AcuityAds Holdings Inc

TSX:AT

Earnings Call Transcript 2020-Q4

[Operator]

Good morning, everyone, and welcome to AcuityAds Fourth Quarter and Fiscal Year 2020 Financial Results Conference Call for 3- and 12-month period ended December 31, 2020. 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 2021 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. [Operator Instructions]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.

[Tal Hayek, Co]

Good morning, everyone, and thank you for joining us. My name is Tal Hayek. I'm the Co-Founder and CEO of AcuityAds. Today, we're going to share Q4 results, Q4 2020 results and 2020 in general. Well, 2020 started off as the most challenging year, but ended up as the best year we ever had. It's been the most profitable year, which led to putting the company in the best financial situation it's ever been in. In 2020, we saw a major increase in Connected TV revenue. In fact, we saw a 287% growth in Connected TV. And we project that we're going to keep seeing aggressive growth coming out of the CTV. But the most important part of 2020 was the launch of illumin on October 1, 2020. illumin is the advertising automation software that we've launched to market, which has now positioned us to change the world of advertising, which also led to what we're seeing as a strong 2021. In fact, when we look at our Q1 numbers, we're seeing strong growth in revenue numbers. So let's talk a little bit about 2020 as related to COVID and share a little bit of the pain that we had. 2020 started off as a great year. January and February, great ones. And by mid-March, we saw a lot of pausing on campaigns. In fact, more than 30% of our revenue was related to travel, retail, entertainment, things that were going down to close to nothing at the time. So that was a tough time to be a leader. And in April, we were down substantially, about 40% down. But then by May, we've seen a major comeback. And then every month since, we've seen a major come back again and again and again. So I'd like to congratulate and thank the sales team that was able to take some of the lost revenue that we saw from other industries and replaced it by things like finance, some e-commerce and insurance, health care, all those things were things that were making up for some of the things that we lost as well. So that was the COVID situation. But when you talk -- when you think about Q4, our revenue was up 35% sequentially, our revenue for CTV was up 227% year-over-year, our EBITDA was up 30% year-over-year. We completely paid off our line of credit, something that we've never seen in this company before. We always had a balance of our line of credit. And we have close to $23 million in the bank, again, something that we've never seen in this company. We're really in the best position -- financial position that the company has ever seen. So in here, we're trying to illustrate the focus of the management team for the last few quarters. As you can see, this is LTM EBITDA, and it's moving up into the right every quarter. And that's what we're going to continue driving and attempting to drive as we move forward. So in this chart, we're trying to show you the focus of the management team for the last few quarters. This is our LTM EBITDA. And as you can see, it's moving up into the right, which has been a great focus of ours. I think another reason that everybody is so excited to be in this industry is obviously the market opportunity. So programmatic started 10 years ago. It grew from $0 to $118 billion during this 10 years, and we really solved the transactional issue of that space. For the future, the prediction is by 2027, we would see the ad space to be $1 trillion industry, and the majority of it is going to be transacted programmatically. So obviously, a very, very exciting place to be in. We believe that programmatic is an engine for recovery and growth. It's always been an engine for growth. Now it's also an engine for recovery as people are recovering out of the COVID situation. And I could tell you that when we've seen a whole bunch of industries, even in the ad space, that were going down during COVID, we had time that the industry went down last year, but it quickly came back. And the reason it came back, because the programmatic has the promise that as an advertiser, you can measure your ROI in real time and you can make sure that you get superior return on investment. Therefore, more and more people, accelerate even by COVID, are moving into this type of advertising. And there's no better company and there's no better algorithm out there than our algorithm, the AcuityAds algorithm, when you want to deliver a positive ROI on investment and you want to deliver a superior one and all measured in real time. This is the place to go. So a big driving factor here is what's happening in Connected TV. It's no secret that people are cutting their cords and moving to digital type of TV. And we've seen tremendous growth in this space. In fact, in Acuity alone, we saw 287% growth in 2020 from 2019. And we believe that is going to a number -- continue to aggressively grow. So we're very excited about what's happening on the CTV space and how it relates to us. And -- but then I think that COVID actually accelerated the CTV adoption because of 2 main reasons. Number