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.

Every time I see this video, I get so excited. It's important, obviously, that I'm excited and that the investors are excited. But it's mostly important that the industry is excited. And I tell you that as running as a DSP for many years before Lumen, it was always a problem even getting meeting with Fortune 1000 brands. When we went looking for beta partners last year for Lumen, that was not the case at all. We had over 30 major brands applied to be part of our beta program. At the end of the day, we selected the Home Depot, MassMutual, Landmark, Purple, WMG, and AIM. These were all very instrumental in helping us bring this to market anywhere from helping us with the usability, fixing some of the bugs we had in the system and being up on stage, sharing their experience with Illumine was something obviously extremely important. And we have a lot of gratitude for those brands for being a part of it. And now I'm going to hand off the screen to Jonathan Pollock, our chief financial officer, to share some of the financial results.

Thank you, Tal. I too am extremely proud of our team's performance during what was an incredibly challenging economic environment due to the COVID-19 pandemic. We not only persevered, but thrived and ultimately delivered the most profitable year in our company's history. I'd like to personally thank each and every Acuity team member and our trusted partners for their hard work over the course of this past year. I'd like to now review our Q4 and fiscal 2020 financial results. Total fourth quarter revenue rose 35% sequentially to $35.1 million compared to $26.1 million in Q3 2020 and $38.5 million in Q4 2019. The year-over-year decrease was due to the continued impact from the pandemic on certain industries, including travel, leisure, and entertainment, which had been strong contributors in Q4 2019. Combined, the year-over-year decline in these sectors was approximately $5.5 million. Growth profit or net revenue was $18.3 million in Q4 2020 compared to $19.6 million in Q4 2019, a decrease of 6.7% year-over-year. Our gross profit margin, however, increased to 52.1% compared to 50.8% last year, reflecting our company's continued focus on best-in-class AI technology. Q4 SG&A expenses declined 20% to $11.1 million compared to $14 million for Q4 2019. SG&A as a percent of revenue was 31.9% as compared to 36.2% in the prior year period. We continue to see substantial operating leverage in our business resulting from disciplined cost management. Please note that 2020 SG&A expense excludes the $1.8 million gain from the PPP loan forgiveness that was realized in November 2020. This improved operating leverage contributed to a 30% increase in adjusted EBITDA to $7.8 million in Q4 2020 compared to 6.4 million in Q4 2019. Net income for the same period was 4.2 million, up 109% compared to net income of 2 million last year. Adjusted net income for the period totaled 7.1 million up over 35% compared to 5.2 million in the same quarter last year. As a reminder, adjusted net income reflects the add back of non-cash charges, including depreciation, amortization, foreign exchange, deferred tax write-off, and stock-based comp. Operating cash flow for the fourth quarter of 2020 totaled 3.3 million compared to 5.7 million for the same period in 2019. This next slide summarizes our performance for the full year ended December 31st, 2020. Total revenue for the full year was 104.9 million compared to 119.1 million in 2019. The 12% decrease resulted from a reduction in client spend due to the COVID-19 pandemic. In 2021, we have continued to see a substantial rebound in our business from the same period last year, and expect year-over-year revenue growth to resume in the first quarter of 2021. Gross profit or net revenue for 2020 was 54.1 million compared to 57.4 million for the same period in 2019, a decrease of 5.8%. However, gross profit margin was 51.6% for the period compared to 48.2% in 2019. SG&A expenses for the year decreased 20.2%, totaling $40 million, compared to $50.1 million in 2019. As a percent of revenue, SG&A expenses totaled 38.1%, compared to 42.1% for 2019. Non-GAAP adjusted EBITDA increased 62.6% to $15.8 million in fiscal year 2020, compared to an adjusted EBITDA of $9.7 million for 2019. Net income for the year was 3.7 million, 166 improvement from the $5.6 million loss in 2019. And adjusted net income for the fiscal year was up 175% to 13.2 million compared to 4.8 million in 2019. And operating cash flow generated for the full fiscal year ended December 31st, 2020 was 19.3 million, compared to operating cash flow of $600,000 for 2019, an increase of close to $20 million year over year. We continue to focus on operating cash flow and generating additional cash from our operations. As you can see on the next slide, and as Tal mentioned previously, we achieved record adjusted EBITDA in 2020 as our profitability continues to strengthen. This was due to the significant amount of operating laboratory we have built into our model. As we continue to add clients at minimal incremental cost, we anticipate continued adjusted EBITDA growth. Looking at the next slide, during the fourth quarter, our strong cash flow generation enabled us to pay down our bank line of credit in full. At the same time, we built up a record cash balance by year end, which was boosted further by a bought deal equity offering completed in the quarter. On the next slide, you can see that our net working capital position has strengthened considerably over the past several quarters. The right side displays a tremendous improvement in our operating free cash flow generation on an annualized basis. As we move ahead into 2021, we will remain focused on growing our top line while working to continue to grow our profitability and free cash flow. There was one other thing I wanted to briefly mention. turning the call back over to Tal for concluding remarks. On our last earnings conference call, we discussed exploring uplisting options for our common stock. To offer further clarity, we have submitted our application to list our common stock on the NASDAQ capital market and are currently working with NASDAQ to finalize the application. I want to point out that the process is streamlined given that we are already listed on the TSX and able to use an expedited process. We will continue to provide any updates when appropriate. Now, back to Tal for the concluding remarks before we open the floor for questions.

