A2Z Cust2Mate Solutions Q3 2026 Earnings Call Transcript

A2Z Cust2Mate Solutions (NASDAQ:AZ) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

A2Z Cust2Mate Solutions reported third-quarter revenue of $10.9 million, with smart cart revenues doubling sequentially to $9.6 million. Gross profit increased to $3.7 million with a gross margin of 33.4%, and operating loss narrowed to $6.8 million.

The company completed the acquisition of Hediya, a move expected to significantly boost its retail media business and add $5 million in Q4 revenues. The acquisition is positioned to enhance the company’s retail media capabilities, leveraging Hediya’s relationships with major brands and retailers.

A2Z Cust2Mate aims to deliver 10,000 smart carts by year-end 2026 and 19,000 by 2027, with increased orders from both new and existing customers. International expansion is a strategic priority, with deployment planned in two international retailers by Q1 2027.

The company’s future outlook is positive, with expected growth in smart cart deployments and retail media revenue.

Full Transcript

OPERATOR

Good day and welcome to the A2Z Cust2Mate Solutions third quarter 2026 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 zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded.

I would now like to turn the conference over to Simon Serovetsky, Investor Relations. Please go ahead.

Simon Serovetsky (Investor Relations)

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 1995. 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 discussion of these risks. A replay of this call will be available shortly after its conclusion.

With that, I’d like to turn the call over to our CEO, Mr. Gad Graus, Chief Executive Officer of A2Z Cust2Mate Solutions.

Gad Graus (Chief Executive Officer)

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 Hediya, 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 carts, surpassing our total deliveries for the entire first half of this year.

Total revenue has 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 Hastock, Israel’s fast-growing home goods retail chain, with a new in-store retail media agreement, and we acquired Hediya, 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 2027. We are very pleased with the expanded orders we are getting from our newest customers following their initial deployment of our smart carts, 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 connected in-store commerce platform. This platform represents an important step in our evolution, moving beyond smart cart 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 Hediya, a leading Israeli in-store retail media company. Generating approximately $20 million in annual revenues, Hediya brings established relationships with leading Israeli retailers and major international brands including Unilever, Kimberly-Clark, Procter & Gamble, Nike, and Henkel, along with comprehensive capabilities in retail media sales, campaign planning, and execution.

By combining Hediya’s commercial capabilities and advertiser relationships with our connected in-store commerce platform, smart cart 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 A2Z Cust2Mate and our retail partners. The Hediya 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 two organizations and expect to drive synergies beginning next year. International expansion is at the heart of our long-term growth strategy, and it’s a top priority for our management team as we close out 2026 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 carts in two international retailers in the first quarter of 2027.

As you may know, a U.S. competitor plans to exit what was a non-core business for them in mid-2027. 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 a path forward to continued growth. Now I will turn the call to our CFO, Alan Rootenberg, to provide a fuller financial review.

Alan Rootenberg (Chief Financial Officer)

Thank you, Gad, and thank you everyone for joining us today. I will review our financial performance for the third quarter of fiscal 2026 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 cost structure. Shortly after the quarter end we completed the acquisition of Hediya, which, as Gad mentioned, adds an established commercial engine to our retail media strategy.

Similar to last quarter, my financial commentary will focus on sequential comparisons at this stage of the business. Year-on-year comparisons are not particularly meaningful given A2Z’s shift from a startup 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 were $9.6 million, more than double the $4.4 million we reported last quarter. We delivered 2,000 smart carts in the third quarter, up from 950 in the second quarter, bringing cumulative deliveries to 5,350. Importantly, deliveries were spread across a broader base of customers. Deliveries to Yohananov continued following the rollout of our new connected in-store commerce platform.

Sura Sapir is now live and began initial deliveries under their expanded commitment of 7,000 carts. At Hastock, we continued to deliver against their original order, and in August they placed a follow-on order for an additional—expanding their total commitment to 3,050. With Super Supplier and Hastock, two 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 one 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 carts. 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 of 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 2026. Now turning to our balance sheet, we ended the quarter with $30 million in treasury and $42.3 million in working capital. These figures do not yet reflect the Hediya acquisition which closed in early October. As a reminder, at closing we paid approximately $8.4 million in cash and issued 833,333 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 Bank Leumi 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 carts. Our contracts typically span five years and consist of two components: hardware and services. Hardware revenue, generally $4,000 to $4,500 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 result is that reported revenue leads cash collection, particularly as deployments accelerate. We fund the timing gap partly through borrowings which are repaid as receivables are collected. Services revenues, which include software, maintenance, and support, are approximately $6,000 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 carts by year end, which implies 4,650 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 cart revenues of approximately $25 million, excluding Hediya revenues. By the end of 2027, fulfilling our current backlog would yield 19,000 cumulative smart cart deliveries.

Beginning in the fourth quarter, our consolidated results will include Hediya, adding an established revenue-generating retail media business alongside our growing smart cart 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 smart cart deployments. With that, I’ll pass the call back to Gad.

Gad Graus (Chief Executive Officer)

Thank you. 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 cart 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 cart 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 question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then two. At this time we’ll pause momentarily to assemble our roster. The first question will come from Dan Cornus with Stonex.

Please go ahead.

Dan Cornus (Analyst)

Yeah, great. Thanks. Good—well I guess late night for you guys, good evening for us here. So, Gad, a couple things here. First, just—it’s kind of been going around, or hasn’t 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 I don’t know if you can talk to what that means for ambitions or upcoming contracts, but kind of link all of that together for us.

