Hey, everybody, I'm Scott Devitt. Wedbush's consumer internet analyst. We're happy to have with us Illumin, and we're joined today by Simon Cairns, the CEO, and Elliot Muchnik, the CFO. What we're gonna do is, the team will go through the business, and then we'll go through some questions on it, to get a kind of complete outlook on the operations. So Simon, you know, with that, why don't you start and give us just an overview on the company?
Sure thing, Scott, and thanks, everybody, for your attention. Illumin is a proven CAD 120 million ad tech platform. 60% of our sales come from the U.S., 20% from Canada, and 20% from international. We grew up as a leading DSP, demand-side platform, differentiating ourselves with really best-in-class AI and also leading managed services, which is where we optimize campaigns for ad agencies, for example, to help them be successful. To be frank, in the last few years, we struggled with the transition to a self-service solution, beginning in 2020, which held the promise of better customer lifetime value and improved operating leverage. New leadership was brought in in April 2024, including a new CEO, myself, along with a new head of marketing and a new head of sales.
Right now, where we're at is, after leadership change, we have two quarters in a row now of showing solid growth in self, which last quarter was up 61% in Q2, now 30% of total revenue. We've stabilized our managed services business, and we've delivered two quarters of EBITDA growth, and are now ramping up our go-to-market to deliver growth in both self-service and managed services. We've successfully positioned ourselves in the marketplace in terms of a strategy where we center ourselves around really excelling on helping advertisers reach and convert their next best customer. Our managed service has a more than a decade-long proven service and history, with a huge customer base of ad agencies winning multiple awards and a solid pattern of gross margin attainment.
Our new self-service platform widens that customer base from ad agencies into brands that demand more transparency into, say, campaign, ad spend pricing, more control over quality inventory and where they're sending their impressions, and quicker insights across all channels to best determine how to deploy their marketing spend. As such, our strategy for 2025 focuses on showing growth in both self-service and managed service, leveraging our core operating engines and building out a complete product portfolio of market sector-centric solutions. Secondly, we're looking at delivering solid gross margin and competitive EBITDA by leveraging our existing infrastructure, teams, capacity, and AI to reinvest the results to further drive our lifetime value. And thirdly, we'll be looking to leverage our engines, our AI, and our balance sheet to grow our top line through, say, market or customer acquisition over the next year or two.
Couple quick highlights from our last reported quarter, which was Q2, reported on August 8th, 2024. Second quarter results were CAD 29.2 million, and we saw a solid bump-up of 61% quarter on quarter for self-service, which is now 30% of revenue. We onboarded 33 new self-service customers in that quarter alone. We saw solid gross margin attainment of 48%, which was consistent with the year prior, despite the growth, and we achieved an EBITDA, adjusted EBITDA of CAD 500,000, which was a significant increase over the comparable period the year prior. Our net loss was CAD 1 million, compared to a net loss of CAD 5.6 million in Q2 2023. We report our next quarter on November the 7th, 2024.
Could you talk a little bit about the, just the transition from managed service to self-serve, and then how investors should think about the growth, the differences, the distinction between the two and, you know, the longer-term kind of growth trajectory between those two businesses?
The market started to see greater demand. There was a greater demand in the marketplace, and in particular, amongst brands who would typically hire agencies to execute their marketing spend across a variety of ad channels. They were wanting more transparency on pricing, more visibility into how results and conversions were being attained, and they wanted to understand what their total impact was on the customer, because within that total impact, as opposed to looking at channel by channel, there would almost certainly be a better way to connect and convert that incremental next customer. And it turns out that that turns out to be very true. And so we started to develop a self-service solution that essentially allowed a combination of a drag-and-drop interface that enabled a wider audience of users to participate. We developed an omni-channel approach.
In other words, you could campaign plan across CTV, open web, a variety of different types of channels for marketing solution output. And we started to consolidate all of those results and create insights that really started to unlock customer performance. And so that sort of need for a bit of control, a bit quicker to market, a bit more understanding of where their ad dollars were going and what ROI they were getting fueled the beginnings of what is emerging as a self-service marketplace. I think where we struggled as a company was we initially saw self-service in, you know, essentially replacing managed service. In theory, self-service would be cheaper over time and drive more stickiness and managed service might fade away because it was the more expensive option.
