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 Dal Hayek, and I'm the co-founder and CEO of Acuity Ads. I'd like to welcome everyone to our Q3 investor presentation. Let's start by thanking the Acuity family. The Acuity family has delivered, in the past two years, an amazing product to market. It's called Illumin. And Illumin is changing the world of advertising. And it would not be possible without the passion, commitment, desire to succeed of everybody in this family. So thank you all for making this happen. The ad industry is changing. We have walled gardens. We have privacy issues. We have line items and gross repetition of ads that do not work anymore. Marketers need journey advertising tools. In fact, marketers think that way. They always did think that way. They just never had the tools to actually produce it that way on the programmatic side. And Illumin is the only tool that solves that huge problem. Illumin is a journey advertising platform. And again, it's the only one of its kind. Imagine you can tailor the message to the consumer depending on where they are on that journey. And you can do it in an intuitive system, drag and drop system, that you don't need to train for it for hundreds of hours in order to know how to operate it. It saves you time in the setup, it saves you time in managing the campaign. So imagine that tool was around, and it is around, it's called Illumin, and it's changing the world of advertising. I can't tell you One of my favorite parts of my job is sitting in on demos. And when marketers see the Illumin demo for the first time, and they cannot sit still in their seat because there's so much excitement. Because again, this is what, this is the way that they like to communicate to consumers. They just didn't have the tools to do it up to now. And with Illumin, it's right there. In Q3, we invested more in Illumin. One of the major improvements we've done is we improved the path part. What does it mean? It means that if a marketer would like to set up a more simple campaign, one that's not a complete journey, but has more like a performance boost, we've adopted the system that will be very easy for the marketers to do that. So that opens up a whole new market for us for campaigns. And when they do that, they improve the time to set up a campaign by at least 30%, and many times a lot more. So we've seen our own internal team preferring to use that over and over again, and obviously the outside self-serve clients as well. We've also been very focused on many things to do with self-serve clients, starting with increasing the number of demos that we do on a regular basis. We've seen over 161% increase in the amount of demos that we do from Q1 to Q3. Our closing rates are higher, and the days it takes us to activate clients from signed contracts to spending on the system is shorter. So all that shows us a great formula for the future. We truly believe that Illumina is changing the world of advertising, and we're so excited to be in the forefront of that change. And we just started. There's a lot more to do. The product is adopting and innovating on a regular basis. Our focus now is truly, truly on the self-serve part from a sales perspective, from a marketing perspective. And with that, let's look at some Q3 results. Well, I'm happy to report that this is the first quarter for a while that we're delivering an increase in revenue. We delivered $29 million in revenue, which is up 5.5% year over year. The illumine as a percentage of revenue is growing aggressively on a quarterly basis. As you can see, it was 36% of revenue last quarter, 46%. of revenue this quarter were well above what we thought were gonna be at this time as we promised we're gonna exit the year at more than 50% of the revenue on the Illumin side. We're also increasing clients on regular basis. So 94 clients on Illumin in Q3 versus 77 that we had in Q2 of this year. or 52 that we had in Q3 of 2021. So that's very nice growth that we're seeing. Revenue, $13.2 million of our revenue in Q3 came from Lumen. That's up 78% from the year before that. And what I track very closely, and I think that's a very important part of where we're going, is the Lumen self-serve revenue. In Q1, we had half a million dollars. In Q2, $1 million. In Q3, $1.2 million. But don't let that number fool you. The number of demos are going up. The number of closed customers are going up. In fact, in Q3, we had many closed clients that we're going to start seeing the results in Q4. And our focus is, the majority of it, is on bringing in new clients, new local into the human self-service. The number of client growth, as you can see, 44 clients using Illumine Self-Serve in Q3 versus 31 in Q2. We will see, again, the results in the revenue side in Q4. Let's talk about some verticals. So we've seen a few verticals that are showing some nice growth, 26% growth, tech software side of things, pharma health is also about 26% growth, and financial side, close to 38% growth. So those are some of the verticals that are doing very well under the current condition. With that, I'd like to call on Elliot, our CFO, to share some financial results.

