Q1 2025 illumin Holdings Inc Earnings Call
We'll be happy to take your questions.
In the first quarter, we had strong year over year revenue growth of 17%.
This improvement was driven primarily by exceptional growth in our exchange services segment as well as increased customer adoption and spend performance in our self service line.
While we did experience some softness, especially in managed services the strength of our exchange service and the better resilience of our self service clearly highlights the success of our targeted investments in our platform.
Managed service by its very nature and spend profile is more responsive to market conditions.
We are encouraged to see that the increased momentum in managed service in the latter half of Q1 continue into Q2.
Reflecting continued demand and continued interest.
At the core of our strategy is a commitment to supporting our customers in a flexible way as opposed to forcing them into one product or to commit to contracts with enterprise level minimums.
We've seen that our customers are responding very positively to that customer centric approach.
We're maintaining this customer centric approach that we launched in the second half of 2024 across every touch point.
Ensuring we're delivering real value and meaningful outcomes for our clients.
This approach was reflected in our ability to add new self service clients during the quarter.
In Q1, we onboard at 18 net new self service clients, which is in line with our goal of adding new higher spend the clients in this specific growth area.
While self service revenue showed modest growth year over year.
This business also exhibited several solid underlying trends such as increased customer adoption and conversion.
This includes improved average revenue per customer largely due to our customers finding more value and new features we launched in the latter part of last year, such as programmatic guarantee or PG and are consistently improving support for connected television or CTV.
This was also driven by enhancements, we've made to the platform, including our integration with walled gardens like meta.
Resulting in better customer stickiness.
Our integration with meta bolsters, our ability to drive greater campaign performance across both open web as well as through walled gardens, which in turn drives better overall conversion for that customer with much less effort and comparison to using multiple traditional single channel campaign planning tools.
In addition to these platform enhancements.
We're also extending our platform support to deal types, such as programmatic guarantee or PG with CTV channels.
We're also preparing to launch our new forecasting tool in Q2, which will add tremendous value to several channels, including CTV.
And when coupled with more automated reporting and RPG support for CTV collectively positions. Our self service product is a very compelling offering to challenger brands and agencies alike.
and reserved for only large clients with significant budgets and only from premium vendors.
Our launch of our forecasting tool democratizes this premium solution previously only accessible to marquee clients or those with large budgets.
With a lumens AI forecaster were delivering equal or better forecasting insights and making that tooling available in a flexible way to any alumina customer all without forcing them to commit upfront to massive minimums.
Based on initial feedback we believe that our flexible approach to this premium feature may accelerate trends, we are already seeing where more up level premium brands are searching for flexibility in their DSP partners and AI forecast or it makes illumina a very viable option.
We also continue to focus on driving adoption and scaling growth through targeted marketing and sales efforts.
Our efforts to market and sell more effectively and efficiently continue to yield initial positive results.
First it is helping us.
Vance, our alumina self service roadmap as I noted earlier.
It also helps us is our ability to offer our client solutions ranging from self service managed campaigns and exchange service or a hybrid approach. If that is what is best for their needs.
We continue to invest in our alumina self service platform and exchange service offering, but as a result, our adjusted EBITDA declined slightly during the quarter, despite higher revenues, reflecting these investments.
While we continue to make these strategic investments in product stickiness sales and marketing to position us for long term growth.
We're also balancing this with a focus on maintaining liquidity and improving operational efficiencies throughout our business.
This emphasis on operational discipline continues to be a priority as we look to grow our adjusted EBITDA, while preserving our substantial net cash position, which was $54 million at the quarter end.
To give a brief recap.
Our strong growth in the first quarter was the culmination of actions we initiated in the latter part of last year to expand revenue improve efficiencies throughout the company and to build a strong infrastructure processes and tactics for sustainable long term growth.
Even in areas, where we saw modest revenue growth such as self service, we are continuing to see patterns of customer adoption stickiness and spend performance that validates our focus on these initiatives.
And while we don't necessarily like today's challenging market conditions. We are pleased with the fact that we now have a messaging product and selling flexibility to pivot and adjust in real time in this environment and still deliver on growth.
Going forward I believe there is still considerable room for us to improve our marketing selling and product strategies.
Further investments, including and especially re launching our brand will be a priority for us during 2025.