But in actual fact, what customers are telling us now, you know, we've made some changes in the business, changed some management, what customers are actually telling us is that actually both are of interest to customers. We have some customers who, by default, don't want to make the transition. They kind of rely on our expertise. They have a good sort of pattern of delivering results to them. They wanna continue to leverage that. We have other customers who want to experiment with self, maybe convert to self, and we have just as many other customers who are coming in through self who are seeing good results and seeing good stickiness and seeing good customer response. But, you know, they're coming back and they're saying, "Hey, how do I make this better?
You have all this expertise, you know, where am I missing the mark? What am I not doing in the product? Maybe I need to be doing something differently, and so there's an opportunity for us to reconfigure our thinking, and therefore our product portfolio, towards instead of managed versus self, a bit more of, like, how does self feed into premium managed services? How does managed services grow into sort of additional or incremental velocity through our platform around managed into self-service, so.
I'd be curious, to the extent that there are things that you would highlight in terms of, you know, mobile versus desktop or app versus mobile web versus desktop, the extent there are any distinctions there in terms of where you're more relevant. And then also, kind of the product type. You mentioned CTV, which is kind of a growth engine for the ad industry at the moment, where you're particularly good in terms of where the advertisements are ultimately getting placed on the types of publisher sites and the types of actually advertisements that are being published.
I'm gonna answer them in reverse. In terms of CTV, for us in Q2, it was a growth channel, up 100%, year-on-year. It's really for us, we see a very bright future in CTV and ability to capture that. What I like about the Illumin platform is if you use a competitive solution, even from a big walled garden, you're really just seeing one, either their channel or their environment, or you're seeing really just the last click of your process of inputting your media out there into the world and seeing what customer response you get.
Because we show you the entire journey, because marketers and brands, for example, can plan within the journey and they can plan across channel, all of a sudden, they can see insights like where they're failing with the customer prior to last click. That same media asset can be deployed in CTV as it can be deployed in the open web, and they can compare the exact same media asset across the entire funnel, across any channel, and see where it's resonating and where it's not. And all of a sudden, what we're hearing from customers is, "Hang on a sec.
I realize in the end that I'm making decisions on the end result, but if I made smarter decisions farther up the marketing process and the marketing funnel with the insights you're providing me, I can get a better end result, and that's really what we're starting to see, a bit of an unlock around the self-service solution, is the fact that it does give you that complete marketing funnel visibility. That visibility extends across all channels, and I'll give you a simple case study. I mean, to be frank, we... You know, I'm looking to see how this matures across multiple clients, but we have had clients in our Q2 quarter who deployed their ad spend in Meta and saw perfectly good results.
But when they deployed the same ad spend with us into Meta, into their walled garden, and then also understood how that ad spend impacted their customer and their brand across other channels on the Illumin platform that they were also deploying to, they saw a 40% higher ROI on their Meta spend through us than using the exclusive tools of Meta. And so it's, you know, it's upon us to figure out, how do we maximize the machine learning and the AI underneath that, so that we can replicate that across any instance, any channel? Because then I think we're in a, in the driver's seat to really sort of excel on both the self side and the managed side, and deliver primarily growth, and then secondarily, you know, operating leverage for investors, so.
And I don't wanna get into any, you know, asking about guidance that you haven't given, but to the extent that you've spoken about this publicly, be interested in when this dynamic between self-serve and managed services kind of comps through, and I say, what the underlying, like, growth of the business is, when the presentation of results from a top-line standpoint start to show growth again-
Mm-hmm
And kind of what the organic growth rate is as you get to that point.
Yeah, I mean, so the last few years, we've essentially traded growth in self-serve, you know, and at the same time, seen a decline or a flattening in the managed services space. So we end up in a net flat position for the last few years. But in the last six months, we started to reconfigure our messaging to customers to position ourselves. We started to reconfigure our the self product in particular to have sort of more relevance, more value, more stickiness with the customer. We start to support managed service in a more meaningful and public way than maybe we recently have, because it's still very valuable to customers.
