Okay, thank you everyone for your patience. As mentioned, today we'll be going over the Q2 results. Today, hosting, you'll have myself, Nick Campbell, I'm Head of Investor Relations here at Adcore. You'll have Omri Brill, CEO and Founder, and Amit Konforty, CFO. The agenda for today, before we begin, I'll go over some forward-looking statements you should be aware of when listening to this call, followed by the CEO opening remarks, followed by the CFO financial highlights, and finally, we'll have a Q&A session at the end. If you do have a question during this call, please use the Submit a Question feature in Zoom, and we will address those at the end of the call.
Now, just before we begin, I'll go over some forward-looking statements, and you can have some time to review these, but these are statements about the business's future projections that are somewhat uncertain in nature. So I'll give you a moment to review this, and then we'll move on to the CEO opening remarks. Okay, and with that, we'll move over to Omri Brill, CEO, for his opening remarks. Omri, the floor is yours.
Great. Thank you so much, Nick. Just one second. Okay, so good morning, everyone, and thanks again, Nick, for the intro. It's my pleasure today to discuss the Q2 2024 result. Obviously, we're gonna answer any questions that might raise from the report that we released today, and I can say high level that the company is pleased with the results. Obviously, we didn't see a significant increase, let's say, in revenue or in midline, but I think all in all, it was a positive report for us, and especially when you look at the six months, because we always have some fluctuation between quarters in the advertisement business, then you can see that yet it's still a strong start of 2024 for us.
High level numbers, revenue in Q2 2024 were $6.6 million compared to $6.9 million in the previous year quarter. Gross profits was $2.9 million compared to $3 million. It's almost flat to decrease a bit, but again, there's no big movement, either positive or negative for this quarter. We discussed, you know, what we see as changing seasonality lately and how the effect, let's say, the result in Q2 and what we can expect in the coming quarters as well.
If you look at key gross KPIs, and this is something we discuss almost every earnings calls, that basically, these are KPIs that the company put extra emphasis on, and that we believe they are important to the company, and they are basically what the company is looking to see that they are going in the right direction. And we can... I'm glad to report that actually, both of these important KPIs for us, which are gross margin and North America market growth, moved in the right direction. So gross margin in Q2 2024 were 44% compared to 43% in Q2 2023, so you have an improvement. And again, as we mentioned before, the sweet spot for Adcore should be between 40%-50%, and 44% mark more or less the middle.
If you look at North America, our results, and actually we saw a significant increase in this quarter compared to the previous year, 22% increase year-on-year to $2 million, compared to $1.7 million in 2023. Again, we see a lot of traction in this market, and that's a market the company put a lot of emphasis on, and we're glad that all these efforts that we put are bearing fruit. So two, two very important KPI, and both of them are actually were positive for the company in this quarter. Just to sum up some highlights from Q2 2024 results, and again, gross margin 44% compared to 43% in the previous year. North America, we discussed it, 22% year-on-year growth. APAC revenue grew as well, 33%.
If you remember, APAC was a challenging region for us in 2022, for example. Client diversification actually improved in this quarter to 49%, and actually, operating cash flow was improved as well. We used around $250,000 this quarter, compared to $400,000+ in the previous year as well. So do we see an improvement in cash flow use for this specific quarter? If you look at the six months, which give us a better picture on the year, how the year started, then actually we see it was quite positive. Gross profit actually improved by 6% year-on-year compared to 2023. Gross margin improved a lot, 45% compared to 42% in the previous year.
North America revenue grew by 26% year-on-year. APAC revenue grew by 6% year-on-year. Client diversification actually dropped from 57% in 2023 to 42% in 2024. Operating cash flow, maybe it's the most significant improvement from cash use of $1.5 million in 2023, we managed to reduce it to $250,000 in 2024. So a very big improvement over there as well. So again, Q2 result was, I would say, fair. But when we look at the six months result, actually, we still see that it's a very positive start for the company. And all in all, like I said, we are happy with what we had to report so far.