one, again, advertisers would like to see return on investment in their ad spend. It's very difficult to measure it on linear TV, very easy to measure it on CTV. So therefore, we're seeing that happening. And the second part is, usually, on linear TV, you have to commit to major upfronts. CTV gives you complete flexibility. In today's world, this is what advertisers are looking for. So again, we predict that the CTV growth is going to continue in an aggressive way. Cookies. Cookies has been my favorite subject lately because everyone is asking me about the cookies and everyone is worried about the future of cookies. And I think it's very important to zoom out of the situation a little bit and think about who is paying for content online. And today, it's being paid by advertisers and consumers are getting it for free, mostly. I don't believe that consumers are going to be willing to pay hundreds of dollars a month for the content that they receive for free today. Therefore, it's going to be continued to be financed by advertisers out there. So I also want to mention that the third-party cookies were never really designed to do what they're doing today from a tracking perspective. So we, as an industry, are welcoming changes to it. So some kind of a universal ID is the way to go. We believe that it's going to solve the situation and it's going to replace the third-party cookies, and it's going to do a better job than that. We are, today, integrated with LiveRamp IdentityLink. We are also integrated with Unified ID 2.0, which is an open source, originally created by The Trade Desk. And there's a new one that's coming in all the time, which is a part of -- it's going to be a part of our platform as we move forward. So my belief is that it's -- the third-party cookies going away is not going to prevent us from being able to tell the story to consumers. So for me, the most exciting part of what we do here at Acuity is in illumin. Look, at the end of the day, Acuity was started by 4 people with a big dream, and we overachieved on our dream many times over. But that pales in comparison to what we're doing with illumin. illumin is changing the world of advertising. And let me share what it is exactly that we're solving here. So there's 2 major problems here. Problem number one is that there's a huge disconnect between the way marketers plan and the way that programmatic gets executed. Marketers plan in stages, and they usually plan in 3 stages, anything from awareness stage to engagement stage to conversion stage. And it's very important for them to send the different messages along the way. But then what happened is, they take that plan, they send it to their programmatic team, the programmatic team takes it, they put the plan in a black box. Essentially what they're doing, they're shredding that plan to pieces. Why? Because the black box cannot execute on a consumer journey. The black box is very good in executing against single-line items and delivering great ROI and results against that line item, but cannot control the message and the consumer journey. So many times, I see a situation that I see a video ad, a 15-second spot, that I really like. And I think, "I should check that brand out." And I see that same ad again, which is great, repetition is really good for marketing. But after seeing that exact same ad 30 times and at that point, I want nothing to do with that brand anymore. I'm sure you guys can relate to it. There's annoying ads that are coming to people all the time. And we tell brands that if you already have your consumers engaged, you need to tell the next reason why. Especially nowadays, when higher-ticket items are sold online, it's so important to educate your consumer and bring them along consumer journey to conversion. I do believe that now more than ever, it is so important. So what you're seeing in front of you right now is the way that our DSP looks like, our old DSP looks like. It works with line items. It's similar to other DSPs, they all work with line items. And this is the way illumin looks like, completely different, completely changing the game. It's a highly intuitive system, a drag-and-drop system. As a marketer, you get a blank canvas. And all you have to do is start dragging and dropping your audiences and then creatives. And then you're setting up some conditions, so you decide how many times each creative are going to be seen before a consumer moves along the journey to see the next message. So that is one of the big problems that we're solving here. Because as a marketer, after I finished planning, all I had to click is on execute and then illumin executes everything for me. I don't need to send it to my execution team, to our programmatic team, to my agency. It does all that for me. And the second problem that we're solving here, which is also a huge problem, today, in order to execute on any DSP, you need to be a highly trained expert. It will take you hours to set up a campaign. And on illumin, any average person can set up a consumer journey in minutes. So you're solving a huge problem for many, many companies who would like to execute on programmatic but just don't have the expertise in-house. So I'm going to share a very short video with you kind of just to illustrate, to let you understand the look and feel of illumin. [Presentation]

