Q2 2024 illumin Holdings Inc Earnings Call
Today's results indicate that more advertisers are recognizing the emerging value of the Illumine platform. In particular, how it enables our customers to see the impact of their advertising spend on just one canvas across the entire consumer journey.
The customer's feedback we've received has a consistent theme. The visibility Illumina offers enables our customers to gauge the results of their campaigns and to dynamically adjust activities in real time, allowing them to maximize their return on investment.
Speaker Change: This is extremely important to advertisers and marketers, particularly in today's macroeconomic environment, where getting the most out of our advertising spend is vital. As these results show, revenue from our self-service platform continues to grow at a good pace.
both year over year and as a percentage of total revenue.
Also, even with the growth we're seeing today, the platform is still largely in the early stages and represents an emerging growth opportunity for us.
Speaker Change: As I mentioned on our last call, I see customers currently utilizing the platform as early adopters. We can learn a great deal from their feedback, improve ourselves to be better, to better serve their needs, and in doing so, increase the growth that we're already seeing on this side of the business.
So, in short, we are pleased with the growth of our Illumin self-service platform, which is part of our strategic shift in our business, transitioning our focus from a transactional revenue model with no contractual commitment to a more sustainable, recurring self-service model with longer-term contracts.
Over time, we believe this should give us the ability to deliver a more consistent revenue growth and profitability.
Turning to managed services side of our business, our second quarter results were in line with expectations and proving on a sequential basis.
Speaker Change: Similar to last quarter, managed services revenue reflected a decline in programmatic revenue, primarily in Latin America. As mentioned on our last call, this was something we expected.
Speaker Change: On our last call, I also talked about how I viewed managed services as an area where our customers consistently tell us they value our services.
Speaker Change: Since then, we have continued increasing our managed services sales efficiency to remove friction.
Speaker Change: We are implementing a number of initiatives as we refine our sales approach and reorganize our sales and marketing activities, including recommitting to manage services.
Speaker Change: Simplifying our go-to-market steps, testing different market segments as under-serviced, along with focusing on how our team supports customers along the various service points in our managed services workflows.
Speaker Change: To this end, we are excited to announce that we have brought on a new Chief Revenue Officer, Liz Ritzkobin, who brings over 20 years of print, digital media, software sales experience with industry-leading organizations to Illumin.
Speaker Change: Before joining us, Liz served as Chief Revenue Officer at Hustle and was responsible for leading Hustle's go-to-market organization, including sales, market development, sales organizations, client services, and marketing.
Speaker Change: Previously, Liz served as Global Chief Revenue Officer at Namogu, Foursquare, Bizarre Voice, Seismic and Parade Media Group. Prior to that, she served as Vice President at Yahoo and Time.
Speaker Change: We are thrilled to have her join us and look forward to her contributing to Illumina's continued growth. Also joining in August is Bridget Westerholtz, our new Senior Vice President of Marketing. Bridget is a global marketing leader with over 20 years of experience inside advertising agencies and inside brands.
Bridget Westervelt: the same two sides of our customer base. She has both built and managed high performance teams, crafted brand strategies for leading clients, and successfully planned and operated campaigns with clients in the US, Canada, and the UK, and elsewhere.
Speaker Change: We are excited to welcome her to the Illumine team. Together we believe these key hires, as well as the actions we're taking in managed services and self-serve, will drive our long-term revenue growth and improve our profitability.
Speaker Change: In the midst of all this recent activity, I want to be clear that we have been carefully managing our expenses, and we have been reallocating those resources in order to improve efficiencies and to bolster revenue, focusing on the areas where we see the most growth potential.
Speaker Change: This is also reflected in our second quarter results.
Speaker Change: You'll notice that even while our sales and marketing spending fell year-over-year, our Illumin self-service revenues still grew rapidly as our sales efforts have become more productive.
Speaker Change: Also, while our gross margin remained consistent at 48% on a year-over-year basis, as I noted earlier, total operating expenses were lower, while our adjusted EBITDA increased 11% compared to the same period in 2023.
Speaker Change: This was mainly due to our improved sales productivity and reduced operating costs. It's now been nearly four months since I joined Illumin. I'm proud of the progress we've made, but we are still in the early stages of returning to growth, so there is a lot of work still to be done.
Speaker Change: Based on our progress to date, the strength and growth we've experienced with our Illumin self-service revenue and the opportunities ahead of us, we currently expect to return the company to year-over-year revenue growth in the third quarter of this year.
Speaker Change: We're continuing to look at how we can do things differently and more effectively so we can capitalize on our current growth drivers like our Illumin self-service platform and make sure we are fully benefiting from the products and services that we already have available to us.