Good morning, and thank you for joining us today for our Q3 earnings call. We are pleased to announce our financial results, which demonstrate the continued and rapid adoption of Illumin as shown by the second consecutive quarter of nearly 30% revenue growth for the Illumin platform. Our strong and growing pipeline is a direct result of the focus and investment we are making in building out our sales infrastructure, as well as continued product development and marketing presence. In Q3, we experienced sequential and year-over-year revenue growth, both overall and within the key aluminum self-serve category, where we had particular success in attracting new clients to the firm. And we will continue to capitalize on this demand and support this growth into 2023. It is clear that the current market continues to reflect fears of financial instability as macro uncertainties persist. So while predicting the market or the economy will be even more challenging during this period, we believe we will see growing revenue as the value and the uniqueness of our Illumint platform to advertisers will outweigh the short-term concerns. Our strong balance sheet and liquidity are key to our ability to execute our strategy and to take advantage of inorganic opportunities to accelerate growth in an environment where sector multiples are at an all-time low. We strongly believe that our best path forward is to invest in our future, invest in our people, product and platform, organizational strength. And on that note, I'd like to discuss our financial results for Q3. Our total revenue of $28.9 million, an increase of 2.5% over Q2 of this year at $28.2, and an increase of 5.5% from prior year Q3 at $27.5 million. We attribute this growth to our Lumen platform, especially the self-serve component, even as the overall spend by our clients was reflecting the high level of uncertainty about current and future economic conditions. Managed service revenue was $28.4 million in Q3 of this year, compared to $19.3 in the prior Q3 of 2021, an increase of 5%. Our self-serve revenue totaled $8.5 million for Q3, compared to $8.1 million for the same period in 2021, an increase of 5%. Revenue from Illumina rose over 29% from Q2 this year to $13.2 million and 78% versus prior year Q3. And year-to-date Illumina revenue is $31.3 million for the nine-month period ending September 30th, up over 97% compared to the same period last year at $15.9 million. Our net revenue was $14.8 million in Q3 compared to $14.3 in Q3 of last year, an increase of 3.5%. Our gross margin in this quarter was $51.3 compared to $51.9 in Q3 of last year. Our operating expense for Q3 was $16.3 million compared to $12.5 million for the same period in 2021, an increase of 30%, and this reflects our strategic product capability and sales and marketing to help drive increased adoption of aluminum. And these targeted investments have began to show significant traction with client activity and new names and brands, as you heard earlier in Tal's presentation. OPEX is 56% of revenue in this quarter compared to 45% for the same period in 2021. And our adjusted EBITDA number in Q3 2022 was 1.6 million compared to 4.4 million for the same period last year. And this decrease in adjusted EBITDA was primarily attributable to our growth initiatives that I just discussed earlier. Net income for Q3 2022 was $2.8 million compared to net income of $3.4 in the prior year. As of September 30th, our cash and cash equivalent balance stood at $88.2 million compared to $102.2 million as of the fiscal year 2021. And much of this change is related to our share repurchases made during the previous six months. And even with these repurchases, we ended the quarter with a strong balance sheet and ample liquidity to continue further repurchases and seek targeted M&A opportunities to increase our growth trajectory and further our strategic objectives. In the quarter, the company purchased and canceled 1.8 million of its common shares at an average price of $3.23 per share for a total consideration of $5.9 million. As of November 4th, we have purchased a total of 4.1 million shares for $13 million in total consideration. And this share repurchase activity demonstrates our confidence in our balance sheet as well as our fundamental belief in the company's long-term prospects. As of September 30th, Acuity had 61.8 million common shares outstanding on a fully diluted basis. Our insider ownership is at approximately 15% of the 57.1 million issued and outstanding shares. In summary, with our investment in our organizational capabilities and our strong balance sheet, we remain focused on scaling our business and growing our team to create more opportunities and build market share. With Illumina now representing 46% of our total top line, it is well on its way to exceeding our stated goal of over half of our top line by the end of the fiscal year. Our growth both in sales and new client wins is proof that our innovative journey advertising platform is changing the game with its amazing simplicity and the deep insights it provides to users. Our growth trajectory includes a continued focus on targeted M&A strategy. We are seeing more aligned valuations in the private market than we have in the past nine months, and we'll explore creative opportunities that fit our synergistic growth plans and build shareholder value. And with that, I'd like to pass it over back to Tal for his concluding remarks.

