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spk11: Good morning, everyone, and welcome to Acuity's first quarter 2021 financial results conference call for a three-month period ended March 31st, 2021. 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 over to Tal Hayek, the co-founder and chief executive officer of Acuity Ads to update you on the operations of the business.
spk05: 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.
spk09: I get so excited about Illumin. What a game changer this has been for our company. Good morning, everyone. My name is Tal Hayek, and I'm the co-founder and CEO of Acuity Ads. I'd like to welcome everyone to our Q1 investor video presentation. I have to start by thanking the Acuity family. Each and every one of you have contributed to the success of this great company that we built. Thank you for an amazing Q1. a quarter of overall growth and a quarter of massive growth when it comes to Ellumin. As many of you know, we launched Ellumin in Q4 of last year. Ellumin over exceeded our expectations many times over. Anywhere from the amount of revenue that we delivered on it, to the adoption that is happening faster than we expected, to just the fact that it's changing the world of advertising one brand at a time. Big brands, great brands like Purina, Purple Mattress, Weight Watchers and Mercedes-Benz have already began using this system. They've already begun to see the And the beauty of that is that this is the way they plan. This is the way they think. They always plan and think consumer journey. And Illumin now gives them the ability to execute on it, gives them the ability to plan and execute on it. So it's really a dream come true to many marketers out there. And the kind of results that they're getting from it and the kind of insights they're seeing and never get before. So needless to say we're so excited about where Illumina is taking us and how it's really changing the company as a whole. Towards the end of the call I'm going to share some very exciting news about the outlook of Q2 and about what's happening in the Nasdaq. So please stay tuned. What a great Q1. We delivered $27.5 million. We are now officially back in growth mode. On the Illumin side, we've seen 107% sequential growth to $3.2 million. And our LTM EBITDA keeps climbing, and it's now at $18.5 million. Illumin gave us a great competitive advantage, but it is so important to be able to maintain it. And a lot of times I get the question, is somebody going to copy Lumen? And look, my response is probably, probably eventually somebody will try to copy it. But we're so far advanced and we're advancing so fast all the time that it's going to be very difficult for anybody to be able to be successful in it. Lumen, like the idea came to us about four years ago and two years ago we started building it. And we're now in the sixth iteration of it, starting at alpha and then beta and then full release. And we get all the feedback from our clients and our product team is making changes. The engineering team is making changes. And we're just making it better and perfecting it all the time. Couple that with all the partnerships that we're adding to it along the way so far and plan for the future. And then the most important part is that in the background, of Illumin. The part that makes all the decision is the AI system that was built in house here and started 11 years ago and we've been perfecting it ever since and that is something that cannot be duplicated. I would love to share some Illumin numbers with you. We currently have 29 clients on the system. That is 29 clients. We only released the system in Q4 of last year and we already have 29 clients running on the system. Out of those, 15 of them are Tier 1 clients. And the majority of the revenue is coming from new business to us. Our closing rate from leads is substantially higher than our legacy business and we have a 100% renewal rate. All that is a great, great recipe for just great future growth. And in fact, I can share that we're seeing again into Q2 strong growth on the aluminum side. I'd like to share a little bit about the different categories. So aluminum is ready for any category out there. So far we've seen a lot in automotive, in food, electronics, pharma, retail, QSR. And we are working and welcoming any other types of industry that would like to take advantage of it. At the end of the day, all major brands think consumer journey, and now Illumin gave them the ability to plan and execute on it. It's a great, great time to be in the ad tech business. Programmatic started about 10 years ago and grew to over $100 billion. But that's not the end of it. the growth of the future is going to continue and continue very, very aggressively. In fact, the prediction is that it's going to go over $150 billion in the next few years. And that's not a wonder for me because at the end of the day, as an advertiser, I would like to really concentrate my budget on things that make sense and things that are proven to me. So programmatic gives you that. It allows you to measure your ROI all in real time, and generally speaking, get a superior ROI to what you're getting somewhere else. So it's no wonder why more and more people are moving into it. And another major driver that's contributing to the growth of programmatic is connected TV. It's not a secret anymore that people are cutting their cords and moving more and more into consuming TV in a digital means. And as we do that, we're seeing the ad tech revenue starting to grow exponentially. in the connected TV space. In fact, we had 987% growth in Q1 over Q1 of last year, just from TV. So we're very excited about what's happening in connected TV and do believe it's going to be a major contributor to the future growth. I will now ask Jonathan to share some financial updates with us.
