Mr. Aziz Rahimtoola reports

SABIO DELIVERS 11% Q2-2023 REVENUE GROWTH, LED BY% INCREASE IN CONNECTED TV/OTT SALES

Sabio Holdings Inc. has released its unaudited financial results for the second quarter ended June 30, 2023. Unless otherwise indicated, all amounts are expressed in U.S. dollars.

"We are pleased to have once again delivered double-digit revenue growth in a challenging economic environment, led by a 57-per-cent increase in our CTV/OTT business," said Aziz Rahimtoola, chief executive officer. "Supported by our highly differentiated, end-to-end CTV/OTT technology stack, under which the majority of Sabio's CTV impressions are delivered through direct supply, we continue to gain market share and outpace industry averages in the category."

Sajid Premji, chief financial officer, added: "In a testament to the stability and scalability of our sales model, 74 per cent of consolidated revenues in the first half of 2023 were from repeat customers, as we continue to attract and retain customers at high rates, resulting in larger average deal sizes and acquisition cost-efficiencies. Moreover, management's ongoing focus on reducing costs and increasing efficiencies has offset continued investments in our technological capabilities, including a new programmatic offering anticipated to launch in the first half of 2024. Our ability to maintain strong gross margins, combined with the stability in our cost structure, positions Sabio well for adjusted [earnings before interest, taxes, depreciation and amortization] (as defined below) gains in the second half of the year and into 2024. Subsequent to quarter-end, we strengthened our cash position with the closure of a non-brokered $1.7-million (Canadian) convertible note offering. Meanwhile, the renewal of our loan facility with Avidbank continues to progress well. Amendments under an executed term sheet include a potential $3-million increase to the facility, subject to approval from the bank's loan committee."

Second quarter 2023 financial highlights:

• Sabio delivered revenues of $8.0-million in Q2 2023, up 11 per cent from $7.2-million in Q2 2022.
• CTV/OTT sales as a category increased by 57 per cent to $5.0-million, compared with $3.2-million in the prior year's quarter. CTV/OTT sales accounted for 62 per cent of the company's sales mix, compared with 44 per cent in the prior year's quarter.
• Mobile display revenues of $2.9-million in Q2 2023, down 24 per cent, from $3.9-million in Q2 2022, as the legacy mobile display campaigns continued to shift their spend with Sabio from mobile display to higher-margin mobile OTT streaming, which is recognized under the company's CTV/OTT revenue category.
• Gross profit of $4.8-million in Q2 2023, up from $4.3-million in Q2 2022. Gross margin improved on a year-over-year basis from 59 per cent in Q2 2022 to 60 per cent in the completed quarter. The increase is attributable to several efficiency and direct sales improvements within the CTV/OTT channel, as well as its App Science business.
• Adjusted EBITDA loss of $1.7-million in Q2 2023 compared with a loss of $1.4-million in Q2 2022. The loss was primarily driven by overhead added during and subsequent to the second quarter of 2022, which included the continued expansion of its sales and marketing apparatus in the prior year and costs associated with transitioning its work force back to the office. On a sequential basis, second quarter operating expenses, normalized for commissions, were flat in comparison with the first quarter of 2023 as cost-efficiencies implemented by management offset incremental head count additions to its sales force to position itself for the 2024 U.S. elections.
• As of June 30, 2023, the company had cash of $1.7-million, as compared with $2.4-million on June 30, 2022.
• As of June, 2023, the company had $6-million outstanding under its credit facility with Avidbank.

Second quarter 2023 business highlights:

• App Science worked with an agency representing a top global automotive brand to integrate App Science with 18 new CTV/OTT platforms. Management believes these integrations will not only solidify recurring revenues from the partner agency but will enhance App Science's overall value proposition to source recurring, third party direct revenues.
• Vidillion continues to add new supply and demand sources, increasing, on a sequential basis, its demand-side integrations by 39 per cent and supply-side integrations by 19 per cent from the first quarter.
• On April 4, 2023, 330,000 share options of the company were granted to certain directors and employees of the company at an exercise price of 99 Canadian cents, and 353,793 restricted stock units of the company were granted to certain officers and employees of the company at the grant date fair value of the company's common shares of 99 cents. The options will vest quarterly from the grant date over a three-year vesting period. The RSUs will vest over three years with one-third vesting at the one-year anniversary of the grant and quarterly vesting over the next two years.

