Sabio Holdings Inc. ($SBIO)

Good morning, everyone, and welcome to Sabio Holdings Q1 2026 earnings call. The financial statements and management discussion and analysis are available on SEDAR. Today is Tuesday, May 26, 2026. Joining us are Savio's Founder and Chief Executive Officer, Aziz Rahimtoola; and 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 the filings on SEDAR for more information. All figures are stated in U.S. dollars, unless noted otherwise. With that, I will turn it over to Aziz.

Thank you, Martin. Good morning, everyone. While we have executed well on our overall objectives by growing our business at 26% CAGR since going public, including average growth of 24% in nonelection years and 61% in election years, all while achieving adjusted EBITDA profitability in 4 of the last 6 years, we have been equally obsessed with building a more diversified, resilient company that is not dependent on 1 product, geography or category of business. The investments we've made along the way in our unified tech stack with our own DSP analytics and streaming channel are helping us deliver on that objective. In Q1, a diversification strategy that started to see traction at the end of 2025, has started to accelerate in 2026, and the timing could not be better. Across the industry, managed service business continues to face pressures as advertisers increasingly shift towards more agile programmatic approaches. This is especially relevant during periods of uncertainty driven by tariffs, inflation and geopolitical instability, where advertisers require greater flexibility ability to quickly adapt strategy in real time. precisely what programmatic enables. At the same time, tariff-related volatility in the U.S. has benefited international advertising markets, with the global brands we work with increasingly leaning into regions where greater stability and less exposure tariff disruptions is enviable. The result is more diversified revenue composition in company history, while also positioning us for meaningful advocacy and political spend beginning this summer. We've evolved from a business that was 90% U.S. managed revenue to a business where 62% revenue now comes from programmatic and international as we saw in Q1. These opportunities are highly scalable and provide a long runway for growth. Importantly, these 2 vectors helped us grow top line revenue core by 6% and despite continued challenges in major categories, including auto-related tariff disruptions and consumer spending pressure tied inflation. Our strategy is also resonating clients, 77% of our new programmatic clients, powered by AppScience in Q4 returned in Q1 and 36% increased spend quarter-over-quarter. In addition, 95% of new international customers renewed further enforcing the durability of this strategy. We're excited about the year ahead, and we will speak more about that in detail. But first, I'm going to hand it over to Sajid to get into the numbers. Sajid?

Thank you, Aziz. Q1 had some headwinds that impacted the top line, but the underlying business has a very different story. The investments Sabio made in 2025 are clearly paying off. Consolidated gross revenues declined 10% overall, driven by 2 temporary factors: First, a $1.4 million shift in political and occupancy spending, which in election meters tend to be concentrated in the second half. Second, a temporary advertiser pulled back in March tied to the Middle East conflict. Despite those headwinds, 85% of our consolidated Q1 revenues came from returning customers, even in our newest and fastest-growing areas. The sales decline was largely offset by strong growth in our newest international and programmatic offerings. Normalized for police efficacy, our core business actually grew 6%. Core asset ported streaming revenues rose 18% year-over-year, excluding political and advocacy. That's continued double-digit growth in our foundational business, which made up 81% of total gross sales this quarter. That growth was led by our 2 newest offerings, which scaled significantly in Q1. International revenues surged nearly 13x, up 1,173%, to USD 3.1 million from just $244,000 in Q1 of 2025 and already representing 60% of our full year 2025 record. Notably, this grew sequentially from a record $2.7 million in Q4 and even though Q1 is a historically softer quarter for ad spending. We are seeing these levels remain steady in quarter 2. Our new programmatic offering is right behind it, also up nearly 13x or 1,125, reaching USD 2 million from $156,000 in Q1 of 2025. Like International, programmatic also defied seasonal trends. 77% of programmatic customers renewed between Q4 and Q1, and 36% of those customers increased their spend as we move into a seasonally softer quarter. Together, programmatic and international accounted for nearly 62% of our first quarter consolidated gross revenues. That highlights how quickly these new offerings are scaling. For context, in 2025, 82% of programmatic sales and 88% of international sales came in the second half of the year. As these businesses enter 2026 from a higher Q1 base that will be joined by a return of significant policy dollars in the second half. Sabio has already secured over $5 million in police avian commitments for 2026 with the bulk expected in the second half. Gross margin was 53% in the quarter. This reflects early pricing investments concentrated in January to drive adoption in our international and programmatic offerings as well as the shift of higher-margin political advocacy spend to the second half. Margins improved as the quarter progressed. Adjusted EBITDA was a loss of $3.4 million. This reflects the fact that higher margin on political [indiscernible] sales were largely replaced by lower-margin programmatic and international sales versus the prior year's quarter. Year-to-date, we've implemented $2.3 million in annualized cost reductions. These savings will benefit the second quarter with the full impact kicking in, in Q3 right is material political legacy dollars returns. With accelerating momentum in our most scalable channels, a growing customer base, a leaner cost structure and a strong pipeline of second half political commitments Savi is positioned for what we expect to be a record year and a return to strong profitability in the second half. Turning to capitalization. Sabio ended the quarter with USD 1 million in cash. Debt outstanding under our U.S. and U.K. credit facilities declined to $6.2 million from $9.1 million at year-end, coinciding with a decline in AR between quarter 4 and quarter 1. [indiscernible] receivables continue to show very low loss rates. This reflects the customer base made up primarily of major global brands and leading advertising agencies. As collections come in, they are used to repay our facilities, which can be withdrawn for ongoing working capital needs, giving us a suffer punishing source of liquidity. On the strength of our international business, Subsequent to quarter end, Sabio was approved for an increase in its U.K. credit limit from GBP 3 million to GBP 5 million. We also seperate this by issuing a CAD 900,000 convertible debt note. Together, these steps give Sabio balance sheet flexibility as we enter what is historically our strongest revenue quarter of the year. Aziz, back to you?

