Okay, great. Let's go straight ahead. Great to have you today. My name is Kovi Fine. I'm a General Manager here at Adcore. Today, we're gonna be hearing from Omri Brill, CEO of Adcore, and Yatir Sadot, CFO of Adcore. Just to speak about the agenda, what we'll be covering today, starting off with some forward-looking statements, the CEO opening remarks, followed by CFO financial highlights, and finishing off with a brief Q&A. Please take a minute or two just to review the forward-looking statements and information. Great. Thank you. With that, I'm going to hand it over to Omri Brill, CEO of Adcore.
Great. Good morning, everyone, and thank you, Kovi, for the, for the intro, and we welcome everyone to the company Q2 2023 earning call. We have a stronger report to present to you today, which obviously we are very proud of the performance of the company in Q2. Let me share my slides so we can get started. As I mentioned, Q2 2023 was a very strong quarter for us. It marked a significant achievement and a positive growth for the company, and we're very proud of the results that we've been able to, to get.
Actually, in this earning call, before we dive deeper into the Q2 numbers, I would like to take this opportunity and basically discuss more high-level strategic opportunities for the company, as well on focusing on the long-term vision of the company, which obviously can lead us for in the path of a continuing, continued success. Usually we dive straight to the numbers, but we want to make this call a bit different and talk a bit in the beginning, high-level strategy and the way the company is, is based, and what is it for the company, what the future holds for the company moving forward. Actually, I would like to start with like some very interesting graphs that cover industry changes that we see in our industry, online advertising.
The first graph that I would like to share is basically demonstrate how Google, both Google and Meta, are basically losing losing dominance or market share within online advertising. This graph actually cover everything from 2008 to 2024. T he blue portion of the graph is Meta and Google share. We can clearly see is that it's peaked around 2016, 2017, but since it's peaked, you know, that was the top of their market share, almost 50%, then it's declined. It's declined, starting to decline. Actually, what we can also see, it's the rise of, let's say, competitor channels or competitor ad networks that wasn't existing back then. Competitors like TikTok, like Amazon Advertising, like Apple Advertising, for example, and many, many others.
The market becoming more complex, and that's not necessarily a bad thing for a company like Adcore. The same story exactly that we see with Google and Meta, we see with regards to North America share with online advertising. This graph actually going back to 2000 and until 2024. Again, North America, that's the blue portion of the graph, and we can clearly see that if in 2000. It was still the early days of the internet, North America was representing 75% of online advertising globally. Obviously, fast-forward, now we are talking about maybe 50%. Again, these emerging markets, emerging countries, and basically the market become more and more diverse. Again, it's not necessarily a bad thing for Adcore.
It's the same story, whether we see it in geographically or we see it with regards to ad network, more complex market, more competitors, and basically, somebody that now is doing online advertising, his life is not as easy than as it used to be, let's say, 10 years ago. Actually, this, this graph actually tell the story quite well. If in 2007, somebody would come to us and say, "I would like to do online advertising," so probably we can recommend him to do Google, which had back then, maybe like 50% of the market share of online advertising. He can maybe only focus in U.S., which was still quite a large market by itself, and that was fine. Life was easy. He can do it by himself, basically.
Even in 2017, 10 years after that, still, maybe not only Google, maybe Google and Facebook back then, but maybe it's enough. Now fast forward to 2023, we have so many channels, so many markets, and basically it's very complex for online advertisers to have relationship with every single channel and in every single market. Ideally, if they have somebody that sit in the middle, like a gateway, what Adcore is doing, that can be a very good news for them, and actually it's also good news to the different channels as well. Only for the channels, the life is becoming more complex, and the channel ability to operate in any single market, and every relationship with every single client is questionable.
