illumin Holdings Inc.

Good morning, everyone. Before we begin the official remarks, here is the cautionary note regarding forward-looking information. Certain information to be discussed during this call contains forward-looking statements within the meaning of applicable securities 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 statement and the risk factors identified in our filings with CDER 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, Chief Executive Officer.

Good morning, everyone, and thank you for joining us today for Illumine's Q2 2026 earning call. My name is Tal Hayek, co-founder and CEO of Illumin. As many of you know, I came back to run the company in the beginning of Q2 of this year, and I'm quite pleased with the results we're seeing so far. I'll begin with a brief overview of our quarterly highlights. Followed by an update on our platform evolution and go-to-market progress. Then, I'll turn the call over to Michael Amaro, our Interim Chief Financial Officer, who will provide detailed review of our financial results. I would like to thank the Illumen team for rising up to the challenge and delivering the highest revenue quarter in the history of the company. With a total of $50.2 million, Delivered by positive performance across all sectors, I am very proud of what we achieved so far. A major contributor was our exchange business, which generated $27.1 million in revenue, as demand from both new and existing customers continued to grow. We're incredibly proud of the team's execution and the results they've built in this part of the business. We also saw a meaningful turnaround in our DSP business. Both managed service and self-serve delivered year-over-year growth, generating $12.3 million and $10.8 million in revenue. Together, these results renewed momentum in our platform and were supported by an addition of nine net new clients during the quarter. This quarter also reflected the strength of our business model. We achieved record revenue while maintaining balanced contribution from both our demand side and supply side business. And at the same time, our approach to operating expenses helped reduce cost and improve profitability, demonstrating that we can grow the business while operating more efficiently. We also continue to strengthen the platform through strategic partnership that deliver greater value to advertisers. During the quarter, we expanded our partnership with Synth Group to bring real-time brand leaf measurement directly into campaigns, giving marketers faster insight into campaign effectiveness. And more recently, we announced our special partnership with Audient Security, Bringing additional audience intelligence into Illumen to help marketers discover, activate, and measure audiences with greater precision. Together, these innovations reinforce our commitment to build a more intelligent, measurable, and effective advertising platform. While there is still work ahead, we believe that we are moving in the right direction and have established a stronger foundation for continued growth. I will now pass the call to Michael to share financial results.

