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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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 is 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 of AcuityAds, to update you on the operations of the business.
Good morning, everyone. My name is Tal Hayek, and I'm the Co-Founder and CEO of AcuityAds. I'd like to welcome everyone to our Q3 Investor Presentation.
Let's start by taking the Acuity family. The Acuity family has delivered, in the last -- in the past 2 years, an amazing product to market. It's called Illumin. And Illumin is changing the world of advertising. And it would not be possible without the passion, commitment, desire to succeed of everybody in this family. So thank you all for making this happen.
The ad industry is changing. We have walled guidance. We have privacy issues. We have line items and gross repetition of ads that do not work anymore. Marketers need journey advertising tools. In fact, marketers think that way. They always did think that way, they just never had the tools to actually produce it that way on the programmatic side. And Illumin is the only tool that solves that huge problem.
Illumin is a journey advertising platform. And again, it's the only one of its kind. Imagine you can tailor the message to the consumer depending on where they are on their journey. And you can do it in an intuitive system, drag and drop system, but you don't need to train for it for hundreds of hours in order to know how to operate it. It saves you time on set up, it saves you time in managing the campaign. So imagine that tool is around and it is around, it's called Illumin, and it's changing the world of advertising.
I can tell you, one of my favorite parts of my job is sitting in on demos and when marketers see the Illumin demo for the first time, and they cannot sit still in their seat because there's so much excitement because again, this is -- what -- this is the way that they like to communicate to consumers. They just didn't have the tools to do it after now. And with Illumin, it's right there. In Q3, we invested more in Illumin. One of the major improvements we've done is we improved the path part.
What does it mean? It means that if a marketer would like to set up a more simple campaign, one that's not a complete journey, but has more like a performance base, we've adopted the system that will be very easy for the marketers to do that. So that opens up a whole new market for us for campaigns. And when they do that, they improve the time to set up a campaign by at least 30% and many times a lot more. So we've seen our own internal team preferring to use that over and over again, obviously, the outside self-serve clients as well.
We've also been very focused on many things to do with self-serve clients, starting with increasing the number of demos that we do on a regular basis. We've seen over a 161% increase in the amount of demos that we do from Q1 to Q3. Our closing rates are higher and the days it takes us to activate clients from signed contracts to spending on the system is shorter. So all that shows us a great formula for the future.
We truly believe that Illumin is changing the world of advertising. And we're so excited to be at the forefront of that change. And we just started. There's a lot more to do. The product is adopting and innovating on a regular basis. Our focus now is truly, truly on the self-service pipe from a sales perspective, from a marketing perspective.
And with that, let's look at some Q3 results. Well, I'm happy to report that this is the first quarter for a while that we're delivering an increase in revenue. We delivered $29 million in revenue, which is up 5.5% year-over-year. The Illumin as a percentage of revenue is growing progressively on a quarterly basis. As you can see, it was 36% of revenue last quarter, 46% of revenue this quarter. We're well above what we thought were going to be at this time. As we promised, we're going to exit the year at more than 50% of the revenue on the Illumin side. We're also increasing clients on regular basis.
So 94 clients on Illumin in Q3 versus 77 that we had in Q2 of this year, or 52 that we had in Q3 of 2021. So that's very nice growth that we're seeing.
Revenue, $13.2 million of our revenue in Q3 came from Illumin. That's up 78% from the year before that. And what I track very closely, and I think that's a very important part of where we're going, is the Illumin self-serve revenue. In Q1, we had $0.5 million; in Q2, $1 million; in Q3, $1.2 million. But don't let that number fool you. The number of demos are going up, the number of closed customers are going up. In fact, in Q3, we had many close clients that we're going to start seeing the results in Q4. And our focus is the majority of it is on bringing in new clients, new logos into the Illumin self-serve.
The number of client growth, as you can see, 44 clients using Illumin self-serve in Q3 versus 31 in Q2. We will see, again, the results in the revenue side in Q4.
