A2Z Cust2Mate Solutions Corp. (AZ) Earnings Call Transcript & Summary

Good day. Welcome to the IAccess Alpha Buy-side Best Ideas Winters Conference 2024. The next presenting company is A2Z Cust2Mate Solutions Corp. [Operator Instructions] I'd now like to turn the floor over to today's host, John Gildea, Vice President of Corporate Communications at A2Z Cust2Mate Solutions Corp. Sir, the floor is yours.

Thank you, Holly. And good morning, everybody or afternoon, depending on what part of the world you're in. Thank you very much for your time and consideration for today's presentation. As Holly pointed out, I represent A2Z's Technology Corp. So I'm going to housekeeping out of the way. We're a NASDAQ-listed company under the ticker symbol AZ, 26 million shares approximately outstanding and a market cap of approximately $170 million as of today. I just click on to the forward-looking statement slide. It's all very standard. That's available on screen if anybody wants to flip through it. It's normal standard fair. I suppose from a company perspective, we feel we are the global leaders when it comes to providing Smart Cart solutions to the primarily grocery space at the present point in time. But over the coming years, I would imagine that's going to expand into other verticals as well. I know shopping carts is not the most thrilling or exciting opportunity in the world in most people's eyes. But hopefully, by the end of this presentation, you'll understand that we're much more than a smart shopping cart. We're much more of a retail platform that allows vendors to do various different things from both the customer perspective, making their lives much handier and easier and also from a retailer perspective, getting them access to much more information, saving costs and giving them access to data that they've never had access to before. So on this slide, we're the global leader. We have a proven solution that is working in the real world. It's been working in Israel for over 3 years right now. And we've also had very successful launches in France, and we just recently launched in the U.S. as well with many, many, many more exciting opportunities to come over the coming weeks and months. Ultimately, what it does is it streamlines the shopping journey for the retailer and for the customer, and I'll just jump into that to give you some of the benefits. So if you can imagine, in most retail environments right now, particularly in grocery, when you walk into the store, the retailer has no communication with you throughout your entire shopping journey, doesn't know where you are in the store, doesn't know what you're doing in the store. So what we've done with the Smart tech-based solution is we've given the ability of the retailer to connect directly with you to the customer in real time throughout the entire journey. So it's really the virtual equivalent of the retailer welcoming you in the store. So, hey, my name is John or welcome, Kevin, Mark, whatever you, Mary, whatever your name might be. Welcome to my store and allow me to spend the next 15, 20, 30, 40, 45 minutes, whatever length of time you're going to be in the store, walking around the store, making sure that your store journey is optimized to ensure you're not wasting time in various different locations you don't need to be, making any suggestions as regards to what you're spending your shopping cart will complement that, giving you access to coupons, loyalties, discounts, et cetera, everything that's available in store, you will have access to for the first time, thus making it a much more practical and customer-friendly journey from both a time perspective and a savings perspective. And then at the end of that journey, basically swiping your card, tapping your phone, whatever it might be, and leaving the store. Very, very seamless journey. So it's -- if you look on our Twitter feed, you'll see a number of testimonials from various different customers around the world. It's universally loved. When people use the system, they don't want to go back and use anything else because who wants to stand in a lane and who doesn't want to save money when they're in a grocery chain. From a retailer perspective, it's even more important, it's ultimately game changing from a retailer's point of view. If you look at retailers in general, they are very high volume, low-margin businesses. They run traditionally 2% and 3% margin. So while their top lines are incredibly big, their bottom line is shrinking on an ongoing basis. That's down to a number of different headwinds in the form of theft has increased due to the cost of living prices and basically a lack of just change in societal norms when it comes to stealing things. Staffing is incredibly difficult to get when you get them, they cost an incredible amount of money to keep and they're constantly retraining staff. With our system, what we do is we eliminate 5 different layers of security in the shopping system, which virtually eliminates the opportunity to steal when you're using a Smart Cart. The other side of the equation is -- and that's very, very important from a retailer point of view, it gives a huge peace of mind. Moving on to the staffing side of the equation what we've proven is that for every 100 smart carts that are in store, you can reduce up to 5 checkout lines. Now again, that's a huge amount of staff that you can reduce or more importantly, when we started this project, we thought there was going to be a huge pushback when it came to big tech taking people's jobs. But what we're seeing is, a, retailers can't find people to work in the front line; b, they can't keep them. So they need to move towards technology. So that's a game changer for them as well. And then ultimately, on those 5 checkout lines, you free up an awful lot more space in the retail environment for the retailer to sell more products. You can engage with the shopper throughout the entire journey so you can promote your own brands, you can make offers, you can make suggestions throughout the journey. And what