Sabio Holdings Inc.

Good morning everyone and welcome to the Sabio Holdings earnings call for the second quarter of 2023. The financial statements and MD&A have been filed and they can be accessed through the CDAR website. My name is Aideen McDermott, Investor Relations Associate at Sabio, and joining us on today's call, we have Aziz Rahimtullah, Founder and CEO, and Sajid Paranjit, Chief Financial Officer. We will start today's call with Aziz and Sajid discussing our Q2 results, and we will then follow that up with a Q&A session. Before we begin today's call, I would like to remind everyone that certain statements made today may contain forward-looking information that is subject to known and unknown risks, uncertainties, and other factors. For a complete description of risks and uncertainties facing the company, please refer to the company's MD&A and other continuous disclosure filings that are also available on the CDAR website. Please note that all figures discussed today are in U.S. dollars unless stated otherwise. And with that, I will turn it over to Adis.

Good morning, everyone. How are you doing? Happy to have you on our 2Q call. Hold on a sec. My internet just paused for a second. I'm going to jump back on. Based in LA, so we've been having a lot of issues with internet. So, all right, here we go. We are able to deliver double-digit growth despite an increasingly difficult environment, as peers and industry have all pointed out. Our strength was driven by unique value proposition that CTV advertising powered by our 55 million cross-screen household graph brings. This combined by the fact that we have one of the most complete end-to-end tech stacks in the space allows us to touch multiple parts of the CTV OTT ecosystem. while delivering price leverage at good margins. Some key highlights from this quarter include strong renewal business numbers, average deal size increases, and a host of accolades and recognitions, including being added to the LumaScape, a prestigious list of top and growing players in the CTV OTT space. In addition, we are in the final stages of the renewal and increases of our credit facility, providing us operating flexibility. Lastly, the capital raise, we also, as noted, we did a recent capital raise, which Saja will get into, which adds additional leverage for inventory maximization. Finally, we're in a growing sector. A couple of slides I wanted to use to highlight this aspect. So we are continuing now non-paid TV households have outnumbered USP paid TV households. And so this number is just continuing to increase at an ever increasing rate. And as you can see, Sabio has 55 million households. Within the next year, Uh, we potentially have the opportunity to actually have more us households and these are validated homes than cable has in terms of total subscribers in the US. So we're heading in the right direction. Unfortunately, cable continues to see the challenges and we see a huge opportunity. along those lines as well. In addition to that, this is leading to more time spent on streaming, which also benefits us from more advertising spend moving to this platform. And finally, it is more diverse viewership wise relative to general market linear TV, traditional TV, which also is where Sabio has positioned early on and well in that space. So the combination of all these elements certainly bodes well for us in a long-term perspective and really is contributing to our growth this quarter. And then as you can see, we're set for long-term growth. And talking about some of the key elements of this quarter, I'm going to hand it over to Sajid to talk about Q2 specifics. Sajid?

Thanks, Aziz. Despite a challenging economic environment, we are pleased to report another quarter of record sales with continued double-digit revenue growth. This came on the back of significant top-line gains in connected TV and LTT streaming. For the three months ended June 30th, 2023, Savio generated 8 million US in sales, up 11% from 7.2 million US in the prior year. Evidencing the stability of our sales model, 74% of sales in the first half of 2023 were generated from repeat customers. The increase was led once again by a CTV and LTT business that continues to grow significantly above the competitive growth rates of our peers and the 21% growth rate for the US CTV industry at large. CTV and OTT sales organically grew 57% to $5 million compared to $3.2 million in the prior year's quarter. For the fourth straight quarter, CTV and OTT streaming was our dominant sales category, accounting for 62% of our overall sales mix versus 44% in the prior year. Meanwhile, the unique analytics and insights provided by our app science business continues to differentiate us from the pack. Approximately 38% of Savio's consolidated revenue during the first half of the year had an outsized component compared to 25% in the prior year's comparable period. Second quarter mobile display sales were $2.9 million U.S., down 24% from $3.9 million U.S. in the prior year's period. Aligned with our sales strategy, Our legacy mobile display customers continue to shift their span with Savio from mobile display to higher margin mobile OTT streaming recognized under our CTV and OTT streaming category. On a trailing 12-month basis, the shift from mobile display to CTV OTT has contributed to a 50% increase in average deal sizes, with CTV OTT as a category representing 64% of our overall sales mix. If our closest peer group continues to experience a sharp deterioration in gross margins, we continue to leverage our end-to-end CTV OTT technology stack to protect ours. Gross margins for the quarter increased to 60% from 59% in the prior year's quarter. Once again, Savio's use of dealing supply and our continued ability to ship legacy mobile display customers into CTV OTT benefited gross margins. Our quarterly adjusted EBITDA loss of 1.7 million US was primarily driven by overhead added during and subsequent to the second quarter of 2022, which included the continued expansion of our sales and marketing apparatus. Sequentially, second quarter operating expenses normalized for commissions were flat in comparison to the first quarter of 2023. Cost efficiencies implemented by management offset incremental headcount additions to our sales force to position ourselves for the 2024 US election. We expect further cost efficiencies to take hold in the quarters ahead as cost reductions implemented during the second quarter are fully realized and additional reductions by management are implemented. Our ability to maintain strong gross margins combined with improving efficiencies in our cost structure positions Savio well for adjusted EBITDA gains for the second half of the year and into 2024. Echoing the thoughts of our closest peer group, rising interest rates have created a more deliberate ad market. Meanwhile, the political and advocacy demand that accelerated in the second half of 2022 may create difficult comps for the rest of 2023 before the material benefits of the 2024 election cycle take hold. We ended the quarter with 1.7 million US in cash on our balance sheet. And subsequent to quarter and we started our task position with the closure of a non broker Canadian once 1.7 million convertible note offering. Finally, the renewal of our loan facility, whatever being continues to progress well. Amendments under an executed term sheet include a potential $3 million us increase to the facility subject to approval from the bank's loan committee. At year end, we have 46.9 million shares outstanding, 4.2 million warrants outstanding, and 3.9 million options in RSU outstanding, with insiders owning 64% of the company. Now, we'll turn things back to Aziz.