Zoomd Technologies Ltd. (ZOMD) Earnings Call Transcript & Summary

Good morning, and welcome to the Zoomd Technologies Reports Second Quarter 2026 Financial Results Conference Call.[Operator Instructions] Please also note, today's event is being recorded. At this time, I would like to turn the floor over to Ben Shamsian, Lytham Partners. Please go ahead.

Thank you. Good morning, and welcome to this morning's Zoomd Second Quarter 2026 Conference Call. With us on the call representing the company is Amit Bohensky, Zoomd's Founder and Chairman; Ido Almany, Zoomd's Chief Executive Officer; and Tsvika Adler, Zoomd's Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call to questions. Please follow the operator's instructions to ask questions. Before we begin with prepared remarks, just a couple of comments. Today's call will contain forward-looking statements that are based on current assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those projected, and the company undertakes no obligation to update these statements, except as required by law. Information about these risks and uncertainties is included in the company's filings, as well as periodic filings with regulators in Canada and the United States, which you can find on SEDAR and Zoomd's website. Today's discussion will include non-IFRS measures. These should be considered as a supplement to and not a substitute for IFRS financial measures. Note that all figures on this call are represented in U.S. dollars as are Zoomd's financial statements. Finally, today's event is being recorded and will be available for replay through the webcast information provided in the press release. With that said, let me now turn the call over to Amit Bohensky, Founder and Chairman of Zoomd. Amit, please proceed.

Thank you, Ben, and good morning to all of you. We are pleased to speak with you today regarding our second quarter 2026 results. In Q2, we delivered a broad-based improvement across our key financial metrics compared with the first quarter. Revenues increased by over 10% quarter-over-quarter and together with an additional 8% reduction in salaries and related costs resulted in operating income and EBITDA turning positive. Net income also improved by approximately $1.7 million compared with the previous quarter. With more than $22 million in cash and cash equivalents and no bank debt, we believe that we are in a strong position to navigate the current transition period while continuing to invest in long-term growth initiatives, business development, strategic partnerships and our technological capabilities. As discussed previously, 2 major customers implemented changes to their operating models, reflecting ongoing adjustments in customer acquisition strategies and KPI measurement as part of broader shifts in the digital marketing landscape. We continue to actively work with both customers following these changes, maintaining our position as a trusted partner, supporting their long-term growth objectives. With one of these customers, as time progressed, we have become increasingly cautious regarding the likelihood of a meaningful recovery in activity levels. With the second customer, we continue to see a meaningful increase in activity levels alongside continued expansion into additional geographies and remain optimistic that the trend will continue. We believe this period of transition reflects an ongoing shift in customer activity mix rather than a fundamental change in our long-term growth strategy. We also continue to expand and diversify our customer base. Over the past several quarters, we expanded our presence across North America and Europe, adding more than 20 new clients across the iGaming, fintech and e-commerce verticals, including Silver Social, SportyBet and Kraken. Based on the typical revenue ramp-up cycle, management expects these customers wins to contribute more meaningfully during 2026. These newly onboarded customers contributed over 20% of the company's revenues during the quarter, supporting the company's transition towards a broader and more diversified revenue profile. We believe these developments support the creation of the healthier, more diversified and resilient long-term revenue base. As part of our growth strategy, we continue to advance strategic partnerships that should accelerate revenue growth. Alongside the collaboration with E2, we initiated an additional partnership during the year currently in the POC stages, focused on expanding capabilities across broad range of digital and multimedia distributor channels. We are expanding the resources dedicated to these initiatives, and we believe they will contribute over the coming quarters. At the same time, we implemented a series of operational efficiency and cost optimization measures designed to better align our cost structure with current activity levels. These actions are now increasingly reflected in our results, contributing to a leaner cost base and improved operating efficiency with dedicated AI tools and internally developed capabilities supporting a growing share of our operational workload. We are, therefore, entering the coming quarters with an improving revenue trajectory, a more efficient cost structure and a stronger foundation for renewed growth. Now I would like to turn to our product and service offering as it's important for investors to understand our competitive advantage and why clients are coming to us. Our competitive edge stems from our comprehensive 360-degree approach to digital performance with a mobile-first focus, all designed to help our clients achieve their goals. We offer a wide range of solutions tailored to digital and mobile performance, enabling us to deliver a holistic suite of products and services that drive measurable results against our clients' digital performance KPIs. Zoomd utilizes a combination of research and development, acquisitions and methodologies to improve its offerings. One of our strengths is our transparent, direct and intensive client communication. Unlike many of our industry peers, we don't operate through agencies. We work directly with our clients, engaging with the Chief Revenue Officer side at the organization. This relationship positions us not just as a vendor but as a trusted adviser. The depth of this engagement fosters long-term partnerships, significantly reduces churn and create strong opportunities for revenue growth within our existing client base. This approach enables real-time campaign management without delays even while simultaneously having multiple campaigns across various geographies. The unique approach positions us as a semi-human, semi-automated command and control platform, effectively combining advanced technology and strategic insights. We closely monitor and respond not only to the shifts in client's strategy, but also broader macroeconomic changes beyond the client direct control. And as a result, we empower our clients to swiftly adapt to market fluctuations, maximizing their impact and driving significant customers globally. Our main platform is integrated with hundreds of media sources, allowing us to promote our customers' digital assets on multiple channels under one system. We use a DSP for a programmatic media buying. The DSP is integrated into the biggest mobile media exchanges, providing our customers full range and reach for the mobile web and app performance needs. We optimize advertisers' resources and maximize their advertising budget and efficiency. There is no dependency on any specific media supplier or traffic channel. This not only saves valuable time and resources for our advertisers, but also provides enhanced clarity and consolidated insights. Beyond the walled gardens like Google, Meta and et cetera, the open marketing landscape is fragmented. Zoomd enable advertisers to leverage a wide range in various types of media channels from social to programmatic, OEMs, SDK networks and more. Their KPIs are achieved on all together or as a mix. I will now review the second quarter of 2026 financial results in detail. Revenue. Revenue in Q2 of '26 were $77 million -- $7.7 million, a 61% increase (sic) [ decrease ] from Q2 '25. The decrease in revenue primarily reflects changes in the operating models of 2 major customers, while the overlook for a meaningful recovery with one customer remains uncertain, activity with the second continued to improve and expand into additional geographies. At the same time, the company continued to execute its diversification strategy with customers onboarded during 2025, contributing more than 20% of quarterly revenues and customer concentration among the company's largest customers continuing to decline. Reflecting this positive trend, revenues in Q2 2026 increased by over 10% compared with Q1 2026. Gross margin. Gross margin in Q2 2026 was 43%, consistent with Q2 '25. Variations in gross margin across periods primarily driven by changes in customer mix remains with our representative profitability range. Operating expenses. Total operating expenses for Q2 '26 were $2.8 million, a 7% decline compared to Q2 '25. The continued decrease in operating expenses reflects the ongoing benefits of the company's operational efficiency and cost optimization measures implemented over recent quarters, including a reduction of approximately 20% of its workforce and other expense reduction initiatives. This ongoing focus on operational efficiency is also reflected in the quarter-over-quarter results. In Q2 2026, compared with Q1 2026, personnel-related costs decreased by approximately 8%, while growth-oriented spending increased by approximately 25%, primarily reflecting a continued investment in business development and customer engagement. EBITDA. EBITDA is used as a primary performance measure by the company's management to ensure it has the right structure to support future growth. We define EBITDA as operating profit before depreciation and amortization. EBITDA in Q2 '26 was $0.7 million compared to $5.5 million in Q2 '25. The decline in profitability compared with the corresponding period in '25 primarily reflects the decrease in revenues. The impact was partially offset by the continued benefits of the company's operational efficiency and cost optimization measures. The combination of positive revenue trends described above and the company's lower cost structure continued to broad-based improvement across the company's key income statement metrics in Q2 2026 compared with Q1 2026. Revenues increased by over 10% and together with an 8% reduction in salaries and related costs supported operating income and EBITDA returning to positive territory, while net income improved by approximately $1.7 million. A full reconciliation EBITDA is available in our MD&A filing. Net income. Net income for Q2 '26 was $1.2 million compared to net income of $6.1 million in Q2 '25, in line with the factors explained above. Before we move to the Q&A, I would like to thank all our employees for their hard work and dedication and as well to our investors for the continued support. And with that said, I would now happy to take questions.

