My name is Aideen McDermott, Investor Relations Associate, and joining us on our call today we have Aziz Rahimtoola, Founder and CEO, and Sajid Premji, Chief Financial Officer. We will start today's call with Aziz and Sajid discussing our Q4 results, and we will then follow that up with a Q&A session. Before we begin the 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 SEDAR website. Please also note that all figures discussed today are in U.S. dollars unless stated otherwise. With that, I will hand it over to Aziz.
Thank you, Aideen. Good morning, everyone. Before we get into the highlights of the quarter and year, I just want to say how incredibly proud I am of our teams here in the U.S. and globally for effectively dealing with what was a challenging macro environment the second half of last year. As a company, we quickly identified inefficiencies, made hard decisions, all while retaining top talent and setting the stage for 2024 being a great year. Building a strong company culture, as we've done over the last 10 years, has translated into a more resilient and agile organization, and I think today's results will prove that. Next slide. Some key business highlights. We delivered 2.1% positive adjusted EBITDA, and that's U.S. dollars, and improved operating leverage for Q4 2023. That's a 21% year-to-year improvement in the adjusted EBITDA margin.
We did that by retaining 90% of our top customers in 2023, while at the same time, 76% of our revenue from repeat customers really helped us deliver efficient revenue. On track to realize $4 million in annual cost savings, and this was really based off of the need to recognize that the macro environment last part of last year was challenging, and we'd really needed to make some immediate changes and adjustments in order to achieve what we were determined to do to get to that positive EBITDA number. We delivered over $27 million in revenue commitments, upfront commitments going into 2024. That's approximately 75% of our 2023 revenue. So we got some great commitments, as you've seen with some of the press releases between clients such as McDonald's, Toyota, and to name many other brands.
And then finally, as I just referenced, a multi-year deal with Pivot Marketing Group leveraging our App Science AI capabilities in support of top brands, including Toyota, who we've been working with for more than a year and a half to fine-tune this App Science AI insights. And how this all comes together is the complete end-to-end tech stack that we really believe in and really deliver to the market in the form of REV: Reach, Engage, and Validate. We're helping brands and agencies reach audiences in streaming TV, including diverse audiences, helping them more effectively engage those audiences, and finally, validate those audiences, help them validate their spend, ensure ROI has been delivered. On that note, I'm going to hand it over to Sajid Premji to talk about our robust business metrics.
Thanks, Aziz. Despite a challenging comparable with the 2022 U.S. election cycle that led to a material reduction in fourth-quarter revenues, Sabio's resolve to right-size their operating infrastructure led to a 23% decrease in fourth-quarter operating expenses when normalized for sales commissions and bonuses. This, in turn, drove over $2 million in Adjusted EBITDA and improvements in gross margins and operating leverage in comparison to the prior year's quarter. Meanwhile, as our operating infrastructure continued to become more efficient, our sales model continued to become increasingly predictable. 76% of our consolidated sales in 2023 came from repeat customers versus 72% in 2022 and 55% in 2021. All the while, our CTV/OTT business remains robust and accounted for 73% of our sales mix during the fourth quarter compared to 72% in the prior year's quarter.
Further into the differentiated value proposition offered through our end-to-end CTV/OTT technology stack, 90% of our top customers from 2022 also renewed in 2023. Furthermore, as we will soon discuss in our outlook for 2024, Sabio has already secured $27 million in committed revenues for 2024, including over $15 million in expected political and advocacy spend that will take place between the second and fourth quarters of 2024. At no point in our company's history have we had more visibility into our sales pipeline. But first, turning our attention to the fourth quarter. For the three months ending December 31st, 2023, Sabio generated revenues of $12.7 million, a 28% decrease from $17.6 million in the prior year's period. For the full year, consolidated revenues decreased 15% to $36 million from $42.3 million in the prior year.
