Adcore Inc. (ADCO) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our investor update conference call. [Operator Instructions] On the call this morning, the company's CEO, Omri Brill, will provide an update on the company's operations and strategy. followed by a financial review by Adcore's CFO, Yatir Sadot of the company's Q3 2021 financial statements, after which we will answer pre sent questions and take questions from participants. I would like to take a moment to remind participants of the safe harbor statement. This conference call contains certain forward-looking statements, including statements about the company. Wherever possible, words such as may, will, should, could, expect, plan, intend, anticipate, variations of these words or similar words or phrases have been used to identify these forward-looking statements. These statements reflect management's current beliefs and are based on information currently available to management as of the date hereof. Forward-looking statements involve significant risks, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully, and listeners should not only should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this call and financial results press release are based upon what management believes to be reasonable assumptions. The company cannot assure listeners that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this call, and the company assumes no obligation to update or revise them to reflect new events or circumstances except as required by law. With that, I will now turn the call over to Omri Brill, Adcore's CEO, to update you on the operations and strategy of the business. Omri?

So again, good morning, everyone, and thank you so much to join us today at this early time of the day for the Adcore Q3 earnings call. So I would like to start with some highlights regarding the quarter and the financial results, obviously, Yatir will then going to be touching in more detail. So actually, Q3 was a very strong quarter for the company that the full quarter in a row that the company is growing triple digit number. And we are obviously very happy about it. So if you look at the graph on the right side, we can see that Q4 2020, the company managed to go overall here, sorry, at 220% almost, Q1 '21 was 161% growth, Q2 '21, 250% growth, and this quarter, Q3 '21, 153% growth again, all 4 quarters in a row, the company has been growing 4 digits -- 3 digits, sorry, which is a quite an accomplishment. And if you look at the 12 months of this year, then we can see that the total revenue accumulated to almost CAD 40 million. Just bear in mind that 2019 was around CAD 50 million. So that's almost 3x more than we did in 2019, and 2022, which was even stronger in France was CAD 23 million. So now the trailing 12 months is almost 2x what we did in the area of 2020 by itself. So again, very strong results for Q3 and a very strong result in a row for the last 4 quarters. And actually, due to this result, that's put Adcore's one of the fastest-growing company among comparable. And again, if you're going to look at the right -- the graph on the right side, we can see that in the last 12 months, Adcore grew in almost 190% year-over-year. And if you look at the comparable companies, obviously, all of them are Adtech company, marketing company, brand names that you all know and familiar with like The Trade Desk, [indiscernible] is basically, the average growth of these comparables are around 46%. That means that Adcore in the past 12 months was growing 4x faster than the comparable company. And that's, again, a very strong achievement for the company. So what happened in the last -- what has the company besides financial has been able to achieve? So I think the biggest milestone that the company announced in Q3 2021 was actually the official launch of the Adcore Marketing Cloud. The Adcore Marketing Cloud is basically a uniform place or a unified platform where we put all the 4 apps of Adcore under 1 roof, and basically allow users to access them using the, let's say, the marketing cloud access. Obviously, the cloud is also setting up the foundation for a much so a larger vision group with regard to the company technology offering moving forward, and basically will allow to scale our technology offering in 2022 and beyond. So another achievement in Q3 was the establishment of the U.S. subsidiary. So that subsidiary joining now 5 other subsidiary, actually 6 other if we include Amphy subsidiary the company already have. And basically, the establishment of the U.S. subsidiary as part of the company longer plan or bigger plan to put more emphasis and focus on the U.S. market. Basically, so this subsidiary is setting up the foundation, and bringing us the right action for us to move to a larger operation in this same important market in 2022. So with regard to client acquisition and in-store growth. So obviously, a lot of the growth that we saw in Q3 2021 was coming from in-store between existing clients and continue to work with us and basically spend more online. But it was also a mix because there was a lot of client acquisition. Some of the numbers were already disclosed in PR, basically a CAD 4 million in aggregate sum that we anticipate to come up from this contract in ad spend, but that's not entire [ ALS ] activity in Q3. And then not only that, in Q3 was, we expanded the team in 10 new employees. That was the largest, let's say, job in the number of employees at the company seen since its history. So in a sense, Adcore is growing now in numbers that we never grew before and in order to accumulative discrete and basically being able to cooperate with everything then, obviously, we need to grow the team as well. So we grow, let's say, top line, we grow in client acquisition, and we're also growing in manpower, which is important. If you remember, we discussed it before in the beginning of the year, growing manpower was a challenge for us, and I think that we are in a much better position right now. And the fact that we can grow in talent, this means that basically the company is setting again the right foundation, and the right structure in order to support not only the existing growth, but equally important, the future growth of the company. So we know that we discussed Amphy a bit in the last earning calls and even before. But this time, for this quarter, we want to give you a bit more in-depth statistic regarding what Amphy did in the last quarter. So for those of you who don't know, Amphy is the marketplace or platform that Adcore built for live online learning. Basically, to that, it's where the most ever, the most large marketplace of -- sorry, it's kind in order. And just to give you some statistic about our Amphy did in the last quarter, then total classes in Q3 '21 was a bit more than 1,000 classes. Just so