Thank you, Tal. Good morning, everyone, and thank you for joining our 2026 second quarter earnings call, which we reported earlier today. Second quarter 2026 revenue was $50.2 million, representing 52% growth, $33.1 million in Q2 2025. This marks a record quarter for Lumen and the first quarter in which revenue surpassed the $50 million threshold. Exchange service continued to be a strong performer this quarter with all service lines delivering double-digit year-over-year revenue growth. Gross profit or net revenue for the second quarter of 2026 was $17.6 million, increasing 24% from $14.2 million in Q2 2025. Although the revenue mix shifted towards service lines with traditionally lower gross margins, increased revenue for the quarter more than offset this impact, resulting in the higher gross profit. Gross margin for the quarter was 35.1% compared to 42.9% in the prior period. This year-over-year change was driven by a higher proportion of revenue from service lines with lower margins, such as Exchange Service. Exchange service revenue for the second quarter increased 108% over the year, $27.1 million, reflecting strong new customer acquisitions and augmented spend from existing clients, as well as expanded partnerships with publishers. Q2 was the exchange's best quarter yet, and its performance continues to underscore the impact of the strategic investments we made over the past year, core technology enhancements, strengthened external partnerships, and expanded customer capabilities. Turning to self-service, revenue was $10.8 million for the quarter, which was an increase of 18% compared to prior year and represented 22% of total revenue. This was primarily driven by higher spend by existing customers and the onboarding of new clients. In managed service, revenue was $12.3 million for the second quarter, an increase of 13% compared to $10.9 million in Q2 2025. This favorable variance was driven by similar factors of self-service, higher volume of spend by customers and acquisition of new customers, largely due to enhanced features with external partners. Total operating expenses for the second quarter of 2026 were $18.7 million compared to $19.2 million in the same prior year period. The year-over-year decrease reflected lower share-based compensation and general and administrative costs that were partially offset by higher sales and marketing costs and higher depreciation and amortization. The decrease in share-based compensation is attributable to forfeitures from a reduced workforce, a general decrease in share-based grants. The decrease in G&A costs were primarily due to lower salaries and benefits from our cost containment initiative. The increase in sales and marketing is mainly due to higher revenue for the period and the variable commission costs that consequently increased, as well as higher marketing costs from enhanced brand development, partly offset by lower salaries and benefits. The increase in depreciation and amortization is attributable to a higher asset base from capitalized salaries. Q2 2026 operating expenses as a percentage of revenue was 37.3% compared to 58.0% in Q2 2025 and is down primarily as a result of the increased revenue the cost containment initiatives the company has undertaken. Q2 adjusted EBITDA was $2.0 million compared to a loss of $1.0 million in the prior year period. This was primarily attributable to higher revenue from brand placement and technological enhancements and lower operating expenses from cost containment initiatives as previously mentioned. Net income for the second quarter of 2026 was $19,000 compared to a loss of $5.8 million in Q2 2025, representing the first quarter since Q4 of 2024 in which we returned to positive net income This year-over-year change reflects the higher EBIT I mentioned, as well as the higher foreign exchange gain, lower severance, and share-based compensation expenses. Net foreign exchange gain was $0.7 million for the quarter compared to a loss of $1.5 million for the same prior year period, largely due to the U.S. dollar strengthening against the Canadian dollar in the current quarter as compared to the prior year quarter. Effective December 31, 2025, the company commenced a normal course issuer bid, or NCIB, purchased for cancellation up to $3.8 million of its outstanding common shares. As of June 30, 2026, 686,558 shares had been purchased and canceled under this program at an average price of $0.85 per share, totaling approximately $0.6 million. The NCIB remains open and can continue until December 30, 2026, or until we reach our target repurchase limit. The company did not purchase any shares in the second quarter to conserve cash in preparation for potential acquisitions. It may do so in the future. End of the quarter with $33.7 million in cash versus $43.8 million as of December 31st, 2025. Cash was down in this period primarily due to investments to enhance our product platform, timing of working capital, common share repurchases, and lease payments, partly offset by a foreign exchange gain on cash and cash equivalents. Compared to March 31, 2026, cash was lowered by $3.8 million primarily due to timing of working capital, investments in our platform, payments on leases, partially offset by cash from operations before working capital and the effect of foreign exchange on cash and cash equivalents. Excluding the impact of working capital timing we generated positive cash from operations in Q2. Turning now to our balance sheet, we ended the quarter with $33.7 million in cash, no debt, positive adjusted EBITDA, and maintained our strong balance sheet to support our long-term strategy. We are taking additional steps to find further efficiencies in our business, improve upon our liquidity, and to improve our financial flexibility, pursue selective, strategically aligned, and creative acquisition opportunities that expand our capabilities and enhance shareholder value. continue to see attractive opportunities and more rational valuations and will continue to evaluate them, the disciplined approach as we move through 2026. As of June 30th, 2026, the total number of outstanding common shares stood at 52,481,173 compared to 51,602,090 as of December 31st, 2025. This increase reflects the exercise of vested equity instruments, partly offset by shares repurchased in Q1 of 2026. Shares on a fully diluted basis stood at $55,409,730 compared to $55,800,361 as of December 31, 2025. This decrease relates to forfeitures and lower grants associated with the reduced workforce, partly offset by the increase in common shares. Our insider share ownership stood at 35.2%. In conclusion, we were happy with our second quarter 2026 results and looked to build on this momentum. We continue to see strong performance in our exchange service line, while managed and self-service lines showed stable improvement from the same prior year period, reflecting the impact of previously implemented strategic initiatives beginning to materialize. Operating expenses decreased year over year as a result of our cost containment initiatives. We're partially upset by higher variable costs from the increased revenue. Investments made in product development and platform upgrades during 2026 and the latter part of 2025 position us to support revenue growth efficiently. We continue to look for opportunities to improve operational efficiency and remain disciplined with our capital allocation. As we continue to scale the business, we believe the company is moving in the right direction and is well positioned for the future. With that, I'll now turn the call back over to Tal for closing remarks.

