Good morning, ladies and gentlemen, and welcome to the AcuityAds Holdings Second Quarter 2020 Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Thursday, August 13th, 2020. I would now like to turn the conference over to our Chief Financial Officer, Jonathan Pollock. Please go ahead.
Good morning, everyone. Before we begin, I will read our 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 2020 objectives, 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, 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. I would now like to turn the conference call over to Tal Hayek, Co-founder and Chief Executive Officer of AcuityAds, to update you on the operations of the business.
Thank you, Jonathan, and welcome everyone to our Q2 investor call. Wow! I'm so pumped about the future of Acuity. This has been the most rollercoaster quarter I've ever seen in my life. And as you're going to see very, very soon from our results, you'll see why I'm so pumped about the future. I hope everyone is doing well as the world opens up, and we are starting the journey of returning to the life we used to live. As I say that, I'm happy to report that we have started welcoming back A cuitians from around the world into our physical offices. We're permitted by local governments. We have done that on a voluntary basis with lots of health measurements. I am super excited to see life coming back slowly to our offices.
Acuity is a company that was built with a family spirit, which is much harder to create while working remotely, and yet this very spirit continued to shine while we work from home. I would like to thank each and every one of the Acuity family for pushing hard and delivering such an amazing quarter under the most difficult conditions we have ever seen as a company, industry, and humankind. In this quarter, we saw many uncertainties and lots of fears about our future, over our health. In this quarter, we also had many difficult moments as we saw many of our great partners losing much of their businesses, and we experienced major revenue drops ourselves as well. We had many moments of uncertainties. We did not know how far it's going to go and whether we'll be able to weather the storm without a major layoff.
I would like to thank the management team that fought so very hard to prevent a major layoff and took every alternative action to achieve this objective. I am speaking to you from my home in Toronto today, as I recently came back from travel and maintaining quarantine. But I am counting the days and looking forward to being back in our office very soon, back with my extended family of Acuity. I know many Acuitians are still anxious, and most of us are working from home. I would like to let you know that that's okay. You are doing an amazing job from home, and I want you to take your time and come back when you feel it's safe for you to come back.
Even under these very, very difficult conditions, we managed to deliver CAD 19.6 million in revenue, which is amazingly only a 24% drop over Q2 of last year. And even more amazingly, we delivered CAD 2.1 million in positive EBITDA, which is about 100% better than we did in Q2 of last year. The other great news is that we're seeing the numbers bouncing back very quickly. In April, which was the worst month, we saw a 41% drop in revenue year-over-year. In May, it was 21% drop, and in June, just 9% drop. And I'm happy to report that we are seeing this trend increasing into Q3, where we're expecting higher revenue and EBITDA.
We were able to deliver these kinds of excellent results while continuing to heavily invest in our technology and in preparation to our upcoming launch of our new game-changing advertising automation platform. According to eMarketer, after COVID-driven drops this year, digital ad spend will resume double-digit growth for the coming three years. Programmatic spending trend will remain strong and over 80% of digital display and video spending in the foreseeable future. Advertisers are being way more selective about where they make their investments. They would like to see measurable results on on ad spend. And when it comes to ROI, there is no better platform out there than Acuity. Acuity's platform, which was founded on an AI engine and delivers highly measurable, superior ROI, all in real time.
In fact, in Q2, our AI continues to outperform as we realize major increase to advertisers' ROI and a 4% improvement to our gross margin year-over-year. At a 52% margin for the quarter, we are extremely pleased with the results of the new iteration of the AI that was released in Q3 of 2019 and believe the best is yet to come. Because of the ROI that we deliver, we often just need advertisers to test us, and the rest happens naturally after they see the results. I'd like to give you some examples. In 2018, a D2C brand spent CAD 840,000 with us. In 2020, they already spent close to CAD 10 million with us, and that's just the middle of the year.
A nonprofit organization that spent CAD 93,000 in 2018 with us, already spent CAD 3.6 million in 2020. A large hotel chain, CAD 122,000 in 2018, and over CAD 746,000 already this year. That's a hotel chain that is very, very affected by COVID. A home appliance manufacturer that spent CAD 64,000 with us back in 2018, already spent CAD 337,000 with us this year. In 2019, we had a pharma company that spent CAD 344,000 with us, to spend this year already CAD 1.8 million. Another pharma company, CAD 246,000 last year, this year, over CAD 1.1 million.