you understand, now we are more than 1,200 classes. So between the quarter end and until now, we already grew around more than 150 classes already. And if you look at the quarter-over-quarter growth, the number of classes, it was almost 50%. And 6 months growth between Q3 compared to Q1, it was almost 150%. And if you look at visitors in Q3, we had almost 100,000 visitors to the site. And again, quarter-over-quarter growth of almost 40% and 500%, if you're looking at 6 months growth. Total sign-ups between the students that signed up to the platform, the number come to almost 4,500, 90% quarter-over-quarter grow, and almost 900% or more than 900% growth in 6 months. Transaction, that's the number of classes, paid classes as it has been taken with the platform, total number was a bit over 3,500. And again, in Q3, and that 77% quarter-over-quarter growth and 450% almost growth quarter-over-quarter. Just to give you some background and highlights. One of the more successful things that we do now was, Amphy, we call it, Amphy Master Series, that's where we put celebrities and people that have high profiles to basically give classes on Amphy. And 1 of the most successful 1 was actually Nancy, which was a British UK [ Bake off 2014 Winner ]. And in one classes that she did, there was 155 participants. So this gives you, let's say, the vision of, let's say, how big Amphy can be. And again, this is just the very early beginning of the platform. So withstand there's no reason that we're going to -- we're not going to have classes on Amphy with more than 1,000 participate. But again, the fact that we already have classes with more than 150 participants in a single class that prove that basically the concept is working, and then we're doing or we're moving in the right direction. FYI, the average transaction value on the platform today, is almost $20. And that remains stable throughout, I say, the last quarter. So the average ticket per class is around $20. Obviously, the price per class can vary a lot so it can be as low as free, and as expensive as more than $100, but the average class is around $20 in terms of tech progression within Amphy during the quarter. So we announced the social commerce component on Amphy that means that every student that's going to join Amphy and is going to take a class, if you're going to bring a friend with them, basically, they can get the discount and actually today, because it's 11.11 a single day, we have a special promotion just for this type of, let's say, social commerce, which we give 50%, which is a massive discount. But basically, the capability of the fact that Amphy can support social commerce, it's a very strong marketing offering and a very strong differentiator of the Amphy of other, let's say, competitors. And other things that we did during the quarter is we build, let's say, the back engine of AI recommendation tool. So with time, we're now collecting enough data in order basically to the algorithm to start giving recommendation, and once it's going to be ready in terms of UI/UX site as well, we can have -- we can start offering recommendation for classes for user, similar for what example Netflix is doing when we watch a Netflix show. So a lot has been achieved, I would say, in the last quarter and not only financial wise, I think like equaling important at operational-wise, an establishment like of the Adcore Marketing Cloud, huge progress in our Amphy as well, the U.S. subsidiary and basically, that's put the company in a much better position for Q4, and equally important 2022 and beyond. But things that investors always like to ask them, okay, we saw the quarter is great, but what is next? What should we expect from Adcore moving forward? What is the company long-term vision? And I would emphasize the following: a, first and foremost, I would say, the Adcore Marketing Cloud. And basically, the metrics that you should look when we move forward is: a, addition of new apps to the marketing cloud. I mean the more the merrier, obviously, then this can be a mix between apps that we develop ourselves in-house or third-party apps that we can add as well. And obviously, that's going to give the scale and value adding that we need for the marketing cloud. And other things that the investor should look is when we're going to officially announce the zero touch on boarding funnel. This means that the user or customer can onboard the marketing cloud without the help or of any of or account manager or success manager. And again, that's going to give us the scale foundations that we need. And equally important as the marketing cloud activity going to grow, we're going to show improvement in the company gross margin again. So that's not going to be on the expense of the direct client activity, which obviously grew massively now in the last 4 quarters. But again, the marketing cloud now setting the right foundation to grow also in the indirect client activity, which comes with much higher gross margin as well. So I think like Marketing Cloud is a huge, let's say, promise. And basically, we will allow the company to scale massively in 2022 and beyond. I think M&A is another focus in the company is putting more and more emphasis now. And again, there's something that investors should look for. We have 2 type of potential M&As that we're looking to do. The first one, I would say, geo-focused. So we're looking for potential company to acquire in the U.S. to establish or as established the operation in the U.S. move fast, I would say. So that's 1 type of potential M&As that we're looking to do. And another type of M&As that we're looking to do is more tech focus, again, expanding the offering of the Adcore Marketing Cloud and basically building a better value offering to our customers. With regard to Amphy, I would say what investors should expect is the following: a, upgraded version of the Amphy website. So that's something that's hopefully going to be large in Q1 2022, a robust vision regarding the -- how to expand the Amphy universe. So that's something that we go announce once we're going to be ready. But basically, it's going to take whatever you know about Amphy and multiply it by, I would say, by 5 at least. So that means it's a lot, let's say, to anticipate over there. And obviously, now currently, the revenue of, let's say, contribution of the Amphy projects like to the overall top line of the company is not, I'd say, not meaningful but we hope that in 2022, it's going to become a bit more meaningful. Still Amphy, a long way to go. But again, if 2021 was, I would say, the focus was to revenue. In 2022, we expect to see a bit more robust revenue coming from the Amphy project as well. So I think that's it from my end, and I'm looking forward to really what Yatir have to say regarding the company financials in more detail.