That's why Adcore now holds very strategic partnership with many channels, whether it's Microsoft or Criteo and many other as well, because they need somebody, a company like Adcore, to sit in the middle and basically have the relationship with the customers from one end, but, and with the channel from other end, obviously, have the technology and able to scale up the activity of everyone. Another things that I would like to cover is, is how the company is accelerating. Everything it's took us a long time to do before, now is taking us a very short period of time, relatively. Basically, when I founded this business in 2006, we were still one, one office, you know, not so, not a lot of people in Tel Aviv, Israel.
It took us more than a decade until, until 2017, until we opened the first outpost outside of Tel Aviv, which was Melbourne, Australia. Then fast forward, after the company became a public company, geographic expansion was a major, a major effort of the company. What took us a decade between 2006 and 2017, literally took us three years to open another four way, four way different outposts. After went public, we opened the Hong Kong subsidiary, we opened the Shanghai subsidiary, obviously the Canadian Adcore Inc., which is, you know, the public company. In 2022, we also opened the U.S. subsidiary. Whatever the company used to do for a long period of time, now we can do much faster.
Actually, we are quite pleased with the current geographical, geographical presence of the company, so we don't accept another, let's say, new, new outpost in the near future. We, we think that we should focus on what we have right now and making the most out of it. The same story exactly as that we see with geographical expansion, actually, it's funny, but we can see it with tech development as well. In 2006, when the company just started, we launched our 1st version of our app, Adcore Views, for campaign creation and optimization. It took us more than a decade, until 2017, to launch our 2nd half, which is Feeditor, for feed optimization.
Let's say, after going public, what we can see is that, again, it took us, like, three hours to launch another, another, four different apps. Obviously, we have Effortless Marketing. This is our Shopify app and WooCommerce app. In 2022, we also launched Alerter, which is account monitoring app. We have Erican, which is a campaign performance app, and in 2023, which is relatively new now, we launched Media Blast, which is account creation and account funding app. Whatever took us a long time before, we can do much faster now, and this give us a lot of confidence on the company ability now to grow much quicker and basically to scale up everything that we are doing. Another interesting thing that the company is doing is that we would, we are implementing vertical integration, strategy.
If historically the company knew how to provide solution, technology solution around feed creation and optimization, and campaign creation and optimization, we decide that actually the media journey of a, of a typical customer of us don't really start with the feed creation optimization or even campaign creation. Actually, it start way before with, let's say, account creation, account funding, maybe media research and planning. Then after the campaign is created, you would need monitoring app, you would need analytical app, you would need financial financing and budget management app. Basically, the company decided we would, we would like to be in every single touch point across, across, let's say, the customer media journey and basically supply value over there. That strategy exactly proving itself. Fast forward, we already have under the Adcore Marketing Cloud, seven different apps.
Media Blast, which is the newest addition to the cloud. It's basically allow client do-it-yourself account opening and account funding tool, aimed more for, I would say, small business type of and small agencies type of businesses, mainly in emerging markets, but not only there. A very interesting app that we started to see a lot of, let's say, traction over there, and it's already generated revenue for us. Effortless Marketing, account creation app, both for Shopify and WooCommerce. Feeditor, one of the flagship app for feed optimization. Views, you know, the first app that we developed for feed for campaign creation. Alerter, account monitoring, and soon we're gonna add the focus component it, so it's gonna also have predictive analytical abilities. Semdoc, which is account, I would say, analytical tool, and Erican, which is basically campaign performance apps that we developed. So again
every single touch point in the user journey, now we have a solution to provide, and that's give us a lot of strength and a lot of power. That's bring me to the company updated vision, which is basically serving as a gateway to enable multi-regional and multi-channel accessibility, connecting business and customer effortlessly. Basically, the fact that the company is able to be in so many different regional location, and having a different, I would say, app and technology solution for every single touch point, that give us a lot of power and basically ability to have, like, all-in-one solution for our customer. That's also give us a lot of cross-sell and upsell opportunity for every client that we bring.
