Financial statements and MD&A have been filed, and they can be accessed through the SEDAR website. My name is Aideen McDermott, Investor Relations Associate at Sabio, and joining us on our call today is Aziz Rahimtoola, Founder and CEO, and Sajid Premji, Chief Financial Officer. We will start today's call with Aziz and Sajid discussing our Q1 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 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. We are excited about the quarter we just delivered as it relates to setting us up for bigger opportunities later this year. We continue to see growth in our CTV OTT business, and this is intentional. We made the intentional decisions back in October of 2021, when we started shifting our business from traditional display, from mobile display into CTV OTT, and we continue this forward march. It's also giving us improved operating leverage, with 21% sequential decrease in Q1 OpEx, narrowing adjusted EBITDA loss by close to $1 million, and over 85% revenue from repeat customers. This also has to do with our R.E.V.: Reach, Engage, and Validate technology stack.
Then finally, we're excited about this political upfront year, as we've talked about on previous calls, and really are set up for an extraordinary year. Having said that, I'm gonna hand it over to Sajid Premji, our CFO. Sajid?
Thanks, Aziz. For the three months ended March 31st, 2024, Sabio generated $6.4 million in sales, essentially flat with $6.5 million in the same period in 2023. The 2% decrease in sales was primarily driven by declines in mobile display advertising, offset by a return to double-digit growth within our Connected TV and OTT business. Connected TV, Connected TV and OTT sales once again outpaced the estimated 16.2% growth rate for the U.S. CTV industry at large, as we continue to take market share. Connected TV and OTT sales grew 29% to $4.9 million, compared to $3.8 million in the same period last year.
Connected TV and OTT streaming was once again our dominant sales category, accounting for a company record 77% of our overall sales mix, versus 59% in the first quarter of 2023. The continuing double-digit growth of our ad-supported streaming business evidenced the Sabio's ability to segment ourselves in the market by leveraging proprietary data to generate valuable insights through a non-cookie based platform. These insights drive a more powerful connection to target audiences, helping brands and political advertisers effectively reach, engage, and validate audiences in a fragmented media ecosystem. Our differentiated offering positions Sabio well in the quarters to come, as we expect to continue to outpace industry trends. First quarter mobile display sales were $1.3 million, down 50% from $2.5 million in the first quarter of 2023.
As Aziz mentioned, our legacy mobile display customers continued to shift their spend with Sabio from mobile display to mobile OTT streaming, which is recognized under our Connected TV and OTT streaming category. Sabio's CTV OTT sales feature lower OpEx and higher customer retention rates, as demonstrated by over 85% of our first quarter sales coming from repeat customers, compared to 79% in the first quarter of 2023. Meanwhile, 20% of the brands who spent with us in the first quarter were new, were new logos, presenting new opportunities for us to expand our sales base in the quarters to come. On a trailing 12-month basis, our Connected TV OTT business now represents a record 70% of our sales mix, as we continue to capitalize on one of the fastest growing channels in advertising.
Within a span of just three years, we have completely transformed ourselves from a company that generated just 13% of trailing 12-month sales from CTV OTT at the end of the first quarter of 2021. During the quarter, we continued to build on the material improvements in operating leverage that drove an expansion of adjusted EBITDA margins in the fourth quarter of 2023. The inherent cost efficiencies and transitioning to a Connected TV OTT streaming sales model from one dependent on mobile display resulted in continued gains in operating leverage in the first quarter of 2024. Operating expenses decreased 18% for the first quarter of 2023, or 21% normalized for sales commissions and bonuses.
Meanwhile, despite certain rate concessions made to secure larger upfront commitments that will provide a more predictable stream of revenue, we maintain healthy 59% gross margins. This was down from 62% in the same period last year and consistent with the 60% margins we have come to expect over the last three years. All of this resulted in material improvements in operating leverage, as our first quarter adjusted EBITDA loss narrowed by close to $1 million to $1.3 million, from $2.2 million in the same period last year. Our reduced operating infrastructure is complemented by several near-term growth pillars. We continue to have over $10 million in remaining upfront brand and media commitments, and $15 million in political and advocacy orders between Q2 and Q4, for an aggregate of over $25 million.
We continue to expect double-digit revenue growth in 2024 over both 2023 and our record 2022 midterm election year, with a return to adjusted EBITDA profitability for the year. After quarter end, Sabio leveraged its improved operating model to execute a term sheet on a multi-year asset-based lending credit facility with a new lender to replace its existing facility with Avidbank. Subject to final credit approval and the finalization of loan documentation, the material terms of the new facility are comparable to the company's existing one. The new facility is expected to provide greater balance sheet flexibility and stability as we drive towards continued growth on both the top and bottom lines.