Another priority for will be our team and how to utilize a more solution centric approach versus a product approach when we sell to larger higher spend clients turning us from vendors into key partners for them as well as removing any friction that remains in how we execute on any and every sale.
Complementing this we will continue to balance these efforts with an eye on ensuring we have ample liquidity to support our continued growth as well as to explore other opportunities to increase our growth trajectory.
Lastly, I want to note that our team clearly recognizes the current economic uncertainty that we're all facing related to tariffs and inflation, while we can't control. The economy, we can focus on what we can control.
Are shifting to more upward brands with bigger spend habits has helped us in Q1 as these challenger brands have more durability when it comes to market fluctuations.
With that in mind, we intend to continue leveraging our customer centric approach, which to date has served us well.
For US this continues to be the best course is clearly working for us and that's been demonstrated in our financial results the past few quarters.
Taking that into account, we are really just getting warmed up.
We will keep updating you as to our continued progress for.
Elliot: For now I will turn the call over to Elliot to give a detailed review of our financial results.
Thank you Simon.
Elliot: Everyone and again, thank you for joining our first quarter 2025 earnings call.
Elliot: Today, we reported our first quarter 2025 results, which included a strong overall company revenue growth led by 148% year over year growth in our exchange service revenue.
Elliot: This was achieved despite persistent uncertainty in the larger geopolitical and macroeconomic environment.
Elliot: I'll now provide additional details on our first quarter results.
Elliot: The first quarter revenue was $29 1 million up 17% compared to $25 million in the first quarter of last year.
Elliot: And as I mentioned earlier this year over year improvement reflects substantial growth in our exchange service segments, specifically, our exchange service business grew 148% over year to $12 million reflect the addition of new customers expanding our partnership with new suppliers and investing in key technology enhancements to the platform.
Elliot: As well as growing our customer support team experiencing measurable success in this area since the second half of last year has sharpened our focus and helps us concentrate more on this part of the business leading to growth in this segment.
Elliot: As Simon noted our self service revenue increased 1% year over year, but we are pleased to have added 18, new customer relationships in the quarter. While we continued to see increased average revenue per client.
Elliot: This self service growth was offset by a large client that reduced spending by $2 million during the quarter due to their own specific circumstances, including undergoing a business restructuring.
Elliot: We expect that the new clients, we added during the quarter were mainly offset this impact going forward as these customers ramp up their spend exclude.
Elliot: Excluding this particular large clients spend or average spend per client increased 30% year over year, we continued to refine our focus of targeting customers with higher spend potential and a greater likelihood of benefiting from this unique attributes of our platform.
Elliot: Due to our increased focus and enhanced sales efforts as well as our investment in brand product management. We expect this underlying momentum to continue as we see further adoption and utilization of our self service platform.
Elliot: Turning to managed service revenue for this segment was $8 7 million in the quarter compared to $11 8 million in the prior years Q1, and based on our ongoing discussions with our customer this year over year change was mainly indicative of the larger macroeconomic environment and the resultant reduction in some customers marketing spend until the gain greater clarity.
On the situations our clients continue to appreciate and value our broad service offering and we see continued opportunity to deliver meaningful results for them as conditions improve over the long term.
Elliot: We are now seeing a higher level of activity that continued from the second half of Q1, and we are working to build on this momentum and overcome the slower start to the year.
Elliot: Gross profit or net revenue for the first quarter was $13 1 million up 13% compared to $11 6 million in Q1 2024, reflecting this higher year sales year over year gross profit or net revenue for the first quarter 2025 was $13 1 million up 13% compared to 11.
Elliot: $6 million in Q1, 2024, reflecting higher sales year over year gross margin for the quarter was 45% compared to 47% for the same period last year, which was driven by a change in our product mix with higher proportion of revenue and service lines with lower margins such as exchange service.
Elliot: Total operating expenses for the first quarter of 2025 were $15 7 million compared to $14 3 million during the same period in 2024.
Elliot: This year over year increase reflects predominantly higher sales and marketing expenses related to increased salaries and benefits as well as commission and bonus costs associated with the higher revenue we generated in the quarter higher technology expenses related to increased variable hosting and data costs, which more than offset by a decrease in general and the <unk>.
Elliot: Administrative expenses as we continue to monitor our overall expenses carefully.