We can bring, for example, maybe client for, I don't know, the account creation and account sell founding, app, and then obviously we can upscale them to another app or maybe even sell them some marketing, solution or services that we can provide them. Again, the more the solutions that we have, the more services that we have, the more technology and applications that we have, there's more upsell and, and, capability for the company. That's actually, we already started to see this power, within the company result. Q1 was very strong. Q2 2023 is yet another, very strong report.
Bear in mind that historically, the first part of the year in online advertising, you just, let's say, warm up for the second part of the year, because Q3 and Q4 supposed to be even stronger historically, and the company believe that 2023 have a potential to become a monster year for the company. Let's dive into some of the Q2 2023 report highlights, and let's start with the top line, middle line numbers. As we can see, Q2 was a very strong report for us. Top line revenue was CAD 6.9 million. That's represented 33% year-over-year growth compared to the CAD 5.2 million that we have in the previous year.
Gross profit, we saw a massive increase of 41% year-over-year to CAD 3 million this year, compared to CAD 2.1 million in 2022. Again, very strong quarter, and as you can see from the graph, Q3 and Q4, historically, supposed to be even stronger quarters for us. If we started this, the first half of the year so strong, we have a lot to expect from the second part of the year. If we talk about quality growth KPIs, and we mentioned them across, you know, the previous earning calls, then these few KPIs that the company like to look at. The first one, I would say, is gross margin, and if you remember, the company is happy as long as it's within the 40%-50% range, and Q2 2023 was 43%.
It's exactly where the company anticipated to be, and we, we're very happy for it. Yet again, 41% in gross profit growth, that's, that's very impressive as well. Again, another of, another, let's say, quality KPI for us is the, the revenue we can generate from North America, which is a strategic market for us. Over there, we see the same trend of growth, you know, like, continuous. 16% year-over-year growth in North America, and we believe we can even be a bit more aggressive over there in the second part of the year. If we discuss AMFI, and we discussed a bit, the monthly average, average, burn rate, for AMFI, we can clearly see it's, it's went down a lot.
For between, let's say Q1 2023, which was CAD 81K, now we are sitting at CAD 66K in Q2, and we expect to see this trend continue well into Q3 and Q4 as well. We are doing a lot of effort to be a more efficient, a more efficient operation, and AMFI is already bearing fruit. The peak was CAD 120K, basically monthly burn that we had in Q1 2022, and since then, we managed to cut it in more than 50%, which is impressive. On the flip side, on the positive side, you can see the same trends that we see on AMFI, let's say, site and blog visitor, is continue.
Q1, we saw 48 average monthly visitor, and we almost double it up, and now in Q2 2023 to almost 100K. We anticipate that Q3, this trend gonna continue as well. Again, we are burning less cash, and we see, like, a more, I would say, interest within the AMFI platform, which is, I think it's a positive signs for us. Just to wrap up, you know, the highlights of Q2 numbers. Revenue grew 33% year-over-year. Gross profit, 41% year-over-year growth. Email revenue grew by an impressive 50% year-over-year. North America revenue grew 16% year-over-year.
Even APAC, that if, if you remember, was declined actually in 2022, is now back on a growth trend and basically growing 29%. We see growth, grow across the board in every single region that the company is operating in. Talk a bit about the share price and basically, so the current share price is, is around CAD 0.20. Obviously, if you look at comparable, we believe that the share is fairly undervalued, and the company, that's why we continue to buy shares as well, until we're gonna see a very strong uplift in, in the stock. NCIB, we purchased in Q2, almost 300,000 shares for constellation. The company invested in this buyback plan, almost CAD 67,000.
Obviously, we're gonna continue to do so as long as we think that the share price is undervalued. In the beginning of the year, we talk about, you know, the company, I would say, high-level targets for 2023. The first target that we mentioned is maintain strong balance sheet with focus on increasing cash reserve. I think, like, Yatir can touch it a bit on his report, on his data, but cash flow is improving a lot. Operational profit and loss is improving, and we definitely think that we are on the right trend, and the company expect for sure Q4 2023 to be a positive quarter, boosting cash flow and operational profit, but hopefully it can happen even earlier than Q3. Stay tuned.