Thank you, Sajid. And to recap, core growth positioned for strong growth backed by 9% renewal rate. App Science powered programmatic is doing incredibly well, delivering strong results were 77% renewal rate. International expansion is accelerating at an even faster rate than we anticipated. And finally, this is a political year. and we already achieved and received commitments of $5 million political advocacy commitments thus far with more anticipated. We are beyond excited about the quarters ahead and do see a positive future in the near future. On that note, I'm going to hand it back to Martin for questions.

[Operator Instructions] The first question is, given the exceptional growth in Sabio London, which is now 38% of gross revenues, how fast can you continue to grow this business?

We're -- we don't have any clear -- we don't provide forward-looking statements, but we will say that we are incredibly excited, and we think there's just a lot of momentum that and a lot of untapped opportunities out there that we haven't even started realizing. So we're excited. We're very bullish on that. And we're also bullish on our core programmatic and our core business in the U.S., along with our Creator TV channel. So we are excited that it is materializing quickly. and that it's having a meaningful impact on our business today and that acceleration will continue happening the rest of this year. Sajid, anything you want to add to that?

Yes. Yes. I think that was very well said by Aziz. I think -- the one thing just to reiterate is what we said in the transcript is that Sabio London did -- which serves all of Europe in the Middle East. The USD 3.1 million of sales in Q1 and we're seeing those levels remain steady in Q2. So when you think about that, we're already on pace to exceed our 2025 sales by the end of Q2. If you think about 2025, we did more than 80% of our international sales in the second half of the year. We still expect second half of 2026 to be bigger than the first half of 2026. And so -- all that said, you have the international scaling up at a really fast rate in the second half. I did any other return policy dollars returning in the second half didn't have programmatic as of scaling up in the second half of the year. So we really think this is going to be a huge second half. And what international really does for us is it provides more sustainability in these all policy years. No more are we stuck in these boom bust cycles where we had to make up for a large political dollars in these optical years. Just in an do international dollars are more sustainable and they're more consistent year after year after year. We did about $5 million in this last [indiscernible] year -- it's a [indiscernible] year next year in 2027, we're starting off with a bigger base at the end of 2026. International loan, what would not compensate for any optical year deterioration in the police spectrum. So we really feel that international has changed our business fundamentally.

And also, I'll add to the programmatic component is the best part about also promatic is it's also allowing us to diversify logos very quickly. So we're less dependent on a few logos. And now going back to this idea of resiliency and being able to navigate off election cycles, we've essentially transformed our business effectively to do that. And I think we're seeing the benefits of that, and you'll see the full brunt of that towards the second half of this year, as Sajid alluded to, but also going into 2027.

Nicholas Cortellucci from Atrium research.

I just wanted to get some more details on the $5 million of political commitments. So what does that mean exactly? Is that cash in the door that people have already paid for? Or is it a contractual commitment, maybe just some more commentary.