At quarter end, we had 50 million shares outstanding, 3.42 million options outstanding, and convertible debt, convertible to 1.74 million shares at an exercise price of CAD 1. Insiders continue to own 60% of the company, with high alignment between our management team and the interests of our shareholders. Now I will turn things back to Aziz for our closing remarks.
Thank you, Sajid. Really, the success that we are seeing in terms of retention of customers and what we're gonna see later this year is driven by our Reach, Engage, Validate capacity and capabilities, and this is our end-to-end stack, which is, we wanted to once again highlight the fact that this is a non-cookie-based tech stack, one that does not rely on cookies and is not subject to change with the change of the deprecation of cookies in the ecosystem. And that is driven by our AppScience household graph, where we use mobile devices, and now CTV and OTT devices, cross-referenced to help identify the customers and insights across the ecosystem of 55 million. Now, to give you some context, the U.S. consumer erosion, the erosion of cable households last year was around 10% of cable households.
There's about 121 million cable households left in the U.S., and so that erosion continues to happen. We, as a company, now have 55 million household reach across our ecosystem, and this is validated households with a lot of deep insights and data that is really driving the success and the renewal rates that you're seeing. That really sets us up, as we've mentioned before, for a great full year 2024. Expect record top-line revenue in 2024, improvements in adjusted EBITDA, as we've already started demonstrating, based off of a Q3, Q4, and Q1, material improvements in balance sheet, and finally, the launch of our streaming TV programmatic offerings, which is very much on track to start testing later this year.
We feel very positive about the year ahead and have already demonstrated our ability to increase our operating leverage along the way. All in all, it's gonna be an incredible 2024, and we're excited about what we see ahead. Thank you. On that note, I will hand it back to Aideen for questions.
Thanks, Aziz. Thanks, Sajid. We will now open the call up for a Q&A. Analysts have been given the speaker's permission, so please raise your virtual hand. Okay, first up, we have Kiran Sritharan from Eight Capital. Go ahead, Kiran.
Good morning, guys. Congratulations on the quarter. Now to start here, a lot of business is repeat comes from repeating customers, but you called out strength with new logos. Are there specific verticals or business lines where that's contributing to this strength? Just trying to understand where this new business is coming from in this environment.
Yeah, we're seeing, we're seeing a lot of great traction in the quick service restaurant category, as well as in retail, and so those two categories have been, strong, as well as some interest in, you know, additional opportunities in pharma. And all the while, we're starting to see the strength of automotive come back, and, automotive, as you can see, you know, the consumer has been healthy, has been buying cars, but the, the time on lots for cars is increasing, which means, car makers are now starting to bring incentives back. And so, you know, all of this bodes well for us, for, for the, for the year. But, you know, to answer your question, Kiran, for the most part, we're seeing a lot of great momentum in that QSR business, in addition to our existing automotive category.
That's helpful, Aziz, thanks. And then it looks like there was some upfront. There were some moving parts to the upfront commitments, that you reported last month. This is some of the backlog flush through. And, how would you say, the political spend has tracked in Q2 so far against expectations?
Sajid, you wanna take that? You're on mute, Sajid.
Sorry about that. Yeah, so I think that at the end of the year, we had reported, you know, over $27 million of upfront commitments for the year, including political, and, you know, a couple of million of that was recognized during the first quarter. So that we still have the vast majority, you know, $25 million, we're talking about, over $25 million between Q2 and Q4, so expecting a very strong year this year. Obviously, political and advocacy, that $15 million that we kind of disclosed last quarter, that remains intact, and in fact, that actually continues to grow day by day as new agencies come on board. A nd these are new names to Sabio as well.
So, you know, they present great opportunities for us, not only, you know, make some great traction this year, but also bodes well for future election cycles as well. So I think that we're expecting a great year this year. I, as we disclosed in our, in our MD&A and in our transcript, we're expecting, you know, very healthy double-digit growth, not only over last year's, but also over 2022's record sales performance.
If you can imagine, you know, the backdrop again.
Sorry.
If you can imagine the backdrop being, you know, the non-cookie-based platform in a world that's changing rapidly. So that really is benefiting us in this, election cycle as well.
Thanks, guys. Then for my final one here, can you comment on some of the working capital dynamics we saw last quarter? It looks like the seasonality with receivables benefited cash flow, and it was good to see the debt pay down as well there. How do we look at payables and other items into next quarter and beyond? I'll leave it there.
