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 security laws, including among others, statements concerning the company's 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 reflects management's current beliefs and are based on information currently available to management and are subject to a number of significant risks and uncertainties that could cause actual results to differ materially from those anticipated.
Please refer to the cautionary statements and the risk factors identified in our filings with SEDAR+ and EDGAR for a more detailed explanation of the inherent risks and uncertainties that could affect such forward-looking statements. Following the presentation, we will conduct a Q&A session. I would now like to turn the conference call over to Tal Hayek, the Co-Founder and Chief Executive Officer.
Good morning, everyone. My name is Tal Hayek, I'm the CEO and co-founder of illumin. I would like to welcome everyone to our Q1 2023 investor video presentation. I'd like to start by thanking the illumin family. Thank you for a quarter of growth. Thank you for a record quarter of 40 new self-serve logos, and for a quarter of a complete rebranding and relaunching of the illumin brand. A quarter that we're starting seeing the stacking effect, the revenue stacking effect on our self-serve revenue. illumin is a journey advertising platform. It's one of a kind, and it's the only one out there that allows you to do that. It solves a huge problem for marketers who design campaigns as a story. They would like to tell their story in stages, depending on where the consumer is on that consumer journey.
Usually, it's broken down to three stages: the awareness side, the engagement side, and the conversion side. The problem is that there's no system other than illumin that allows you to do that. This is the major problem that illumin allows you, that illumin solves. It allows you to design the consumer journey and by a click of the button, go ahead and execute. We're seeing more and more advertisers bringing digital in-house. They're doing it in order to take control of their own campaigns. What does it mean to them? There's a few things that it means. One of the things is that they're gonna be paying less margins, and they're doing that by cutting more and more middlemen.
They can only do it because illumin is a highly intuitive drag-and-drop system, so you don't need to be a highly trained expert and use it like the traditional DSPs. Again, illumin is the only platform that will allow you to design and execute on a consumer journey. illumin is changing the world of advertising. In Q1, we continued to invest in illumin. We saw a major increase in the number of demos that we're doing out there. We saw a record of 40 new net logos added to our self-serve system, things are just warming up. I have to say that we were expecting self-serve growth from a revenue perspective in Q1, even over Q4. We were a little bit disappointed about that.
We know that we made some assumptions that were not 100% accurate, and we're making adjustments in order to predict the future better. There's a number of reasons why we were a little bit below our Q4 numbers. Number one, seasonality. Q4 is the busiest quarter for the advertising space. Q1 is generally the slowest quarter. We were adding a lot of logos, so the major assumption that was wrong is it was the day activation. How many days does it take to activate a new logo that we sign into our system? It ended up being a little more days than we planned. We made the adjustment and the model looks beautiful now. I think most importantly, we're starting to see the stacking effect on the self-serve revenue.
If you look at the whole quarter as a whole, you don't see it. If you start looking at January, February and March, you're starting seeing that stacking effect happening very aggressively. What do I mean by stacking effect? It means that our customers during the current month, our existing customers are spending, plus the new customers that were activated are spending on top of that. Every month, we should see more and more revenue coming out of that. I'm very happy to report that we already see an annual run rate of over $12 million by the end of Q1, and that number should be climbing every month.
I think the other piece of great news is that the majority of new logos that are signing contracts with long terms of one year or longer and with minimum revenue guarantees. I'd like to spend a minute on that 'cause it's not very common in our industry. There's not many companies, DSPs out there that are getting long-term contracts with commitment from customers, and we are able to get it. Again, why? Because customers are really excited when they see the illumin system, and they're willing to take some risks in order to be a part of the consumer journey world. Let's look at our some of our financial results. We saw $26.5 million in revenue in the quarter, which is 11.2% year-over-year growth. Is that the number we would like to see from a growth perspective?
No, we would like to see much higher numbers, and we do believe that we're gonna get there. We are at times that many of our competitors are actually shrinking in revenue, and we're happy to say that we've seen an overall growth of 11.2%. Obviously, from illumin self-serve revenue numbers, we've seen a growth and stacking effect starting last year. We saw over 2,000% growth from Q1 of last year to this quarter from a revenue perspective on self-serve, and a slight decline of 8.3% from Q4. Again, seasonality and the fact that it took us more days to activate, especially in the beginning of the year, where people are a little bit more delayed than normal. A very good indicator for us is the number of logos that we're signing.