Let's talk about some verticals. So we've seen a few verticals that are showing some nice growth, 26% growth, tech and software side of things. Pharma, health is also about 26% growth. And financial side, close to 38% growth. So those are some of the verticals that are doing very well under the current condition.
With that, I'd like to call on Elliot, our CFO, to share some financial results.
Good morning, and thank you for joining us today for our Q3 earnings call. We are pleased to announce our financial results, which demonstrate the continued and rapid adoption of Illumin as shown by the second consecutive quarter of nearly 30% revenue growth for the Illumin platform.
Our strong and growing pipeline is a direct result of the focus and investment we are making in building out our sales infrastructure as well as continued product development and marketing presence.
In Q3, we experienced sequential and year-over-year revenue growth, both overall and within the key Illumin self-serve category, where we had particular success in attracting new clients to the firm, and we will continue to capitalize on this demand and support this growth into 2023. It is clear that the current market continues to reflect fears and financial instability as macro uncertainties persist. So while predicting the market or the economy will be even more challenging during this period, but we believe we will see growing revenue investment value and the uniqueness of our Illumin platform to advertisers will outweigh the short-term concerns.
Our strong balance sheet and liquidity are key to our ability to execute our strategy and to take advantage of inorganic opportunities to accelerate growth in an environment where sector multiples are at an all-time low. We strongly believe that our best path forward is to invest in our future, invest in our people, product and platform and in our organizational strength.
And on that note, I'd like to discuss our financial results for Q3. Our total revenue of $28.9 million, an increase of 2.5% over Q2 of this year at $28.2 million, and an increase of 5.5% from prior year Q3 at $27.5 million. We attribute this growth to our Illumin platform, especially the self-serve component even as the overall spend by our clients was reflecting the high level of uncertainty about current and future economic conditions.
Managed services revenue was $20.4 million in Q3 of this year compared to $19.3 million in the prior Q3 of 2021, an increase of 5%. Our self-serve revenue totaled $8.5 million for Q3 compared to $8.1 million for the same period in 2021, an increase of 5%. Revenue from Illumin rose over 29% from Q2 this year to $13.2 million and 78% versus prior year Q3. And year-to-date, the Illumin revenue is $31.3 million for the 9-month period ending September 30, up over 97% compared to the same period last year at $15.9 million.
Our gross profit or net revenue was $14.8 million in Q3 compared to $14.3 million in Q3 of last year, an increase of 3.5%. Our gross margin in this quarter was 51.3% compared to 51.9% in Q3 of last year.
Our operating expense for Q3 was $16.3 million compared to $12.5 million for the same period in 2021, an increase of 30%. And this reflects our strategic focus on increasing our product capability and sales and marketing to help drive increased adoption of Illumin. And these targeted investments have begun to show significant traction with client activity and new names and brands, as you heard earlier in Tal's presentation.
OpEx is 56% of revenue in this quarter compared to 45% for the same period in 2021. And our adjusted EBITDA number in Q3 2022 was $1.6 million compared to $4.4 million for the same period last year. And this decrease in adjusted EBITDA was primarily attributable to our growth initiatives that I just discussed earlier. Our net income for Q3 2022 was $2.8 million compared to net income of $3.4 million in the prior year.
As of September 30, our cash and cash equivalent balance stood at $88.2 million compared to $102.2 million as of the fiscal year end 2021. And much of this change is related to our share repurchases made during the previous 6 months. And even with these repurchases, we ended the quarter with a strong balance sheet and ample liquidity to continue further repurchases and seek targeted M&A opportunities to increase our growth trajectory and further our strategic objectives.
In the quarter, the company purchased and canceled 1.8 million of its common shares at an average price of $3.23 per share for a total consideration of $5.9 million. As of November 4, we have purchased a total of 4.1 million shares for $13 million in total consideration. And this share repurchase activity demonstrates our confidence in our balance sheet as well as our fundamental belief in the company's long-term prospects.
As of September 30, Acuity had 61.8 million common shares outstanding on a fully diluted basis. Our insider ownership is at approximately 15% of this 57.1 million issued in outstanding shares.