Thank you, Omri. 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. As you have seen in our results, Q3 was a very strong quarter for Adcore. Revenue of $10.4 million was up 153% compared to last year. During the quarter, we benefited from the continued massive shift to e-commerce in the digital advertising ecosystem. We saw continued strength from our direct revenue stream across all regions, channels, and verticals. With the continued strong top line performance throughout 2021, during the last 9 months, we generated $2.7 million compared to $2.2 million for the same period in 2020, an increase of 23% in adjusted EBITDA. From a balance sheet perspective, we exited Q3 with a strong cash and liquidity position. As you can see, total working capital of $13.1 million compared to $7.8 million at December 31, 2020, an increase of $5.4 million or 69%. We started the year with $11.7 million of cash and cash equivalents, and as of September 30, 2021 were $15.5 million. The increase is mainly attributable to the ongoing business results, and the capital raise, the company completed in the second quarter this year. Total assets of $22.2 million compared to $17 million in 2020, an increase of 30%. Significant low debt. The company fully repaid its COVID loan from the government during the second quarter this year. And as of September 30, the company doesn't hold any financial debt on the balance sheet. Now let's discuss comprehensive income. For the last 3 months ended at September 30, 2021, we delivered a record third quarter revenue of $10.4 million compared to $4.1 million in the same period of 2020, an increase of $6.3 million or 153%. This was mainly driven by growth in our direct channel, particularly strong growth in APAC region, but not only. Third quarter gross margin saw a decrease to 23% from a gross margin of 60% in Q3 2020. The decrease in gross margin was attributable to the large increase in direct client activity which have lower profit margins compared to indirect clients. Moving to OpEx items. Research and development expenses for the quarter were $346,000 or 3% of revenues compared to $334,000 or 4% of revenues in the prior year. Sales and marketing expenses, and general and administrative expenses for the quarter were $2 million or [ 90% ] of revenues compared to $1.4 million or 35% of revenues in 2020. The increase was attributable mainly to the expenses related to the capital raise in the second quarter, the listing on the TSX and the commencement of trading on the OTCQX in the U.S. Our operating profit for the quarter was $27,000 compared to $717,000 in the prior year. The decrease in operational profit was mainly attributable to the development of Amphy, the largest marketplace for light recreational learning, which I'll discuss more in more detail shortly. During the quarter, we reported a net loss of $323,000 compared to profit of $543,000. The loss was mainly attributed to the finance expenses from the warrant revaluation and Amphy development. From a segment perspective, during the second quarter of this year, the company started to report and measure Amphy as a separated line of business. Amphy revenues in the third quarter amounted to $4,000 compared to $0 in previous year. Total transaction value in the 3 months ended September 30, 2021, was 20,000 compared to 0 in previous year. Amphy total expenses in the third quarter were $425,000. After excluding Amphy's expenses, the operating profit of the asset activity was $453,000 in the 3 months ended September 30, and $1.2 million for the 9 months ended September 30, 2021. However, quarterly non-GAAP results reflect adjustments for the following items. Depreciation and amortization totaled $217,000. Share-based payments totaled $318,000. And offering, listing, and global expansion totaled $12,000 and other nonrecurring items totaled $11,000. Adjusted EBITDA for the 3 months was $585,000 compared to $925,000 for the same period in 2020. When we exclude the Amphy's expenses from the Adtech activity, adjusted EBITDA was $1 million compared to $925,000 for the same period in 2020, and in case of 9.3% and $3.6 million compared to $2.2 million when comparing the last 9 months to the previous year, an increase of 64% in adjusted EBITDA after excluding Amphy's activity. With that, I will turn the call back to Omri for Q&A session.