A lot of you will recall that it took us time to get the organization to change, the DNA of the organization to change from managed service to self-serve. Illustrated by the numbers here, in Q1 of last year, we signed two new logos on the illumin self-serve. In Q2, we signed eight new logos. In Q3, 17, in Q4, 27, and in Q1, 40 new logos into our system. That's a really great indicator of how our revenue is gonna stack in the future as well. I would like to now introduce our Chief Revenue Officer, Nadeem. We brought Nadeem in last year with tons of experience in SaaS type revenue, specifically from Salesforce, and has tons of experience in managing enterprise sales team and large sales team in organization.
We brought him in to really help us to change the DNA of our organization from the managed side to the SaaS-like type of our side of the company, which is self-serve. That's all our focus is on right now. Nadeem, please update us.
Thank you so much, Tal. I appreciate the kind words. As you know, Tal brought me in the organization in late 2022. I can't thank him enough. At the time, he was very clear on the mandate. The first was to bring balance to the business in terms of managed and self-service. Our business was skewed towards managed service. We needed to create the same excellence in our self-service revenue motions as we had in our managed service revenue motions. We had an innovative product that we were simply not selling enough of. We need to have the right people, the right rigor, the right processes, the right methodologies, the right measures in place, not just balance and transform our business, but also to transform the industry. The second was to grow further into the enterprise market from our mid-market roots.
Third and final was to steadily grow our managed service business while our self-service grew at a higher velocity, essentially achieve balance. As we transform ourselves along those three lines, we also need to transform the industry. In speaking with our CSO, Suraj Bhawani, we all witnessed the same transformation in the travel industry over the past few decades when they had productivity issues accessing vast amounts of inventory. In the late 1980s, booking travel was very complex, utilizing line item systems and accessing massive airline, hotel, and car rental inventory that required specialized and highly trained travel agents, and was typically reserved for businesses or higher income families. The rest of us, like myself, were stuck in the back of the station wagon going on driving vacations with maybe one trip in our childhood, some exotic vacation in the Caribbean or Europe.
It took years to transform the travel industry to where it is today. Technology has evolved to highly visual and intuitive apps like Expedia and websites with easy access to travel inventory. The expensive middle has been removed. The cost of travel as a result is dramatically reduced and is now accessible to everyone, resulting in an explosion in travel. That's the same transformation illumin is bringing to advertising technology, to addressable advertising with a journey-based advertising platform. Today's advertising is accessed in line items by a large trader, highly trained bureaucracy. illumin makes accessing inventory as simple to use such that business users, planners, creative folks, and strategists can all access that inventory using graphics, pictures, drag and drop, and clicks instead of line items.
Our internal transformation will require a level of rigor we have not previously had in our business. It's my mandate to accomplish this to unlock the market opportunity. We started by introducing new processes, sales methodologies, and KPIs, measuring everything from number of calls being answered, number of calls we made, conversion rate by stage, churn rate, sales cycle length, LTV to CAC, NRR, average selling price, average selling price by customer segment, time to activate, and many, many more. To know that we were on the right track, we wanted to start with a couple of key leading indicators. One of those was the number of late-stage demos. We have seen a 52% increase in this metric. This means more people are seeing illumin and more senior people are seeing illumin. Will this result in new customers?
We also wanted to track new logo growth. In Q1 of 2023, we saw 40 new self-service customers sign up for illumin, up 74% quarter-over-quarter. This means the increased sales activity, calls, and demos are driving increased signed contracts. In addition, 62% of those contracts had minimums and 45% were greater than a year in length. We're constantly looking at generating these sales, progressing pipeline, driving them to close. These KPIs will make a world of difference. Q1 closed sales were comprised of pent-up demand that stalled in pipeline. It drove us to a really terrific place. The net result is we saw 113% year-over-year self-service growth, while the overall business grew double digits at 11%. As you saw in Tal's presentation, there was an 8.3% quarter-over-quarter decrease in our self-service revenue.
While our year-over-year looked excellent at 113%, we dug deeper to ensure our trend was strong rather than the seasonal. We wanted to see revenue behave like self-service revenue, which means it stacks and it has low churn. Looking deeper into Q1, we saw a 67% increase from January to February in our self-service revenue and a 99% increase from February to March in our self-service revenue. What drove the 8.3% decrease quarter-over-quarter? Two factors. One, seasonality. We all know in Q4, advertising is a great quarter with Black Friday, Cyber Monday, Christmas, New Year's, Boxing Day, all of that driving a ton of consumer activity. Number two was business rhythms. The fiscal budgeting process for many of our customers this year took longer and was more conservative.