[Tal Hayek, Co]

Every time I see this video, I get so excited. It's important obviously that I'm excited and that the investors are excited, but it's mostly important that the industry is excited. And I tell you that as running as a DSP for many years before illumin, it was always a problem even getting meeting with Fortune 1000 brands. When we went looking for beta partners last year for illumin, that was not the case at all. We had over 30 major brands applied to be part of our beta program. At the end of the day, we went -- we selected the Home Depot MassMutual Landmark portal, WMGNA. These were all very instrumental in helping us bring this to market. Anywhere from helping us with the usability, fixing some of the bugs we had in the system and being up on stage sharing their experience with illumin was something obviously extremely important. And we have a lot of gratitude for those brands for being a part of it. And now I'm going to hand off the screen to Jonathan Pollack, our Chief Financial Officer, to share some of the financial results.

[Jonathan Pollack, Chief Financial Officer]

Thank you, Tal. I, too, am extremely proud of our team's performance during what was an incredibly challenging economic environment due to the COVID-19 dynamic. We not only persevered, but thrived and ultimately delivered the most profitable year in our company's history. I'd like to personally thank each and every Acuity team member and our trusted partners for their hard work over the course of this past year. I'd like to now review our Q4 and fiscal 2020 financial results. Total fourth quarter revenue rose 35% sequentially to $35.1 million compared to $26.1 million in Q3 2020 and $38.5 million in Q4 2019. The year-over-year decrease was due to the continued impact from the pandemic on certain industries, including travel, leisure and entertainment, which had been strong contributors in Q4 2019. Combined, the year-over-year decline in these sectors was approximately $5.5 million. Gross profit or net revenue was $18.3 million in Q4 2020 compared to $19.6 million in Q4 2019, a decrease of 6.7% year-over-year. Our gross profit margin, however, increased to 52.1% compared to 50.8% last year, reflecting our company's continued focus on best-in-class AI technology. Q4 SG&A expenses declined 20% to $11.1 million compared to $14 million for Q4 2019. SG&A as a percent of revenue was 31.9% as compared to 36.2% in the prior year period. We continue to see substantial operating leverage in our business resulting from disciplined cost management. Please note that 2020 SG&A expense excludes the $1.8 million gain from the PPP loan forgiveness that was realized in November 2020. This improved operating leverage contributed to a 30% increase in adjusted EBITDA to $7.8 million in Q4 2020 compared to $6.4 million in Q4 2019. Net income for the same period was $4.2 million, up 109% compared to net income of $2 million last year. Adjusted net income for the period totaled $7.1 million, up over 35% compared to $5.2 million in the same quarter last year. As a reminder, adjusted net income reflects the add-back of noncash charges, including depreciation, amortization, foreign exchange, deferred tax write-off and stock-based comp. Operating cash flow for the fourth quarter of 2020 totaled $3.3 million compared to $5.7 million for the same period in 2019. This next slide summarizes our performance for the full year ended December 31, 2020. Total revenue for the full year was $104.9 million compared to $119.1 million in 2019. The 12% decrease resulted from a reduction in client spend due to the COVID-19 pandemic. In 2021, we have continued to see a substantial rebound in our business from the same period last year and expect year-over-year revenue growth to resume in the first quarter of 2021. Gross profit or net revenue for 2020 was $54.1 million compared to $57.4 million for the same period in 2019, a decrease of 5.8%. However, gross profit margin was 51.6% for the period compared to 48.2% in 2019. SG&A expenses for the year decreased 20.2%, totaling $40 million compared to $50.1 million in 2019. As a percent of revenue, SG&A expenses totaled 38.1% compared to 42.1% for 2019. Non-GAAP adjusted EBITDA increased 62.6% to $15.8 million in fiscal year 2020 compared to an adjusted EBITDA of $9.7 million for 2019. Net income for the year was $3.7 million, 166% improvement from the $5.6 million loss in 2019. And adjusted net income for the fiscal year was up 175% to $13.2 million compared to $4.8 million in 2019. And operating cash flow generated for the full fiscal year ended December 31, 2020, was $19.3 million compared to operating cash flow of $600,000 for 2019, an increase of close to $20 million year-over-year. We continue to focus on operating cash flow and generating additional cash from our operations. As you can see on the next slide, and as Tal mentioned previously, we achieved record adjusted EBITDA in 2020 as our profitability continues to strengthen. This was due to the significant amount of operating leverage that we have built into our model. As we continue to add clients at minimal incremental cost, we anticipate continued adjusted EBITDA growth. Looking at the next slide. During the fourth quarter, our strong cash flow generation enabled us to pay down our bank line of credit in full. At the same time, we built up a record cash balance by year-end, which was boosted further by a bought deal equity offering completed in the quarter. On the next slide, you can see that our net working capital position has strengthened considerably over the past several quarters. The right side displays a tremendous improvement in our operating free cash flow generation on an annualized basis. As we move ahead into 2021, we will remain focused on growing our top line while working to continue to grow our profitability and free cash flow. There was one other thing I wanted to briefly mention before turning the call back over to Tal for concluding remarks. On our last earnings conference call, we have discussed exploring uplisting options for our common stock. To offer further clarity, we have submitted our application to list our common stock on the NASDAQ Capital Market and are currently working with NASDAQ to finalize the application. I want to point out that the process is streamlined given that we are already listed on the TSX and able to use an expedited process. We will continue to provide any updates when appropriate. Now back to Tal for the concluding remarks before we open the floor for questions.

[Tal Hayek, Co]