that ultimately leads to is increased basket size by up to 40%. So again, more people spending more money in your store equals more profits, which is very beneficial for them. And I suppose the 2 really big things for them is we actually share all our auxiliary revenue with them. The 2 big revenue points in that would be retail media, which is just a really fancy way of saying advertising. So the best point of -- or best location you can advertise to somebody is when they're actually making buying decisions. If you think at all of all the money that's spent around the world on advertising grocery products, et cetera, this is the first time you're able to actually advertise to people when they're about to pick up a product that you know they normally buy. So for example, if you're normally a Coca-Cola drinker, how valuable is that real estate for Pepsi to hit you at that exact point in time when you are beside Coca-Cola or beside Pepsi to try and influence your buying decision and change over, be that with a coupon, some type of special offer, et cetera, et cetera. There's a huge amount of revenue going into that side of the business now from a retailers' perspective. And again, I'll just give you an anecdotal story. If you look at the like of Walmart, Carrefour, Target, et cetera, they've set up huge retail media divisions. And from a numbers perspective, 0.5% of all Walmart's revenue last year was from Retail Media, which 0.5% is not a huge percentage, but it's a huge amount of money in dollar terms. But even more importantly, that 0.5% equated to 15% of their -- almost 18% of their EBITDA. So an exponential profitable business as opposed to them selling whatever they're selling in store. And I suppose the holy grail of all holy grails is when we understand what's going into your shopping basket, then we have a very good snapshot of your life. So the data subset that's able to come off your shopping basket gives a huge amount of opportunity for the retailer, CPGs and other people who want to use that data to provide services for you, be it banking, be it insurance, whatever else it might be. So an incredibly compelling argument for retailers to adopt smart carts, along with having a much better customer experience that we already discussed. As regards to the marketplace itself, I won't go into the TAM and revenue numbers in the business, et cetera. Grocery retail is huge. There's 60 million shopping carts in the world, okay? So it's a huge, huge, huge marketplace. We don't need to own the entire marketplace. Anywhere in the top 10 in this marketplace, you're going to be a huge company. We're in a very good position right now where we're seeing within retail itself as being the #1 in the space, and we hope to maintain that for quite some time. And hopefully, you're going to start seeing a lot of news in that in the coming weeks and months as regards major chains, et cetera, starting to move towards the Smart Cart solution. I suppose the big thing that has happened over the last 12 months is that there's been a real shift in the marketplace from major retailers to move towards the Smart Cart solution. Up until that, there was a lot of questions been asked, some people were looking at it. They didn't really understand what it did for them. And then it also wasn't very cost effective, and we're talking to some of the competitors in a few moments. But ultimately, now what we've done is we've been able to reengineer our hardware. The software is basically the same. But we've reengineered our hardware to make it a retrofittable system. What that allows us to do is it allows us to reduce the cost when it comes to the retailer, which is hugely important. But also, it allows us to ship worldwide. It allows us to maintain service, et cetera, et cetera, at a much better cost level. Ultimately, we're able to give the retailer now all the benefits at a price point that makes sense for them. And that's been a game changer in this over the last 12 months. Our model is very simple. We run a SaaS-based subscription model. We charge a fee upfront from the retailer for the use of it, and then we charge them an ongoing monthly fee. That's normally around $150 a month. To put that into context, bear in mind there's 60 million carts out there. If we have 100,000 units in the marketplace, then that equates to $15 million a month or almost $200 million a year, just purely on the SaaS model without any of the auxiliary revenue in the form of retail media, big data, coupons, loyalties, all the other apps that actually can slot into our system. Because we're an open source system, we invite other people to come in and use our platform. And that's ultimately what we see ourselves as being is a platform for retail. If you can imagine the Apple iPhone or the smartphone when it was originally launched, it was a basic enough system to where it is right now. And ultimately, that's the journey we see smart carts going on and where we'll be in 3 to 5 years as regards to what the functionality will be and what level of apps and service to be on there will be. The things happen and then that we're not even aware of right now. I suppose the big question is if you have the demand and you have potential retailers coming in, how are you going to manufacture this because you're a small company and then how are you going to finance and there are 2 very valid questions. First and foremost, we don't see ourselves as an all-encompassing company. We see ourselves very much as the hub of this, the service provider, the software provider, and that's ultimately where the real, real money is going to be. And then what we do is we outsource to our manufacturing partners with a relationship with Flextronics. They're a Tier 1 bespoke manufacturing group. They are all over the world. So they will manufacture our systems in various different locations. And then from a financing perspective, we've already signed an agreement which is public knowledge with Nayax Capital, and they'll provide financing not only for ourselves to manufacturer, but