In summary, with our investment in our organizational capabilities and our strong balance sheet, we remain focused on scaling our business and growing our team to create more opportunities and build market share. With Illumin now representing 46% of our total top line, it is well on its way to exceeding our stated goal of over half of our top line by the end of the fiscal year. Our growth both in sales and new client wins is proof that our innovative Journey Advertising platform is changing the game with its amazing simplicity and the deep insights it provides to users.
Our growth trajectory includes a continued focus on targeted M&A strategy. We have seen more aligned valuations in the private market than we have in the past 9 months, and we will explore accretive opportunities that fit our synergistic growth plans and build shareholder value.
And with that, I'd like to pass it over back to Tal for his concluding remarks.
Thank you, Elliot. Well, I'm excited to say that we are on track, as promised, to exit 2022 with over 50% of our revenue in Illumin. In fact, I do believe the number is going to be even higher than that. We're very focused on our self-serve as far as client growth, as far as the amount of demos that we're doing out there for Illumin. The conversion rate from demos to closed contracts and the conversion rate from closed contract to activation, all those things are something that we're focused on very heavily.
We're also very happy about the progress in general that we see at Acuity. Look, this year was a major year of reorganization. We've done a lot of work to prepare the company and move it from the start-up mode that we've always been in to being a thriving large organization, and that will show up in the future.
I'm very happy about the progress of Acuity. I do believe that Acuity is in the best position it's ever been in. We've done a lot of work on the reorganization and preparing this company to go to the next level, and we're now in a phase that we've done all this work, and it's all about executing and getting more and more clients to adopt Illumin.
About Q4, I'm very happy to report that I'm expecting Q4 to be the second quarter of growth for us. And after a few quarters that we did not see growth and the economical uncertainties out there, I'm very happy about this progress as well. I believe Acuity is the best investment you can make.
And I'd like to thank all of you for joining us today and invite you to our Q&A section.
[Operator Instructions] Tal and Elliot, your first question is going to come from Dan Medina at Needham & Company. Please wait a moment as he loads.
My question is on your cost growth strategy going forward. Do you see cost growth? Do you see just kind of what your -- do you see growth? Do you see decline? How do you see the next couple of quarters on the cost side?
No, we're actually doing the exercise of the budget for next year. We -- as you know, we invested already a lot this year. And we think most of the investment is down. It's probably going to be a little bit more investment happening into next year as well. We're really, really, really focused on the Illumin self-serve, all the metrics that come from the top of the funnel, bringing in more demos, getting contracts signed and then getting those contracts -- those customers to sign the contract to start betting on system. So that's been our focus. And it's going to continue to be that way.
And -- so to make a long story short, I think most of the investment is done. So we'll probably see a little bit of expansion on the expenses, but nothing very serious.
Okay. And then my last question is that in the past, I think you said that you're basically ad vertical-neutral. And I just was curious, just going forward, if that -- you still see that as the case or what, it gives a little bit of a hint just to look into where the strength has been in this current quarter. Just what do you see for the rest of Q4 and into early 2023 in that vertical?
We don't have any vertical concentration that I can speak to, it's really a wide range. So there's no specific concentration that we have, and we don't have any client concentration like we used to have in the past as well. So there's nothing really to share on that.
Our next question comes from Daniel Rosenberg at Paradigm Capital.
Congrats on a good quarter despite the macro backdrop here. My first question was around the self-serve platform. I was curious to hear if you could provide any color on the type of customer that is adopting it, whether it be vertical specific or any targeting that's going on there as well as any first impressions that you may have had as they're ramping up on utilization.
Yes, I'm really glad you asked because that's everything that we think about these days, is the Illumin self-serve customers. And that's been our focus, as you may have read in the press release, we brought in a new sales leader in Q3, Nadeem that comes with a lot of experience on the SaaS side, actually is a sales leader at Salesforce for many years. And all that, in order to kind of change the DNA of the organization from managed to self-serve.