Thank you, Elliot. Well, I'm excited to say that we are on track, as promised, with over 50% of our revenue in a little bit. In fact, I do believe the number is going to be even higher than that. We're very focused on our self-serve as far as client growth, as far as the amount of demos that we're doing out there for Illuminate. The conversion rate from demos to closed contracts and the conversion rate from closed contract to activation, all those things are something that we're focused on very heavily. We're also very happy about the progress in general that we see at Acuity. Look, this year was a major year of reorganization. We've done a lot of work to prepare the company and move it from the startup mode that we've always been in to being a thriving, large organization. And that will show up in the future. I'm very happy about the progress of Acuity. I do believe that Acuity is in the best position it's ever been. We've done a lot of work on reorganization and preparing this company to go to the next level. And we're now in a phase that we've done all this work and it's all about executing and getting more and more clients to adopt the loop. About Q4, I'm very happy to report that I'm expecting Q4 to be the second quarter of growth for us. And after a few quarters that we did not see growth and the economical uncertainties out there, I'm very happy about this progress as well. I believe the QE is the best investment you can make. And I'd like to thank all of you for joining us today and invite you to our Q&A section.

Thank you, Tal and Elliot. I would remind analysts that if you would like to ask a question to use the raise hand function located on the screen. If I could ask that all analysts respect the two question limit per participant to allow time for everyone. And please wait a moment while we assemble the roster. Tal and Elliot, your first question is going to come from Dan Medina at Needham & Company. Good morning. Please wait a moment as he loads. Dan, please go ahead when you're ready.

Good morning, Tal. Good morning, Elliot. Congratulations on a great quarter. So my question is on your cost growth strategy going forward. Do you see growth? Do you see decline? How do you see the next couple of quarters on the cost side?

We're actually doing the exercise of the budget for next year. As you know, we invested already a lot this year, and we think most of the investment is down. There's probably going to be a little bit more investment happening into next year as well. We're really, really, really focused on the human self-serve, all the metrics that come and it's going to continue being that way. So to make a long story short, I think most of the investment is done, so we're probably going to see a little bit of expansion on the expenses, but nothing very serious.

Okay, thank you for that. And then my last question is that in the past, I think you said that you're basically at vertical neutral. And I just was curious, you know, just going forward, if that, you know, you still see that as a case of what, it gives a little bit of a hint as to, or, you know, look into, you know, where the strength has been in this current quarter. Just what do you see, you know, for the rest of Q4 and into early 23? We don't have any vertical concentration that

So there's no specific concentration that we have. We don't have any client concentration like we used to have in the past as well. So there's nothing really to share with that.

Great. Okay. Thank you very much.

Our next question comes from Daniel Rosenberg at Paradigm Capital. Daniel, please go ahead.

Hi, good morning, guys. Thanks for taking my question. Congrats on a good quarter despite the macro backdrop here. My first question was around the self-serve platform. I was curious to hear If you could provide any color on the type of customer that is adopting it, whether it be vertical specific or any targeting that's going on there, as well as any first impressions that you may have had as they're ramping up on utilization.

Yes, I'm really glad you asked, because that's everything that we think about these days is IlluminSelf customer. that comes with a lot of experience on the SaaS side, actually as a sales leader at Salesforce for many years. And all that in order to kind of change the DNA of the organization from managed to self-serve. As you know, we've been trying to do it for a while, but boy, is it harder than I thought it's going to be. And now we're seeing that it's actually happening. The focus on the demos, system. And generally speaking, it's either the mid-sized agencies that we're going after or brands direct that would like to take control of their advertising budget. This is what we're seeing success. This is what the product is designed for at the moment. And I think that even more importantly, people really, really get excited when they see the demos and the feedback. Now that we have active users, like hands on keyboard using it on their own, people are really, really loving, giving us good feedback, and also giving us things to fix, which we always do. So all that is giving us the signal that we're going to start seeing the compounded effect of revenue. To me, it's not exactly a traditional SaaS model. It's more, I would say, more predictable consumption model, but the basis of it is that you don't really lose customers like we do on Manage. So therefore, every month you have the revenue that you had the month before. On top of that, you get the revenue of the new clients you signed up, usually the quarter before. or the self-serve number. So we will see that from a number of clients. We will see it from the revenue on it. And I can tell you, not all revenue is created equally. This revenue for us is the most valuable. And we're right in the middle of that shift. We're seeing that it's happening. We're very, very excited about where it's going.

