AcuityAds Holdings Inc.

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. My name is Tal Hayek, and I'm the co-founder and CEO of AcuityX. It is my pleasure to welcome you all to our Q1 2022 investor video presentation and coming to you live from our Toronto office. I'd like to start by thanking the Acuity family. Q1 was a lot about reorganization and working hard to implement the investments that we have marked for growth. So thank you for doing such an amazing job with that. As expected, Q1 was down 13% to $23.8 million. A lot of it was due to customer concentration. We'll drill down into that in a few seconds. Illumin continues to change the world of advertising. We delivered $7.9 million in revenue. That's up 145% from Q1 of last year. Illumin is now 33% of our revenue. That's starting to be a very big chunk of it. Illumin solves two huge problems out there. Problem number one, that there's a huge gap between the way that marketers think and plan to the way that programmatic gets executed. Well, marketers think consumer journey. And when they go to execute it, they usually execute it in a black box, which completely disregards the consumer journey. So Illumin gives marketer a way of planning that consumer journey and execute it with one click of a button. And the second problem that we solve is the fact that it's highly, highly intuitive and easy to use. Let me explain. Using a programmatic system today, you need to be a highly trained expert. You will need to go through hundreds of hours of training in order to only starting to touch that system. And then it will take you hours to execute on a campaign. With Elumen, all that goes away. You need barely any training on it. It's highly intuitive. And almost any average person will be able to execute campaigns on it with very little knowledge and training in minutes. So with those two things that it's solving, it becomes a very, very important tool for the world out there. While in Q1, our team was focused on organization. Neil, our new COO, is doing an amazing job getting the teams to work together and being accountable to one another. Elliot, our CFO, is doing an amazing job, a fantastic job in organizing our back end. And I believe that this organization is crucial, very much crucial, to take us into the next level of growth. Our investments in growth are doing very well, and the team is very, very busy implementing all these dollars we earmarked for that growth. And we're expecting that, at least from a financial way, we will see the results coming in the second half of the year. Well, knowing all this, we believe that the QE is the best investment we can make. And this is why we're starting to buy back our own shares. And we're going to do that while still leaving enough cash in the bank for M&A discussions. In Q1, $23.8 billion was delivered from the way of revenue. As we expected, and as we told the market, this quarter is going to be down year over year. One of the major reasons that happened is in Q1 of the year before that, we had one client with $5 million concentration. Well, we lost that client. It was not due to performance. It was due to that client changing agencies with an agency we don't have a relationship to. That happens in the managed size business sometimes. And that's what happened to us in that case. And that was the big contributing factor to that job. Well, 33% of our revenue in Q1 came from Illumin. Well, I think it's amazing. I mean, just that Illumin just came into the market just a few quarters ago, and we already have 33% of our revenue coming from that. We communicated in the past, and I'll say it again, I do believe that This year, the majority of revenue is going to come from the Illumin side. So that's great news for QE and for us. So we're also seeing some client information. So last year in Q1, we had 17 clients. It's now up to 61 clients. Tier one clients, we had eight and now we have 20. So all our great signs out there. And we went up from $3.2 million in revenue last year to $7.9 million this year. That's 145% growth year over year. And we're looking forward to seeing those numbers grow in the future quarters as well. Some of the verticals to watch out for is the lottery and gaming. We're seeing 288% growth. Technology and software, 180% growth. And retail, we have 117% growth. CTV sales, up again, not a big surprise. We communicated all the time that we believe it's going to continue being very much a big growth factor. We've seen 131% growth year over year, and we predict that we're going to continue seeing more and more growth out of the CTV side in the future. continue to invest in illumine growth um we're spending more and more money into marketing and sales but also specifically in specific verticals and in our people from the product side from the technology side as well uh in uh to get uh better and better on that great system called illumine let's talk about our share buyback program this is something we took a long time to decide We looked at many companies on the M&A side and obviously seeing our share price being where it is, we decided to execute on it. Why? Because we do believe that the QT is the best investment we can make. So therefore, over the next few days, we're starting that buyback program. And I'm happy to also say that it will not affect our ability to execute on our M&A side. So with all that great update, I would like to call on Elliot to share some financial updates for us.

