Sabio Holdings Inc. (SABOF) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Sabio Holdings Third Quarter 2025 Earnings Call. The financial statements and management discussion and analysis are available on SEDAR+. Today is Tuesday, November 25, 2025. Joining us are Sabio's Founder and Chief Executive Officer, Aziz Rahimtoola; and our Chief Financial Officer, Sajid Premji. After management's remarks, we will open the call for questions. [Operator Instructions] Before we begin, please note that today's remarks may contain forward-looking information. These statements involve known and unknown risks and uncertainties. Please refer to our filings on SEDAR+ for more information. All figures are stated in U.S. dollars unless otherwise noted. With that, I'll turn it over to Aziz.

Thank you, Martin, and good morning, everyone. Let me begin with an honest look at the environment we operated in during the third quarter. The overall market conditions were best described as chaotic. Many advertiser's front-loaded budgets into the first and second quarters and government spending cutbacks created a ripple effect across the advertising ecosystem. As a result, advertising revenue was pressured in the third quarter. Despite those challenges, our team stayed laser-focused on the plan we laid out early in the year, a plan built around diversification, scalability and building a business that it performs consistently even when the broader market does not. That focus delivered results. We achieved growth in the first half of approximately 34% and year-to-date growth of 10% when normalized for political spending in what is traditionally our softest quarter of a nonpolitical year. This quarter is not about temporary macro headwinds, it's about how Sabio executed through that and how the business we've built over the past 18 months is structurally stronger, more resilient and more diversified than at any point in our history. Before we get into the details of how we transform our business this quarter in a meaningful way, I want to take you back to who we were just a few short years ago in 2020. That year, we were a mobile display company whose ad-supported streaming revenue was in the single digits. In contrast today, we are delivering more than 70% of our revenue in ad supported streaming, which is one of the fastest-growing segments in advertising. While our transition into ad supported streaming was consequential, the transformation of our company's quarter is defining. Just one year ago, Sabio relied on a single United States product for nearly 100% of our revenue. Today, we operate across three distinct product lines, each with strong momentum, advertising supported connected television via programmatic, mobile video and performance marketing, Creator Television, our creator led streaming network. All this powered by, while simultaneously sending data to our App Science 80 million household data graph. In parallel, we built a meaningful international presence led by the United Kingdom, giving Sabio multi-geography exposure for the first time. These shifts generated tangible acceleration. We moved from 4% growth in first quarter to 40% growth in third quarter of our emerging categories. Sabio is no longer in one product, one market business. We are now multiproduct, multimarket, multichannel, data-driven and built for scale. This is exactly the platform required to compete and win and an advertising supported streaming enters into next major growth cycles. Our product transformation is showing up clearly in the numbers and momentum remains strong across all of our new product lines. Creator Intelligent continues to scale across major advertising supported video-on-demand partners. We saw over 38% month-over-month growth in unique viewers across platforms such as Plex, Live TV, Sling TV, Comcast Xumo, Amazon Fire TV and Anoki. Distribution and leadership continues to climb as more partners on board and expand our reach. Programmatic buying is accelerating. We delivered over 57% month-over-month growth in programmatic sales this year, and programmatic now accounts for 20% of our total sales mix. This is where we have a key advantage in our App Science household proprietary graph and complete tech stack. When brands turn on our programmatic offering, the household graph has them coming back for more. In fact, despite this being a new offering, we are seeing 85% renewal rate. When combining that with our record number of new nameplates, we are starting to build momentum for 2026. In addition, our international strategy is performing exceptionally well. Revenue grew over 257% year-over-year, representing 90% of the total sales mix in third quarter. In parallel, our App Science measurement capabilities continue to drive brand validation and strengthen campaign performance, while mobile performance marketing remains solid and complementary. These new product lines have become real growth engines for Sabio, expanding our revenue base, strengthening diversification and increasing the resiliency of the business as we enter into a strong 2026 political cycle. More than 90% of all advertising supported streaming spending now occurs programmatically, including in political inadequacy. Our early investments in programmatic infrastructure, supply integrations and data positioning via our proprietary App Science graph means we benefit from this trend as it accelerates. As programmatic expands within our mix, it enhances our operating leverage, improves yield efficiency and drives more predictable quarter-to-quarter performance. Our top line performance and customer metrics demonstrate the durability of our model and the growing adoption of our expanded product suite. Top line results, advertising and supportive streaming revenue increased 30% year-over-year, excluding political and advocacy spending. International revenue increased 257% year-over-year, now 8% of our total sales. Recurring revenue remained strong at 85%, excluding political advertising. 182% year-to-year growth in new logos, nearly 70% of major 2020 customers increased their spend with Sabio. And then finally, continued expansion across connected television and over-the-top streaming environments. These metrics underline expanded demand, strengthening diversification and increasing validation of our long-term strategy. With that, I'll turn it over to our CFO, Sajid Premji. Sajid?

