illumin Holdings Inc T.ILLM

RBC

[retiredcf]

March 9, 2023

AcuityAds Holdings Inc
Q4/22 Results - A Good End to the Year with Investments Taking Hold

TSX: AT | CAD 2.25 | Sector Perform | Price Target CAD 3.50

Sentiment: Neutral

Our view

Given the choppy operating environment and continued ongoing investment, we view Q4/22 results as largely in line with our expectations and indicative of a good end to the year. We view the results as neutral for the shares.

First impression

• Q4/22 results largely in line with expectations. Revenues and adjusted EBITDA were $40.0MM (+8.7% YoY) and $2.4MM (-58.3%) versus our estimates of $37.9MM and $3.8MM (consensus is $37.4MM and $3.1MM). Excluding media costs, net revenue of $19.4MM was in line with our estimate of $19.5MM and above consensus of $18.1MM. Please see Exhibit 1 for a summary of Q4/22 results versus expectations.

• illumin represented well over half of total revenue consistent with guidance. illumin revenues were $22.5MM in Q4/22, representing 56% of total revenue and up +70.0% sequentially versus $13.2MM in Q3/22, and up +120.7% YoY versus $10.2MM in Q4/21. illumin self-serve revenue increased +100% sequentially to $2.4MM with the number of self-serve clients up +86% sequentially.

• Other notables. (i) management continues to monitor the macro environment and customer spend, reducing costs accordingly, while continuing to invest in illumin's growth; (ii) 623k shares were repurchased for $1.5MM in Q4/22 (4.7MM shares were repurchased for $14.5MM at an average price of $3.08/share in 2022); (iii) the company had cash of $85.9MM as of Q4/22; and (iv) long-term self-service illumin contracts are being pursued as a new initiative, with terms greater than one year and guaranteed revenue minimums.

• Issues in focus for the 8:30am ET call. (i) updated commentary on the 2023 outlook including Q1/23 pacing; (ii) an update on the continued uptake and traction of illumin; (iii) the extent to which ad category exposure continues to diversify; and (iv) the M&A environment and extent to which new opportunities are emerging given the pullback in valuations.