The decrease in sales was primarily driven by pronounced declines in political and advocacy spending compared with the prior year, which benefited from the U.S. midterm election cycle. Fourth-quarter revenues were also impacted by category-specific events such as the United Auto Workers strikes and Screen Actors Guild strikes that impacted short-term advertising budgets before reaching a resolution. Sabio delivered CTV/OTT sales of $9.2 million for the fourth quarter, a 27% decrease compared to $12.7 million in the prior year's period. For the full year, CTV/OTT sales were down marginally from $24.8 million in the prior year to $24.1 million in 2023. The decrease was primarily driven by pronounced declines in our political and advocacy spend compared with the prior year, whose span ran right in the thick of the 2022 U.S. midterm election cycle.
Fourth-quarter mobile display sales were $3.1 million, a 36% decrease compared to $40.8 million in the prior year's quarter, as more mobile campaigns continued to shift from mobile display to mobile video recognized under our CTV/OTT revenue category. Management responded to the macro and category-specific challenges in 2023 by executing several initiatives that will fortify our balance sheet and underpin our growth in 2024 and beyond. The $4 million in annualized cost savings implemented during the third quarter of 2023 resulted in $2.1 million in fourth-quarter adjusted EBITDA, a marginal decline compared to $2.4 million of adjusted EBITDA in the prior year's period. As a testament to our expanding operating leverage, it's worth noting that last year, the adjusted EBITDA was delivered on close to $5 million in additional revenues.
Management expects significant improvements in operating leverage to continue to benefit our bottom line in months and the quarters ahead, driving a return to full-year profitability in 2024 as political-related spending returns. Gross margins during the fourth quarter also increased by 2% to 61% compared to 59% in the prior year's quarter, as Sabio continued to leverage its differentiated end-to-end tech stack, including the use of the Vidillion CTV supply, to maintain 60%-plus margins in what was historically our weakest margin quarter of the year. Full-year gross margins also ticked up to 61% from 60% in the prior year. We entered 2023 with $2.6 million in cash on our balance sheet and $7 million outstanding under a line of credit with other banks.
While the company continued to negotiate with other banks on a longer-term renewal, subsequent to year-end, Sabio came to terms with the bank on a 90-day extension on a $6.5 million facility through August 21st, 2024. Under the extension, the other material terms of our credit facility will remain intact and will be assessed for a longer-term renewal during the extension period. Turning our attention to 2024, as this graph illustrates, similar to Olympic versus non-Olympic years in traditional broadcasting, our business continues to witness seasonal revenue growth associated with the political election cycle in the United States. Although the seasonally adjusted growth is becoming less varied as the company matures, we do typically witness a pronounced revenue acceleration entering into these political election periods.
In a continuation of these trends, Sabio enters 2024 earned with record upfront branded campaign commitments of over $12 million and assigned over $15 million in additional political and advocacy insertion orders on campaigns between Q2 and Q4, for an aggregate of over $27 million in committed revenues. The commitments under these endeavors already represent close to 75% of 2023's consolidated sales, with the rest of the year still to come. With a return of meaningful political and advocacy dollars in 2024, our strong margin profile and our reduced operating infrastructure that will ensure a larger portion of top-line sales will fall to the bottom line, significantly improving operating leverage and driving a return to full-year Adjusted EBITDA profitability. Management will use these improved cash flows to transform our future balance sheet position over the year.
We expect to enter 2025 with lower debt, improved cash reserves, and the greatest level of balance sheet flexibility in our company's history. At year-end, we had 50.1 million shares outstanding, 3.6 million options outstanding in RSUs, and no warrants outstanding with insiders owning 60% of the company. Back over to Aziz.
Thank you, Sajid. What we wanted to do next is highlight a couple of key deals that we have negotiated last year and really speaks to this tremendous capability we have across various technologies. So in the case of McDonald's, we are able to collaborate with them to help them effectively reach diverse audiences, leveraging not only Sabio App Science but also Vidillion in inventory, and then eventually Sabio TV capabilities. That really is an example of how we're leveraging all of our capabilities together. Same situation at Toyota. Toyota, we've been working with for a number of years on a couple of different facets. This one specifically is focused in on providing them a better understanding of ROI as relates to Asian audiences in the ecosystem, in Asian audiences who are looking for who might be in the market for automotive vehicles.
