RE:RE:RE:RE:RE:RE:RE:The jokes write themselves"You can lead a horse to water but you cannot make them drink" You are banking everything on illumin when they can declare each incremenatl rev $ is legacy vs illumin on a whim. This is the second biggest error you are making. Ms. Market sees through it, why don't you?
The biggest error you are making is trusting the management team. They have all made their money. The equity remaining is a rounding error on their net worth at this point and they have been sipping margaritas on the beach. Putting your trust in people that do not have your same level of committment is not wise.
Third, if the secular trends reverse and ad spending is on the rise again there is no reason to believe that they will outperform their peers given the above.
You are also cherry picking the data you want. Comparing Q3 to Q2 is not relevant as there is cyclicality and fluctations. I was comparing YoY which is less noisy.
That said, good luck and if somehow things turn around I will be the first to change my mind but until then this is very clearly dead money for the foreseeable future.
Torontojay wrote:
truthis0utther3 wrote: “Here is a recap of the financial negatives:
1. Revenue growing at tepid pace. Since inflation is running between 6-8% depending on Canada vs US you would at least expect revenue to keep up with inflation. Since it is not, it is in fact negative growth in real terms.
2. Gross costs: Meanwhile, media costs are growing faster than they can grow revenue which is of course negative.
3. Operating expenses have grown 40% in Q3 2022 vs Q3 2021 and expected to grow further as Tal mentioned they still need to invest more for illumin self serve to grow.
4. Stock based compensation up about 15% and continues to rise.”
- The actual results in the third quarter outpaced inflation on a quarter over quarter basis. If you annualize the sequential growth In Q3 vs Q2 or Q3 vs Q1 the company outpaced inflation. The market is forward looking and a better question to ask is: can the company outpace inflation going forward? If they continue to increase client growth from Illumin then this is what I call “real” growth which is a hedge against inflation. When the advertising market picks up steam again then it’s the client growth and retention that will lead the charge when ad rates pick up in nominal terms.
Another point worth mentioning is that some industries experienced inflation while others are experiencing deflation. For instance, the used auto market and housing market is in a deflationary environment on a month over month basis. If one looks at the advertising market we see a similar story playing out. Cpm rates have been declining this year relative to last year which explains why sales growth from the largest adtech companies is slowing down. The best metric for advertisers to look for is client growth and retention which tells you how the company is doing in real terms versus nominal terms. Investors should be focusing on this number as if and when the price for ads stabilizes or improves then revenue growth will continue to go higher.
2) Gross profit margins in Q3 is still higher than historical standards. The company has consistently achieved gross margins in the 50% range and no major issues here.
3) You have confirmed to me that the company is investing its profits in growth initiatives such as marketing and technology which works with a lag. If you increase your sales force in Q3, then results are expected to appear in the coming quarters not in the current quarter in which the investments were made. Looking at the financial statements, we see gross profit increased in absolute terms but technology costs and marketing costs increased ~ $1.66m and $0.64m respectively. Lower ebitda margins due to the aforementioned reasons only confirms to me that they’re investing in its future.
4) They have made more significant hires in the last year which explains the increase in compensation costs. This number fluctuates from quarter to quarter and is to be expected when a company increases its workforce. Ceo and co-founders have a very reasonable annual salary of $220k with total compensation of $595k if we include share based awards. I think this is reasonable given the revenue this company generates and works out to be about 2% of revenue for the combined co-founders.
truthis0utther3 wrote: "If illumin had traction it would show up in the numbers. The truth is - for whatever reason - it is not selling and given the recent call there is nothing new being said that has changed the narrative."
This part makes no sense to me. Are you equating Illumin growth with overall revenue growth?
Illumin sequential growth has been very strong ever since it's adoption in the market. Illumin revenue since it's its fourth quarter 2020 to present day goes as follows:
Q4 20 : $ 1m
Q1 21: $3.2m
Q2 21: 5.2m
Q3 21: $7.4m
Q4 21 : $10.2m
Q1 22: $7.9m
Q2 22: $10.2m
Q3 22: $13.2m
To suggest to me that Illumin is not doing well is being plain stupid. I don't have to elaborate here but my point should be clear.