Adcore Inc. (ADCO) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us. We will start in a minute or so. We'll give other people another minute or 2 to join, and then we'll start shortly. All right. Good morning once again. Thank you for joining us. Great to see this turn up. Earlier this morning, Adcore released its Q2 2026 financial results. And today, we'll be walking you through these results and providing you an update on the ongoing company initiatives. First of all, you might see some familiar faces on the call today. I'm Martijn, Chief Partnership Officer here at Adcore. Joining me today is Omri Brill, Adcore's CEO and Founder; and also Amit Konforty, Adcore's CFO. And also [ Kobi Arif ] will be here to present some great insights on our AI Studio. For the agenda today, before we begin, we will go over some forward-looking statements you should be aware of while listening to this call, followed by the CEO opening remarks and the latest innovations on our AI Studio done by Kobi and then the CFO financial highlights. Finally, we will conclude with a Q&A session. [Operator Instructions] Before we begin, I will give everyone a moment to review these statements. Please bear in mind when listening to the call today that the management team may use forward-looking statements, which are inherently uncertain in nature. All right. And with that, I would like to pass the floor to Omri for the CEO's opening remarks. Omri, the floor is yours.

Thank you very much, Martijn, and good morning, everyone. It's my pleasure to discuss the company financial results for Q2 2026. I'm going to give, let's say, the high level of the results, obviously covering some of the stuff that we've been doing, innovation and working during the last quarter. Obviously, we have some nice presentation to show you on the back of my remarks. And our CFO, Amit Konforty, will dive into the numbers in more details after that. So let's start with it. Okay. So all in all, Q2 was a very strong quarter for us. Top line revenue grew by 10%. Gross profit even double up, it's grow by almost 20%. So we see a really positive trend. And when we look at the numbers and also comparable numbers, you will see that this wasn't the usual quarter for us. So if you look at top line revenue, it amounted to $7.2 million in Q2 2026 compared to $6.5 million in the previous year, again, 10% year-on-year growth. And gross profit $3.7 million in Q2 2026 compared to $3.1 million in the previous year. You can see that the gross profit was almost as strong as Q4 2025 and that Q4 is, let's say, a robust quarter for us. So basically, in Q2, we've been able to achieve almost a strong number as Q4, and that's tell you a lot about how unique in that regard this quarter was really was. And if you look at, let's say, quality metrics, what the company considers quality metrics, we can still see that, again, gross profit $3.7 million, almost 20% year-on-year growth. Cash position still solid at $4 million during this quarter. Again, you see some seasonality, right? In Q4, the company usually acquire more cash and then the cash position is going down as the quarter move along. But again, that's something that is part of, I would say, the normal course of business for the company. So, to discuss number high level, again, $7.2 million top line revenue, 10% decrease, gross profit $3.7 million, almost 20% year-on-year increase. EMEA revenue grew by 12%, which is solid. And North America saw a really nice rebound to -- grew to $1.5 million, almost 30% year-on-year increase, and that's on the back of, I would say, a soft year that we saw in 2025 for this reason. So basically, this is exactly what we anticipated. We say that we would expect to see some stabilization starting in the beginning of the year and now a nice rebound in this last quarter. So that's important for us. If we look at H1, so again, very strong start of the entire year. Total revenue almost $16 million, 16% year-on-year growth. That's impressive. Gross profit grew to almost $7 million, again, 10% year-on-year growth in, I would say, year-on-year. APAC, 23% year-on-year growth, that's massive. EMEA, 8% year-on-year growth. And North America, again, after a softness that we saw in the beginning of, let's say, the year and 2025, 6%, so back in positive trends. So, all regions actually are growing in H1 2026, and that's exactly how we would like to see it moving forward. And now I would like to discuss a bit more technology and innovation. In the last earnings call, we already discussed that we built and shipped the first AI agent for proposing the inbound agent. And basically, you can think of the inbound agent as a receptionist. So that's the guys that's answering the phone that's coming to the company, that's answering the e-mail that can [indiscernible] to the WhatsApp from the Facebook Messenger, all different channels and basically one agent that can do the work of 1 person of 10 receptionist or even a team of [indiscernible] receptionist. So that's all done by this agent, but it don't stop in just answering question and give information. It can literally send proposal. It can send payment request, ticket, sell ticket. So, this agent can do everything they can do an [ onbound ], they can start the conversation, send a proposal and make sure this proposal is signed, and it doesn't matter which channel we're talking about. It can done by e-mail. It can be done by the phone. It can send you an SMS link with the proposal, everything. So that was the first agent was already built and shipped in Q1 2026. And then we said we committed to build another 2 agent during Q2 2026. But guess what, what we believe we built for. So, we built and ship the outreach agent, which is basically like an SVR. This agent can go over or work over, let's say, old lead, cold lead and basically make them warm again and see if there is like a sale opportunity to this database, for example, deal agent taking into -- like it started to play when the proposal already sent, it's like a salesperson. We do the follow-up, we make sure that everything is clear about the proposal, and we offer some kind of discount, but basically, this agent is responsible for the deal to get closed. And customer agent taking responsibility start when the offer already closed, basically make sure that the client is happy, satisfied, gives them update. It can do a collection if need. It can do upsell and cross-sell. So, everything that is more or less, I would say, for-sell type of activity. Again, between the inbound, outreach, deal and customer agent, you have your entire sales team. And that's not like a slogan, that's what is already up and running and reality on the ground, and we are super happy about it. Actually, the fifth agent is AI Studio agent which Kobi going to cover in a bit more detail. So, I think Proposaly, in 6 months' time, we did a complete platform, I would say, flip over the platform from a workspace document type of platform to agentic first agent sales platform, which workspace and basically documents are now tools in the agent's toolbox. So basically, it's a complete, I would say, upside down where the platform used to be. So, it's not like that agent are serving the document, now the agent, basically the document serving the agents. And that's a complete, I would say, a complete evolution of where the platform is today. And that's a big promising moving forward, and we can discuss it in a bit more detail if needed during the Q&A session as well. And now the next thing is AI Studio. AI Studio is already up, running and generating some early revenues. We have really good traction and good sign for good market fit about this product. Kobi will give you a quick demo about the latest and greatest and what we've been able to build and ship during the last quarter in AI Studio as well. So, I think like stay tuned for Kobi presentation. And I think like this cover, I would say, the highlights of the technologies that we've built or working on during the last quarter. And last but not least is comparable. Current share price is CAD 0.15. We see a very big upside if you look at EBIT to gross profit compared to comparable, almost 900% that put the target price at around CAD 1.3. It's a big gap from where we are today. And ideally, we would like to see the gap is starting to close. So basically, the company has high expectation from the future where this company is growing to this high level of innovation, maybe like never before in the history of the company and we are very optimistic of the level of maturity that our product achieved already. And I think like H2 is going to be an interesting time for us, making sure that basically the app are already generating revenue, and we can take them to the next level. With that, I conclude my remarks, and I will hand the floor, I guess, now to Kobi.