Thank you, Jonathan. These are some great numbers. A few final thoughts before we go to Q&A. Obviously, back to Illumin. So we believe that Illumin is democratizing the advertising space, just like Shopify did for e-commerce. You guys remember years ago, you needed to call an expert to book you an airline ticket. And today the system is so intuitive, so easy to use that we can all do it online. This is where Illumina is taking us. This year we're concentrating on the bigger brands and adoption, but next year and forward, we will concentrate on the small to medium sized businesses. And we believe there's no reason why any pizza store cannot log into a Lumen, set up their campaign and spend $500 a month to reach a five mile radius around their store. So that's where I think we're taking a Lumen. And I want to mention that we are the leader in this advertising automation space. This is the only system out there that has this intuitive features into it. We just released our third iteration into it and it's looking better every day. I would like to congratulate again the Acuity family, our partners, our investors. I'd like to thank all of you because each and every one of you are very instrumental in building such a great organization that we built over the last 11 years. We're so excited to be in the programmatic space. Obviously, it's a space that's been adopted greatly over the last 10 years, and we do believe that it's going to keep on growing tremendously for the future as well. The growth of CTV is obviously something that we're also very excited about. It's driving the future of programmatic. And we're seeing that as a major, major driver of the future. And again, for me, the most exciting part is Illumint, the advertising automation platform that we launched to market that has now positioned us to be changing the world of advertising. I'd like to share a little bit about the adoption of Illumine. So many of you know that as a management team, we always communicated that we feel that the revenue from Illumine is going to come in mid 2021. Well, when we launched it in October of last year, we saw that it's moving much faster than we expected. In fact, we had $1.5 million in revenue running in Q4 alone on the Illumine system. Our pipelines, the amount of demo requests and the demos that we're doing on regular basis is just through the roof. And that led to what we believe now is going to be a strong 2021. In fact, when you look at Q1, we are at strong growth mode And all the indication about the future of acuity are really great. So thank you for joining us today. And we're now going to go to a Q&A.

Thank you everyone. We are now going to turn the floor to questions. The first question that we have coming in will be from Aravinda of Canaccord. Aravinda, when you're ready, you can go ahead.

Good morning. Good morning, Tal and Jonathan. Congrats on the quarter. And thanks for taking my question. I'll start with a question for Tal where you left off the conference on Illumin. When we try to sort of project how the ramp up would occur, And you talked about a lot of the demo requests that you're getting. Do you feel that near term it would be a question of sort of a few large accounts adopting the product? And that's where much of the growth, let's say, over the next 12 months would come from? Or do you feel like it will be a lot of small accounts with maybe early stage spend? I wanted to sort of get your thoughts on that as we try to sort of visualize what that trajectory would be like.

I would say that so far it seems like it's large accounts testing it and coming back and spending more, which I believe they're going to turn into very large accounts. So this year we are really concentrating on the bigger accounts. I do believe that Illumine is eventually going to be right for small to medium-sized businesses as well. But the focus this year is on the large accounts. Remember, these large accounts are the ones that are thinking consumer journey. This is the way they plan already. So we're almost making the dreams come true by giving them the tools that they need to execute on it. Okay.