Thank you Yatir. Now that we've concluded that part of the discussion, we'll move on to a Q&A session. We'll start with some questions that were sent ahead of us. So Omri. This is a question from Dan. Are you pushing Adcore Marketing Cloud as a self-service platform? Can you give some color regarding how you expect this combined platform to impact gross margins going forward?

So that's an excellent question. I would answer the following: a, for sure, Adcore Marketing Cloud is a [ pure SaaS ] offering like the current technology offering of the company, what changes now that basically it's unified. So we put all the 4 apps that have been, I would say, separate app up until now under the one unified platform. And basically, it's more accessible, it's more scalable. And it sets the right foundation for a much rapid growth in 2022 and beyond. And basically, as everybody understands, technology offering come with much better gross margin, and that should have a positive effect on the company gross margin moving forward, especially in 2022 and beyond.

Have you seen any traction with some of your promotional activities on Amphy, just carriers as private consumer discretionary budgets are relatively slim. Are there incentives to make learners keep coming back to the platform?

So that's an interesting question. I would say the following. Obviously, we are constantly doing running promotion on the Amphy website. Some of the promotions are more geared towards the new client acquisition, some of the promotion geared into retention, for example, and some promotional or hybrid effort in a sense. One of the things that we saw that working for us really well is basically when we give a special gift card or promotion coupon codes to Amphy. And just an example, in the last Halloween, we did like a big promotion that was run for 1 week. And basically, everybody that visited the Amphy websites and their question or the proper dialogue, let's say whether we want to trick or treat. And obviously, if you select a treat, you've got a $25 coupon code to use on the Amphy website. And that boost the activity level of the website. We saw a lot of, let's say, a lot of activity going on. We have some content also between the teacher for special Halloween classes, and let's say, the other 1 winner or than 80 students participated classes just for Halloween, so that was special classes made just for Halloween, but that's just an example. So we have promotion running all the time. Now as of today, we have the 11/11 signal day promotion, and basically, we continue doing running promotion in the Amphy platform.