Speaker Change: At the same time, we are exploring new opportunities for growth in our managed services.
Speaker Change: We are continuing to invest in areas that represent the greatest return on investment, including improving our product roadmap, our AI and our algorithms, simplifying the user experience of the Illumine platform, and strengthening our sales and customer service steps.
Speaker Change: We are setting clear and achievable targets for ourselves, reviewing them constantly and holding ourselves accountable to making them. By continuing on this course, I believe we will enhance productivity, make our sales efforts more effective, increase revenues, and ultimately drive Illumina's long-term growth.
Speaker Change: With that, let me turn the call over to Elliot to give a detailed review of our financial results.
Elliot: Thank you, Simon. And good morning, everyone. And thank you again for joining our second quarter 2024 earnings call.
Elliot: Today, we reported second quarter results which included a strong IlluminSelfServe revenue growth, reduced total operating expenses, and adjusted EBITDA improvement of 11% compared to the same period last year.
Elliot: Our second quarter revenue was $29.2 million. The year-over-year difference reflects a decline in managed service revenue and programmatic revenue primarily in Latin America. This was partially offset by an increase in illumined self-service revenue.
Elliot: Returning to our IlluminSelfServe business, IlluminSelfServe revenue was $8.8 million in the second quarter, up 61%, compared to $5.4 million in Q2 2023, and is now representing 30% of total revenue compared to 16% in last year's second quarter.
Elliot: This year-over-year growth was driven largely by new customer relationships. As mentioned earlier, we onboarded 33 new LumenSelfServe clients during the quarter, resulting from sales initiatives targeting higher-spend customers.
Elliot: In sum, these self-serve revenue results speak to the success of our sales initiatives as well as the traction this platform is gaining in the marketplace. What's even more impressive is that this growth was achieved even with the normal seasonality we typically see in the second quarter.
Speaker Change: And now, I'll give a more detailed review of our financial results.
Speaker Change: As I mentioned earlier, second quarter revenue was $29.2 million compared to $33.2 million in Q2 2023.
Elliot: This decline was mainly driven by a decision to reduce activity in Argentina at the end of last year in order to reduce the risk of a rapidly changing and unsteady economic environment and inflationary pressure.
Speaker Change: Growth in self-serve of 61% offset the decline partially. This growth was primarily driven by new clients as well as higher utilization of the platform by our existing clients.
Elliot: Gross profit or net revenue for the second quarter was $14.0 million, compared to $15.9 million in Q2 2023, reflecting lower sales in the quarter
Elliot: Gross margin was 48%, consistent with the same period in 2023, despite the change in our revenue mix towards self-serve.
Speaker Change: Total operating expenses for the second quarter of 2024 were $16.5 million, a decrease of 14% compared to $19.2 million during the same period last year.
Speaker Change: We continue to be focused on operational discipline and implementing our strategic cost management initiatives which contributed to this year over year expense decline.
Speaker Change: As I mentioned earlier in my opening comment, we saw an adjusted EBITDA improvement during the quarter of 11% compared to the same period last year.
Speaker Change: For the quarter, adjusted EBITDA was $515,000 compared to $465,000 in Q2 2023, and this improvement, despite lower revenues, demonstrates our ongoing focus on operational efficiency and cost control.
Speaker Change: Net loss for the second quarter of 2024 was $1 million, a considerable improvement compared to net loss of $5.6 million in the same period last year, again illustrating our lower operating costs on a year-over-year basis.
Speaker Change: a net foreign exchange gain versus a loss in the prior year period, and lower income taxes.
Speaker Change: As previously announced, in June 2024, the company uplisted the trading of its common shares from the OTC Pink Market to the OTCQB Venture Market, or OTCQB as it is known in the United States.
Speaker Change: We began trading on the OTCQB on June 7th under the ticker symbol ILLMF.
Speaker Change: As of March 6, 2024, we are also fully deregistered from the SEC. The majority of the savings from the NASDAQ deregistration will be fully realized in 2025. However, we will expect to see some impact in the second half of 2024 from reduction in related costs, such as insurance.
Speaker Change: The company's shares continue to be listed on the Toronto Stock Exchange in Canada under the trading symbol ILLM.
Speaker Change: And we are very pleased with this OTCQB upgrade as we believe it will provide shareholders and investors with improved accessibility and liquidity.
Speaker Change: On November 13th of 2023.
Speaker Change: 3. The company announced a new normal course issuer bid, or NCIB.
Speaker Change: For the purchase of Castellation of up to $4.3 million of its outstanding common shares.
Speaker Change: During the three and the six months ended June 30th, 2024, the company purchased and cancelled 1.3 and 2.5 million of its common shares under the NCIB at an average price
Speaker Change: of $1.64 and $1.65 per share totaling 2.2 million and 4.1 million in consideration respectively.