Thank you, Omri. Hi, everybody. I'm Kobi, and I'm leading the go-to-market of the AI Studio app, basically in charge of generating revenue out of the platform. Now I know in our last earnings call, you have seen the app already. You got excited of seeing how cool it is. So, it actually became even cooler in the last month. We actually added some really, really cool and really smart features that we can see from our clients that are already using it, how excited it is and how it's going to save a lot of time and a lot of resource for our partners. So, I'm going to show you today, I'm going to focus on how we generated a special flow that allows users to create any kind of creative format from a single static banner. It could be a banner that you created on our platform. It could be a banner that you created by yourself. But in a single static banner, you will be able to generate all the way to motion banners, moving on to a UGC user-generated content like influencers and TikTok videos and all the way to a TV production, CTV production commercial only in a single click. Sounds a bit like magic, but it's already here. It's already working on our platform. Let me share my screen to show you the full-on example. So actually, I started putting in a brief -- a very simple one-line brief saying, generate me static banner for a super promotion sell 30% of Sunny Sunny [indiscernible], it's a cosmetic sunscreen brand giving a bit of glow attracting women. So, the platform generated 4 different design concepts. By the way, that itself, if someone knows a bit about how advertising studios work, takes about 5, 6 hours work that took me at less than a minute to generate. So, they generated those 4 different creative static. Let's say, I'm in love with this one. This one is my favorite. So, I'm just clicking here. And with that single click, I can create a motion banner, a UGC user-generated content video or a full on commercial. Let's see how it actually looks like. So, I'm clicking the motion banner. Let's see the end results. I'm getting this.