An international fast food chain that spent $159 last year, already spent $615 this year. A mattress company that spent $103,000 last year, already spent close to $600,000 this year. And a top U.S. insurance company that spent $211,000 with us last year, already spent $431,000 this year. All these companies are spending more year-over-year with us for one reason and one reason only: we are providing the best return on investment on their campaign, and therefore, that's why they're increasing their spend with us. There's also some new companies that started advertising with us this year. In 2020, there's a healthcare company that already spent $1.5 million with us.
A national beverage company that already spent CAD 604,000. CPG company, close to CAD 600,000. A storage cabinet company, CAD 556,000, and a large U.S. brewery, CAD 472,000. A cigar company, CAD 411,000. Another pharma company that spent CAD 320,000, and the list goes on and on and on. And again, all these companies are using us because we're delivering positive ROI for them. Let's talk about connected TV, something that we're always been very excited about at Acuity. We predicted that CTV will be a huge driver for the future, and now that we're seeing CTV is growing even faster than originally projected. Advertisers are now demanding to see measured results from their TV ads, and therefore, moving more and more of traditional TV buys into CTV.
These same advertisers, also in this time, do not like to commit major upfronts, and the ability to buy ads on connected TV eliminates that the need for major upfront. So this puts Acuity in an amazing position for the future as we have access to the majority of households in North America. In fact, we have seen 400% revenue growth in Q2 versus Q1 of this year on CTV. And as important, we are seeing more and more new and existing clients place CTV-only campaigns with us, including some of the world's largest brands. We expect this to be a growing trend as advertisers continue to realize the strength and importance of CTV and measuring results. I'm also very excited about our new partnership with OverActive Media. Esports is becoming very popular and even faster accelerated by the shortage of live sports.
One of the problems for esports company is that they have limited ways of reaching their fans. Acuity and OverActive partnered up to solve that problem. By using the access Acuity has to over 500 million consumers and the data that OverActive owns, we have delivered a complete solution for any advertisers that would like to reach esports fans, and that solution is using the Acuity AI, and it uses our new advertising automation platform. It just delivers a solution for the esports side that was never there before. I would like to address the third-party cookie issue. As an industry, we are working on a few different solutions to replace the third-party cookie. We are making great progress, and I'm confident that a new and even better solution will be developed.
While Google Chrome has set a deadline of early 2022 to stop third-party support for cookies, Google also said it won't go into effect until Google is ready with a solution that serves the interests of advertisers, publishers, and platforms, while also protecting the user privacy. For us, this is a great indicator that this industry is going to continue to operate and being able to target people based on what they're interested in. We are seeing more and more M&A opportunities. The number of companies contacting us has increased, and we believe that COVID has made many companies realize scale is critical, and they can't continue giving their scale and overhead. While there's nothing imminent at the moment, we believe that we may have unique opportunities in the future. Now to my personal favorites, our new advertising automation platform.
Everyone who knows me knows how passionate I am about this new platform. Why? Because this product is going to change the way programmatic advertising gets executed, not just at Acuity, but industry-wide. This is a real game changer. This is a system that aligns the way that marketers think and plan to the way that programmatic gets executed, which is not the way it is today. Today, marketers think and plan in one way, and then generally they deliver it to their ad agency, and the ad agency now execute it in a programmatic kind of way, but very different than the way that it was planned, and our new system just closes that gap completely.
Now, it also allows average users to be able to create campaigns within minutes, so advertisers will not have to hire very expensive, highly trained talent as they do today in order to run programmatic, which I think is a very important point, because recent study by the IAB states that over 65% of advertisers in the U.S., EU, and LATAM are bringing programmatic in-house. This wonderfully aligns with the launch of our new advertising automation platform. So when we launched beta, we had about 30 different companies apply to participate in the program. We selected six. Some of them are very, very large brands who want to be at the forefront of innovation. I am very excited to announce that we are going to be officially releasing the full product into market in October.