As you know, we've been trying to do it for a while, but boy it is harder than I thought it's going to be, and now we're seeing that it's actually happening. The focus on the demos, the conversion from demos to contracts, from contracts to clients who are spending on the system. And it's -- generally speaking, it's either the midsized agencies that we're going after or brands direct that would like to take control of their advertising budget, this is what we're seeing success. This is what the product is designed for at the moment.
And I think that even more importantly, people really, really get excited when they see the demos. And the feedback, now that we have active users, like hands on keyboard using it on their own, the feedback is tremendous. People are really, really loving it. It has good feedback. And also giving us things to fix, which we always do.
So all that is -- it has the signal that we're going to start seeing the compounded effect of revenue. To me, okay, it's not exactly a traditional SaaS model. It's more -- I would say, more predictable consumption model, but the basis of it is that you don't really lose customers like we do on managed. So therefore, every month, you have the revenue that you had the month before.
On top of that, you get the revenue of the new clients who signed up, particularly the quarter before because it takes a little bit of time on the system. So that gives us the component that we're going to see of the self-serve numbers. So we will see that from a number of clients, we will receive from the revenue on it.
And I can tell you, not all revenue is rated equally. This revenue for us is the most valuable, and we're right in the middle of that shift. We're seeing that it's happening. We're very, very excited about where it's going.
And just one question on capital allocation. Nice to see you guys put the NCIB to use with shares as they're trading here. I'm wondering if you would consider expansion of the NCIB. Obviously, it's a Board decision. But just given the way things are, it's the best use of capital for you guys given you have a nice cash balance on the balance sheet.
Yes. Do you want to take that?
Well, thanks for that, Dan. For us, this is an important aspect of where we are today. We do want to balance our NCIB for cash with first of all, cash preservation building, also for inorganic opportunities. But yes, I think I believe that we -- from the current conditions of the marketplace, this is certainly an attractive opportunity for us to continue with the NCIB. Whether that's going to be expanded beyond our current approved limits, I can't speak to that at this point, but we're certainly continuing to be active.
Your next question comes from Aravinda Galappatthige at Canaccord Genuity.
I wanted to pick up on the comments you made, Tal, about the improvements or the added features to Illumin in terms of sort of the path and sort of the most simplified feature set. Is that aimed at the mid-market more? I mean, does that really open up the mid-market a little bit more to you than maybe originally you would have been looking for enterprise. I want to make sure I understood that correctly. And if so, what kind of feedback are you getting from the largest enterprise level? Are they kind of asking for more features, asking for more capabilities? What's that conversation like?
Yes. So definitely, it's more geared to anybody who's doing -- running a campaign that's not a full consumer journey, or that. So there's many people out there that are using programmatic today to run line item stuff, and they simply want to use the algorithm to get the results. Well, we have the best algorithm out there, but it was very complicated, but on Illumin it was easier to put up on our old UI. So we came up with a way that Illumin kind of assists you doing it. And so first of all, the results are -- from an ROI perspective is the same as the old system using the same outlook. So amazing ROI.
Second, it saves you a lot of time of setting up the campaign, with minimum 30% savings in setting up your campaigns. And then maintaining the campaigns, being able to see report on Illumin and things like that, lots of added value. So we're getting really good feedback about it from our clients and also from our internal Ad's team that are using it more and more.
In the beginning, it was harder for us to get it to use it because it was more complicated to build. Now there is a choice to use it, they want to use it because they save a lot of time on it and it's easier for them to manage it as well. So I'd say really, really good feedback.
Regarding the enterprise, it's still early days in that side of the fence. So the large enterprise clients, it's early days. We're not ahead enough to make conclusions about what's needed. We're seeing the success in the mid-market right now, and this is our focus, while we're starting to develop our enterprise strategy properly with the team that has a lot of experience.
