AcuityAds Holdings Inc.

Good morning, everyone. 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 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 reflect management's current beliefs and are based on information currently available to management and are subject to a number of significant risks and uncertainties that could cause actual results to differ materially from those anticipated. Please refer to the cautionary statements and the risk factors identified in our filings with CDAR and EDGAR for a more detailed explanation of the inherent risks and uncertainties that could affect such forward-looking statements. Following the presentation, we will conduct a Q&A 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 welcome to our q4 and 2021 investor presentation my name is tal hayek and i'm the co-founder and ceo of acuity and i'm very happy to be here live from our toronto office after many quarters that we were not here and the office is alive again full of energy and i can't even describe i happen to see that I'd like to start by thanking the Acuity family for delivering an amazing year. We've seen a year of growth of 16% on a year-over-year basis. We've seen Illumina numbers grow by 37% in Q4 alone, sequentially, and 580% year-over-year growth Now we can compare it on a year-over-year basis. It's our fifth quarter and on the Illumin side. So look at those numbers grow. Our expectations when we launched Illumin is to reach about $10 million in the first year. And last year alone, we reached $26 million. So Illumin went from zero to 27 million in just five quarters. Brand new product that was launched in Q4 of 2020, already $27 million in that five quarters. What an amazing achievement to celebrate. Q4, our overall revenue was up by 5%. Well, that was below our expectation. The majority of the reasons are things like the supply chain issue and slower travel and hospitality sector that is coming back, but still hasn't come back like we expect it to come back by now. Overall revenue was 122 million for the year. Well, that's a growth of 16%. But when you look at it on a constant currency basis, it's closer to 24% growth. And why is it important to look at it this way? Because most of our revenue are in US dollars and we're reporting in Canadian dollars. So if you really want to know the true growth rate, look at our constant currency numbers. In Q4, we delivered $36.8 million, 5% growth and a constant currency growth of close to 8%. That was below our expectation. And as I said before, some of the reasons are supply chain issues and the travel and hospitality industry that's taking longer than we expected. Supply chain, I think it's pretty self-explanatory. We have a whole bunch of clients that simply don't have products or not enough product to ship, so they're slowing down their spend. And we also have... potential clients that are on the pipeline that are not closing as fast as we expected, because again, they don't have the products to ship. So that slows down that part as well. Obviously, that's a temporary issue. We expect that to be resolved sometimes this year. In addition to that, we have the travel and hospitality business that we were expecting to come back by now big time. And we'll share a little bit more information about that in a second. In Q4, 28% of our revenue was already from Illumin. So we're starting to get to a place that Illumin is more and more critical mass of our business. And we do expect in the second part of the year, it's going to be the majority of our business. In Q4, we had 62 clients using our new platform, Illumi. That's 62 clients that are taking advantage of being able to connect the journey of their campaign and being able to really send the messages that they want to send to their clients as a journey and not send every message on its own. So that is something that's very important that more and more clients are taking advantage of. We've seen 26 client, tier one clients running on the global in Q4. And we've seen some specific verticals that did very well. So we talked about the travel as it's coming back, and we've seen 831% growth, but it was only 3% of our revenue. As you guys may recall, before the pandemic, travel and hospitality used to be close to 30% of our revenue. So we do predict that it's coming back and it's coming back big time this year, and we will see that as a big growth driver. Another driver is healthcare. Healthcare has grown 256% in Q4 alone over Q4 of last year. It's now 11.4% of our business in Q4 and we again see healthcare to continue driving forward. Connected TV. Connected TV is an integral part of what we do with Illumi. It's easy to sell a connected TV campaign, but when you can put it on a Lumen and you can see the effect of seeing an ad on TV to your ROI, that makes it a much more appealing story. And we're seeing more and more of our clients resonating with that message. We've seen over 200% growth in CTV sales in this year or 2021 over 2020. And we expect that to continue to be a driver for us in the future. And I'd like to share a little bit of the Illumine success story. And today we will focus a little bit on our legacy clients that moved into Illumine. So it's a bucket of four clients that use our system, our legacy system in 2020. They spent $2.4 million and they moved to Illumine last year. And then they spent $5.2 million, the same clients. And that's up 118%. I'm telling that story because I do believe that as we get more and more clients moving from the legacy system into the Illumin system, then we will see the average spend per client go up. And this is something we all at Acuity are extremely proud of, the growth rate of Illumin. Again, we launched it five quarters ago. And look at the way it's been growing. We've achieved $26 million in revenue in 2021 and product that is brand new and just went to market very recently. So when we see all these signs, it's so encouraging to us that we feel very comfortable that Illumina is changing the world and it's time to invest more and more in it. So we are investing to meet the growing demand of the future. And the investment is really happening across the org. The majority of the investment is obviously happening in sales and in marketing. but also in research and development, in infrastructure, in people, in organization in general. And to be more specific, we're investing $11 million this year into that. And we do believe the results will happen in the second part of the year. And what is that result? Well, to be simply put, we believe that the top line growth this year will be 20 to 25%. Again, making those investments, we will see the top line, the majority of the top line growth happening in the second part of the year. I also like to share that when you think about Illumine revenue, I like to share that 70% of that revenue came from new business to Acuity, which means brand new logo. That's been our focus from day one to bring brand new logos to Illumine. And the concept of Illumine opened up a lot of new doors and a lot of new customers for us. And many people are asking us, when are you going to start switching more and more of your legacy client into Ellumint? We're very close to it. Some of the reasons are, one, we've been focused on bringing new business in, but number two, there's a whole bunch of features on the roadmap that are not completed yet, and we're working very hard to complete them. And without them, it doesn't make sense to transfer some of our legacy clients into it. Once we're in that position, which I do believe it's going to be in second part of the year, we will be able to move more and more of those legacy clients into the Illumin side. And then we expect the average spend per client to go up. I like to share that the bulk of Illumin revenue is coming from managed service. Why? Well, a few reasons. Number one, it's a brand new product, a brand new concept. So people are not used to it. They don't always know how to run a fully connected journey. So we're doing it for them. They're learning a lot from it. We're learning a lot from it and making the product better. And the intent is to move them along and move them to the self-serve side very, very quickly. On top of that, I'm very happy to announce that we've made an investment into a dedicated sales team that only sells self-serve. I do think there's something to be said about focus. And I believe that this investment is already starting to pay off big time. So by next investor conference, I do believe we'll be able to share some more specific numbers. And I do believe that people are going to be very happy with the results that we're showing out there. With that, I'd like to introduce Elliot, our CFO, to share some financial results.