There's a huge opportunity here on both of these brands. Obviously, we're just scratching the surface today, but this is similar to the opportunities we have with these two brands and many others that we work closely with. To recap today's call, we expect record top-line revenue in 2024 driven by our political spending, improvement in Adjusted EBITDA profitability, and as Sajid talked about, a lot of operating leverage to really improve and materially improve things on our balance sheet. We are focused in on that. We have started recognizing the ability we have to really squeeze out operating leverage and continue to expand our business at the same time. That's really what we expect to do. Finally, the launching of new offerings, including that of programmatic, which will provide an additional opportunity for revenue in 2024 going into 2025.
On that note, I'm going to hand it back to Aideen for a question-and-answer session.
Thanks, Aziz and Sajid. We'll now open up the call for a Q&A. Analysts have been given speaker permission, so please raise your virtual hand. We will begin today's Q&A session with Kiran Sritharan from Eight Capital . Go ahead, Kiran.
Good morning, guys. Thanks for taking my question. Congratulations on the quarter and the outlook. Now, to start, can you unpack the strength of these commitments and their forward visibility? How do they compare to 2023 or previous election years, and what changed this year?
In terms of the specifics, because of confidentiality agreements, we can't get into too much detail on some of these. But really, what this speaks to, when you're working with a Toyota and a McDonald's, obviously, these are big global brands that have wide reach and pretty big marketing budgets overall. And so what these commitments speak to is our versatility as a company. In some cases, in the case of Toyota, they're not only obviously, in both cases, they're not only only using us on the media side of the business, but they're also benefiting from our App Science analytics. And they're seeing the value in that as a separate standalone. And so really, the way to think about this is it is a land and expand strategy.
It's more efficient when you have top brands like a Toyota, McDonald's, some of the other major automotive companies we work with, and the ability to expand on that is significant. So to answer your question, it provides us another opportunity to expand those relationships and opportunities to really stabilize the revenue overall. Sajid, anything you want to add to that? And then in terms of the political cycle question, two years ago, we did have a decent amount of advocacy business come in. Political business did come in two years ago during the midterm election cycle, but really, advocacy was driving a lot of our top-line growth. This political season, because of the investments we continue making in D.C. and have made over the last four to five years, both in personnel and as well as technology, we're seeing the benefits of that with our commitment.
As Sajid mentioned, the level of visibility we have in our revenue pipeline, at this point in the year, we've never had this type of visibility ever at this point in the year. So it really speaks to the strength of the business for this year, but then also is going to really dovetail into next year's growth as well. Sajid, anything you want to add to that?
Yeah, no, I think that that was well said, Aziz. I think that what I would kind of add to that is that in 2022, as Aziz mentioned, we did do a large amount of our sales from the advocacy side of the business. And a lot of those orders came in, I would say, about a month or so before the campaigns were delivered. This is a big change this year, that we already have orders in place between Q2 and Q4. So yeah, that speaks to that we never had this level of visibility into our sales pipeline at this early point in the year before.
Just to clarify, that's not simply even just political. That's brand dollars that we now have visibility that's combined with brand dollars that we have visibility into. That number just continues to grow because we're just starting the cycle for this year going into next year. Some of those dollars will now get committed into Q4. This number will grow from a commitment perspective overall. Feel good about what we're seeing.
That's a really helpful comment, guys. Thanks. And then your comments earlier also called out better diversification of the top line as you exit 2024. Maybe it is the push to programmatic, but are you able to discuss any of these initiatives today?
Yeah, and I think, yeah, programmatic is one big component. We see a lot of opportunity there. And this is coming out of, quite honestly, the desire of the companies and the brands we work with to not only provide them a managed service capability, but one that is also programmatic. So we believe there's an additional opportunity there. We see a lot of growth potential in App Science. App Science continues to be integrated with top publishers that we continue to integrate with some of the top DSPs in the space. App Science is becoming very effectively what we see it as becoming as a de facto analytics tool for diverse audiences in this space, diverse in streaming TV audiences. And we see a lot of opportunity there.
And then separately, we do have the initiative of Sabio TV and Vidillion that's providing some additional opportunities for supply side, supplying inventory to other DSPs in the space. So there's a lot of we already had the blueprint for the last two years. Now it's a matter of fundamentally executing on that blueprint. And we see an acceleration in some parts of that this year and next year. Obviously, the only addition to that is programmatic.