Okay. And just a quick question for Elliot. The free cash flow number obviously kind of bounces around a little bit. That's the nature of it. Recognizing that top line is hard to call going forward, given the macro, do you -- how would you look to kind of manage cost? And from a free cash flow perspective, do you want to maybe -- is one part of the thought process to sort of maybe reduce the burn and keep that burn at kind of breakeven level, and wherever you have flexibility, to spend that on growth? Or is that given the cash balance, that's not much of a consideration? I just wanted to see how you kind of rank that as you consider.
I'll answer it in my way, and then you will answer it, okay? I want to say, like in general, we have invented something that's going to change the world of advertising. So we're not interested in optimizing expenses in order to produce a certain amount of EBITDA in order to get the right multiples for it. We're not interested in that. We're interested in really getting the adoption out there, and that's really our forte.
While we do that, yes, we don't want to burn cash. And that's part of our mission, to do it without burning cash. But the focus in this company is about changing the world. It's not about what's going to happen in the next few quarters from a cash burn perspective or from an EBITDA perspective. I'd say we're more sensitive to cash burn, we don't want to burn cash, but EBITDA is less important for us for the next few quarters because we're really, really want to have the adoption of Illumin self-serve, and that's what we're focusing on and then we're making the investments in that.
Now you can answer in your way.
And completely aligned. We are not using the cash on our balance sheet as a shield or as a safety net for -- and what we're trying to do is make sure that we're feeding into -- while we did a lot of investment this year. Going forward, we want to be exceptionally targeted, and I mean sales and marketing and feeding into that advantage that we believe we have in the marketplace.
And elsewhere, we will look to make sure that we're very prudent and it's more about reallocating towards those things that we believe will drive future growth as opposed to just all systems go. We're very cognizant of the marketplace. You see the macro. You're absolutely right. It's going to be very challenging, predicting revenues going forward with these kind of the signals that are coming out of it, left and right, but we feel very confident that we have something special.
Our revenue, as Tal said earlier to the question is not the same revenue, we're replacing it with more consistency. And at the same time we want to make sure we don't lose that competitive advantage. So that's why the investment will continue in a measured way, but we are very, very focused on making sure we're being effective. And that's an ongoing effort for sure.
Our next question comes from Rob Goff at Echelon Wealth Partners.
My question would be on mix. Actually, a 2-part question there. Can you talk to the mix of Illumin versus non-Illumin revenues exiting next year or H2 next year? And you're talking a lot about this growth of self-serve. Can you talk about what part -- or what portion of revenues you see self-serve representing next year?
Okay. So next year, self-serve, we don't have it down. I can tell you that we're going to aggressively grow self-serve sequentially every quarter, and I'm talking about the Illumin self-serve, okay? That's the focus of the company today. Again, like bringing in new clients, activating them, getting them to the system and making sure they don't leave.
So it's going to be aggressive growth. I'm not -- we're not locked on the numbers just yet. So that answers that question.
And the mix of revenue on the Illumin next year, we're ahead of schedule. I mean, we told everyone that we will be at a run rate of over 50%. We're very close to it already by the end of the year, we're very close to it already. So I think we're going to be in a high run rate. And it's -- the managed stuff is moving, like all the new campaigns are starting to run on Illumin. So it will be fast, and we will sunset it next year -- sunset the old system next year.
Very good. And can I ask for perhaps a bit of an update on what you're seeing in the CTV marketplace itself.
We're seeing [Audio Gap] still an integral part of all the Illumin campaign, especially if you're running Journey campaigns, it's usually the first part, the awareness piece is done well with CTV, and we're seeing consistent growth in those numbers. We just don't focus on it because we don't believe that this should be the focus of us. Where our focus is on the Journey. And the algorithm makes this decision where it's going to get the best ROI. And actually, we see CTV numbers going up.
The next question is going to come from Dillon Heslin at ROTH Capital Partners.
Can you hear me?
Yes.
I wanted to start with the client mix, like with the self-serve 42% sequential growth, how much of that are net new customers to your company versus someone you might have converted from a legacy software?