spk02: Thank you, Tao. We have enjoyed a very strong start to 2021 and I too would like to thank all of our team members for their hard work in making this happen we're extremely excited about what lies ahead as tal discussed we're seeing incredible traction in the market for our advertising automation platform illumine and this success was indeed a significant growth driver in the first quarter illumine has vastly exceeded our expectations once again and we believe this bodes very well for the remainder of 2021 and beyond with that in mind I'd like to discuss the financial results for our first quarter 2021. Total revenue in the first quarter was $27.5 million compared to $24.2 million in Q1 2020, an increase of 13.4% year over year. Growth would have been approximately 20%, excluding the impact from COVID-19 on certain industries, including travel, leisure, and entertainment. Revenue from Illumine this quarter totaled $3.2 million compared to $1.55 million in Q4 2020, an increase of 107% sequentially. We continue to see strong demand for Illumine and are extremely excited for what the remainder of the year holds. We also saw strength in newer emerging verticals such as pharmaceutical, technology, and direct-to-consumer brands in the quarter. Gross profit or net revenue was $14.4 million in Q1 2021 compared to $12.2 million last year, an increase of close to 18% year over year. Our net revenue margin in Q1 2021 was 52.3% compared to 50.3% last year. This year over year increase reflects a continued focus on best-in-class AI technology. Total operating expenses for the quarter equal 12.1 million compared to 12.8 million for the same period last year, a decline of 5.2% year over year. We continue to see strong operating leverage in our business resulting from streamlined operations, as well as a reduction in travel expenses associated with our sales and marketing teams. This improved operating leverage led to an adjusted EBITDA in Q1 2021 totaling $4.5 million. up 152% from 1.8 million last year. Net income for the same period was 1.4 million, up from net income of $200,000 in Q1 2020. And adjusted net income for the period totaled 4.2 million, or a 318% growth compared to a million dollars in the same quarter last year. As a reminder, adjusted net income reflects the add back of non-cash expenses, including depreciation, amortization, foreign exchange and stock-based compensation. Finally, operating cash flow for the first quarter of 2021 totaled 5.7 million compared to 4 million for the same period last year, an increase of 43%. On the next slide, our profitability continues to strengthen with each passing quarter as we realize the benefits of the previously mentioned operating leverage inherent in our business. Here you can see the strong consistent growth and profitability on an adjusted EBITDA trailing 12-month basis over the last seven quarters. As at the end of Q1 2021, Acuity generated 18.5 million in LTM adjusted EBITDA, and we expect to exceed the $20 million hurdle soon. On the balance sheet, you can see here on the left side, our cash on hand as of Q1 2021 has increased again in the first quarter. As of March 31st, 31st, 2021, our cash balance stood at a record $27 million, an increase of 4.4 million from 22.6 million as at December 31st, 2020. On the right side, you can see our working capital position as it has evolved over the past several quarters. We continue to improve our working capital position each quarter. And despite Q1 typically being a softer quarter due to seasonality, we are in the best working capital position in our company's history. Working capital ended the quarter at a record $30.4 million. Looking ahead, we see continued strong aluminum growth supplemented by continued emerging vertical growth and a rebound in spending from clients and industries that were hit the hardest by COVID-19. As vaccinations continue to roll out globally and lockdown restrictions lifted, We expect to see many clients that pause their budgets over the course of 2020 begin to resume spending once again. Now, I'd like to send that back to Tal for some closing remarks, followed by Q&A. Thank you very much.
spk09: Thank you, Jonathan. But with all this exciting news, I have to congratulate the Acuity team once again. Just before we go into Q&A, thank you again to the Acuity family for delivering such an amazing quarter of aggressive growth on the Lumen side, of growth overall, of $4.5 million in EBITDA. Thank you, thank you, and thank you. As I see more and more brands are adopting Illumin, I get more and more excited. At the end of the day, Illumin is fixing a huge problem in our industry. The problem that there's a huge disconnect between the way marketers plan and the way marketers think, which is a consumer journey, and the way that programmatic gets executed, which is, generally speaking, tell the whole story in one type of creative. Illumin comes along and now gives the ability for marketers to plan and then to execute on a consumer journey. And then be able to see the insight that they could never see before and get the performance. And that is the recipe for amazing future of Acuity and the company. I feel that the wind is in our back. The pipeline, the amount of meetings that we're having, the types of conversations we're having in those meetings, the RFPs, the demo requests we're getting into the system on a daily basis, and the amount of demos that we are performing are at an all-time high. And I'm very happy to report that we're expecting strong growth in Q2 on the Illumine revenue numbers and in general. So things in Q2 are going extremely well. In Q2, we are now expecting to be at minimum 50% growth on a year-over-year basis. I know a lot of people are anxiously waiting for news about the Nasdaq. I'm personally looking forward to the time that I can go and share the Acuity story with more and more investors. And I'm very happy and very excited to report that our application to the NASDAQ is going very well and we expect to be listed there in the coming weeks. So with all these exciting news, Jonathan and I are now happy to welcome you to our Q&A section.