That would be a great starting point. And then I have a couple more for you.

Gad Graus (Chief Executive Officer)

Well, thank you, Dan. Good evening. Before carts can be operational at the retailers, a lot of work goes into preparation. So, for instance, you have to do integration with the retailers’ legacy systems, and there are multiple legacy systems that you have to deal with: payments, POS, promotion engines, etc. The smart carts themselves—the features are customizable, configurable to meet each retailer’s different needs. So our teams work closely with the retailer to prepare the smart carts, and that’s what we’ve been doing to make sure they will be ready for delivery in Q1.

And 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 (Analyst)

And then I thought you put out a pretty eloquent note online about Caper shutting down. I know you didn’t mention them by name in the release, but we all know who it is. I’m just curious how you view that in terms of an opportunity. Obviously very different products they were bringing to market, but just kind of your opinions on what that might mean for shots on goal for you guys and kind of the visibility of smart carts throughout the industry.

Gad Graus (Chief Executive Officer)

So yeah, we didn’t mention by name, but everyone knows that Caper has exited the market for their own reasons. And as we’ve mentioned many times, we 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’re positioning ourselves, as we believe, to be the leading long-term smart cart platform for the market. Early conversations indicate that retailers are actively reassessing their smart cart 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 (Analyst)

Super helpful. And last one for me, you know, this is kind of your opportunity I think to talk about the acquisition a little bit more—sort of what Hediya 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’s incremental that helps accelerate the business for you guys.

Gad Graus (Chief Executive Officer)

Yeah. Thank you. So there are various aspects—in fact, numerous aspects—where Hediya provides us strategic synergies and ability to accelerate our business. So first of all, this allows the Hediya acquisition to allow A2Z Cust2Mate—Hediya Group to offer both retailers and advertisers a complete end-to-end in-store retail media solution. And this is important: it allows us to have control of 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. Hediya also has been in in-store retail media for a long time. They have established long-term relationships with advertisers. This allows us to accelerate demand generation for in-store retail media, which is a nascent and growing business. And this will allow us to sell, more profitably, our smart cart media inventory.

Dan Cornus (Analyst)

Wonderful. Thank you. Appreciate it.

Gad Graus (Chief Executive Officer)

Thank you, Dan.

OPERATOR

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

Giuliano Bologna (Analyst)

Good evening. Congrats on the continued progress and scale in the business. One thing I’d be curious about, thinking about the Hediya acquisition: when we kind of look forward just from a business and 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’ll run retail media separate from that as a line item?

Gad Graus (Chief Executive Officer)

Yeah. So thank you, Giuliano, and good evening. It’s a bit of both. So where Hediya is active, which is principally in Israel, we see our retail media business being run jointly with Cust2Mate and Hediya. Outside of Israel, Hediya would allow us to tailor our solutions using the experience gained by Hediya, but we would see Cust2Mate actually generating, managing, and operating the retail media abroad on its own.

Giuliano Bologna (Analyst)

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

Gad Graus (Chief Executive Officer)

Well, it’s a little early to come along and say, but our initial conversion rates and other metrics are looking very, very positive. It’s a little early to give out exact figures on the metrics, but as I said, our initial review of the figures shows that conversion rates, adoption, and other metrics are looking very good.

Giuliano Bologna (Analyst)

And maybe one final one—obviously ramping up pretty well, especially with the implied run rate of, call it, 4,650 cart deliveries in the fourth quarter. I’m curious, when you look forward, is there kind of an upper bound to what quarterly deliveries can be without major investments? And how effective do you think you can be at scaling up deliveries in other geographies, in other markets?

Gad Graus (Chief Executive Officer)

So in the actual cadence of deliveries, there’s a combination of our abilities to manufacture, our abilities to deploy, and the retailers’ ability to absorb and adapt their stores and their own internal operational efficiencies. As we’ve said, our manufacturing capabilities, for our purposes, are more or less unlimited—we can manufacture in any amounts that we need. Our ability to deploy—we’ve shown that we can deploy multiple stores a week and thousands of stores.

We see no issue on our own part in utilizing local partners and local employees to deploy many thousands a month and as many as is needed. For retailers themselves, there’s 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 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 (Analyst)

That’s very helpful. I appreciate the time, and I will jump back in the queue.

Gad Graus (Chief Executive Officer)

Thank you.

OPERATOR

The next question will come from Greg Gibbes with Northland Securities. Please go ahead.

Greg Gibbes (Analyst)

Hey, thanks for taking the questions. Congrats on the quarter and the Hediya 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’re able to provide any progress toward additional contracting to come based on your conversations.

Gad Graus (Chief Executive Officer)

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

Greg Gibbes (Analyst)

Okay, fair enough. And I guess one more as it relates to that: those two international retailers’ 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, the total opportunity with those customers?

Gad Graus (Chief Executive Officer)

No, we can’t provide them at present. We will provide them as soon as we can, but at present we are not giving guidance for 2027.

Greg Gibbes (Analyst)

Got it. One last one, if I could. As it relates to— Perhaps your integration plans with Hediya—like how much is kind of needed there to get that in position to accelerate the retail media business?

Gad Graus (Chief Executive Officer)

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

Greg Gibbes (Analyst)

Got it. Thanks very much.

Gad Graus (Chief Executive Officer)

Thank you.

OPERATOR

This concludes our question and answer session. I would like to turn the conference back over to Gad Graus for any closing remarks.

Gad Graus (Chief Executive Officer)

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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