Thanks. And just one question on capital allocation. Nice to see you guys put the NCIB to use with shares as they're trading here. I'm wondering if you would consider expansion of the NCIB. Obviously, it's a board decision, but just given the way things are, what's the best use of capital for you guys, given you have a nice cash balance on the balance sheet?

Yeah. Do you want to take that? Sure. Well, thanks for that, Dan. For us, this is an important aspect of where we are today. We do want to balance our needs for cash with, first of all, cash. and building, also for inorganic opportunities. But, yes, I think I believe that we, from the current conditions of the marketplace, this is certainly an attractive opportunity for us to continue with the NCIB. Whether that's going to be expanded beyond our current approved limits, I can't speak to that at this point, but we're certainly going to continue to be active.

Thanks for taking my questions.

Your next question comes from Aravinda Galapataghi at Canaccord Genuity.

Hi. Good morning, Tal, Elliot. Good to see you. Thanks for taking my questions. I wanted to pick up on the comment you made, Tal, about the improvements or the added features to Ellumin in terms of sort of the path and sort of the more simplified feature set. Is that aimed at the mid-market more? Does that really open up the mid-market a little bit more to you than maybe originally you would have been looking for enterprise? I want to make sure I understood that correctly. If so, what kind of feedback are you getting from the largest enterprise level? Are they asking for more features, asking for more capabilities? What's that conversation like?

Definitely, it's more good to anybody who's running a campaign that's not a full consumer journey. So there's many people out there that are using programmatic today to run line item stuff. So we came up with a way that Illumin kind of assists you doing it. So first of all, the results are, from an ROI perspective, is the same as the old system, using the same algorithm. So amazing ROI. Second, it saves you a lot of time of setting up the campaign. It's minimum 30% savings in setting up your campaigns. And then maintaining the campaigns, being able to see reports on Illumin and things like that, lots of added value. We're getting really good feedback about it from our clients and also from our internal DevOps team that are using it more and more. In the beginning, it was harder to get them to use it because it was more complicated to build. Now, it's their choice to use it. They want to use it because they save a lot of time on it and it's easier for them to manage it as well. So I'd say really, really good feedback. Regarding the enterprise, it's still early days in that side. And so the large enterprise clients, it's early days. We're not ahead enough to make conclusions about what's needed. We're seeing the success in the that has a lot of experience in it. Okay.

And then thanks, Tal. And just a quick question for Elliot. The free cash flow number obviously kind of bounces around a little bit. That's the nature of it. Recognizing that top line is hard to call going forward, given the macro, how would you look to kind of manage cost from a free cash flow perspective? Do you Do you want to maybe, is one part of the thought process to sort of maybe reduce the burn and keep that burn and kind of break even level and wherever you have flexibility to spend that on growth or is that given the cash balance, that's not much of a consideration? I just wanted to see how you kind of rank that as you consider.

I'll answer it in my way and then you'll answer it. I want to say like in general, we have invented something that's going to change the world of advertising. So we're not interested in optimizing expenses in order to produce a certain amount of EBITDA, in order to get the right multiples for it. We're not interested in that. We're interested in really getting the adoption out there. And that's really our focus. While we do that, yes, we don't want to burn cash. And stop burning cash. But the focus in this company is about changing the world. It's not about what's going to happen in the next few quarters from a cash perspective or from an EBITDA perspective. I'd say we're more sensitive to cash burn. We don't want to burn cash. But EBITDA is less important for us for the next few quarters because we really want to hammer the adoption of

What we're trying to do is make sure that we're feeding into, while we did a lot of investment this year, going forward, we want to be exceptionally targeted, and that means sales and marketing, and feeding into that advantage that we believe we have in the marketplace. And elsewhere, you will look to make sure that we're very prudent, and it's more about reallocating towards those things that we believe will drive future growth as opposed to just all systems go. We're very cognizant of the marketplace. We see the macro. You're absolutely right. It's going to be Our revenue, as Tal said earlier in the question, is not the same revenue. We're replacing it with more consistency. And at the same time, we want to make sure we don't lose that competitive advantage. So that's why the investment will continue in a measured way. But we are very, very focused on making sure we're being effective. And that's an ongoing effort for sure.