Budgets were loaded in mid-February. The net result was spending delays. We're still seeing the revenue just later in the quarter and later in the year than expected. The 40 new logos that we talked about earlier came from a result of us entering Q1 with 103 deals in the pipeline. Today, or as we entered Q2, we had 212 deals in our pipeline. These deals, however, are skewing earlier stage. The Q1 103 pipeline was later stage. What we have to do is take those earlier stage deals, those 212 deals, and drive them through the entire buying process on behalf of our customers. In order to do that, we have to answer three key questions that our customers care about: Why change, why now, and why illumin?
I'll now turn over the call to our Chief Financial Officer, Elliot, who's gonna further discuss our business results. Thank you.
Thank you, Nadeem. Hello, everyone, thank you for joining us today on our Q1 2023 earnings call. Today, we reported first quarter 2023 total revenue of $26.5 million, an 11.2% year-over-year increase driven mainly by illumin revenue, which increased 135% compared to Q1 2022. We continue to focus on growing our illumin platform, including our self-serve pipeline through targeted sales and marketing efforts, these efforts led to a 74% increase in self-serve illumin clients in the quarter. We are excited by the organic growth we have achieved through illumin sales this quarter, it continues to be the focal point of our revenue growth in the future. On that note, I'll now review our financial results for the first quarter of 2023.
As noted earlier, total revenue for the first quarter of 2023 was $26.5 million, up over 11% compared to Q1 2022 revenue of $23.8 million, driven mainly by increasing illumin sales. For the three months ended March 31, 2023, revenue from managed services was $17 million, up 8% from the same period last year. Revenue was $9.5 million from self-service for the quarter, up 18% on a year-over-year basis. Overall revenue growth was primarily a result of organic growth from existing clients that have gained traction, as well as new clients that have joined the illumin platform, as discussed by Nadeem.
For the first quarter of 2023, total illumin platform revenue was $16.7 million, an increase of 113% compared to $7.8 million in the same period last year. This highlights the continued adoption and growth of illumin, reflecting its success in the marketplace as more customers and prospects recognize the value it brings to the consumer's advertising journey. Even utilizing illumin for managed campaigns allows for deeper insights and reporting than the legacy platform. Gross profit or net revenue was $12.5 million for the first quarter of 2023, compared to $11.9 million in the same period last year. Our gross profit margin in Q1 2023 was 47.1% compared to 50% during the same period last year.
The decline is mainly due to a higher proportion of overall revenue attributable to self-serve, which has lower take rates. In addition, we saw strong growth in our international legacy self-serve volume for Q1, which tends to have lower margin campaigns than in North America. Our outlook for Q2 suggests that the ramp-up in North American pipeline will contribute to improved GP margins going forward. Total operating expenses for the first quarter of 2023 were $16.6 million compared to $14.3 million in the prior year period. As a percentage of revenue, operating expenses were 63% in Q1 2023 compared to 60% for the same period last year. This reflects higher sales and marketing expenses as well as increased focus on product development to support illumin's growth and expand the platform's capabilities even further.
Adjusted EBITDA for the first quarter of 2023 was a $1.3 million loss, compared to just under $200,000 for Q1 2022. This year-over-year decrease is mainly due to the factors I discussed earlier to facilitate the growth of our illumin platform. Net loss for the first quarter of 2023 was $3.6 million, compared to $4.3 million loss in the same period in 2022. The difference primarily due to the increased revenue in 2023 and higher interest earnings from our cash on hand. On to the balance sheet. As of March 31, 2023, our cash and cash equivalent balance stood at $80.2 million, compared to $85.9 million as of December 31, 2022.
This change since year-end was largely due to cash used in operations, investments in our platform, and a reduction of our credit facility. During the three months ended March 31, 2023, we did not repurchase any of our common shares under our Normal Course Issuer Bid program. Post quarter-end, with continued weakness in the broader markets, we utilized our standing automated share purchase plan facility to purchase approximately 701,000 shares for a total consideration of $1.5 million or $2.13 per share. In total, since we began, we have purchased 5.4 million shares to date out of the allowed NCIB total of 5.5 million. We've spent $16 million since May 2022 and acquired the shares at an average value of $2.96.