Our marketing team have been very busy over the past few months with planning the strategic message, naming the product, giving the look and feel, creating a new website, and full launch plan leading up to October. Everyone in Acuity is pumped about this transformation. I am so excited about the future of Acuity. Advertisers are rewarding us for delivering superior ROI. Our AI system is getting better and better all the time. We have amazing people on our team, people that were able to deliver an excellent quarter under most difficult situations. We are seeing the upward trends continuously into Q3 and beyond. CTV is exploding, and most exciting is the transformation we're introducing to the market with advertising automation. I would now like to pass the call to Jonathan Pollock, our CFO, to talk about our financials.
Thank you. As Tal also mentioned, the entire Acuity team deserves a big shout-out for their commitment to the company and our customers during what was a very unique quarter. The whole team around the world performed above expectations, and we thank each and every one of you. Despite the sudden and significant economic impact of the pandemic, beginning in the middle of March and continuing into April, client spend subsequently saw a dramatic recovery. In line with trends experienced across the digital advertising industry, certain campaigns that were paused or reduced in April have begun to be reinstated as companies and organizations have adjusted to what has become a new norm. This recovery commenced in earnest in May, continued into June, and gained strong momentum as we entered into the third quarter of 2020.
We are cautiously optimistic that this broad-based improvement in customer activity will continue for the foreseeable future. Further, we remain committed to fortifying the business through our acute focus on gross margins and strong operating expense controls. These ongoing initiatives have helped place the company in the strongest financial position in its history, allowing us to better navigate current market conditions while continuing to invest in the business's market-leading technology. Our second quarter financial results reflect the previously mentioned dramatic drop in demand experienced in March, which continued into April, partially offset by the recovery that began in the month of May. Our continued focus on improving gross margins and operating efficiencies led to a gross margin improvement of 400 basis points year-over-year, as well as a 100% increase in Adjusted EBITDA.
The company also posted its fourth consecutive quarter of positive operating cash flow, with yet another quarter of positive adjusted net income. Further, we recorded a substantial increase in revenue from connected TV, with second quarter revenues close to 400% sequentially. While we continue to expect to experience impact from COVID-19 on our financial performance, we are confident that with recovering demand from our customers, as well as actions taken in the first and second quarters of 2020, we will be well-positioned to weather the economic turbulence associated with the pandemic and emerged even stronger than before. As for the numbers, total revenue for the second quarter of 2020 was CAD 19.6 million, compared to Q2 2019 revenue of CAD 25.8 million, a decrease of 24%.
Total revenue for the six months ended June 30th, 2020, was CAD 43.8 million, compared to CAD 53.7 million for the same period in 2019, a decrease of 19%. The decrease was attributable to the previously mentioned reduction in client spend due to the COVID-19 pandemic, partially offset by an increase in spend in May and June. To better understand the monthly improvement in revenue throughout the quarter, we achieved CAD 5.2 million in April, over CAD 6.7 million in May, representing close to 30% monthly improvement. And then in June, we achieved CAD 7.6 million in revenue, which is close to a 50% improvement from April. In addition, we expect July revenues to be around the same, in August, to be even stronger. Gross profit margin was 52% for Q2 2020, compared to 48% in Q2 2019.
Gross margin for the first six months of 2020 was 51%, compared to 46% for the same six-month period in 2019. We are seeing this strong gross margin continuing in the third quarter. Operating expenses for the three months ended June 30th, 2020, reduced 28% to CAD 10.6 million, compared to CAD 14.7 million for the same period in 2019. Operating expenses for the six months ended June 30th, 2020, totaled CAD 23.4 million, compared to CAD 29 million for the same period in 2019, a decrease of 19%. As we have discussed over the past three quarters, management has been vigilant on costs and making sure we are as efficient as possible. This has proven to be even more important during this pandemic and has been a key variable in the growth in our EBITDA sequentially and year-over-year.
