Adcore Inc. ($ADCO)

Okay. Very good. Let's begin. Once again, good morning, and thank you for joining Adcore's Q4 and 2025 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 2024. 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's CEO and Founder; and Amit Konforty, Adcore's 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 that will be followed by the CEO opening remarks, followed by the CFO financial highlights and finally Q&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. 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 30 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 we have the chance to speak about the company results for Q4 2025 and full year of 2025. 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 -- that you know also forward-looking and not just like backward-looking. So let me share my screen and we can jump right to it. One second. Okay. Let's go. So like I mentioned, we ended 2025 with a strong note, 8% -- sorry, 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 2025. And we -- equally important, we are entering 2026 as an AI-first company. We'll cover what exactly does it mean for us, for you as 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, a 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 million, $12.1 million to be accurate in Q4 2025, that represent 8% year-on-year growth compared to Q4 2024 -- sorry, and which amounted to a bit more than $11 million. Quality gross KPI, gross profit in Q4 2025 was $3.8 million, almost equal to $3.9 million that we achieved in Q4 2024. If we look at the cash and cash equivalents, so a bit more than $10 million in Q4 2025, very similar to the results that we've been able to achieve in Q4 2024 as well. So maintaining a very high level of cash and cash equivalent. It's a massive jump from $7.3 million that we've been able to achieve in Q3 2025. So more than 3% -- CAD 3 million, sorry, in Canadian dollar difference. So again, earning highlights for -- report highlights for the quarter. Q4 revenue up 8% year-on-year. APAC region exploded with almost 40% year-on-year growth Q4 2025. Near record Q4 operating cash flow, $4.17 million, 9% year-on-year growth, very strong second 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. It is actually the sixth consecutive -- sorry, quarter that we've been able to demonstrate to deliver positive adjusted EBITDA, which is strong. 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 million. APAC revenue surged by 34% for the full year, which is big. Operation cash flow remained strongly positive, $2.2 million. So even if we have a negative quarter, we can definitely see that we still have full year positive operational cash flow and cash position reserved strong at $10.3 million at the end of 2025. So all in all, like I said, strong finish of the year of 2025, and I would say, strong results all in all in, I would say, full year 2025. 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 a year of acceleration. We see like a fast acceleration in almost every different department or things that we do in Adcore. And that give us a lot of confidence that basically this can be a breakthrough year for the company. If you look at Adcore, there's a lot of, I would say, history and a lot of experience built up in this company. So we have 20 years of digital marketing expertise, which is massive. Actually, in June this year in 2026, going to mark our 20 years old anniversary. So that's a big milestone for a company. We have more than 50 years in software development. So a lot of experience, a lot of tools that we developed already over the years and 10 years of strategic partnership with all the major platforms. But what we see now with AI, it's -- AI is like the spark that ignites a fast acceleration across all these different departments, 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, yet very different company in 2026 and beyond. So just to give you some numbers and metrics beyond what -- when we say acceleration, what do we mean? So let's talk about Australia, for example. A key region, Australia represents, Amit, like 40%, 50% of the entire APAC region to date?

Yes, yes, usually.

Okay. So I think like -- and we already reported that Australia had a record January. 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, obviously, we are excited about the record 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 2025, like AI studio that we already discussed in the previous earnings call, top of funnel activity, SEO, for example. So all of that wasn't existing 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 and 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 unfold 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. In 2026, we're going to become a AI-first company. And AI-first company, that means that we are going to be a very different company, as you know the traditional, I would say, software companies that Adcore used to be. And a few things to take into account for shareholders. A, to date, we are coding 3 fast -- 3x faster than we've been able to code, I would say, 1 year ago, for sure, 2 years ago, for example. And this is massive, but it's only -- not only fast can we code, but it's also the level of sophistication and the deep of the features that we can develop. So we code 3x faster, but also, I would say, 3x deeper. And we can develop now things and tools that up until, I would say, even 6 months ago, we can only imagine how we can develop such a thing. And now it's becoming reality, and this is massive. Can you hear me, Amit?

Yes.

Okay. So a lot of acceleration in software development. We're going to launch a new line of AI agent. That's the first line of AI agent, the company plan to launch in the first part. It's going to be towards the half of the year, and this is big. AI agent is going to be the wave of the future. This is a new type of, I would say, of software tools, AI software tools. And Adcore plan 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. AI help us like to code 3x 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 to grow the company, grow our service, grow our lines of 2 lines, but maintain the headcount more reasonable, and this is something that wasn't able before. So in 2026, we think we can already see some fruits of this efficiency. But for sure, '27 and 2028 should be a big impact of how many people we need in order to operate our business, and this is massive. Still to date, for Adcore, the single biggest line item in our book for expenses is salaries, of course. Amit, am I wrong?