Excellent. Thank you. All the best.

Thank you.

Our next question comes from Rob Goff at Echelon Wealth Partners. Rob, please go ahead when you're ready.

Good morning, guys, and thank you very much for taking my question. Good morning, Rob. Good morning. My question would be on mix, actually a two-part question there. Can you talk to the mix of aluminum versus non-aluminum revenues exiting next year or H2 next year? And you're talking a lot about this growth of self-serve. Can you talk about what part or what portion of revenues you see self-serve representing next year?

Next year? Yes. Okay. So next year, self-serve, we don't have it down. I can tell you that we're going to Aggressively grow, self-serve, sequentially every quarter. And I'm talking about the human self-serve. That's the focus of the company today. Again, bringing in new clients, activating them, getting them to use the system, and making sure they don't leave. So it's gonna be aggressive growth. We're not locked on the numbers just yet. So that answers that question. And the mix of revenue over the next year, We're out of schedule. I mean, we told everyone that we will be at the run rate of over 50%. We're very close to it already. By the end of the year, we're very close to it already, so I think we're going to be in a higher run rate. And it's, you know, the managed stuff is moving. All the new campaigns, almost all the new campaigns are starting to run on Illumion, so it will be fast. And we will sunset it next year. Sunset the old system next year.

Very good. And can I ask for perhaps a bit of an update on what you're seeing in the CTV marketplace itself?

Yeah, we're seeing it's still an integral part of all the Lumen campaigns, especially if you're running journey campaigns. It's usually the first part. The awareness piece is done well with CTV, and we're seeing we see CTV numbers going up.

Thank you. Good luck. Thank you.

We are seeing no further questions. The next question is going to come from Dylan Heslin at Roth Capital Partners. Please wait a moment.

Can you hear me?

Yes.

Hey, thanks for taking my question. I wanted to start with the client mix, like with the self-serve 42% sequential growth. How much of that are net new customers to your company versus someone you might have converted from a legacy software?

The majority of it is new logos. So we added in Q3, we added 13 new customers on the Illuminate self-serve system. And that's a majority of growth you're seeing from that. We may have converted one or two from UI3, but it wasn't anything significant.

Got it. But then, I mean, like with your comment that you're going to sunset the legacy platform, is that still an opportunity to convert those over?

Of course. We're going to be converting all of them before we sunset it.

Gotcha. Thanks. And then as a follow up, when you talk about 4Q still growing, what are some of the puts and takes between the clients you signed in 3Q that didn't maybe fully sort of produce revenue in 3Q that we're going to pull into 4Q versus some of the seasonal strength that typically happens in 4Q and then just the broader ad market softness in certain verticals?

Yeah, I mean, in general, Q3, our existing current plans, in general, I mean, overall revenue should be higher, which it is. And also we have, and specifically on Illumine Self-Serve, we signed up 13 new clients in Q3. All those clients that we signed in Q3 are going to spend in Q4. And so, again, the component effect that we're seeing from that of course, and the sign-up of new clients.

Great. Thank you.

That's all. Thank you.

Your next question comes from Eric Martinuzzi at Lake Street. Eric, please go ahead when you're ready. Hi, Eric.

Hey. Hi. The question has to do with the growth rate of the company. You posted a 5.5% growth in Q3, and I assume the language is intentionally vague, but I just wanted to get a better feel for Q. Are you assuming a similar growth rate in Q4, kind of a mid-single-digit growth rate?

So, Eric, that's where we don't want to be too exact because we're, ourselves, not 100%. As you know, we were very bullish on the second part of this year, and we didn't deliver those results like we thought we were going to do. And it's a combination of, for me, it's mostly the issue of the investment we make are taking a little bit longer to hit, and the reorganization took a little bit longer, especially the latest part of bringing in a team to run the sales team and Tony to run marketing. Now we have the full team in place in order to deliver what we said we're going to deliver in the second part of the year. But at the same time, we're Until we have more certainty rather than promise things that we may not deliver. So we'll be the first ones to say we didn't deliver what we promised for the second part of this year. And we've made a lot of adjustments to the way that we think about it. We learned from it. We have the right executive team in place in order to do better for the future.