The majority of it is new logos. So we added in Q3, we added 13 new customers on the Illumin self-serve system. And that's the majority of growth you're seeing from that. We may have converted 1 or 2 from UI3, but it wasn't anything significant.
Got it. But then, I mean, like with your comment that you're going to sunset the legacy platform, is that still an opportunity to convert those over?
Of course, we're going to be converting all of them before we sunset.
Got you. And then as a follow-up, when you talk about 4Q still growing, what are some of the puts and takes between the clients you signed in 3Q that didn't maybe fully sort of produce revenue in 3Q that we're going to pull into 4Q versus some of the seasonal strength that typically happens in 4Q and then just the broader ad market softness in certain verticals?
No. I mean, in general, Q3, our existing current clients in general, all -- I mean, overall revenue growth should be higher, which it is. And also, we have -- and specifically on Illumin self-serve, we signed up 13 new clients in Q3. All those clients that we signed in Q3 are going to spend in Q4.
And so again, the compounded effect that we're seeing from that is going to be big. And all the clients we signed up in Q4 are going to be spending in Q1. So it's about a quarter delay, I would say. So it's a combination of seasonal effect of course, and the new -- sign-up of new clients.
Your next question comes from Eric Martinuzzi at Lake Street.
Question has to do with the growth rate of the company. You posted a 5.5% growth in Q3. I assume the language is intentionally vague, but I just wanted to get better feel for it. Are you assuming a similar growth rate in Q4 kind of a mid-single-digit growth rate?
So Eric, that's where we don't want to be too exact because we're ourselves not 100%. And as you know, we were very bullish on the second part of this year, and we didn't deliver those results like we thought we were going to do.
And it's a combination of -- for me, it's mostly the issue of the investments we make, are taking a little bit longer to hit, and the reorganization took a little bit longer, especially the latest part of bringing in Nadeem to run the sales team and for me to run marketing. Now we have a full team in place in order to deliver what we said we're going to deliver in the second part of the year.
But at the same time, we're -- we don't know for sure. It's -- we're in the middle of the quarter. It's looking good, but I think it's much better for us to wait and see until we have more certainty rather than promise things that may not deliver.
So we'll be the first ones to say we did deliver what we promised for the second part of this year. We've made a lot of adjustment to the way that we think about it. We learned from it. We have the right executive team in place in order to do better for the future. And it's our job to start the delivery now. So I am sorry I'm not giving you an answer, but it's just...
You don't know, you don't know. I'm just curious to know if we shift over to the adjusted EBITDA for the business, we did have revenue growth in Q3, but adjusted EBITDA was down year-on-year. Are you -- should we assume the same thing for Q4 if you hit the revenue that you're talking about, would we expect adjusted EBITDA to be...
Yes, definitely yes. We increased our cost base for the investments we made and that hasn't changed. So we will see a lower EBITDA.
But up sequentially?
Sequentially, we expect that to be increasing quarter-over-quarter. But year-over-year, we're going to see a decline for sure because we did put it those investments at this time.
Your next question comes from Laura Martin at Needham & Company.
Maybe just following up on Eric's question a little bit. Are you still running 2 sales forces, 1 for Illumin and 1 for the other? And could we rationalize those over 2023, do you think?
We are not running 2 sales forces. Illumin is not being sold at all -- sorry, the old system is not being sold at all, everything that we sell today is Illumin. And the separation is maybe between management and self-serve, but it's still the same team that are selling both. Just the focus now is really, really moving and -- we're really moving the DNA of this organization to self-serve, which is something that we've been trying to do for a while and is finally happening.
But we do find that it's the same team, with a higher focus on self-serve, is getting us the result. We had 6 new clients in Q2 for Illumin self-serve, 13 new clients in Q3 for self-serve. The number is higher for even the first half of Q4, and the revenue will start showing up very quickly.
Okay. What's my percent of self-serve now at the end of the third quarter of total revenue?
The entire self-serve? Or Illumin self-serve?
No, entire. Total.
