Sabio wins another target raise from Paradigm

Despite a slowdown in the broader advertising space, ad tech company Sabio Holdings (Sabio Stock Quote, Charts, News, Analysts, Financials TSXV:SBIO) continues to shine, according to Paradigm Capital analyst Daniel Rosenberg, who ticked his target price higher in a Thursday report. Rosenberg reiterated a “Buy” rating on Sabio while reviewing the company’s latest (and record) quarterly results, saying the company’s opportunities in the TV analytics space are huge.

Sabio, a demand-side platform (DSP) for marketers to plan, buy and execute programmatic ad campaigns, announced its fourth quarter and full 2022 financials on Thursday. The company reported record revenues of $17.6 million, representing a 66 per cent year-over-year improvement, and gross profit of $10.4 million compared to $6.3 million a year earlier. Adjusted EBITDA at $2.4 million was also a record for the company and represented a 42 per cent year-over-year increase. (All figures in US dollars except where noted otherwise.)

“Our CTV/OTT business posted 144 per cent year-over-year growth, largely organic, in the fourth quarter. Sabio is outpacing the estimated 23 per cent growth in U.S. CTV advertising spend and taking market share,” said Sabio CEO Aziz Rahimtoola in a press release. 

“Moreover, our proven ability to expand our share of customer wallets in short-order bodes well for 2023 and beyond, as we continue to add large brands to our customer roster, while making further inroads with our existing Fortune 500 nameplates,” he said.

Rosenberg said the strong Q4 is a testament to Sabio’s differentiated CTV offerings, while for investors, he said SBIO offers a compelling risk-reward profile.

On the quarter, Rosenberg said the $17.6 million topline was well ahead of his estimate at $14.0 million, while adjusted EBITDA at $2.4 million was also a beat of his forecast at $1.5 million.

Rosenberg noted Sabio’s improved balance sheet, where the company exited 2022 with $4.0 million in cash compared to $3.6 million at the end of the previous quarter, while debt dropped from $4.7 million to $4.4 million. 

“Sabio has built a comprehensive technology portfolio and is trusted by some of the world’s leading brands and agencies,” said Rosenberg. “While the macro-picture is a short-term headwind, Sabio continues to outperform. The industry has substantial long-term tailwinds including shifting viewer habits that are supportive of continued rapid growth.”

“Sabio is in the early stages of commercializing its analytics platform, App Science. In addition to rapid organic growth, we see meaningful optionality to monetize App Science in the attractive TV analytics market, estimated to be a $1.9 billion opportunity,” he wrote.

Rosenberg noted management’s outlook which is calling for a softer Q1 due to spending delays but with the expectation of year-over-year growth and market share gains for the rest of the year.

The analyst revised his forecasts and is now calling for full 2023 revenue of $50.6 million and adjusted EBITDA of $2.3 million, to be followed by 2024 revenue of $66.8 million and EBITDA of $4.4 million. Rosenberg’s target moved from C$3.25 to C$3.50 per share, which at press time represented a projected one-year return of 233 per cent.

Disclosure: Sabio Holdings is an annual sponsor of Cantech Letter.