Q3 2025 illumin Holdings Earnings Call
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Speaker #2: Good morning , everyone . Before we begin , the official remarks , I will read the cautionary note regarding forward looking information . Certain information to be discussed during this call contains forward looking statements within the meaning of applicable securities laws , including , among others , statements concerning the company's objectives .
Speaker #2: The company's strategy to achieve those objectives , as well as statements with respect to management's beliefs , plans , estimates and intentions , and similar statements concerning anticipated future events .
Speaker #2: Results , circumstances , performance or expectations that are not historical facts . Such forward looking statements reflect management's current beliefs and are based on information currently available to management and is subject to a number of significant risks and uncertainties that could cause actual results to differ materially from those anticipated .
Speaker #2: Please refer to the cautionary statement and the risk factors identified in our filings with CDER for a more detailed explanation of the inherent risks and uncertainties that could affect such forward-looking statements.
Speaker #2: Following the presentation , we will conduct a Q&A session . I would now like to turn the conference call over to Simon Cairns , Chief Executive Officer .
Speaker #3: Thank you , Steve . Welcome , everyone , and thank you for joining us on today's third quarter 2020 earnings call . I'll start by reviewing the operational highlights for the quarter , then discuss how our strategic pivot towards an integrated outcomes based platform is meeting growing industry demand .
Speaker #3: After that , I'll turn the call over to our chief Financial Officer , Elliott Mutchnick , who will review the financial results in detail .
Speaker #3: Then we'll be happy to take your questions . Our third quarter results demonstrate that our strategic pivot towards an integrated outcomes based platform in exchange and self-service , supported by managed services , is meeting growing industry demand .
Speaker #3: Revenue rose 5% year over year to 38.2 million , driven by exceptional 103% year over year growth in Exchange Service revenue . Exchange now represents 54% of our total sales at 20.5 million , more than doubling from the prior year period .
Speaker #3: This exceptional performance reflects strong execution by our commercial and technology teams in capturing publisher demand as they seek new value . That traditional ssps no longer provide cell service revenue was 8.3 million , representing 22% of total revenue .
Speaker #3: Now , the headline number appears flat compared to 8.4 million in the year ago period . But that doesn't tell the full story .
Speaker #3: Our year over year comparison continues to be impacted by a single large client that paused spending in early 2025 due to their own restructuring .
Speaker #3: When you exclude the temporary impact , cell service , sales were actually up 15% for the quarter and 34% year over year . That's the real trajectory of this line of business .
Speaker #3: Specifically , we onboarded 23 net new self-service clients during the quarter , reflecting our sales initiatives targeting higher spend clients and positioning us for long term revenue growth .
Speaker #3: These aren't just any clients. They're the type of customers who align with where the market is heading and where our platform capabilities provide the most value.
Speaker #3: In uncertain markets like we've seen through 2025, a Lumen is attracting new customers to its exchange service, offering alternatives as publishers seek options to older, established SSPs.
Speaker #3: At the same time , more brands are shifting to self-service options with a goal of converting more of their ad spend to actual advertising rather than service fees .
Speaker #3: The market is clearly moving away from traditional DSPs and towards AI powered outcomes based platforms , with integrated retail media capabilities . This shift validates the strategic investments we've been making to lead this transformation .
Speaker #3: We recently appointed Brian Garrigan as our Chief Revenue Officer . Brian brings proven adtech leadership and a track record of driving scalable growth .
Speaker #3: Most recently, Transforming Simplify into a category leader. We're excited to have Brian leading our global sales, account management, and client success efforts as we scale our platform.
Speaker #3: Our investments in leading in-app incrementality measurement are expected to be rolled out later this year , and in the first half of 2026 , combined with our plan to transition self-service to a fully generative AI solution in 2026 .
Speaker #3: These capabilities will enable us to add far more value to brands and marketers well beyond the historic customer profile , and increase our growth trajectory .
Speaker #3: This isn't just about keeping up with the market , it's about positioning a lumen to lead in an increasingly competitive landscape , particularly in Incrementality measurement and AI powered optimization .