Thank you, Jonathan. These are some great numbers. Well, a few final thoughts before we go to Q&A. Obviously, back to illumin. So we believe that illumin is democratizing the advertising space. Just like Shopify did for e-commerce, you guys remember years ago, you needed to call an expert to book your an airline ticket. And today, the system is so intuitive, so easy to use that we can all do it online. This is where illumin is taking us. This year, we're concentrating on the bigger brands and adoption. But next year and forward, we will concentrate on the small- to medium-sized businesses. And we believe there's no reason why any pizza store cannot log into illumin, set up their campaign and spend $500 a month to reach a 5-mile radius around their store. So that's where I think we're taking illumin. Now I want to mention that we are the leader in this advertising automation space. This is the only system out there that has these intuitive features into it. We just released our third iteration into it, and it's looking better every day. I would like to congratulate again the Acuity family, the -- our partners, our investors. I'd like to thank all of you because each and every one of you are very instrumental in building such a great organization that we built over the last 11 years. We're so excited to be in the programmatic space. Obviously, it's a space that's been adopted greatly over the last 10 years, and we do believe that it's going to keep on growing tremendously for the future as well. The growth of CTV is obviously something that we're also very excited about. It's driving the future of programmatic. And we're seeing that as a major, major driver of the future. And again, for me, the most exciting part is illumin, the advertising automation platform that we launched to market that has now positioned us to be changing the world of advertising. I'd like to share a little bit the -- about the adoption of illumin. So many of you know that as a management team, we always communicated that we feel that the revenue from illumin is going to come in mid-2021. Well, when we launched it in October of last year, we saw that it's moving much faster than we expected. In fact, we had $1.5 million in revenue running in Q4 alone on the illumin system. Our pipelines, our -- the amount of demo requests and the demos that we're doing on a regular basis is just through the roof. And that led to what we believe now is going to be a strong 2021. In fact, when you look at Q1, we are at strong growth mode. And all the indication about the future of acuity are really great. So thank you for joining us today, and we're now going to go to Q&A.

[Joanna Taccone]

Thank you, everyone. We are now going to turning the floor to questions. The first question that we have coming in will be from Aravinda of Canaccord.

[Aravinda Suranimala Galappatthige, Managing Director]

Tal and Jonathan, congrats on the quarter. I'll start with a question for Tal where you left off the conference on illumin. When we try to sort of project how the ramp-up would occur and you talked about a lot of the demo requests that you're getting, do you feel that in the near term, it would be a question of sort of a few large accounts adopting the product and that's where much of the growth, let's say, over the next 12 months would come from? Or do you feel like it will be a lot of small accounts with maybe early-stage spend? I wanted to sort of get your thoughts on that as we try to sort of visualize what that trajectory would be like.

[Tal Hayek, Co]

I would say that so far, it seems like it's large accounts testing it and coming back and spending more, which I believe they're going to turn into very large accounts. So this year, we are really considering on the bigger accounts. I do believe that illumin is eventually going to be right for small- to medium-sized businesses as well. But the focus this year is on the large accounts. Remember, these large accounts are the ones that are thinking consumer journey. This is the way they plan already. So we're almost making their dreams come true by giving them the tools that they need to execute on.

[Aravinda Suranimala Galappatthige, Managing Director]

Okay. And with respect to -- just switching on to M&A. Obviously, you have a very strong balance sheet, still a fragmented industry, currency is strong. Is there any sort of updated thoughts that you want to share on M&A? Obviously, the ad tech valuations are getting stronger. Is that starting to infect the private markets? Just wanted to get your take on that front as well.

[Tal Hayek, Co]

Yes. That's obviously an interesting conversation. So we've been having a lot more discussion regarding M&A in the last few months. We're seeing a lot of companies. We're very picky about what we're going to do because we want something that's going to work and it's going to work specifically with the leverage on the model. So i.e., that we are able to take customers of revenue and bringing them into our system, eliminating all the cost of duplication from a technology standpoint. So that's obviously something very important for us. Also, it's also great to bring in new technologies that will expand the capabilities of illumin faster. So we definitely have been having a lot of conversation. Look, some companies, the expectations are not through the roof and might not be the right fit for us. Some companies are still reasonable. There's companies out there are still too small on their own and they're losing money. And under us, they're going to be profitable. So there's tons of possibilities. And I do believe that eventually, we will find the right fit for us.

[Aravinda Suranimala Galappatthige, Managing Director]

Okay. Just two quick financial questions and I'll ask them back to back and turn it over. With respect to margins, obviously, when we look ahead, Tal, you talked about strong revenue growth in Q1 and obviously a good outlook for 2021. We know that Self-Serve will obviously rebound in the year. That will obviously have margin implications. You saw a lot of expenses in '20, some of which will obviously come back in 2021. How should we think of that trajectory of margins as we pick up where you left off in Q4? And my last financial question is on non-U.S. growth. Obviously, non-U.S. has been lagging. Do you expect a little bit more of a tailwind from sort of the international territories?

[Tal Hayek, Co]

Yes. So margins, eventually, when -- so we do believe that eventually, we're going to be a self-serve business in general. So it will take a few years to get there and to be only self-serve. And at that point, margins will go down, but I believe we will move to net reporting by then. So that's from an accounting point of view, it's not going to look that way. But I think this year, we will probably maintain more or less on margins. And over the next year, gradually, it will go down as revenues also climb up substantially and SG&A cost as a percent of revenue should go down substantially as well because when you're running self-serve, you have to provide much less services and then your cost goes down as well.

[Jonathan Pollack, Chief Financial Officer]

Just to focus on that, Aravinda, it will be our gross margins that we're talking about. Our EBITDA margins, we expect to continue to increase. And that's really been a focus overall of how we're looking at this. I think over the early quarters of 2021, our gross margins year-over-year will be higher. But as illumin continues to grow, which is at a lower margin base, we'll have slightly lower gross margins year-over-year but we'll have much higher EBITDA margin.

