Sabio Holdings: A Growth Engine Fueled by Diversification and Tech Innovation

Sabio Holdings Inc. (TSXV:SAB) is emerging as a standout player in the fast-growing ad-supported streaming market, with its Q1 2025 results underscoring a compelling combination of sustainable revenue growth, strategic diversification, and operational efficiency gains. The company's 43% year-over-year revenue surge to $9.1 million, paired with its aggressive geographic expansion and investments in AI-driven technology, positions it to outpace the US Connected TV market's modest 13% growth forecast. For investors seeking exposure to a high-growth digital media company with clear margin-improvement catalysts, Sabio's trajectory is worth a closer look.

The Growth Engine: Diversification Beyond US Borders

Sabio's Q1 performance is a testament to its multi-pronged diversification strategy, which is reducing reliance on any single market or vertical. Key highlights:

• Geographic Reach: The UK market delivered triple-digit revenue growth, while Sabio's Creator TV FAST channel—now distributed internationally via partnerships with Plex and Sling TV—has expanded its audience to over 20 million viewers globally. This foothold in international markets sets the stage for outperformance as Sabio eyes India and other regions.
• Vertical Balance: No single industry now contributes more than 19% of revenue, with telecom, automotive, and finance sectors all contributing steadily. The 25% of new clients in Q1 2025 highlights effective sales execution.

The Recurring Revenue Flywheel: 91% Repeat Customers

Sabio's sticky customer base is a critical driver of its growth. With 91% of Q1 revenue coming from repeat clients—a 6 percentage-point increase since 2023—the company's App Science™ platform is proving its value. This AI-powered household graph, now covering 80 million US streaming households, enables hyper-precise ad targeting without compromising privacy. The result? A low-cost, high-margin recurring revenue model that's immune to fleeting trends.

Strategic IT Investments: Cloud Costs Are a Temporary Drag

While Sabio's Q1 Adjusted EBITDA loss widened to $1.6 million (18% of sales), this reflects strategic, one-time IT investments—not operational failure. The company spent $0.8 million on cloud infrastructure upgrades, including its migration to AWS, which will:
- Reduce long-term costs: Scalable cloud architecture and AI-driven automation are expected to normalize cloud spending by year-end.
- Boost margins: Gross profit margins rose to 61% in Q1, up from 59% in 2024, as efficiency gains take hold.

Management is confident EBITDA profitability will materialize by late 2025, with the sales force expansion (now 50% larger) and global partnerships accelerating top-line momentum.

The Buyback Signal: Management's Confidence in Its Plan

Sabio's recently approved Normal Course Issuer Bid—authorizing up to 5% of its shares for repurchase—sends a clear message: management believes the stock is undervalued. With $3.8 million in cash and a debt-reduction trend, the company has the liquidity to execute its strategy while returning capital to shareholders. This buyback is a rare positive signal in a sector where many firms prioritize growth over shareholder returns.

Why Act Now?

• Margin Turnaround: The path to EBITDA profitability is clear, with cloud costs stabilizing and sales efficiency improving.
• Market Share Gains: Sabio's 40% ad-supported streaming growth vs. the industry's 13% pace suggests it's taking share, not just riding a macro trend.
• Global Expansion: The UK and upcoming India push open avenues for double-digit growth beyond the US.

Historically, the strategy of buying SAB 3 days before quarterly earnings announcements and holding for 30 calendar days has demonstrated strong performance. Backtests from 2020 to 2025 reveal a favorable risk-return profile, with the stock capitalizing on positive earnings catalysts like its recent 43% revenue surge. This historical trend underscores the potential for outsized gains during earnings-driven momentum windows.

Risks to Monitor

While Sabio's story is compelling, risks remain: regulatory shifts in data privacy, intense competition from tech giants, and execution delays in scaling. However, its current momentum and diversified revenue streams mitigate these risks more effectively than most peers.

Conclusion: A High-Growth, Low-Rate Buy

Sabio is at a pivotal inflection point. With a recurring revenue model, geographic diversification, and technology investments that will soon deliver margin gains, it's primed to outperform its market. The stock's current valuation—trading at roughly 10x 2025E revenue—offers a rare entry point for investors seeking exposure to a digital media disruptor. Act now before the EBITDA turnaround and global expansion fully price in.

This analysis is based on Sabio's Q1 2025 earnings report and public disclosures. Always conduct your own research before making investment decisions.