Good morning, and thank you for joining us today. I'm pleased to present our Q4 and our full year results, which are driven by strong illumined growth and continued economic recovery post-pandemic. Today, our focus is on 2021 financial results, but we are extremely excited about what lies ahead in the second half of 2022. and beyond as investments we made in Q4 and continue to make in early 2022 will begin to contribute to growth in revenues and profitability. As we move forward, we are dedicated to expanding the reach of our unique and industry-leading technology platform to advertisers throughout the world. And on that note, I would like to discuss our financial results for Q4 and fiscal 2021. In Q4, the total revenue is $36.8 million, which is compared to $35.1 in Q4 2020, which is up 5% year-over-year. Non-illumined revenue, which includes managed service and self-serve, was $26.6 million in Q4 2021, compared to $27.8 million in Q4 2020, a slight decrease year-over-year. We attribute this decline to the adoption of Illumine by legacy clients, as well as select industry verticals that are still recovering from the pandemic. And revenue from our Illumine platform totaled $10.2 million, up 37% sequentially compared to $7.4 million in Q3 2021. And it's up considerably from our first quarter of Illumine revenue of $1 million at the end of 2020. Gross profit or net revenue was $19.1 million in Q4 2021 compared to 18.3 in Q4 2020, a 4.8% increase year over year. Gross profit margin or net profit margin was 52% in Q4 2021, which is in line with our Q4 2020 margin of 52.1%. Total operating expenses for the quarter totaled $16.3 million compared to $11.7 million for the same period in 2020, an increase of 39%. And operating expense as a percentage of revenue was 44.2% for the quarter compared to 33.3% in the prior year. I would like to discuss the key drivers of this increase in operating expense. Primarily, increase was driven by a $1 million increase in headcount costs driven by higher commissions tied to higher overall annual revenues, new hires and sales, technology and administration, and an increase of half a million for travel and entertainment as we return to pre-pandemic level of sales-related activity. In Q4 2020, our costs also benefited from the forgiveness of a pandemic payroll loan of $1.8 million. This one-time benefit was recorded in Q4 2020 and applied against our US payroll costs. This is also a material driver of our year-over-year comparison. And finally, balance of the increase in operating expenses was driven by our return to our offices and related costs plus increases in year over year run rates related to our NASDAQ listing earlier in the year, including but not limited to insurance, listing fees, and professional and advisory fees. Our adjusted EBITDA in Q4 2021 totaled $5.9 million compared to $7.8 million in Q4 2020, a 24.9% decrease quarter over quarter. This decline is related to our strategic investments to drive Illumina's future growth that we discussed earlier, as well as the factors that I mentioned impacting our overall OPEX, specifically the loan forgiveness of $1.8 million. Net income for Q4 was $2.5 million compared to $4.2 million in Q4 2020. For overall fiscal 2021 results, total revenue was $122 million, which is up 16.3% compared to $100.9 million in 2020. This includes $26 million in Lumen revenue for the full year, which considerably surpassed our own internal target of $10 million. We are very proud to have achieved this rapid growth in 2021, despite the supply chain and COVID related headwinds we encountered. Our gross profit or net revenue in 2021 was 63.6 million compared to 54.1 million prior year or up 17.5%. Gross margin was 52.1 for the year compared to 51.6 in the prior year. And our total operating expenses for the full 2021 year totaled $54.2 million compared to $47.1 million in 2020, an increase of 15%. This increase related in part to the investments I mentioned earlier that will support our future growth and the variances discussed during the Q4 overview, but to a larger degree, specifically for travel and entertainment, insurance, and our listing fees. Operating expenses is a percentage of revenue in 2021 for 44.4% compared to 44.9% in 2020. We generated adjusted EBITDA of 20.3 million for the full year, up 28.3% from the 15.8 we generated in 2020. And that income for the full year 2021 totaled 10.6 million, which is an increase of 186% compared to the net income of 3.7 in 2020. Moving on to the balance sheet. As you can see on this slide, our cash balance as of December 31st, 2021 stood at 102.2 million, a considerable increase from the 22.6 million as of December 31st, 2020. And this increase is largely due to the proceeds from our successful cross-border public offering in June, as well as additional cash flow we generated during the fourth quarter, despite increased spending in the latter part of the year to further capitalize on our unique consumer journey platform, Illumine. I'm very happy to report that Acuity's balance sheet is now at the strongest level in the company's history. For some additional corporate data points, as of December 31st, 2021, Acuity had 60.7 million common shares outstanding, or 64.4 million on a fully diluted basis, translating into a market cap of just under 200 million. Insider ownership is at approximately 12% of issued and outstanding shares. In summary, while we saw lingering effects of the pandemic, we're extremely proud of our strong revenue growth in the fourth quarter and for the full year. Given our performance and the continued sales momentum driven by Illumina, we're comfortable with reiterating the previous guidance we provided for fiscal 2022. Our top line growth is expected to grow organically by 20 to 25% for the next year. We're taking a conservative approach as we not only see continued effects of COVID-19 on key client segments, uncertainty around the macroeconomic outlook and inflation, and as well as overall geopolitical uncertainty. Supply chain issues are likely to be exacerbated given the tragic events in Ukraine. On a more granular level, we expect revenue growth to be more weighted toward the second half of the year. And based on our current pipeline, we expect modest and lower Q1 revenues on a year-over-year basis. This is reflective of both a return to more normal pre-COVID seasonality, continued headwinds from supply chain, and the surge of the Omicron and Delta variants in late Q4. And also, in Q1 2020, we benefited from the concentrated spend from a one-off large campaign around legislative change around delayed tax filings. And as we move through the course of 2022, we will continue to invest into our platform and capabilities. 70% of that investment will be directed towards sales growth by increasing our presence in key markets. And the balance of the investment is focused on research and development growth to enhance the Illumint product, support new client relationships, and increase data throughput capacity. And these investments will impact 2022 by approximately $11 million. Again, the majority of which is driven by new hires and investing in our brand presence and reach. we expect to hire almost 90% of our hiring target by the end of Q2. And this upfront investment will temporarily exacerbate the impact of our initially lower revenues on EBITDA. But despite these short-term effects, this upfront investment will ultimately set the stage for both delivering and supporting the increased level of activity and market demand that we have experienced over the previous quarters. And overall, we expect 2022 EBITDA to increase by 10% over the Furthermore, we remain steadfast in our acquisition strategy and hope to add to the Qt platform during the course of the year. We are currently evaluating several accretive opportunities and look forward to providing you with updates on our progress. And with that, I would like to pass it over back to Tal for his concluding remarks. Thank you.

