AcuityAds Holdings Inc.

Good morning, everyone, and welcome to ACQUITY as fourth quarter and fiscal year 2020 financial results conference call for three and 12 month period in the December 31st, 2020. Before we begin the official remarks, I will read the cautionary note regarding forward-looking information. Certain information to be discussed during this call contains forward-looking statements within the meaning of applicable security laws, including among others, statements concerning the company's 2021 objectives, the company's strategy to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Such forward-looking statements reflects management's current beliefs and are based on information currently available to management and is subject to a number of significant risks and uncertainties that could cause actual results to differ materially from those anticipated. Following the presentation, we will conduct a question and answer session I would now like to turn the conference call over to Tal Hayek, the co-founder and chief executive officer of Acuity Ads to update you on the operations of the business.

Good morning, everyone. And thank you for joining us. My name is Tal Hayek. I'm the co-founder and CEO of Acuity Ads. Today, we're going to share Q4 results, Q4 of 2020 results and 2020 in general. Well, 2020 started off as the most challenging year, but ended up as the best year we ever had. It's been the most profitable year, which led to putting the company in the best financial situation it's ever been in. In 2020, we saw a major increase in connected TV revenue. In fact, we saw 287% growth in connected TV. And we project that we're going to keep seeing aggressive growth coming out of the CTV. But the most important part of 2020 was the launch of Illumin on October 1st of 2020. Illumin is the advertising automation software that we launched to market, which is now positioned us to change the world of advertising. which also led to what we're seeing as a strong 2021. In fact, when we're looking at our Q1 numbers, we're seeing strong growth in revenue numbers. So let's talk a little bit about 2020 as related to COVID and share a little bit of the pain that we had. 2020 started off as a great year. January and February, great months. And by mid-March, we saw a lot of pausing on campaigns. In fact, more than 30% of our revenue was related to travel, retail, entertainment, things that were going down to close to nothing at the time. So that was a tough time to be a leader. And April, we were down substantially, about 40% down. But then by May, we've seen a major comeback. And then every month since, we've seen a major comeback again and again and again. So... I'd like to congratulate and thank the sales team that was able to take some of the lost revenue that we saw from other industries and replace it by things like finance, e-commerce, and insurance, healthcare, all those things were things that were making up for some of the things that we lost as well. So, That was the COVID situation. But when you think about Q4, our revenue was up 35% sequentially. Our revenue for CTV was up 227% year over year. Our EBITDA was up 30% year over year. We completely paid off our line of credit, something that we've never seen in this company before. We always had a balance of a line of credit. We have close to $23 million in the bank. Again, something that we've never seen in this company. We're really in the best position, financial position the company's ever seen. So in here, we're trying to illustrate the focus of the management team for the last few quarters. As you can see, this is LTM EBITDA, and it's moving up and to the right every quarter. And that's what we're going to continue driving and attempting to drive as we move forward. So in this chart, we're trying to show you the focus of the management team for the last few quarters. This is our LTM EBITDA. And as you can see it moving up into the right, which has been a great focus of ours. I think another reason that everybody's so excited to be in this industry is obviously the market opportunity. So programmatic started 10 years ago. It grew from zero to 118%. billion during those 10 years. And we really solved the transactional issue of that space. But the future, the prediction is by 2027, we would see the ad space to be a trillion dollar industry. And the majority of it is going to be transacted programmatically. So obviously a very, very exciting place to be in. We believe that programmatic is an engine for recovery and growth. It's always been an engine for growth. Now it's also an engine for recovery as people are recovering out of the COVID situation. And I can tell you that when we've seen a whole bunch of industries, even in the ad space that were going down during COVID, we had time that the industry went down last year, but it quickly came back. And the reason it came back, because the programmatic has the promise of that as an advertiser, you can measure your ROI in real time and you can make sure that you get superior return on investment. Therefore, more and more people, accelerated even by COVID, are moving into this type of advertising. And there's no better company and there's no better algorithm out there than our algorithm, the QD Ads algorithm, when you want to deliver a positive ROI on investment and you want to deliver a superior one and all measured in real time. This is the place to go. So a big driving factor here is what's happening in connected TV. It's no secret that people are cutting cords and moving to a digital type of TV. And we've seen tremendous growth in the space. In fact, in Acuity alone, we saw 287% growth in 2020 from 2019. And we believe that is going to continue to aggressively grow. So we're very excited about what's happening on the CTV space and how it relates to us. And I think that COVID actually accelerated the CTV adoption because of two main reasons. Number one, again, advertisers would