Adcore Q3 2026 Earnings Call Transcript

Adcore (TSX:ADCO) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Adcore’s Q3 2026 financial results showed significant improvements in gross profit and margins, with gross profit at $3.7 million and a gross margin of 64%, up from 40% in the previous year.

The company announced a major restructuring, reducing workforce by 25% and cutting salaries to focus on becoming a lean, profitable, cash-generating business, with a goal of saving $5 million annually.

Future guidance for Q4 2026 includes achieving operational profit between $500k to $700k, supported by cost savings and restructuring efforts, with plans to cease funding AI initiatives from operational revenues and potentially spin them out.

Despite a 25% decrease in revenue to $5.8 million, the strategic decision to focus on higher-margin revenue streams has improved overall profitability.

Management emphasized a return to dividend payments and capital return to shareholders by 2027, contingent on sustained operational profitability and successful separation of AI-related projects.

Full Transcript

Martijn (Chief Partnership Officer and Investor Relations)

Walking you through these results and providing you an update on the ongoing company initiatives. You might see some familiar faces on the call today. I’m Martijn, Chief Partnership Officer and Investor Relations here at Adcore. Joining me is Omri Brill, Adcore CEO and founder, and also Amit Conforti, Adcore’s CFO. The agenda for today, before we begin, we’ll go over some forward-looking statements you should be aware of while listening to this call, followed by the CEO opening remarks and then the CFO financial highlights. Finally, we will conclude with a Q&A session. If you have any questions during the call, please use the Submit a Question feature in Zoom and we’ll get to those at the end of the call.

All right, 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. Give everyone a couple seconds to review. All right, very good. And with that, I would love to pass it on to Omri for some opening remarks and the CEO remarks on the numbers and financial results for Q3 2026. Omri, the floor is yours.

Omri Brill (Chief Executive Officer)

Thank you very much, Martin, and welcome everyone. It’s my pleasure to discuss the company results for Q3 2026 with you and obviously talk in more detail about the company announcement on October 21st regarding the restructuring and change of course. So I think it’s a good opportunity to have an open discussion about the new direction of the company, see if it’s reflecting already at least partially in Q3 results, and what shareholders should expect moving forward.

Let me switch. Okay, so today in my opening remarks we’re going to discuss three topics: A, the change of course that the company announced on October 21st and the new direction of the company, the restructuring plan and what already in the opening. And then we’re going to discuss obviously Q3 results, numbers and last but not least, what should be the company outlook for Q4 2026 and what should shareholders anticipate? So, restructuring and change of course. I would say it’s big words, but trust me, it wasn’t easy to let go 25% of your workforce, to cut salaries, including my own salary, to change the way we interact, to work with a lot of suppliers. So that’s never an easy thing to do, but I think not easy, but necessary if we care about the company future, if we care about the business that is named Adcore. That was needed to make because the current path wasn’t sustainable anymore and the company needed to, I would say, choose a new course.

And this new course would mean the following: Adcore should become again a lean, profitable, cash-generating operational business. This was the company that Adcore originally was before it went public—profitable, dividend-paying business—and this is the company we would like Adcore to become once more. So this is still the core, I would say, part of Adcore. It’s still exactly this type of business. But on top of this core there was a lot of, let’s say, growth initiatives, whether it’s Amphy, whether it was the AI initiative Proposed, the AI Studio, and other initiatives that we took in the past years. And basically the mix between, I would say, a profitable operating business and growth business together or initiatives wasn’t, I would say, getting the results we were hoping to get.

And we decided to basically stop it—stop running two different businesses under the same umbrella. And I think moving forward, A, we want to focus on being again a profitable, cash-generating operating business—that’s the core of what Adcore used to be, that’s what we should become once again—and second, to look for external capital for the AI products, whether it’s Proposed, the AI Studio, and Total Eclipse. And again, when we’re talking about external capital we can talk about a few things: we can talk about a spin-out if needed, we can talk about a dropdown of a specific product.

