Sabio is “prioritizing profitability”, says Eight Capital

Following the release of preliminary third quarter numbers, Eight Capital analyst Kiran Sritharan has maintained his “Buy” rating on Sabio Holdings (Sabio Stock Quote, Chart, News, Analysts, Financials TSXV:SBIO).

On October 30, Sabio announced cost savings initiatives it said would reduce expenses by about (US) $4.0-million.

“The macro headwinds impacting overall advertising spend were pronounced in the third quarter, as rising interest rates and category-specific events including the auto workers strike impacted short-term advertising budgets,” said CFO Sajid Premji. “During the quarter, Sabio faced these challenges head-on implementing several cost and operational initiatives to optimize our operating infrastructure. While some of these initiatives, including our headcount reductions, did not take effect until the beginning of September, they were instrumental in helping us maintain Adjusted EBITDA neutrality in Q3-2023. Moreover, our reduced break-even point positions us well to realize meaningful positive Adjusted EBITDA in the fourth quarter, and into 2024 when the full benefit of these reductions will be realized. Our performance in winning the upfront commitments has already set a Company record without the expected tailwinds of the 2024 U.S. election cycle, demonstrating the strength of our technology-led value proposition in the CTV/OTT market.”

The analyst said that despite challenging headwinds, the company is doing what it has to do.

“Sabio announced guidance for Q3/23 headline results prior to their report expected in November,” he wrote. “A material miss in revenue was partially offset by an EBITDA beat following cost reductions implemented in the quarter. Macro-driven weakness continues to cap advertising budgets and impact the ad-tech sector, further exacerbated by certain vertical specific headwinds. Bootstrapped since inception, the Company responded by implementing operational efficiencies across their organization including headcount reductions. We like that Sabio is focusing on its core strategies and prioritizing profitability in the most challenging operating environment it has experienced.”

In a research update to clients October 20, Sritharan maintained his “Buy” rating and one-year price target of $2.50 on Sabio.

“Sabio currently trades at 0.3x 2024E EV/revenue compared to ad tech players in Canada at 1.7x and larger US peers at 4.0x. Our target price is based on 2.0x,” the analyst concluded.

Disclosure: Sabio is an annual sponsor of Cantech Letter.