It is also important to note that we continue to see a reduction in our overall expenses, even with the continued investments we have made and continue to make in our technology and the new self-serve platform. It is also worth mentioning that the Canadian government wage subsidies provided support during the quarter, which allowed Acuity to forgo mass layoffs during the depths of the pandemic, which would have significantly delayed the improvements in revenue we realized starting in May and continuing through Q3, and the incredible service our team has provided to our customers. Acuity has reported Non-GAAP Adjusted EBITDA of CAD 2.1 million in Q2 2020, compared to an Adjusted EBITDA of CAD 1.1 million in the same quarter last year, an increase of approximately 100%.
Adjusted EBITDA for the six months ended June 30th, 2020, totaled CAD 3.9 million, compared to CAD 2.1 million the prior year, an increase of 89%. It's also important to note that our LTM EBITDA is now CAD 11.6 million versus CAD 6.5 million at the same period last year. As Tal mentioned in our press release this morning, we are optimistic that this number will continue to grow in the third quarter. Net loss for the quarter was CAD 1.6 million, as compared to a loss of CAD 3.4 million in Q2 2019. Net loss for the first half was CAD 1.3 million, compared to CAD 6.1 million for the same period in 2019.
More importantly, adjusted net income for the second quarter of 2020 was CAD 1.4 million positive, compared to an adjusted net loss of CAD 700,000 for the same period last year. Adjusted net income for the six-month period ended June 30th was CAD 2.4 million, compared to CAD 1.2 million for the same period last year. Adjusted net income excludes non-cash charges, including depreciation, amortization, foreign exchange, and stock-based compensation, and is an important metric for management as it reflects our ability to generate cash from our operations. We are very pleased that our operating cash flow generated for the three-month period ended June 30th, 2020, increased 233% to CAD 5.3 million, compared to an operating cash flow used of CAD 4 million for the same period last year, a swing of over CAD 9 million.
Cash flow generated for the six months ended June 30th, 2020, increased 241% to CAD 9.3 million, to cash flow used of CAD 6.6 million for the same period last year. As previously mentioned, this is our fourth consecutive quarter of positive operating cash flow, a significant milestone for Acuity, especially in these unprecedented times. Cash on hand as of June 30th totaled CAD 9.1 million, compared to CAD 7.4 million at December 31st, 2019. In addition, since December 31st, we have paid down close to CAD 7 million of our operating loan, and today we have the strongest working capital balance and the strongest financial position in our company's history. Before I turn the call over for questions, we want to reiterate our continued focus on margins, cost containment, EBITDA growth, operating cash flow, and financial strength.
This message has been constant over the past year, and we are very pleased that our results continue to show that we are achieving what we said we were going to do and not wavering on this commitment and with that, I would now like to open the floor for questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Suthan Sukumar from Eight Capital. Please go ahead.
Good morning, guys, and congrats on a very strong quarter.
Thank you.
Guys, the first question from me, just on the strength that you guys are seeing. I'm curious to know, what types of changes are you guys seeing with respect to client spend behavior post the and now, any changes to the level of spend? And more broadly, are you seeing any changes in the profile of new clients that are coming to you guys now?
Yeah, so I think naturally, I shared it before that, that it brought it up to a few different groups. But when the crisis started, so back in March, we saw a significant drop from our travel customers and hospitality, which was obviously had the most amount of impact on it. Then there was a general panic in the market of customers pausing. So that's what we saw originally. And then we almost right away saw the general panic reverses and customers coming back and unpausing their campaigns. Then we actually started seeing some travel customers coming back, not to the same levels, but they realized that they still need to be in touch with their customers and come back, so they did come back.
But I gotta tell you, the sales team was very resilient. They went out, they looked for a lot of new business. D2C, which is a trend that started even before that, is becoming more and more these days, and we're getting more of that business in. So generally speaking, that's how I would do that. And then regarding your question of the size of campaigns and things like that, I think it's probably a little smaller, but we're seeing that it's starting to trend up again. So we're starting to see the big RFPs and big IOs and all those are coming back into our system on regular basis now. So the indication is that everything is going back to the way it used to.
And that's even without travel being fully back. So I can just imagine what happens when travel is fully back, and we have all these replacement campaigns and customers that we didn't have before. I think that will create magic.
Great. That's encouraging. And, you know, kind of looking at it historically, you know, the back half of the year, H2, tends to be a more seasonally stronger period. Do you guys expect those trends to continue this year despite everything that's happened?