It's basically a contractual commitment, but that's a minimum amount, and we expect that number to increase, and that's just what we have seen so far. So there's a lot of other things that are coming in. So it hasn't -- it hasn't been added into our overall number yet. What is going to happen is that is going to have an impact starting this summer. So you haven't even seen -- we haven't seen any of that political or even advocacy. And what happens, as Sajid alluded to, is efficacy in political years gets pushed back to the second half of the year. So while we had the benefit of advocacy in last year's Q1 number. We didn't see any of that in this Q1. And so that gets more concentrated in -- usually in July, August, September, and then leading into the election cycle. And we might even see some in June, but really that is where it sits.

Right. And with this cost-cutting program, can you tell us a bit more about the details on that? What kind of expenses are you pulling out of the business? Are you guys using AI a lot to supplement that?

We are. We're seeing efficiencies across the board using AI, but it's also looking at our changing business overall. And what we mean by that is is we are seeing, as you have heard on this call, we're seeing a lot of expansion in international. It's allowing us to move some resources from not that we don't see a lot of great growth ahead here in the U.S. We are, but programmatic provides more efficiency from how we execute campaigns. We're also implementing working on agents to implement and fine-tune some of the procedural things we do on our operations side. So we are looking at efficiencies overall that's benefiting our business, and that is leading to our ability to then move those investments into international. So U.S. market more mature, programmatic taking hold there provides more efficiency with an international market, providing a lot of growth, which primarily is driven by managed service. So we're able to play in both of these markets. I'm going to -- Sajid, anything you want to add to that?

Yes. I think just as Aziz mentioned, programmatic has play a big part of that. We said from the outset the programmatic is a lower gross margin business, but it's less OpEx intensive. You need fees senior sellers, you need for your account managers to manage those campaigns. And so programmatic has reached a level of scale, including $2 million in sales in Q1. We're in a position that where we can, we've got some of those OpEx reductions, and that's what we've done. And so -- we continue -- expect this programmatic is to excel. Scale is international [indiscernible]. There'll be further opportunities for efficiencies ahead as well.

That's at least the cost reductions, as Sajid mentioned, overall.

Understood. Okay. And then last 1 for me would be just on Creator TV. If you guys could provide an update on what's the latest with that? Has it been contributing meaningfully yet? Or do you expect that over the coming quarters?

Create TV continues. The first objective last year was to get to a minimal viable product, which they did. And now they're they're on 149 million have the access to 149 million devices across the U.S. And so from a revenue perspective, we do believe that it's going to start contributing. We've already seen some contributions starting to take place in Q3, but I really think that it is in '27 that that's going to play a bigger role. And once again, as Sajid talked about earlier in the call, we're really setting ourselves up for not only a strong second half of '26. But to end these boom and bust cycles that we've experienced because of political and efficacy, we're streamlining business. We've now diversified the business and create TV plays a role in that next year. So we're excited about the contributions it will make next year overall.

Gabriel Leung from Beacon Securities.

Just on the political spend, if I recall. back in '24, I think you guys did about $7.9 million of political. I'm just curious, based on the current backlog of what you've signed so far, how do you think you're going to attract this year relative to the last cycle?

Right now, we're feeling optimistic. I mean there's a lot of opportunity. And what was different about the last cycle relative to this one is we had advocacy come in like Q1 and Q2. And now the good part is we were able to fill that void with our international and programmatic growth. And so now we have all this money that is likely to come in and concentrate in the second half of the year. So we're feeling good about still the opportunity to track in that amount. Now obviously, there's a lot of variables here. Candidates are changing frequently. And so there's -- it's hard to say exactly what's going to turn out, but we're -- so far, we're feeling cautiously optimistic as with the second half. Sajid, anything you want to add to that?

Yes. I think what's sometimes underappreciated is that in these midterm election years like we saw efficacy comes in quite strong. And so in the second half of the year, with $5 million more commitment, there could be a substantial share down that is driven by efficacy as well. So it's we're definitely excited about the second half of the year.

We're also seeing international opportunities with efficacy. So this is going to be -- this is opening us up to now other opportunities that are outside of political and efficacy, of course, is advocating on behalf of various brands and communication strategy. And so we see that as a potential of growing globally as well in line with the growth that we're seeing global on our brand business.

And just in terms of the -- I guess, your -- the rest of the business, what sort of feedback are you getting from some of the customers within the traditional sort of high-value verticals, what are they telling you about their feelings of how Mark spend might go for the remainder of this calendar year, notwithstanding any big unknown event.