[Tal Hayek, Co]

Yes. The EBITDA margin is something that we start looking at as a percentage of net revenue.Jonathan, do you have that number?

[Jonathan Pollack, Chief Financial Officer]

I have the number in front of me. So as a percent of net revenue in Q4, we were at 30%, which is adjusted EBITDA margins, which is very, very good. And we expect that to continue to increase over time. We believe that we still continue to be a leader in the industry with that given our high gross margins and our cost base. And that's really what we're focused on.

[Tal Hayek, Co]

Yes. So it kind of shows you the leverage on this model. We are showing similar types of EBITDA margin to much larger organization that are competing with us. And as the revenue go up, the leverage will be even higher.

[Aravinda Suranimala Galappatthige, Managing Director]

And then just on the non-U.S.?

[Jonathan Pollack, Chief Financial Officer]

I think we have huge -- sorry. Let me just jump in. I think we have huge tailwinds in the U.S. still. The growth is spectacular. illumin will drive a big chunk of that. We still are in an infancy with illumin. And the U.S. alone, where we have the highest core of our sales team, there was significant growth still there. And that's where we believe we should focus a significant amount of our energies.

[Tal Hayek, Co]

Yes. Eventually, it's going to be time to go -- to start focusing on other geographical areas, but we think the best return on the investment right now is in the U.S.

[Joanna Taccone]

The next question that we have coming in is from Suthan Sukumar at Eight Capital.

[Suthan Sukumar, Principal]

Tal, Jonathan, congrats on a strong close to the year.

[Tal Hayek, Co]

Suthan, how do you like the format of this video form?

[Suthan Sukumar, Principal]

It's good. It's slick, it's slick. I wish there was more companies were doing it.

[Tal Hayek, Co]

Well, we're trying to elevate the situation.

[Suthan Sukumar, Principal]

Yes. Good. Good. Guys, so first question from me is on illumin. So clearly, you guys are seeing strong momentum here in this new growth initiative. I'm kind of curious, looking at the longer term, how are you seeing growth trends shape up over fiscal '21? What -- at what point does this start to displace your existing self-serve business?

[Tal Hayek, Co]

I think closer to the end of the year. So the way I always thought about it even before we launched, I -- we didn't even think there's going to be any revenue before second half of 2021. So -- and the reason was because we're obviously working on very big accounts. And those accounts, to adopt into this kind of situation, they take the sale cycles longer. So I always thought it's going to be second half of 2021. So obviously, it was a very good surprise that in Q4, we already ran $1.5 million in it, and that the pipeline are exploding and there's more deals coming in on a regular basis and all that. So that is great news, but I still think that the very large accounts are going to come in at the second part of the year. And then we will start seeing some more major revenue taking over the self-serve line.

[Suthan Sukumar, Principal]

Okay. Okay. Great. No. That's helpful. And you guys in the past have talked about a vast majority of that pipeline from illumin is coming from the Fortune 1000 clients, and you touched on that earlier today. Aside from the size of these clients, is there anything different about these clients that you're working in by way of vertical or their focus? And the second part of that, what's the opportunity now to start leveraging illumin to start working more closely with the agency, trading desks of the world?

[Tal Hayek, Co]

So from the type of clients, I think as general, it's the early adopters are the ones that like to push the limits and they're creative and they're willing to take risks for things that make sense. So I don't think it's one type of industry. It is, generally speaking, the companies who would like to educate their consumers, so bring them along the consumer journey to conversion versus the companies that just needs a quick conversion and do not need to invest in the journey itself. So that's -- that will be the -- generally, the largest corporations do it that way. And is there an opportunity with the agency trading desk? My original thought that this is going to be the best fit for brands direct that want to bring digital in-house because you're now providing them the ability to create a consumer journey but also in an intuitive way and you don't need like highly trained experts to do it. But we are seeing the agencies adopting it as well, and we're seeing the agencies are excited and bringing it -- showing a -- bringing innovation to their clients is something that's very important for them. So yes, I think there's also going to be opportunities on that side as well.

[Suthan Sukumar, Principal]

Okay. Good. Good. My next question is more around the outlook for fiscal '21. And just given the momentum in the business and the growth in channels like CTV and, obviously, a new initiative like illumin, how are you thinking about additional investments in the business with respect to sales capacity and even the platform over the course of this year? And Jonathan, I know you touched on expectations for continued margin expansion. Just kind of curious how you guys are balancing the 2 priorities over the course of this year.