But at the end of the day we want to stop funding these products out of the operational business and start funding them from external sources. So that’s the bottom line. This is what the company is aiming for. And number three, when everything is going to work according to plan, we want to return capital to shareholders, to start paying dividends again. And again, I know it’s still a bit further down the line, but this is the plan and this is what we’re hoping to see.

Me personally, you know, still holding a lot of shares in this company, so basically paying dividends should be in everybody’s best interest. And so, like I say, easier said than done. Restructuring, letting people go, cutting salaries, you know, changing the way you operate with suppliers—it’s not easy, and we’re talking about big numbers. So if we’re talking about the company cost base as it was before Q3, I would say 1.3 million on average Canadian dollars. We want to reduce it to 0.9 million. So it’s a 400k reduction, almost 30%. That’s big numbers we’re talking about. And if you’re talking about yearly, that means almost 5 million Canadian dollars in savings in the cost line item of the company.

This can go directly to the bottom line as well. So it’s a big, big movement. And basically we already started to do some cost restructuring efforts in September. Most of the heavy lifting was done by September, by October already. But we still have a lag—you know, even if you let people go, for example, we still need to pay them salary, etc. So we expect to see the full potential of this restructuring effort and cost saving, I would say, in Q1 2027, but Q4 should be already, I would say, the majority of the effort already should be reflected.

And actually when you look at Q3 results, you can see early signs that we did something right and it’s already working. If you look at OPEX, for example, already down 7% quarter over quarter, G&A down 6%, R&D down 50%. So basically if you look at the direction, direction is already positive. But again, Q3 we only started in September, so it wasn’t really reflecting Q3 numbers. So you should expect—look at Q3, I would say, still the old structure more or less.

So that was the restructuring part. And this restructuring is critical to the company Adcore should become once again. So it’s not something that—it’s not, I would say, an episode; that is the essence of the new Adcore, the old Adcore that is returning. And if you look at the historical numbers—and that’s a different story—I would say all in all it was a very positive quarter for us even with the old structure. So we’re talking about 64% gross margin.

That’s a major increase year on year—you know, it was 40% in 2025. And if we look at even quarter on quarter, it was 51% in Q2. Let’s say gross margin-wise, one of the best quarters in the company history. And gross profit—again, massive numbers—3.7 million. This is a number that historically we’ve been able to present only in a Q4, for example. And it went up 20% year on year. Operating loss down a lot—you know, from almost 600k operating loss in Q2 2026 to 263k in Q3 2026.

So it’s a big drop as well. Adjusted EBITDA positive 112k—again went up, if you look at quarter over quarter, from 42k in Q2. Cash from operations up almost 1 million compared to 1.5 million, sorry, cash used in 2025 in the previous year quarter, and that’s a big delta. We’re talking about 2.5 million delta. So that’s a big, big increase. And cash position went up quarter over quarter from 4 million to 4.3. That’s again an early signal that things are stabilized a bit and we are stopping losing cash as well.

So I think all in all when you’re looking at the numbers, the numbers are very positive. And again we’re talking about a quarter that still was under the old structure. Revenue did go down. But when we look at revenue, I would say the following: it wasn’t a bug, it’s a feature. So the company took a strategic decision to focus more on revenues that pay better gross margin. I would say this strategic decision was already made in Q2 2026. We saw an improvement in gross margin in this quarter, but even a bigger improvement now in Q3 2026.

So just so you understand the numbers, cost of revenue went down by 50% or 54% year on year compared to a 20% drop in top line revenue. Gross profit because of that actually went up 20% year on year. North America top line revenue actually continued to grow and we see a lot of strength coming again in this critical region for us. And I think, all in all, when we look at top line revenue, basically a lot of this top line revenue contains cost of revenue, which is basically media—paying to Google, paying to Meta, paying to other channels.

So it’s not money going into Adcore. Money going into Adcore is more the operational profit and gross profit, obviously. So I think that’s a more critical number for us, and the company decision to focus on these items I think proved itself. And when we look at Q4 and what should we expect: so Q4, the company expects to see an operational profit between 500k to 700k. That’s a big increase, you know, from a loss of 250—or a bit more than 250—in Q3, and almost, you know, more than 500k loss in Q2 2026. So that’s a big delta that we need to cover and we believe we can cover this delta thanks to the restructuring, thanks to the cost saving, and thanks to what should be a better quarter for us.