Speaker #3: These are the capabilities that will differentiate winners from everyone else in our space . Now , managed service revenue was 9.4 million , down from the prior year .
Speaker #3: As per earlier this year , market conditions have impacted advertisers willingness to market on a full funnel basis , which has impacted our managed sales .
Speaker #3: As such , we can't sugarcoat this . Managed is a challenge , but platform data indicates we have a very sellable solution . Our platform data indicates that we're attracting larger , premium focused agencies as opposed to our traditional mid-market agencies .
Speaker #3: These agencies are willing to pay a premium for performance and our managed services performance and pricing are as good or better than any of the larger brands in our industry .
Speaker #3: As a result , we are now refocusing our sales pitch around a revitalized , managed matched with some additional services that reach beyond our traditional DSP capabilities .
Speaker #3: And as a result , in Q4 , we are already seeing better performance in our managed pipeline . Furthermore , our managed services is now integrated with exchange .
Speaker #3: So just like in self , we can offer compelling pricing and supply chain optimization to our managed service and self-service clients alike . This brings our managed services pitch in line with an outcomes based approach to the platform that is proving itself out in both exchange and self-service .
Speaker #3: Already . For too long , the managed line has been sold as us assisting you in producing great campaigns . You'll see us reposition the entire sales pitch under our new CRO to focus on outcome based approaches and how it can serve as an upsell to self-service solution .
Speaker #3: Regardless of our revitalized approach and managed . Given the year to date challenges in like for like managed sales . We've taken decisive actions to streamline operations through cost containment and to accelerate our shift towards scalable , technology led revenue .
Speaker #3: With a focus on improved cash flow generation and protecting our balance sheet . To be clear , we're not just cutting costs . We're fundamentally restructuring operations to drive profitability and realize platform leverage .
Speaker #3: Our generative self-service version not only removes friction in customer adoption and spending , but also creates new opportunities to realize that platform leverage .
Speaker #3: As we close 2025 and move into 2026 , our priorities are crystal clear . First , continue scaling , exchange , and self-service through platform innovation and sales execution .
Speaker #3: The momentum is there . We need to capitalize on it . Secondly , continued investment in our product roadmap to differentiate ourselves and increasingly competitive market , particularly in incrementality measurement and AI powered optimization .
Speaker #3: These aren't nice to haves . They are must haves for sustainable , competitive advantages . And third , complete our operational restructuring to drive profitability and platform leverage .
Speaker #3: The early benefits from restructuring and cost reduction initiatives we've been implementing this year are already visible, and these actions are helping us position the company for improved profitability as we move into 2026.
Speaker #3: We're confident this strategy will position the lumen for sustainable , profitable growth . Now , I'll turn the call over to Elliot to provide detailed review of our third quarter financial results .
Speaker #3: Thank you . Simon . Good morning , everyone , and thank you for .
Speaker #4: Joining our third quarter 2020 earnings call . Today we reported our third quarter 2020 results that included sustained revenue growth driven by another quarter of exceptional performance and exchange service , which rose , as Simon mentioned , 130% year over year as our initiatives to drive adoption and expand demand continue to pay off .
Speaker #4: I will now provide additional details on our third quarter results . The third quarter revenue was 38.2 million , up 15.4% compared to the 33.1 million in the previous quarter and 5.2% compared to the 36.3 million from Q3 of the prior year .
Speaker #4: Our year over year revenue growth continues to be driven mainly by strong performance in our exchange service business and stable revenue in our self-service , partially offset by a decrease in managed service revenue .
Speaker #4: Our growth in Exchange Service was driven by adding new customers in this area , as well as an increased volume of spend by our clients .
Speaker #4: We are now seeing the benefits from our efforts over the past year to invest in key technology improvements , working with external partners to improve these capabilities , and by providing better service .
Speaker #4: Due to our expanded customer support team . Turning to self-service revenue was 8.3 million , relatively stable with last year's third quarter and representing 22% of total revenue for the quarter .