Looking at shares outstanding as of March 31st, AcuityAds had 56,824,589 common shares outstanding compared to 56,808,921 as of the end of 2022. In closing, we are very pleased with illumin's strong sales growth during the 1st quarter and the growing self-serve component. We believe this growth reflects greater recognition of illumin's value-add proposition for both advertisers and agencies, and the success of our strategic investments in sales and marketing to support this recognition and illumin's increased penetration in the marketplace. With our strong balance sheet and solid cash position, we continue to be well-placed to explore opportunities for inorganic growth through acquisitions.
While we see it as a lower strategic priority than our organic growth of our self-serve illumin platform, we remain very keen to explore accretive options. With that, I would like to pass it over back to Tal for his concluding remarks.
Thank you, Elliot. In closing, I would like to again congratulate our team for a successful rebranding. This is a quarter that we re-rebranded from Acuity to illumin. We launched a new website, and we had a major launch event, and the entire marketing team and sales team and many other people with the org were involved, and we showed up like we've never shown up before to this event. So thank you to the team for doing that. Testing out the idea of long-term contracts versus short-term contracts without commitment has been showing really positive results when the majority of the contracts that we're signing now are with a minimum 12 months contract with revenue guarantees built into them. So I'm very proud of the team for that.
Of course, the most important part though, and the most impact to our business is what we're doing on the self-serve illumin side of things. We are seeing the self-serve stacking effect and the number of new logos. Like I said, we're already seeing that we exited Q1 at a $12 million run rate. I'm very proud of the team for that. With that, we're gonna open up the floors for questions.
Our first question comes from Aravinda Galappatthige from Canaccord Genuity. Aravinda, please.
Good morning, guys. Congrats, on the quarter. Good to see you all.
Good morning, Aravinda.
Good to see you.
I wanted to talk a little bit about, you know, what you referred to in terms of sort of the minimum guaranteed long-term contracts, obviously very significant for the business model going forward. When you talk about the negotiations or sort of the conversations you're having with these new clients, what's the offset? A client that wants to give you a minimum guarantee and give you a longer term commitment versus somebody who wants to stick to the original model. Is there sort of, are they getting better economics? Apart from the product itself, which is obviously key, what's the other kind of incentive?
Maybe that's the first question.
Yeah. Okay. Yeah, sure. Absolutely. Thank you for the question. I'm gonna let Nadeem answer that 'cause he's dealing with that every day. Thank you, Aravinda, for the question. Very much appreciated. The real trade-off is the right to use illumin. illumin is incredibly innovative and powerful, and if we've done our job properly in the selling process, and if we've demonstrated and shown the business value of illumin, that's the trade-off. We've created enough demand, interest, and spark in the customer's eyes that they want this. They desperately want what we have to deliver. In our best selling motion, that's always where we go first. After that, you know, there's discussions of margins, people or care about.
We really have to understand the customer interest, what business outcomes they're trying to achieve, what their primary goals are, and how do we best achieve those goals without sacrificing a long-term contract, without sacrificing guaranteed minimums.
Awesome. Thank you, Nadeem. Just a clarification on the new ads. I mean, when it aggregates the new wins, it comes up to what? 94 for illumin self-serve, including the 40 from the quarter.
Yeah.
Just to get a sense of magnitude here, what is your legacy self-serve customer count? I realize that they're not, you know, some may be off contract, Just to get a sense of the relative magnitude, what percentage is that of your legacy base?
You want me to take that? Aravinda, like, we're really only focusing on our illumin self-serve numbers. We believe that this is the future of the company. We're not focusing on any other numbers at this point. I know that the rest of the business is paying the bills, and it's important, and we're doing what we need to do to maintain it, but our focus and your focus should be only on the illumin self-serve and how we're growing it. We do believe that it's gonna grow very substantially this year, and obviously will take over the entire business in future years.
Thanks. Then last one from me, before I hand off. You know, looking at where the share price is, and your net cash balance, the traction you're getting with illumin, obviously, you know, you're not being rewarded with the share price. Why not? Or maybe just, how are you thinking of the idea of buying back stock? I mean, I know that you restarted it, but it's still, you know, limited amounts. You, you don't need a lot of cash to drive this business forward, especially with the success that you're starting to have now. Why not sort of make a stronger statement with buybacks? Just wanted to get your sense of the thinking there.