I think from Elliot and I, our point of view, we haven't provided any guidance to the marketplace, but I think what we have a healthy curiosity about is, can we move from a trajectory of really sort of having growth in one and a decline in the other, to having growth in both? 'Cause they're... It's a margin-healthy business, and there's a way that customers wanna be supported.
Maybe switching over to profitability then. And, you know, Elliot, feel free if, if you wanna take this one or, or Simon, about the EBITDA profitability that you displayed in the current quarter. Like, how do you think about the long-term margin profile of the business and the trajectory that it's on, now? I suppose that's tied to the growth in top line and, and mix and, and things like that. But curious about, like, how you think about margin profile and kind of at what revenue base, you know, that the business is scaled to get to that figure?
Yeah, thank you, Scott. And again, thank you for everyone being here and hearing our story. That's a great question. What we've seen over the last several years as we've made this pivot, we've effectively been changing our engine mid-flight. So it's been a bit of a challenging time for us as we invested in developing this product while trying to maintain a business in what arguably were very difficult macro conditions. We feel that we're in a good place, and we've committed, and we've said this publicly, that our OpEx will not grow beyond our current past levels from the prior year, while we're now utilizing what we have and reconfiguring our spend towards those strategic areas that are gonna help the product, gonna help the sales, and gonna help the marketing element of our business grow the top line.
We feel that we have, from here, improving bottom line prospects for us and the EBITDA specifically. Like I said, over the last couple of years, we've focused very much in investing in our tech. We've made dramatic improvements in our structure of the company, the foundational strength of the company as a kind of a long-term franchise, and building up our management team in particular, and we feel like we're in a good place. We continue to focus on it, and it continues to be a key element of our strategy going forward, to maintain expenses, to reduce in non-strategic areas. That's never gonna go away from the radar. But we feel like we're in a good place.
Frankly, we're helped by the fact that we have a strong balance sheet to the business as well, that we can rely on a cash position that we can deploy appropriately, whether it's an organic, inorganic growth that we need to support. So overall, from a profitability perspective, we're all focused on revenue, and with a cautious use of our expenses, we feel that that'll translate well into the bottom line of the business going forward from here. It will never not be a key focus, like it shouldn't be in any business, but it's definitely for us. We're all about revenue right now and growth. That's where the focus is.
Maybe zooming back out, you know, for a few questions, Simon. Just thinking more thematically, investors try to tie into themes, like, and if you were to position the company relative to, like, what drives success? Is it continued growth in the advertising industry outside of walled gardens, inside walled gardens? Is it AI, you know, a component here that can accelerate the business? Is CTV, you know, the driver? Is it simply the mix, you know, the mix dynamic that where you're expanding your addressable market now that you have the self-service option? It'd be interesting to think of it that way, so then investors can begin to kind of try to find ways to tie the company to the existing themes that are in the market.
It's a good question, and thank you. I guess maybe I have a layered up answer for you. I mean, we're already seeing good growth in the business and sort of a bit of a refocusing earlier this year, and that's largely done in absence of, say, macroeconomic conditions or the marketplace or competition. We have good, loyal, healthy customers who are interested in doing more. We're getting much better more quickly at getting out of our own way, sort of simplifying our sales process, being much more precise in our marketing, and addressing the relative utility and value of the self-service product in particular. And so, you know, we have, you know, solid gains that can still be achieved by just simply being better at what we're already doing.
I see that across the board in the organization, and the organization is very much responding to that. If I layer up that question, then again, I see us as uniquely positioned, and early into a market that is transitioning to more of a balance between what has traditionally been a darker side, a darker market around managed services, towards a bit more of a transparent side of the business, which is self. I see us as differentiated in a variety of ways, including that our user experience, the fact that we are, we can cross between open web and walled gardens, for example, and deliver results, and because we're doing that, we're also unlocking the next level of insights, farther up the marketing process. I think that that's...