Thank you, Michael. In summary, during our last earning call, I asked our investors to give me time to deliver positive results for Illumin. I'm pleased that this quarter reflects meaningful progress and demonstrates the impact of the work happening across the organization. Looking ahead, our focus remains on building sustainable, profitable growth We believe the business is on a much stronger foundation today, with record revenue, a balanced mix of demand-side and supply-side revenue streams, and a more disciplined operation model that supports long-term profitability. As we look ahead, we continue to invest in the next generation of Illumine platform, including AI-powered technologies designed to simplify the workflow and help marketers work more efficiently. We'll share more details when we get closer to launch. We see continued momentum into Q3 with double-digit year-over-year growth. With that, we're now going to move to Q&A.

Good morning, everyone. Thank you for joining today's presentation of Illumine Holdings' second quarter financial and operating results. Before we begin, I'd like to remind our analysts that if you would like to ask a question, please select the raise hand icon on your screen. We will now take our first question, and the first question comes from Daniel Rosenberg from Paradigm Capital. Daniel, please proceed with your question when you're ready.

Good morning, Tal and Michael. Congrats on a strong quarter. Great to see the results. My first question just comes around some of the partnerships you mentioned in your release. I was wondering how you could describe them a little bit more and how that might relate to some demand for you guys to partner with other firms.

Absolutely. And thank you very much. And obviously, we're very excited to deliver this kind of quarter. The partnership. So first of all, we do partnerships and add more partners into our demand side platform on a regular basis. and we plan to continue doing that. The first one we've done was all about helping advertisers really measure the brand lift and it's built right into the system. So that's something that's very important for advertisers, obviously. The second one, Audience Acuity, and coincidentally, we used to be called Acuity, but we're very excited about this partnership. It has nothing to do with our historical name, but we're excited about it because it provides really, really, really good data to our advertisers. At the end of the day, when you have good data, it delivers better results and better ROI. What do I mean by good data? Thank you so much for joining us. Special relationship with them and we are very excited about moving forward together with them and to, at the end of the day, help advertisers get better ROI in their campaigns.

Thanks for that. And then digging a bit deeper, I mean, some extremely strong growth in the exchange side. Could you speak to some of the demand drivers here? I mean, I look across the industry and growth rates across the board and it seems like you're outpacing, albeit, you know, you guys are coming from a tougher place last year. But nonetheless, I'm curious if anything changed on the demand front.

Are you asking on the DSP side, on the exchange side, on all?

I mean, I'll leave it to you to call out what needs to be called out, but the exchange side is kind of standing out to me.

Okay, so we'll start with the exchange side, 108% growth year over year. Amazing growth, and at the end of the day, it's a function of getting more and better quality publishers into the exchange. and getting more demand partners as well. So the business dev team and the exchange were very busy in getting more of these types of publisher into the system. And when you get better type of quality of publisher, you get better inventory and you can increase your revenue because you're doing a better job for your advertisers and they're getting better results. So that's what it is on the exchange and Oren Hisherik I'm so happy to see that we're growing. It's a 15% growth. It's not where I want it to be. We're used to 20-30% growth on the DSP side for many, many years. That's where I want to get the DSP side to go back to. But I'm very, very happy about the progress and moving forward with that. And it's a function of many, many things. It's a function of improving the product, creating more partnerships. But a lot of it is in the sales process. We spoke about in the past that we still sometimes feel like we're selling like a startup and we're really starting to move upstream now. We're not fully there yet, but we are making a lot of progress on the marketing and sales side. At the end of the day, to move upstream to bigger clients, bigger advertisers that are going to spend more with us.