Thank you, Elliot. As you can see, we are super excited about the eWomen adoption. We believe that we will see 20 to 25% top line growth this year, and the majority will happen in the second part of the year. I want to reemphasize that Illumine over exceeded our expectations after we launched it, and we're ready for it to over exceed our expectations again. And it leaves us very comfortable in making investments in the future. investments in growth the majority of our investment is happening in sales and marketing i want to share something in the past it was very hard for acuity to come into a let's say new geographical market and hire the best of the best people in that market so what we did is we went and we hired amazing people and together we developed them to be superstars And today, the situation is a little better. We can come into a market and hire existing superstars. Why? For two main reasons. Number one, we have the budget. But that's the small part of it. The big part is we have Illumin. And I tell you, as soon as we demo Illumin to that salespeople that thinking about joining Illumin, and if they had any doubt in their mind, that's the moment that they changed their mind because Illumin is the one that sells everything. It shows them the future of advertising and they want to be a part of it. So we're so glad to report that we have quite a few salespeople that we've made a hire to that are the best of the best in the field. And when you do those kinds of things, there's always a lag. We're very happy that those people are taking a chance of us because they are taking a chance, leaving a very successful job with a huge book of business and coming to a new business is always a risk. But they're taking that risk because they see the future and they see the very bright future of Illumine. The lag that I'm talking about, I do believe is going to be smaller than normal because of the level of people that we're getting in. And therefore, we will see major results in the second part of the year. From the $11 million investment we're making, 70% of it will go into marketing and sales. With that, I would like to thank you all for joining us today. And Elliot and I would like to welcome you to our Q&A section.