Speaker #4: Year over year comparison in self-service continued to be impacted . As mentioned earlier by a large client , that reduced spending this year due to their own specific circumstances , including undergoing a business restructuring .
Speaker #4: Excluding this spend of that client from both comparative periods , self-service revenue grew by 15% over the same period last year and 34% over the nine months .
Speaker #4: Comparative . We onboarded 23 new self-service clients during the quarter , reflecting sales initiatives targeting higher spend clients . Our focus remains on targeting higher spend clients , as we see further progress in raising customer adoption , conversion and spend performance .
Speaker #4: In this segment . In managed service revenue , here was 9.4 million for the third quarter , compared to 17.8 million in Q3 2020 .
Speaker #4: For this year over year , change was mainly due to larger economic uncertainty , which has been influencing some marketing spend , and we anticipate to continue this in the near term to mitigate the effects .
Speaker #4: We're already taking measures to reallocate resources in order to drive improved sales in this service line . As part of a larger series of initiatives .
Speaker #4: Gross profit or net revenue for the third quarter of 2025 was 14.4 million , compared to 17.2 million in Q3 2020 . For reflecting increased media related costs , which showed in the gross margin for the quarter as it was 38% compared to 47% for the same period in 2020 .
Speaker #4: For this year over year variance reflects a shift in our product mix with a higher portion of revenue coming from service lines with a lower margins , such as exchange service .
Speaker #4: We expect gross margin to return to a level more consistent with prior quarters in Q4 . Based on our current pipeline . Total operating expenses for the third quarter of 2025 were 17.5 million , compared to 18 million during the same period in 2020 .
Speaker #4: We expect gross margin to return to a level more consistent with prior quarters in Q4 . Based on our current pipeline . Total operating customer decrease reflected lower technology expenses .
Speaker #4: General and administrative costs and share based compensation . This was partially offset by increased depreciation and amortization attributable to an increase in capitalized costs .
Speaker #4: Irap funding received in the prior year period and higher sales and marketing expenses, which were primarily related to the increased salaries and benefits, as well as commission and bonus costs associated with higher revenues for the quarter.
Speaker #4: Q3 2025 operating expenses as a percentage of revenue were 45.8% , compared to 49.9% in Q3 2020 . For third quarter , adjusted EBITDA was 0.2 million compared to adjusted EBITDA of 1.9 million in the prior year period .
Speaker #4: Despite the higher revenues . The year over year decline was primarily attributed to lower gross margin . As a result of product mix and higher sales and marketing expenses , partially offset by lower general and administrative expenses .
Speaker #4: Net loss for the third quarter of 2025 was 2.1 million , compared to a net loss of 1.1 million in Q3 2020 . For the year over year change reflects the lower adjusted EBITDA .
Speaker #4: As mentioned above , higher depreciation and amortization expense and higher severance expenses . As part of our cost containment initiatives partly offset by net foreign exchange gain versus a loss in the prior period .
Speaker #4: On December 23rd of 2024 , the company commenced a normal course issuer bid or NCIB , to purchase for cancellation up to 3.9 million of its outstanding common shares .
Speaker #4: As of September 30th, a total of 744,108 shares had been repurchased under this facility, at an average price of $1.65 per share, for a total cost of $1.228 million.
Speaker #4: This includes 432,490 common shares during the third quarter of 2025 , at an average price of $1.57 per share , for a total cost of 680,123 .
Speaker #4: The normal course issuer bid remains open and can continue until December 22nd , 2025 , or until we reach our targeted repurchase limit .
Speaker #4: Turning to some corporate information on our balance sheet , we exited the quarter with $43.2 million in cash versus 48.3 . As of the end of the prior quarter , the quarter over quarter decrease was primarily attributable to investments in our platform payments and leases .
Speaker #4: The repurchase of common shares and negative cash flow from operations . The negative cash flow from operations is consistent with the seasonality of our business and industry , and typically reverses in the fourth quarter .
Speaker #4: We continue to maintain a strong balance sheet in order to support our growth and to support our flexibility to develop our strategy . Despite ongoing difficult market conditions .