So again, most of the restructuring cost savings should already reflect in Q4, which is positive. AI product review is ongoing. Once we have something to announce, we’ll announce it. And basically that’s what shareholders should expect looking forward. And again, it shouldn’t be just like a single Q4—it should be every quarter moving forward. The company aims to be operationally profitable and that’s the key. That’s part of the new strategy the company decided to take.

And if you’re looking at the comparables—so, share price was as of November 4th—it went up a bit, and let’s call it 15 cents. Upside is massive, more than 700% if you look at compared to comparables. But I think, like, in a more personal, I would say that might be a very interesting entry point or re-entry point again to the Adcore story. Share price is still very low compared to the company Adcore should become. Once again, this should be a very profitable company, a dividend-paying company, and a very different company than the company that you’ve been seeing in the last three years.

Plus we should see some capital or value coming from the AI products as well. So I think taking all of that into consideration I would say that we feel very, let’s say, confident in the new direction the company decided to take. We believe it’s a better strategy moving forward and hopefully that’s going to be reflected in the share price as well, whether it’s in this quarter or the following quarter. That’s as much as I can say. And with that I conclude my remarks. So we covered the change of course, the fact that it wasn’t easy but necessary, and the fact that most of it has already been done and executed in September and October and we should see most of the effect in Q4, even more in Q1, in terms of cost savings. We talked about, all in all, Q3 was a very strong quarter for the company—massive gross margin, 20% increase in gross profit, North America grew—and the fact that the company expects Q4 to be operationally profitable and that should be the norm moving forward.

So with that I conclude my remarks and the floor is back to Amit and Martin.

Martijn (Chief Partnership Officer and Investor Relations)

Thank you so much, Omri. And with that, we’d love to hand it over to Amit Conforti, Adcore CFO, to go over some more in-depth financial metrics.

Amit (Chief Financial Officer)

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 third quarter of 2026 showed a significant improvement in gross profits and gross margins. The results reflect changes in client mix due to our strategic decision to focus on higher-margin revenue and let lower-margin business go. Let’s review in more detail. For the three months ended September 30, 2026, we delivered revenue of 5.8 million compared to 7.7 million in the same period of 2025, a decrease of 1.9 million or 25%. Gross profit for the three months ended September 30, 2026 was 3.7 million compared to 3.1 million in the prior year, an increase of 0.6 million or 20%.

Gross margin for the three months ended September 30, 2026 was 64% compared to 40% in the same period last year. This increase in margin is mainly driven by changes in client mix. As for operating expenses, R&D expenses for the quarter were 0.5 million compared to 0.5 million in the prior year. SG&A expenses for the quarter were 3.5 million compared to 2.9 million in the prior year, an increase of 0.6 million or 21%. Operating loss for the three months ended September 30, 2026 was 0.3 million compared to 0.3 million in the same period last year. Net loss for the three months ended September 30, 2026 was 0.6 million compared to 0.5 million in the same period last year, an increase of 0.1 million.

Looking at the quarterly results, we can see a significant increase of 20% in gross profitability even with lower revenues. When looking at the nine-month results, we can also see a significant 13% increase in gross profits on a relatively similar revenue base. We expect this trend of higher gross profit to continue through the full year. As for geographical revenue breakdown for Q3, APAC and EMEA revenue decreased by 33% and 33% year over year, respectively. The results were mainly impacted by changes in client mix. North America revenues saw a strong year-over-year increase of 27%. This increase was primarily driven by increased activity from existing clients.

Net cash generated by operating activities in Q3 2026 was 0.9 million compared to 1.5 million of cash used in Q3 2025. This improvement reflects the company’s shift toward higher-quality revenue, tighter cost control, and the timing of collections and payments. In terms of financial position, we had cash and cash equivalents of 4.3 million as of September 30, 2026 compared to 10.3 million at December 31, 2025. Total working capital amounted to 2.3 million compared to 5.1 million at December 31, 2025, a decrease of 2.8 million or 54%.

