A strong finish to the 2022 year looks good on Sabio Holdings (Sabio Holdings Stock Quote, Charts, News, Analysts, Financials TSXV:SBIO), according to analyst Gabriel Leung of Beacon Securities. Leung reviewed Sabio’s fourth quarter results in a recent report to clients where he retained a “Buy” rating on the stock and 12-month target of C$3.25 per share.
Sabio’s share price ticked higher last week after the release of its Q4 and full 2022 earnings. The company, which provides over-the-top (OTT) and connected TV (CTV) advertising platforms, reported quarterly revenue up 66 per cent year-over-year to $17.6 million and positive adjusted EBITDA of $2.4 million versus $1.7 million a year earlier. Both top and bottom numbers were records for Sabio. (All figures in US dollars except where noted otherwise.)
The company’s average deal size grew 43 per cent year-over-year to $138,000, while on the road ahead, management said it expects strong year-over-year growth and market share gains.
“Sabio continues to benefit from its strengthened salesforce, highly differentiated data-driven and end-to-end Connected TV product offering, and an increasing number of Fortune 500 brands as repeat customers,” the company said in a March 22 press release.
“Additionally, approximately 57 per cent of the logos that spent with Sabio in 2022 did not spend with it in 2021, presenting a potential opportunity to further expand the Company’s share of the wallet with these new nameplates, just as Sabio did with existing clientele in 2022,” Sabio said.
The Q4 results were a beat of Leung’s estimates, where the company’s revenue, gross profit and EBITDA at $17.6 million, $10.4 million and $2.4 million, respectively, compared to the analyst’s forecast at $13.3 million, $8.2 million and $1.9 million, respectively.
Leung emphasized Sabio’s strong growth in CTV revenue, which at $12.7 million were up 144 per cent year-over-year and up 90 per cent sequentially, representing 72 per cent of Q4 revenues. Leung noted that the CTV growth was largely organic, as well.
Leung said Sabio’s operating expenses were larger in the Q4 due to higher sales commission but he expects only a modest increase in operating investments in 2023.
He noted that Sabio reported spending delays in January and February of the current year while expecting a demand rebound in March and into the second quarter.
“The company also started testing with new Fortune 100 brands in Q1, which could lead to larger orders several quarters down the road. The company is also making early investments in the UK / Europe as a source of geographic expansion,” Leung wrote in his March 24 report.
“Overall, it was a solid year and we believe Sabio will continue to outperform industry growth thanks to strength in its CTV business,” he said.
Leung is forecasting Sabio’s revenue to grow from $42.3 million in 2022 to $51.3 million in 2023 and to $63.4 million in 2024, while EBITDA is expected to go from $1.3 million in 2022 to $1.7 million in 2023 and to $4.3 million in 2024.
At the time of publication, Leung’s C$3.25 target represented a projected return of 222 per cent.
Disclosure: Sabio Holdings is an annual sponsor of Cantech Letter.