Thank you, Tal. Thank you, Elliot. A reminder to our analysts to please use the Zoom raise hand function when you are ready to ask a question, as well as, if possible, to please limit it to two questions per analyst. Our first question comes from Aravinda at Canaccord.

Hi. Good morning, gentlemen. Thanks for taking my question, and congrats on a robust quarter under difficult conditions, I suspect. Two for me, I'll stick to the two limits. The first is where Tal actually left off on the development of the sales team. Can you just give us a sense of what proportion of the expanded sales team you've hired so far? And a little bit more about sort of the makeup of the sales people that you've hired. individuals with existing enterprise relationships that they can kind of bring into Acuity? Or is it, you know, will they sort of, you know, be, you know, would these accounts be sort of relatively new to them, but with obviously a lot of sales background? That's my first question. And my second question is for both Tal and Elliot, you know, given where the share price is, given where your cash is, and given the very specific guidance you've given, is there a temptation to maybe consider share buybacks. I know that you've raised and you're looking to grow maybe some M&A, but given the variance of what I think most would agree is an intrinsic value of the stock and where it is, is that a discussion that you're having at this point? Thank you.

Thank you and good morning. Regarding the sales org, we've done a lot of changes to the sales org from reorganizing it to splitting it up and having a self-serve team now. After we've done that, we started going and hiring people with books of business. To answer your questions, everybody that we're hiring now, they have a book of business. They're very experienced people. They have deep relationships. And that's why we expect the normal lag that you have for salespeople to be much, much shorter. And obviously, payback is faster. And as I said before, it was tough for us to hire these types of people at the get-go and beginning because... you know, budget issues, but mostly because we didn't really have something to wow them with. And when a lumen it's, you know, it's something that everybody wants to come and join the, uh, what we're doing because they see what it's doing for the future. So, um, And that's what it is from a sales perspective. Now, you asked about the share buyback and you and I have talked about it before and we were generally against it because we want to use our cash for growth. But when we talked about it, the share price was in a different place and now it's becoming to a place that it's starting to be very hard not to do it. So I'm going to say that we are now in very, very serious discussions with our board and strongly considering it. And we will share the news, obviously, when we make a final decision. But I can't see anything more attractive to buy right now than Acuity.

Great.

Thank you.

You asked that from a percentage perspective, about two-thirds of our target for the sales account have been hired, despite challenging market conditions, but we've been very successful in attracting those sales professionals.

Yeah, was some of that already in the Q4 numbers as well? Some of that spend or not really?

Very little. People joined us late in Q4, so the impact was minimized on Q4, but the majority would be to the next year, to the current year.

Okay, perfect. Thank you, gentlemen, and all the best.

Thank you. Thank you. Thanks for joining us. Thank you, Aravinda. Our next question comes from Laura Martin at Needham. And hi, Laura. Good morning, Laura. Hi.

I'll just ask two. I have 10, but I'll ask two because that's the rule. So the first one is we saw total revenue for the year about 16. It went to 5% growth year over year in revenue. In the fourth quarter, you're going to go negative revenue, according to Elliot's just comments. So my question becomes, what gives you confidence you can hit your full year number, given the decel we've actually seen in the P&L near term? Let's start there.