It's -- we're about 1/3. And the reason it's not higher is just we had some seasonality in self-serve as we have in other ones in Q2 when they had on the travel side.
I am going to push it to Ell then, somebody else ask this for me, I am going to push you on this. We're 1/3 now, you're saying everything they're doing is self-serve. So by year-end, are you happy with half of the revenue coming from self-serve? Or like should we still expect a third?
I'm focusing on Illumin self-serve. So what I'm happy with is aggressive growth for Illumin self-serve from 1 quarter to the next. This is what I'm focusing now and throughout next year as well. And then as we start converting, so we don't really convert the old system, UI3 customers to self-serve Illumin yet, because it's a harder sell. Why? Because people are used to a self-serve system, and they don't like changes.
It's really great from a retention point of view because once you get people on it, it's hard to change them. But it's also us to move our own clients into it, it's a tougher sell.
So we are really, really focusing in, bringing new logos, activating them and getting them to spend on the Illumin self-serve and not the overall self-serve number that we're looking at. Although sometimes next year, yes, we will see all those flip into Illumin self-serve.
So when we started Illumin, I want to say, 1.5 years ago, 1 of your big goals was to shutdown 1 of the 2 parallel platforms and save the money. But from your comments just now, what you're saying is sort of for all of next year we're still going to be running those 2 same platforms. How much money would it be saving you?
I don't think it is all next year. I mean I think sometime next year we will shut it down, probably around mid next year, it will be -- we will sunset the old system. You're going to ask about, I think, expenses that's related to it. Well I don't see those expenses go away, we're going to reallocate the resources of the old system into the new system. I mean, we're in hiring mode on the tech side to begin with. So -- and as you know, it's hard to hire, I know those things are about to change now, but it's still like down to the tech side is still tough, especially the talent that can do programmatic, the amount of transactions that we do and all that, it's a different type of talent you need to get into. And the people that we have are amazing, so we're going to keep them and reallocate them, kind of remove the time that they spend on the old system.
Okay. So it doesn't sound -- I mean it's taken a lot longer to shut down that old platform than we thought, like years longer. And so at sort of...
It's absolutely, our expectations was that we will be able to shut it down sooner. As you and I talked about, our expectation was that we can move the DNA of the org from managed to self-serve faster. As we talked about, it's proven to be more difficult, but it's happening now. It's happening now when you have a sales leader that comes from the SaaS side of things that worked for Salesforce, leading their sales team. He's like -- that's the kind of the DNA change that we needed, and I'm very happy that we finally have it. And we will see over the next few quarters that those things are happening.
Okay. And then my second question is on mix. So I think of Illumin as a full service like, from actual awareness all the way down to performance and conversion. So my question to you is, we are hearing in the marketplace from some of your competitors that there's been a strong shift away from branding into performance advertising as consumers demand has weakened. Are you seeing that in your Illumin product, too? This shift towards performance and away from sort of brand upper funnel?
I would say half of the campaigns we run on Illumin are performance because we are used to using programmatic for performance. And obviously, these are some of our existing clients. And the other half are the ones that are looking at more holistically and understand that we need to take care of the top of the funnel too in order to get your leads into the system, engage them and then convert them at the bottom of the funnel.
We've seen recessions before. People start -- are more focused on saving money on their marketing, and then they see the decline in the revenue and they start focusing on doing that again. And the best way of doing it is on systems that give you positive ROI. So Illumin, the focus of Illumin is on mostly customers that will do the complete journey. But the new feature that we launched this year recently is allowing us to go after that market that's doing just the performance we meant -- and it's doing -- it's providing great value for them. So we have both.
But I don't -- I haven't seen like a major shift in Acuity more towards the performance side.
Okay. My last question is on Trade Desk. So they grew revenue 31% and there is -- what would you say to an investor who says Trade Desk is just eating the world. Are you seeing them take your clients? Do you -- they have such an outsized growth here and they're so big to start with. Can you talk about industry design and whether you think Trade Desk just basically eats all the other DSPs, which would include yourself?