Speaker #4: As of September 30th , 2025 , the total number of outstanding common shares stood at 51,821,042 , compared to 51,612,725 as of June 30th , 2025 .
Speaker #4: The figure reflects the impact of shares issued through the exercise of vested equity instruments, offset by our share repurchases during the quarter.
Speaker #4: On a fully diluted basis, our shares outstanding are approximately 55.9 million, and our insider share ownership is at 25%. In conclusion, our third quarter results were fueled by strong performance in our exchange service business.
Speaker #4: As a result of our targeted investments in this segment and stable performance in self-service revenue as anticipated , operating expenses have started to decline as the majority of our growth investment designed to enhance our product platform , strengthen brand identity , increase client satisfaction , improve efficiencies and drive sales are now behind us .
Speaker #4: In addition , we continue to implement various cost reduction and restructuring initiatives in order to better align ourselves with the current economic environment .
Speaker #4: These actions are designed to drive sales growth , enhance our competitive position , and to improve efficiencies throughout the organization . We remain confident in our long term growth prospects as we continue to balance cost management with investments in key growth initiatives to drive revenue and improved profitability .
Speaker #4: And with that , I'll now turn the call back over to Simon for his closing remarks .
Speaker #3: Thank you . Elliot . Let me summarize what Q3 tells us about where we're headed . Our third quarter results demonstrate real progress in our strategic transformation Exchange service .
Speaker #3: More than doubled , proving that our platform approach resonates with publishers seeking alternatives to traditional ssps . When adjusted for temporary exit of one client , self-service revenue was up 34% year over year .
Speaker #3: And 15% for the quarter . That's the underlying health of this business . Yes , we are navigating headwinds in managed services , but we addressed this head on through operational restructuring that already is showing benefits while accelerating our shift towards a scalable , technology led revenue .
Speaker #3: The market shift towards outcome based platforms with AI powered optimization and integrated retail media capabilities validates our strategic direction , our investments in Incrementality measurement and generative AI for self-service will position us to capture that opportunity as we move into 2026 , we're focusing on three things scaling our high growth services , differentiating through product innovation , and driving profitability through operational efficiency .
Speaker #3: These aren't just nice to have improvements , they are the foundation for sustainable , profitable growth . We appreciate your continued support and look forward to demonstrating continued progress on these priorities .
Speaker #3: Thank you all for joining us today. This concludes our formal remarks. We look forward to answering your questions.
Speaker #2: Good morning , gentlemen , and thank you to everyone for attending this morning's presentation of Lumen Holdings third Quarter 2025 Financial and Operating Results .
Speaker #2: I would like to begin by reminding our analysts that in order to present your question , you must first unmute yourself and select the raise your hand icon on your screen .
Speaker #2: Gentlemen , your first question this morning comes from Aravinda Gullapalli at Canaccord Genuity . Aravinda , please proceed with your question when you are ready .
Speaker #5: Thank you . Just two questions from me . First of all , maybe for Simon , can you just talk a little bit more about the innovations that you're looking to bring in ?
Speaker #5: I mean , maybe explain the features and how they're different from what you see in the industry , specifically on the AI automation side of things that could , you know , that could potentially attract more self-service revenue .
Speaker #5: And then secondly , I guess this is a quick question for Elliot . Can you just help us understand what the FX impact was ?
Speaker #5: It looks like a lot of the exchange revenues are , you know , are let em or Europe based wanted to understand sort of the constant currency revenue trend was and sorry just a quick one on the margins .
Speaker #5: How different are the exchange services margins from from self-serve and manage just some just some general color on that . Thank you .
Speaker #3: Thanks , Aravinda I can go first . Just regarding your the product , your questions around product innovation going forward . So we've seen a material sort of shift in the DSP marketplace from a .
Speaker #6: Customer lens moving away from inputs . In other words , help me spend my advertising dollars across a variety of channels towards really help me understand what value I'm getting for my my marketing dollars .