And with respect to just switching over to M&A, obviously you have a very strong balance sheet, still a fragmented industry, your currency is strong. Is there any sort of updated thoughts that you want to share on M&A? You know, obviously the ad tech valuations are getting stronger. Is that starting to infect the private markets? Just wanted to get your take on that front as well.

Yeah, that's obviously an interesting conversation. So we've been having a lot more discussion regarding M&A in the last few months. We're seeing a lot of companies. We're very picky about what we're going to do because we want something that's going to work. And it's going to work specifically with the leverage on the model. So we are able to take customers and revenue and bring them into our system. eliminating all the costs of duplication from a technology standpoint. So that's obviously something very important for us. Also, it's also great to bring in new technologies that will expand the capabilities of Illumine faster. So we definitely have been having a lot of conversation. Look, some companies, the expectations are not through the roof and might not be the right fit for us. Some companies are still reasonable. Uh, there's companies out there are still too small on their own and they're losing money and under us, they're going to be profitable. So there's tons of possibilities. And you know, I do believe that, uh, eventually we will find the right fit for us.

Thank you. Just two quick financial questions and ask them back to back and turn it over. With respect to margins, obviously, when we look ahead, Tal, you talked about strong revenue growth in Q1 and obviously a good outlook for 2021. We know that self-serve will obviously rebound in the year. That'll obviously have margin implications. You saved a lot of expenses in 20, some of which will obviously come back in 2021. How should we think of that trajectory of margins, you know, as we pick up where you left off in Q4? And my last financial question is on non-U.S. growth. Obviously, non-U.S. has been lagging. Do you expect a little bit more of a tailwind from sort of the international territories? Thank you.

Yeah, so margins eventually, when, so we do believe that eventually we're going to be a self-serve business in general. So it will take a few years to get there and to be only self-serve. And at that point, margins will go down, but I believe we will move to net reporting by then. So that's, you know, from an accounting point of view, it's not going to look that way. But I think this year we'll probably maintain more or less on margins. And over the next year, gradually, it will go down as revenues also climb up substantially. And SG&A costs as a percent of revenue should go down substantially as well. Because when you're running self-serve, you have to provide much less services and then your cost goes down as well.

Just to focus on that too. It will be our gross margins that we're talking about, our EBITDA margins we expect to continue to increase. And that's really been a focus overall of how we're looking at this. You know, I think over the early quarters of 2021, our gross margins year over year will be higher. But as aluminum continues to grow, which is at a lower margin base, we'll have slightly lower gross margins year over year, but we'll have much higher EBITDA margin.

Yeah, the EBITDA margin is something that we started looking at. as a percentage of net revenue. Jonathan, do you have that number?

So as a percent of net revenue in Q4, we were at 30%, which is adjusted EBITDA margins, which is very, very good. And we expect that to continue to increase over time. we believe that we still continue to be a leader in the industry with that, given our high gross margins and our cost base. And that's really what we're focused on.

Yeah. So it kind of shows you the leverage on the small. We are showing similar types of EBITDA margin to much larger organizations that are competing with us. And as the revenue go up, the leverage will be even higher.

And then just on the non-U.S.,

I think we have huge tailwinds in the US still. The growth is spectacular. Aluminum will drive a big chunk of that. We still are in infancy with aluminum and the US alone where we have the highest core of our sales team, there is significant growth still there. And that's where we believe we should focus a significant amount of our energies.

Yes, eventually it's going to be time to start focusing on other geographical areas, but we think the best return on the investment right now is in the U.S. Great.

Thank you both, and congrats. I'll pass the line. Thank you.

Thanks very much, Aravinda. The next question that we have coming in is from Sutan Sukumar at 8Capital. Sutan, whenever you're ready, please go ahead.

Good morning, Tal. Jonathan, congrats on a strong close to the year.

Sutan, how do you like the format of this video call?

It's good. It's slick. It's slick. I wish more companies were doing it.

Well, we're trying to elevate the situation.