[Tal Hayek, Co]

Yes. I would say that the investments are already built into our P&L already because from a technical perspective, we've been developing illumin for years. So pretty much the entire company and team is working on the illumin project. So that's already a part of it. From a sales perspective, we set up a new sales organization. And their job is obviously to bring in the -- sorry, it is the enterprise sales team to bring in the enterprise dollars, but they're also supporting the rest of our sales teams that are also selling illumin as well. And under that, we have sales engineer doing the demos and coming in to support the sales organization. We have a new side of our service side from a client care point of view that is there to make sure that the illumin clients are succeeding with whatever they're setting up. And look, it's also a new product. So we find issues with it, small issues and I think big, but small issues all the time, and we're fixing them very quickly. And the entire team and the company is working very, very well together. So from that perspective, I think we're pretty good from an investment point of view. And we're happy with it. So we made some investment to increase our sales capacity. It's moving faster than we expected. So we made more investment from that as well as from the support side faster. But I don't think we'll see anything material coming in from an investment point of view that is not already built into the numbers.

[Suthan Sukumar, Principal]

Okay. Great. That's helpful. And Jonathan, maybe one quick follow-up for you. How should we think about the level of spend on the technology side of the OpEx profile? Just given what you've -- given the level of spend in 2020, how should we expect these investment trends in technology over 2021?

[Jonathan Pollack, Chief Financial Officer]

As Tal said, obviously, our investments in technology run through the income statement, not on the cash flow statement. Our team is built. We are adding and upgrading some on a regular basis, but we're also putting in some best practices. So I don't think our technology spend on an absolute level will go up significantly. I think we're obviously making the needed investments to make the system work a lot better and be ready for even more growth, but I don't see a significant increase.

[Joanna Taccone]

The next question that we have coming in is from Vince from TD Securities.

[Tal Hayek, Co]

Vince?

[Jonathan Pollack, Chief Financial Officer]

Vince?

[Tal Hayek, Co]

Joanna, maybe we want to go to the next analyst at the moment?

[Joanna Taccone]

No problem. The next analyst we have is Eric from Lake Street Capital Markets.

[Eric Martinuzzi, Head of Research & Senior Research Analyst]

Okay. I've got the audio on. I just got to get the video crank in here. Tal and Jonathan, so congrats on the quarter, terrific sequential growth there. That's awesome. I'm just curious, as we look to 2021, you didn't give us a view for the year. But obviously, we analysts -- the analyst community already has a number out there that's implying about 24% growth. Would you care to comment on that? Or do you want to stay clear of it and just kind of focus on the quarter in front of you for 2021?

[Tal Hayek, Co]

We don't provide any guidance, as you know. But we always like to beat the analyst expectations, and that's almost what we live for. And we're -- and we usually do that. So that's the best I could say.

[Eric Martinuzzi, Head of Research & Senior Research Analyst]

Okay. And then specifically on illumin, I'm curious to know, obviously early days there and good success. But what can we expect as far as metrics on an ongoing basis? Obviously, this is something that's -- this is a product, a service that is unique to Acuity. And we've got -- right now, we've kind of got this -- we did $1.5 million in Q4. Are we going to be getting an illumin revenue number each quarter? Will you be giving us some -- maybe a logo count, maybe revenue per logo, anything that you'll be providing on a regular basis?

[Tal Hayek, Co]

Yes. So it's very early years still, but we are -- I believe, Jonathan, we have a separate line item for the illumin revenue, correct?

[Jonathan Pollack, Chief Financial Officer]

Yes. So we are monitoring illumin and booking illumin separately. We also will likely be issuing some press releases over time with respect to some of the big names that have signed on to illumin. And as we move through each quarter, the data that we will provide obviously as it continues to grow will help everyone understand how great illumin is.

[Joanna Taccone]

The next person that we have in line is Daniel Rosenberg from Paradigm Capital.

[Daniel Rosenberg, Analyst]

Congrats on successfully exiting what's been a roller coaster and a challenging year. Well done.

[Tal Hayek, Co]

Thank you.

[Daniel Rosenberg, Analyst]

I wanted to ask specifically on the cash generation. You guys put up some impressive year-over-year improvement when we look at 2020 cash flow from operations versus last year. I was wondering if you could comment what the profile looks like. Understandably, you've got a lot of working capital swings, just the nature of your industry. But if you could provide any color there, that would be helpful.

[Jonathan Pollack, Chief Financial Officer]

Yes. So as I mentioned on the call, we are very focused on operating cash flow and cash flow in general. Given what Tal and I both talked about, which is increased cash and basically 0 operating line and some term debt, we expect our interest payments to come down in 2021, principal payments to stay the same and our continued focus on reducing our days receivables outstanding, capital expenditure requirements. Our goal is to continue to generate cash. There may be some quarters that it goes up and some quarters it goes down. But at the end of the day, our goal really is continued cash flow generation.

[Daniel Rosenberg, Analyst]

Great. You guys mentioned some of the industry changes around cookies and adopting new solutions out there. It seems like as an industry, everybody is converging and becoming -- kind of derisking what that change looks like. I was wondering if you could provide any commentary on what -- how you feel post-cookie what the industry will be using as tracking? Will it be several different options that are out there? Will it be a specific solution that drives things? How does it look?