As for the liability side of the financial position, we can see that the company is still debt free. The quarterly non-GAAP results reflect adjustments for the following: depreciation and amortization, share-based payment, and other non-operational items. For the three months ended September 30, 2026, adjusted EBITDA was positive 112,000 compared to positive 122,000 for the same period in 2025. Adjusted EBITDA remained relatively stable year over year.

With that, I will turn the call back to Martijn.

Martijn (Chief Partnership Officer and Investor Relations)

Thank you so much, Amit. With that, we will move to the Q&A portion. I think we got a couple of questions come in, and you can still ask some questions live in this session by following the Submit a Question button. Let me go to the first question. I think this is directed for you, Omri. Gross margin went from 40% a year ago to 51% last quarter and 64% now. What drove a jump that large? And is 64% the new level we should expect from here, or was this quarter unusual?

Omri Brill (Chief Executive Officer)

Yeah, I wouldn’t call it unusual. I would call it—like the gross margin improvement is definitely a trend that is here to stay. I would say because that’s also part of the strategic decision the company took to focus more on revenues that come with better gross margin. So I think it’s proved itself—like I said before, gross profit is up as well, and I think all in all we will see it more and more in the results. Having said that, looking at the quarters historically, obviously Q4 comes historically with more media spend and therefore higher cost of revenue associated with it. Q1 now is becoming more and more similar to Q4 as well. So I think between quarter to quarter we should see some, I would say, shift in mix. Obviously I would expect Q4, for example, to have lower gross margins than 64%. Having said that, if before we talked about the norms that we want to be between 40% to 50% in gross margin, then we can comfortably now talk about average year to be between 50% to 60%.

That’s a big increase and a big improvement. And again, as we’re moving forward that should be the new norm, and this is what shareholders should expect.

Martijn (Chief Partnership Officer and Investor Relations)

Thank you, Omri. The second question is regarding the revenue. Revenue is down about 25% year over year from 7.6 million to 5.8 million, Q3 2026. You say that was a choice. At what point will top-line contraction level off and transition back to revenue growth?

Omri Brill (Chief Executive Officer)

Yeah. So that’s a good and a fair question. I would say probably we should expect leveling it up, I would say in 2027, and basically back to growing trend again. The company obviously is looking to grow all lines, right—top line, bottom line, and middle line as well. So that almost goes without saying. Having said that, we need to be strategic in where we focus, and currently if the focus is to become operational profits—and I would say gross profit and obviously operational profit are far more important metrics for us—and if for that we need to give away a bit of top-line growth that comes with, I would say, more risky or revenues that are with lower margins, then so be it.

Martijn (Chief Partnership Officer and Investor Relations)

Thank you, Omri. The next question I think is for you, Amit, to answer. You generated 0.9 million in cash from operations this quarter after using cash in Q2 and Q3 last year. What changed, and is positive operating cash flow something you can repeat?

Amit (Chief Financial Officer)

Yes. So as I mentioned, it’s basically a mix of our shift toward higher-quality revenue, tighter cost control, and the timing of the collection and payments. Going forward, we are aiming to keep the operating cash flow positive.

Martijn (Chief Partnership Officer and Investor Relations)

Great, thank you. Omri, the restructuring only started in September. How much of the net new cost base is in the Q3 numbers, and how does that take you from a 263,000 operating loss to actually a 500k to 700k operating profit you are targeting for Q4?

Omri Brill (Chief Executive Officer)

That’s a good question. I would say the following. The delta that we saw in operating loss between Q2 2026 and Q3, I would say that’s more or less reflected. So I would say it’s reflected around, let’s say, 350–400k saving already in Q3, but I think moving forward, if you’re talking about an average saving of 400k per month—and that’s together 1.2 million Canadian dollar saving in the cost base—then I think that’s exactly the delta that we’re talking about.

Obviously not everything is going to be reflected in full in Q4, but I would say between the minus 250k operational loss that we saw in Q3 2026, then I think all we need to do the 500k, for example, is a delta of 750k, which is basically two months of full saving. So I think it’s doable, it’s usual. Obviously also revenue should go up in Q4 as well. So I think the combination between the two makes us believe that basically it’s still a reasonable target.