also for the retailer to actually acquire and lease the system. So it's a very encompassing financial package. And then for the larger Tier 1 clients, they have no issues banking their own or alternatively, we can get normal debt financing from various banks around the world to facilitate that. Let me switch to that next slide here. We have a number of very high-end investors in the company. It's very, very tightly held. Insiders and management still own 32% of the company, and there's over another 40% to 45% owned by a core group of investors that have fundamentally supported the company over the last couple of years. It's suppose to wrap up, it's important to look at the space from a competition perspective. If you have no competition, then you're at the wrong party. Two big competitors in the U.S. will be Amazon and Instacart, which bought Caper. We don't view Amazon really as a competitor because what we have found is that a lot of the major retailers, while they want to adopt Smart Carts will never let Amazon into their store because they don't want to let them access to their clients or their data. So while Amazon validates the space and obviously, they're a huge company, they're not seen as a real player in the Smart Cart space in the U.S. because, as I said, the retailers won't let them in there. The other competitor will be Caper. They have a Caper Carts that's similar to ours, different in fundamental ways that we believe we have a distinct advantage, which I can go into more detail if people want. But ultimately, Caper was bought 3 years ago for $350 million. They're in the marketplace along with ourselves. We come across them quite often. But as I said before, the marketplace is so big. It's too big for Caper. It's too big for us and maybe 5 other companies to deal with. And we feel that we will get more than our fair share of this new market, and we look forward to bringing some exciting news in the near future. Ultimately, why now? Why is it a good time to be talking about us? We have a proven -- sorry, we have a proven and world technology that's worked in multiple continents around the world. We have manufacturing capabilities in place. We have financing capabilities in place. We have a backlog of 8,000 carts at the present point in time. And there's a real adoption in the marketplace when it comes to moving towards smart carts, and we thoroughly believe that 2025 and onwards, you're going to see a real launch and a real move in this marketplace, and we plan to be a very significant part in that. So with that, I thank you for your time. Happy to open it up to any questions or comments or anybody may have.

I have someone there. So I'll just run through them. And if anybody else as they go through these wants to ask any more questions by all means, just jump in and just refresh them. So where are you seeing the most opportunities for near-term rapid adoption geographically? Very good question. The answer is worldwide. We're getting major traction in France right now. We just launched today in our new system in Yochananof in Israel. We launched last week in a retailer in the U.S. Ultimately, North America, Europe will be our primary focus purely because they are the big retail locations in the world and all the big players are there. But as I said, worldwide, there's a real move towards Smart Carts for all the benefits I outlined earlier. And we see primarily for us, Central America, U.S. and Europe as our primary focus point, and that's where we're going to see our major moves over the next 3, 6, 12, 24 months. Can you please discuss some of the traction you're getting on retail media side. If you can't name names, perhaps you can talk more about how this opportunity will unfold. Very good question again. Sorry, somebody just interrupting. The retail media space is huge and will be getting bigger on a day-by-day, week-by-week, month-by-month basis. All the big players, as I alluded to earlier, every major retailer in the world right now is looking at retail media. We have a number of different opportunities in the retail media space. One, we can launch our own retail media or have retail media partners. So a retail media company comes to us and says, okay, you have x amount of carts in the ecosystem. We will take all that real estate that you have, and we will pay you for that. That's opportunity number one, and that's a very viable option. The other option we have is when you're dealing with some of these particularly big companies that have very sophisticated retail media arms already. What they do is they sell their own retail media, and we will take a rev share from that. So they are the 2 strands that we're working on right now. But you will see a lot -- as we roll out more carts, that will become more pertinent. And all our partners feel that the retail media side of the business will be the largest size along with big data. And right now, we're starting to build out our big data availability in the company as well. We're hiring new staff to look at various different data suites that we can offer the retailer and then offer various different interested parties in the company. Could you give a little more detail on the JV with Nayax, perhaps you could elaborate a bit more on the framework of that agreement and any updates on how the initial rollout is going? So ultimately, what we do is we see Nayax as a fantastic partner for some of our medium to small-term retailers. They may not have as good access to capital as the big guys. So what they do is they will underpin our manufacturing costs and then also offer a service to those retailers to actually fund the purchase of the carts upfront and they in turn then will pay back that system. So very excited by that. It gives us a lot of opportunity to deal with smaller to medium-sized retailers over and above the larger retailers. So Holly, can I ask you how do I get to the next -- there's 10 more questions, but I can't seem to see them on the screen. Just bear with me folks to get to some of the next questions.

