan, how we do business, how we coding, you know, how we are more efficient, you know, the level and sophistication of tools that we can develop. And then I would like to talk a partnership. So ADCO already benefits from, I would say, very strategic partnership. You know, Google was, I would say, the first strategic partnership that we had more than ten years now. Microsoft second strategic partnerships that we had, you know, I think we are entering the seven years of this strategic partnership, very important for us. Meta, obviously, like a strong partnership, Criteo as well. And actually actually in in Q1 Q1 twenty twenty twenty six, we signed a new partnership agreement with TikTok as well.

13:55 So and which we are very excited about and basically give us a very good coverage of the entire digital marketing landscape. So between, let's say, Google, Microsoft, TikTok, Meta and Criteo, I believe we cover between 85% to 90% of digital marketing as we know it, which is massive. This is very much like tie, you know, to everything we do with the tools that we develop, the monetization path it can bring us and so on and so forth. So this type of partnership level is critical for the company ongoing success, whether it's software development, you know, and monetization, quick monetization pass for these tools, for example, whether it's, you know, new services and solutions that we bring tied together with this partnership. So everything in the end of the day tied together and basically, you know, like operate in a perfect harmony, would say. Software development, partnership and marketing solutions as well.

14:52 Let's talk a bit about stock price. Obviously, we still continue even a deeper disconnection between how the company is actually operating and the future of the company and the current stock price. Currently trading, I think, like in a yesterday numbers at $0.14 or something like that. And again, uptick is massive. If we talk EV to EBITDA, we talk almost 500%, you know, uptick, a potential if we talk EV gross to gross profit, we talk even bigger number, more than 2000% uptick. So there's something going on and we continue saying that every earning call, but now I would to say something a bit different to investors and shareholders. Maybe it's time to take a fresh look about Adcore as a company, you know. So by becoming an AI first company, you know, by accelerating our growth now in 2026 And also look at the different metrics, million in cash and end, three weeks fast development that where it used to be even one year ago, almost 40% APAC region that accelerate. And again, APAC is leading the way. This is the reason why APAC is accelerating because they are adopting faster new technology and solutions over there. And 4.2 almost million in a cash flow generating during the last quarter, that's all a very positive signals. So basically, the company is doing something right and we have a bright future in front of us.

16:22 2026, like I say, we plan it to be a breakthrough year for ADCOM. And I think with the current actually stock price, actually it's represent far bigger, I would say, opportunities than a risk to shareholders. And again, I strongly recommend when you're looking at Adcore to take a fresh look about where the company is currently studying and where equally important the company is going to go to. And obviously stock price need to follow at some point. So this was my, I would say, I wouldn't say like a 2¢, but my, I would say remarks regarding the earning call equally important about the direction the company is going in 2026. We are very excited about what's going on and trust me, there's so much going on. You almost wouldn't believe it. But I would like shareholders to be at least as excited as we are about this company.

17:13 Amit, the floor is yours. Okay. Thank you, Murray and good morning everyone. Before beginning the financial overview, I would like to remind you that the following discussion will include GAAP financial measures as well as non GAAP results. All amounts will be presented in Canadian dollars. We delivered a strong fourth quarter with revenue increasing by 8% year over year and cash from operating activities increasing by 9%. APAC revenue grew by 37% reflecting continued progress in this region.

18:02 Let's review in more detail. For the three months ended 12/31/2025, we delivered revenue of $12,100,000 compared to 11,200,000 in the same period last year, an increase of $900,000 or 8%. Gross profit was $3,800,000 compared to $3,900,000 a decrease of $100,000 or 2%. As for operational expenses, R and D expenses for the quarter were $300,000 compared to $700,000 in the prior year. The decrease is mainly due to increase in capitalization during 2025. SG and A expenses for the quarter were $3,500,000 compared to $2,800,000 in the prior year.

18:49 The increase was mainly driven by increase in sales and marketing costs. Operating profit for the three months ended 12/31/2025 was nil compared to 400,000 in the same period last year. As for net loss for the three months ended 12/31/2025, it was 300,000 compared to net profit of $500,000 in the same period last year. Now to revenue and gross profitability. As shown on the left side of the slide, revenue increased by 8% in Q4 twenty twenty five compared to the same quarter last year. Gross profitability remained relatively stable with a decrease of 2%, mainly due to change in client mix.

19:37 On a full year basis to the right, we can see a moderate increase in revenue over time and we expect 2026 to reflect further growth supported by the company's investment in technology and new initiatives. As for geographical revenue breakdown for Q4 twenty twenty five, APAC revenue saw a very strong year over year increase of 37%. This is primarily due to new client acquisition and an increase in existing client activity. EMEA and North America revenue decreased year over year by 844% respectively, mainly due to reduced budgets and stopped activities. Net cash from operating activities.