[Operator Instructions] Our first question today comes from Jesus Sanchez from Castanar Investments.

It's great to see the quarter-over-quarter improvements. I don't know if you can quantify for this Q2, what percentage of the Q2 revenue was that customer that is coming back and what the Q2 revenue will have been without him?

This is Ido, the CEO. I'll take this question. We don't specifically disclose clients, but it was, say, around 20% to 25% of the revenue of the quarter.

And you said that you expect it to come stronger than it was before they had this...

Yes. Again, this is -- with this customer, we are seeing, as we've said during the remarks, we are seeing continued expansion and testing of -- on their end through our service of new avenues like new geographies, new media types, and we are seeing continual growth there. Again, as it is still in the testing phase, it hasn't stabilized, but we see future of growth with them going forward with this client, yes.

Fantastic. Now that I have you another, finance question. So if we back out the ForEx effect on the cash balance, our non-ForEx finance income more or less implies like 1.5% of the cash interest yield. Is that -- I'm reading that right? Or...

Can you -- you were kind of breaking up. Can you please repeat the question regarding the ForEx?

So if we remove the ForEx effect from the cash, the interest income implied like a yield roughly of 1.5% on our cash. Is that right, what I'm reading? Or why it's not higher and we don't have the money in term deposits or any other high yield?

So a meaningful part of the finance income come from currency movements, mainly because the Israeli shekel strengthened against the U.S. dollar. We also earned interest on our cash deposits, but most is from the currency -- most income -- most of the finance income came from the currency movement. Most of our available cash is held in new Israeli shekel. At the same time, a large part of our expenses is also in the new Israeli shekel. So that creates some natural offset and reduce the overall effect. And the interest for our deposits is more or less something around 4% for the deposits, and we don't have interest for the cash balance.

So it's then the ForEx that is counterbalancing that 4%.