spk07: Our first question comes from Aravinda from Canaccord. Aravinda, if you can turn on your video and audio, you can go ahead.
spk08: Hi, guys. Congratulations on the quarter. Hope you're doing well. Thank you. A couple of questions from me. I'll start with Tal. With respect to Lumion, obviously very encouraging numbers. I was curious to hear from you. I know that sort of the key focus is the brands and the advertisers, but have you had the opportunity to pitch the product in a material way to the agencies as well? And is there any material feedback that you care to discuss? And the second question, I'm sorry to make you talk about third party cookies again this quarter, but there was obviously some noise around an update from Google in February that created some disturbance in the market. I wanted to give you an opportunity to sort of get your updated thoughts based on that update. and how you feel sort of independent DSPs can fare in a sort of unified ID environment going forward?
spk10: Yeah, okay. So that's two very good questions. So let's start with the agency side. I was actually surprised how the agencies loved the product because the original intent was for brands and giving them the tools to bring it in-house and create the marketing automation system. Now, we started pitching it to brands as well, and the response was amazing. They love the product, they love to come back and show innovation to their clients. and show them something different. At the end of the day, what it is, it's a dream come true for every marketer. And then if an agency can come and do it for them, then it makes them look very good and makes them perform better. So we did, and some of our clients are branched to agencies and some are branched direct, and it's all working very well. So that's on the agency side. The third-party cookies, at the end of the day, I'll go back to the way that I think about it, is the fact that consumers are getting content from the internet for free, generally for free. And I don't believe that consumers are going to start paying for content that they're getting for free. And if that's the case, then there's going to be some kind of mechanism that's going to make it all work. I do believe the universal IDs are the right solutions and they actually work better than the cookies. And I'm looking forward to in the next couple of years to get them replaced. So I am not concerned about the industry going away or being able to track going away and all that stuff. But at the end of the day, if that happens, we do have other mechanisms in place to use and other input variables that we can use in order to create performance. Publishers are going to be the ones that suffer the most out of that as CPMs will go down. But again, if publishers are suffering. content but no content so at the end of the day somebody has to pay for it and I think it's very important to zoom out of the situation and think about it that way.
spk08: Thanks, Tal. A couple for Jonathan, and I'll pass the line. Obviously, you're seeing really good growth on the managed services front. Any kind of color for the analyst as to when you would start to see that self-serve perhaps accelerate ahead of managed services? I know that's the long-term direction, but any kind of update in terms of the timing? And then as we come out of COVID-19, Jonathan, Any sort of restart costs we should think about? Obviously, you did a very good job reducing costs during the pandemic. Could there be blocks of restart costs that we should factor in? Thank you.
spk02: Thanks, Parabinda. So your first question with respect to self-serve, we're already seeing some growth in Q2 because aluminum, obviously, as that continues to grow, we'll get more growth in that. But as Tal has always said, the second half of 2021 is when that self-serve aluminum will take off. And we're investing in it now, and we should see that definitely grow. But we're also very happy that the growth, as Tom mentioned, the over 50% year-over-year in Q2 will be driven by both managers themselves. When it comes to your question about COVID, unfortunately, we've been paying rent through the last 12 months, so there's no startup cost there. But what we do believe is there will be some increased travel and entertainment expenses, but I don't think it's going to be material. I think people have learned, you know, they don't have to do as much travel and entertainment, but I do believe those costs will increase. But when we look at the size of the business today, you know, obviously generating 25, 30, 30 plus million quarter in revenue, it's not going to be a material cost for that T&E increase. And the only other thing we expect to increase is our commissions because we're going to get more revenue.
spk08: Thank you. Congrats. And I'll pass the line.
spk02: Thanks.
spk07: Thanks very much, Aravinda. Our next question is coming in from Sutan from 8 Capital. Sutan, whenever you're ready, go ahead.
spk12: Good morning, Jensen. Congrats on a very strong quarter. Nice hat. It's become a necessity here. With a lack of haircuts. Thank you, thank you. Guys, the first question for me is more so on, and I apologize if you guys touched on this in the opening remarks, I wasn't able to capture a lot of it, but in terms of the recovery that you're seeing from some of your COVID impacted customers in the travel and entertainment sectors, What's your sense on kind of the recovery and the trajectory of the recovery over the course of this year as you start to see these broader kind of digital ad spending tailwinds kind of play out?