I'm actually pretty aligned with what you're saying. It is a discussion at the management level and the board level, but the logic that you're presenting is very aligned with what we're thinking. Obviously, we didn't make any final decisions, but, you know, in the past, we wanted to keep it mostly for acquisitions. Now the, we believe that we cracked the formula for the organic growth. As such, we. The only reason we need acquisition is for strategic smaller tech-ins, so we probably wouldn't need all this money for that. Therefore, we are seriously considering that.
Awesome. Thank you. All the best. I'll pass the line.
Thank you for joining us.
Thank you, Aravinda. Our next question comes from Laura Martin of Needham & Company. Laura, please go ahead when you're ready.
Hey, can you guys hear me okay? There you are.
Yes.
My first one, I'll stick it to two 'cause that's the request. My first one is about logos. You have 40 logos, really impressive logo win rate. My question is trends in type of logo. Do you find that certain industries are more, you know, beneficial for illumin? Can you talk about what the logo mix is and whether you're entering verticals and then deeply penetrating, or it's still pretty broad-based in terms of the industries you're being successful with?
Yeah. I would let Nadeem answer that. I think that we wanna talk about more the size and the type rather than the industry.
Yeah. Absolutely.
We're gonna add that we're learning that as we go as well, but go ahead, Nadeem.
Yeah. One thing is we've got a lot of great industry expertise here at illumin, which is terrific. We have people who know multiple industries, retail industry really well, the farm industry really well, political industry really well. Our approach in terms of new logos is we just want to get as many customers as possible so we can learn as much as possible from their use cases. There's not a focus in one area versus another. The focus is on how do we get as many customers as possible? How do we learn from them? Eventually, we know industries will take care of themselves. We'll see, you know, a certain industry do incredibly well, others do poor. We also wanna have it broad-based to protect ourselves against seasonality. We wanna protect ourselves against specific industry fluctuations.
Our approach right now is to have knowledge in every industry, but to take logos from wherever we can get them in a good mix, and then learn from those clients as to who are the best spenders. Who are the most stackable spenders? Who make the biggest commitments? Who sign the longest term contracts? We can double down and focus our efforts in those areas.
Okay, super helpful. My second and last question is about generative AI. Tal, one of the things that Jeff Green said on The Trade Desk call yesterday is he believed that the big datasets required for the ChatGPT generative AI future, that big companies would distance themselves from smaller companies. My question to you on generative AI is are you using it in your business? Is it impacting either the cost or the productivity? Can you speak to that issue of the big get bigger, because generative AI is gonna make predictions better so long as you have enough money to invest in those kinds of algorithms.
I would say we're starting to use it in different parts of the org, but more importantly, we're starting to look at incorporating it into the product itself. Imagine if the AI can now create the consumer journey or suggest the consumer journey for illumin versus allow the humans to build the journey. That's one of the things and many of things that we're looking at here. Yeah, I do agree, you need a lot of data. We obviously are a company that holds tons of data out there. We go through hundreds of billions of transactions a day, as you know. We've been using AI since day one. One of our founders is has a PhD in that field.
We're gonna continue innovating in that space as well, and incorporate into illumin as well. I do wanna say one more thing to you because you and I had conversations in the past about illumin self-serve. I think I made a commitment to you that we're gonna get to $15 million, and you were so excited you asked me if you can print it. It looks like we're going to over-deliver on that promise this year. I'm looking forward to the next few quarters to sharing that.
Congratulations. Thank you.
Thank you.
Thank you, Laura. Our next question will come from Rob Goff of Echelon Wealth Partners. Rob, please go ahead when you're ready.
Thank you. Good morning, and congratulations on the revenue beat for the quarter. It was very nice to see.
Thank you.
Thank you. Thank you.
I'm sure it's gonna be even more of a theme, but the questions would be on the minimums that you're signing, like how should we look at that such that like, would a minimum typically be 50% of what you look to bill from a client? Or how do you see that mix between minimum and actual revenue generation per client?
Yes. The minimum is what the client is committing to, from an overall contract. It could be an annual contract, it could be a three-year contract. It's not necessarily going to be equally on a monthly basis. It could be the commitment for the entire year. There could be a situation that it will be top-heavy on the beginning of the year or at the end of the year. But the commitment is the minimum commitment, like you said. We have seen and we expect that as the client starts loading up campaigns and being successful at it, they're gonna add more and more campaigns and be over the minimum. We're not...