Good, good. Guys, so first question for me is on Illumint. So clearly you guys are seeing strong momentum here in this new growth initiative. I'm kind of curious, looking at longer term, how are you seeing growth trends shape up over fiscal 21? At what point does this start to displace your existing self-serve business?

I think closer to the end of the year. So the way I always thought about it, even before we launched, we didn't even think there's going to be any revenue before second half of 2021. So, and the reason was because we obviously working on very big accounts and those accounts to adopt into this kind of situation, they take the sales cycles longer. So always thought it's going to be second half of 2021. So obviously it was a very good surprise that in Q4, we already ran 1.5 million in it. And that the pipeline are exploding and there's more deals coming in on a regular basis and all that. So that is great news, but I still think that the very large accounts are going to come in at second part of the year. And then we will start seeing some more major revenue taking over the self-serve line.

Okay, great. That's helpful. And you guys in the past have talked about, you know, a vast majority of that pipeline from Illumina is coming from the Fortune 1000 clients. And you touched on that earlier today. Aside from the size of these clients, is there anything different about these clients that you're working with by way of vertical or their focus? And the second part of that, what's the opportunity now to start leveraging Illumina to start working more closely with the agency trading desks of the world?

um so from uh the type of clients i think it's general it's the the early adopters are the ones that like to push the limits and uh and they're creative and they they they're willing to take risks uh for things that uh that make sense so i don't think it's it's one type of industry um it is generally speaking The companies who would like to educate their consumers, so bring them along the consumer journey to conversion versus the companies who just needs a quick conversion and do not need to invest in the journey itself. So that will be generally the largest corporations do it that way. And is there an opportunity with the agency trading desk? My original thoughts that this is going to be the best fit for, for brands direct that want to bring digital in house, because you're now providing them the ability to create a consumer journey, but also in an intuitive way. And you don't need like highly trained experts to do it. But we are seeing the agencies adopting it as well. And we're seeing the agencies are excited and bringing it showing in a bringing innovation to their clients is something that's very important for them. So yeah, I think there's also going to be opportunities on that side as well.

Okay, good, good. My next question is more around the outlook for fiscal 21 and it's given the momentum in the business and the growth in channels like CTV and obviously a new initiative like a Lumen. Now, how are you thinking about additional investments in the business with respect to sales capacity and even the platform over the course of this year? And Jonathan, I know you touched on expectations for continued margin expansion. Just kind of curious how you guys are balancing the two priorities over the course of this year.

Yeah, I would say that the investments are already built into our P&L already because From a technical perspective, we've been developing Illumint for years. So pretty much the entire company and team is working on the Illumint project. So that's already a part of it. From a sales perspective, we set up a new sales organization and their job is obviously to bring in the, and so it is the enterprise sales team there to bring in the enterprise dollars, but they're also supporting the rest of our sales team that are also selling Illumine as well. And under that, we have sales engineer doing the demos and coming in to support the sales organization. We have a new side of our service side from a client care point of view that is there to make sure that the Illumine clients are succeeding with whatever they're setting up. And look, it's also a new product. So we find issues with it. small issues, nothing big, but small issues all the time. And we're fixing them very quickly. And the entire team and the company is working very, very well together. So from that perspective, I think we're pretty good from an investment point of view. And we're happy with it. So we made some investment to increase our sales capacity. It's moving faster than we expected. So we made more investment from that as from the support side faster, but I don't think we'll see anything material coming in from an investment point of view that is not already built into the numbers.

Great, that's helpful. And Jonathan, maybe one quick thought for you. How should we think about the level of spend on the technology side of the OpEx profile, just given the level of spend in 2020? How should we expect these investment trends in technology over 2021?

As Tal said, obviously, our investments in technology are run through the income statement, not on the cash flow statement. Our team is built, we are adding and upgrading some on a regular basis, but we're also putting in some best practices. So I don't think our technology spend on an absolute level will go up significantly. I think we're obviously making the needed investments to make the system work a lot better and be ready for even more growth, but I don't see a significant increase.

Okay, great. Thank you for taking my questions, guys, and congrats again on the quarter. Pass the line.

Thanks very much, Sutan. The next question that we have coming in is from Vince from TD Securities. Vince, whenever you are ready, please go ahead.

Hi, Vince.