spk10: Yeah, so we're not seeing any recovery from the existing revenue that we have so far. We're seeing kind of signs that it's starting. And our belief is that During this year, it's going to come back more and more and more. You know, something interesting that is only my thoughts about the travel industry is there's not, like right now, there's still not a lot of flights, like scheduled flights, commercial flights. And there's a lot of pent-up demand for it. So they're kind of filling up with our advertising right now. But I think that as soon as they start adding more and more flights, and you need to start fighting for passengers, then we will see more and more of that coming back. So I do feel that it's slowly coming back, and this year it should come back full force. My personal feeling, with all the pent-up demand and people are dying to go on vacations, it's going to come back very strong.
spk02: But we are seeing little bites from a bunch of the travel and entertainment companies, but it tells us that they're little. But the good news is it's better than zero. And the number of brands doing small amounts now is much greater than it was three, four months ago. And as Tel said, we do expect that pickup, especially as we get into the summer months.
spk12: Perfect. Perfect. And Jonathan, I think you can confirm, but I believe in an earlier call, I think you mentioned about 30% of your business pre the pandemic was actually from like in the travel and hospitality industry. Is that, is that accurate?
spk02: Yeah, I'm not sure if it was a, you know, every quarter is different, but we had some very large travel entertainment companies. And we believe, as Tal and we all believe, that they're going to come back very strong. So if you take the base that we have now and just add that revenue we lost, you could see the huge growth potential just from that one source.
spk12: Sure. Okay, great. Guys, my next question is on Illumina. Obviously, this has been a very important driver for new customer acquisition. And you've seen really strong momentum there, obviously. When do you plan to start onboarding some of your existing sales or customers onto Illumina? Can you talk a little bit more also about where you're investing in terms of some of the growth areas for the platform over this year?
spk10: yeah so um it's interesting because at the end of the day we don't want to manage and maintain two platforms right so uh we would like to eventually move everything to aluminum however illumine is not built like a normal dsp so it's not like you take all the fun if you take all the functions of norm your dsp and put it to illumine it's going to turn into the normal DSP. It's going to turn to be complex. It's going to turn to be something that takes you hours to set up a campaign. And that's the last thing we want to do. So we're very, very careful about doing that. Even though a lot of times customers ask us, we want this feature and that feature. And a lot of times we say, no, that feature doesn't work with advertising automation. It works with a DSP if you want to do it manually. So there's the legacy clients that are used to using DSPs and they're professionals at it and they're using that and it will take them longer to move. But look, I think that by the end of next year, let's say, we want to sunset the old DSP and move everybody to the new one. how fast that's going to go along the way. Right now, we're really concentrating on going after the bigger brands and new logos for Acuity. And then probably next year, that's when we're going to start seeing some migrations.
spk12: Great. And guys, maybe just one quick one for me on M&A. What are your thoughts on how the current valuation environment looks like? And where are you seeing kind of interesting opportunities as part of your M&A pipeline here? Is it tech? Is it market access? Is it customers?
spk10: We're seeing, so we're seeing, we're having a lot of conversations. It's like the most we ever had. And anywhere from something similar to what we do, not on the advertising automation side, but on the DSP side, to things that would integrate very nicely into aluminum, you know. I personally like marketing automation to be the next add-on to, to illumine, but there's many things we can add and we'll, we'll add to it. Anything from email marketing to search to social outdoor sign. There's a whole bunch of things that we want to add to it. And we're having many of those discussions in general. I think that people are surprised. Uh, when it comes to valuations, uh, it's hard to make sense. Uh, but also, you know, uh, our populations are, um, are aligned, so we don't have anything in it right now. We keep having direct conversations, but we're really, really, really focused on a little bit. And as soon as you do something like an M and a deal, which I'm not saying we're not going to do, but if we do that, um, you know, some of the focus goes to the least focus on Illumine and at the same time look at other companies that will add value to the Illumine journey at the end of the day. So it's going to be interesting over the next few months to see what we find.
spk12: Perfect. Perfect. Great, guys. After for me, thanks for taking my questions.
spk02: Thank you.
spk12: Thanks for joining.
spk07: Thanks very much, Sutan. The next set of questions comes from Laura Martin at NeedMCo. Laura, whenever you're ready, please go ahead.
spk06: Can you hear me okay? There you are. How are you doing?
spk02: Hello, Laura.
spk06: Good morning. So I guess my first one, I'm interested in you comparing and contrasting We had both Trade Desk and Magnite report sort of 35% revenue growth yesterday and the stocks corrected hard because people were sort of underwhelmed with the growth rate. So can you talk about your growth rates quite a bit slower than that? Why the juxtaposition between your growth rate and theirs?
