ILLM Illumin Holdings Inc

illumin Holdings Inc. (TSX: ILLM) (“illumin” or “Company”), a journey advertising technology company that empowers marketers to make smarter decisions about communicating with online consumers, today announced its financial results for the fourth quarter and full year ended December 31, 2023.

Fourth Quarter 2023 Highlights

• Fourth quarter 2023 revenue was $37.0 million, down 8% year-over-year, reflecting anticipated lower managed service revenue due to the Company's ongoing strategic shift to focus on the self-service business and challenging market conditions for advertisers, partially offset by a significant increase in illumin self-service revenue derived mostly from new customer relationships.  
• Overall self-service revenue was up 38% to $18.5 million, compared to $13.4 million in the year ago period, and represented 50% of total revenue, up from 42% in Q3 2023. Self-service revenue growth was driven by an increase in new illumin self-service customers and higher illumin self-service platform utilization.
• illumin self-service revenue was $8.9 million in the quarter, up 75% from $5.1 million in the prior quarter and up 271% versus Q4 2022. This represented 24% of revenue in the fourth quarter, up from 6% in the prior year period, and was driven largely by new customer relationships and by increased illumin platform utilization.
• The Company onboarded 33 net new illumin self-service clients during the quarter similar to the prior quarter, reflecting sales initiatives targeting higher-spend clients and positioning the Company for further illumin self-service revenue growth in Q1 2024 on a year-over-year basis.
• Gross margin was 49%, relatively flat compared to 48% for the same period in 2022.
• Net revenue or gross profit (revenue less media-related costs) for the quarter ended December 31, 2023 was $18.0 million, compared to $19.4 million for the same period in 2022, reflecting reduced sales in the period.
• Adjusted EBITDA was $2.4 million for the fourth quarter 2023, similar to the same period in 2022, reflecting cost management initiatives which offset lower revenue versus the prior year period.
• Q4 2023 net loss was $2.6 million, compared to a net loss of $0.8 million in Q4 2022, primarily as a result of lower total revenue and a higher foreign exchange loss, partially offset by lower operating costs.
• On November 13, 2023, the Company commenced a new NCIB, to purchase for cancellation up to 4,330,226 of its outstanding common shares. Under this new NCIB, as of March 2024, the Company purchased and cancelled 1,273,947 of its common shares at an average price of $1.64 per share totaling $2.1 million.

Fiscal Year 2023 Highlights

• Full year 2023 revenue rose to $126.3 million, up 4% on a year-over-year basis, which included a 33% increase in self-service revenue, predominately driven by illumin self-service client spend growth. This was partly offset by a decline in managed service revenue.
• Total self-service revenue increased to $53.4 million, compared to $40.1 million in the year ago period and represented 42% of total revenue, up from 33% in 2022.
• illumin self-service revenue was $21.6 million in 2023 up 279% from $5.7 million in the prior year and represented 17% of total company revenue versus 5% the year earlier.
• Gross margin for the year ended December 31, 2023 was 48%, compared to 50% for 2022, largely due to an increased mix of self-service revenue.
• Net revenue or gross profit (revenue less media-related costs) for the year ended December 31, 2023 was $60.3 million, relatively flat compared to $60.8 million for the same period in 2022.
• Adjusted EBITDA was $1.3 million for the year ended December 31, 2023, compared to $5.8 million for the prior year, primarily due to higher operating expenses and lower margin from business outside of North America.
• Net loss for the year ended December 31, 2023 was $11.0 million, compared to a net loss of $0.8 million for the year ended December 31, 2022 due to the factors mentioned previously, and a weakened U.S. dollar compared to the prior year period, partially offset by the recognition of a current income tax benefit from losses carried back with illumin Inc.
• During the year ended December 31, 2023, the Company repurchased for cancellation under the normal course issuer bid (“NCIB”) programs 1,146,476 common shares at an average price of $1.90 per share totaling $2.2 million.
• Pursuant to the substantial issuer bid, the Company purchased for cancellation 4,593,200 of its outstanding common shares at a purchase price of $2.65 per share for an aggregate purchase price of $12.2 million.
• At December 31, 2023, the Company had cash and cash equivalents of $55.5 million, compared to $85.9 million last year. This decrease was attributable to a combination of share repurchases, net loan repayments, lease payments and investments in our platform.

Tal Hayek, Co-Founder and Chief Executive Officer of illumin, stated, “During the fourth quarter, we continued to see considerable sequential and year-over year growth in illumin self-service revenue of 75% and 271%, respectively. That’s because our illumin platform provides a unique and differentiated solution for marketers and advertisers, giving them an effective and flexible self-serve approach to utilizing their advertising spend and managing the consumers’ advertising journey. This was also evident in our annual results, as illumin self-service revenue grew 279% for the full year.”