Thank you, Aziz. Our third quarter results align with what we typically expect in the nonpolitical year where advertiser budgets are weighed more heavily towards the first half than in political years. Even with the seasonality in the softer market backdrop, our branded business remained solid. Gross revenue was $9.3 million or $8.8 million normalized for political and advocacy compared with $9.8 million in the same period last year when normalized for political efficacy. The expected softness in the nonpolitical third quarter was further impacted by budget front loading ahead of U.S. tariffs. Net revenue was $8.2 million or $7.7 million normalized for political and advocacy compared with $9.8 million last year when normalized for political and advocacy. This reflected a higher mix of programmatic transactions, which typically carries lower top line net revenues by more efficient delivery. Core advertisers supported streaming revenue have increased 2% year-over-year, excluding political and advocacy spending, demonstrating continuing stability in our foundational business and represented 76% of our gross sales mix for the quarter. Programmatic sales reached $1.9 million, representing 20% of consolidated gross revenues, highlighting strong adoption of automated buying for a new offering launched just this year. International sales grew 240% year-over-year, driven primarily by strong traction in the U.K. as our investments in the region continued to deliver strong returns. Gross margin was 59% compared with 60% last year, remaining stable, even as programmatic scaled within the mix. Adjusted earnings before interest, taxes, depreciation and amortization was negative $2.2 million compared with $2 million gain in the same period last year, reflecting continued investment in new product lines and international expansion. Programmatic and international sales combined accounted for nearly 40% of our third quarter consolidated gross revenues, highlighting the rapid scaling of our new offerings and geographies normalized for political and advocacy spending, year-to-date consolidated gross sales remained up 10% versus last year. Turning to capitalization. Sabio ended the quarter with $2 million in cash. During the quarter, we retired CAD 1.7 million of secured and unsecured convertible notes and subsequent to quarter end, we completed a CAD 1.28 million listed issuer financing exemption offering. These actions strengthened our balance sheet while minimizing dilution and aggregate. During the quarter, our U.K. subsidiary entered into a receivables purchase agreement with revamp funding to complement our existing U.S. facility with SLR. This is a common liquidity tool in the ad tech sector. In practice, it allows us to borrow against invoices already issued and campaigns already delivered on, giving you access to the cash sooner, much like a payday advance does for individuals. Our receivables continue to carry very low loss rates because our customers are primarily major global brands and leading advertising agencies. And as those invoices are paid, the cash automatically goes towards reducing the loan balance, and we can draw again for working capital needs, subject to availability. As a result, our facilities are continually being repaid and recycled as collections come in. Collectively, these stats position Sabio for flexibility and strength entering into 2026. Aziz, back to you.

