A2Z Cust2Mate (AZ) Q3 2026 Earnings Call Transcript

Motley Fool Transcribing, The Motley FoolThu, November 12, 2026 at 2:03 AM UTC

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Wed, Nov. 11, 2026

CALL PARTICIPANTS -

Investor Relations - John Gildea

Chief Executive Officer - Gadi Graus

Chief Financial Officer - Gadi Levin

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TAKEAWAYS -

Total Revenue -- $10.9 million, growing from $5.9 million in the second quarter driven by increased delivery volume.

Smart Cart Revenue -- $9.6 million, more than doubling from $4.4 million in the prior sequential quarter.

Quarterly Deliveries -- 2,000 smart carts, representing a sequential increase from 950 units delivered in the second quarter.

Cumulative Deliveries -- 5,350 units, surpassing the total delivery count for the entire first half of 2026.

Fiscal 2026 Delivery Target -- 10,000 smart carts, requiring approximately 4,650 deliveries in the fourth quarter to meet cumulative year-end goals.

Long-term Backlog -- 19,000 units, reflecting the total cumulative deliveries expected by the end of 2027 based exclusively on current customer commitments.

Gross Margin -- 33.4%, decreasing from 42.6% in the second quarter due to the delivery of lower-margin, earlier generation carts to a single customer.

Operating Loss -- $6.8 million, narrowing from a $7.6 million loss in the second quarter following an organizational realignment.

Net Loss -- $6.6 million, or $0.15 per share, compared to a net loss of $7.3 million, or $0.16 per share, in the prior sequential quarter.

Organizational Realignment Savings -- $1.75 million quarterly, representing an annualized run rate of $7 million in savings expected to be fully realized in the fourth quarter.

Hedia Acquisition Revenue -- $20 million annually, with management expecting the retail media business to add approximately $5 million in the fourth quarter.

Acquisition Terms -- $8.4 million in cash and 833,000 restricted common shares, used to complete the Hedia transaction in early October.

Treasury and Working Capital -- $30 million and $42.3 million respectively, as of the end of the third quarter prior to the closing of the Hedia acquisition.

Debt and Credit Facilities -- $7.1 million term loan and $4.7 million drawn on a Banklumi inventory facility, utilized to fund the acquisition and growth in inventory.

Smart Cart Hardware Economics -- $4,000 to $4,500 per unit, recognized as revenue upon delivery with up to 30% paid upfront by customers.

Smart Cart Service Economics -- $6,000 per unit, generated over a five-year contract term at a rate of approximately $100 per month for software maintenance and support.

Hastok Customer Expansion -- 500 additional carts, following an initial deployment that brought the retailer's total commitment to 3,050 units.

Super-Pharm Commitment -- 7,000 carts, marking the start of initial deliveries under an expanded commitment for the retailer.

International Expansion -- Two retailers, expected to begin smart cart deployments outside of Israel in the first quarter of 2027.

Manufacturing Capacity -- Management stated the China-based facility currently provides sufficient capacity to fulfill the entire existing 19,000-unit backlog.

A2Z Cust2Mate Solutions Corp. (NASDAQ:AZ) reported a significant acceleration in smart cart deliveries and revenue as it transitioned from a pre-commercial stage to active market scaling. Management reported that total revenue increased 84.7% sequentially, supported by a doubling of hardware deliveries and the rollout of the next-generation Connect in-store commerce platform. The company completed the acquisition of Hedia in early October to integrate established retail media capabilities and advertiser relationships into its smart cart ecosystem. The company stated that it remains on track to meet its cumulative delivery target of 10,000 carts by the end of 2026 while expanding its presence into international markets starting in early 2027.

CEO Graus stated, "The Hedvio acquisition closed in early October, and is expected to add approximately $5 million in revenues in the fourth quarter and be immediately accretive to our business."

Management identified a unique market opportunity following the planned exit of a major competitor, Caper, from the smart cart market in mid-2027.

The company is shifting its product mix toward higher-margin new generation carts as it expects to exhaust legacy inventory by the end of 2026.

CEO Graus noted, "Deliveries more than doubled sequentially to reach 2,000 smart cards, surpassing our total deliveries for the entire first half of this year."

Strategic synergies from the Hedia acquisition include end-to-end control over the digital landscape in stores, including digital screens, end caps, and electronic shelf labels.

Management reported that delivery timing is primarily influenced by the speed at which retailers can prepare store infrastructure for smart cart integration.

INDUSTRY GLOSSARY -

Connect Platform: The company's next-generation in-store commerce system that integrates shopper engagement, personalized retail media, and actionable data insights.