We have very limited data sets so far as as starting to to calculate the the recurring part of of the revenue and things like that. We're starting to look at different types of metrics that are more related to SaaS business. We need at least a few more months to to figure out, to make sure we have the correct consistent data there.
Okay. Recognizing it might be early days, but a question that came in from a client, actually, just to read it off. Once illumin clients have spent on the product, do you see a certain percentage of up-spend after that initial contract or initial execution?
You mean would they go over the minimum spend?
No, it's sort of, you know, if a client comes on with the minimum or without a minimum.
Yeah.
are you seeing them spend or commit to greater budgets on subsequent programs?
I think you're saying going over the minimums. No? Or am I?
No, I think what he's trying to understand is at the individual client level, are we seeing a stacking effect?
Exactly.
Of revenue with individual clients? The answer is yes. Absolutely.
Yes.
We have, you know, it's limited data right now, so we don't share numbers, but it's very, very positive, very optimistic in terms of what we're seeing from our clients from the first dollar they spend on our platform in the first month they're using it, compared to how much money they're spending on our platform 12 months later. Very impressive. It's occurring for two or three reasons. Number one, that first campaign is working exceptionally well. They love it, they love the performance, they love the results, and they look to see who else, what other brands, what other products that can they add to the platform. Second, our roadmap is very impressive. As we're adding incremental functionalities, as we're adding channels, they very much want to and quickly embrace those new channels.
Let me share what we're about to launch.
We're, you know, we did a lot of digital out-of-home in Q1, which is launching now and working that to our customers, so that channel is becoming available. Social is next on the horizon, and we're working towards adding that as a channel. You can see these clients, once they understand the journey. They are also understanding that, wait a second, there's a gap in that journey. Where's digital out-of-home or where's social or where's something else? Our roadmap is filling in every component of the journey. We are gonna meet every consumer where they are in a digital addressable space, and that's what's unique about illumin. Only illumin can do that, and only illumin is connecting that entire journey.
Great. Thank you.
Thank you.
Thank you, Rob. Our next question comes from Darren Aftahi of Roth Capital Partners. Darren, please go ahead when you're ready.
Yeah. Good morning, guys. Thanks for taking questions and nice progress here. Nadeem, I think I heard you say 45% of 1Q self-serve clients were long-term in nature. Is that correct?
Yeah, that's correct, Darren.
Yeah. I'm just trying to understand the context. Like, how does this compare to sort of, let's say, second half 2022 levels in terms of percentage of mix? Like, where do you see that KPI ultimately trending?
You know, I think we get a division by zero error when you do that calculation. There were zero contracts that were long-term in nature last year or, I'm gonna say sort of three-quarters of the way through the year. We did our first set of long-term contracts in Q4, and now it's become normal. Now the question is, why is it not long-term versus can we do it long-term? We see that trend just continuing to go up into the right. We should be able to increase that number as we have greater discipline, greater rigor, and greater selling in our sales process. A key component of this is automation, right? You know, right now, a lot of our contracts are done manually without automation.
We're integrating that into Salesforce, so you won't be able to get a contract out the door without my approval electronically in the system to audit all of those capabilities as well. Nothing but moving that number up into the right.
I'd like to spend a couple of minutes on that side because I think it's very important. You probably have two companies in the entire space that is capable of getting long-term contracts with commits. illumin came along in Q4. We ourselves did not know if we can do it because it's not a common practice in the industry. Our team certainly didn't believe they can do it. But in Q4, there were a few believers that received those types of contracts, everybody started following. Again, because they started seeing that we are not selling a traditional DSP. We're selling something completely different. We're solving a huge problem. When we show a demo to a marketer, it's like the dream come true right in front of them.
They're willing to take the risk and sign that long-term contract in order to have access to illumin. The trend is more and more of the new logos are coming in with long-term contracts. If it doesn't come in with a long-term contract, there's got to be a really good reason for us to approve it.
That's helpful. Just second question, the pipeline commentary, I think you said 103 going into Q1 and 212 going into Q2. How many of those 103 going into the year actually became paying clients? How do you deduplicate between early stage and later stage in terms of sales cycle? Thanks.
Right now, we don't have the data, David, to Darren, apologies, to fully answer that question. We haven't been long enough. Those deals haven't matured fast enough for us to say. That's part of the KPIs that we're measuring, right? We're looking exactly at understanding what how long does it take truly for an opportunity to go from early stage to close based on the source of that opportunity. Is it BDR? How long do those opportunities take? How long do they take if it's coming from a trade show? How long does it take from coming from a rep? How much activity do we have with that customer in the past, and what's that impact on length of time to drive through the pipeline? It's a great question. It's a great question that's top of my mind every day.