like to see return on investment in their ad spent It's very difficult to measure it on linear TV, very easy to measure it on CTV. So therefore, we're seeing that happening. And the second part is usually on linear TV, you have to commit to major upfronts. CTV gives you complete flexibility. In today's world, this is what advertisers are looking for. So again, we predict that the CTV growth is going to continue in an aggressive way. Cookies, cookies has been my favorite subject lately because everyone is asking me about the cookies and everyone is worried about the future of cookies. And I think it's very important to zoom out of the situation a little bit and think about who is paying for content online. And today it's being paid by advertisers and consumers are getting it for free, mostly. I don't believe that consumers are going to be willing to pay hundreds of dollars a month for the content that they receive for free today. Therefore, it's going to be continued to be financed by advertisers out there. I also want to mention that the third party cookies were never really designed to do what they're doing today from a tracking perspective. So we as an industry are welcoming changes to it. So some kind of universal ID is the way to go. We believe that it's going to solve the situation. It's going to replace the third party cookies and it's going to do a better job than that. We are today integrated with live ramp identity link. We are also integrated with a unified ID 2.0, which is a open source originally created by the trade desk. And there's new one that's coming in all the time, which is a part of, it's going to be a part of our platform as we move forward. So my belief is that it's the third party cookies going away is not going to prevent us from being able to tell the story to consumers. So for me, the most, Exciting part of what we do here at Acuity is Illumin. Look, at the end of the day, Acuity was started by four people with a big dream, and we overachieved on our dream many times over. But that pales in comparison to what we're doing with Illumin. Illumin is changing the world of advertising. Let me share what it is exactly that we're solving here. So there's two major problems here. Problem number one is that there's a huge... disconnect between the way marketers plan and the way that programmatic gets executed. Marketers plan in stages, and they usually plan in three stages, anything from awareness stage to engagement stage to conversion stage. And it's very important for them to send the different messages along the way. But then what happened is they take that plan, they send it to their programmatic team, the programmatic team takes it, they put the plan in a black box. Essentially what they're doing, they're shredding that plan to pieces. Why? Because the black box cannot execute on a consumer journey. The black box is very good at executing against single line items and delivering great ROI and results against that line item, but cannot control the message and the consumer journey. So many times I see situations that I see a video ad, a 15 second spot that I really like, and I think I should check that brand out. And I see that same ad again, which is great. Repetition is really good for marketing. But after seeing that exact same ad 30 times, and at that point, I want nothing to do with that brand anymore. I'm sure you guys can relate to it. There's annoying ads that are coming to people all the time. And we tell brands that if you already have your consumers engaged, you need to tell them the next reason why. Especially nowadays, when higher ticket items are sold online, it's so important to educate your consumer and bring them along the consumer journey to conversion. I do believe that now more than ever, it is so important. So what you're seeing in front of you right now is the way that our DSP looks like, our old DSP looks like. It works with line items. It's similar to other DSPs. They all work with line items. And this is the way Illumin looks like. Completely different, completely changing the game. It's a highly intuitive system, a drag and drop system. As a marketer, you get a blank canvas and all you have to do is start dragging and dropping your audiences and then creatives, and then you're setting up some conditions. So you decide how many times each creative are going to be seen before the consumer moves along the journey to see the next message. So that is one of the big problems that we're solving it because as a marketer, after I'm finished planning, All I had to click on, on execute and then in Lumen executes everything for me. I don't need to send it to my execution team, to our programmatic team, to my agency. It does all that for me. And the second problem that we're solving here, which is also a huge problem today in order to execute on any DSP, you need to be a highly trained expert. It will take you hours to set up a campaign and on a Lumen, any average person can set up a consumer journey in minutes. So you're solving a huge problem for many, many companies who would like to execute on programmatic, but just don't have the expertise in-house. So I'm gonna share a very short video with you, kind of just to illustrate, to let you understand the look and feel of Illumine.

For years, media plans have been put in a black box that you didn't have access to. Until now. Now, Illumine has reinvented advertising technology. Now you can see everything. The Illumine Journey Canvas lets you plan, buy, and see results on a single platform in real time. Drag and drop your creative to plan the consumer journey on any digital channel and activate it. Track the consumer journey. Target the right message at the right time and get a better return on your advertising spend. Illuminate the consumer journey with unparalleled insights all the way to conversion. Illumina's advertising automation like you've never seen before. Goodbye, black box. Hello, everything.