Sabio Holdings Inc. (SABOF) Q1 2026 Earnings Call Transcript

welcome to sabio holdings q1 2026 earnings call the financial statements and management discussion and analysis are available on cedar plus today is tuesday may the 26 2026 joining us are sabio's founder and chief executive officer aziz ramatula and chief financial officer sajid primji after management's remarks, we will open the call for questions. Analysts may raise your virtual hands and investors may submit questions in the question and answer window. 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 CDR Plus 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% kegger since going public, including average growth of 24% in non-election years and 61% in election years, all while achieving adjusted EBITDA profitability in four out of the last six years, we've been equally obsessed with building a more diversified, resilient company that is not dependent on one 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 and 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 to 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 long runway for growth. Importantly, these two vectors helped us grow top-line revenue core by 6%, despite continued challenges in major categories, including auto-related tariff disruptions and consumer spending pressure tied to inflation. Our strategy is also resonating with 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 has some headwinds that impacted the top line, but the underlying business tells a very different story. The investments Samuel made in 2025 are clearly paying off. Consolidated gross revenues declined 10% overall, driven by two temporary factors. First, a $1.4 million shift in political and advocacy spending, which in election years tends to be concentrated in the second half. Second, a temporary advertiser pullback 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 political advocacy, our core business actually grew 6 percent. Core ad-supported streaming revenues rose 18 percent year-over-year excluding political and advocacy. That's continued double-digit growth in our foundation in our foundational business which made up 81 percent of total growth sales this quarter. That growth was led by our two newest offerings, which scaled significantly in Q1. International revenues surged nearly 13 times, up 1,173% to 3.1 million U.S. from just 244,000 in Q1 of 2025, already representing 60% of our full-year 2025 record. Notably, this grew sequentially from a record $2.7 million in Q4, even though Q1 is a historically softer quarter for ad spending. We are seeing these levels remain steady in Q2. Our new programmatic offering is right behind it, also up nearly 13 times, or 1,175%, reaching $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 if 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, they'll be joined by a return of significant political advocacy dollars in the second half. Savio has already secured over 5 million in political advocacy commitments for 2026, with the bulk expected in the second half gross margin was 53 percent in the quarter this reflects early pricing investments concentrated in january to drive adoption in their 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 political advocacy 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 advocacy 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, Sabio 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 $1 million U.S. in cash. Debt outstanding under our U.S. and U.K. credit facilities decline to $6.2 million from $9.1 million at year end, coinciding with a decline in AR between Q4 and Q1. Samuels' 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 redrawn for ongoing working capital needs giving us a suffer punishing source of liquidity on the strength of our international business subsequent to quarter n sabio was approved for an increase in his uk credit limit from 3 million pounds to 5 million british pounds we also supplemented this by issuing a 900 000 canadian dollar convertible debt note together these steps give sabio greater balance sheet flexibility as we enter what is historically our strongest revenue quarters of the year. Aziz, back to you.

Thank you, Sajid. And to recap, core growth position for strong growth backed by 90% renewal rate. AppScience powered programmatic is doing incredibly well, delivering strong results with 77% renewal rate. International expansion is accelerating. at an even faster rate than we anticipated. And finally, this is a political year, and we have 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. we will now open the line for questions analysts please raise your virtual hands investors please submit questions in the question question and answer window the first question is given the exceptional growth in sabio london which is now 38 percent of gross revenues how fast can you continue to grow this business we're you know 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 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 um we are excited uh that it is materializing quickly and that it's having meaningful impact on our business uh today and that that acceleration will continue happening the rest of this year so anything you want to add to that yeah yeah i think that you know that was very well said by aziz i think that the one thing just to reiterate is what we said in the transcript is that Savio London, which serves all of Europe and the Middle East, did 3.1 million US 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 all of 2025's 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 the second half of 2026 to be bigger than the first half of 2026. And so, you know, all that said, you have the international scaling up at a really fast rate in the second half, and then you have the return of political advocacy dollars returning in the second half, and then you have programmatic also 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 off-political years. No more are we stuck in these boom-bust cycles where we have to make up for large political dollars in these off-political years. These international dollars are more sustainable and they're more consistent year after year after year. We did about $5 million in this last political year, in this off-political year um next year in 2027 if we're starting off with a bigger base at the end of 2026 international loan will more than compensate for any you know off political year deterioration in the political side of the spectrum so we really feel that international has changed our business fundamentally and also i'll add to the to the programmatic component is the best part about also programmatic is it's also allowing us to diversify logos very quickly so we're less dependent on few logos and now going back to this idea of 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 uh the second half of this year as sajid alluded to but also going into 2027. nicolas cortellucci from atrium research your uh microphone is open morning guys uh thanks for asking my questions um i just wanted to get some more details on the five 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 um it's a it's it's basically a contractual commitment um 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 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 is, as Saja alluded to, is advocacy 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, you know, usually in July, August, September, and then leading into the election cycle. And we might even see some in June, but, you know, really that is where it sits.