When we're talking about the four strategic pillar of the company, and this is area where the company put extra emphasis on, I would start with the most important one, where is technology and AI. A lot of innovation, and that's something that I also add in my remarks on the earning report, PR, that we mentioned that our recent innovation, MediaBlast app, reached an ARR of CAD 1 million within the first 12 months. So this is a very strong traction, a very strong start of a new app in 12 months to reach an ARR of CAD 1 million. And we see a bright future for this app moving forward as well. Another strategic pillar for the company is enterprise and aggregator.
We want to focus on a larger type of clients and making sure that we are more profitable doing so. Another strategic pillar is low touch and do it yourself. So we want to make sure that, again, we are more efficient, we need to put less effort on onboarding and serving each client and basically focusing on do-it-yourself type of a solution. And last but not least, is synergy, making sure that every different solutions in the company operating basically is synergetic to other operation and other solutions the company is offering. If we talk about the comparable company, then basically what we can see from the comparable table is that if we look at EV to gross profit, the peer multiple are almost 4 versus 0.3 to Adcore.
So yet, a very big upside over there for the company, and the same story goes to EV to Adjusted EBITDA. So if the peers are at 12x multiple, we are trading at around 4x multiple. So again, a very big upside over there for the company. And we believe that once the market try to turn positive for small cap companies as well, like Adcore, then we should see this basically gap in the market or normality in the market pricing will change as well.
The company, within the NCIB plan, purchased 60,000 shares for cancellation in Q2, 2024, and all in all, in the last two years, whether it's through the NCIB plan and other plans, we purchased for cancellation 4.1 million shares, and basically that represent around 7%, give or take from the overall outstanding shares of the company, and invested almost CAD 1 million in this process. So again, we believe that one will see an uptick in the market, the stock price can go up a bit more aggressively because of this effort of share cancellation the company did. So that, I would say, conclude my remarks regarding the Q2 , so in the first six months of 2024.
With that, I will bring it back to Nick and Amit.
Thank you, Omri, for your comments. At this time, we'll move over to the CFO financial highlights. Amit, the floor is yours.
Thank you, Nick. Just one moment. Okay. So 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. Despite a challenging Q2 with lower revenues, we successfully improved our gross margins. For the first half of the year, both gross profitability and margins have grown, continuing the upward trend in profitability from previous years. Now, let's review in more details. For the six months ended June 30, 2024, we delivered revenues of CAD 6.6 million, compared to CAD 6.9 million in the same period of 2023. A decrease of CAD 0.3 million or 4%. Gross profit was CAD 2.9 million compared to CAD 3 million, a decrease of CAD 0.1 million or 1%.
Gross margins for the three months ended June 30, 2024, were 44%, compared to 43% in the same period last year. As for operational expenses, R&D expenses for the quarter were $0.6 million, compared to $0.4 million in the prior year. The main reason for this increase is we started amortizing additional intangible assets in the three months ended June 30, 2024. SG&A expenses for the quarter were $3.1 million, compared to $3 million in the prior year. This increase is partially due to the move to the new offices in Tel Aviv during the Q2 of 2024. Operating loss for the three months ended June 30, 2024, was $0.8 million, compared to $0.4 million in the same period last year.
An increase of $0.4 million or 92%, which was mainly caused by the increase in R&D amortization expenses. Net loss for the three months ended June 30, 2024, was $0.7 million, compared to $0.5 million in the same period last year, an increase of $0.2 million or 32%.... Moving on to gross profitability. As we can see on the left side of the slide, Q2 gross profitability saw a slight decrease of 1%. However, the six months results in the center show a 6% increase in overall gross profitability and an improvement in gross margins from 42% to 45%. This aligns with the full year trend on the right, indicating that we are on the right path towards a more profitable 2024.