ESL: Electronic Shelf Labels, digital displays used to automate price changes and show product information at the shelf edge.

POS: Point of Sale, the digital system used by retailers to process customer transactions and payments.

Retail Media: Advertising inventory located within a retail environment, allowing brands to target shoppers at the point of purchase.

Smart Cart: A shopping cart equipped with computer vision, weight sensors, and a touchscreen to allow customers to skip traditional checkout lines.

Full Conference Call Transcript

Operator: Good day, and welcome to the A2Z Customate Solutions Corp third Quarter 26 Financial Results. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. Then 1 on a touch tone phone. Withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Simon Sarovietsky, Investor Relations. Please go ahead.

John Gildea: Thank you, operator. Before we begin, please note that today's call will contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 2000. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected. Please refer to our earnings release as well as our filings with the SEC for a discussion of these risks A replay of this call will be available shortly after its conclusion. With that, we would like to turn the call over to our CEO, mister Gadi Graus, chief executive officer of A2Z.

Gadi Graus: Thank you, Simon. Good afternoon, and thank you for participating in today's call to discuss our third quarter results and our business outlook. This was another quarter of positive momentum for our company. Reflecting increasing customer demand for our product, efficient ramp-up of deliveries, and the completion of the acquisition of Cust2mate, which we expect will be a driver of considerable incremental growth for our platform and retail media business. Key takeaways from the third quarter included our deliveries more than doubled sequentially to reach 2,000 smart cards, surpassing our total deliveries for the entire first half of this year.

Total revenues increased to $10.9 million of which Smart Cart revenues more than doubled sequentially to $9.6 million reflecting growing deliveries across multiple customers. We expanded our partnership with Hastok, Israel's fast-growing home goods retail chain with a new in store retail media agreement. And we acquired Cust2mate, a leading Israeli retail media company that accelerates the growth of our retail media business. Our third quarter sales performance has put us on track to achieve our goal of delivering 10,000 carts by the end of this year. And it reinforces our expectation of delivering at least 19,000 carts by the end of 2027, which is based exclusively on our current backlog.

Our outlook does not take into account any additional orders from new or existing customers between now and the end of 27. We are very pleased with the expanded orders we are getting from our newest customers following their initial deployment of our smart cards. Clearly indicating the value of our product once in store. We have also seen increased demand from existing customers and greater interest from potential customers since the launch of our next generation Connect in store commerce platform. This platform represents an important step in our evolution. Moving beyond smart cards to a broader integrated solution that connects the entire in store shopping journey.

It brings together an enhanced shopper experience personalized engagement, retail media capabilities, and actionable shopper insights, all supported by our unified technology platform. We took a major step forward in our retail media strategy with the acquisition of Cust2mate. A leading Israeli in store retail media company generating approximately $20 million in annual revenues. Hedia brings established relationships with leading Israeli retailers and major international brands, including Unilever, Kimberly Clark, Procter and Gamble, Nike, and Henkel. Along with comprehensive capabilities in retail media sales campaign planning, and execution. By combining Hedges' commercial capabilities and advertiser relationships with our connected in store commerce platform, smart card media inventory and shopper insights, we are building a more comprehensive retail media offering.

This combination creates opportunities to expand our retail media business, introduce new integrated advertising solutions, and generate additional revenue for both Cust2mate and our retail partners. The Hedvio acquisition closed in early October, and is expected to add approximately $5 million in revenues in the fourth quarter and be immediately accretive to our business. We are working closely to integrate our 2 organizations and expect to drive synergies beginning next year. International expansion is at the heart of our long term growth strategy. And it is a top priority for our management team as we close out 2020 and move into 2027.

We remain in advanced stages of discussions with international grocery chains outside of Israel, and our teams are working closely with them on system architecture, integration, and logistics. We expect to deploy Cust2mate smart cards in 2 international retailers in the first quarter of 27. As you may know, a U. S. Competitor plans to-- what was a non core business for them in mid-27. This could provide a boost for us as we believe our platform is the most advanced available in the market. More to come on this, but rest assured that we are focused on expanding internationally and we have the infrastructure in place to do so efficiently. And effectively.

With our next generation connected in store commerce platform, differentiated technology and expanding manufacturing and deployment capabilities, we are well positioned to capitalize on this opportunity to support international growth. To sum up, this was a strong quarter for us with deliveries up in line with our expectations, and the path forward to continued growth. Now I will turn the call to our CFO, Gadi Levin, to provide a fuller financial review.