So we definitely expect Q3 to be better than Q2, and Q4 to be better than Q3. Absolutely. I mean, you know, we don't know to what levels it's going to come back at, as Q4 is the seasonally strongest quarter.
It's too early to tell, but the indicators are showing. I'm really, really happy with what I'm seeing about the indicators for the rest of the year.
And to that, even with the revenues, as Tal mentioned, as we talked about before, our margins continue to improve and be above last year, and our cost structure is much more efficient. So we can make more money on the same or even less revenues than we did last year.
Right. Okay.
I think even if you look at the studies that are being done out there, everything is pointing out that after the dip that we've seen this year, digital is gonna go back, and specifically programmatic, to double digits growth. Which makes a lot of sense because advertisers are now way more picky about where to make their investments, and they're doing it where they're seeing proven ROI. Acuity is the best system out there for proven ROI, so therefore I believe that we will see more and more. After this, all this is over, I believe we'll be even in a better position than when we came into it.
Okay. Okay, good. And on connected TV, I mean, you guys touched on seeing, call it an acceleration in trends here, especially on back of the pandemic. Can you speak on how well you guys are positioned in connected TV? You know, obviously, given your Visible Measures asset then, and where do you see opportunities to enhance your position? Is it potentially investing in tech, go to market?
Yeah. So I mean, to anybody who doesn't know about our purchase of Visible Measures, so Visible Measures is a company we purchased at the end of 2016, which the specialty was 100% video advertising, which is essentially what TV advertising is today. That gave us a lot of expertise and a lot of tools for video advertising and positioned us very well to digital TV, as we know it today and as it's going to be in the future. So I think we're very, very strong position. We already have access to most of the households in North America, and therefore, it's a matter of bringing in more and more of the demand into it, and we already have the customers, they're coming to us.
The customers that have been using us and trusting us for many years, they're coming more and more to us and asking us to run their connected TV campaigns for them. And as we're showing them success and ROI, they're spending more and more with us. So it's something that's naturally gonna continue occurring over the next few quarters.
Okay. Okay, good. And just on the new self-serve platform, can you speak to how you're measuring success and performance during the beta? And what types of specific feedback are you getting from your trial users today?
Okay. So we're getting so much exciting, great feedback, and also some feedback about what we need to fix. But I tell you that, it's not easy to excite, sell people about a new product, and that, that when they have already products that they've been selling for years, and they're doing it successfully. But it started very, very slowly when we started doing some demos to beta customers, and the reaction that the salespeople saw from the customers, the reaction that I saw when I was in, on those meetings, is people could not stay in their seats, okay? The reaction is, "Oh, my God, I can actually see my campaign in front of me on the, on the board here. I can see exactly my creative. I see how it's going to be communicated to the customers. I can see the conditions.
I can see exactly, I have full control over this." And the reaction is, "This is exactly how we plan as marketers, and now you're giving us a tool that we can plan on and just click on go, and it actually goes and executes?" People were amazed. I can tell you that the reaction that we're getting about the system is amazing, and it's opening up a lot of doors for us that we couldn't open before. From how do we measure the success of the beta? Well, there's a number of things to it. First of all, the usability is one of the most important things in there.
Okay, this system was created, so any mom and pop shop, any pizza store, will be able to go ahead and set up the campaigns within minutes. They won't need the experts to do it. So that's why it's so important for us to see that people without experience can set up those campaigns very quickly and intuitively and all that. So that's one of the important part of the beta. The second part is, the concept of the system is absolutely amazing. Now, does it deliver results? Does it deliver ROI? Does it measure throughout the different sections of the campaign? And does it deliver the right insights?
So far, the indicators are great, and we're seeing great results from an ROI perspective, great results from the type of insights that the system delivers. And we're discovering a lot of other big benefits to brands, as we go along, and we talk to them. And we're fixing all the usability issues as we find them. We're very, very excited about launching it in just a few months. And, you know, in the next few weeks, we're gonna be starting a drip campaign, so people will get excited, and we'll give a little bit more exposure into the product itself as well.
Great. And if I recall correctly, you guys mentioned October is the planned launch, right?
That's correct.
