Record revenues in its latest quarter look good on Canadian advertising tech company Sabio Holdings (Sabio Holdings Stock Quote, Charts, News, Analysts, Financials TSXV:SBIO), with the company expecting further growth in the year ahead.
Toronto-based Sabio, which has software and services for advertisers and advertising agencies aimed at the connected TV and over-the-top streaming markets, announced its fourth quarter 2021 earnings on Wednesday, showing revenue of $10.6 million compared to $5.4 million a year earlier, which was good for a 96 per cent year-over-year growth rate. (All figures in US dollars except where noted otherwise.)
“Our outstanding fourth quarter results demonstrate the strong product/market fit of our CTV powered by Mobile Data solutions with major Fortune 100 customers,” said Aziz Rahimtoola, Founder and CEO of Sabio, in a press release. “The strong revenue growth is being driven by our success with major brands across multiple verticals.”
The company said the generational move from traditional TV to CTV and OTT is still in its early stages, and Sabio’s tech stack is primed to take advantage of that shift for years to come.
“We are seeing this strength across key business metrics,” said Rahimtoola. “Average deal size grew 70 per cent year-over-year, from approximately $59,000 in 2020 to $100,000 in 2021, over 80 per cent of CTV brands who had over $100,000 in spend with us in 2020 renewed in 2021, as did 100 per cent of the brands who spent over $1 million with Sabio in the prior year. Moreover, we are starting to sign annual and multi-year deals with some of the world’s biggest brands.”
Along with the revenue growth, Sabio’s Q1 gross profit hit $6.25 million compared to $3.1 million a year earlier, while adjusted EBITDA ticked upwards from $1.6 million to $1.7 million. For the 2021 year, revenue was up 84 per cent to $24.2 million and gross profit was up 84 per cent to $14.6 million.
Apart from its organic growth, Sabio has been active on M&A, as well, closing earlier this month on the acquisition of US-based CTV/OTT supply side company Vidillion for $3 million.
Sabio’s share price has rallied over the past month, but analyst Gabriel Leung of Beacon Securities says there’s plenty of upside from current levels. Reviewing the company’s announcement last month of its largest contract in Sabio’s history — a three-year expansion on an existing partnership with a Fortune 50 client — Leung said Sabio is developing strong relationships with the brands and agencies with whom it’s contracting, showing the strength and value of its platform.
“At its current valuation of ~2.4x net sales (i.e. gross profit) versus the peer group at ~5.3x, we continue to view Sabio as a compelling investment opportunity given its high exposure to the fast growing CTV market, compelling DSP/SSP and analytic platform, and growing list of Fortune 500 customers,” Leung wrote in a March 25 report.
Leung currently has a “Buy” recommendation on Sabio with a C$3.25 target price, which at the time of his report’s publication represented a projected one-year return of 185 per cent.
Disclosure: Sabio Holdings is an annual sponsor of Cantech Letter.