Okay. No, if you don't know, you don't know. I'm just curious to know if we shift over to the adjusted EBITDA for the business. We did have revenue growth in Q3, but adjusted EBITDA was down year on year. Should we assume the same thing for Q4 if you hit the revenue growth that you're talking about?

cost base for the investments we made, and that hasn't changed, so we will see a lowering of that.

But up sequentially?

Up sequentially, we expect it to be increasing quarter over quarter, but year over year, we're going to see a decline for sure because we did put in those investments this time.

All right. Thank you. Thank you, Eric. Thank you.

Your next question comes from Laura Martin at Needham & Company. Laura, please go ahead when you're ready.

Maybe just following up on Eric's question a little bit. Are you still running two sales forces, one for Illumine and one for the other? And could we rationalize those over 2023, do you think?

We're not running two sales forces. And the separation is maybe between management and self-serve, but it's still the same team that are selling both. Just the focus now is really, really moving. And we're really moving the DNA of this whole organization to the self-serve, which is something that we've been trying to do for a while and it's finally happening. But we do find that it's the same is getting us the result. We had six new clients in Q2 for Illumine Self-Serve, 13 new clients in Q3 for Self-Serve. The number is higher for even the first half of Q4, and the revenue will start showing up very quickly.

Okay, what's my percent of Self-Serve now at the end of the third quarter of total revenue?

The entire Self-Serve or Illumine Self-Serve?

No, entire, total.

It's not even, I was just, we had some seasonality in self-service. We have another one in Q2 when we had on the travel side. But we're at a third level.

I'm going to push you, Tal, then. Somebody else asked this, but I'm going to push you on this. We're third now. You're saying everything they're doing is self-serve. So by year end, are you happy with half of the revenue coming from self-serve? Or should we still expect a third?

and throughout next year as well. And then as we start converting, so we don't really convert the old system, UI3 customers, self-serve into Luminia because it's a harder sell. Why? Because people are used to the self-serve system and they don't like changes. them and getting them to spend on the Illuminate self-serve and not the overall self-serve number that we're looking at. Although sometimes next year, yeah, we will see all those flip into Illuminate self-serve.

So when we started Illuminate, I want to say a year and a half ago, one of your big goals was to shut down one of the two parallel platforms and save the money. But from your comments just now, what you're saying is sort of for all of next year, we're still going to be running those two same platforms.

How much money would it be saving you? I mean, I think sometimes next year we will shut it down. Probably around mid next year, it will be, it will sunset the old system. You're going to ask about, I think, expenses that's related to it. about to change now, but it's still, like, talent on the tech side is still tough, especially the talent that can do, you know, programmatic, the amount of transactions that we do and all that, it's different type of talent that we need to get into. And the people that we have are amazing, so we're going to keep them and reallocate them They spend on the old system.

Okay. So it doesn't sound – I mean, it's taken a lot longer to shut down that old platform than we thought, like years longer. And so it's sort of – It's absolutely.

Our expectation was that we will be able to shut it down sooner, as you and I talked about. Our expectation was that we can move the DNA of the org from managed to self-serve faster. when you have a sales leader that comes from the SAS side of things that work for Salesforce for leading a sales team, he's like, that's, that's the kind of DNA change that we needed. And I'm very happy that we finally have it. And we will see over the next few quarters that those things are happening.

Okay. And then my second question is on mix. So I think of Illumina as a full service, like from actual awareness all the way down to performance and conversion. So my question to you is, we are hearing in the marketplace from some of your competitors that there's been a strong shift away from branding into performance advertising as consumers demand is weakened. Are you seeing that in your Illumina product too, this shift towards performance and away from sort of brand upper funnel?

I would say half of the campaigns we run on Illumina are performance because people are used to using programmatic for performance and obviously these are somewhere existing clients. And the other half are the ones that are looking at more realistically and understand that you need to take care of the top of the funnel too in order to get your leads into the system, engage them and then convert them at the bottom of the funnel. You know, we've seen recessions before people focused on saving money on their marketing and then they see the decline in their revenue and they start focusing on doing that again and the best way of doing it is on systems that give you positive ROI. So the focus of Illumin is on mostly customers that will do the complete journey but the new feature that we launched this year recently is allowing us to go after that market that campaigns, and it's providing great value for them. So we have both. more towards the performance side.