No. Go ahead.

Okay. 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 have been growing up until now, which is huge by itself. And -- so we discuss new services and solutions. We discussed their effect or like the tremendous effect of branch like Australia, for example. We discussed becoming an AI-first company and how it's actually affecting not as a slogan. How we do business? How we coding? How we are more efficient, the level and sophistication of tools that we can develop. And then I would like to talk a partnership. So Adcore already benefit from, I would say, a very strategic partnership. Google was, I would say, the first strategic partnership that we had more than 10 years now. Microsoft, second strategic partnership that we had, I think we are entering the 7 years of this strategic partnership, very important for us. Meta, obviously, like a strong partnership. Criteo as well. And actually, in Q1 2026, we signed a new partnership agreement with TikTok as well. So -- 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 to everything that 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 and monetization, quick monetization path for these tools, for example, whether it's new services and solutions that we bring tied together with this partnership. So everything at the end of the day tied together and basically like operate in a perfect harmony, I would say, software development, partnership and marketing solutions as well. And let's talk a bit about stock price. Obviously, we still continue even a deeper disconnection between how the company is actually operating in the future of the company and the current stock price. Currently trading, I think, like in yesterday numbers $0.14 or something like that. And again, uptick is massive. If we talk EV to EBITDA, we talk almost 500% uptick potential. If you talk EV gross to gross profit, we talk even bigger number, more than 2,000% uptick. So this is something going on. And we continue saying it every earnings call, but now I would like to say something a bit different to investors and shareholders. Maybe it's time to take a fresh look about Adcore as a company. So by becoming an AI-first company, by accelerating our growth now in 2026 and also look at the different metrics. $10 million in cash in hand, 3x fast development that where it used to be even 1 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 million almost like in a cash flow generating during the last quarter. That's all a very positive signal. So basically, the company is doing something right, and we have a bright future in front of us 2026. Like I say, we plan it to be a breakthrough year for Adcore. And I think with the current actually stock price, actually, it represents far bigger, I would say, opportunity 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 standing and where equally important the company is going to go to. And obviously, stock price need to follow at some point. So that was my, I would say -- I wouldn't say like [ $0.02 ], but my, I would say, remarks regarding the earnings 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. Amit, the floor is yours.

Okay. 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. 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. Let's review in more detail. For the 3 months ended December 31, 2025, we delivered revenue of $12.1 million compared to $11.2 million in the same period last year, an increase of $0.9 million or 8%. Gross profit was $3.8 million compared to $3.9 million, a decrease of $0.1 million or 2%. As for operational expenses, R&D expenses for the quarter were $0.3 million compared to $0.7 million in the prior year. The decrease is mainly due to increase in capitalization during 2025. SG&A expenses for the quarter were $3.5 million compared to $2.8 million in the prior year. The increase was mainly driven by increase in sales and marketing costs. Operating profit for the 3 months ended December 31, 2025, was nil compared to $0.4 million in the same period last year. As for net loss for the 3 months ended December 31, 2025, it was $0.3 million compared to net profit of $0.5 million 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 2025 compared to the same quarter last year. Gross profitability remained relatively stable with a decrease of 2%, mainly due to change in client mix. 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 2025, 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 8% and 44%, respectively, mainly due to reduced budgets and stopped activities. Net cash from operating activities. For the 3 months ended December 31, 2025, cash from operating activities amounted to $4.2 million compared to $3.8 million in the same period last year, an increase of $0.4 million or 9%. This is reflecting a strong business performance. In terms of financial position, cash and cash equivalents were $10.3 million as of December 31, 2025, compared to $10.8 million at December 31, 2024, a decrease of $0.5 million or 5%. We continue to maintain a strong cash position to support ongoing operation and growth. As for total assets, that amounted to $21.6 million compared to $23.4 million at December 31, 2024, a decrease of $1.8 million or 8%. As for the liability side of the financial position, we can see that the company is still debt-free. Adjusted EBITDA. The quarterly non-GAAP results reflect adjustments for the following items: depreciation and amortization, share-based payment and other nonoperational items. For the 3 months ended December 31, 2025, adjusted EBITDA was $0.5 million compared to $1.3 million for the same period in 2024. This decrease of $0.8 million 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.

Very good. Thank you both Amit and Omri for your comments. At this time, we'll move forward to the Q&A session.

And starting off, looking at APAC, which has been posting exceptional growth. Investors are interested, what exactly is driving the growth in APAC? And can it continue at this rate? Or do you expect it to continue? Can you provide some color there?