Thank you, Sajid. This slide illustrates Sabio's long-term revenue growth trajectory, a compounded annual growth rate of 37% in nonelection years and the annual growth rate of 60% in election cycles. And just to remind the call that next year is a midterm election cycle. The 2026 midterm election cycle is expected to be one of the largest streaming cycles in history, and Sabio is entering this period with more products more international reach and significantly more programmatic scale than in 2022. We have the team in place heading into a political year, and we're well positioned to capture the uplift we expect from 2026 midterm cycle. We believe Sabio is positioned to capture more of the demand than at any point in our history. Since going public in 2021, Sabio has pivoted from mobile display advertising to supported streaming, going from 40% gross margins to 60% gross margins, built a multiproduct ecosystem, launched Creator Television, expanded internationally, strengthened our data measurement advantage through App Science, increased customer diversification and recurring revenue and built a more stable and scalable revenue base. This evolution is a key driver of Sabio's resilience and growth potential. Our business model is now multiproduct, multi-geography, data-driven programmatic first, anchored by cross-screen household graph through App Science that covers nearly 70% of the United States streaming household. This model allows us to reach, engage and validate audiences across the entire streaming ecosystem, a major competitive advantage as the market continues to shift to a measurable automated ad-supported streaming. In closing, Core product remained strong despite macroeconomic headwinds. New product momentum continues to accelerate. International expansion is delivering meaningful results, programmatic demand and strengthening scalability and margins, our first quarter -- in fact, our first quarter 2026 pipeline is up nearly 60% year-over-year. Advertising-supported streaming is entering a significant growth cycle driven by our stronger measurement, broader adoption and improved global guidance. We're entering 2026 with a multiproduct, multimarket programmatic first platform, the strongest sales pipeline in our history, a political cycle that aligns directly with our strengths in connected television and mobile video, key differentiation, leveraging our 80 million cross-screen App Science data graph. We expect 2026 to reflect both structural growth in streaming and cyclical strength from our midterm election cycles. With our first quarter 2026 pipeline already up nearly 60% year-over-year, we believe Sabio is exceptionally well positioned for an acceleration in revenue and margin profile in the coming year. That concludes my remarks. Martin, I'm going to hand it back to you to begin the Q&A.

[Operator Instructions] First question comes from Gabriel Leung.

Aziz, just on the growth in the programmatic side of things, are you finding that as coming at the expense of your managed services side of the business, whether in the past few quarters or sort of the pipeline going forward?

Thank you for the question. As it relates to cannibalization, programmatic cannibalization as it relates to managed service, what we're finding is programmatic is actually our growth driver relative to cannibalizing or managed. So what's happening in some instances in a lot of instances, in fact, our managed service clients are telling us, "Look, there are pieces of the business that we need your help on managed service for. But you're leaving money on the table unless you do programmatic." And that exactly was driven. Our move into programmatic was obviously driven by what we're seeing in the macro environment, but also specifically driven by clients telling us, "Listen, Sabio, we want to give you more money. And if you get to -- if you start offering a programmatic offering, we're going to give you that opportunity to do that." And we're seeing that. So in the big scheme of things, it's actually not cannibalizing our managed service. What it's doing is it's actually allowing us to take dollars we would not have gotten in the past. But it is also the key growth driver in the sense that there are a lot of -- with 90% of all ad-supported streaming now the being bought and sold programmatically, it's opening us up for a lot more.

And then just in terms of the pipeline, I mean, clearly, you're pretty bullish on what 2026 is going to bring, just given what the Q1 pipeline is looking like. But I'm curious whether the front end loading on the -- in terms of ad spend this year, might impact seasonal trends for Q4.