Moving on to a couple of questions from Peter Lamberti. What is your long-term target for the revenue percentage received from direct and indirect customers?

So that's a fair question. I would answer the following: a, if you look, let's say, the split of gross profit between direct and indirect, then don't get me on the accurate numbers. So I would say that as of today, indirect going to be around 25%, maybe even more than the gross profit. So obviously, and we would like to see it increase the Adcore Marketing Cloud offering continues to grow. Then I say gross profit-wise, if 50% is something that we feel comfortable with and that should be like a reasonable goal for the company moving forward.

Why is the majority of Q3 revenue solely from direct customers? Does this have anything to do with the recent [ App Not to Track ] options of Apple and Google and advertising -- advertisers requiring more assistance with new strategies?

No, absolutely not. So that's got nothing to do with thanks God with the recent changes that Apple did with the iOS 14. Obviously, Google pull back the changes in the planning to do, and now talking about 2023, but the company is lucky enough to operate in segments that was less, I would say, impacted by the recent changes, let's say, Apple did. And I would say that despite that we see in the direct line, revenue is solid because the part that we see in general e-commerce activity during and post COVID. So this more demand, more activity and this segment is just went faster for us.

Now for a question for Yatir from [ Markram ]. We know the large decrease in gross margin is mostly attributable to the company shifting its focus towards direct clients in order to scale up revenues as quickly as possible. Based on your growth plans going forward. what level of quarterly revenues do you need to achieve in order to reach an inflection point where gross margin begins heading back in the right direction, being up?

Thank you, Mark. The company's strategy is to increase the level of indirect sales supported by the launch of Adcore Marketing Cloud. As Omri mentioned before, the focus of the target of the gross margin is around 50%. And we believe the gross margin improvement will take press gradually during 2022. Now take into consideration that with Amphy have been more and more material impact on revenues, the gross margin should improve as well, and the level of gross margin will increase.

Yes, I would like to add that, obviously, everything that Yatir just said is true, but it's not a zero-sum game. So it's in a sense, we don't look to decrease the level of direct client activity rather than increase the level of indirect client activity with some with better gross margin and also Amphy, which should come with better gross margin as well. So instead of, let's say, decrease one portion, we rather to increase the other portion of the activity.

Another question from Mark. I was surprised to see Amphy revenue of just $3,000 for the quarter, less than the $4,000 generated in Q2 before Amphy was even publicly launched in July. As stated in the PR earlier that Amphy growth to date exceeded our most optimistic expectations. While the growth in classes offered has been impressive, the revenue suggests growth in actual students using the platform has been lackluster. Are you able to provide an update on Amphy's performance so far in Q4? Or projections as to what kind of revenue levels you can expect to achieve from the Adtech segment in the coming quarters? A few questions there.

Okay. So let me try and answer them one by one. With regards to the, let's say, to the financial result. Bear in mind that what we published in Q2 2021 was basically 6 months, a bit even more than 6 months aggregated number because Q2 was the first quarter that we disclosed Amphy activity as a separate segment. So basically, it's not fair to compare Q3 to Q2 because basically, you're comparing 1 quarter to more than a 2 quarter aggregated activity. Also bear in mind that as a platform, we only disclose, let's say, the net plus from tax that we've taken. But total managed, let's say, of booked class money-wise volume-wise, let's say, in Q3 was more than $20,000. Obviously, there's still early numbers and low numbers. We expect it to grow much bigger and is insignificant to what the company is doing -- currently doing with the B2B activity. But this time, we believe that we are building the right infrastructure that will allow it to scale much larger. So I think like, again, Amphy, and this is important for me to emphasize is still in the 0 to 1 stage. So we're still focusing on building the platform, optimizing the business model, making sure that we have the best value offering possible. And then once we feel that we have everything we need, we're going to switch to the one to many phases. That means it's scaling up and basically focused on bringing more students to platform. With regards to Q4, we see spike of activities that they started in Q4, but it's still too early to estimate. Bear in mind, Q4 is going to be an interesting quarter because there's a lot of holiday sales promotions that we would like to run during this quarter. So I believe Q4 should be far stronger than Q3. But again, it's a bit too early because most of the holiday massively they sell didn't even started, which is Black Friday, Christmas related sales and so on.