Yeah, there's a few things. Okay, so let's talk about Q1. So in Q1 of 2020, we had one very large seasonal client that did not renew due to switching agencies and so forth. That was a very large client. If we actually isolate that number, we actually would have seen growth. But putting that aside, we're fairly happy with what's happening in Q1 just because of what I just mentioned. But on top of that, When we talk about the $11 million of investment that we made, and remember, 70% of it went into marketing and sales. We haven't made investments in that type of growth for many, many years. We were really focusing on the EBITDA part. And now that we, number one, we've proven that the Lumen story resonates with the market. So we're very comfortable making those types of investments in the future. So all that money going into marketing and sales is going to accelerate our growth. And because there's a lag time every time you make those types of investments, we see that happening in the second part of the year. So that's now. We're already seeing great growth. Great results, number one, from our hiring. We hired great people. And looking at our pipelines and looking at our closed sales, our annual closed sales already, all the indicators are that we will have that 20% to 25% top line growth this year.

Okay, and then Elliot on your comments, I just want maybe a couple for you actually I'm going to try to cram them into my second question. I thought what I heard you say Elliot is that Illumine lowered your year over year margin and I would have guessed that Illumine would have increased your margins. Did I misunderstand that about when you said the transition to Illumine lowered your net revenue margin?

I don't believe it actually did. Forgive me if that's what I came across, but I don't believe we said that. Maybe that was a misunderstanding. But Illumina has not. We still see these very similar margins across the board. We're very confident in the underpinnings of our ability to buy media well. And so that hasn't happened yet. We do expect that as we move more into what Tal said about self-service, that we'll see

of self-serving roles for sure okay and then what's the ctv just a housekeeping thing for you um what how much ctv i saw you in your slide it was up 251 percent for ctv for 2021 what was ctv revenue in 20 in the fourth quarter or 21 whichever one you have off the top of your head or both i think we're comfortable saying that we believe that this year it's going to be about 10 of our revenue so that should be a good indicator of the uh of the numbers but you're not going to give us last year, right?

We didn't publish last year.

All right. That's all I have. Thanks guys.

Thank you. Thank you, Laura.

Thank you, Laura. Our next question dialing in by phone comes from Drew McReynolds at RBC.

Yeah. Good morning. Can you hear me?

We can hear you.

Cannot see you.

Uh, yeah. Sorry for that. It's a little bit of a compliance block, but, uh, Yeah, thanks very much. A couple for me. Maybe first, Tal, just on the M&A side, just maybe provide an update on just the environment out there, things that would be of interest to Acuity and just within the context of a quickly changing market in all aspects out there. Secondly, just on Illumin, and I'm obviously the new kid on the block here from the analyst perspective, In terms of modeling the revenue contribution from Illumine, is there kind of a target percentage of revenues? I think in your remarks you spoke to maybe the majority of revenues coming in the back half of 2022, but I may have missed that. So just trying to kind of level set expectations here on the revenue trajectory for Illumine. And then third and final, in terms of the reinvestment, I think, Ellie, James Heitinger, kind of widely communicated that that ramp up if you get the success that you're anticipating in the back half of 2022 you know, should we expect another kind of ramp up in in reinvesting in the business to go in and capture incremental growth, looking to 2023 Thank you.

Okay, great questions. Let's start with the M&A one. So we've seen a lot of activities in the last few weeks from the M&A side. Some of it is due to our efforts. So we set up our own team here and we hired a consultant in Europe that is actively going out and looking for targets for us. We're also looking at many targets in North America as well. So we're looking at many, we're having many conversations. There's nothing imminent at the moment. But what I would say, I do think it's a better time now. The evaluation expectations definitely came down. And there's some great companies out there that we can do a lot together with them and add a lot of value, strategic value and financial value to us. So I'm very encouraged with the signs of what we're seeing and the pipelines on the M&A side is just getting fuller and fuller all the time. Obviously, it's something that we really want to do this year, but we're always very cautious not to make a mistake there because the mistake there is, it could be a big mistake. So, you know, we've done four acquisitions to date. All of them were successful. We have a lot of experience with it by now with the integration and everything, and we know exactly what we're looking for. Illumine, you asked about the Illumine dollars. So 28% of the revenue in Q4 was Illumine. We've seen that continue to grow. So the percent of revenue Illumine will grow every quarter, I believe every quarter. By the second half of the year, I believe it's going to be the majority. So over 50% of it is going to be Illumine. And, you know, our intent is, is to start transferring people from the legacy system into the Illumine system later on this year and at some point to turn off the legacy system. We don't know exactly when that's going to be. Again, the intent is hopefully by the end of the year or there's going to be a very small amount of people left on the legacy system. We do expect the customers that we move to Illumine that we're going to see an increase in average spend. So there's an upside there. And obviously we'll keep adding more and more new deals, new logos, new companies into Illumine. On top of that, we're making all those investments and new salespeople that has new relationship that making the new introductions and we're investing in the marketing and the brand. So more leads are coming internally. So all that is a great recipe for success. And then you asked an interesting question. You asked if the investment pays off. I hate that word. If I would say when this investment pays off, because we thought very hard and long before we did it. And we are very confident that it's going to pay off. We're only going to see a fraction of it happening in 2022. The majority of the payback from that is going to happen in 2023 without any further investments. We could make a decision to invest more and to hire more people on the sales side. And... And that could be a very logical decision, but because of the lag time, most of what, like it's going to affect some of this year, but the majority of the, of the payback is happening in 2023. So 2023 is going to be even more aggressive growth. I hope that answers the question. That's great.