Yes. We're getting a lot of optimistic kind of sentiment overall. I mean -- and if you think about specifically, and we've talked about this before, Gabe, right, on the automotive side, which has always been a very strong vertical for us. What we noticed what happened last year is the tariff impact was significant, especially in the second half of the year, and that impacted the vertical impacted us. What we're seeing now is those automotive companies are getting positioned because they're getting these rebates back, the tariff rebates that they're putting into the hands of they're actually looking to potentially deploy that in terms of advertising spend. I think Walmart just announced that they're going to use some of those rebates to help with prices. So there is a sentiment that some of this now. The tariff rebates that are coming back are going to have a positive effect on their bottom line in the second half of the year. But they do want to deploy that to increase that overall revenue. So we have it yet despite a war going on, and obviously, it had some impact on us in March. That's where we saw the biggest impact was we were pacing incredibly well in January, February. And in March, there was a little bit of a pullback. And then there is a reverse that started taking place in Q2. So thus far, the sentiment is very positive. We haven't heard of any cutbacks. In fact, in our specific case, and it relates to Q4 and Q1, we actually grew like 70-plus percent of our comments who spent on us in Q4 and programmatic came back in Q1. But what was interesting about that, 30-plus percent in prespend that was kind of unique in the sense that going from Q4 into Q1, increasing spend, which is something that is -- that doesn't happen often. So -- we believe the sentiment is getting better, especially as it relates to Q2, and we're seeing very positive momentum. But we haven't seen anything that's giving us a lot of caution into the second half of the year. Sajid, anything you want to add to that?

No, I think that was well said. If anything, I mean still a caution, we're feeling very, very optimistic in the way that we have [indiscernible] lines meeting in the center, right? You have your programmatic scaling up at a fast pace. You have your international is filling up at a fast pace in a political dollars coming back [indiscernible] all culminating in the second half of this year.

Yes. We're cautiously optimistic this is going to be 1 of the best second halves in company history. So we're super excited.

Maybe one last question for me. Just in terms of the -- I think it was 2-point sorry, the $2 million cost savings you're expecting, how much of that has been realized so far?

So not too much has been realized so far. So we put in the first cost cuts in the beginning of the big -- so there were some benefits in Q1, but you'll see a bigger benefit in Q2 and then the full brunt of gold cost costs to be felt in Q3 and onwards. So the RC login $2.3 million of cost cuts are significant cost cases. So we'll have a profound impact on our bottom line in Q3 and Q4. It also benefits to as well.

And where should we see most of the cuts coming from which operating line?

So they were widespread. We cut in back office functions like finance, in HR. We also cut on the sales side of the coin as well. As we talked about, we have a business that's transitioning more and more sales coming internationally. So there's been a reallocation of resources there. And there's also the fact that we have programmatic now, which is more operationally efficient. And so there's been cutbacks around there as well.

Thomas Hui of Paradigm Capital.

Just one question from me. Just on the reducing this margin this quarter, in the prepared remarks in totes strategic cited those are pended to revert exiting Q2 1, maybe you can just dive a bit more on that and what the expected duties heading into Q2 and onwards upgrade?

Do you want to cover that?

Yes, yes. So at the beginning of the year, we did come out with some aggressive pricing to encourage adoption of our upper products, and that was really contain the January for the most part. And so it did a benefit. We saw a strong early adoption of programmatic renewal rates between Q4 and Q1. And those renewal rates have persisted after the prices went up in February and March. And so it was definitely beneficial. And so where we exited Q4 was the, I would say -- I mean, Q1 was I think -- that there is a road map to sustaining that in Q2. And then as to really benefit Q3 and Q4 is that political is a higher-margin business. We're talking about plus businesses. We've also are in the process of negotiating better supply terms with our key vendors. And so you can even see margin improvements on our core business as well as our police business coming back as well. And so there are a couple of things there, which we can really pave the path that it could get us back into the high 50s eventually.

Okay. If I can squeeze just one more in. You touched about the international side. It seems like you guys are having a nice beachhead in Monday, on expanded [indiscernible]. Just what are some of the things that are working strategically and resonating with customers? And as you guys scale that international, do you see a need for more resources like head count or R&D to drive that outgrowth?

That's a great question. And fortunately, we have built we've invested in our infrastructure along this way. So we're using that existing infrastructure to expand out into the international markets. And so what's resonating is back that we have this infrastructure. We're one of the very few companies that have this type of tech stack that is owned and operated that has all of these three functions within its umbrella. And that is a key differentiation for -- especially as new markets adapt to ad-supported streaming, we're experienced. We've executed well. Our renewal rates are just demonstrating that. And so as it relates to CapEx and how we look at that, we're not seeing a lot of additional CapEx that is needed as we continue expanding internationally. We've borne those costs by building what we have built a very expandable defensible tech stack. And now we're just benefiting and extremely, we will have to continue adding some sales folks and operations, but from a technical perspective, we have everything it takes to continue accelerating.