I think like over there, we definitely see a positive momentum, you know, obviously, top line, bottom line, but also, also, you know, bottom line and numbers are improving. Second KPI or target is keep the gross margin within the 40%-50% range. Yet another check, 43%. Third goal is achieve a dual-digit growth in revenue, gross profit, and operational profit. 33% growth in revenue, 41% growth in gross profit and operational profit improved in more than 30%. I think, like, loss improve. I think, like, we are definitely in the right direction. Expand our global footprint in North America. Yet again, we see this region is continuing to grow year-over-year, and also quarter-over-quarter.
Number 5 is strengthening the strategic partnership that drive mutual growth and market share. The company recently was named as Microsoft Advertising Global Channel Partner of the Year, and obviously, Channel Partner in EMEA. We recently also announced a partnership that we have with Amazon Advertising, and also, the company become a preferred retail partner of Criteo in Israel, and hopefully it's gonna be followed up with other markets as well. We are definitely moving in the right direction. Obviously invest in R&D. Again, you see there's a lot going on, both on Amphy, that we have a brand new brand site, website with, you know, more focus on work-related learning courses, and obviously with AMC, that we recently launched another app, the Media Blast app.
Yet again, we are moving actually and accelerating our R&D efforts. I think that's, you know, was my remarks for today. We covered a lot. We talk about high-level strategy, changes that we've seen within our industry that obviously affect the company and actually represent a massive opportunity for us to act as a gateway in the media. The fact that the company is accelerating, whatever it took us a decade to achieve, now we can literally achieve it within one year or two years. That's amazing. That means we can achieve much more and grow much faster. We already started to see that within the results, you know? The company have a more holistic approach.
We understand what is our value proposition within the market, basically, this is starting to bear fruit, I think the reports will speak for themselves, I think, like, next is Yatir.
Thank you, Omri and good morning, everyone. One second, I will share my screen here. I would like to present a clear and comprehensive overview of our second quarter financial results, highlighting both GAAP and non-GAAP metrics, all denominated in Canadian dollars. Despite facing a difficult business environment, our team performed well in the second quarter, maintaining the same positive momentum we experienced in the first quarter this year. As I mentioned in the last call, since mid-2021, we've strategically focused on higher margin revenue streams and building relationship with the scalable, resilient clients. This approach has enhanced our business sustainability and improved our long-term profitability. Now, let's dive into details.
For the three months ended June 30, 2023 we delivered revenue of CAD 6.9 million compared to CAD 5.2 million year-over-year, an increase of CAD 1.7 million or 33%. We are delighted to have achieved the upper range of our projections for the second quarter. Gross profit was CAD 3 million compared to CAD 2.1 million, an increase of CAD 900,000 or 41%. This quarter, gross margin was 43% compared to 40% in the same period last year. We kept the target range of gross profit between 40%-45%, and we are, we are feeling very comfortable, as Omri mentioned before. As for operational expenses, R&D expenses were CAD 0.4 million or 6% of revenues compared to CAD 0.4 million or 8% year-over-year.
Sales and marketing and general and administrative expenses were CAD 3 million or 43% of revenues, compared to CAD 2.3 million or 44% of revenues year-over-year. SG&A expenses increased mainly due to partnerships expansion and marketing expenses. Operating loss was CAD 0.4 million compared to an operating loss of CAD 0.6 million. This decrease in loss was mainly driven by the increase in revenues. Net loss was CAD 0.5 million compared to a loss of CAD 1.2 million year-over-year. This slide, we will discuss the total revenue. As you can see on the left wing of the slide, we went up by 33% year-over-year, on the second, the second quarter of 2023 compared to the same period last year.