Maybe you need to share again with some.

Sorry, one second. So interesting fact about motion banners. Actually, what we know from research and our own experience that motion banner are able to double the conversion rate of a campaign, reduce dramatically the cost per conversion and generate just much better result. Again, there is no need to produce. There is no need for an AI motion design -- sorry, for a motion designer to generate those things, clicking a button, anyone can do that really. I'm not a designer, and I have done it myself. So, take this motion banner. I want to even challenge it even more. I want now to go live on TikTok, for example, with an influencer talking about this amazing product. I clicked user-generated content, and I get this amazing thing. What it actually did, it took the person, the girl from the banner, generated there is an avatar and was able to generate a UGC full influencer video in a click of a button. [Presentation]

We're talking here about a video that usually cost a few thousands of dollars to produce, takes days and finding the creative and everything. And for me, it's magic. I don't know about you guys. Moving on, I want to challenge it even more. I want to go live on a CTV campaign, YouTube campaign with a commercial , full-on commercial addressing general audience. That is possible as well in a single click. [Presentation]

Looks amazing, I don't know. Now let's put it this way. Using the platform is super, super easy. But this month, it became even easier for our users to use it. We added our AI agent, which is embedded within the Adcore AI Studio app, can just ask whatever you want, generate a banner, generate a commercial, generate a picture, whatever you want, you can use the AI agent to do it for you without saying too much to say what you want to be in the banner and the AI take it from there. You know what, we want to -- you're even more lazy than we think. You don't have any strength. You don't even want to leave your own AI agent -- the AI program that you are using. I'm using Claude, some people using ChatGPT, and you want to use our platform through that AI platform. Simple it is with an MCP, we need our new MCP connector. You can just go in, connect it to ChatGPT, connect it to Claude, whatever AI you're working on, saying, create a banner with Adcore AI Studio by just add the brand name, what is the discount? And it's automatically generating in a click of a button, you get a full set of banners. And of course, from that, again, you can create a UGC, a commercial and so on. So obviously, bottom line, we've dramatically improved the platform. We are continue working. There's a lot of things -- sorry, I'm going to stop there. There's a lot of things coming in this month and already in development. But as you can see, every single day, this app is improving. There are already active paying clients for the app and a lot of people are just on the step of joining in. So more to come, stay tuned. Thank you.

Thanks so much, Kobi. It's amazing to see how much has developed since the last time we met at the Q1 2026 earnings call. So it's amazing progress, and I love to learn more in the next update. With that, I'd like to pass it on to Amit Konforty, CFO of the company, for some CFO highlights and financial highlights.

Thank you. Okay. So 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. The second quarter of 2026 showed continued momentum with revenue growing 10% year-over-year and gross margins improving to 51%. This is in line with the overall first half performance, which also reflects higher revenue and gross profitability. Let's review in more detail. For the 3 months ended June 30, 2026, we delivered revenue of $7.2 million compared to $6.5 million in the same period of 2025, an increase of $0.7 million or 10%. Gross profit for the 3 months ended June 30, 2026, was $3.7 million compared to $3.1 million in the prior year, an increase of $0.6 million or 19%. Gross margins for the 3 months ended June 30, 2026, were 51% compared to 47% in the same period last year. The increase in margin is due to the increase in revenue and the change in client mix. As for operational expenses, R&D expenses for the quarter were $0.6 million compared to $0.5 million in the prior year. The slight increase in expenses was primarily driven by increased use of AI-related tools. SG&A expenses for the quarter were $3.7 million compared to $3 million in the prior year, an increase of $0.7 million or 22%. The increase was mainly driven by payroll-related expenses and was partially impacted by foreign exchange rate fluctuations. Operating loss for the 3 months ended June 30, 2026 was $0.6 million compared to $0.5 million in the same period last year. Net loss for the 3 months ended June 30, 2026, was $0.8 million compared to $0.4 million in the same period last year, an increase of $0.4 million. Revenues and gross profit. As shown on the left side of the slide, Q2 revenue grew 10% year-over-year to $7.2 million with gross profit increasing 19% and gross margin improving from 47% to 51%. This is driven again by changes in client mix. Looking at the first half results in the middle, we observed a similar trend with revenue growing 16% to $15.7 million and gross profit increasing 10% to $6.8 million. This is consistent with the full year trend on the right, which highlights ongoing annual growth in both revenue and profitability. As for the geographical revenue breakdown for Q2 2026, APAC revenue continued to grow year-over-year. EMEA revenue grew 12% year-over-year, primarily due to new client acquisition and expanded activity from existing clients. North America revenue rebounded after a slower prior year, delivering a 27% year-over-year increase. In terms of financial position, we had cash and cash equivalents of $4 million as of June 30, 2026, compared to $10.3 million at December 31, 2025. Total working capital amounted to $3.1 million compared to $5.1 million at December 31, 2025. 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 payments and other unusual and nonrecurring items. For the 3 months ended June 30, 2026, adjusted EBITDA was $41,000 compared to $155,000 for the same period in 2025. The decrease in adjusted EBITDA was mainly driven by the increase in operating loss. With that, I will turn the call back to Martijn.