As for revenue breakdown, for the geographical revenue breakdown for Q2, 2024, we see a significant growth of 22% year-over-year in North America, which is mainly due to acquiring new clients. In APAC, revenue increased by 3% year-over-year. Our EMEA revenue decreased by 27% year-over-year, mainly due to reduced advertising budgets and stopped activities in this region. We believe this is a temporary setback and anticipate a recovery in the last part of this year or early 2025. Now, let's discuss about net cash flow used in operating activities. In the three months ended June 30, 2024, we used cash in operating activities in the amount of $249,000, compared to $406,000 in the same period in 2023, a decrease of 39%.
This improvement in cash flows is mainly caused by improved collections from clients. In terms of financial position, we had cash and cash equivalents of $7.3 million as of June 30, 2024, compared to $8.1 million at December 31, 2023. Total working capital amounted to $6.4 million, compared to $7.6 million at December 31, 2023, a decrease of $1.2 million or 16%. This decrease is mainly due to a decrease in cash and cash equivalents and an increase in short-term lease liabilities due to the move to Tel Aviv offices. As for the liability sides 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 non-operational items.
For the three months ended June 30, 2024, Adjusted EBITDA was negative CAD 173,000, compared to CAD 112,000 for the same period in 2023, reflecting a decrease of CAD 285,000 or 254%. This decrease was partially due to a large adjustment in share-based payment made in previous years. With that, I will turn the call back to Nick.
Thank you, Amit, and that concludes management's comments on the quarter and financial performance. At this time, we'll move to the Q&A, which we've had a number of questions submitted in advance. And again, I'll remind you, if any other questions do come up from our attendees, please use the Submit a Question feature and we'll get to those. But starting off, we have a question from Ryan, who mentions the North American region saw a very significant growth this quarter in Q1 as well. Is Adcore expecting this to continue?
So the short answer would be yes, but to give a bit more context to this answer, then, as we mentioned before, that we look at North America as a strategic market for the company. We think there's a lot of potential for the company to grow in this particular region, and we see a lot of demand also coming from this specific region. So we are continuing to increase our footprint. We are recruiting more sales personnel and boost our marketing effort in this region, and we expect this trend and this, let's say, demand to Adcore services and solution, continuing with the second part of 2024, and hopefully well beyond that.
Thank you, Omri. And, from Ryan, another question is about EMEA, with revenue decreasing about 27% this quarter. What's the reason for that? And similarly, is that expected to continue?
So I think Amit also already mentioned, some in his remarks, you know, like, the, of the company look at the EMEA current weakness. So, like, we see some weakness in this market, you know, we believe this weakness is probably temporarily. We believe that we're gonna see a rebound in the second part of the year, or the least, latest in 2025. And I think that's something that we can see from time to time for different reason. Like I mentioned before, APAC, we saw some weakness in 2022, and then it's managed to rebound. And basically, we see in 2023 and 2022 as well, a good growth coming from APAC region as well. So I think, like, the company is well diversified.
You know, we operate over three different regions globally, and if we see some weakness in some specific region, we are lucky enough to have the, let's say, at least the other regions compensate.
Very good. Mark asked, in Q1, during our call, you were somewhat optimistic on 2024. Is that still your view, or have you changed kind of your expectations for the year?
It's a fair question. I would say is that a more realistic overview. A, you need to bear in mind in advertising businesses, this is a tendency between different quarters, and sometimes you can see budgets that was planned to go out in specific quarter, shift to another quarter. Sometimes the holidays can be in quarter A, and then they're moving to another quarter and so on and so forth. So it's not carved in stone, and you can see it in the numbers. Like, I would say two remarks: A, when you look at the six months, six months results are still positive, and the company have no reason to believe that 2024 not gonna be another positive year for the company.
Bear in mind, in the advertising business, traditionally, the second part of the year is almost the stronger part of the year. So that's, I would say, one remark. Another remark, that what we see lately, let's say in 2024, in particular, that because the company is more diverse now, we have different type of company. We. During COVID, we've been very, I would say, e-commerce centric, but now we have a lot of lead gen clients, we have a lot of e-commerce clients and other type of client. Then for lead gen clients, actually, Q1 is become a stronger quarter, sometimes stronger than Q4, you know, because of New Year's resolution, let's say, fitness-related clients and stuff like that.