Having said that, we are still very much early into the quarter. Most of the spending didn’t really happen yet, which is holiday related. So I think we’ll have more clarity if we are going in the right direction towards the end of December—mid to end of December, I would say.

Martijn (Chief Partnership Officer and Investor Relations)

Great. Thanks, Omri. Amit, I think another question for you. Cash was 10.3 million at the year end and is 4.3 million today. That’s 6 million gone in nine months. The question is, where did that go?

Amit (Chief Financial Officer)

So basically this is our normal seasonal cycle. Q4 is always our strongest quarter. So we end the year with high cash but also with a large amount owed to suppliers. So we pay those amounts in Q1 and cash comes down. In 2026 the same thing happened but on a larger scale.

Omri Brill (Chief Executive Officer)

If I can add to what Amit just said, the whole idea of the restructuring and cost saving is basically to start generating cash as well and for the cash position of the company to grow naturally. I would say, and the proof is in the pudding—you know, we should see it happen in Q4 and obviously in the next coming quarter—and that means it’s going to be very strong signals that we are stepping in the right direction and basically things are looking better.

Martijn (Chief Partnership Officer and Investor Relations)

Great, thank you, Omri. Next question that came in is regarding North America revenue, which grew 27% in the quarter and actually 15% year to date while the company’s total revenue was almost flat for the nine months. What is working there, and can it become a bigger part of the business?

Omri Brill (Chief Executive Officer)

It’s a good question, and it’s a funny question because if you remember 2025, we saw a lot of weakness coming from this market, and we said wait, it’s temporary, we know what we are doing, and we can rebound. And I’m glad to see that we had a very nice rebound actually in North America, which is a critical strategic market for us in 2026. And the answer is yes, we expect it to continue to be positive in Q4 2026 as well and obviously moving forward.

But let’s say if we’re talking about Q4, then the answer is definitely yes. The company estimates to continue to see growth coming from this important market.

Martijn (Chief Partnership Officer and Investor Relations)

Great, thank you, Omri. The following question is regarding our apps, including Proposedly, AI Studio, Total Eclipse. People would love to see the strategic review of these apps and what a good outcome would look like for Adcore shareholders. In conjunction with that, there’s a question that came in live: What will be the path for these apps and the timing for the next steps for these?

Omri Brill (Chief Executive Officer)

Timing is always, you know, I would say we still need to walk the walk even if we have started. But I would start with the bottom line: the company wants to stop funding these apps from the operational business. That’s the bottom line. This is where we’re aiming to go. Are we going to do it? It depends on each app. You know, Proposedly obviously has more cost associated to it, so maybe the right direction for Proposedly is going to be even as a spinout from the company, raising capital outside of Adcore’s shareholders.

But I think other applications that come in with a lower cost, maybe it’s a drop-down in raising external capital for them. So it depends, but I think it almost doesn’t matter which course we’re going to take as long as the bottom result would be we stop funding them from our own operational business and start funding them from external sources. So that’s what shareholders should care about. And I think again once we are doing these steps we’re also going to see new value or pricing tags attached to these assets, which is positive to shareholders as well.

Timeline—I think it’s anywhere between Q4 to Q1; that should be the ideal timeline. But again, I don’t want to promise anything before it happens.

Martijn (Chief Partnership Officer and Investor Relations)

That makes sense. Thank you, Omri. Another live question that came in regarding the core business model. The question is if you can walk us through the core business model, what it will be, and what the future top-line prospects are for this unit.

Omri Brill (Chief Executive Officer)

Yeah, so I think what you see right now in the results, that’s the future cost, like that’s the core business. The AI app almost doesn’t generate any real revenue yet. So I think what you see right now is the core business, but you see it with costs associated today to the growth initiative of the AI apps. So basically, if you strip down the AI apps from the core business, that’s basically the report you’re going to see. But you can strip down, I would say, at least 100k, that’s USD a month, you know, for the cost base of this app. So let’s say whatever you see now, like all the restructuring, you can remove another 100 — let’s say if it’s Canadian dollar, around 150k a month — that should be the core business. So you see the core business, but you see it with expenses of the AI growth initiatives.