Well, I think that we're in a different market today. We're going after the midsized agencies and the brands there. We have a product that nobody else has. If you want do Journey, you cannot do that with the other system. You have to -- you have to take Illumin. So for us, it's all about the Illumin adoption going out. And we have so many marketers that didn't even hear of Illumin yet, which is frustrating and also it's a huge opportunity for us to get it to the market properly.
So this is our focus, our focus is on Illumin. It is completely different than anybody else that's out there. Some of the bigger companies or the bigger DSPs out there, they're focusing on the top tier and on the big agencies. Not exactly our focus. So we don't exactly compete head to head at this point. And we see other companies in the programmatic space are reporting declines. We're happy that we're still increasing revenue.
But as we are moving towards more and more the predictable revenue model on self-serve, I believe we're going to see much higher growth in the future.
Our final 2 questions come from Drew McReynolds at RBC Capital Markets.
Yes. Can you hear me?
Yes.
Okay. Okay. Awesome. Yes. Nice to see you, just 2 final ones for me. First, on the M&A side, it does sound like you're incrementally a little bit more optimistic on maybe the opportunities out there. So just remind us thematically some of the pieces that would fit with AcuityAds in terms of the strategic areas you're looking at.
And then the last one just gets back to the adoption of Illumin and conversion rates. So I guess I'm under the assumption your sales and marketing team is fully ramped up and are almost fully ramped up in full run rate mode. Like what -- I know you're not going to probably commit to a conversion rate here, but like what is the untapped base of advertisers and agencies you still haven't hit? Do you get 50% conversion? 75%? 25%. Like we're just trying to kind of see under the hood on exactly what your hit rate would be as you sit down with new folks.
I'd say the amount of advertisers and marketers and agencies that we didn't even talk to are in tens of thousands, so it's a huge market, only in the U.S. itself. So we have a lot to do. I don't think we're fully ramped on the sales side, but we're pretty good. Ramping up a little more there.
And what do you mean by conversion rate?
Well, just you talked about how excited advertisers are when they get the demo...
Get -- so those are the -- so the metrics that we're starting to work on and we don't have enough theoretical consistency, are the number of demos that we have, conversions from demo to contract, conversion from contracts to active clients on the system. So those are the things that we're tracking. It's just the numbers are so low to begin with, the baseline, and it's hard to share them yet because they might not -- they might have inconsistency because it's so early now.
And just on the M&A side?
The M&A side, what are we looking for strategically. The main part that we want to add to Illumin is to complete more of the consumer journey, and it's not -- the consumer journey doesn't just happen on the programmatic side that we have in Illumin today.
So we want to add social to it. We want add search to it. We want to add e-mail marketing to it, influencer marketing to it, a whole bunch of other things that we don't have it in today that is not programmatic, and it's not going to work exactly the same, but it's going to be a great part.
Imagine you're an advertiser, now you have to use -- you have to log into Facebook and into YouTube and AdWords and to Illumin to do programmatic. You could all do it all from one system, it's going to add so much more efficiencies for you.
And so that's where -- that's strategically what we want to add to it, we don't really have the expertise in-house to do it. We could build it, but we prefer going up and getting a company that already had all those things that are established and just plug into it. So that's the major focus.
Of course, we can also focus on companies who are in the same space as us, the product is not as strong, and you can remove tons of expenses by amalgamating the product. So that's always something we can do, focus on for size. But for me, it's more exciting to focus on what this company can produce on the organic side, on the self-serve side, on the Illumin side. And for that, the strategic growth is more important than the M&A side.
There are no other questions. So Tal, I will hand it back over to you for any final remarks.
Thank you. So thank you, everyone, for joining us. I'd like to again thank our investors and the Acuity family and everyone that's involved that made this journey possible. We're really, really, really excited about what we're doing with Illumin and specifically Illumin self-serve. And we believe that the best is yet to come. And thank you, everyone, and have a great day.
This now concludes AcuityAds Q3 Financial Results Video Conference Call. You may now disconnect.