Good morning, and thank you for joining us today. While today we'll focus on Q1 results, we're extremely excited about what lies ahead in 2022 as we realize the benefits of our actions to expand our reaching capabilities. The investments we started making last year are continuing to enhance our Lumen platform through broader features and functionality that'll improve each user's for deeper, broader, and more consistent relationships with our clients. While we are all experiencing one of the more trying times for the global economy and managing through the related headwinds, we continue to believe the right path for us is to keep investing for the future, improving our platform, making sure that we have the right team in place to support its growth, as well as improving our overall organizational capabilities. And on that note, I'd like to discuss our Q1 financial results. In Q1, our revenue was $23.8 million compared to $27.5 in the same quarter of 2021, a decrease of 13.5%. As disclosed in our financial statements under segmented information, this year-over-year change is attributable to a large one-off campaign that we benefited from in Q1 2021. This campaign generated $5 million in revenue that we did not see again in 2022. And this campaign was driven by legislative changes While to a large degree we have successfully pivoted away from verticals initially impacted by COVID-19 and the supply chain issues, we have seen a number of clients affected by more recent developments in the Ukraine, as well as growing recessionary fears which have impacted consumer confidence. Our revenue from our managed services in Q1 was 15.8 million compared to 22.3 in Q1 2021, a decrease of 29% year over year. was driven by our increased focus on self-serve revenue, which at $8.1 million increased 56% year-over-year from $5.2 million in Q1 2021. Our self-serve component represented 34% of total revenue in Q1 2022 versus only 19% in Q1 2021. And the Lumen in Q1 this year was $7.9 million, or 33% of our total revenue versus $3.2 million, or 12% in the comparable 2021 period. Our target is still to have 50% of our revenues derived from the million in Q1 compared to 14.4 in Q1 2021. This decrease of 17.4% was the result of the lower overall revenues and a lower gross profit margin of about 50% in Q1 2022 versus 52.4 in the prior year quarter. This is directly related to the increase in our self-serve component. Our total operating expenses for quarter totaled $14.5 million compared to $12.1 million the same period in 2021, an increase of 19.8%. As a percentage of revenue, our operating expenses are 61% versus 44.2% in Q1 2021. I'd like to discuss the key drivers of this increase, which include, as previously noted, investments in sales in our marketing capabilities. While still early, as Al noted, we are encouraged by the progress being made by our recent hires and expect that they will meaningfully contribute to the second half of 2022. And the majority of the increase in cost was driven by general and admin expenses, which increased $1.6 million. or 106% over Q1 2021. This is driven almost entirely by the increase in costs related to our NASDAQ listing, including insurance, listing fees, and legal costs. And finally, share-based compensation expense increased 71% through the issuance of restricted share units to better align senior leadership and management compensation with the interests of our stockholders. Our EBITDA declined year over year to 0.2 million from Q1 2021 of of this quarter compared to a net income of $1.4 million in Q1 of 2021. And a key driver contributing to this decline was an FX loss of $1.8 million in Q1 of this year versus a loss of only $0.6 million in Q1 of the prior year. For the balance sheet, we generated positive Q1 cash flow from operations of 1.8 million. However, due to the impact of the FX conversion, our overall cash balance declined slightly to 99.6 million from the 102 million at the end of last year. Year over year, our cash position increased substantially by 72.6 million due to the proceeds from our public offering in June of 2021, as well as strong subsequent operating cash flow. Some of the corporate information to share with you is as of March 31st, 2022, Acuity had 60.9 million common shares outstanding on a fully diluted basis, 64.4 million. Our insider ownership is still at approximately 12% and our market cap at the end of Q1 was approximately 240 million. This concludes my financial review. And in summary, despite a challenging economic embark, we believe that through our actions, we're putting in place a strong foundation for future growth, especially for a game-changing and living platform. Spending efficiency, managing operating expenses, and maximizing cash flow remain key objectives, but the overarching priority is building a platform for growth in the second half of 2022 and in subsequent periods. And before I hand it back share buyback plan. As you know, we have recently announced and have received TSX approval to commence a normal course issuer bid, which will launch on May 16th in 2022. Over a period of the next 12 months and subject to TSX rules and guidelines, we will be purchasing up to 5.5 million shares in the open market. And during blackout periods, we will engage with our agents through an automated stock purchase plan. And with our solid balance sheet, history of strong operating cash flow, and belief that our current market value does not fully reflect the future value of our company, we believe this is an appropriate and effective use of our capital at this time. And owing to our strong balance sheet, we remain committed to exploring acquisition opportunities as we continue to make progress on that front. And while we are seeing multiple potential opportunities, given the current economic landscape, we believe the multiples for potential targets will start to move lower in the near term. And it's important to note that this normal course-issue bid is not a hurdle to this focus strategy. And with that, I will now hand it over to Tal for his concluding remarks.