Speaker #6: In other words , a shift from inputs to outcomes . From our point of view , we have found a a very solid pathway through this shift based on some of the extensive investment that the company has made over the last several years in its self-service product .
Speaker #6: In particular , its journey canvas . So first and foremost , we've we have found a path to really layer in what the industry calls incrementality .
Speaker #6: This fundamentally is creating a link between advertising spend and new business growth . Most of the advertising industry is essentially approximation spend money over here and you will get incremental business over there .
Speaker #6: We have found a solid pathway to do this within within the experience in a near real time basis , as opposed to having to jump out to third party applications or wait weeks at a time .
Speaker #6: I am very proud of the product team and what they're doing there to sort of start to roll this out , start to piece it together through Q3 , Q4 , Q2 , and into early 2026 .
Speaker #6: That is a solid shift in how the product has historically been positioned and the value prop that it historically offers . And we are seeing climbing interest as a result of that , that also widens up our applicable customer base to a wider array of in particularly direct brands .
Speaker #6: Brands are the ones that want to most solve this problem . So it does create a good link between revised brand marketing , revised product marketing and revised product stance around shifting to an outcomes based .
Speaker #6: We found a pathway through and this layers into generative AI quite quickly . We have a lovely drag and drop canvas that has been a great wow factor with customers in the last several years .
Speaker #6: Imagine just being able to interact directly with that either through voice , either through keyboard . Have the machine do a lot of the setup , a lot of the refinement .
Speaker #6: You always have control . Of course , and so we see a way to create a very intelligent and a very interactive and most importantly , I think an absolutely frictionless self-service campaign .
Speaker #6: And orchestration and optimization, not just a tool, but a platform that gives us a data layer that's quite compelling, that provides us with an experience layer that I think is unique and different, and certainly better than anything I've seen in the market right now.
Speaker #6: And I like the fact that from an investor's point of view , we leverage a lot of of the investment we've already made in the product the last several years to deliver them .
Speaker #6: What I think is the full promise of self. So hopefully that gives you some commentary.
Speaker #4: Was that okay with you ? Do you want to move on to your second question ?
Speaker #5: Yeah , it's good . Yeah , yeah , just on the , the the the the margin differentials . I was wondering if you can just sort of give us a sense of and also the , the , the effects here .
Speaker #5: Yeah .
Speaker #4: Absolutely. Thank you for that question. Good morning. The exchange effects are really because we built in the U.S. The transactions happen in USD, and in Q3, I believe the exchange rate with CAD showed that the U.S. dollar strengthened against the Canadian dollar from 1.36 to 1.39.
Speaker #4: So we were it's that's part of the overall FX gain that you saw in the books from a margin perspective , the exchange represents a a margin profile .
Speaker #4: That's lower than our other two lines in particular , the managed in self . So it is generally in the low to mid 30% gross .
Speaker #4: Take position . But it also has additional SG&A expenses that follow with that business in particularly the highly variable . So such as hosting , which we don't see in our other lines , where we can get more scale .
Speaker #4: So it's a it's a very solid , strong business for us . But and but it does represent a smaller proportion from a margin perspective , which is why you see the overall dip because of the proportion of exchange this quarter .
Speaker #4: As a top line part . Does that answer your question ?
Speaker #5: Yes, it does. Thank you.
Speaker #7: Thank you .
Speaker #5: I'll pass the .
Speaker #7: Line .
Speaker #2: Great . Thank you for that . Arvind . I think there was a third part to your question . That was it . Okay .
Speaker #2: Thank you very much for that . Our next question comes from drew McReynolds at RBC securities . Drew , please proceed with your question when you're ready .
Speaker #2: Can you .
Speaker #7: Hear me .
Speaker #6: I can , yes . Can you hear me ?
Speaker #7: All right . Yeah okay .
Speaker #4: Good morning .
Speaker #8: Yeah , I can I can hear you guys . If you can hear me . And I think this is the first with our technology on our end .
Speaker #8: So nice to connect any event . Some follow ups for me . Maybe starting with you , Ali . Just on cost efficiencies .