Elliot: In the first quarter of this year, our operating expenses as a percentage of revenue were 54% compared with 57, 2% in the first quarter of last year.
Elliot: The first quarter adjusted EBITDA loss was 400000.
Elliot: Compared to a breakeven in the prior year period. Despite the higher revenues. The decline was primarily attributable to higher operating costs as we had anticipated and mainly again due to sales and sales support expenses from building out our account management support team along with higher marketing costs that I discussed earlier net loss for the quarter.
Elliot: $1 9 million compared to a net loss of $1 1 million in the same period last year the year over year change reflects the higher operating cost previously discussed a lower net foreign exchange gain compared to the prior period, which was again, partially offset by the higher revenues.
Elliot: On December 23, 2024, the company commenced a new normal course issuer bid to purchase for cancellation up to $3 9 million of our outstanding common shares.
Elliot: No repurchases were made under the 2024 facility in this quarter.
Elliot: This facility remains open and can continue until December 'twenty 2025, or until we reach our targeted repurchase limit.
Elliot: Now turning briefly to our balance sheet at.
Elliot: At the end of Q1, our cash position was $54 million versus $56 million as of the end of fiscal 2020 for the quarter over quarter decrease was primarily attributable to investments in our platform payments on leases and was partially offset by positive cash from operations.
Elliot: Remain focused on shoring up our balance sheet and in addition to being a constant source of strength. It also ensures we have the liquidity to support our continued growth.
Elliot: In addition, our strong balance sheet provides us considerable financial flexibility to explore strategic and increasingly attractive acquisition opportunities in order to expand our capabilities or to increase our growth prospects.
Elliot: We believe that accretive growth opportunities in our space are becoming more available with more reasonable valuations. This.
Elliot: This will be an important focus for us in 2025.
Elliot: As of March 31, 2025, the total number of our outstanding common shares to the $51 million 704785, compared with <unk> $51 million 238056 as of December 31, 2024. This figure includes the impact of a modest number of shares issued through.
Elliot: The exercise of options and other vested equity instruments.
Elliot: On a fully diluted basis, our shares outstanding are approximately $57 5 million and our insider share ownership is that just under 24% and $23 six.
Elliot: In conclusion during the first quarter, we delivered strong year over year total revenue growth, including exceptional revenue growth in our exchange services business, which in turn was driven by our recent investments in that area. This is consistent with what we said on our last earnings call that we expected to record higher expenses in the first half of the year mainly.
Elliot: Continued investment to enhance our product platform strengthened brand identity as well as certain initiatives to increase our sales capacity efficiency and focus by our enhanced account management team. This team will be focused on increasing client satisfaction retention and incremental spend along those lines. We also said we would expect more.
Elliot: <unk> third and fourth quarters. Once those investments were largely completed and this view has not changed assuming that the short term headwinds we are experiencing related to tariffs and persistent macro economic uncertainty ease. We continue to believe in our long term prospects and intend to remain focused on cost management and generating strong sustainable revenue growth.
Simon: With that I'd like to turn the call back to Simon for his closing remarks.
Simon: Thank you Elliot and closing we had a strong first quarter in terms of revenue growth.
Simon: This was mainly led by outstanding growth in our exchange services business, which benefited from our targeting investments in this area.
Simon: While growth in self service was modest we continue to see strong input trends into this business line, including adding new alumina self service clients increased customer adoption and conversion.
Simon: Our results in managed service were less than we were targeting but given the nature of their higher spend profile. It was not surprising that they were more subject to changing market conditions.
Simon: We expect these factors may continue to cause delays in marketing spend in the short term to address this environment, we will remain highly tactical in our marketing and selling shifting to where we see green shoots all while keeping our focus on managing costs and improving operational efficiencies through our organization.
Simon: At the same time, we will continue to focus on capitalizing on the longer view growth opportunities such as platform improvements in CTV. So we position ourselves for long term success.
Simon: Thank you all for your time today. This concludes our formal remarks, we look forward to answering any questions you may have.
Speaker Change: Good morning, gentlemen, and thank you to everyone for attending this morning's presentation of alumina holdings first quarter 2025 financial and operating results.
Simon: I would like to begin by reminding our analysts that in order to present. Your question you must first select to raise your hand icon on your screen.
Simon: Okay.