Yeah. Yeah, so I think, that that's a good point, Kiran. And even though we really took this as an opportunity to rightsize our balance sheet following a strong Q4, where we did, you know, over $2 million in adjusted EBITDA. And so you are right that our debt line with Avidbank was reduced during the quarter. We were able to maintain healthy cash balances while doing that, and we will expect, you know, the working capital differential between payables and receivables to narrow. And of course to come, as we enter really into our cash flow positive part of the year. You know, the hard part of the year is always Q1, and that part's over now. Like, that's in the rear-view mirror. So our best days for 2024 are all ahead of us.
As we kind of mentioned as well in the release, we've have signed a new term sheet with an alternative lender as well. So it's a important point to hit home on. Now, we were banking with Avidbank. We do very much like the team at Avidbank, and would expect to maintain some sort of banking relationship going forward. So it wasn't an easy choice, but, you know, quite frankly, the Avidbank is a California-based regional lender, and as we've seen following the collapse of Silicon Valley Bank, that the terms offered by regional lenders aren't as advantageous as they were three years ago. So, you know, putting that into the context, we actually received a couple of very, very competitive term sheets from a couple of other lenders.
And, you know, all the key terms were in line with what we currently have, if not, you know, more, if not better. And, you know, the lender that we signed a term sheet with actually had some additional accommodations that our current lender, Avidbank, does not have. So, you know, that coupled with a longer-term commitment, a multi-year commitment, made this offer compelling. So we're going through due diligence right now with them. That's where we conduct our audit. We expect to be presented with final loan documentation by the end of June. And, you know, and once we, w e basically are expecting to have this done before the end of Q2, and we expect to do a press release, based on the close, with some more details.
That's great, caller. Sajid, thanks so much. I'll pass along.
Thanks, Kiran. Up next, we have Daniel Rosenberg from Paradigm Capital. Daniel, go ahead.
Hi, Aziz and Sajid. My first question was around the leadership. I saw part of your release said there was a change there. I was wondering how you're thinking about sales strategically going forward. Do you have the bench strength that you need, or do you have alternative plans to, as you guys grow into the later part of the year to hiring? So how are you thinking about that?
Good morning, Daniel. Thank you for the question. We are a company in transition in the sense that, as we pointed out, we transitioned from mainly a mobile display company to a streaming, ad-supported streaming company, and now we're in the process of adding programmatic. And that kind of, you know, understanding and know-how is important. And quite honestly, we do have incredible bench strength, and it's important, as a company in transition, that we're always looking to add resources that head to take us to where we're going, not necessarily where we're at. And so, you know, that really is what this was about. I mean, having said that, as we have said and will reiterate, we're gonna have a great year.
This is gonna be a, you know, a great year of profitability and opportunity, and we just felt like this was a great time and an opportunistic time to get us set up for 2025. So we're not taking our eyes off the ball for 2024, but I will tell you that we are now setting ourselves up to really think beyond this year, and that's exactly what these moves are about. Sajid, anything you want to add to that?
Yeah, I think that, you know, that was well said, Aziz. I think that, you know, it should be no surprise to anyone here that we had some challenges in 2023, and we had to address those to position ourselves for long-term sustainability and growth. I think that we've shown we've got our cost model under control. We've demonstrated the last two or three quarters, operating leverage improvements and our ability to hold our cost base down. We've had to address our balance sheet in light of tough capital markets environment for micro caps. We've addressed that, including with the term sheet that we signed with the alternative lender. A lot of these issues are now in our rear-view mirror, right? We continue to be a CTV OTT leader, and we're seeing strong growth and improvements in our business model.
We've increased our upfront, our political and advocacy business. So yeah, we made some tough decisions. They weren't easy, but because of these tough decisions, our future really has never been brighter.
Okay, I appreciate that color. And then, assuming you close the new lending agreement in the next month or so, or what have you, I'm curious, as you start generating cash, where you will put it? And, you know, as you stand today, you know, is this sufficient to comfortably get you where you need to go?
Yeah, yeah. Yeah, I think we have more than enough cash resources to get to where we wanna go. I think that, you know, we are focused on repairing our balance sheet, and we've made a number of great strides already towards that. I think then, you know, what we plan to do with using our proceeds for this year is that, I mean, we are still a growth company. We're still gonna be investing in some of our growth pillars, including programmatic. But at the same time, we wanna get our own house in order, and that includes keeping a low debt load, right? We have a couple of debt instruments. We have a convertible debt instrument that's coming due for maturity next year.
So that's a great opportunity there to retire some debt off our balance sheet, you know, come next August when that matures. And obviously, we plan to maintain a debt balance, you know, around comparable levels, around our credit facility.