Okay. My last question is on TradeDesk. So they grew revenue 31% and there is, what would you say to an investor who says TradeDesk is just eating the world? Are you seeing them take your clients? Do you, you know, they have such an outsized growth here and they're so big to start with. Can you talk about industry design and whether you think TradeDesk just basically eats all the other DSPs, which would include yourself?

Well, I think that We're in a different market today. We're going after the mid-sized agencies and the brands that we have a product that nobody else has. If you want to do journey, you cannot do it in a member system. You have to take it. So for us, it's all about the Illumina adoption, going out. And we have so many marketers that didn't even hear about Illumina, which is frustrating. And also, it's a huge opportunity for us to get into Our focus is on Illumen. It's completely different than anybody else has out there. Some of the bigger companies or the bigger ESPs out there, they're focusing on the top tier and on the big agencies. Not exactly our focus, so we don't exactly compete head to head at this point. And we see other companies in the programmatic space are reporting We're happy that we're still increasing revenue, but as we're moving towards more and more the predictable revenue model on self-serve, I believe we're going to see much higher growth in the future.

Okay. Thank you very much.

Thank you, Laura. Thank you.

Our final two questions come from Drew McReynolds at RBC Capital Markets. Drew, please go ahead when you're ready.

Yeah. Hi, Tal. Hi, Elliot. Can you hear me? Yeah, I can see you, Drew. Okay. Okay. Awesome. Yeah. Nice to see you. Just two final ones for me. First, on the M&A side, it does sound like you're incrementally a little bit more optimistic on maybe the opportunities out there. So just remind us thematically some of the pieces that would fit with acuity ads in terms of those strategic areas you're looking at. And then the last one just gets back to the adoption of Illumin. and conversion rates. So I guess I'm under the assumption your sales and marketing team is fully ramped up or almost fully ramped up in full run rate mode. I know you're not going to probably commit to a conversion rate here, but what is the untapped base of advertisers and agencies you still haven't hit? Do you get 50% conversion, 75%, 25%? We're just trying to kind of see, you know, under the hood on exactly, you know, what your hit rate would be as you sit down with new folks.

I'd say the amount of advertisers and marketers and agencies that we didn't even talk to are tens of thousands. So it's a huge market, only in the U.S. itself. So we have a lot to do. I don't think we're fully ramped on the sales side, but we're pretty good, ramping up a little more on there. And what do you mean by conversion rate?

Well, you talk about how excited advertisers are when they get the demo.

So the metrics that we're starting to work on, and we don't have enough experience and consistency, are the number of demos we have, conversions from demo to contract, conversion from contract to active clients on the system. So those are the things that we're tracking. It's just the numbers are so low to begin with, the baselines, and it's hard to share them yet because they might not, they might have inconsistency because it's so early on.

And just on the M&A side,

The M&A side, what are we looking for strategically? The main part that we want to add to Illumint is to complete more of a consumer journey. And the consumer journey doesn't just happen on the problematic site that we have in Illumint today. So we want to add social to it. We want to add search to it. We want to add email marketing to it, influencer marketing to it. A whole bunch of other things that we don't have today that is not programmatic and it's not going to work exactly the same, but it's going to be a great part. Imagine you're an advertiser and now you have to log into Facebook and into YouTube and AdWords and to do the programmatic. You can do it all from one system. and getting a company that already had all those things established and just plug it into a room. So that's the major focus. Of course, we can also focus on companies who are in the same space as us, that their product is not as strong, and then you can remove tons of expenses by modeling the product. So that's always something we can do, focus on precise, but for me, It's more exciting to focus on what this company can produce on the organic side, on the self-serve side, on the human side. And for that, the strategic part is more important than any side.

Got it. Okay. Thanks very much. Good luck. Thank you. Thank you.

There are no other questions. So Tal, I will hand it back over to you for any final remarks.

Thank you, Sola. Thank you, everyone, for joining us. I'd like to again thank our investors and the QE family and everyone that's involved that made this journey possible. We're really, really, really excited about what we're doing with this woman, specifically who is self-serve. And we believe that the best is yet to come. And thank you, everyone.