Speaker Change: Our first question comes from Daniel Rosenberg of paradigm capital. Daniel. Please proceed with your question when you are ready.
Simon: Yes.
Simon: Yes.
Simon: Morning, Simon and Elliot.
Simon: Taking my question My first one is around the macro environment.
Simon: Obviously, now changing and fluid one, but I'm wondering given what we've seen.
Simon: Numbers and exchange versus manage how directly.
Simon: Impacted by tariffs, if youre able to Arthur fired some color around that.
Simon: From our point of view, we're a small company in my view, we have the opportunity to really.
Simon: Drive our own performance.
Simon: I think it is a tougher environment out there, but we're not using that as any sort of shield or excuse we're focused on winning customers across the org, we've set up an environment, where all of our products should be able to win but our muscle strength is definitely strongest on shelf. We saw good to strong influx of new customers coming into self we saw good strong flexing upwards in terms of spend on <unk>.
Simon: Self managed I think there is from that point of view that muscles less mature I think if anything those customers were.
Simon: More wary of just macro market conditions, but in terms of what we saw on the on the product side and on the overall space My personal opinion as CEO is we are going to determine our success in Europe. This year largely based on entirely our work our product development, our sales and marketing strategies and not really factoring in our re managing back on some sort of tariff economy.
Simon: <unk>.
Speaker Change: Okay appreciate that Marc and I guess, the follow on would be or said differently. The beauty. So if we werent to see the tariff environment is.
Simon: Could we see a reversal in some of the trends we saw this quarter.
Simon: Manish.
Manish: What I see in terms of when I look at the core inputs. So I mean, even going down to the granular level. So like number of communications, we're getting inbounds from customers number of leads where customers are responding to say our marketing when I look at stickiness on our platform for our customers are experimenting with that product.
Manish: When we launch new sellers for example, who may be come from other companies with books of business their time to ramp up to getting proposals out all of those inputs are trending strong word an upward to the right in a way that they should be and so when we look at the inputs, yes, if theres a malaise in the economy out there from our point of view we are.
Manish: We're seeing good customer interest and we are pulling the sort of right leavers to also earn that customer interest.
Manish: So from our point of view.
Manish: Yeah, if if theres a spring back in the economy right now.
Manish: Firmly believe we have been building the right product over the last year and it certainly seems when I look at the core metrics on how we're selling how we're differentiating ourselves messaging, we're putting out there when we test up it is responding so.
Manish: You know like I said, we're going to we're going to continue down the path, we like what we see in terms of the inputs, we need to translate that into sales right now where that I mean, that's where all of our effort is going and its economy Springs back then I think we're well set up to capture that across all three product lines.
Manish: Of note we did invest in you know just just isn't a minor example on exchange we invested in improving the algorithm. We invested in you know trying to essentially differentiate the product in an extremely tight marketplace, where differentiation is very very hard and we also layered in some additional sellers largely to capitalize on some of the trending we saw around exchange of Q3 and Q4 that we previously.
Manish: We discussed and it won the day in Q1, we saw solid hundred are up 148 points quarter on quarter on exchange and so again like when I look at the process, we're going through like let's test. This let's invest in this to tune this let's let's flip over some new sellers, let's look at testing the Stefan level marketing, if we launched this product or fee.
Manish: Or is it going to stick it looks like our process of taking data than making smarter decisions versus any decisions not chasing after every sign the object, but instead look really listened to what the customer how they want to be support across the board all of those inputs are strongly indicating that there is there is interest in and where we're going with the product lines tight economy for sure, but I think we're well set up.
Manish: And is it snaps back.
Manish: Okay.
Manish: And I guess on that topic of product your AI tools forecasting.
Manish: There's going to be.
Manish: <unk> launched.
Manish: So I'm wondering how you're thinking about.
Manish: Obviously theres value adds hearing customers say is this kind of.
Manish: And new ways to engage customers and started discussion with that name clients and or will it be consistent with the sales pipeline and this is another value add another lever to kind of keep retention high and increased spending per account.
Manish: So it's a really good question and really two answers for you. So when I think about AI forecaster and new customers I think it is a strong driver to bring in new customers. One of the things we've been experimenting with is how do we reach out connect than land and helps succeed higher spending customers sort of get into a higher spend range.