Vince? Joanna, maybe we want to go to the next analyst at the moment.

No problem. The next analyst we have is Eric from Lake Street Capital Markets. Eric, if you are ready, please do turn your video audio on and go ahead.

Okay, I've got the audio on. I just got to get the video crank in here. Good morning. Hello, Hal, and hello, Tal, and hello, Jonathan. So congrats on the quarter. Terrific sequential growth there. That's awesome. I'm just curious, you know, as we look to 2021, you didn't give us a view for the year, but obviously we analysts, the analyst community already has a number out there that's implying about 24% growth. Would you care to comment on that, or do you want to stay clear of it and just kind of focus on the quarter in front of you for 2021?

We don't provide any guidance, as you know, but we always like to beat the analyst expectations. And that's almost what we live for. And we usually do that. So that's the best I can say.

Okay. And then specifically on Illumine, I'm curious to know, obviously early days there and good success, but what can we expect as far as metrics on an ongoing basis? Obviously, this is something that's, this is a product, a service that is unique to Acuity. And we've got right now, we've kind of got this We did a million five in Q4. Are we going to be getting an Illumin revenue number each quarter? Will you be giving us some, maybe a logo count, maybe, you know, revenue per logo, anything that you'll be providing on a regular basis?

Yeah, so early years still, but we are, I believe, Jonathan, we have a separate line item for the Illumin revenue, correct?

Yeah, so we are monitoring Illumin and booking Illumin separately. We also will likely be issuing some press releases over time with respect to some of the big names that have signed on to Illumin. And as we move through each quarter, the data that we will provide, obviously, as it continues to grow, will help everyone understand how great Illumin is.

Okay, that covers it for me. Congrats, and I'll let you get to the next person in queue.

Eric, thank you. Thank you, Eric.

Thanks very much, Eric. The next person that we have in line is Daniel Rosenberg from Paradigm Capital. Daniel, whenever you're ready, please go ahead.

Hi, good morning, guys.

Hey.

Congrats on successfully exiting what's been a roller coaster and challenging year. Well done. Thank you. I wanted to ask specifically on the cash generation. You guys put up some impressive year over year improvement when we look at 2020 cash flow from operations versus last year. I was wondering if you could comment what the profile looks like. Understandably, you've got a lot of working capital swings, just the nature of your industry. But if you could provide any color there, that'd be helpful.

As I mentioned on the call, we are very focused on operating cash flow and cash flow in general. Given what Tal and I both talked about, which is increased cash and basically zero operating line and some term debt, we expect our interest payments to come down in 2021, principal payments to both stay the same. and our continued focus on reducing our days receivables outstanding, capital expenditure requirements. Our goal is to continue to generate cash. There may be some quarters that it goes up and some quarters it goes down, but at the end of the day, our goal really is continued cash flow generation.

Great. Thank you for that. You guys mentioned some of the industry changes around cookies and adopting new solutions out there. It seems like as an industry, everybody's converging and becoming kind of de-risking what that change looks like. I was wondering if you could provide any commentary on what how you feel post cookie, what the industry will be using as tracking. Will it be several different options that are out there? Will it be a specific solution that drives things? How does it look?

Yeah. I believe it's going to be some kind of a universal ID. And as we discussed, the third-party cookie was never designed to do what it's doing today. It kind of fell into it. One of the big problems with that is When we see consumers across different devices, they look like they're different people. So a universal idea solves that issue, which is right now we're doing it by partnering with different companies to figure out who the same users are. It works, but it's not perfect. I think with a universal idea, it's even going to be better. And so the question is, is it going to be one universal idea or many? We really don't know. We know that most likely that concept is going to catch, but you know, we, we are integrated with live ramp identity graph. We are integrated with unified ID 2.0 that was originally by, by the trade desk. Now it's open market. And there's many others that are coming to market. And as a platform, our job is to put all of them in the platform and make sure that we identify everyone and then create some kind of a, integration between them and being able to figure out how they correlate as well. So that's where I think it's going to go. I think the risk of tracking going away completely is extremely low. And yeah, I know there's a lot of focus out there also on other things that are not to do with cookies. So being able to target based on more contextual stuff and other, let's say, call it input variables that are not related to the cookies, which we already done many, many years ago. And we have a lot of input variables that are not related to the cookie in our algorithm as well. So no cookies does not mean that we're blind. It just means we have less variable. But again, I believe that the adoption of the universal ID is going to happen. It's going to happen this year or next year. And it's just simply a better solution for the industry and for consumers.