Thank you, Omri. Moving on to a few more questions then, and then we'll try to get to some questions from the Q&A. When can we expect substantial revenue from U.S.?

So as I mentioned before in my presentation, we are now building up the, let's say, the structure and the foundation for a much more robust activity in the U.S. The company believes that 2022 should be the year that basically we're going to see more revenue coming from this region. If you need to take, let's say, the Chinese activity as, let's say, as an example or as a benchmark, originally, we anticipate to have significant revenue coming from the, let's say, China greater region after, let's say, 2 years, and it will happen much quicker. Even in the first year, we saw a significant revenue coming from distribution. So I would say, from our previous, let's say, operation, I would say, it should take between 1 to 2 years in order to have substantial revenue coming from a specific new region.

Thank you, Omri. Any progress with M&A strategies?

So we are putting more and more, I would say, focus and emphasize on M&A. We are, I would say, more a better understanding of the target companies that we are looking out to acquire and working on creating a potential deal flow as well. So once we're going to have something that obviously is ready, we can go and announce it. But I can assure the investors that is going to be the first 1 to know about it. But the company is putting more and more focus on this avenue.

Great. Do you plan to become a filing U.S. company and list in the U.S.?

The short answer is, yes. But I would say the long answer is we're not going to want to jump the gun and do it before we believe the company is ready. So once the company is going to be big enough in terms of revenue, once the company is going to be ready in terms of, let's say, client base and the operation base and everything, then we believe that's the right time to do then we're going to add and we'll do it. Having said that, the company is already taking steps in order to achieve this goal. So bear in mind that during '21, we uplift from the TSXV venture capital to the TSX, which is premier exchange offices, that's going to give us a much more easy entering to the NASDAQ or to the New York Exchange, if needed. We did OTC listing as well, again, give us more exposure to U.S. investors, and open out of the U.S. subsidiary. So basically, that's on the company road map. This is where the company is aiming from. The company is actively doing steps and measures in order to fulfill this vision. But we're not going to do it before we believe we are fully ready to do it.

What are Amphy's potential margins like?

So it's a bit too early to tell, but I can look at, let's say, similar marketplaces, marketplaces that we all like and know like Fiverr, for example, or even Airbnb, then typically for this type of marketplace, and Amphy shouldn't be any different. They're merging between 75% to even 80%, if you're talking about 5 years. So that's where we should expect to land as well eventually. But again, it would be too early.

Moving on to a few questions from the Q&A. A question from [indiscernible], do all 7 global offices generate synergies, how, for example, cross-border e-comm?

So that's actually a very good question, and that's -- and it's worth talking about because 1 of the, let's say, the company expanding strategy is expanding globally. And one can say why Adcore is a relatively still young and small company, need to expand so fast geographically. So we already have 6 different offices worldwide, operating 4 different continents. And I would say the following: the nature of the activity of our clients is very global in a sense. So every large e-commerce clients that we serve, usually, we'll have operating several territories for sure, the U.S., U.K., Australia, maybe other countries in Asia and Europe as well. And I think in order to give them the kind of, let's say, support they needed and service they needed, some of them would need 24/7 support, some of them would be multi-language support, some of them would need, would need, let's say, support the same in a different time of the day or different markets and stuff like that. Then again, the fact that early in the morning, our let's say, Australia office, and this is based on a true story, right, can stop operate, and be available and basically open campaigns, and activate campaign, and do some support for the client, then they say, the Tel Aviv office can step in, and do activity and then late night, the Canadian office can step in, then let's give you the exact 24/7 as coverage that we need. And I might even start to talk about different language support and stuff again. So again, the fact that, that could expand so good geographically, would give the company with an excellent advantage on the comparable companies that we are fighting against the company on the customer retention, I would say.