[Tal Hayek, Co]

Yes. So it's -- I believe it's going to be some kind of a universal ID. And as we discussed, the third-party cookie was never designed to do what it's doing today. It kind of fell into it. One of the big problems with that is when we see consumers across different devices, they look like they're different people. So a universal ID solves that issue, which is -- right now, we're doing it by partnering with different companies to figure out who the same users are. It works, but it's not perfect. I think with the universal ID, it's even going to be better. And so the question is, is it going to be one universal ID or many? We really don't know. We know that most likely, that concept is going to catch, but we are integrated with LiveRamp Identity Graph. We are integrated with Unified ID 2.0 that was originally by The Trade Desk, now it's open market. And there's many others that are coming to market. And as a platform, our job is to put all of them in the platform and make sure that we identify everyone and then create some kind of integration between them and being able to figure out how they correlate as well. So that's where I think it's going to go. I think the risk of tracking going away completely is extremely low. And yes, I know there's a lot of focus out there also on other things that are not to do with cookies. So being able to target based on more contextual stuff and other, let's say, call it, input variables that are not related to the cookies, which we already done many, many years ago. And we have a lot of input variables that are not related to the cookie when -- in our algorithm as well. So no cookies does not mean that we're blind. It just means we have less variable. But again, I believe that the adoption of the universal ID is going to happen. It's going to happen this year or next year. And it's just simply a better solution for the industry and for consumers.

[Daniel Rosenberg, Analyst]

Last question and I'll pass the line. Just on Connected TV, so you've seen another quarter of tremendous growth. Is this -- are you willing to provide some context on how meaningful a share TV is becoming? It's certainly accelerating faster than people have expected. And I'll pass the line.

[Tal Hayek, Co]

I think it's going to be more meaningful this year. Last year, the absolute numbers were not very meaningful, but more meaningful this year. There's no -- we can't provide any exact numbers yet. But as it continues to grow, and I believe the growth rates are going to continue to be aggressive, it's going to become more and more meaningful as a part of our business.

[Joanna Taccone]

The next question we have coming in is from Rob Goff from Echelon.

[Robert Goff, MD & Head of Research]

And let me echo the congratulations on a fantastic quarter and a year despite the environment. Tal, you did say the cookies -- sorry for repeating the question. So could I ask, on the cookie issue or it's typically put forward as a challenge, but is there an opportunity for you where because of your platform and your scale, you can adapt better than perhaps some of your would-be competitors? If you could just sort of dive into that, that would be appreciated.

[Tal Hayek, Co]

I think that the cookie is going to be sold by the industry and not so much by individual companies because if we do it alone or other companies do it alone, it's not going to have enough data in it. So I do believe that the industry has gotten together here and cooperating. And as soon as -- because all of us are contributing and working together here, that's why we can reach the scale of the cookies -- of the replacement of the cookie, the universal ID. And I hope and I wish that it's going to be available for everyone in the industry because we like an open market kind of industry.

[Robert Goff, MD & Head of Research]

And if I could, also going back to the CTV area. Can you talk to the sources of demands versus the strength that you were seeing in that product or service?

[Tal Hayek, Co]

It's the -- generally, we deal with the larger advertisers out there. And they're moving more and more of their ad dollars to Connected TV. So from linear TV to Connected TV, it's -- I actually believe it's moving faster because of some of the issues with the pandemic and everything. So it's not -- yes, it's not a lot of -- like it's not getting a lot of new clients that are just CTV clients. It's all part of the mix. So they're running digital with us up to now. And now, connected TV is part of digital. So they're adding it in-house. We -- our favorite is -- when it comes to CTV is illumin because it's an integral part of the consumer journey is Connected TV. So -- and when we see a big focus on people who are running illumin with us on Connected TV and integrating that into the consumer journey.

[Joanna Taccone]

We are going to bring back Vince. I hope -- no, I have lost Vince. Sorry, we are actually going to go to Neal from Haywood.

[Neal Gilmer, Research Analyst of Special Situations]

Yes. Can you hear me?

[Tal Hayek, Co]

Perfect.

[Neal Gilmer, Research Analyst of Special Situations]

Congrats on the quarter as well. Obviously, a lot of the questions have been asked, but maybe curious on what you're seeing as far as current trends. With respect to the progress in the U.S., obviously, with the vaccine and more talks about return to the travel and entertainment industry and so forth. So obviously, that was impacting your business in 2020. Are you seeing any encouraging signs so far in through Q1 with respect to those segments? I know Q1 is obviously traditionally seasonally slower than Q4, which is always the strongest quarter of the year. But just wondering whether you're seeing any early signs given the progress that we're seeing in the U.S. on the vaccine distribution.