Mr. Hayek added, “We continue to be very encouraged by our illumin self-serve growth, both in terms of new customer relationships and increased advertiser spend. To capitalize on this, we have further refined our sales efforts to target client demographics where we are seeing the greatest success. We also continue to focus on signing long-term self-serve contracts carrying guaranteed minimums and terms greater than one year, which will establish a sustainable and recurring, self-service revenue stream for us.”

Elliot Muchnik, illumin’s Chief Financial Officer, commented, “Based on our growth in illumin self-serve to date, we expect this be a key driver for us to deliver total Company revenue growth again in 2024. We expect to achieve this growth even as we purposely reduce our relationships in certain markets that have generated lower margin revenue and experienced significant volatility in exchange rates. In light of the larger overall macro environment, we also intend to keep monitoring our costs closely and do not expect to see an increase in operating costs in 2024 compared to last year. Furthermore, given our strong financial position, we expect to continue executing on our NCIB program, reflecting our positive long-term outlook.”

The following table presents a reconciliation of Net loss to Adjusted EBITDA for the periods ended:

	Three months ended						Twelve months ended
	December 31,			December 31,			December 31,			December 31,
(in thousands of Canadian dollars)		2023			2022			2023			2022
Net loss for the period	$	(2,579	)	$	(820	)	$	(10,987	)	$	(754	)
Adjustments:
Finance costs (income)		(528	)		115			(2,122	)		544
Foreign exchange loss (gain)		2,034			958			2,827			(6,270	)
Depreciation and amortization		1,110			1,326			5,482			4,853
Income tax expense (benefit)		82			(470	)		(1,095	)		962
Share-based compensation		1,141			1,245			5,725			5,851
Severance expenses		940			92			1,307			491
Other expenses		157			-			157			79
Total adjustments		4,936			3,266			12,281			6,510
Adjusted EBITDA	$	2,357		$	2,446		$	1,294		$	5,756

Conference Call Details:

Date: Thursday, March 7, 2024Time: 8:30AM Eastern Time

To register for the conference call webcast and presentation, please visit

https://illumin.com/investor-information/earnings-call/

Please connect 15 minutes prior to the conference call to ensure time for any software download that may be needed to hear the webcast.

A recording of the conference call webcast will be available after the call by visiting the Company’s website at https://illumin.com/investor-information/

Non-IFRS Measures

This press release makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures including “revenue less media-related costs”, “revenue less media-related costs margin”, “Adjusted EBITDA” and “Adjusted Net Income (Loss)” (as well as other measures discussed elsewhere in this press release).

The term “revenue less media-related costs margin” refers to the amount that “revenue less media-related costs” represents as a percentage of total revenue for a given period, while the term “revenue less media-related costs” refers to the net amount of revenue after deducting direct media costs and specific costs, such as data acquisition, validation and verification. Revenue less media-related costs is used for internal management purposes as an indicator of the performance of the Company’s solution in balancing the goals of delivering excellent results to advertisers while meeting the Company’s margin objectives and, accordingly, the Company believes it is useful supplemental information.

“Adjusted EBITDA” refers to net income (loss) after adjusting for finance costs (income), impairment loss, fair value gain, income taxes, foreign exchange loss (gain), depreciation and amortization, share-based compensation, acquisition and related integration costs, severance expenses and adjustments to the carrying value of investment tax credits receivable. The Company believes that Adjusted EBITDA is useful supplemental information as it provides an indication of the results generated by the Company’s main business activities before taking into consideration how those activities are financed and taxed and prior to taking into consideration depreciation of property and equipment and certain other items listed above. It is a key measure used by the Company’s management and board of directors to understand and evaluate the Company’s operating performance, to prepare annual budgets and to help develop operating plans.

These non-IFRS measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS measures. We believe that securities analysts, investors, and other interested parties frequently use non-IFRS measures in the evaluation of issuers, and that these non-IFRS measures are relevant to their analysis of the Company.

About illumin:

illumin is a journey advertising platform that enables marketers to reach consumers at every stage of their journey by leveraging advanced machine learning algorithms and real-time data analytics. The Company’s mission is to illuminate the path for brands to connect with their customers through the power of data-driven advertising. Headquartered in Toronto, Canada, illumin serves clients across North America, Latin America, and Europe.

Disclaimer with regard to forward looking statements

Certain statements included herein constitute “forward-looking statements” within the meaning of applicable securities laws. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management at this time, are inherently subject to significant business, economic and competitive uncertainties and contingencies. In particular, this news release contains forward-looking statements and information relating to the Company’s belief that the NCIB is in the best interests of the Company and its shareholders and that underlying value of the Company may not be reflected in the market price of the shares. Investors are cautioned not to put undue reliance on forward-looking statements. Except as required by law, illumin does not intend, and undertakes no obligation, to update any forward-looking statements to reflect, in particular, new information or future events.