spk10: Yeah. I think that a lot of our, for us, a lot of our revenue before COVID was travel entertainment. So it was close to 30%. So we obviously felt the loss of revenue and had to make it up and recover out of that. So that was great to see that we're back to growth. Yes, 13% growth rate is not as much as we want to be, but the great news is In Q2, we're seeing over 50% growth already. And we have the possibility to overachieve that a lot. And what we are concentrating on is not our overall growth. We're concentrating on the Illumine growth. We feel that this is our edge. This is where we're changing the world. And you can see the type of growth that we're seeing, over 100% growth on a quarter-over-quarter basis. And in Q2, very strong growth again. So we're very happy with where this is going.
spk06: Okay. So you may recall, you probably read the transcript for Trade Desk yesterday. They're introducing Solomar, which is, to me, it sounds like a lot like they sort of took Illumine and copied it, but I haven't seen it yet. It hasn't been introduced. On that point precisely, if Trade Desk is successful at replicating some of the aspects of Illumine, does that slow your growth rate and lower your competitive advantage as they roll out Solomar later this year?
spk10: Yeah, no, I haven't seen it, so it's hard for me to comment on it. But I'll go back to the fact that we've been, you know, the idea came to us about four years ago. We've been working on this over two years. We're on our sixth iteration right now, and we're becoming experts in the field, and we're getting better and better and better all the time. Anybody new comes along right now, they're way, way behind us. It will take them a long time to catch up. And in the background of everything that we do at Illumin is the algorithm that we perfected over the last 11 years. And that is what making the decision. That's at the end of the day, what delivers the ROI to customers that cannot be duplicated. So I'm not worried about anybody catching up to us. Okay.
spk06: And then my final question is just, can you remind us about international expansion and how you see international as a growth driver going forward?
spk10: We are focusing mostly in the U.S. because we have a lot of work still to do in the U.S. We have some Latam business. It's not huge, but it's there and it's easy for us to expand on that. So we're doing a little bit of that. We can definitely expand more in Europe than we have today. And then you think about areas like Asia and so forth. which I don't think we're ready for it right now. It's not something you want to do on your own. You want to do it with a local partner. We had some conversations in the past and we'll probably have more in the future, but there's so much to do in North America and Europe. And that's really our focus now. Let's get Illumine adopted by the major brands out there. That's the first step. The second step is... You know, Illumin is going to be ready sometimes next year for the small to medium sized market. And then we can start concentrating on any pizza store that wants to spend $500 a month by logging into Illumin and drive business within a five mile radius around their store. It's going to be so easy for them to log in, create their campaign within a few minutes without being an expert, and then Illumin will go and execute for them. So I think we still have tons of work at the places that haven't been touched yet.
spk02: Okay. I just want to add one thing, Laura, that despite our Spanish and Latin American business being relatively small, it's never been stronger and it is growing very nicely. as part of the overall business. But as Tal said, Illumina is the focus and Illumina is going to be integrated with our Spanish and Latin American business.
spk06: And I'll just throw in one last one. Do you agree with the notion that COVID accelerated the convergence between performance advertising and brand advertising?
spk10: In principle, yes. And it's logical. And I believe we see more and more brand advertisers now would like to have more control over their spend and not just having more control, being able to measure it in real time. Even though it's branding, there's ways to measure it. And also being able to pivot very quickly without needing to make major upfront commitments and making changes as things happen out there. So I think that's important. And then obviously with CTV, that's clearly going that way as well. But as you know, CTV numbers in general, the absolute numbers are still low compared to the industry and they're growing very, very quickly. So we're definitely looking forward to see a major number coming out there. And that will be driven by that.
spk06: Thanks very much, guys.
spk10: Thank you.
spk07: Thank you so much, Laura. The next question we have coming in is from Eric from Lake Street Capital Markets. Eric, whenever you're ready, please go ahead.
spk04: Okay. Hey, gentlemen. A couple of questions for me. I want to focus first on Illumin. I've heard you say in the past, Tal, that you would be disappointed with less than $10 million in 2021. Given the $3.2 million that you just reported for Q1, would you care to revise that?
spk10: Yes, I do believe it's going to be a lot more than $10 million at this point. Again, it's early days and it's over exceeded on our expectations, you know, multiple times over. But I do believe now it's going to be way more.
spk04: Okay. And we're still talking about sequential growth throughout the year?
spk10: Yes. Yes.