Yeah. That's fantastic. Thank you. Very helpful. That's it. Thank you.

Thanks for joining us today. Thank you, Drew. Our next question is going to come from Eric Martinuzzi from Lake Street.

Okay. I appreciate you taking the question, guys. I'm trying to get a better feel for the seasonality of the revenue during the year. Obviously, you've given us a full year number of about $150 million, and you've given us a Q1 that's down slightly year on year. But if I could look at it maybe on a first half, second half, and this is for either Tal or Elliot, is it kind of a 40-60 ratio? you know, 35, 65, help me with the seasonality of the revenue during the year based on what you see now.

So we're not really breaking our, our soft guidance into, into, into those kinds of numbers. But if you look at our historicals and historical and the ad tech in general, you know, Again, I'm not giving you exact numbers, but I think the number is usually 40, 60. Maybe it's just slightly under 40 for the first half and slightly over 60 for the second half. But again, I'm not looking at concrete numbers, but I think that that's what you will find if you look at historicals.

Yeah, and I fully acknowledge the large seasonal customer you had in the year ago comp that makes it a little bit more difficult than maybe in a A normal year. And then second question for me on the adjusted EBITDA, you talked about revenues down potentially in Q1 here. A year ago, we had adjusted EBITDA of, I've got four and a half million here on revenue of 27.4. Should we assume the same kind of, you know, if reds are down here in Q1 of 22? slightly that the adjusted EBITDA will be down slightly as well. And then can you size that? Can you put a number on it or is it just too difficult?

And for Q1, you're referring to Q1, Eric, of course? Yeah. Yeah. So for Q1, we expect it to be lower than the prior year from a relative perspective because of the investment that we're making and the lower revenues that we've guided to. So for Q1, our EBITDA will be substantially lower than the prior year. But by the end of the year, which is important, we expect overall EBITDA to grow year over year by 10%. So, yeah, very likely.

Still positive in Q1 of 22?

We believe very close, yes. We believe that it'll be lower, even though not, but it should be positive. Okay.

Thanks. Eric, just to add to that, remember we were not on the NASDAQ in the Q1 of the year before. The NASDAQ itself adds naturally a lot of expenses, mostly from an insurance perspective.

I understand. Thanks for taking my questions.

Thank you. Our next question is going to come from Dylan Heslin at Roth.

Thanks for taking my questions. First on Illumin, how much of that growth is coming from moving some of your legacy customers onto Illumin during the second half of the year? Like what's organic from new pipeline versus customers that you're switching over? And then I think you mentioned in 2020 versus 2021. Those that you did switch, their spend was up 100% or 118 in dollar terms. Is that a realistic expectation for what you see going forward?

So the percentage of, so 70% of our revenue for Lumen so far came from brand new business to Acuity, right? So that would leave about 30% that move over. So that's your first question. The second was... Yes, we saw when we look at the group of four customers that switched from 2020 to 2021 from the legacy system to Illumine, we saw 118% increase in spend. Is it realistic to see it for every customer? Probably not. Is it realistic to see it for some clients? Absolutely, yes. Remember, when you run a campaign on Illumint, you're running a full funnel campaign, which is very different than just a lower funnel that people normally do on DSPs. So therefore, your investment in the campaign is usually larger. Now, there are customers who are going to use aluminum just for the lower final part, which is for us, it's a shame because, you know, it's not using it to the full potential. But there are still customers who are used to doing it that way. And those customers will see more or less the same results. So I do believe the average spent per client will go up. and it potentially will go up 118%, but probably the average is going to be lower. The average increase will be lower than that.

Great, thank you.

My pleasure. Thank you, Dylan. Our next question is going to come from Rob Goff at Echelon. Okay.

Congratulations on a very solid quarter. I'm pleased to see the revenues, very pleased on the margins. Thank you. With respect to your revenue guidance of 20 to 25%, just mathematically, if you're starting off lower on the first quarter, would it be fair to say that you look to exit the year pushing 30% revenue growth? That would make sense.