Gadi Levin: Thank you, Carrie. And thank you everyone for joining us Today, I will review our financial performance for the third quarter of fiscal 26 and discuss our outlook for the year. In the third quarter, we continued to accelerate our commercial deployment We significantly increased Smart Cart deliveries across a broader customer base while continuing to execute on our organizational realignment to sharpen our commercial focus and drive a more efficient core. Shortly after the quarter end, we completed the acquisition of Cust2mate, which, as Gadi Graus mentioned, adds an established commercial engine to our retail media strategy. Similar to last quarter, financial commentary will focus on sequential comparisons.

At this stage of the business, year on year comparisons are not particularly meaningful given Cust2mate's shift from a start up to a commercial stage company. Total revenue for the third quarter was $10.9 million up from $5.9 million in the second quarter. Smart cart revenues was $9.6 million more than double the $4.4 million we reported last quarter. We delivered 2,000 smart cards in the third quarter. Up from 950 in the second quarter bringing cumulative deliveries to 5350. Importantly, deliveries were spread across a broader base of customers. Deliveries to Yokananov continued following the rollout of our new connected in store commerce platform. Super-Pharm is now live began initial deliveries under their expanded commitment of 7000 cards.

At Hastok, continued to deliver against their original order and in August, they placed a follow on order for an additional 500 carts. Expanding their total commitment to 3050. With SuperSup and now Hastock, 2 customers have expanded their orders post deployment. We believe this demonstrates the value our platform delivers once it is implemented in store. Our dedicated manufacturing facility in China supported the higher delivery volumes this quarter and provides the capacity we need to fulfill our current backlog. Gross profit totaled $3.7 million up from $2.5 million in the second quarter. Driven by higher revenue, Gross margin was 33.4% compared with 42.6% last quarter.

The sequential change reflects the delivery of lower margin earlier generation carts to 1 customer during the quarter. We expect to work through the remaining legacy inventory by year end, after which our product mix will shift to new generation cards. As production scales, we expect to benefit from improved manufacturing efficiencies and economies of scale. Operating loss narrowed to $6.8 million from a loss of $7.6 million in the prior sequential quarter. The organizational realignment we announced last quarter remains on track. We have maintained our delivery capacity and core technical and customer support capabilities while reallocating resources towards product development sales, and marketing.

Some of the benefit of the organizational realignment is reflected in the third quarter results and we expect to reach the full quarterly run rate of savings approximately $1.75 million in the fourth quarter representing $7 million on an annualized basis. Third quarter net loss was $6.6 million or $0.15 per share compared to a loss of $7.3 million or $0.16 per share in the second quarter of 26. Now turning to our balance sheet. We ended the quarter with $30 million in treasury, $42.3 million in working capital. These figures do not yet reflect the Hedia acquisition, which closed in early October.

As a reminder, at closing, we paid approximately $8.4 million in cash and issued 833,000 restricted common shares to the sellers, Approximately $7.1 million of the cash consideration was funded through a term loan from a commercial bank in October. Our credit facility with Banklumi continues to fund inventory as we grow. And we had drawn $3.5 million at quarter end and a further $1.2 million in early November. To bring the total to $4.7 million. Before turning to the outlook, I want to take a step back and walk through the economics of our smart cards. Our contracts typically span 5 years and consist of 2 components, hardware and services.

Hardware revenue generally $4000 to $4500 per cart, is recognized upon delivery. Customers pay up to 30% of the purchase price upfront and the remainder over the term of the contract. Since those payments are deferred, we record that portion of revenue at a discount and recognize the difference as interest income over the contract term. The results is that reported revenue leads cash collection, particularly as deployments accelerate. We bridge the timing gap partly through borrowings which are repaid as receivables are collected. Services revenues which includes software maintenance and support, approximately $6000 per cart over the term of the contract. The revenue is recognized as earned on a monthly basis at about $100 per month.

Now turning back to our outlook, we continue to expect cumulative deliveries of 10,000 smart cards by year end which implies 4650 deliveries in the fourth quarter. This step up reflects broader deployment across a growing customer base, supported by the capacity of our manufacturing facility. We also continue to expect second half smart card revenues approximately $25 million excluding Hedia revenues. By the end of 27, fulfilling our current backlog yields 19,000 cumulative smart card deliveries. Beginning in the fourth quarter, our consolidated results will include Hedia adding an established revenue generating retail media business alongside our growing smart card operations As a result, we expect retail media to represent a larger share of our revenue.

Going forward, We are pleased with our results this quarter and remain on track to achieve our long term targets as we continue scaling SmartPart deployments. With that, I will pass the call back to Gadi Graus.

