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.