Martijn (Chief Partnership Officer and Investor Relations)

Thank you, Omri. Great. We’re nearing the last few questions here. I got another one for Amit coming live here. It’s regarding finance costs. Obviously the company is debt free, so there were some questions where the finance costs relate. Can you speak to that, Amit?

Amit (Chief Financial Officer)

Basically it’s exchange rate differences. The company, mostly the company, is operating in multiple areas and multiple currencies. So it does bear exchange rate differences.

Martijn (Chief Partnership Officer and Investor Relations)

Thanks for clarifying that one, Amit. That brings us to the last question today for Omri. You said the plan ends with return of capital to shareholders with 4.3 million in cash and no debt. What has to happen before that starts and what form would it take?

Omri Brill (Chief Executive Officer)

Actually that’s a good question. I would say the following. A, we need to see a few quarters that we have positive operational profit. That’s critical. We need to see the company cash position building up again. Ideally we want to see the company stop financing the AI growth initiative as well. So I think if all of that is going to happen, and this should happen I would say during 2027, then the company should be in a position to start returning capital back to shareholders.

And trust me, I’m a big shareholder of Adcore and basically a dividend will do me good as well. So that’s, I think, a direction that we are definitely aiming to go. That was what the company did before it went public. So that’s not something that I would say is unusual or unknowable to the company. So it’s basically going back to base as far as the company behaves, you know.

Martijn (Chief Partnership Officer and Investor Relations)

Got it. Thanks so much, Henri. We have many questions coming today live. The last one, and then we wrap up this session, is what is the vision and main goal for AI Studio for the upcoming year? Can you speak a bit about that?

Omri Brill (Chief Executive Officer)

That’s an interesting question and it’s an interesting product. I would say a few things. A, overall, the sentiment that we get from the market is positive, right? People like it — the result, the way it looks — so that’s always a positive. But I would say in terms of the longer product strategy or roadmap, I would say the following. AI currently, I would say, is an AI creative generating tool. So basically it knows how to generate binary nodes, how to generate a UGC video, how to generate even commercial and carousel, other types of assets, in order to do it quite well. But that’s a tool. We want to take AI Studio from a place that it’s a tool to a place it’s a studio. That means you can start talking to him and work with him like you work with your own creative studio that is human-based.

You’re going to give him the brief, you’re going to tell him this is the type of assets I want, and he’s going to start generating for you and create it. The idea is to take it from a place that took to create, I would say, assets, to a studio working for you, and that’s how you should work with him. And that’s a big step forward. That’s a big difference from where the tool is today. It’s also a big differentiator from the competitors out there. So if we can build it — and we will build it this way — it’s going to become even more interesting than it is today.

Martijn (Chief Partnership Officer and Investor Relations)

Great, thanks again, Omri. We covered a lot. Do you have any closing remarks for the audience today?

Omri Brill (Chief Executive Officer)

No, I think again, I wouldn’t call it a normal quarter because a lot is going on — a big restructuring, big change in the company strategy or direction. And it was important for me to discuss it with the shareholders, to explain what’s going on, why we took this decision, for them to understand that we stand firm behind this decision and believe this was the right decision to make, even if it wasn’t the easiest decision to make. So this is 1B to tell shareholders that we already see early signs that it’s working in Q3, and we should expect it to be even bigger, a better sign in Q4 and the moving quarters as well. And I think in general you should look at Adcore very differently than the company was, I would say, up until a quarter ago, even Q3. So it’s going to be a different company moving forward, and this should be reflected in the numbers, reflecting the company focus.

And basically that’s why I’m excited again about the directions that we took — excited about the future and the fact that, ideally, if everything only goes according to plan, the goal is to start paying dividends in 2027.

Martijn (Chief Partnership Officer and Investor Relations)

Great, thank you so much, Henrique. And with that, we conclude the earnings call for Q3 2026. We thank everyone for joining this earnings call and look forward to seeing you next time. Thanks again and have a great day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.