spk04: Okay. And then given those, you talked about 29 clients using the platform. And by the way, that's terrific traction for a product that only launched in October. I think one of the ways I would characterize it as incremental to your overall business, as opposed to a shift between managed service and self services, if you were to tell me that those 29 clients grew faster than the 13% that the overall company grew, is that a correct statement?
spk10: Yes. First of all, the majority of them are new to the company.
spk04: Oh, those clients are new to the company.
spk10: Yes. So the majority of them. Okay. And we're tracking a lot of different metrics to be able to share in the future. But what we're seeing is the average spent on Illumin is way higher than the spent on the traditional DSP. And we'll be able to share more numbers as we have. you know, more experience with it, but generally speaking, we're definitely seeing higher spend per client.
spk04: Gotcha. And then Jonathan, the final question is for regarding the NASDAQ. This is the greatest clarity you've given thus far. It's always been this amorphous time somewhere in the future. It's a little bit less amorphous now when you talk about you hope to complete the process in the next few weeks. What is the last one or two gating items here?
spk02: So, It's been a process because NASDAQ has never been busier. I'm sure you've read about that over and over again. We are continuing to push this forward. I think it's the coming weeks, not the next few weeks, just to be clear. Give us a little bit more hedge there. As I said to people, it will be likely before the end of Q2 and full team on deck. It's just, unfortunately, the NASDAQ has never been busier and it takes a little bit of time to navigate it, but we're very pleased where we are today and we'll have more of an update coming.
spk04: Okay, we're looking forward to it. Thanks for taking my questions.
spk02: Thanks, Eric.
spk07: Thanks very much Eric the next question is coming from Colin from Vince at TD securities.
spk03: hi can you guys hear me okay. yeah perfect. a couple questions first is there anything regionally that you're seeing um in terms of the recovery and demand and the in the growth you saw this quarter anything in certain regions of the u.s that may be opening faster or or any big differences between your u.s and canadian clients and how much they're spending johnson maybe you have those times well the group
spk02: Let's talk about Q2 growth because Q2 growth is, I think, coming from all parts, both Canada and the US, driven by, as Tal mentioned before, the direct-to-consumers, the pharmaceuticals, even some of these financial firms. But at the end of the day, what we're still waiting for is a lot of the travel and entertainment clients to come back in full force as they have before. But we expect to see that as we roll through Q2 and into Q3.
spk03: Okay, I guess that's part of the reason I asked the question, Jonathan, is the airport volumes in the US are significantly higher than Canada, where it's still almost an entire lockdown in Canada, but you're not seeing any notable difference in the pickup from travel and hospitality advertisers in the US versus Canada.
spk02: Well, I'd say most of our business, as you know, Vince, is in the US. We are seeing, as I said, some bites in the US from the travel entertainment companies. I would tell you that a lot of the airport traffic has gone up in the US, but it's still a very low bar compared to what it used to be. But we are excited by some of what we're hearing from our sales team in the pitches they're doing, in the meetings they're having with their clients in these industries that took a pause over the last 12 months. As I said, they're very excited, our sales team. We hear it every week on our sales call, and we expect that to be generated into revenues relatively soon.
spk03: Excellent. Second question on the Lumen. I want to make sure we don't get ahead of our skis here and hopefully you can level set expectations. With all these new clients coming on and more people using it and you say you're going to have significant sequential growth, should we be thinking that in terms of another sort of 1.7 million quarter over quarter lift or should we be looking more at the percentage growth and expecting another basic double from Q1 to Q2 to get you up to the 6 million range?
spk10: I think we're still not close to the end of the quarter, so it's a little early to comment on that. But we are seeing the indication for another strong sequential growth. We're just not ready to share the numbers yet. But we will as soon as we're more comfortable.
spk03: And on that, is there any reason why the the April 13th release had a lower number than the number today?
spk02: Yeah, I'd say it's a combination of a few things. One, it takes time for our team to close the books every quarter. So we do a preliminary close and then with the close of a quarter and our auditors coming in to do a review, we obviously spend more time and do some more diligence on it. So we usually see the preliminary close and then the final close. We want to get that number out early in April, and then we finish the closing of the books a few weeks later.
spk03: Good. Let me just say, I appreciate the fact that the number is higher today, not lower, that your initial estimate, you're not trying to be overly ambitious with it. So kudos on that. And I'll leave it there. Thanks for the answers.
spk10: Thank you. It's always about the under-promise, over-deliver, right?
spk07: Thanks so much. The next question is coming in from Kevin from Desjardins. Kevin, whenever you're ready, please go ahead.
spk01: Hi, can you hear me?
spk11: Hi, Kevin.