Gadi Graus: Thank you, Gadi. Looking ahead, we are pleased with our progress to date Deliveries, order activity and backlog, all are pointing in the right direction. And there is strong interest in the marketplace. We believe we are well positioned to capture a meaningful share of an emerging market. With smart card deployments accelerating, supported by our direct manufacturing capabilities and a sharper commercial focus following our organizational realignment, we are confident in delivering the fourth quarter sales step up implicit in our full year 2026 guidance. And our next generation connected in-store commerce platform and smart card solutions together with our significantly expanded retail media capabilities, set the stage for future growth.

We appreciate the dedication and commitment of our staff and the loyalty of our customers. And we look forward to providing further updates on our progress. Operator, let's now open the line for questions.

Operator: Thank you. We will now begin the Q&A session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question will come from Dan Cornus with Stonex. Please go ahead.

Dan Cornus: Great. Thanks. Good, well, I guess, late night for you guys. Good evening for us here. So, Gadi G, couple things here. First, just it is kind of been going around. It. Or has not been lost on people that you guys now have a bunch of open positions and listings. That are out there. And in your prepared remarks, your language was very clear around integration and advanced stages of all of this stuff. So do not know if you can talk to what that means for ambition or upcoming contracts, but kind of link all of that together for us, would be a great starting point. And I have a couple more for you.

Gadi Graus: Well, thank you, Dan. Good evening. Yeah. Before carts can be operational to retailers, a lot of work goes into preparation. So for instance, you have to do integration with the retailer's legacy system. Systems and there is multiple legacy systems that you have to, deal with, payments, POS, promotion engines, etcetera. The smart cards themselves, the features are customizable, configurable. To meet, you know, each retailer's different needs. So our teams work closely with the retailer to prepare the smart cards, that is what we have been doing to make sure they will be ready for delivery in Q1. And, you know, we are. As any company, we are dynamic.

So we are looking to engage with the right people before we go ahead. So select positions are always available And as you can see on our site, we are looking to employ select positions.

Dan Cornus: Gadi, I thought you put out a pretty eloquent note online about, Instacart shutting down. I know you did not mention them by name in the release, but we all know who it is. I am just curious how you view that, you know, in terms of an opportunity. Obviously, very different product, they were bringing to market, but just kind of your opinions on you know, what that might mean for shots on goal for you guys and kind of the visibility of smart cards throughout the industry.

Gadi Graus: So, yeah, we did not mention by name, but everyone knows that Caper has exited the market for their own reasons. And as we have mentioned many times, we have, believe in our strategy of having carts designed to be deployed at scale in the supermarkets, which we believe is the only way forward to create value. So Caper's exit has definitely created a significant market transition and I think a unique opportunity for us We are proactively engaging with a broad set of former Caper customers We initiated discussions with key retailers, and we are positioning ourselves as to be the leading long term smart car platform for the market.

Early conversations indicate that retailers are actively reassessing their smart car strategies. And we definitely believe that we are well positioned to convert that disruption into meaningful opportunities. Our objective is not simply to replace existing deployments, but to establish ourselves as a strategic partner of choice for retailers investing in the future of connected shopping.

Dan Cornus: Super helpful. And last 1 for me, you know, I. This is kind of your opportunity, I think, to talk about the acquisition a little bit more, and sort of what Adia brings to the table, why you made the deal, how it accelerates the retail media strategy, just anything you can give us on sort of the uniqueness of the asset and really what they add that is incremental that helps accelerate the business for you guys.

Gadi Graus: Yeah. Thank you. So there. there is various aspects, in fact, numerous aspects where Hedia provides us with strategic synergies and ability to accelerate our business. So first of all, we. This allows. The HEDG acquisition allows the Cust2mate-Hedia group to offer both retailers and advertisers a complete end to end retail media solution. In store retail media solution and this is important. It allows us to have control over the entire digital landscape in a store from digital screens end caps, digital end caps, ESLs, video rails, and of course, our carts. This significantly strengthens the value proposition we provide to retailers, advertisers, and anybody else in the ecosystem.

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Hedia also has been in store retail media for a long time. They have established long term relationships with advertisers. This allows us to accelerate revenue generation for in store retail media, which is a nascent and grow and growing business. And this will allow us to sell at more profitably our smart card media inventory.

Dan Cornus: Wonderful. Thank you. Appreciate it.

Gadi Graus: Thank you, Dan.

Operator: The next question will come from Giuliano Bologna with Compass Point. Please go ahead.