Are there any verticals to call out that have come back online in size for you guys?

Thank you for having me.

Okay, great to be here. And then just on the mix, I mean, I'm curious how you think about, you know, allocating resources and what the right mix of revenue is between product lines, or is that the wrong question? You know, it really is offering something across all sorts of products and going from there.

So I'll try to answer it because it's always risky for a DSP to own an exchange. Why? Because if the DSP starts favoring to buy media from its own exchange, it's now not having the best intention for the advertisers. At the end of the day, you want to deliver the results for advertisers. Thanks for having me. So the majority of our people and the focus of the company is still on the DSP side. And the exchange is running with less people and more reliant on systems and algorithms and so forth in order to deliver it. So it's really hard to... to predict what the revenue in the exchange side is going to be. We didn't predict it's going to go up 108%. We just delivered it and we're very happy about it. We have a lot more experience on the DSP side, as you know, and it's easier for us to predict and to allocate the right resources into it and to make the right investments into it. And we're learning a lot about the exchange business at the same time. and we have really great and amazing management team that is running that exchange and doing a really great job. So that's what I can share about that.

Fair enough. Maybe turning to the cost side of things. So, you know, the The mix worked out well for you guys in bringing profitability to the bottom line. How would you, you know, talk about the margin profile of Illumine? Is this a fair baseline to kind of say, you know, this is where we want to operate? And then I know you also spoke to cost optimizations, looking out for those. Anything to say about the OpEx number, if it might change or steady state here, how you're thinking about

Yeah, so OPEX, we've done some cuts in early Q2, and that's affecting, obviously, so we have some savings on the expenses. And I think we're good from that perspective. We do have increase in the variable OPEX, the side of the things. which is related to sales. So we have higher revenue, more commissions and all. But in general, we've seen good savings from the OPEX perspective. And remind me the first question again.

Mainly on kind of the gross margin line, like is there a sense you have of bottoming from that point of view?

So we're... I think we'll be improving the gross margins by a few points. That's what we're after. We have some accounts that we're running on low margins that we are either Removing or negotiating higher margins with them. And therefore, I believe that we will see slightly, maybe a couple points, two, three points, slow progress throughout the year that we can improve margins on.

On the DSP side.

Okay, understood. And then a last couple for me, if you don't mind. One was M&A. Lots of things going on out there in terms of valuations. Any update there? And the one other question I have around the sales go to market. In terms of the team you have, you You know, it sounds like you're automating a lot. So to continue the growth, does there need to be an investment in sales or are you having more success in making each salesperson more productive?

On the M&A side, we have a banker that we hired to execute on that role for us. They created a list. They started calling, sending emails. We already had a few conversations. Thank you for watching. and you're right, valuations are all over the place. I think that in general, we can see the valuations in the market is lower at this point and it should be favorable for us from that point. And regarding sales and marketing, it's all about making it more efficient. I think we have Probably the right amount of salespeople out there. It's all about getting them to go after bigger accounts and at the end of the day, manage a bigger book of business on average. And therefore, we should be able to grow the revenue without increasing any major investment on the sales and marketing side.

Great to hear. Congrats again on a strong quarter. I'll pass the line. Thanks.

Thank you, Daniel. And thank you for the support. And I'd like to thank, again, the Lumen team for delivering such an amazing quarter. And to our board of directors, to our investors that are patient with us and allowing us to We're working hard on it and we will obviously update you in the next few quarters as well and looking forward to continuing momentum here. Thank you guys.

Thank you very much for that, Daniel. As there are no further questions, this will conclude our time this morning. My thanks to Tal, Michael, and a special thanks to our analysts and shareholders for attending. Please join us next time as we present our third quarter 2026 financial and operating results. Bye for now.