Thanks for that. Last question, and I'll pass the line. Just on connected TV, so you've seen another quarter of tremendous growth. Is this... You know, are you willing to provide some context on how meaningful a share TV is becoming? It's certainly accelerating faster than people have expected. And I'll pass the line. Thank you.

I think it's going to be more meaningful this year. Last year, the absolute numbers were not very meaningful, but more meaningful this year. There's no, we can't provide any exact numbers yet, but As it continues to grow, and I believe the growth rates are going to continue to be aggressive, it's going to become more and more meaningful as a part of our business. Thanks, guys.

Thanks, Daniel.

You're welcome.

Thank you very much, Daniel. The next question we have coming in is from Rob Gough from Echelon Raw. Whenever you are ready, please go ahead.

Good morning, guys. Good morning. And let me echo the congratulations on a fantastic quarter and a year, despite the environment. Tal, you did say that cookies were your favourite question, so could I ask, the cookie issue or is typically put forward as a challenge but is there an opportunity for you where because of your platform and your scale you can adapt better than perhaps some of your would-be competitors if you could just sort of dive into that it would be appreciated i think that the cookie is going to be sold by the industry and not so much by individual companies because

If we do it alone or the other companies do it alone, it's not gonna have enough data in it. So I do believe that the industry has gotten together here and cooperating. And as soon as, because all of us are contributing and working together here, that's why we can reach the scale of the cookies, of the replacement of the cookie, the universal ID. And I hope and I wish that it's going to be available for everyone in the industry because we like an open market kind of industry.

Thank you. And if I could, I'm also going back to the CTV area. Can you talk to the sources of demand, sources of strength that you are seeing in that product or service?

It's the, you know, generally we deal with the larger advertisers out there. And they're moving more and more of their ad dollars to connected TV. So from linear TV to connected TV, I actually believe it's moving faster because of some of the issues with the pandemic and everything. So it's not... Yeah, it's not a lot of like it's not getting a lot of new clients that are just CTV clients. It's all part of the mix. So they're running digital with us up to now and now connected TV is part of digital. So they're adding it more now. We our favorite is when it comes to CTV is is aluminum because it's an integral part of the consumer journey is connected TV. So And when we see a big focus on people who are running Illumine with us on connected TV and integrating data to the consumer journey.

Thank you.

Pleasure.

Okay, thanks very much, Rob. We are going to bring back Vince, I hope. Oh, I've lost Vince. Sorry, we are actually going to go to Neil from Haywood. So Neil, whenever you are ready, please go ahead.

Devin Glennie, CA Department of Health and Human Services, There can you hear me yeah good morning. Devin Glennie, CA Department of Health and Human Services, How you doing. Devin Glennie, CA Department of Health and Human Services, Congrats on the quarter as well, obviously, a lot of the questions have been asked, but maybe a curious on what you're seeing as far as current trends. Devin Glennie, CA Department of Health and Human Services, With respect to you know the progress in the US, obviously, with the vaccine and more talked about. Devin Glennie, CA Department of Health and Human Services, You know, return to the travel and entertainment industry and so forth, so you know, obviously that was impacting your business in 2020 are you seeing any encouraging signs so far and through Q1 with respect to those segments. I know Q1 is obviously traditionally, you know, seasonally slower than Q4, which is always the strongest quarter of the year, but just wondering whether you're seeing, you know, any early signs given the progress that we're seeing in the U.S. on the vaccine distribution.

So we are definitely starting to see early signs from mostly a little bit of travel and hospitality. Very, very small from a revenue perspective, but at least they're starting. And as you know, more than 30% of our business in the past used to be travel and hospitality and things that we're down to substantially. So we are definitely looking forward for it to come back. We're hoping as we come out of it, there's gonna be pent up demand for things like travel and it's going to be back big time. And look, as all these companies are, recovering, they need to talk to their consumers and that's what we're there for. So we're starting to see encouraging signs, but people are still not traveling big time yet, but hopefully it's coming soon.