Thanks, Aziz. And for my last one here, you touched on App Science there, and we've seen some recent wins. Are there any developments in either the go-to-market or the technology that is leading to the strength there?
Yeah, and everyone's been talking a lot about AI as I know you, all the analysts on this call have been inundated with. And the core basis of AI that you all know is having data, is having unique datasets that could then train the AI models to really learn and continue to do things that it takes too much time or effort, human time or effort to do. And what we're seeing the benefits of in that respect is we've had this App Science platform since 2017, 2018. We've been doing machine learning since then. We have a lot of great data. And now we're using that, leveraging that to provide more natural language capabilities. So when a Toyota, for example, goes into a dashboard, the rudimentary way was you go into a dashboard and you have to type up questions and you have to ask questions and information.
We're getting to a point where we're providing up-to-date answers and things that they might want to know before they even know it. And so that's really where we see this use of AI natural language technology going and the ability to make it really just simplified. The days of dashboards are going away. The ability to have natural speech and recognition and just natural language capabilities is something that we're actively working on. And then the speed. As a small company, one of the challenges, we've built a pretty elaborate infrastructure. Having said that, one of the things that we're very focused in on in the next year or so is to help automate that and increase the speed of the data outputs that we're getting. And so we see a lot of opportunity.
And like I said, App Science continues is becoming a real leader in that understanding of the diverse space. And it goes back to 55 million household footprint across the U.S. with rich data that's privacy compliant. It's important. And people are recognizing how important that is when you're trying to identify different groups of Latin consumers, different groups of Asian consumers, different groups of Black and African-American consumers. It's important.
Thanks, guys. I'll pass the line.
Thanks, Kiran. Next up, we have a question from Daniel Rosenberg of Paradigm Capital. Go ahead, Daniel.
Good morning, Aziz and Sajid. My first question is just around the kind of strike you mentioned that impacted the quarter as well. It sounded like it was a bit of a year-over-year tougher comp with some one-time items. I'm just trying to understand the cadence of the base business for this quarter versus some of the things that might have been one-time. Is there any way to put just some numbers around it or rough impacts, what it looked like absent of these events?
Yeah, it's a good question, Daniel. I think that automotive has traditionally been the number one category for our company. And so the UAW strike did have a profound impact on our Q4 performance as did the absence of the political dollars that came with the 2022 midterm election.
I think that if you were to strip out these two events, you might see kind of a flat-ish revenue picture compared with the prior year. And the prior year was also a much more favorable economic environment as well. What we've seen is that when we're in a political cycle, it kind of is a tide that does lift all ships. And so the good news is that going into this year, we've seen a sharp rebound. If you look at let's strip out political advocacy from the rest of the year, from 2024. What we're seeing right now is that at this point, at the end of Q1 compared to the previous year, we actually have more than 20% more visibility into our brand and business growth compared to last year.
Our brand and business growth is already pacing over 20% higher than it was the year before. Our core business, it does remain strong. We really do view this that the Q4 kind of flat-ish performance is kind of just a one-time effect just due to the overall macro environment. Anything to add to that, Aziz?
Yeah, and I think the way to think about political, Daniel, is political really kicks off in Q2. There's no real effects of that in Q1. And so the core business in Q1, what we have seen over the last few years without getting into too many specifics, is the reality is Q1 is always slow. It's traditionally the slowest part, the slowest quarter of all of our quarters. Having said that, the structural differences we made in our company are going to benefit us in Q1. And so it's not the quarter that's going to come out full guns blazing. It's going to be really what you're going to see is Q1 always starts off slow, but our structural differences will make the impact. And then you go into Q2, and that's really where political begins. And so that's really where we're seeing the benefit.
Okay. Appreciate that. Helps us better understand the moving parts. On that idea of kind of looking ahead, basically, on the economics and macro front, we hear basically a U.S. economy that seems to be doing well. So putting aside the political spend and any the automotive lags, do you see that as well in your customer discussions? Are budgets? Has there been any change in spending patterns of customers? Just generally speaking, anything to say about the macro outlook over the past three months?