To reiterate what we said on our slide, we are interested in balance sheet improvement. That is really what we are fundamentally focused on. But as Sajid pointed out, we are still a growth company that has a lot of opportunity. So we're gonna balance those two worlds out, but nothing is more important than balance sheet improvement, and that really is our key focus while we invest in areas to grow, which is the three areas we see a big opportunity in. We're seeing a lot of great traction that is behind our AppScience, especially in a cookie-less world. That is. You know, we're leading the charge there. We're in a unique position, and we're gonna take advantage of that. Programmatic is a great opportunity, and we see, you know, a lot of gains to have there. We see an opportunity in our advocacy business.
Sure, political happens every two years, but advocacy happens every year. And so, you know, we really see those three as really great growth opportunities for 2025. And so we're gonna really focus in on balance sheet improvement, Daniel, as we've mentioned all along since the end of last year, but we're also gonna be focusing on getting ready for 2025.
Thanks for that. Lastly, for me, I was wondering if you could just elaborate a bit on the dynamic between mobile and CTV. So I'm just wondering if customers are just rolling off mobile spend, or is there an active push to shift that spend to CTV? Could you help me just understand the dynamics there, legacy versus, you know, new logos signed on?
Sure. So what we're finding is, there's a little bit of both. So we have our existing customers who have been using it, you know, were using us on mobile. And so, you know, as we move deeper into CTV, and our expertise really was demonstrated by our unique, you know, once again, R.E.V., Reach, Engage, Validate, platform we have put together over the last three years. They've recognized that there's, you know, where we have a competitive advantage is in, in the streaming, ad-supported streaming space. So they have used us in mobile. They're using us progressively more in streaming and TV. Outside of that, we're getting new logos that have never used us on mobile or streaming TV, and so that is the growth opportunity we're seeing. So there is, you know, there is, two parallel paths here.
There's one where certainly we have taken some of our advertisers and moved them into streaming TV. You know, most recently example of that is Starbucks, who only used us on mobile, and now they're using us on streaming TV as well. And so, you know, but at the same time, we're getting new logos that are coming in that are really going to help us, you know, go after new markets and new opportunities. And not only. By the way, we should mention, it's not only happening here in the U.S., but now we're starting to see traction internationally as well, specifically out of our U.K. market, where we're getting new logos that we've never had before, specifically in streaming TV.
And then, just one kind of quick follow-up just on that. In contrasting them, I mean, it sounds like the targeting is more interesting or more differentiated on the CTV side. But I'm trying to, c ould you help me better understand the kinda top of funnel versus bottom of funnel data that's coming out of both sides of the equation, or are they the one and the kinda one and the same between mobile and CTV?
Yeah, and the way to think about mobile is it's mobile display. When we talk about mobile, we're talking specifically about mobile display. So, you know, those display one-dimensional units are being increasingly commoditized in the marketplace. And when you think about mobile this day and age, what's happening is you're thinking about social. Social and mobile are synonymous now, and so what's happening in that category is it's being commoditized. There's a lot of inventory there, and you know, the differentiation factor, especially as it relates to new privacy laws, is going away. It's very contextually driven. On the streaming side of the business, it's still benefiting from the growth of or the deprecation of linear TV and cable TV. And so, you know, on that side of the business, the targeting is different.
Mobile, you have, you know, a lot of geotargeted campaigns. You have, you know, all kinds of different parameters. On streaming TV, you have the focus in on key demos. You have this understanding of, you know, data-driven TV is becoming a really important aspect of that, which is something TV has not had, ever. Linear, cable, they've not had this ability to bring data to the ecosystem, and that is really what puts us in a differentiated position there. So display certainly has had all kinds of different targeting, and insights, and capability, but that has not existed in in TV world, and that's what puts us in a unique position there. Does that answer your question on the two worlds?
Yeah. I really appreciate that context. I'll leave it there. Thank you, guys.
Thank you, Daniel.
Thanks, Daniel. Looks like that's it for the questions today, so I will hand it back to Aziz for closing remarks.
Great. Well, thank you. Thank you for the opportunity once again to, you know, join us on the call this morning. As we mentioned before, we are very focused in on balance sheet improvement, while we're gonna set ourselves up for a very strong year. And so, you know, we have proven, what we're interested in doing, which is increase our operating leverage. That will continue, to stay where it's at, in addition to the growth we're gonna see on the top line. And so the combination of both of those is gonna provide us an opportunity to really focus in on balance sheet improvement this year. And we're excited about, once again, the political and upfront years we've had, and we're already getting our, our sights set on 2025, working on our upfront commitments and, the opportunities we see ahead.
So a lot of great momentum ahead. So thank you. Looking forward to being on this call again in a quarter from now.