Perfect. Perfect. Okay, all right, guys, and maybe last question for me here. You know, with the you know, with overall spend to demand backdrop, improving here, where do you guys see potential for growth investments? You know, is it doubling down on your core markets? Is it net new markets, or is M&A really a key part of that? I'm just kind of curious how you guys are thinking about that going forward.
Okay. So, you know, my opinion is that we're doubling down on the new advertising automation platform, and this is where we're gonna see our growth. Not necessarily from the new geographical areas, but from existing geographical areas, just getting more and more of the bigger brands on that system and getting more and more of their spend, and that will increase our self-serve revenue tremendously. So that's where I think the growth is gonna come from. Now, talking about M&A, it's just a faster way of accelerating, because, look, we already built the engine, the technical engine.
If we buy another company that have a technical engine, and most likely not as good as ours, and we can eliminate theirs, put all the customers on ours, now you've created a highly leveraged model that we bring in more revenue into the system, and removing about 60%-70% of SG&A expenses that are related to the technology of the target company. So that is that could create magic, but we are extremely picky, like we've gone through in the last year and a half, we saw a lot of companies that we passed on because it needs to be something that makes sense for everyone.
Okay, great. That's it for me, guys. I'll pass the line. Thank you for taking my question.
Pleasure.
Thank you. The next question comes from Rob Goff from Echelon Wealth Partners. Please go ahead.
Thank you very much, and good morning, and let me echo the congrats on the results and the work that went behind it. Thank you for giving the trend in revenues. Could you also perhaps talk to the regional trends in that, you know, the U.S. was particularly resilient, just speaking more towards the Canadian and other revenues, how are you seeing them in the recovery?
I think that.
Yeah, Jonathan, go ahead.
The U.S. has definitely shown a very strong comeback in revenues. That's where a lot of the growth that Tal had mentioned is coming from. We are, though, seeing Canada pick up nicely of recent. We could tell because we get, you know, the emails of all new contracts that come in, and we can see that the Canadian team, both here in Toronto, in Quebec, and out west, is picking up, and we're seeing some of our Spanish slash Latin American business, August is typically quite slow for them just because of the holidays and how things work in Spain and Latin America. But July was stronger than we expected. August will likely be down, but that's as expected, and then there is belief and momentum for September.
Okay, thanks, Jonathan. Then could you perhaps talk a bit more on the CTV? To what extent is that bringing you new clients? Are you selling it as part of a bundle?
These specific, so I actually looked at the revenue in Q2 for CTV. It's mostly existing clients that are spending on CTV with us. And mostly, most of those were CTV-only type of campaign, so it wasn't part of a mix and says, "Okay, CAD 1,000,000," and then some of it goes to CTV. No, these specific ones that we're seeing is more and more we're getting specific orders just for CTV.
Thank you. And one more if I may, and it's with respect to your, your new advertising platform. You've mentioned mom-and-pop, but could you talk to the target market as it would extend from mom-and-pop up to larger brands?
I said any mom-and-pops would be able to use it, but this is definitely not our target market to begin with. I do think that eventually it would be a great target market, but this is not where we're starting. We're starting. The target market for this is Fortune 500 brands. So that is where we're starting. That's what we're gearing up for. We're setting up dedicated teams in our company to be able to service those. So that's the target.
Thank you, Tal. I will pass it along. Cheers.
Thank you. The next question comes from Daniel Rosenberg of Paradigm Capital. Please go ahead.
Hi, good morning. Congrats on a good quarter, and nice to see strong indications of the new product launch having a, you know, potentially good traction to come. I was wondering what the go-to-market strategy is on that front, and when do you think it will start having a meaningful impact? I get that you're, you know, taking small steps, honing the product in its early days, but is this a mid-next year kind of impact or a late next year kind of impact? Any color would be helpful.
I can't go too much into the launch plan because we've put a lot of effort and invested a lot of money into it, but I can tell you it's not going to be slow. I can tell you that in October, when we're launching it, we're putting a lot of advertising dollars into it, marketing dollars into it, PR and all that. Everything is coming to life around industry events that are happening that month. We will start sharing that there very soon. I suspect that we will see immediate impact from the pipelines getting filled. And I think that also some of our beta customers are naturally gonna become normal customers as well.