On the right wing of this slide, you can see the growth for this first six months of this year by 38% compared to the same period last year. As for a geo revenue breakdown, as you can see, EMEA and APAC showed the most growth year-over-year. EMEA grew by 50%, APAC grew by 29%, and North America grew by 16%. We continue to observe strong momentum and notable expansion in our partners plan. Now, let's discuss about net cash used in operating activities. In the three months, ending June 30, 2023, the company utilized CAD 0.4 million in net cash for operating activities only, a notable decrease from the CAD 1.3 million used during the same period last year.
This positive shift can be attributed to the team's diligent efforts in, one, enhancing our collections from clients, and number, reducing vendor payments and securing improved terms with existing suppliers. In terms of financial position, we ended Q2 with cash and cash equivalents of CAD 6.2 million as of June 30, 2023, compared to CAD 8.8 million at December 31, 2022. Total working capital of CAD 7.8 million compared to CAD 9.2 million at December 31, 2022, a decrease of CAD 1.4 million or 16%. The decrease in cash is mainly attributed to, first of all, media payments related to the 4th quarter of 2022, purchasing shares through the NCIB plan, as Omri mentioned before, the intensive investment in Amphy, and expanding our partnerships plan.
We anticipate reducing our cash expenditure in operating activities and increasing our cash and cash equivalents in the latter half of 2023 compared to 2022. This expectation is based on increased demand for the company's products and enhanced profitability. We still hold debt-free position, and the company continues to be debt-free for the future scene. Adjusted EBITDA, our quarterly non-GAAP results reflect adjustment for the following items: depreciation and amortization totaled CAD 201,000, share-based payment totaled CAD 126,000, other non-operational items, CAD 191,000. For the three months ended June 30, 2023, Adjusted EBITDA was CAD 112,000, compared to a loss of CAD 30,000 for the same period last year.
Adjusted EBITDA for the AdTech activity was CAD 337,000 in the same period. Thank you, everyone. With that I will turn the call back to Kovi.
Thank you, Yatir. We're now going to be heading into some Q&A. These are some pre-sent in questions, and I will go ahead and read them. I'll read them to Mr. Omri Brill, and then he'll take it from there. So starting number one, does the company expect to be profitable by Q4? If not, when?
Yes. I also already mentioned it in my, my opening remarks, the, the short answer is yes, and hopefully we can achieve it even before that in Q3, but I think, like, we can definitely see the trend. The company, let's say, loss is, is narrowing or shrinking, and the company has become more efficient and more profitable. With, you know, like, the historical, historical momentum that online advertising have in the second part of the year, for sure, we believe they can be profitable in Q4 and hopefully even before.
Okay, great. Do you anticipate any M&A activity in 2023 to spur growth?
The market condition is, is still very much challenging, I would say never say never, if we're talking about M&A that we can use, maybe some of our shares as capitals, then maybe yes, if this means that we need, need now to allocate our own cash for it, then maybe I think it's too early. It's depend. That's the, that's the honest question.
If the economy heads towards a recession, how big of an impact will this have on your business?
It's a good question. We are in recession, I would say, for the past year and a half now. We're still waiting for him, in a, in a sense, so hopefully it's not gonna come. I think, like, up until now, you know, obviously, we had COVID and post-COVID effect, and obviously, the interest rate is going up in everywhere in the world. There's obviously a lot of, I would say, changes within the economy, and market condition are anything but normal. I would say, even under this type of condition, the company, has been able to outperform our original expectation, and so very strong, start of the year of 2023.
I would say, for now, we don't anticipate any, any, I would say, any negative business condition more than what we see up until now. Hopefully, we can see some positive business condition moving forward. With the current business condition, the company expect to have a very strong second part of the year as well. That's the company's estimation.
Are you planning to expand to any new geographic areas?
It's a good question. I think, like, I already touched it a bit in my, my remarks, that we are happy with our current geo presence. Like, we are literally, for a company in headquarter size, are very well spread. You know, we're in Tel Aviv, Israel. There's the headquarters of, obviously, Canada, which is where we are listed as well. We have another branch now in the U.S. as well, Melbourne, Australia, two offices in Greater China region. I think, like, we might as well focus in what we have and making the most out of it. I don't see us opening any new office anytime soon, but again, that's for 2023.