And what we see is that if historically Q1 was the slowest quarter in the year, then actually now it's became stronger, sometimes almost as strong as Q4, and then Q2 become relatively to Q1 a bit, a bit slower. So I think we see a bit of a, of a shift in demand between the different quarters, but like I, like I say, lucky for everyone, the year contains 12 months, and we still have a lot of time, you know, to make 2024 a very successful year.
Very good. And Mark asks, "What specific strategies and innovations have driven the annual recurring revenue of $1 million for the MediaBlast app that you just launched within the year?
Yeah. So that's actually a very good question. I would start with maybe the most important thing when you launch a new technology or new solution is the product market fit, right? If there is a good product market fit, and basically there's a demand for your product, then you're already in a very good position. And that's definitely, I can say, that's for MediaBlast , it's been a bit of a wildfire effect since we launched this app. But we still have a lot of, let's say, I would say, challenges that we need to overcome, you know, like making sure that the app is stable, making sure it's secure, making sure that we can deliver and fulfill everything regarding it.
So yes, we achieved $1 million ARR within 12 months, which is an amazing achievement, but we still have a way to go. But I think that sends a very strong signal regarding the potential of this app and where it can take us in the next coming years as well.
Very good. Nick asks, "With an Adjusted EBITDA of -$173,000, what steps is Adcore taking to improve efficiency and achieve profitability in the near future?
So, that's a good question, and that's something that, for us, you know, being efficient and being, let's say, profitable, it's critical. It's always was in the company DNA, and it's gonna be continue to be part of the company DNA. The company is already working on a plan, how we can save or reduce costs of CAD 1 million between CAD 1 million to CAD 1.5 million over the course of the next 12 months. So that's something that we're already working in. We believe we have some areas that we can reduce fat, let's put it this way, not a lot, but you also need to balance it out, because Adcore is relatively still a small company. We have a large potential to grow.
You wanna make sure that you are not cutting too much fat, 'cause you want... You need still some fat in order to support future growth as well. So it's a balance. I would say from one end, we can be more efficient, and we will introduce a plan that will help us to achieve this efficiency or to improve efficiency, I would say. From the other end, we need to double down and be more focused on what's generating revenue right now and making sure that we are making more out of it, you know? Like, so that's, I think, the secret sauce. From our end, double down on what's working for the company and making sure that we can extend it, and from the other end, being a bit more efficient.
I think the magic will happen when we're gonna do both of them.
Very good. And kinda similar along the same lines, Nick asked, "Why did gross profit for this quarter decrease by 1% compared to 2023?
Okay, so that's a fair question. Having said that, when we're talking about 1% gross profit, we're talking about around $20,000 USD. So it's not big numbers we're talking about, and let's say, literally a single client that we win in a single month can generate $20,000 USD net revenue for the company. So that's something you need to bear in mind, and we are—if we are talking 5% gross profit growth, we're talking about $100,000 USD, which is not big numbers as well. So I think, like I said before, there's some fluctuation between quarters, you know, like we see spendings that maybe were historically related to Q2 now happening in Q1 and vice versa. This is one.
Like, Amit mentioned, we had some extra expenses in Q2 related to the office move in Tel Aviv, that basically, let's say, are not in the normal course of the company business, and once every 10 years, you know, the last time that we moved offices was 10 years ago almost. So I think, like, that's, I would say, the two major factors.
Very good. Natalie asked, "CTV is quite an exciting area in digital marketing. Can you talk about your brand awareness solution you recently announced and how you're incorporating CTV?
Absolutely. So I think, like, CTV, it sits, I would say, in the, in the center of, brand awareness, right? When you're talking brand awareness, you're talking CTV first and foremost. I think there's not a single, let's say, platform nowadays that don't offer a CTV solution, right? Whether it's giants like, Netflix, Paramount, but, but YouTube, but, and many, many others. Even linear TV nowadays offers some kind of CTV solution parallel to, to the, let's say, traditional, TV solutions that they're offering. Since CTV is more efficient, people like it more, it's less costly than you need to compare it to, you know, what was historically linear TV, and obviously, you can measure it much better. So I think, like, we see a lot of demand, we see a lot of opportunity.