Speaker #8: Just where are you in terms of kind of realizing those cost efficiencies with Q3 and kind of how do they funnel in as we go forward ?
Speaker #8: And then second question , maybe for you , Simon , on the managed services side , obviously there is a ton of change .
Speaker #8: That's happening in the ad tech world . You know , what do you see here in this segment as kind of cyclical versus structural and and maybe a third one just on the self-serve .
Speaker #8: Just remind me , when do we lap that pause in customer spend earlier this year . Thank you .
Speaker #4: Thank you drew . And good morning . And I am really happy that we both have our technology aligned . This time around so we could hear each other clearly .
Speaker #4: So to your question as to the cost efficiencies that we undertook at the end of the second quarter , we've actually been able to realize those cost efficiencies .
Speaker #4: There are some tail on that around real estate that's going to take probably until the end of the year to to actualize here .
Speaker #4: But for the most part , we're seeing that . So one of the reasons that it's obviously impacted this year a bit is because it involves people .
Speaker #4: So there was a severance charge that reduced the cash impact of those savings . And at the same time , you know , as our margin profile changed it , it obfuscated some of the savings on our SG&A that we were realizing by the fact that we have a lower gross profit and some additional expenses to support the business .
Speaker #4: That is that is surging . But we're we're in we've done what we needed to do at the end of the second quarter .
Speaker #4: We've made substantial changes in our headcount in particularly in North America and repurposed a lot of those investments focus as to what Simon said is to with our existing , with our existing capital to support these innovations , that with our existing people and to focus on sales growth .
Speaker #4: So from our perspective , we've accomplished what we needed to do with the cost savings . We're just , you know , looking at the profile of the business and seeing how it's progressing in Q3 was probably we saw a bigger fallback in our top line from management than we had expected .
Speaker #4: Does that answer your question , drew ?
Speaker #6: I can take the question as .
Speaker #8: Yep , that's great . Thank you . Yeah , maybe on to Simon on the managed services side .
Speaker #6: Thanks , drew . And thanks for the question . So you asked about cyclical and then also structural . So in terms of cyclical through the first sort of calendar half or three quarters of this this year , the way I would characterize the cyclical impact on manage is the some of the opaqueness in the the global trade economy in particular .
Speaker #6: All goods going in and out of the United States . Obviously . So specifically , what I mean is , if you're a marketer and you're trying to plan your your fall or your holiday or your seasonal discounts , your offers to capture , say , consumer demand or new customer business in the second half of 2025 and you're you're starting your brand campaigns , your full funnel campaigns out in January , February or March and April in order to drive that demand , a lot of marketers told us that they they suffer from being really unclear about what discounts , what offers they can .
Speaker #6: They can have because they don't necessarily know what the margin is on their products , given tariffs , for example . So across the board , they sort of hit pause on some of the , the , the top of funnel advertising .
Speaker #6: This is primarily brand advertising positioning , advertising . And instead sort of just went with short term practical tactical . They secured enough inventory for their products .
Speaker #6: They know what their price is . They know what margin they're going to make on their products . They know what discounts they can offer .
Speaker #6: So they went practical , tactical in Q2 and Q3 , we see that where we see spending for example , in brands and whatnot , active on , say , self-service products to achieve that , managed offers both offer full funnel value , but manage usually gets more customers who want to do more full funnel work .
Speaker #6: They want to do a bit of that brand work , plus a bit of the practical tactical . And with that brand work , sort of shifting downward across the first half of this year , that that is the cyclical side that did impact manage for us year to date .
Speaker #6: This is not unique to us . There are several industry reports that note that on the whole , full funnel advertising really took a beating .
Speaker #6: The first half of this year . Most people went practical , tactical on the bottom of the funnel . And again , you can use your self-service product for that at a at a cheaper rate .
Speaker #6: And so both agencies and brands have you can get as good or better results for a more competitive margin . It makes sense .
Speaker #6: And that's part of the reason why on a like for like basis , we've seen a year to date a 34% increase in sort of customers using self on a revenue basis in terms of of structural .