Giuliano Bologna: Good evening. Congrats on the continued progress in the business. 1 thing I would be curious about thinking about the Hedia acquisition. When we kind of look forward just from a business and have a financial perspective, are you planning on running all of your retail media, let's say, revenue and everything through that segment or through that business? Or in a sense, will that business stand on its own and then you will run Retail Media separate from that you know, as a as a line item?

Gadi Graus: Yeah. So thank you, Julian, and good evening. it is a bit of both. So where Hedia is active which is principally in Israel, we see our retail media business being run jointly with Hedia and Cust2mate. Outside of Israel, Hedia would allow us to tailor our solutions using the experience gained by Hedia, but we would see Cust2mate, actually generating, managing, and operating the retail media abroad, on its own.

Giuliano Bologna: that is very helpful. And then since we have you and you are kind of working towards pushing out retail media, I would be curious if you have any early examples, maybe not specific products, but any early examples or data around performance of retail media and, you know, and how effective, you know, retail media on your smart cards, you know, is and how, you know, just to get a rough sense of how things are performing and how the product offering, you know, should look to potential customers.

Gadi Graus: Well, it is it is a little early to come along and say that our initial conversion rates and other metrics are looking very, very positive. it is a little early to give out, exact figures on that. But as I said, our initial review of the figures show that conversion rates, adoption, and other metrics are looking very good.

Giuliano Bologna: Sorry. And maybe, you know, 1 final 1. Obviously, ramping up pretty well, especially with kind of the implied run rate of call it 4.65 thousand-cart deliveries in the fourth quarter. I am curious, when you look forward, is there kind of an upper bound to what quarterly deliveries can be without major investments. And, you know, how effectively do you think you can be at scaling up deliveries in other geographic or geographies and other markets?

Gadi Graus: So in actual cadence of deliveries, there is a combination of our abilities to manufacture, our abilities to deploy, and the retailer's ability to absorb and adapt their stores and their own internal operational efficiencies. As we have said, our manufacturing capabilities for our purposes are not more or less unlimited. We can manufacture in any amounts that we need. Our ability to deploy, we have shown that we can deploy multiple stores a week and thousands of stores. We see no issue on our own parts in utilizing local partners and local employees to deploy many thousands a month and as many as is needed. For retailers themselves, there is a growth period.

So it takes them a little bit more time Once they get going though, they can also do multiple stores a week each retailer. So I think the main the main cadence would come from how ready retailers are to accept the carts in the stores rather than any restrictions on our ability to manufacture or deploy.

Giuliano Bologna: that is very helpful. I appreciate the time and I will jump back in the queue.

Gadi Graus: Thank you.

Operator: The next question will come from Greg Gibas with Northland Securities. Please go ahead.

Greg Gibas: Congrats on the quarter and the Hedia acquisition. Wanted to maybe just follow-up on your comments around strong interest in the marketplace. Could you maybe discuss how the pipeline of potential customers has trended and how those discussions are going? And you know, if you are able to provide any progress toward additional contracting to come based on your conversations.

Gadi Graus: So conversations and our discussions and our work, as I have said, are intensive and ongoing. We cannot give more guidance than we have, but we continue to give the guidance. So we expect our carts to be available at least 2 international chains outside of Israel in Q1. But as I have said, we are working intensively with retailers chains outside of Israel to get our carts going.

Greg Gibas: Okay. Fair enough. Then I guess 1 more as it relates to that, those 2 international retail customer deployments in Q1, are you able to provide like an approximate number of cart deployments that those could represent? Both in the quarter and maybe as, you know, total opportunity with those customers?

Gadi Graus: No. We cannot provide them at present. We will provide them as soon as we can, but at present, we are not giving guidance for 2020.

Greg Gibas: Got it. And, Greg, 1 last 1, if I could. As it relates to-- yeah, absolutely. Hedia, perhaps your integration plans with it? Like, how much is kinda needed there to get that in position to accelerate the retail media business?

Gadi Graus: So there is not an overly significant amount of integration which is required in the synergies we see are already coming in related, as I said, to accelerated demand generation. Relationships with the advertisers, the understanding of the in store retail media language, metrics, etcetera, which gives us extra insights. The integration will come fairly quickly, but it is not a significant impediment. We can already start working on creating revenue generating synergies immediately.

Greg Gibas: Got it. Thanks very much.

Gadi Graus: Thank you.

Operator: This concludes our Q&A session. I would like to turn the conference back over to Gadi Graus for any closing remarks?

Gadi Graus: So thank you all for being with us. Much appreciated. Your time is much appreciated. And we look forward to our next conference call on our audited financials for 2026. Thank you very much.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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