spk01: Hey, good morning, gentlemen. Nice to see you. A couple maybe modeling questions first. Just can you clarify on the Q2 guidance, you called for 50% growth. I think you did mention balanced, managed service, self-service. Is that fair or do we see one of them outpaced the other in terms of the revenue growth?
spk02: I would say that the approximate 50% growth we expect to achieve year over year in Q2 managed would be a higher percent versus the self-serve, but I don't think it's going to be two to one.
spk01: Okay. And then on the quarter, your gross margin was, you know, continues to tick higher at 52%. Is that driven? Can you talk about the drivers there? Are you getting better? Are you delivering better ROI on the service? Or is that a function of a Lumen, you know, maybe making the self-serve I think typically, has that been at 30, 35%? Are you seeing any benefits there, just the drivers on the gross margin?
spk10: It's really a function of the AI always getting better and always improving. And as that is improving, then you deliver better ROI to clients. And sometimes you can take a little bit more for yourself as long as you give most of it to clients. And as you know, one of our major focus has always been AI and it's continue and always will be AI. And Dr. Nathan McCune and his team are always working on that, improving it. So it's something that we will never stop doing.
spk02: But to level set, I think the margins in Q1 were higher than even we expected, which was great. But I would say as Illumine continues to grow, the margins will level set around that 50% level throughout the
spk01: Okay. Very helpful. And then a couple of questions on Illumine. First, really good to see the 29 clients and the majority of them are new. Are they, are these competitive displays? Like how would you characterize them? Are they coming from kind of Greenfield? Are these new brands? Are they new agencies that maybe are getting into digital or are you actually winning, you know, business away from like a trade desk or someone else?
spk10: These are, these, these would be people that we would, try to pitch them in the past and they would never even see us. Okay. So that's what we're seeing. So, you know, as being a DSP, a smaller DSP and competing in a world of everybody's doing more or less the same thing, it was very hard to even get meetings with these guys. And now with Illumine, first of all, people are coming to us. Second of all, when our sales team goes out there, they're taking the calls. Whenever we have meetings and doing a demo for Illumine, that seals the deal. So imagine you're a real marketer and all your life you're trying to plan a consumer journey, and then you're trying to translate it into a black box. And now Um, Illumin comes along and lets you plan it and then execute it all from, uh, from one platform. So that's really something that they're really get excited about. So that's why we're seeing more and more new clients coming into, uh, to the system.
spk01: And, and it, is it more, so are you, um, in terms of the wins then is it, how much is coming? Like how much is inbound versus outbound? Are you getting any? are you seeing more momentum just coming in or are you still, is there still more outreach? Are you, do you plan to put more marketing out there to advertise the awareness and like, how do you see things kind of building over time? It's still very early and these are impressive numbers for starting early.
spk10: Yeah. I would say that we, as a company in general, security never invested a lot in marketing. So it's something new for us. We started last year, um, We didn't do a lot, but we've done a lot around the launch event. We have recently brought in a VP of marketing that is already doing an excellent job. And I do believe that more and more of the revenue is going to come in from marketing. Today, already, some of the revenue is coming from marketing. In the past, it was always salespeople. Today, it's marketing and sales. And in the future, I do believe that we have the opportunity to get it very much into the marketing side of things. And that will create a much more ability to scale much faster.
spk01: Yep, absolutely agreed. Excited for that. One more maybe thought for you then, just more on the numbers. So Illumine, just correct me if I'm wrong, just for clarity. The Illumine, is it? It's all self-serve or are you driving any of that on the managed service? Are you running any campaigns for clients or is it purely self-serve?
spk10: We're selling it as self-serve. Some of the clients that need help, we do a little bit of a hybrid for them as they learn the system. And so we would tell the self-serve and then we would charge them to manage if they want us to do it. But the overall future is also.
spk01: OK, because when I look at the three point two million reported versus the five point two million self-serve, I mean, that's a big number at 60 percent. It was only 20 percent last quarter. So it's a big step up. Is that am I looking at it the correct way in terms of the mix?
spk02: No, so in Q1, as Tal said, most of the Illumine revenue was swayed toward the managed because that's how they start. So they start through the concierge model and then they transition over to self-serve. So over the period of time, the percent of Illumine revenue that is self versus managed will flip.
spk01: Okay, can you help us with like in that 5.2 though on the self-serve, how much in there was related to Illumine? Is that like a million or? Less than a million. Kevin Nielsen- it's less than nine okay that that's helpful that helps because I was looking at the year of her comps 4.9 versus so now now it all makes sense okay thanks so much congrats on good quarter guys i'll pass the line.