Yeah, I think we're all hoping for that. And maybe just one small one, obviously, strong year on jittering cash flow and the financing in November. As you continue to build on that, what are your thoughts on use of that cash going forward?

So right now, we're quite happy to have that cash from the bank. We do have thoughts on potential M&A. As Tal mentioned on one of the Q&A, we have nothing imminent at the moment. But at this point, our cash is not going to be used for investing in the business. We do that with our own cash flow generation and through our income statement. But as we've said before, M&A is important to us. When the time is right and we have that right value accretive acquisition, we will capitalize on it. But at this point, it's just sitting there until we have something that is good for the company, good for the shareholders, and good for the business.

Great. Thanks very much, guys. Thanks, Neil.

Thank you so much, Neil. Our next question coming in is from Gavin. Fairweather from Coremark Securities. Gavin, whenever you're ready, please go ahead.

Hey, guys, can you hear me? Yes, perfect. Okay, great. You talked about the Illumine launch and kind of an expected ramp in the middle of the year. I was hoping maybe just to start, you could talk about the typical enterprise sales cycle that you see and what kind of hoops you need to jump through as you're working some of these larger deals.

Yeah. So let's start with the fact that before we launched Illumine, it was challenging to even get meetings with, let's say, Fortune 1000 brands. As a DSP competing with other DSPs, it was always hard to differentiate ourselves. And after launching Illumina, it's a completely different situation for us. And so first of all, we're getting leads coming in. People are requesting demos on a regular basis. So we go out, we do the demos. Um, usually people, when they see the demo, they're very, very excited. And I'm talking about people that are very high level on the marketing side of things, um, have a hard time staying in their seat from, uh, from excitement that they see about the, uh, the aluminum product. Um, so then the, the discussions continue. I mean, some of them turn into, um, a test very, very quickly. Um, and some of them, the sales cycle is longer. They do need to make different types of investment as they did before, because before the whole point of programmatic was I'm going to try to tell the story in one creative and I'm going to repeat it over and over and over again until people convert. With this, it's now we're going to tell the story in stages. And for that, you need to have different creatives. It aligns with the way they plan, but it doesn't align with the way that they're used to do programmatic up to now. So, um, a lot of times we have to come back after we sell the deal even and educate them again, like, okay, you need to give us creatives in stages and you need to tell the story in stages. And it's not about bombarding the consumers with the same message over and over again. It's about educating them and moving them along the consumer journey. Uh, so, um, and, and surprise, I mean, surprisingly, not surprisingly, they're, they're making those investments, uh, and they're coming up with a creative zone and then. The results that they're seeing on the system, they really, really love it from a performance standpoint, but also from many other things that they can do. They can control it. They can actually see that the kind of insight that they're seeing from the flow they could never see before is priceless for them. So that is the cycle. But we also have another cycle of bigger companies that want like even better integration so uh we're we're talking and working on api integration to into their back-end system and much deeper integration that will take obviously uh quite a few more months to do but will be a lot stickier and become very big accounts

That's helpful. And then I know we're kind of running up on time. But maybe just lastly, for me, can you talk or you talked about how you expect your mix to kind of shift towards self serve, obviously, you know, some strong growth in a lumen is obviously a pretty integral factor in that. But just in terms of how it relates to kind of your full serve business, can you speak to kind of, you know, how that will play out? Are you still investing in terms of, you know, sales headcount for growth there? And do you think that there's a good number of those customers that might be able to convert to a Lumen over time? I guess I'm trying to think about how that'll all play out.

I think two to three years, there's not going to be Acuity anymore. It's all going to be Lumen. That's a simple answer, but... That's what we're going to be driving to. Now it's the movement from managed service to self-serve. Illumin is not going to be fully, it's not going to be a focus for us this year. This year is all about bringing in new revenue, new customers to use Illumin. Obviously, we have some of our existing customers that are moving to Illumin because they like it and they want to use it. But the focus is on getting new business into it this year. But look, over time, there's no reason to, maintain two different technology two different products we will sunset the uh the old uh dsp and uh and everything is going to be running under illumine okay that's it for me thank you thank you thank you everyone that concludes the q a and thank you very much for your time thank you thanks for joining us everyone