Well, we're seeing more positivity, that's for sure. Towards the end of last year, there was a lot of uncertainty. Part of that is the inflationary concerns that were taking place, the impact on what it was going to happen on employment. The anticipation of what was going to happen was causing some pullback in advertisers. Then, as we talked about, the UAW strike, United Auto Workers strike, that affected the Big Three automakers. We've had a presence in Detroit since the company started. Obviously, that had an impact on us. Coming out of that, what we're finding on the automotive side is the consumer is healthy. They're buying. I mean, if you look at the most recent numbers that have come out with some of the big automakers, consumers, despite the high interest rates, are buying cars.
They're out there and they're actively buying. So from the automotive perspective, that bodes well for our business. From other categories of business, it seems like the consumer is healthy enough to go out and start purchasing other items. I mean, we do well not on automotive. We do well in QSR. QSR dealt with some challenges in the short term. I think some of our QSR clients had mentioned that they saw a pullback at certain menu levels for other consumers. Now, we believe some of that will start reversing as this job economy continues to stay hot. So overall, the sentiment we're hearing and what we're starting to see is a very positive one this year relative to what we saw last year. So we are cautiously optimistic that the economy is going to start. Potentially we've seen it in the numbers, obviously, in the jobless numbers.
The problem is the inflation numbers, the interest rates have been high. So we think the consumer is now going to start shaking that off potentially towards the end of this year. 2025 could be a really good year. That's the indications we're starting to get, that there'll be some benefits of that later on part of this year, but really 2025 is where there could be an acceleration. If you add to it, interest rates will at some point, the commitment for a reduction in interest rates will happen. If that happens, that certainly reduces the burden on consumers from a credit card debt perspective. So to net-net, we believe there's a lot of positive signs in the road ahead outside of political advocacy. Having said that, political advocacy is obviously a big opportunity for us in a big way.
Thanks. So last question for me. Just it sounds like you're anticipating a busy year ahead. So in terms of the sales organization, customer management, is there a capacity to serve the activity that you see ahead? How are you thinking about hiring? Any insight there? And I'll pass the line. Thank you.
Sajid, you want to cover that?
Yeah. So I think that as far as our capacity is concerned, is that we did kind of see this coming. So we do believe that we are well-staffed to meet this year's goals. I think that what we're really turning our attention to is next year in 2025. I mean, we all know that this year is going to be a great year. In 2025, we see a lot of opportunities, including in programmatic, as Aziz mentioned. And so we do plan to make some incremental investments, particularly in our sales apparatus. But again, we expect those to be more of the incremental nature rather than a large-scale investment.
Daniel, in the past, you brought up the question of our balance sheet. I'd love to address that this time. It's a focus of ours. This year, we're not interested in accelerating our business. We believe, as Sajid pointed out, we have the right pieces in place to execute on this year. Really, what we don't want to do is overbuild going next year. We want to deliver operating leverage as we did in Q4. We want to really stabilize and really improve our balance sheet position. That's really our focus. So if that means we're a little bit more cautious as it relates to adding people, that's the route we're going to take this year. We're going to be cautious.
We're going to be mindful of the balance sheet and really focusing on giving us that operating leverage that we're really the balance sheet opportunity and balance sheet leveraging opportunity that we'd love to see. So that's at the foremost. Yes, it's going to be a great year. It's going to be a busy one. But the balance sheet is really our focus this year and making sure we're doing everything we can to ensure it's in the best position possible.
Okay. Thanks for taking my question, guys.
Thank you.
Thanks, Daniel. Next up, we have Gabriel Leung from Beacon Securities . Go ahead, Gabe.
All right. Thanks. Just two things. So first, Aziz, based on historical precedent, how much more time would you have in the current selling season to secure commitments that would be recognized for this current calendar year?
How much time? It depends on which line of business you're speaking about. If you're talking about the political and advocacy business, that tends to become fast and furious. We already got commitments in place, but that will start. There'll be a lot of last-minute opportunities coming in, starting in August and September. We already have great commitments, but we see an acceleration there. As it relates to the core business, as it relates to upfront commitments, that will start negotiating in the summer months, and we'll start seeing some benefits of that starting Q4 of this year. So there's two different cycles simultaneously happening, and we feel pretty good about both overall. Does that answer your question, Gabe?