Right. Got it. 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 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, you know, programmatic taking a hold there provides more efficiency. But then 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?

Yeah, I think just, you know, as Aziza mentioned, you know, programmatic has played a big part in that. You know, we said from the outset that programmatic is a lower gross margin business, but it's less OPEX intensive. You need fewer senior salaries, you need fewer account managers to manage those campaigns. And so now that programmatic has reached a certain level of scale, you know, including two million sales in Q1, we're in a position now where we can move on some of those OPEX And that's what we've done.

And so, you know, we expect this programmatic continues to scale as international continues to scale will be further opportunities for efficiencies ahead as well yeah that at least the cost reductions as i should mention overall yeah understood okay and then the last one for me would be just on creator tv uh if you guys could provide an update on on what's the latest with that has it been contributing meaningfully yet or do you expect that over the coming quarters uh creator tv continues the first objective last year was to get to a minimal viable product which they did.

And now they're on 149 million, have 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're already seeing some contributions starting to take place in Q3, but really think that it is in 27 that that's going to play a bigger role. And once again, as Sajid talked about earlier on the call we're really setting ourselves up for not only a strong second half of 26 but to end these you know boom and bust cycles that we've experienced because of political and advocacy we're streamlining business we've now diversified the business and creative tv plays a role in that next year so we're excited about the contributions it'll make next year overall okay that's the time thanks very thank you gabriel lung from beacon securities your microphone is now open morning and uh thanks for taking my questions um just on the political spend of i recall back in 24

i think you guys did about um i think it was 7.9 million of uh political i'm just curious based on the the current backlog of uh what you've signed so far how do you think you can 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 and, you know, like Q1 and Q2. And 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 second half of the year so we're feeling good about still the opportunity track on that amount now obviously there's a lot of variables here um candidates are changing frequently and so uh you know there's no you know it's hard to say exactly what's going to turn out but we're so far we're feeling cautiously optimistic is what the second half will hold so anything you want to add to that yeah i think that you know what's awesome sometimes underappreciated is that in these op in these um in these midterm election years like we saw in 2022 advocacy comes in quite strong and so we're in the second half of the year you know that 5 million more commitment you know there could be a substantial share now that is driven by advocacy as well so it's uh we we're definitely excited about the second half of the year we're also seeing international opportunities with advocacy so you know this is going to be this is opening us up to now other opportunities that are outside of political and advocacy of course is you know advocating on behalf of various brands in a 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 um you know on on our brand business thanks for that and um just in terms of the i guess your your uh the rest of the business um you know what sort of feedback are you getting from uh some of your customers within the uh your traditional uh sort of high valley verticals

What are they telling you about their feelings of how market spend might go for the remainder of this calendar year, notwithstanding any big unknown event?

Yeah, 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, well, 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 a position 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. And 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 haven't 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 then March, there was a little bit of pullback. And then there was 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 30% of 70 plus percent of our clients who spent on us in Q4 and programmatic came back in Q1. But what was interesting about that 30 plus percent increased spend. So that was kind of unique in the sense that going from Q4 into Q1 increasing spend, which is something that is, you know, 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 so anything you want to add to that you're saying no i think that that was that was well said if anything instead of caution we're feeling you know very very optimistic in the way that we have basically three lines meeting in the center right you have your programmatic scaling up at a fast pace you have your international scaling up at a fast pace and you have political dollars coming back uh but that's all it's all culminating in the second half of this year yeah we're caught to the optimistic this is going to be one of the best second halves in company history so you know we're super excited um maybe one last question for me just um in terms of the uh the uh i think it was a two point um sorry the two million dollars in cost savings you're expecting uh how much of that has been realized so far so not too much has been realized so far so you know we put in the first cost cuts at the beginning of near the beginning of q1 um so there was some some benefits in q1 but you'll see a bigger benefits in q2 and then the full brunt of both cost cuts will be felt in q3 and onwards um so you know they are they are significant you know 2.3 million dollars of cost cuts are significant cost cuts so it will have a profound impact on our bottom line in q3 and q4 and also benefiting q2 as well and where should we see most of the cuts coming from which operating line so they were kind of they were widespread You know, we are caught in back office functions like finance and HR. We also caught on the sales side of the coin as well. And as we talked about, we have a business that's transitioning, you know, 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 too as well.