I didn't run the exact numbers, but obviously it's going to be more aggressive growth at the end of the year in order to achieve those numbers.

And in looking at the composition exiting the year, you've indicated more than half of the revenues exiting would be from a lumen. Yes. You've also indicated that CTV could be roughly 10%. And I know there's some overlapping CTV and lumen. Could you talk to the reasonableness of lumen plus CTV exiting the year being more than 60% of revenues?

I again it's it's it's it's it's hard to tell because it's it's a little bit far away, but my best guess is that absolutely like we're going to be in a run rate of more than 60% in the in the last quarter.

Just one last if I may, with respect to the revenue guidance there. what sort of recovery would it be reflecting in the COVID sensitive areas? And would it reflect any very significant aluminum contracts? I know the sales cycles there are longer, but if you could address that, it would be very much appreciated.

So I would say that when we're thinking about the one sector is the travel and entertainment, we see that that's coming back. Now, we're not thinking it's going to be 30% of our revenue this year, but it's going to be a more significant part. And so that's a great upside. At the same time, there's other... industries like we share, like the health care, that is something that always does well. Right. So with COVID, without COVID, it does well. And more and more of the budget is going online and more and more of the budget is going programmatic. So I don't think we're so dependent on specific industries coming up. Also, our sales team is very agile. Even when the pandemic started and we lost 30% of our revenue, more than 30% on the travel and entertainment, right away they started shifting into health, into retail, into all these other things that recovered us very fast from that downturn. So in general, I would say that we have a very good team, a very good product. And if things change to more pandemic or more issues with COVID, with war issues or anything else that would lead for specific verticals not to do well, we are very well equipped to move to harder verticals that will do well.

And Rob, we did not assume any large wins. We've taken a very conservative perspective there. We think we're making terrific progress, but we also know that that is, like you mentioned, a longer sales cycle. So in our assumptions, we did not assume that, although we would be very pleased to see that occur. But we are just basing it on a more kind of constructive and more of a conservative approach to our forecast.

Thank you, Tal. Thank you, Elliot.

Thank you for joining us this morning. Thank you, Rob. Our next question will come from Daniel Rosenberg at Paradigm.

Hi, good morning, Tal. Good morning, Elliot. I had a question around privacy regulation. I was just wondering if you could provide some commentary on any changes on how you view the impacts of big tech's privacy changes on your business since we last spoke?

Yeah, I always like to go back to the way that the open internet operates, right? So we can go into details and how to do things and how it's going to get done and all that. But I think the better way to approach it is how does it work? And how does it work today is all the content is being provided free for consumers and it's being paid for by advertisers, right? My personal belief is that consumers are not going to start to pay for this content that they're getting for free today. And therefore, it has to be continued to be subsidized by advertisers. And therefore, the advertisers and we will have to show relevant ads to the consumers. So having said that, we will be able to find a mechanism to do it. Today, there's no issues. We can fully do that. There's always been talked about either the cookies or IDFA and all that other stuff. At the end of the day, we're not dependent on IDFA. The cookies are not going away, as we know, for decades. About two years, and then it's very doubtful if they're ever going to go away. But even when and if they go away, we will switch to either the universal device ID or any of the other partnerships that we're doing and developing with our suppliers, our customers, the vendors, our... Even our competitors were working on a regular basis to build those systems. And there's going to be a replacement. So that's where I believe it's going to take us. the cookie has been tried, the third party cookie has been tried to be taken away for over 20 years now and it's unsuccessfully because the internet needs it at the moment. So if we make changes to that, we also have to make changes in other ways that we will be able to deliver it even in a better way.

So, I mean, certainly you agree that, you know, the risks are manageable and a solution will come. But in terms of actual expectations around exposure to any immediate changes, whether it be on Android phone tracking or if in two years from now cookies do come, any commentary you could give around how dependent are you on these things and the preliminary test maybe you're running with other alternatives?

So I think that, look, for example, when Google made their change and people who are really dependent on the traffic on their apps, they were hurting. We don't do anything. Less than 1% of our traffic is on apps. So we're not really dependent on it and it didn't really affect us, right? So... The biggest impact that could happen to us is a cookie issue, right? And so that's what we really, really are working towards to solve. And we're doing that by replacing it with some type of universal ID. We're working with many companies to do it. And we have our own universal ID at the back end that matches them all together so we can figure out who the people are. And in fact, the universal ID for me is a better solution to the cookies because now we don't have to guess that you're the same person on your mobile device, on your computer, on your connected TV. You're all going to have one universal ID that connects you. So in my opinion, that's where we're going. And therefore, I don't believe there's a revenue impact on acuity.