Thank you so much, Amit. With that, we arrive at the Q&A portion of this call. We got a couple of questions in. The first one I direct to you, Omri. It's about the gross margin expansion. The question is gross margin expanded nicely to 51% from 47% year-over-year, with gross profit growing almost twice as fast as revenue. Could you walk us through what's driving that mix shift and how much more room you see to keep expanding the margin?

It's a good question. I would say, a, first of all, like I would say [indiscernible], right? If you see top line revenue growing, gross margin improving, so one can expect gross profit will follow. And actually, it follow quite nicely, almost double the growth rate that we saw for top line revenue. So, I think that the company, like we have different revenue streams, and we're focusing on the revenue streams that are more profitable for the company coming with better margins. And I think this type of strategy is proving itself. So, you see like a nice, I would say, improvement in the company gross margin, and we could -- we expect to see this trend carry on onward. I would say, with some exception. Obviously, Q4 can have lower gross margin traditionally because of the spike in cost of revenues related to holiday related spending. So, I say but the trend -- as a trend, I would say, is definitely looking more positive, and we expect gross margin to remain solid.

Thank you, Omri. Following question is regarding North America. It's encouraging to see North America bounce back with 27% growth after a softer 2025. What's behind the turnaround? And do you feel good about that momentum carrying into the second half of this year?

So, I think maybe Amit can shed a bit more light, but I think like most of the growth that we saw in North America coming from actually existing client activity. So, improving this activity, I would say. And that's something that is very encouraging for us to see, let's say, the momentum is shifting and that these clients are now growing again, growing the spend and basically that's always a positive sign. So, I think this is one thing. Also bear in mind that moving towards and see like H2, we still have compare -- like better numbers to present because the comparables should be working in our favor, soft in 2025. So, I think like, yes, we are more positive regarding North America, and we expect to see this type of behavior. We expect it to see it stabilize and then to see it going back into, I would say, growing trend. And I'm happy that we've been able to achieve it in Q2, and we are hoping to preserve this type of momentum carrying into the second part of the year as well.

Great. Thank you, Omri. The next question is about our AI development and development in general. You committed to 3 autonomous agents by Q2 and actually delivered 5, which is a nice execution story. What kind of early customer feedback or usage signals are you seeing from Proposaly agents and also the creative agents on the AI Studio?

So, first of all, if we miss, we might as well miss like overdelivered and underdeliver, I guess. But I would say, like if we're talking about Proposaly, obviously, we have 4 different agents now running live, inbound agents, outreach agents, [indiscernible] agents and customer agents. And we see like a good, I would say, market fit from early beta clients. So, they are excited about what this agent capabilities are, what type of issues they can solve for their organization. And I think like in general, we see, okay, this is definitely a place for the solution like Adcore is building in the market and actually, it's quite a unique solution in the market because maybe everybody more or less can, I would say, build an AI agent nowadays, but let's say, AI agent that is integrated to the different workspaces and platform and document and can generate revenue from A to Z just from visitors, that's quite a unique sales story that only Adcore. And I think that puts us in a very different, I would say, position from other vendors in the market today. So AI like Proposaly, I'm definitely happy from the early reaction that we are getting. And maybe Kobi can elaborate a bit more about the reaction that we see from early user of AI Studio with regard to the agent.