Gotcha. So thanks for all the feedback.

Thank you. Thank you. Thomas Hui of Paradigm Capital, your microphone is now open.

Guys, just one question from me. Just on the 53% of this module this quarter, you looked at your prepared remarks. You noted that there was some strategic pricing there and that those are expected to revert exiting Q1. You can just dive a bit more on that and what the expected first module should be heading into Q2 and onwards.

Do you want to cover that? yeah so you know at the beginning of the year we did come out come out with some aggressive pricing um to encourage adoption of our products and that was really you know contained the january for the most part um and so you know it did it did uh it did benefit we saw strong early adoption of programmatic renewal rates between q4 and q1 and those renewal rates even persisted after the prices went up in february and march and so it was definitely beneficial and so So, you know, where we exited, you know, Q4 was in the, I would say, I mean, I think Q1 was in the mid-50s. You know, I think that there is a roadmap to sustaining that in Q2. And then what's going to really benefit Q3 and Q4 is that political is a higher margin business. You know, we're talking about plus 60% businesses. We've also are in a process of negotiating better supply terms with our key vendors. And so you'll even see margin improvements on our core business as well as our political business coming back as well. And so there are a couple of things there which we believe can, you know, really pave the path to get us back into the high 50s eventually.

Okay, thank you for that. And if I could squeeze just one more in. You touched about the international side. It seems like you guys are having a nice beachhead in London. They've expanded fast. 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 Headcount or R&D to drive that growth?

Thank you. That's a great question. And fortunately, we have built and 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 the fact 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, and 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 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 certainly we will have to continue adding you know some sales folks and operations but from a technical perspective we have everything it takes to continue accelerating thank you for those questions and audience as a reminder please

type your questions into the q and a box you mentioned there are were aggressive pricing strategies in january to gain market share when can these pricing strategies provide more normalized margins?

We're already seeing, as Sajid alluded to, the reversal of some of that aggressive 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, you know, 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, you know, 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're able to, as Saja 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 creative TV, which is going to provide us, once again, the ability to push margins up as creative TV continues to scale. That is unique supply that no one else has access to. But beyond that, what makes this really unique is AppScience and the household graph that we continue building and expanding. And at this point, looking to expand into international markets, we are looking to launch AppScience 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 AppScience has, especially in global markets, as it has had in the U.S. markets. Once again, as I mentioned, the renewal rate on Programmatic, it's a new product. 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 app science. Sajj, anything you want to add to that? Yeah, I think that's well said.

Do you envision the AppScience platform evolving into a standalone SaaS offering versus its current role powering the rest of your services?

You know, we've been asked that question before. And, you know, quite honestly, there's always a possibility of that. And the reason we say that is in a highly fragmented media ecosystem, and there's all kinds of different transactions happening today, okay, AppScience's value continues to increase. And, you know, at some point, you know, if we're not getting the full credit of what we're doing with that, absolutely, there could be a real path to us potentially spinning it off and giving it the investment it needs. Similar to, you know, it's the same conversation we're having about Creative TV. Creative TV continues to grow and could be a viable product in and of itself in a standalone basis. So, yeah, you know, it is something we've explored and we're always open to those kind of, you know, 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 tried it out and they liked it. They saw their ability to pair, you know, AppScience insights and data to meet their desired audiences. And they decided ROI was coming in. And so this year they're spending more with us. And so I think that, you know, it's a function of us proving ourselves and proving our ROI. And so, and you see the same thing play out internationally as well. You know, as that business has scaled up, that's a very high returning rate. You know, 90% of our sales in Q1 internationally were from recurring customers, from existing customers. And so, you know, I think it's a testament to people seeing the ROI when they spend with Savio.

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 even have licensing deals with the major foreign automaker who uses our data, 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 category, and 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 lastly, obviously, political advocacy. 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. 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, you know, obviously the subscription services. And so we're seeing a resurgence of that. But the top three categories continue to be automotive, quick service, restaurant, and financial.

Thank you. There are no further questions. Do you have any final comments before concluding this call? Thank you again for joining us on the call and look forward to chatting again next quarter.