[Tal Hayek, Co]

So we are definitely starting to see early signs from mostly a little bit of travel and hospitality, very, very small from a revenue perspective, but there's -- at least they're starting. And as you know, more than 30% of our business in the past used to be travel and hospitality and things that were down to -- substantially. So we are definitely looking forward for it to come back. We're hoping as we come out of it, there's going to be pent-up demand for things like travel and it's going to be back big time. And look, as all these companies are recovering, they need to talk to their consumers, and that's what we're there for. So we're starting to see encouraging signs, but people are still not traveling big time yet. Hopefully, it's coming soon.

[Neal Gilmer, Research Analyst of Special Situations]

Yes. I think we're all hoping for that. And maybe just one small one. Obviously, a strong year on generating cash flow and the financing in November. As you continue to build on that, what are your thoughts on use of that cash going forward?

[Jonathan Pollack, Chief Financial Officer]

So right now, we're quite happy to have that cash on the bank. We do have thoughts on potential M&A. As Tal mentioned on one of the Q&A, we have nothing imminent at the moment. But at this point, our cash is not going to be used for investing in the business. We do that with our own cash flow generation and through our income statement. But as we've said before, M&A is important to us. When the time is right and we have that right value-accretive acquisition, we will capitalize on it. But at this point, it's just sitting there until we have something that is good for the company, good for the shareholders and good for the business.

[Joanna Taccone]

Our next question coming in is from Gavin Fairweather from Cormark Securities.

[Gavin Fairweather, Analyst of Institutional Equity Research]

Can you hear me?

[Tal Hayek, Co]

Yes.

[Jonathan Pollack, Chief Financial Officer]

Yes. Perfectly.

[Gavin Fairweather, Analyst of Institutional Equity Research]

Okay. Great. You talked about the illumin launch and kind of an expected ramp in the middle of the year. I was hoping maybe just to start, you could talk about the typical enterprise sales cycle that you see and what kind of hoops you need to jump through as you're working some of these larger deals.

[Tal Hayek, Co]

Yes. So let's start with the fact that before we launched illumin, it was challenging to even get meetings with, let's say, Fortune 1000 brands. As a DSP competing with other DSPs, it was always hard to differentiate ourselves. And after launching illumin now, it's a completely different situation for us. And so first of all, we're getting leads coming in, people are requesting demos on regular basis. There's -- and so we go out, we do the demos. Usually, people -- when they see the demo, they're very, very excited. And we're talking about people that are very high level on the marketing side of things have a hard time staying in their seats from excitement that they see about the illumin product. So then the discussions continue. I mean some of them turn into a test very, very quickly. And some of them, the sales cycle is longer. They do need to make different types of investment as they did before because before, the whole point of programmatic was, I'm going to try to tell the story in one creative. And I'm going to repeat it over and over and over again until people convert. With this it's, now we're going to tell the story in stages. And for that, you need to have different creatives. It aligns with the way they plan, but it doesn't align to the way that they used to do programmatic up to now. So a lot of times, we have to come back after we sell the deal even and educate them again like, "Okay. You need to give us creatives and stages, and you need to tell the story in stages. And it's not about bombarding the consumers with the same message over and over again. It's about educating them and moving them along the consumer journey." So and -- I mean surprising -- not surprising, they're making those investments and they're coming up with the creatives. And then the results that they're seeing on the system, they really, really love it from a performance standpoint, but also from many other things that they can do: they can control it, they can actually see that the kind of insight that they're seeing from the flow they could never see before. It's priceless for them. So that is the cycle. But we also have another cycle of bigger companies that want like even better integration. So we're talking and working on API integration to -- into their back-end system and much deeper integration that it will take, obviously, quite a few more months to do but will be a lot stickier and become very big accounts.

[Gavin Fairweather, Analyst of Institutional Equity Research]

That's helpful. And then I know we're kind of running up on time, but maybe just lastly from me. Can you talk -- or you talked about how you expect your mix to kind of shift towards self-serve. Obviously, some strong growth in illumin is obviously a pretty integral factor in that. But just in terms of how it relates to kind of your full-serve business, can you speak to kind of how that will play out? Are you still investing in terms of sales headcount for growth there? And do you think that there's a good number of those customers that might be able to convert to illumin over time? I guess I'm trying to think about how that will all play out.

[Tal Hayek, Co]

I think 2 to 3 years, there's not going to be Acuity anymore. It's all going to be illumin. That's a simple answer, but that's what we're going to be driving to. Now it's the movement from managed service to self-serve, illumin is not going to be full -- it's not going to be a focus for us this year. This year, it's all about bringing in new revenue, new customers to use illumin. Obviously, we have some of our existing customers that are moving to illumin because they like it and they want to use it, but the focus is on getting new business into it this year. But look, over time, there's no reason to maintain 2 different technology, 2 different products. We will sunset the old DSP and everything is going to be running under illumin.

[Joanna Taccone]

Thank you, everyone. That concludes the Q&A, and thank you very much for your time.

[Tal Hayek, Co]

Thanks for joining us, everyone.