spk07: Kevin Nielsen- Thanks very much Kevin the next question we have coming in, is from Daniel rosenberg at paradigm capital. Daniel, when you're ready, please go ahead. Thank you.
spk00: Good morning, guys. Congrats on a good quarter. I just had a couple of quick questions around Illumin. I was wondering if you could provide any color around customer feedback and how they're evolving their usage in these early days. Maybe, you know, what percentage of revenue growth is coming for from more campaign usage versus bigger campaign usage? just any color around on their usage, please.
spk10: Yeah, we're tracking metrics, but it's like, we only have two quarters. So it's very, very hard to decide what's going to be a long-term metrics. And we don't want to do it sporadically. So we don't have exact numbers to share, but what we can tell you is that, you know, customers are first of all, need to, change the way they think even before they start to illumine because in the past they used to send all their messages in one specific creative and then kind of rotate between creative now they have to tell a story in many creatives and create this and think about the sequence and divided into different parts of the journey. So they have to think about their campaign more. They have to come up with a creative in a different way. And they love the ability to plan that and then to execute on it. But what they love equally as much is the insight that they're seeing when they're looking at the report. They're looking at the insight and they're seeing Where do people start? How do they go through the funnel? How do they get transferred from the different stages of anything from awareness to engagement to conversion? How much did it cost them to translate every consumer from one stage to the other? And then how much did it cost them to actually convert the users? So this is data that they could not see before. Being able to also work on the upper panel, the mid panel, and the lower panel all from one specific platform is also a great advantage for them. So they love that they learn from it and then they come back for more. So like you said, the renewal rate is 100%. And we're seeing increased spend on it as well. So at this point, I would say that there's clients who are using now Lumen as part of their campaign, which is the smaller clients. And then we have bigger clients that are still testing it and figuring out
spk00: to accelerate how to become closer to us and that's why i always say closer to the end of the year this is where we're going to see the majority of revenue coming into this system thanks for that and maybe just on the pricing model as it's early days and it's new any thoughts around your pricing strategy with illumine and any feedback you're getting from clients around that
spk10: So this year, the pricing model is very similar to what we're doing on the other DSPs. We're throwing up with the idea of charging more platform fees and more SaaS types fees, something that hasn't been And the other part is we're starting to introduce long-term contracts with minimum guarantees. So again, something we're testing in the early days. It's an industry that's not used to it. Ultimately, you want to be able to deliver the results to clients and not make them spend money with you. And that's the ultimate success for Lumen. But it's also very But by the end of the year, we'll have more and more information on how that's going.
spk00: Thanks for taking my questions. I'll pass the line. Thank you.
spk07: Thanks very much, Daniel. And we're just going to have time for one more question that is coming in from Rob Goff at Echelon. Thanks, Rob. Please go ahead.
spk13: There we go. And thank you for taking my questions. Two simple questions. There's been a lot of discussion about the external demand for a loan. Could you discuss the internal capabilities and expansion to support that demand? And then the second question perhaps for Jonathan would be on the CTV. Can you talk to the growth expectations sequentially in that market? We've talked about the external demand for Lewin. Could you talk to your internal capabilities to match that demand? Are your internal resources a gating factor in any way?
spk10: No, so not anymore. We're obviously in Q4, we were really, really surprised by the amount of activities we had on. And we had quite a small team. We set up an enterprise team and anywhere from the sales side, sales engineering side, and also the support side. And we quickly had to expand on that and bring more people in and train them. And we've done that and we're in good shape now. And I believe we're going to keep on expanding that team over time and probably not need as big of a team on the other side. And that will all balance itself.
spk02: And Rob, on your other question, we expect sequential growth in CTV every quarter. Already in Q2, we did announce, I believe a month or a month and a half ago, that we got a Lumen CTV contract.
spk10: exclusively so we have both quite well for q2 ctv revenue and when we release obviously our q2 results in august you'll see that continued sequential growth rob something that's interesting actually about ctv as it relates to illumine is that brands love running ctv on illumine because they see the impact that running the the entire funnel and how it relates to CTV. So they can actually see the impact on display, the impact on mobile, the impact on, on video when they're running CTV campaigns on the same journey, and they can see how that flows and helps them convert better. So that's actually, uh, something that they're very excited about. And that's why a lot of the, uh, the Lumen campaigns come with CTV parts.
spk02: Awesome.
spk07: you very much thank you welcome okay great this concludes our q1 conference thanks everyone for participating and have a great day thank you everyone appreciate all your support and congratulate to the acuity team once again
spk10: for delivering such an amazing quarter and for very, very excited about what's happening today and Q2 and beyond. And again, much appreciate all the support of our great shareholders. Thank you, everyone.
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