AcuityAds Holdings Inc (TSX: AT) is a technology company that enables marketers to connect intelligently with audiences across video, mobile, social and online display advertising campaigns. Its solutions include Illumin, which is its marketing platform; Attention Advertising; and Audience Solutions.

Key Highlights

• Encouraging response from the illumin platform: In the recent past, the company has claimed excellent customer interaction via its illumin platform, with sequential increase of 42% in Q3FY21. The similar trend is expected to continue for the rest of the year and into FY22, according to management. Furthermore, in order to reach a bigger audience, the company is putting more attention on marketing, sales, and product development resources for illumin.
• Increase in cash flows: The company reported a higher cash flow of CAD 18.6 million in 9MFY21, higher than CAD 15.9 million in pcp, supported by a net income of CAD 8.8 million in 9MFY21, as compared to a loss of CAD 0.4 million in pcp. The above is likely to support the company’s overall liquidity position.
• Ample opportunities from the new emerging verticals: During Q3FY21, the company witnessed improved traction from certain segments like pharmaceutical, technology, automotive and direct-to-consumer brands. The above indicates that the group is very well equipped to face the changing industry dynamics, which is a key positive.
• Management Update: On November 30, 2021, the company announced the appointment of Elliot Muchnik, who is a qualified CPA and CA, as the Chief Financial Officer.

Risks associated with investment

The company operates as a communication service company and therefore change in technology might hinder the company’s performance drastically as they are subject to the high cost of capital. 

Financial overview of Q3 2021 (expressed in Canadian dollars)

Source: Company Filing

• In Q3 2021, the company posted its revenue of CAD 27.4 million, slightly higher than CAD 26.0 million in pcp. The growth was primarily attributable to higher income from Canada and Europe region, partially offset by lower revenue from the United States (prime geography).

• Gross profit stood at CAD 14.2 million, improved from CAD 13.5 million in pcp. The increase was driven higher income, partially offset by higher media costs.

• The quarter was marked by higher sales and marketing expenses, coupled with higher general & administrative expenses. Notably, share-based compensation stood higher at CAD 1.4 million, significantly higher than CAD 0.2 million in pcp.

• The group reported a net income of CAD 3.3 million, as compared to CAD 0.9 million in pcp.

Valuation Methodology (Illustrative): EV to Sales

Analysis by Kalkine Group

Stock recommendation 

The company is receiving great responses from prominent global brands and organizations, as well as positive feedback for its newest service, illumin marketplace. Improved demand from some industries, such as travel, leisure, and entertainment, is also expected to help the company's future success, which is a big plus. Furthermore, the Company generated very good operational cash flow, which helped to strengthen the balance sheet, and the company expects to deliver year-over-year overall revenue growth and excellent adjusted EBITDA based on its current pipeline. Hence considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock at the last traded price of CAD 4.31 on January 10, 2022. 

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Summary Analysis

One-Year Technical Price Chart (as on January 10, 2022). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.