We don't see it that way, and I'll let Sajid get in here as well. But our view is that traditionally, Q3, Q4 are strong quarters. What was different about this year, as I mentioned in my remarks, was the fact that our clients, a lot of our clients started front-loading. We saw this in automotive specifically. Automotive and telco were essentially trying to get out of the way of the tariffs. And so what ended up happening as we talked about, we were up 34% in the first half of the year. And that was driven, yes, our growth in programmatic, but it was also driven by front loading. And so we believe there's -- and we've heard this from our clients, we're seeing this in the macro environment that there is a normalization that's now taking place. The tariffs are having less of an impact moving forward. We're already seeing that in Q4. We're going to go back to a more traditional cycle, but that traditional cycle is going to be where a lot of spending is going to happen in Q3, Q4 next year with political and of course, retail spending. But we're seeing great strong momentum. In fact, what clients are telling us is that, "Look, Aziz, yes, we're spending in Q4, but we are now really already starting to shift our thinking to Q1." And we're seeing earlier pipeline movement because of that. So like I said, our pipelines are up considerably. And we had the best Q1 in company history and we're now positioned to have beat that record in this coming Q1 based off of everything we're seeing. Now obviously, anything can change last minute, but with the macro environment but thus far, we're seeing a lot of positive momentum. Sajid, anything you want to add to that?

Yes, I think that was very well captured by Aziz. I think that looking at Q1, a few things to keep in mind is that, number one, International did $244,000 in Q1 of this year. We already have $1 million in the pipeline for Q1 already, and that's being conservative. Programmatic, our new offering, as we saw in Q3, it scaled up fast to the point where it's already 20% of our gross base in Q3. I mean that's -- again, that is a new product launch this year. For that to scale up that fast, is really a testament to how -- to the demand out there. And what's good about programmatic is that you don't typically see the drop off you do in managed service between year-end in Q1. So -- and again, what it's doing for us as well as it's opening up new logos for us. We saw 180% growth in new logos year-over-year. 54% growth in all logos you spend with us in the quarter combined. So we are a much better company today than we were in Q3 and Q4 of 2023 going to the political 2024 year.

And Gabe, one other thing I'll add to that is what happened, and we knew this is going to happen as the tariff conversation started heating up, what took place as advertisers were less -- were more reluctant to do kind of the managed service commitments early. What they were likely to do is do some quick in and out programmatic deals. And what traditionally happens in Q1, if you can imagine, we hit the holiday cycle. Clients are not making commitments as fast as they usually need to. So what will happen is in Q1, you will see this uptick of programmatic last-minute spending that comes in and out. And so the key here is we are now able to provide our clients the ability to use Sabio in whatever platform and whatever way they want to use it, which is conducive to growth. That is the great part. And that means that -- and we see this now a lot where in the past, we would have the request for proposal to come down. It would be the cycle would take a good couple of months back and forth. We're literally walking into meetings and the clients are saying, "Great, let's turn this on tomorrow." That's what we're seeing, which is great, and it's exciting. But it doesn't take away from the manager because that's where Creative TV is coming in, Creative TV is that unique opportunity that they also want to integrate into and figure out, listen, I need to be part of the social influencer ecosystem. How do I get there? We're now giving them that opportunity, and that's where the managed service component will -- in addition to our performance products. So I mean we can't speak enough about what is happening in programmatic, we're seeing exciting results. And that is primarily in the U.S. In the international markets, they still have a big preference for a lot of managed service as well.

And now we will take questions from Daniel Rosenberg.

My first question just comes around the logo growth at 180% figure. I was just wondering if that's being driven by the new programmatic offering or the kind of expanding of new geographies? If you could provide some segmentation that'd be helpful.

Thank you for the question, Daniel. And really, it's driven by a couple of different factors. First of which is, yes, we're seeing great expansion opportunity in a couple as we've talked about, more than 40% of our revenue in Q3 was coming from our new product set was the expansion. That includes international, that includes programmatic. So that is driven by that growth factor that is programmatic. And of course, is going to be assisted with international and then also Creator TV is adding to that. Then separately from that, it's the election cycle that is about to take place. This midterm election cycle is on par to be one of the most hotly contested election cycles in history. And then you add to it there's a California governor's race. There's an L.A. City Mayor's race, which the last time there was an L.A. City Mayor's race, $100 million was spent. And we didn't participate at all the last election cycle in the L.A. City Mayor's race. And so we are better positioned to go after all of those. So it's a combination of these factors and the right pieces. The other part that I'd like to mention, Daniel, is the fact that roughly, sorry, about 60% of our sellers have been here less than a year. And so we are literally like we've been training them. We've been putting them in place. Really, they're starting to scale up. So where all the pieces are really coming into play for next year, and we're super excited. So there's no additional G&A added. There's -- in fact, we're going to look at cost efficiencies going into next year. And so it's going to provide us an opportunity to really deliver some tangible EBITDA and net profit next year.