20:26 For the three months ended 12/31/2025, cash from operating activities amounted to $4,200,000 compared to $3,800,000 in the same period last year, an increase of $400,000 or 9%. This is reflecting a strong business performance. In terms of financial position, cash and cash equivalents were $10,300,000 as of 12/31/2025 compared to $10,800,000 at 12/31/2024, a decrease of $500,000 or 5%. We continue to maintain a strong cash position to support ongoing operation and growth. As for total assets, they amounted to $21,600,000 compared to $23,400,000 at 12/31/2024, a decrease of 1,800,000 or 8%.

21:25 As for the liability side of the financial position, we consider the company is still debt free. Adjusted EBITDA. The quarterly non GAAP results reflect adjustment for the following items: depreciation and amortization, share based payment and other non operational items. For the three months ended 12/31/2025, adjusted EBITDA was $500,000 compared to $1,300,000 for the same period in 2024. This decrease of $800,000 or 62% was mainly due to a higher operating loss as well as fewer adjustments in 2025 compared to the prior year. With that, I will turn the call back to Nick.

22:15 Very good. Thank you both Amit and Omri for your comments. At this time, we'll move forward to the Q and A session. And starting off, looking at APAC, which has been posting exceptional growth. Investors are interested, exactly is driving the growth in APAC? And can it continue at this rate or do you expect it to continue? You provide some color there. Yeah, I'll take that. I think like we both Amit and and myself, you know, touch this topic to some extent. You know, Amit mentioned, obviously, new client acquisition, which is obviously a big growth factor, but I think equally important, I think like what we see in Australia and what generate a lot of this growth that we are seeing, the fast adoption of new marketing solution and services that we are introduced to this specific market. And like I mentioned, in January 2026, which was a record month for this branch, actually 40% of this revenue come or net revenue come from the solution that wasn't even existing one year ago. So I would say it's a mix, you know, like an healthy mix between new client acquisition, fast adoption of new marketing and a solution.

23:29 And this is the type of acceleration we hope to see in more branches in 2026 as well in other branches. Very good. Thank you. Omarion, you somewhat touched upon it, but I wanted to maybe drill down a bit. You mentioned new services gaining traction in Australia or at the APAC region. You just provide us or elaborate a bit more on those solutions and is there a market for these in your other regions? Yeah, absolutely. I think like I would touch few of them, like ADCO was primarily around performance marketing. So this means more top of funnel type of activity, a lot of Google, a lot of Meta, to some extent TikTok. So what we introduced in 2025 is more or let's say even in the end of 2024, it's more upper funnel or full funnel solution and activity and that's big. So that's targeted bigger brands that have more holistic approach, you know, branding awareness and everything attached to it. This to the back of, you know, introducing the AI studio, Adcore AI studio that basically allows to generate, you know, I would say TV grade commercial using AI, for example. So the combination between them is like a wildfire effect. So there's a lot of traction, you know, for both of these new services.

24:41 They're coming with big budget, you know, bigger players, you know, more enterprise type of players. And this is part of, you know, like the effects that we see in Australia. Thank you, Omari. And in the press release issued this morning, you talked about being an AI first company. Again, you mentioned it within this call, but I'd love to understand a bit more. What does an AI first company mean exactly? It means a lot in many different ways, but I would say first and foremost, you know, I would say I would split it to two. A, we're fully integrating AI and using AI in everything that we do. You know, if let's say up until, I don't know, like six months ago or one year for sure, you know, I would say 80%, 90% of the code was been written by, you know, our developers. I would say now it's flipped over.

25:32 So AI is reading 90% of the code and and we are like, the developer just need to tweak it and fine tuning and making sure that it's fine is working okay. So that's that's very big difference, I think. Like so AI is reading most of the code nowadays. Like, the the role of developers is changing, you know, and we are changing with it. And like I said, that's allow us to write code three times faster. That's why us to write more sophisticated code, but this is just one example for one department, which is r and d, you know, and you can take the same logic and now apply it to marketing, for example. Our marketing used to be done before AI and with AI. So that's another example. And I think with AI as well, it's not only how we use AI to write code, it's also how we integrate AI within our tools, you know? So correctly, for example, let's say if we talk about Proposal, we have a three sixty degree coverage of AI solution within the system. So if you were talking about the proposal, we send the client portal, we have a chatbot that basically can interact with the recipient. They can ask him question. They can talk about the proposal, give him immediate answer and, you know, help him getting this presentation or proposal across the finish line, for example.