Yes, I'll take that. I think like we both, Amit and myself, touched this topic to some extent. Amit mentioned obviously new client acquisition, which is obviously a big growth factor. But I think like equally important, I think like what we see in Australia and will generate a lot of this growth that we are seeing. There are fast adoption of new marketing solutions 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, you know the solution that wasn't even exist 1 year ago. So I would say it's a mix, like a healthy mix between new client acquisition, fast adoption of new marketing solution. 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. Omri, you somewhat touched upon it, but I want to maybe drill down a bit. You mentioned new services gaining traction in Australia or at the APAC region. Can you just provide us or elaborate a bit more on those solutions? And is there a market for these in your other regions?

Yes, absolutely. I think like I would touch a few of them, like Adcore was primarily around performance marketing. So that 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, it's more or less 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, branding awareness and everything attached to it. This to the back of introducing the AI studio, Adcore AI studio that basically allow us to generate, 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 for both of these new services. They're coming with big budget, bigger players, more enterprise type of players, and this is part of like the effects that we see in Australia.

Thank you, Omri. 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, that I would say, I would split it to two. A, we're fully integrating AI and using AI in everything that we do. If let's say, up until, I don't know, like 6 months ago, 1 year for sure, I would say 80%, 90% of the code was been written by our developers. I would say now it's flipped over. So AI is writing 90% of the code, and we are like the developer just need to tweak it and fine-tuning and making sure that it is working okay. So that's very big difference, I think, like -- so AI is writing most of the code nowadays, like the role of developers is changing, and we are changing with it. And like I said, that allow us to write code 3x faster, that allow us to write more sophisticated code. But this is just one example for one department, which is R&D. 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. So currently, for example, let's say, if we talk about proposing, we have a 360-degree coverage of AI solution within the system. So if you were talking about the propose that we sent the client portal, we have a chatbot that basically can interact with the recipient. You can ask him questions, you can talk about the proposal, give him immediate answer and help him getting this presentation or proposal across the finish line, for example, and same goes in the back end, where the company operates. So again, you can operate, talk with the chatbot, understand open new proposal, send new proposal, analyze what's going on. AI can tell the salesperson what he should tell to the recipient, if they have questions and so on and so forth. So everything I would say is covered with AI, and that's a big, big difference between how things used to be happen, I would say, even 1 year ago or even 6 months ago. So AI-first company that means everything done with AI 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. As of recently, I think most are aware, there's been a conflict in Iran. I would love to hear -- or would love to understand, is that impacting your business in EMEA or globally or otherwise? Or how is that affecting business for you?

Amit, do you want to take this one?

Yes. Honestly, we don't see like a big impact on our operations globally, obviously, not a big impact. But also in Israel, I think a lot of the workforce started to work remotely, so we even see a bit of spike in the activity.

yes. It remind me a bit of COVID happy days. We see a lot of online activity, a lot of e-commerce going on. And obviously, we see more demand now to what we do from the local clients in Israel than even I would say before. So again, everybody would like and hope that the war going to end soon, and we'll have a peaceful days. But I think like even with what everything that is 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 or COVID-similar effect, I would say.

Okay. Thank you, Omri, Amit. Switching gears again, looking at costs, your capitalized software costs doubled in 2025. Thinking about going forward, should that tail off in 2026 as you perhaps reduce investment in proposedly? A bit of color there would be great.

Yes. I think like proposedly, I would say, definitely, we can reduce or already starting reducing some of resources and effort we put in proposely. Actually, we want to start recognize the capitalization proposely in 2026. But I think, I would say that, yes, we're not going to maybe invest in Proposely as much. We are investing in new tools. I mentioned some of them, the AI engines. So I think like -- this level of investment in innovation is going to remain. But like I said, at least we don't need to increase it. We can maintain more or less what we have right now. 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. It's not just like how much we invest. It's also value for money. So the value proportion is going very big. 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. I would say, obviously, we're not thrilled with the results that we've been able to demonstrate for this specific region in 2025. I would say, if you look at 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 like making the right moves over there.

Very good, very good. Thank you, Omri. Looking forward to Q1, well, I guess, Q1 is almost concluding here. But -- you talked about it in the presentation, particularly 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?

Yes. So we -- as you know, we don't give guidance regarding to the quarterly results. But I can say that if we have something excited to share with investors, whether it's a new innovation, new tool, like a big result, 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 the investors, that's 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&A session for today. Thank you all Omri and Amit for your comments. And most importantly, thank you all for joining. Omri, I want to pass back to you for any final words before we end here.

No, I think I already gave a lot of words. I'd just like -- again, I want to thank everybody that participated 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 is a lot going on. Trust me, and you will see it in the numbers.

Very good. Thank you, Omri. 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.