Great. The next question is, will you maximize your NCIB allowance?
Yatir, maybe you would like to answer this one?
Yes, I will take it. We are already maximizing the program's potential, so, this is a pretty straightforward answer.
Okay.
Great. Will GMs continue to improve, and what's the long-term target?
Yeah, I think, like, we, we mentioned it before, like, we, we're happy as long it's in, the gross margin are within the 40%-50%, and in Q2 it was 43%. I think, like, yeah, we feel comfortable where, where we are, we are today. Obviously, if it can be more even nearing 50%, this could be even better for the company, but as long as that we are within this range, we are happy with the results.
Mm-hmm. EMEA growth was very strong. Do you expect this to continue for the year?
It's a good question. EMEA is outperforming in terms of market, you know, for the past, I would say, 12 months or so, which is encouraging. I think, like, the, the company is lucky enough to be very well spread, and then I think, like, revenue coming, I think almost 38% or 7%, from APAC and EMEA, and then the rest coming from North America. Even if one market, for whatever reason, it started to slow down, we still have two other markets that can, can take its, its place. I think like, yes, EMEA is doing great. We expect it to continue doing good, but even if EMEA, for whatever reason, gonna start to slow down, we are still lucky to have APAC in North America to take its place as the, as the leading horse, you know?
Great. What was the biggest driver in the 70% reduction in cash burn for the quarter?
Yatir?
Yeah, I will take it. The primary reason for the cash reduction is due to media payments made in early Q1 2023. Media payments related to the activity in the fourth quarter of 2022. Other explanations related, as I mentioned before, to the purchasing shares under the NCIB, the investment in Amphy, and of course, the expanding the extension of our partnerships plan.
Yeah.
What is--
To what Yatir, to what Yatir is just saying, that obviously, in a sense, the cash that we are losing in Q1, which is related to Q4 the last year, we should be earning back, back in the Q4 of this year, in a sense.
What was Amphi's contribution and impact in the quarter?
Yatir?
Yeah. Amphy contributed, like, CAD 21,000 to the company's total revenue at this quarter, and the company invested CAD 236,000 on Amphy's project.
So-
This is on the level of the revenue and on the level of the expenses.
Okay.
And the-
I would add that also for Amphy, historically, the quarter four is the stronger quarter as well. Even for Amphy, the second part of the year should look much better, and we are in the projection of lowering the burn rate over there as well. More revenue and less burn rate is obviously a good news for Amphy and for the company as well.
How should investors evaluate the company's result throughout the year, given industry seasonality?
Yeah. We talk about seasonality a lot, like in a, in a sense, what, what you can think on online advertising, that literally the, the year is building up quarter-over-quarter. Historically, Q1 is the slowest month of the year. You know, people spend all the money in the, during the holiday season. It's winter, there's not a lot of activity going on, so there's not a lot of spending. That's historically the slowest quarter. Q2 started to pick up. It's already spring, so we have the spring break and people is starting home renovation and maybe some real estate-related activities, so we see more momentum in Q2. Q3 is even stronger. It's already summer, so we have all the summer breaks, travel-related spends.
There's more activity, people are outside, people are enjoying themselves, so obviously, Q3 is even stronger. Then, to finish the year with the bang, like Q4, is obviously the stronger months of the year, with holiday season and all the holiday-related expenses. Q1, Q2, Q3, Q4, very simple.
Great. That completes our Q&A section. Thank you everyone who sent in your questions. That will conclude today's call. Thank you very much for joining in, and have a great day.
Great. Thank you, guys. Thanks, Kovi, for, for the hosting, and thanks, Yatir, for your, for your, remarks on the financial report. Again, thanks for everybody to join us today.