There's a material gain in value that'll be a key focus for us for the next two years, is ensuring that we deliver on that piece, and then, if I mark it up even further, I see the industry continuing to improve, everything from rate cuts and healthier economy through to the market is being ingenious in its ways of connecting with customers. I mean, CTV, you know, has been around for a bit, and it's only really starting to take off, and analysts have CTV as significantly and materially growing, but that's not the only channel by any means, and we see new social media networks popping up. We see new ways of connecting with the customers.
So the market is also feeding opportunities for us to deliver those insights across multiple channels as well. And then, as Elliot said, you know, our additional element is we do have a clean balance sheet. We have a healthy balance sheet, and so how do we leverage that smartly to also then drive our growth? Whether that's, you know, acquiring, you know, sales through, you know, an incremental service or something that's doing well, but if we brought it back into our sales force, which we do have a sales force, then how can we, you know, how can we leverage that? Or it's an international market gain or something like that. So we have that balance sheet as well, in our back pocket as another way to grow.
And who do you compete with? And you talked a little bit about how you differentiate without naming competitors, but, you know, to the extent there's anything that you would add, you know, to that about how you differentiate, and then, and then how do you see, you know, this segment of the market playing out over time? Is it consolidation as you just suggested? Is that how you think of it, that stronger players acquire or just take share and remove competition through organic growth?
I mean, I see a couple of sort of very interesting trends right now around us. Like, below us, I would say, is a diverse and fragmented pool of really just straight-up old school DSPs, demand-side platforms, who are there and executing the ad spend of agency clients. You know, there's no real way to differentiate, and that has been a commoditized side of the space for a while. Then, on the very top end of the market, you have the walled gardens, which, you know, have obviously done well the last several years.
But, you know, as insiders in the industry will tell you, there's equal concern if there's concerns among brands and advertisers that they're not getting the quality out of the bottom end of the marketplace because those bottom-end providers aren't providing the insights, they're not providing the machine learning, they're not providing the multi-channel view. At the same time, there's trust issues emerging among the really big players, the key partners in the space, because, again, like, advertisers feel like they gotta have some level of control over, you know, how they're connecting with their customer, and they wanna make sure that they have a quality experience.
You know, we're sitting right in between those two forces, and it's within this space where we're seeing solid separation from the bottom DSPs, where we are adding value, and we're seeing where we're measuring that is in the lifetime value and the stickiness of a customer on our platform, and our ability to deliver a gross margin, which then helps us deliver the OpEx. And at the same time, we're seeing more and more, you know, tier two moving into tier one, moving into tier 1A brands, exploring conversations. You know, it's like, "Hang on a sec," like, "How do I get a little bit more control?
How do I, you know, see both open web and inside a walled garden at the same time?", and so I think in that sense, that positions us in the short term for a good catalyst towards growth, and returns, and in the longer term, you know, widens the options for us in terms of what the future of the company could be in terms of acquisitions, so.
Perfect. Well, this is a, it's a great intro to the company. I guess in closing, Simon or Elliot, if there's anything that you'd like to add that you didn't think was touched on at this point that you think is important about the business, feel free, and we can end it there. If there's anything you'd like to add
I would only add just one. I'll go first, maybe then Elliot second. Thanks, everybody, for your time, and I believe our next reporting day is November the 7th, so you can look for a release there. But happy to meet in terms of a one-on-one environment with any clients and any opportunities, and answer questions on a further basis. Elliot, anything else?
Yeah. Thank you again. I would second that. Really happy to be given the opportunity to talk to you, Scott, and to your audience. We're very pleased. We're very happy about our progress. You know, I think we need to clarify our story. I don't think the market understands our story very much, and that's on us, and we're being very cautious about how we do that, and we're gonna do that with results. So we're very excited here, and you know, we're looking forward to kind of a good trajectory going from here. It's a pleasure to have the opportunity to talk about it here as an introduction, so thank you.
Great. Thank you. Thank you, Simon and Elliot. Appreciate your time, and have a good-