Adcore Inc (TSX:ADCO) has announced a significant improvement in its margins in the first quarter of 2022 after it decided to focus on higher-margin indirect revenue, a strategy it expects to boost profitability in the long term.
Gross margin for the three months to March 31, 2022, was 43% compared to 23% for the same period in 2021, the company said.
"During the quarter we successfully executed on our strategy started in the second part of 2021 to achieve improved and sustainable gross margins in the 45%-55% range by focusing on higher-margin indirect revenue,” Omri Brill, CEO of Adcore said in a statement.
“We began to see the positive impact of our strategy in Q4 2021 and continued to drive significantly higher gross margins in Q1 2022 from a higher quality revenue mix as well as growing our gross profit. We are encouraged by our progress thus far in fiscal year 2022 and confident this strategy will deliver enhanced profitability over the long term as we continue to grow our business," added Brill.
READ: Adcore says Australian subsidiary awarded new contract with retailer Best & Less
Adcore reported revenue for the first quarter of C$4.7 million compared to C$8.6 million for the same period in 2021, while gross profit increased by 2% to C$2.0 million. Adjusted EBITDA came in at C$85,000, compared with C$584,000 the year before.
"During the quarter we successfully acquired new clients across all our regions and further elevated our partnerships with both Microsoft and Google,” Brill noted. “With a more diverse, higher-margin revenue mix, a laser focus on end markets with attractive long-term growth, and a solid balance sheet, we look forward to driving improved performance as we move through 2022 and beyond."
Adcore said it will host a conference call to discuss its first quarter 2022 financial results at 10:00 am ET on Wednesday, May 11, 2022.
Intention for normal course issuer bid
In a separate statement, Adcore also announced that it intends to make a normal course issuer bid (NCIB) to purchase up to 3,188,475 of its common shares.
The company said it reviews all elements of its capital allocation strategy on an ongoing basis, and its management and board of directors believe that the market price of the common shares may not, from time to time, fully reflect their value and accordingly, the NCIB purchase would be in the best interests of the company and its shareholders and represents an attractive and appropriate use of available funds.
The NCIB has been approved by the Board; however it is subject to acceptance by the Toronto Stock Exchange (TSX), and if accepted, will be made in accordance with the applicable rules and policies of the TSX and Canadian securities laws.
Under the NCIB, the company said it would be permitted to purchase for cancellation, through the facilities of the TSX, up to 5% of the issued and outstanding common shares, or 3,188,475 common shares. The exact number of common shares subject to the NCIB will be determined on the date of acceptance of the notice of intention by the TSX. All common shares under the NCIB will be purchased at prevailing market prices in accordance with the rules and policies of the TSX and applicable securities laws.
Subject to acceptance by the TSX of the NCIB, the company intends to commence the NCIB on Wednesday, May 18, 2022. The NCIB will terminate one year after its commencement, or earlier if the maximum number of common shares under the NCIB have been purchased. The company reserves the right to terminate the NCIB earlier if it feels it is appropriate to do so.
In connection with the NCIB and subject to TSX approval, the Company may enter into an automatic share purchase plan with its designated broker, Canaccord Genuity (TSX:CF, LSE:CF) Corp., to allow for purchases of its Common Shares during certain pre-determined black-out periods when the Company ordinarily would not be active in the market due to its own internal trading blackout periods, insider trading rules or otherwise. Outside of these pre-determined black-out periods, shares will be repurchased in accordance with management's discretion, subject to applicable law.
Adcore offers digital marketing solutions that empower entrepreneurs and advertisers by managing and automating their e-commerce store advertising and monitoring and analyzing the performance of their advertising budget to ensure maximum return on investment.
Established in 2006, the company employs over 50 people at its headquarters in Tel Aviv, Israel and satellite offices in Toronto, Canada, Melbourne, Australia, Hong Kong, and Shanghai, China.
-- Adds details on NCIB intention --
Contact the author at jon.hopkins@proactiveinvestors.com