John, you would have hit the refresh button.

Yes, but it's just the top 3 on that. Okay. Perfect. I noticed you posted on Twitter and exec former NCR using the Shopping care. Do you have any business with them currently? I'm not at liberty to go into too much details on some of the potential partnerships. Suffice to say that NCR are very aware of what we're doing and conversations are ongoing in that regard. The data value is enormous and not represented in your market capitalization so that is great. Adoption is key. You mentioned Carrefour. What makes you see getting them on board in a significant way. Ultimately, you're 100% right. The data is something that we're not really talking about right now because we don't have significant scale in the marketplace. However, it potentially is mind-blowing as regards to the opportunity that, that presents. As you rightly pointed out, when we know what's in your shopping basket, then we understand completely what's going on in your life. And that gives us a huge amount of ability to use that data in novel ways that are both beneficial from the consumer and also from the retailer and other invested parties. Carrefour itself, we've already -- we're already in Carrefour from previous PRs, you'd be aware of that. They've undergone a huge amount of internal, I suppose, changes. They're merging a couple of their big divisions. Last year, they're in the major cost cutting. So that's on an ongoing basis. However, I feel that there's other opportunities out there that maybe not have come to life yet that will make people incredibly happy again over the months ahead. There are several benefits to the retailer that you discuss shrink, increasing basket size, no checkout lens, fewer applies. Can you discuss these and any more that I haven't listed in the benefits to the retailer? Yes. Ultimately, it's game changing from a retailer perspective because as you pointed out, if we can reduce shrinkage, now shrinkage is back in the store and it comes from multiple sources. It's not just people walking out the door with baskets, there's different elements of it. But as regards to shopping basket itself in front of the consumer, we're able to eliminate that quite significantly. We don't say 100% because nothing is 100% full fledged, but we can do it at a very high level. If you can imagine that, that's just a 100% loss for the retailer. They paid for the product and it's walking out the door with no upside from them at all. If we can reduce that by a fraction of percent, it's huge for the retailer because it ultimately goes to the bottom line. The basket size increase goes without saying the more money people spend in store, the bigger the more profit that the retailer is going to make, and that's a win for everybody. No checkout lines like nobody wants to send the checkout line. That's also a number of retailers when they have metrics in store, checkout line time is one of the metrics that the store manager is gauged on. So anything that will bust the queue is a big, big deal for the retailer. I suppose the thing that I want to highlight even more on that is they're the cost saving side of the equation, which are incredibly important. Those alone make it sensible and worthwhile for the retailer. But on the other side, the extra revenue we can generate, we share our app revenue, we share retail media revenue, we share our data revenue. That's all revenue that the retailer never had access to before. And that ultimately goes to straight to the bottom line because they've already dug in their costs. So that's a game changer from their point of view. Are the carts theft resistant, not taking them out of the store without paying. We have a number of security features on the carts. One of the big things that retailers were coming back to us were that they wanted people to be able to bring the carts to the store when you fill the cart. And our older systems were limited in that regard because nobody wanted a very big expensive piece of equipment to be wandering around in their car parks. So with our retrofit system, the main hard frame of the system never leaves the store. So you take it off the charging wall, you put it in your cart. When you're leaving the store, you put it back on there again. There's security gates to ensure that, that happens. If you haven't completed your shopping journey unpaid, the carts won't leave the store. There's a red light on them to say the journey hasn't been completed. the retailer will be notified, et cetera, et cetera. So it's very, very difficult for anybody to steal. But unless you walk into the store, put one under your arm and ultimately, things like that will happen. But on a day-to-day basis, it's incredibly difficult to steal any our products. Plus we have GPS systems on. We know exactly