[Operator Instructions] You mentioned there were aggressive pricing strategies in January to gain market share. When can these pricing strategy to provide more normalized margins?

We're already seeing, as Sajid alluded to, the reversal of some of that gross pricing. And now as we get into these markets, both programmatic and international, and demonstrating the quality of our work and what is unique about our differentiated offering, especially as it relates to App Science, that allows us to then go back to those advertisers and start pushing some of those margins up and to other new advertisers as well. So, as Sajid mentioned, we already started seeing some improvements in Q1. We think the improvements will continue in Q2. And then Q3 will be in a much better trajectory. That will probably be the steady state of where we're going to be at is most likely Q3 and Q4. And then, of course, we get back into the Q1 cycle next year, and that tends to be a little bit more aggressive. So I think the better way to look at where we're going to be margin-wise is really Q3, Q4. That gives you a good barometer. But we're feeling good. I mean we are able to, as Sajid talked about, also renegotiating some supply deals, getting some additional supply. The key is it's not about our supply that makes us unique because everyone has the same supply outside of our Creator TV, which is going to provide us, once again, the ability to push margins up as Creator TV continues to scale, that is unique supply that no 1 else has access to. But beyond that, what makes us really unique is app science in the household graph that we continue building and expanding. And at this point, looking to expand into international markets. We are looking to launch App science in there. We're already doing some beta testing as we speak, and we're going to make a formal announcement on that of the official launch. But, we're excited about the ramification App Science has, especially in global markets as it has had in the U.S. markets. Once again, as I mentioned, renewal rate on programmatic. It's a new product -- we go into -- we've gone into this market, used our app science capabilities to really help us start pushing these margins up. So we're excited about the trajectory ahead and believe we can get value-add pricing based off of the unique differentiation of upsides. Sajid, anything you want to add to that?

Yes, I think that [indiscernible].

Do you envision the App Science platform evolving into a stand-alone SaaS offering versus its current role powering the rest of your services?

Yes. We've been asked that question before. And quite honestly, there's always a possibility and quite -- and the reason we say that is in a highly fragmented media ecosystem, and there's all kinds of different transactions happening today. App Science value continues to increase. And at some point, if we're not getting the full credit of what we're doing with that, absolutely. This could -- there could be a real path to us potentially spinning it off and giving it the investment in need. Similar to -- it's the same conversation we're having about created TV. Career TV continues to grow and could be a viable product in of itself on a stand-alone basis. So yes, it is something we've explored and we're always open to those kind of -- that kind of thinking because it does add meaningful value.

57% of returning logos grew their spend year-over-year. Is this expansion coming from growing budgets moving budget away from linear TV or shifting from digital competitors?

Well, I think part of it is just due to -- we launched a new product last year called programmatic. People try it out, and they like it. They saw their ability to pair insights and data to beat their desired audiences and they study ROI was coming in. And so this you're just spending more with us. And so I think that it's a function of us proving ourselves, improving our ROI. And so you see the same thing play out internationally as well. Is that business has scaled up has a very high returning rate. 90% of our sales in Q1 internationally were from recurring customers from X customers. And so I think it's a testament to people seeing the ROI [indiscernible].

Are there particular verticals or market segments that find your data-driven approach, particularly resonant?

Automotive has been a consistent player in that. As we've mentioned in the past, we have licensing deals with the major foreign automaker who uses our data and not just simply not also using our targeting but using our data for analytics purposes. And automotive is a category, quick service restaurant is a great agreement simply because A lot of transactions are now happening via app. Financial is -- we're seeing a resurgence in the financial category as well. And then lastly, obviously, political and efficacy, that is a category where they need the data. They need to understand mindset of the consumer better than what is available in the off-shelf market today. So -- but those are really the top categories that we see a lot of momentum. And of course, we're seeing this new resurgence of entertainment, just simply because a lot of money is now going into, obviously, the subscription services. And so we're seeing a resurgence of that. But the top 3 categories continue to be automotive, quick service restaurant and financial.

There are no further questions. Do you have any final comments before concluding this call?

We don't. Thank you again for joining us on the call and look forward to chatting again next quarter.

This concludes Sabio Holdings Earnings Call. Thank you for joining us today, and this call is now over.