26:44 And same goes in the back end, you know, where the company operate. So again, you can operate, talk with a chatbot, understand, open new proposals, send new proposal, analyze what's going on. AI can tell the salesperson what he should tell, you know, to the recipient if they have question and so on and so forth. So so everything I would say is covered with AI, and that's a big, big difference, you know, between how things used to be happen, I would say even one year ago, even six months ago. So AI first company, that's mean everything done with AI, you know, and the people role is a bit different, I would say. Very good. And that makes a lot of sense. Thanks, Omri. I want to switch gears here. You know, as of recently, I think most are aware, you know, there's been a conflict in Iran.

27:30 I would love to hear, you know, or love to understand, is that impacting your business in EMEA or globally or otherwise? Or how's that affecting business for you? Amit, you want to take this one? Yeah. Honestly, we don't see, like, a big impact on our operations globally, obviously. Not a big impact. But also in in Israel, I think a lot of the workforce started to work remotely, so we even see a bit of a spike in the activity. Yeah. It's remind me a bit of COVID updates. You know? Like, we see a lot of online activity, a lot of ecommerce going on, and, obviously, we see more demand now to what we do from the local clients in Israel than than even I would say before. So, again, everybody would like an hope that the world gonna end soon and we'll have a peaceful days, you know, but I think like even with what everything that's going on in terms of, let's say, it's business, I would say business is still running strong and even a bit stronger because of the COVID effect, you know, or COVID similar effect, I would say.

28:46 Okay. Thank you, Omri, Amit. Switching gears again, you know, looking at costs, your capitalized software costs doubled in 2025. Thinking about going forward, should that tail off in 2026 as, you know, you perhaps reduce investment in proposal.ly? A bit of color there would be great. Yes. I think like proposal.ly, I would say definitely we can reduce or already starting reducing some of resources and effort we put in proposal. Ly, actually, want to start recognize the capitalization for Proposia in 2026. But I think like I would say that, yeah, we're not going to maybe invest in Proposia as much. We are investing in new tools. You know, I mentioned some of them, the AI agents. So I think like this level of investment in innovation gonna remain. But like I said, at least we don't need to increase it. We can maintain, you know, more or less what we have right now.

29:38 We can write more code and better code with AI. So I think with time, we can maintain it even to some extent, maybe reduce it. But I think like build much more, you know, it's not just, you know, like how much we invest, it's also, you know, value for money. So the value proportion is going very big, you know, money will maybe maintain the same, but the value part of the equation is going to grow a lot. Very good. Thank you, Omri. I want to switch regions here to North America. 2025 saw some softness. Looking forward into 2026, do you expect that region to return to growth or what is the outlook there? It's a fair question. Would say, yeah, obviously we're not thrilled, you know, with the results that we've been able to demonstrate for this specific region in 2025.

30:24 I would say, hey, if you look 2026, year on year comparison should be more favorable, like we shouldn't see such a big drop of 40. So it should stabilize for sure in 2026. And we anticipate that in the second part of the year, we should be returning back into growth mode as well in this region. So it's not like it's not a lost cause. We know there's a lot of potential for us over there, and it's just about, you know, like making the right moves over there. Very good. Thank you, Omri. And looking forward to Q1, well, guess Q1 is almost concluding here, but you talked about it in the presentation, the Australia region off to a hot start. Do you have a growth rate in mind that you expect for Q1 overall and any preliminary view?

31:13 Yes. So as you know, we don't give guidance regarding to the quarterly results. I can say that if we have something excited to share with investors, whether it's a new innovation, new tool, like a big results, like for example, like we saw in Australia, then obviously we will share them. We keep nothing in our pocket. So when we have something to share, we're going to share it with investors that much I can tell. And like I said, this is the reason why we started the conversation about 2026 with 2026 acceleration because the company is accelerating. Very good. Thank you, Omri. And that does conclude our Q and A session for the day. Thank you Omri and Amit for your comments. And most importantly, thank you all for joining. Omri, I want to pass back to you if I have any final words before we end here.

32:02 No, I think I already gave a lot of words. Just like, again, I want to thank everybody that participate today. Again, very strong finish of 2025, but I would say even more important, very strong, even stronger start of 2026. A lot of exciting things going on, whether it's partnership, whether it's shift or the spikes that AI give to everything we do, software development, new services and solutions. So there's a lot going on. Trust me and you will see it in the numbers. Very good. Thank you. I agree. Very exciting times ahead and we look forward to keeping you updated. So once again, thank you all for joining and we'll talk to you soon. Thank you.