For further information, please contact:

Steve HoseinInvestor Relations Coordinatorillumin Holdings Inc.416-918-5647investors@illumin.com	Babak PedramInvestor Relations – CanadaVirtus Advisory Group Inc.416-646-6779bpedram@virtusadvisory.com	David HanoverInvestor Relations – U.S.KCSA Strategic Communications212-896-1220dhanover@kcsa.com

Please note that the following financial information is an extract from the Company’s Consolidated Financial Statements for the twelve months ended December 31, 2023 and 2022 (the “Financial Statements”) provided for readers’ convenience and should be viewed in conjunction with the Notes to the Financial Statements, which are an integral part of the statements. The full Financial Statements and MD&A for the period may be found by accessing SEDAR+.

illumin Holdings Inc. Consolidated Statements of Financial Position (In thousands of Canadian dollars)

		December 31,2023			December 31,2022
Assets
Current assets
Cash and cash equivalents		$	55,455		$	85,941
Accounts receivable			32,136			33,792
Income tax receivable			3,301			848
Prepaid expenses and other			4,123			3,153
			95,015			123,734
Non-current assets
Deferred tax asset			-			449
Other assets			63			248
Property and equipment			9,329			7,117
Intangible assets			7,618			5,229
Goodwill			4,870			4,870
			116,895			141,647
Liabilities
Current liabilities
Accounts payable and accrued liabilities			26,488			26,545
Income tax payable			717			43
Borrowings			131			4,032
Lease obligations			1,726			2,882
			29,062			33,502
Non-current liabilities
Borrowings			47			191
Deferred tax liability			1,001			1,060
Lease obligations			6,087			3,768
			36,197			38,521
Shareholders’ equity			80,698			103,126
			116,895			141,647

illumin Holdings Inc. Consolidated Statements of Comprehensive Loss (In thousands of Canadian dollars, except share amounts) For the years ended December 31, 2023 and 2022

				2023			2022
Revenue
Managed service			$	72,874		$	80,978
Self-service				53,444			40,060
				126,318			121,038
Media-related costs				66,023			60,251
Gross profit				60,295			60,787
Operating expenses
Sales and marketing				26,104			24,043
Technology				19,695			16,805
General and administrative				14,666			14,753
Share-based compensation				5,725			5,851
Depreciation and amortization				5,482			4,853
				71,672			66,305
Loss from operations				(11,377	)		(5,518	)
Finance costs (income)				(2,122	)		544
Foreign exchange loss (gain)				2,827			(6,270	)
				705			(5,726	)
Net income (loss) before income taxes				(12,082	)		208
Income tax expense (benefit)				(1,095	)		962
Net loss for the year				(10,987	)		(754	)
Basic and diluted net loss per share				(0.20	)		(0.01	)
Other Comprehensive Loss
Items that may be subsequently reclassified to net loss:
Exchange loss on translating foreign operations				(1,860	)		(901	)
Comprehensive loss for the year				(12,847	)		(1,655	)

illumin Holdings Inc. Consolidated Statements of Cash Flows (In thousands of Canadian dollars) For the years ended December 31, 2023 and 2022

			2023				2022
Cash provided by (used in)
Operating activities
Net loss for the year		$	(10,987	)		$	(754	)
Adjustments to reconcile net loss to net cash flows
Depreciation and amortization			5,482				4,853
Finance costs (income)			(2,122	)			544
Share-based compensation			5,725				5,851
Foreign exchange loss (gain)			2,827				(6,270	)
Severance expense			850				50
Income tax (benefit) expense			(1,095	)			962
Change in non-cash operating working capital
Accounts receivable			(296	)			(2,819	)
Prepaid expenses and other			(2,906	)			125
Other assets			185				(248	)
Accounts payable and accrued liabilities			(1,811	)			1,881
Income taxes received (paid), net			99				(1,985	)
Interest received (paid), net			2,658				(409	)
			(1,391	)			1,781
Investing activities
Additions to property and equipment			(867	)			(91	)
Additions to intangible assets			(4,375	)			(3,737	)
			(5,242	)			(3,828	)
Financing activities
Repayment of term loans			(4,411	)			(2,261	)
Proceeds from international loans			1,181				1,435
Repayment of international loans			(1,435	)			(1,886	)
Payment of leases			(3,020	)			(2,517	)
Repurchase of common shares for cancellation			(15,313	)			(14,500	)
Proceeds from the exercise of stock options			7				374
			(22,991	)			(19,355	)
Decrease in cash and cash equivalents			(29,624	)			(21,402	)
Impact of foreign exchange on cash and cash equivalents			(862	)			5,134
Cash and cash equivalents – beginning of year			85,941				102,209
Cash and cash equivalents – end of year			55,455				85,941
Supplemental disclosure of non-cash transactions
Additions to property and equipment under leases			4,403				4,957
Other non-cash additions to property and equipment			734				-