Events subsequent to June 30, 2023:

• On Aug. 16, 2023, the company closed a non-brokered private placement financing of secured convertible notes in the aggregate principal of $1.2-million (Canadian) and unsecured convertible notes for aggregate gross proceeds of $537,850 (Canadian) for total gross proceeds of $1,737,850 (Canadian). The notes will mature on Aug. 16, 2025. The notes will be convertible in whole or in part, at the option of the holder, into common shares in the capital of the company at a price of $1 (Canadian) per common share at any time before or on the maturity date. The unsecured notes bear interest at the rate of 14 per cent per annum payable as of the maturity date, except that: (i) the interest on the unsecured note issued to Mr. Rahimtoola will be payable monthly; and (ii) the company may prepay the unsecured note issued to Mr. Rahimtoola at any time after 12 months from the issuance. The secured notes bear interest at the rate of 14 per cent per annum payable semi-annually in arrears in cash or common shares at the option of the company, and are secured against all personal property and assets of the company. The secured notes can be prepaid in all or a part of the principal plus accrued and unpaid interest without penalty or bonus.

Sabio's interim consolidated financial statements, including the notes thereto, and management's discussion and analysis, for the three months ended June 30, 2023, and June 30, 2022, can be found under Sabio's profile on SEDAR+.

Outlook

Despite what is traditionally the slowest half of the calendar year due to the seasonal trends affecting the advertising industry, the company continued its expansion into the connected TV/OTT market by delivering 59-per-cent revenue growth in the category for the six months as it continues to substantially outpace the market and take market share. Moreover, in the first half of the year, approximately 74 per cent of consolidated revenues came from repeat customers as Sabio continues to attract and retain customers at high rates, bringing more stability and larger deal sizes to its revenue model and gaining cost-efficiencies. Additionally, its customer mix continues to become less transitory and more predictable. Approximately 26 per cent of the revenues in the first half were generated from top logos that did not spend with Sabio previously, replacing COVID-19 and 2022 U.S.-election-related spending that dissipated in 2023.

While economic uncertainty, driven by macro interest rate policies, continues to impact advertising budgets, management remains cautiously optimistic as it enters the second half of the year. The company expects political and advocacy spending to accelerate in the leadup to the 2024 U.S. elections. Further, as a result of the company's continuing focus on cost optimization and efficiencies, operating expenditure spend, normalized for sales commissions, remained flat from previous quarters, with further efficiency gains expected in the quarters ahead. Sabio's ability to maintain strong gross margins, combined with the stability in its cost structure, positions Sabio well for adjusted EBITDA gains in the second half of the year and into 2024. The majority of Sabio's CTV impressions delivered is through direct supply gained through the acquisition of Vidillion, making Sabio one of the highest direct supply options in the CTV/OTT space and supporting strong gross margins.

Sabio continues to invest in technology to further enhance its end-to-end CTV/OTT technology stack. Sabio expects to launch a new programmatic CTV/OTT offering in the first half of 2024, which is anticipated to drive further incremental revenue gains in 2024.

To the extent the company finds suitable and attractive acquisition candidates that are complementary to its long-term objectives, Sabio may also pursue further inorganic growth through strategic business acquisitions.

Conference call

The company will host an investor conference call for the second quarter ended June 30, 2023, at 9 a.m. ET on Aug. 22, 2023. The webinar details are below.

Date:  Aug. 22, 2023

Time:  9 a.m. ET (6 a.m. PT)

Please register for the webinar.

Dial: For higher quality, dial a number based on your current location.

Canada:  1-778-907-2071 (Vancouver local) or 1-647-374-4685 (Toronto local)

Webinar ID:  873 6691 0387

Please connect five minutes prior to the conference call to ensure time for any software download that may be required.

About Sabio Holdings Inc.

Sabio (TSX Venture Exchange: SBIO) (OTCQX: SABOF) is one of the fastest-growing CTV/OTT technology and service providers in the high-growth ad-supported video-on-demand (AVOD) and Fast channel space. Its cloud-based CTV/OTT technologies provide publishers with distribution, monetization and analytics while delivering return on investment validation for brands and agencies. The Sabio portfolio is composed of: Sabio, its trusted and transparent content monetization DSP; App Science, its cutting-edge, non-panel-based, real-time measurement and attribution software-as-a-service platform; and Vidillion, its cloud-based ad insertion and content distribution and management platform.

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