We don't have enough data yet to answer that question. What I can say is, I'm thrilled to have the amount of pipeline we have coming into the quarter. I'm thrilled to see the close rates that we had in Q1 and in Q4. We just got to move them, answer those questions on behalf for our clients, get them in front of more senior buyers. The rest will take care of itself.
Great. Appreciate it. Thanks.
Thank you.
Thank you, Darren. Our next question comes from Drew McReynolds of RBC Capital Markets. Drew, please go ahead when you're ready.
Yeah. Thanks. Thanks very much, and good morning. Two for me. First, maybe for you, Eli, just in terms of your growth commentary for Q2. Just wondering if you can fine-tune a little bit as to, you know, what you're expecting year over year. Is it directionally acceleration or, you know, generally something similar to Q1? Forgive me, I missed some of your net margin or gross profit margin, kind of commentary on the outlook. If you could just kind of repeat that. The second one may be for you, Nadeem.
Very helpful, your commentary on just how you're working through the process that you worked through. From your perspective as of today, what are some of the remaining kind of hurdles or challenges or gating factors in the whole process that you still have to tackle, if there are any kind of material ones left? Thank you.
Okay. Thanks very much, Drew. I'll quickly just. I think your question is what are we expecting for the balance of the year in terms of growth. We are expecting continued growth on our top line and significant improvement in our bottom line. What we've expected happened in Q1. We knew that it was a soft quarter, we knew that it was a seasonally soft quarter, and we had made commitments and are continuing to make commitments to create that strategic advantage with our platform, with our sales team, and with the brand. We knew that we were gonna have the results that we experienced in Q1. We are looking for a performance level on the EBITDA front that is consistent with prior year, our top line, we expect to grow.
I think you could view the kind of growth on a, on a reference quarter basis as representative. Obviously, we don't know all the macro factors that will come into play, but we're very encouraged by the growth that we're seeing, particularly illumin self-serve, and we expect that cadence to continue.
I would say that our focus is to figure out that growth engine on the illumin self-serve and bring it down to science and accelerate on it. That's our focus. That's why we're very, very focused on the data and the numbers and, obviously, having enough of it before making further decisions. All the early indications are extremely positive on that side. Wanna answer your part?
Sure. Thanks a lot, Drew. There's two fundamental challenges that we still see, and Tal addressed 1 of them, which is predictable repeatability. We've proven now that illumin resonates in the market. We've proven we can sell it. We can prove that we can sell it with long-term contracts. We can proven we can sell it with minimums. We can proven that we can sell 40 of them in a quarter. My hurdle now is to do that every quarter and increase that number every quarter. That's one challenge that's in front of us, and with increased spend on those clients, and that they get spending in a high proportion of them spending. That's one hurdle we're really, really focused on.
The second is, you know, Tal talked about the fact that there's very few companies in this space that have even ever earned the right to long-term and minimum contracts. There's also very few companies, I can't think of any, that have actually made this transition and transformation from managed to self. We have to do that as well, right? We're not losing... I talk about balance as one of the key principles. We're not losing sight of our managed service business. That's continued to be strong for us. It's actually continued to grow for us. The level and the percentages that we're growing self-service at is tremendous. We got to keep these two things in mind.
Much of our energy is self-service, but we're not losing sight of, and we're not losing track of our managed roots and how excellent we are in that space. Those are the two big hurdles that we're gonna overcome. Very few people have done it. We're gonna do it.
That's very helpful. Thank you.
Thank you, Drew. Our final two questions will come from Daniel Rosenberg of Paradigm Capital. Daniel, please go ahead when you're ready.
Thanks. Good morning. My first question was around the support required to onboard an illumin customer and kinda train a new client. How has that changed in the past couple quarters? How do you think you could impact it going forward?
Yeah. Nadeem?
Just so I understand the question, Daniel, it was around new client onboarding and how we're shifting that motion?
Yes.
How it changed. Yes.
