Sabio is more than a triple from here, says Beacon

Ad tech company Sabio Holdings (Sabio Holdings Stock Quote, Charts, News, Analysts, Financials TSXV:SBIO) is powering through a difficult environment in the online advertising space. That’s the take from Beacon Securities analyst Gabriel Leung, who reviewed the latest quarterly numbers from Sabio in a Wednesday report.

Los Angeles-based Sabio is an advertising tech software and services business working to help digital ad companies with extending their reach, with targeting and analytics for both mobile and connected TV (CTV) platforms. 

The company reported its Q1 2023 on Tuesday, featuring record first quarter revenue of $6.5 million, up 16 per cent year-over-year, and a boosted gross margin of 62 per cent compared to 61 per cent a year ago. (All figures in US dollars except where noted otherwise.)

“Approximately 21 per cent of first quarter revenues were generated from new logos, up from 12% in the prior year’s quarter, presenting a significant opportunity to turn these first quarter tests into larger campaigns in the latter half of the year,” said CEO Aziz Rahimtoola in a press release.

“Meanwhile, we continue to grow our Connected TV/OTT business well above industry averages1 and take market share, making us one of the fastest growing Connected TV/OTT companies in North America,” he said.

Leung said the $6.5 million topline was above his estimate at $5.9 million, with CTV/OTT revenues up 63 per cent year-over-year and with about ten per cent of its growth coming from the acquisition of Vidillion. 

On EBITDA, Sabio’s Q1 was negative $2.2 million, which was also better than Leung’s forecast at negative $3.1 million. Leung noted that management is expecting to end up with positive EBITDA for 2023.

“The company noted that January and February were difficult due to the macro environment, although there was a big rebound in March, which resulted in positive EBITDA during that month,” Leung wrote.

Looking ahead, Leung is now forecasting full 2023 revenue and EBITDA of $45.2 million and positive $1.1 million, respectively, and 2024 revenue and EBITDA of $56.7 million and $2.7 million, respectively.

With the update, Leung reiterated a “Buy” rating on Sabio while moving his target from C$3.25 to C$2.75, good for a 12-month projected return of 206 per cent.

“On the back of the Q1 results, we have made some adjustments to our estimates. Specifically, we have lowered our growth assumptions around Mobile based on the company’s commentary that it will likely de-emphasize this side of the business in favour of higher growth in CTV,” he said.

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