So I believe that we're already gonna see some impact in Q4, but also don't forget our target market is the Fortune 500 brands will take a longer sales cycle. So the major impact is gonna happen next year, probably, I would say mid-next year, where we're gonna see good, like, great numbers coming into it.
Okay. Okay, great to hear. In terms of... You mentioned some of the government support programs that helped you out in the quarter and helped you know overall operations. I was wondering if you could quantify any impact it had specifically in the quarter. Should we expect any next quarter?
Hey, Daniel, so as I said on the prepared notes, there was impact from the subsidies. There's a bunch of them. The U.S. subsidy has not hit the income statement just because it is a loan that gets waived, and we will be applying for that by the end of Q3. The Canadian one, if you add them up, was about CAD 800,000. However, as I said, if you actually look at what it is net, meaning we didn't reduce any of the headcount, we didn't take, you know, mass layoffs, I think the effect may be a couple hundred thousand dollars net in the quarter. For Q3, we are definitely not expecting any or anything material, and as we said before, even without it, we are expecting sequential growth in EBITDA.
So, our perspective was it just allowed us not to have to do mass layoffs and which is exactly what the program was meant to do.
Great, okay. And, turning to the margins, so particular strength this quarter, was there any specific driver behind that? I've seen some, you know, current, currency support with, in other areas of the market, sometimes that helps. Do you expect that to continue going forward, or are you already seeing, any changes in, how you view the margin profile going forward?
So when you look at that, the first thing that we always wanna do is deliver a positive ROI to our clients. And once we do a great job on that, if we do exceptional job, we can allow ourselves to take a little bit more to Acuity. So that's essentially when you're seeing the margins are getting better. It means that the algorithm is getting better. So as you recall, we went wide with a new algorithm at late two thousand and nineteen, and then every quarter we saw an improvement. And I can tell you, the algorithm gets improved all the time. Dr. Nathan Mekuz and his team are doing a phenomenal job, and that's what they live for.
They live for to make the algorithm better, and all the time there's new features and new things that are going to the algorithm to make it better, and that's a direct result of why we're seeing better margins.
Okay, great. And then also with the news release, around, you know, exploring gaming partnerships, I was just curious. I mean, it's very interesting, and I haven't really seen anything in the market quite like that. So I was wondering if you could just give a little bit more color on that partnership, where it's going, what you envision?
Yeah, absolutely. So look, I spoke to a number of esports companies out there. Obviously, it's very exciting. The investors are very excited by it and giving it multiples and investing in it. But one of the problems that they have is they need to start showing revenue and material revenue. And the problem is that it takes them a long time to start collecting all their fans and being able to reach those fans. Now, we already have all their fans, right? All we need to do is identify them. So we take our AI engine, we take the five hundred million user profiles that we have on people. We couple it with a partnership with an esports company that has the data, and we start extrapolating and finding the esports fans.
Then, now we can start reaching those fans, and advertisers can come to us in order to reach those fans. Those are very desirable type of demographics as well. It's just in the beginning of it, on its way. We're starting to get the salespeople to talk about it and to sell it. You know, I predict it, it's going to be very successful, and you know, for us, it's a pilot program right now, but if it works very well for both sides, it could be extended into something bigger and really across the world.
Okay, great to hear. Excited to see the new product this fall, and congrats again on a good quarter.
Thank you, Daniel.
Thank you.
Thank you, ladies and gentlemen. As a reminder, should you have any questions, please press star followed by one. There are no further questions. You may proceed.
I'd like to thank everyone for joining us on the call today. As I already said, I'm very, very excited about the future of Acuity. This quarter was a rollercoaster. We had very, very tough time, and the management team did an amazing job in preserving jobs and preserving obviously cash for the company and coming out in a, you know, profitable way. I'm very, very thankful for everybody in the management team for doing that. I cannot say how excited I am about the new advertising automation platform that we're bringing to market. I really think it's going to be a big game changer, and really looking forward to showing everyone as we're launching it into market.
So, all in all, I'd like to also thank all the support from the investment community. And, I'd like to thank you for joining us, and looking forward to the next time. Thank you, everyone.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.