Adcore acted and moved to this specific market relatively quick, and I think that's something that can generate a lot of growth for the company for the next coming year, because it's gonna be massive. It's already big, but it can be massive.
Very good. Kieran asked: Recently, there was a ruling from the DOJ, an antitrust ruling against Google. What do you expect to be the impact on advertisers and searchers, given this ruling?
I think, to be honest, you know, I'm not a legal expert, nor I'm an expert of governments. You know, like, we don't like governments so much in Israel, but that's our personal, my personal opinion. But I would say the following, I guess for this specific ruling, it's a bit too early to understand exactly what's gonna happen and what's gonna be the impact. I can comment on another thing that is related to Google, that Google recently mentioned that they are pulling back their attention to basically kill third-party cookies. That's something that Google announced almost two years ago, parallel to, I would say, Apple announcement. Google took two years to prepare, and then eventually in the last moment, they pulled back, which I think it's actually positive things for the market and for advertisers.
And that will allow us, you know, to be more efficient for every advertising dollars that we are buying. And I think, all in all, it's a very positive news to the market and put more certainty. The last thing that we wanna see is another big change, like the change that Apple implemented to the market. So this is one remark. With regards to, you know, to the, to the latest ruling, like I said, it will take time to understand exactly what's gonna happen, but I can comment high levels, that the more diverse the market gonna be, the more competition we're gonna see in the market. It's better news for Adcore, let me, let me put it this way.
Very good. Richard asked, "Can you give us an update on your partnerships with Google and Microsoft, and how those work?
Yeah. So I think, like, again, Adcore, Adcore have a very strong partnership, both with Google and Microsoft, and many other advertising platform as well. I can name a few of them, Criteo, obviously and other. And I think all in all, what we can see in this, which is partnership, is basically two-way street, right? From one end, Adcore act as a partner, as a reseller sometime, basically promoting this particular channel. And from the other end, the channel benefit, you know, from the Adcore, from their clients, access to the Adcore technology, from the Adcore, you know, position as a global company in many different markets as well. So I think that's something that actually is working quite well for everyone.
It's been around for, I would say, if you're talking Google, for almost 10 years now, and if you're talking Microsoft, for more than five years now.
Okay, and we got one last question. It's: How are you going to use AI at Adcore?
So it sound like a small question, but it's a big question. But I would say... I would split my answer to two. You know, there's the day-to-day operations that is not even a technology related to the Adcore tech or to the Adcore apps, and I say we use AI every day, multiple times a day. AIs help us to do everything from, you know, from, making sure that the PR that we are released are the best PR we can do, making sure, you know, that we are ready for everything. Like, we are using AI in every single almost operation or action we're doing on a daily basis, and that's something that help us a lot in making the company more efficient.
Basically, that can reduce manpower and another basically allow us to achieve more and to be accurate with everything that we are doing. If you're talking within the technology, then AI is a game changer as well. It's a game changer in our ability to write code. If, let's say, a developer historically could write, just throwing a number, 200 lines of code in a single day, then now we can write 400 lines of code in a single day. And the 400 lines of code probably gonna be in a better quality than what he used to write the 200 code, source of code. So we can write more code, we can write more efficient code.
We can use AI, you know, to make sure that our application, our technology is more efficient, is more smart. There's a lot of stuff we can implement AI, whether it's to enrich text, whether it's to analyze conversation of user between the, you know, in the apps, to understand if there's like if there's a distress, if there's something that we need to pay extra attention to, and stuff like that. So I think, like, AI is already changing the way Adcore is doing business. And if you're looking, let's say, fast-forward one year from now and two years from now, it will change even more. So it's working in our benefit, and it's something that, you know, like, every time that I use AI, I thanks God that this exists. Let's put it this way.
Me too. Me too, Omri. With that, that's all the questions we had today, and that concludes the call. I thank you for joining Adcore-