Great. I'll leave it there. Thanks for taking my questions.

Pleasure. Thank you, Daniel. Our final question comes from Kevin Krishnarathne at Desjardins.

Good morning, Kevin. Okay. Good morning, gentlemen. How are you? Nice to chat to you. I had a question for you on Illumine, the Illumine wins, maybe the conversations you're having with the clients that are spending on Illumine. Any sense of how you're being viewed from a competitive point of view? Where is this budget coming from in your view? Are clients simply expanding their budget or do you think you might be winning some share from a company like the Trade Desk, for example? Any commentary on essentially how you're stacking up now that it's been one year with the product against some of the bigger guys out there?

Yeah, I would say both. So some of it, the budgets are coming from their general spend and they're just allocating it to a lumen. They're seeing what the results, they're seeing the insight they're getting from it, they're spending more on it and they're liking it. Some of it, the budget is coming from innovation. So it's all about trying new things and learning new things. um, and, uh, an increase in budget in general, as it comes to the, uh, to what you're spending on the internet. So, and don't forget that ROI is also very important to them, uh, at the end of the day. So when you deliver that ROI, um, then you get more and more of their budget. So it's a combination of all of it. Uh, we're definitely taking some business from other companies. We're definitely capturing some of the, um, uh, the incremental spend that people are spending and, um, the things that they're trying to do for innovations.

Okay. Well, it's good to hear that there's some, uh, potentially some competitive displays since they're sort of a part, sorry, part B on this question is just trying to understand a Lumen. Um, I would think the consumer journey and the, the way the product, um, you know, is designed that there should be, you know, how, how, how to think about the amount of CTV, um, that you're driving on an aluminum when, um, You know, is it a third of a client's budget spend on a campaign coming from CTV? Is it more it would seem that you should be getting a bigger portion of CTV when you're winning an aluminum win? Just any thoughts there?

Kevin, I'm not sure if you can see what's happening behind us, but there's a room that's called Journey. And there's three sections to it. It starts at awareness, then it goes to engagement, then it goes to conversion. But awareness is usually the piece that you would see the CTV on. And awareness is usually the biggest investment of a campaign because once you move people from the awareness, you may have a million people in the awareness side. And then you decide which ones are moving into the next stage of and it's substantially a lower amount of people. Let's say it's 20,000 people that now are aware of you, and now you want to engage them more. And then you start engaging them. That could still be with videos, but it could be a combination of many things. And then once they're fully engaged, all you want to do is bring them back to the website to convert them, right? And that's even a smaller amount of people. So it could be more than 30% of the budget between, let's say, video, online video and CTV. But every campaign, a lot of it is about the algorithm making decision and seeing what works best for that specific campaign. So I'm sorry, I can't give you a general rule of how much CTV per campaign. I can tell you that it's very effective. It's easy to see that it's effective when you're using a Lumen. If you're just running CTV, it's very hard to see. So that's why people really, really like it as a part of their campaign.

Yeah, no, gotcha. So look forward to hopefully pushing much higher than 10% CTV growth over the coming back half of the year. Just the last question, you know, is just think about a lot of people have asked about the guidance forming for 2022 and maybe just more Q1, Q2. Can you talk about Anything on Europe? I think Europe is maybe 10%, maybe a little higher than your revenue. Any just thoughts on client discussions there, given what's happening in the region right now would be helpful. Thanks, guys.

Yeah. So Europe, as you know, we have... We have a location in Barcelona. It's doing well. It's growing. It's delivering its numbers. We're actually seeing more and more self-serve clients coming out of that region. We don't really see so far any effect as for what's happening in the region. So it's really hard to say. Nobody knows what's going to happen next. So far, we haven't seen any serious effect on revenue.

Okay, good to hear. Yeah, so the discussions with clients, their spending, it's just as is, as expected.

Absolutely, absolutely.

Okay, good stuff. Thanks for taking my questions. Have a great day.

Thank you. Thank you. Tal, Elliot, that's all we have for questions today. I'll hand it back to you to close up shop.

thank you corey and thanks everyone for joining us today we would like to thank all our shareholders for being our partners and for allowing us to do what we're doing and to create the successful company that we've created and of course Illumin. We're super excited about what we're doing with Illumin and just can't wait to what happens next this year. And I would like to welcome Elliot for joining the team. Just here for a little bit and already showing a lot of great uh you know progress uh with uh with the organization uh of acuity so i like warm welcome and uh thank you for joining us um and uh for all our viewers we uh we're looking forward to the future