Thanks. And in your prepared remarks, you used the word chaotic in terms of what you saw this quarter, and I also hear you speaking about the strong or strengthening kind of Q1 pipeline. So I'm wondering if that implies Q4 is also seeing these trends of just challenges and kind of chaos where do you use? Any details to share you there?

Yes. Look, we did see -- we're starting to see some normalcy return as it relates to Q4. We're feeling better about that. There is some -- still some short-term challenges there. But overall, our Q4 traditionally have been strong and this Q4 is not going to be any different. So there are definitely challenges in Q4. And in some cases, what's happening is our clients are opting to move into Q1. They're still spending in Q4, but as you're already seeing with some of the retail spending that's coming out, there is a little bit of a retail pullback happening in Q4. Having said that, we do see a lot of elements of normalcy returning back to Q4. Sajid, anything you want to add to that?

Yes, I think that was captured well. I think that, as Aziz mentioned, some of the challenges in Q3 did start to ebb a little bit into the beginning of Q4. But those conditions are dissipating. And Q4 is traditionally the highest revenue quarter of our year, and we are seeing the same trends continue on this year.

Okay. I appreciate that. And then I'm curious about the programmatic offering. So as you scale this, are you able to move the dial on the margin profile of it? And then you also mentioned some areas you're exploring to improve cost structure. Just how far or how much of an opportunity do you have to increase the profitability?

Yes. I think that's a great question, Daniel. And to answer your question first on programmatic is yes. We are seeing is a year of progress, the margins are improving on the programmatic offering. So we expect next year, a lot of the work that we'll be doing this year to increase that margin profile will be quite evident. And even saying that, we've been able to maintain 59%, 60% margins this year while that's scaling up. And so that really bodes well for the picture of next year, 2026. On the cost structure, yes, we are continually fine-tuning the structure. It's worth noting that our operating expenses did decrease 2% for the prior year and on a sequential basis, by 10% from the second quarter of 2025 we normalize for sales commissions and bonuses. I would expect further targeted efficiency to be implemented in the near term with the aim of getting to deeper margins to what we would expect of ourselves in a political year. To answer your question about specific areas, if you look between Q2 and Q3, we did see an 8% sequential decrease in sales and marketing costs. There were sort of head count reductions and cut back on discretionary spend. But one really key area is also cloud costs, and that's an area that we really believe we can find further efficiencies. It was a big contributor to our loss this year. Cloud costs were up $1.5 million or 109% for the first nine months of the year. But if you look at the trend between Q1 and Q2, those cloud costs were down 24%. Between Q2 and Q3, those costs were down 10%. And so that is a very solid trend line, and we believe it's headed in the right direction. And we believe that we have certain measures that we can take to unlock further efficiencies.

And in addition to that, while there's a lot of folks out there that talk about AI, don't actually implement it. We, on the other hand, are actually really automating a lot of processes internally, have used AI tools out there that are allowing us to now not have as many people in certain areas of the business. So that is continuing -- that trend is continuing. And so we haven't spent -- if you look at our -- obviously, our expenses as it relates to the infrastructure, we haven't really spent a whole lot on AI. But that doesn't mean we're not doing it. And what we're doing is we're taking a very measured approach in efficiency and deploying it where we can to streamline and automate some functions within our company to allow us to then expand top line and figure out how to start really boosting some of those EBITDA margins by tuning that even more as we go into probably the best year in company history.