where they are at all times. So even if you do take it, it's not very difficult to find out where you are. Have Capers won any business? Yes, Capers are in a number of locations throughout the U.S. at the present point in time. They have had no rollouts, and they're very much at a pilot trial basis. We've moved away from that model. We don't do pilots and trials anymore. Our products already tried, tested and proven. If you want to figure out if it works or not, we can send you to a number of locations to show it working, and we can give a number of testimonials for people that are using the product. So they will be in the marketplace. They will win business, which is good. As I said, even the U.S. marketplace is so big, it's too big for any 5 companies that own Capers or ourselves. So there's enough business for everybody, but there will be business they won. We feel we will won more business, and we feel that we are economically a better solution and fundamentally a much better working solution. But again, people will have preferences. So I'm not going to say we're going to own the entire market by any stretch of the imagination. Have you been able to leverage any of the unique data that you're collecting from us using the Smart Carts? Yes, we have. I'll give you one anecdotal story. We had a major retailer in Israel who was using the product. they pay in bulk for a lot of their big product, sugars, wheat, et cetera, et cetera. And what we were able to do with our Smart Cart system, we were able to determine that they weren't actually getting full value. So every bag of sugar, whether it should have been GBP 2, might have been GBP 1.99, GBP 1.97, GBP 1.98. We were able to correlate all that data. The retailer was able to go back and use that data to work out a better deal for their wholesale suppliers. So the amount of data that we can garner from the Smart Cart is incredible. What are the potential opportunities with Trixel and Level 10? We rely heavily on partners. A big part of our strategy over the last couple of years was to ensure that we were able to offer retailers the level of support and management they needed after we actually give them a product. That's one thing selling the product, but then you have to make sure that you have the proper support systems in place. Level 10 is the #1 integrator in the U.S. Trexel is the #1 integrator in Central America. They have huge in-depth relationships with all the major retailers. They're very trusted. Before they would take us on as a partner we had undergo a very severe process with them. And we've obviously put them in place because we feel that we will have rollouts in those various different locations and that we need their level of expertise to offer that level of support for the retailer as we move forward in a bigger way. Thank you very much, Jeffrey. I appreciate it. Feel free to reach out, and I'll follow up with the staff there. Any updates on. Yes. They're already starting to be delivered really. You're going to see more news out of France and various different locations. And I can't comment if there's any change in the backlog. But hopefully, if not before Christmas, after Christmas, you'll start seeing more news on other potential -- not so much potential, but other retailers that are starting to adopt. What are the key verticals you see expanding outside the traditional grocery? To be honest, if we manage to crack the grocery space, which I believe we will, the other opportunities will fall into themselves. like if you're looking at the likes of Home Depot, Lowe's, et cetera, they all have the same issues that grocery had, maybe not so much in theft as regard to big products, but customer service, finding somebody in stores, upselling products, et cetera, et cetera. They are all issues for retailers no matter what business they're in. So that can go as far as pharmacies, DIY stores, home stores, duty-free, et cetera. So ultimately, we can go into any system where there's a cart or any store that has a checkout. So hopefully, that answers your questions. Let me see, I have a few more questions here. I think that's it for now. I think we're coming closer to time as well. So if I missed anybody and anybody wants to follow up, my e-mail address is on the site. It's john@a2zas.com, and I'd be happy to follow up with anybody. And I know there's some slots available for follow-on tomorrow. So if you reach out to IAccess, I'm sure they'd be happy to set up those calls as well. So with that, we're just on the button. Thank you very much for your time. Hopefully, you felt it was worthwhile, and I look forward to speaking to you all again soon.

That concludes the A2Z Cust2Mate Solutions Corp. presentation. You may now disconnect. Please consult the conference agenda for the next presenting company.