Speaker Change: In total, by the end of Q2 of this year, we have acquired 2.9 million shares at an average price of $1.63 for a total cost of $4.8 million.
Speaker Change: And since the end of Q2, we have continued the program and purchased an additional 556,000 shares at an average price of $1.62.
Speaker Change: Therefore, since inception, we've acquired 81% of our allotted limit of 4.3 million shares with an average cost of $1.63 per share and a total spend of $5.7 million.
Speaker Change: The NCIB can remain active and continue until November 12, 2024 or until we reach our target repurchase limit. This initiative is part of our broader strategy to optimize our capital structure while maintaining the flexibility to invest in growth opportunities as they arise.
Speaker Change: As of June 30, 2024, our cash and cash equivalents stood at $51.6 million.
Speaker Change: A decrease from $55.5 million at the end of 2023, and this decrease was primarily attributable to the repurchase of the company's shares, investments in our platform, and property and equipment, and payments on leases.
Speaker Change: This was partially offset by positive cash provided by operating activities before changes in working capital, income taxes paid, and interest paid.
Speaker Change: and from timing of non-cash operating working capital in the period.
Speaker Change: As of June 30, 2024, the total number of outstanding common shares
Speaker Change: Stutt at 51,455,952. Following a series of strategic adjustments to our share structure, which was compared to the 56,185,631 shares on June 30, 2023.
Speaker Change: And this figure includes the impact of our recent share repurchases under the NCIB.
Speaker Change: Partially offset by a modest number of shares issued through the exercise of restricted share units and other vested equity instruments. And in conclusion, during the second quarter we saw strong sequential illumined self-served revenue growth despite the quarter typically being seasonally lower.
Speaker Change: This uptick in self-serve revenue speaks to the recognition that this innovative platform is gaining in the marketplace. At the same time, we continue to be focused on our operational discipline, and this focus led to a further year-over-year reduction in our expenses.
Speaker Change: And aside from our improved operating efficiencies, our long-term focus remains on generating strong, sustainable revenue growth in both managed service and illumined self-serve, and we have implemented
Speaker Change: A number of sales initiatives to accomplish this, which should produce year-over-year revenue growth in the third quarter of this year. And with that, I'd like to turn the call back to Simon for his closing remarks.
Simon: Thank you, Elliot.
Simon: In summary, our second quarter results reflect another quarter of growth in our illumine self-service business despite normal quarterly seasonality and macroeconomic concerns.
Speaker Change: This growth was driven by new customers to Illumin, showing the success of our refined sales initiatives and the growing recognition of our advertising journey platform is gaining in the marketplace.
Simon: Looking forward, we will continue to advance our growth plans for both illumine self-service as well as managed services, which we consider to be an area with great promise.
Simon: We are carefully managing our cost structure while improving productivity to make sure we are working effectively and maximizing revenue opportunities.
Speaker Change: We are excited about our future and confident in reaching these goals. We look forward to delivering further growth and generating long-term value for our shareholders.
Speaker Change: Thank you all for your time today. This concludes our formal remarks. We look forward to answering any questions you may have.
Speaker Change: Nadeem Ahmed, Elliot Muchnik, Unknown Executive, Simon Cairns, Tal Hayek
Speaker Change: presentation for illumined holdings of our Q2 financial and operating results.
Speaker Change: Before we begin, I remind the audience that in order to present your question, you must first click the I want to join the stage button at the top of your screen.
Speaker Change: We will now begin our Q&A.
Speaker Change: Gentlemen, your first question comes from...
Drew Mcreynolds: Drew McReynolds
Speaker Change: Excuse me just one second.
Speaker Change: Just a moment, please.
Speaker Change: So it appears this morning we have no direct questions for management. I guess the presentation was nice, clear, and concise.
Speaker Change: Hold on one second. We have a question coming in.
Speaker Change: After all.
Speaker Change: And, once again, our first question comes from Drew McReynolds of RBC Securities. Drew, please proceed with your question when you are ready.
Speaker Change: Looks like there might be some difficulty with Trudy's connection perhaps.
Speaker Change: have oper
Speaker Change: Aravinda Galappatthige, Aravinda Galappatthige, Nadeem Ahmed, Simon Cairns, illumin Aravinda Galappatthige, Nadeem Ahmed,
Speaker Change: So looks like we are back to the no questions. Unfortunately, we were not able to bring Drew into the platform. So with that, I would like to thank Simon and Elliot and our participants this morning. Please join us the next time as we present our Q3 financial and operating results.
Speaker Change: Goodbye for now.