Speaker #6: So slightly different story . There . Because we have sort of seen brands and agencies adopt self and they're getting good results . And the margin profile is different .
Speaker #6: Naturally . We've seen that the customers who are winning with us on managed and that's really my lens . Not so much are we winning ?
Speaker #6: But are they winning with us . Are they getting good value . Are they sticking through those customers are slightly different than our historic ideal customer profile .
Speaker #6: There actually larger , bigger , more robust agencies who are willing to pay a premium for premium support , premium service , white glove support , insights , ideas , coaching and so while the customer segment is , it shows up in our results , it's definitively smaller .
Speaker #6: What we're seeing right now , which is why we are seeing a material decline in the managed results year to date . But those customers themselves are actually quite solid .
Speaker #6: So this means that we do need to rebuild the pitch . We do need to reposition managed around sort of a bit of more of a premium service , you know , a bit more sort of what are the motivators of these larger agencies , for example , who are willing to pay the premium to get that extra differential with their customers .
Speaker #6: And so with our new CRO and with some other platform innovation , we're doing that I mentioned in the previous question specifically related to outcomes .
Speaker #6: This is a big piece . We feel like we've got the cards now , in our hands . You know , finally , I think to have a good , meaningful outcomes centric , performance centric , upmarket pitch on managed , it's essential for us to now push that out into the marketplace and get that managed , pipe up and get the managed sales up in 2026 for sure .
Speaker #6: So hopefully that answers your question .
Speaker #8: Yeah , that's that's super explanation . Thank you for all that . Yeah . And then just lastly just lapping the the one customer .
Speaker #6: Oh sorry I think I can say Q1 . But you know Elliot may want to correct me on that .
Speaker #4: No , that's absolutely right . They were this customer spent well throughout the year was particularly focused on the first half of the year .
Speaker #4: And concentrated in the first quarter .
Speaker #8: Okay . That's great . Thanks very much .
Speaker #7: Thank you .
Speaker #2: Thank you very much for your questions , Drue . Gentlemen , your next question comes from Thomas , who from Paradigm Capital . Thomas , please proceed with your question .
Speaker #2: When you are ready .
Speaker #9: Hey . Good morning , Simon and Elliot . My question is just on the revenue mix . So for this quarter , there was some shifts , and you guys are going through your transformation .
Speaker #9: And there was the effect of a large customer . My question is whether we can take this quarter as a baseline for maybe Q4 .
Speaker #9: And then as we move further out into 26 and into the future , where do you see your ideal revenue mix to be in the business ?
Speaker #6: I could take I don't know , necessarily say it was guide to sort of similar . I'll let Elliot sort of answer that in terms of Q4 , but I will say that we do expect the gross margin in particular to bounce back in Q4 .
Speaker #6: And I would want to call that out and not have that necessarily buried under the lead of your question . So we did see a decline in gross margin this quarter , partly due to , you know , some some mix shift for sure , but also , you know , we again , we've had some larger customers on the DSP side , a larger customer , in particular on the DSP side , who you know , experimenting with us , testing with us .
Speaker #6: And at a lower margin profile . And that that pulled it down , you know , so we do expect a bounce back in the gross margin in Q4 .
Speaker #6: So I did want to call that out . But but but I'll let Elliot provide probably a more adult answer . Just related to the Q4 .
Speaker #4: Thank you , Simon , and good morning , Thomas . So we don't believe that Q3 is representative of our going forward . We we we had particularly , you know , a quarter where managed fell off while others remained stable or grew .
Speaker #4: We believe that with what we're doing with the effort that we're putting in and the things that Simon discussed in his remarks , that those will help us kind of deal with the immediate headwinds in managed service .
Speaker #4: And so we're actually we believe that that's a line that we could improve . And thereby improving our gross margin overall . And our bottom line performance as a result .
Speaker #4: So I would not draw a line from Q3 . It's it's a from from a proportionality perspective , it's quite out of line .
Speaker #4: We think that we should be with managed in self-serve to have the largest proportion of our top line with , with exchange , still a strong a very strong participant , but perhaps not at the level that it has been in Q3 .