How it has changed. A couple of things, Daniel. It's a really good question, and thank you for it because as great as it is and awesome as it is to close a customer, if we don't make that customer successful, it's all for naught. Our number one mission is to make our clients successful in the world of advertising. illumin can do that unlike any other platform. No other platform can tie top of funnel awareness with bottom of funnel conversion and tell them how that spend is affecting one another. That's unique to us. We have to train them, and we have to make sure they're onboarded successfully to do it. A couple of key factors where we're really upping our game in our customer success function. Number one is how do we do it at scale and at volume?
Tal talked about the fact that one of the reasons for our challenges in onboarding these customers that we had in Q1, their spend was delayed against our plan 'cause we'd never onboarded that many customers before. The first time you do something, it's a bit hard. We're becoming excellent at scaling that onboarding process. That's number one. Number two is spending more of our time and energy focused on driving their success, not dealing with technical support questions or how to questions, or how do I find this or where do I find that, or what icon do I push for that, but how do I make my business successful? How do I optimize this campaign? How do I get better performance? How do I beat the competition? How do I take share away from my competitors?
Those are the questions that we're transforming our customer success organization so that they're more trusted business advisors to our clients and trusted business advisors to the C-suite. We're early in that transition, but that's directionally where we're headed, and we've built business plans to do that. One of the things I'm really excited about that customer, our customer success group is driving, is an illumin customer advisory board. These are some of our customers that meet with us once a quarter and really talk to us at a deep level about what success they're achieving, what more they want from us to achieve further success, and are partners in that with us in that future.
I think that was a really, really good question, kind of highlights one of the reasons why we haven't seen growth in self-serve in Q1, because we did run into a challenge in January. We fixed some of it by February, and by March it was completely fixed and ready for all that volume of onboarding. A key part of it is once you get a new client, you do need to activate them in order to see the dollars flowing in. Happy to say that we've seen that now. We're getting better with that all the time because we do believe that we're gonna accelerate on the number of logos coming in as well.
We have to do better at being able to intake all of those, activate them, train them, and get them to start swimming.
Thanks for that. My second question was just around social. You had mentioned, Tal, in your remarks that that's an area that you guys are looking to add as functionality. How key is that for your customer base for attacking different parts of the market? If you could elaborate on that, please.
I think it's huge. I think it's huge because right now, the way that customers are running, let's say, the desired consumer journey is in silos, right? The more things you can connect to one platform, even from a planning perspective, and then from an execution perspective, the better, because it becomes more efficient and you can bring people along that consumer journey no matter where they're at. Ultimately, we wanna have many more things in it, and it's all in the pipeline. Anything from search, to email marketing, to SMS marketing, and a few other items that will be built right into it.
Social is going to be the next one that we all been dreaming of for, you know, since before we even launched illumin. It's in the paperwork that we drew originally many years ago. We're just a few weeks away from launching Facebook and Instagram into it. Look, we all know it's a walled garden, so it's not going to be perfect communication between illumin and the walled garden. There are functionalities that we can use and target customers. Sometimes we will not get the results or the performance back. It's better getting some data and tying it somewhat rather than nothing.
Look, we're all looking for the time that the walled gardens are gonna fall and it's gonna be more of an efficient market, which eventually we believe that's where it's going to go. I think it's going to be great for our existing customers, but also opens up a whole new slew of customers that would like to use one platform to do this. Look, we're gonna be testing it, offering it to the market, see what the type of customers it resonates with. We certainly have been getting a lot of requests for it, and there's a lot of excitement happening as we're rolling into it.
Thanks for taking my questions.
With pleasure.
Thank you, Daniel. This concludes the Q&A portion of the call. I will now hand it back over to Tal to give any closing remarks.
Yes. I'd like to thank everyone for joining us today and for the support. Obviously without investors, we would never be where we are today. This company started with nothing. Just as a reminder, it did start as a bootstrap company for many years, going directly to the public side and became a huge company, from my perspective, 250 employees around the world with many offices, and most importantly, very innovative. With our new product, illumin, it's changing the world of advertising. We're very, very excited about that. We did rename the company from, well, the operating side of the company from AcuityAds to illumin. We're going all in on that.
The company name as well is going to be changing in the short future. We are very excited about launching social into it in the next few weeks. Super excited about the stacking effect that we're seeing on the self-serve illumin side. Tracking it very, very closely. Like I said, we exited Q1 at over $12 million run rate on illumin self-serve. For me, that's the biggest focus of our business, and I believe this is our future. I'd like to thank the illumin family again for delivering a lot of things this quarter, a lot of changes, a lot of positive changes, growth, and just for doing an excellent job. Thank you everyone.