Question from an anonymous attendee. Please talk about the higher cost of goods sold in this Q3 as well as margin compression we are seeing, cost of goods sold increase, good sales sold increased significantly this quarter?

Yes. So that's not, I would say, unique to Q3. That's already a trend that we saw start in Q4 2020. But again, some of the direct client activity is also associated with cost of goods sold in cases that the Adcore [ Adtech ] is principle for this client. So obviously, this comes with higher cost of good sold and a lower margin. Having said that, for the long run, as you're still stated and the company said more than one time, we are aiming to go back to the ranges of around 50% gross margin, and we believe that the Adcore Marketing Cloud can place the company in the right track to achieve that. Again, knock on the expenses of the direct tech client revenue stream, but rather on expanding the interest line revenue stream.

And another question from the Q&A from Lindsay Leese. Is there any potential to improve gross margins on your direct client revenue?

Yes. So that's also a good question. I would say the following, once we believe the direct client is, let's say, ready and all against stuff like that, and it can be a bit more, let's say, you know like make, do by itself, then we can switch into the do it yourself, let's say, type of offering. And obviously, that's going to come with better gross margin as well. That's happened before also with large clients and the [indiscernible] that the company is looking to do. Also these other activities that company is doing in order to improve the, let's say, the gross margin of direct clients, such as, let's say, strategic agreements that we have with different ad network and so on. So I would say, other switching some of the direct client activity to do it yourself model, or basically increasing the overall value that we can extract from this type of client and obviously improve the gross margin as well. So the answer is yes. There is a lot we can do in this front as well.

Okay. We'll take 1 more question from the Q&A, I think, 1 or 2. In reference to Amphy, how do you perceive and manage the potential risk that students bypass, for example, by finding and contacting the teacher directly on social media?

So that's a fair question. In the beginning before we opened Amphy that was I would say 1 of the concerns that we had regarding the business model. Lucky enough to get what we found out that this is a type of behavioral activity, not a almost at all. And basically, we have enough, let's say, opportunity to know if such a thing happen, like we can never disguises a client and other measures that we can put in place in order to monitor this type of behavior. At the end of the day, if the teacher is trying to avoid the Amphy activity then he is no longer going to be a teacher on Amphy. Then we're going to have more -- that gives the more value we can bring to the teacher. The teacher is going to have more to lose it if it's not working with Amphy than vice versa. So -- and that's the honest truth, currently, we have a waiting list for teachers in a lot of, let's say, different categories. So this means that we have more teachers that we currently even need on the platform.

I think the last question we'll take from here. Omri, what is your take on the recent decline in the company's share price and current valuation?

Yes. Obviously, I don't like it as the company's largest shareholder as well. So obviously, nobody -- if you invest in something, nobody likes to see his investment price decrease. Having said that, that's a part of life of being a public company and basically investing in the stock market. So I think like for 1 and as a shareholder, I don't like to see the stock price where it stands today. And for sure, I don't really understand the current valuation, which basically gives the company multiple one on earning if you talking TTM. But I mean, on the other hand, I'm also lucky enough to be at not only the largest shareholder, but also the company's CEO. So I'm putting 120% of my time working on the company, innovation, operation, building the team, expanding the team, expanding their technology. And I can assure you that as the company's CEO as the 1 that is on the field and see what's going on, and what we are able to achieve every single quarter, and the company is great, then I'm super optimistic. So in a sense, like I'm sticking it for the long plan. We just continue what we are doing, report another great quarter after great quarter, and I think like a stock price will follow. That's my philosophy. This is what I'm believing.

Thank you, Omri. On that note, we'll conclude this call. I would like to thank you all for joining us, and we encourage everyone to send any further questions you may have, and have a great day. Thank you.

Thanks, everyone. Thanks, Barak and Yatir.