illumin Holdings Inc T.ILLM

TD Follow Up Report

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AcuityAds Holdings Inc.

(AT-T) C$24.90

Revenue Momentum Improving

Event

Q4/20 results.

Impact: NEUTRAL

Revenue and EBITDA exceeded TD and consensus expectations in Q4/20 (see page two for more details). On the conference call, management signalled a return to positive y/y revenue growth in Q1/21 (versus pandemic-induced y/y declines in each quarter in 2020), including what was termed as significant sequential growth for the illumin platform (please see our recent initiation report for more information on illumin: LINK). Management also suggested that it would be disappointed if it could not exceed the former revenue consensus for 2021 (~$130 million). Large advertisers have been showing a lot of interest in illumin, and we are optimistic that Acuity will once again provide a revenue update for this new service shortly after Q1/21 ends. The platform delivered $1.5 million in revenue in Q4/20 and we would like to see that double in Q1/21 in order to sustain investor enthusiasm for AT shares.

TD Investment Conclusion

We are maintaining our BUY rating on AT shares because we see good potential going forward for both market-share gains (via illumin) and healthy double- digit growth in the programmatic advertising industry, including CTV (connected/ streaming TV). Based on the EBITDA margin beat in Q4/20 (to be clear, adjusted EBITDA does not include government wage subsidy benefits that were booked in the quarter) and the revenue outlook commentary from management, we have increased our estimates for 2021/2022/2023. With no change in our target multiple of 26x 2022E net revenue (a 21% discount to the current 2021E EV/revenue multiple of 33x for The Trade Desk), our target price remains unchanged at $37.00. We continue to look forward to a potential NASDAQ listing soon, and then benefits from a reopening economy over the next several months (illumin awareness via live industry conferences, and a recovery in ad spending for the hard-hit travel/leisure/ entertainment sectors).