Yeah. No, it's great. That's helpful. Second thing, so as we think about calendar 2025 then, can you walk through some of the initiatives that your team would be undertaking that would help smooth out the volatility, not just for political spend, but also just seasonality in general? Is there anything you can talk about that you guys are looking at?
Yeah. I think there's two key initiatives. Look, this is an opportunity and a challenge. The opportunity is we continue to accelerate in the political and advocacy business. The opportunity is that. The challenge on that is, as Sajid mentioned, we're turning into a company that has the Olympic cycles, Olympic years, and non-Olympic years. So yes, we have a couple of initiatives that are going to do that are going to help us in the non-Olympic years. Programmatic being one. We see an opportunity, a really big growth opportunity with that. Programmatic could account at one point, a number of years ago, programmatic accounted for 10% of our revenue. This is when we were on the mobile-focused side. We believe that it is very feasible for it to get to that point on the CTV and on the streaming side.
So that's one big initiative that we're really taking on. And then the second one really is about App Science, insight, and analytics. And the two really work well together because if you could imagine a client such as Toyota, right, who's integrated our App Science capabilities, they're running media campaigns with us on a managed service basis, but now they're asking for additional capabilities that are programmatic to scale up some of the insight capability we're giving them, not only through other partners, but through us, it provides a great opportunity for both products simultaneously. So that's really that, I would say, is at the cornerstone of our initiative. Sajid, anything you want to add to that in terms of?
Yeah. Yeah. And I think that was well said, Aziz. The only thing I would add to that as well is it helps with the seasonality is our upfront commitments as well. I think that looking at going into 2024, we have on just the media side, over $12 million that we've announced from upfront commitments. And that's up from $4.3 million the year before. And so having that level of certainty, it is helpful, especially with that seasonality. So many upfront commitments do come with quarterly budgets. And so that gives us a lot more certainty going into future years as well. And we expect those upfront commitments to grow as part of this year's renewals too.
Gabe, as we get bigger, what's going to happen is as we continue to expand our revenue base, even in Q1, which is traditionally our challenging. I'm not saying it's going to happen right away tomorrow, but as we continue doing that, then that variability factor reduces, right? It's not so much our cost structure is in a better place for this last Q1. It's going to be in a better place next Q1 because of the top-line growth we're going to see. So we think there's an opportunity to kind of help smooth out with upfronts, programmatic. What we find, programmatic plays a key role in Q1 because what ends up happening and we've seen this every year, the planning cycles get delayed.
And so since the planning cycles get delayed, when the clients want to pull the trigger, the most efficient and quickest way for them to do it is programmatic. And that's where the dollars tend to flow at a bigger, we believe, a bigger portion in Q1 relative to other quarters. And so we think that's the way we can really kind of help balance out some of this seasonality in our business.
Gotcha. No, thanks for all the feedback.
Thank you.
Thanks, Gabe. That concludes our Q&A session. So I will hand it back to Aziz for closing remarks.
Great. Well, thank you, everyone, again, once again, for joining us. As we talked about today, the key elements for our trajectory for 2024 is really going to be driven by political advertising and advocacy. We're going to see an opportunity with these upfront deals that have provided us a great level of assurance and visibility into our future pipeline. Our new structure that's more efficient and providing us greater leverage, our operating opportunity there. And then the combination of all that is really going to come together in a really big focus on our balance sheet. And that will provide us even more operating leverage as we go into next year. So we're really excited about this year, not just simply from a top-line growth perspective. We're excited about this year from a net profitability perspective. And that's really what we're focused in on as a company.
Sajid, anything you want to add to that before we disconnect?
No, I think that was well said, Aziz. I think that it's been hammered home over the course of this call. This is great. It's going to be a great year, and we're going to take advantage of this opportunity to really give ourselves a lot more balance sheet flexibility going into 2025 and beyond.
Awesome. Well, thank you again, everyone, for joining us this morning.