Manish: And you know what we've done so far seems to be resonating I think we've got a lot of work to do there I think we're still like really in the infant stages and I want to actually get us up to a much larger level of spend quickly and in order to sort of validate that aside from the like the usual attractors around state limits office, we do need some key features and one of those absolutely critical features.
Manish: As in the AI forecaster. This is a tool that is typically reserved.
Manish: You know it is available elsewhere, but it is typically reserved for a large upfront contracts in big commitments and so when we talk to these brands. These challenger brands are like Hey, you had forecast or we might flip you some of our business we might switch all of our business, especially if we don't have to be beholden in tight times, two 5 million 6 million 4 million dollar upfront commitment and so from our point of view.
Manish: We know we have the right tack, we know we're building a solid platform, which in the end, we'll get to that effect, but we think that AI forecaster can bring us in new customers because when they look at sort of what they need to be successful we've got the right <unk>.
Manish: We've got the right UX, we've got the right support team we've got the right track record that they've used to validate us we've got the right channel support can you really helped us sort of manage our you know our our cash flow and our commitment budget on a week to week and month to month basis in AI for us forecast or does.
Manish: What is in that game first and foremost, but puts us in that game in a way that's much more customer centric doesn't commitments that expense. So we think that's going to bring us new customers as for performance on the newly sort of coming into alumina, especially lumens self but also lumen manage.
Manish: Related to their spend performance and the stickiness of the platform again like arrows are up into the right in terms of stickiness, but again, we think that AI forecaster will also help them because in the end when you really want to be successful out there in the world you're going to need a few key tools in your quiver Nai forecasters, one of them and we're proud to bring it to them in a way that we think is it's definitely going to be beneficial so.
Manish: It is two sided win and then like my last note on AI forecast or is.
Manish: It is essential to me as CEO and I think as to the company in the long term as it builds value for itself and for customers and for shareholders that we do build a robust tech platform, where we can start to really create.
Manish: That delta between revenue growth and operating expense and so a key to that is longevity and performance of customers who are already on the platform. They come at a lower customer acquisition costs. They have a higher spend performance based on our history. So how do we maximize that an AI forecaster plays a tool and really sort of building up that alphabet, that's really going to land.
Manish: Them and keep them and hold onto them and help them succeed with us and we think that that long term ability to drive that stickiness is another benefit that we get from a forecaster hope that helps.
Manish: Hope that helps.
Manish: Yes. Thank you.
Manish: Lastly for me I think it's Bruce and.
Manish: The cash position has been on the balance sheet for a while and you touched on M&A and your comments I was just wondering if you could speak to the environment.
Manish: Bye.
Manish: Specialists are having.
Manish: Al.
Manish: Any opportunities.
Manish: It's looked at and whether valuations have changed and the conversations you're having.
Manish: Yeah actually again solid question. So what I am pleased with is is we have had discussions internally.
Manish: We have said publicly that we want to use our balance sheet. After we demonstrate patterns of growth I feel like we're in that position now.
Manish: We are looking at different opportunities, where we could acquire.
Manish: Essentially different sort of customer base is if there is somebody out there who need to self service product and theyre great in certain vertical.
Manish: Maybe that's a play for US we have seen some we.
Manish: We have seen some technology come at US, we're typically shy on unproven technology, but.
Manish: We have actually seen some technology come at us where they actually have a customer base and they have some accretive ability.
Manish: And so we like that and and in at least on the little harder on the private company side, but on the public company side, where we have seen some smaller opportunities we have seen valuations changing and favorably for us.
Manish: So right now we.
Manish: It is a tool in our Arsenal to grow this business I think first and foremost we win the street cred by growing the organic building, a robust business and growing it organically, but we don't want to be shy in this area. If we have opportunities, where we can be accretive and grow the business and also layer on in key growth channels. For example, and that's those are the things we want to execute on it and so we are out there in the market and.
Manish: And we are seeing USA seeing interesting opportunities.
Manish: Yes.
Manish: Okay. Thank.
Manish: Thank you for that I'll pass the line.
Speaker Change: Much Daniel I don't believe there are any other questions from the audience. This will conclude our presentation for this quarter my thanks to Simon and Elliot and our analysts for and shareholders for joining US. This morning. Please join US next time as we present, our Q2 2025 financial and operating results.
Manish: Goodbye for now.
Speaker Change: Yeah.
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