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.