Speaker #9: Thanks for that . And I guess my last question would be the focus on the ideal customers . I think you hinted on a couple of times that you're shifting towards larger agencies , as well as brands , maybe a little bit more about like what you can share on that .
Speaker #9: That would be great .
Speaker #6: We historically have gone after customers of a certain sort of lower mid-market spend profile , sort of maximum six figures , and where we're seeing better customer first and foremost interest in us .
Speaker #6: And then secondly , spend performance , the willingness to migrate from managed to self or from self to managed , whether they are an agency or a brand .
Speaker #6: These these spenders are are in the seven figure grouping . So trade trade Desk has a strong held position in the marketplace . And they're they're a key agency strategic partner .
Speaker #6: I'm not saying that . But we have found a strong interest in what we're doing from what we nicknamed challenger brands . So this is not the category captain .
Speaker #6: For example , the brand in the space , but they're the challenger brand and they have money to spend to get their brand out there , to get their product out there and , you know , they're less subject to , say , the quarterly or the month to month whims of the economy .
Speaker #6: They are , you know , they are committed , you know , perhaps on a one , two , three year trajectory to build up their brand or build up their product line .
Speaker #6: They're not startups . I'm not characterizing that . I think you know what I mean when I say a challenger brand , they are very established and they're really trying to get , you know , they're essentially trying to break through to the next level of market share in whatever it is that they're doing that space is proving very interesting to us .
Speaker #6: It's a little underserved because because it is a bit fluid . And at the same time , it has a diverse range of needs .
Speaker #6: This is a place where national brands with local needs, for example, find a home. This is a place where they are hearing from a Lumen.
Speaker #6: They are seeking a lumen and we are starting to sort of see that customer mix . From my point of view . You know , I suffer from I , you know , I want everything all the time right now , immediately .
Speaker #6: And so we can't get there fast enough . So that's we did a brand relaunch in Q3 . If you saw us maybe at Adweek or even on our website , we are focusing first and foremost , much more on making a direct sort of human and productivity question between the product and the customer .
Speaker #6: Typically , historically , DSPs have been marketed as amazing tech and towards men that that's not who is in this space definitively and secondarily , it is about , you know , helping .
Speaker #6: You know , we're I always joke internally , we're in the hero making business that that's sort of where we're repositioning the the product line and the feature set and this resonates well with that , that seven figure spending customer .
Speaker #6: And that's where I think we see a lot of interest that's going to emerge . Or is emerging around self . It's important to get managed in there .
Speaker #6: Again , I think we've been so focused on self the last little bit because that's where the demand is . And you know , where our attention goes .
Speaker #6: Energy flows and but you know , we have we've identified that . We see a similar slightly different but similar pattern with agencies in particular around managed services who want that premium support .
Speaker #6: Slightly different story there . But but similar enough . And so it's important to get managed into that arena quickly . And so 2026 is all about getting after this customer , helping make heroes out of them , really transitioning and and , you know , getting the product first and foremost , fully out there in terms of an outcome , outcomes based position and approach .
Speaker #6: And then rolling into a generative solution because that generative piece , I get it . Like everybody is talking about AI . Great , amazing .
Speaker #6: Like that . My my actual goal is very simple . The fact that it can remove so much friction to helping people succeed , I think is , is going to be a key .
Speaker #6: That canvas plus the generative I think is going to be a key long term unlock in terms of creating value for the customers , which then should return value to the shareholders .
Speaker #6: So hopefully that's a hopefully that helps your your question .
Speaker #9: Yeah . Thank you .
Speaker #2: Thank you very much for that Thomas . I'll just take a quick pass through the audience to see if there are any follow up questions for Simon and Elliot .
Speaker #2: As there are no further questions , this will conclude our presentation for this quarter . My thanks to Simon Elliot and a special thank you to our analysts and shareholders for attending this morning .
Speaker #2: Please join us the next time as we present our fourth quarter and full year 2025 financial and operating results . Goodbye for now .
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