Q1 Revenue Jumps 53% Despite Market Headwinds

• Q1 revenue rose 53% YoY to $2.7M (Q4-2024: up 23% YoY), marking the highest Q1 revenue in the company’s history, and beating our estimate by 26%. Growth was fueled by strong demand, with advertisers launching multiple campaigns on the Kidoz platform during the quarter. In contrast, YouTube and Meta saw more modest YoY ad revenue growth of 10% and 14%, respectively, in Q1.
• Driven by higher revenue, improved gross margins, and lower G&A expenses, EPS improved from -$0.01 to -$0.0001. Free cash flow turned positive for the first time in four years. We are doubling our 2025 EPS forecast from $0.01 to $0.02. 

• Apple (NASDAQ: AAPL) and Meta are responding to stricter child privacy rules, including the FTC’s updated COPPA rule (a U.S. law that protects the personal data of children under 13), taking effect June 23, 2025. Several U.S. states, including California and Utah, are introducing their own legislation to further regulate how apps collect and use children's data. We believe these changes favor platforms like Kidoz that already comply with COPPA through contextual, non-personalized advertising.
• Global ad spending growth is expected to slow due to elevated uncertainties, including trade tensions, geopolitical risks, and the threat of a global GDP slowdown from Trump’s proposed tariffs. However, we believe these measures may be softened or reversed as trade deals progress and to avoid harming U.S. consumers and businesses. Major digital ad companies saw average YoY revenue growth of 14% in 2024, with consensus forecasts predicting 11% revenue growth (previously 10%) in 2025.
• KIDZ’s forward EV/R is 1.4x vs the sector average of 2.7x, a 48% discount. We anticipate record revenue and EPS in 2025.    

KIDZ Price and Volume (1-year)

Financials

Q1 revenue was up 53% YoY, beating our estimate by 26%. Gross margins increased 1.4 pp YoY to 54.7%, driven by higher direct vs reseller sales, and streamlined campaign execution. G&A and other expenses declined 3% YoY, to 43% of revenue, driven by a shift to a virtual office in Vancouver, and lower consulting fees

Driven by higher revenue, improved gross margins, and lower G&A expenses, EPS improved from  -$0.01 to -$0.0001. Cash from operations and free cash flows turned positive. Healthy balance sheet, with no debt. Can raise up to C$1M from in-the-money options

FRC Projections and Valuation

Global digital ad spending grew by 10% in 2024, with 2025 growth forecasted at 8% amid economic uncertainties, and stronger data privacy regulations. We anticipate AI-driven personalization and programmatic advertising to be the primary drivers of growth in this sector

Historically, we estimate that KIDZ's revenue growth outpaced global digital ad spending growth by 1.6x on average. In light of the robust revenue growth in Q1-2025, we are raising our full-year revenue and EPS estimates. As a result, our DCF valuation increased from C$0.87 to C$0.91/share

KIDZ is trading at 1.4x forward EV/Revenue (previously 1.7x), well below the sector average of 2.7x (previously 2.4x). Using the average sector EV/Revenue, we arrived at a comparables valuation of C$0.54/share (previously C$0.43/share

We are reiterating our BUY rating, and raising our fair value estimate from C$0.65 to C$0.73/share (the average of our DCF and comparables valuations), reflecting higher revenue estimates. KIDZ’s record Q1 performance and return to positive free cash flow signal strong momentum heading into 2025. Its COPPA-compliant model is well-aligned with upcoming privacy regulations, reinforcing its long-term positioning. With the stock trading at a 48% discount to peers, we see significant undervaluation as revenue and EPS are poised to reach new highs this year.

Risks

We believe the company is exposed to the following key risks:

• Operates in a highly competitive space 
• Unfavorable changes in regulations
• Ability to attract publishers and brands will be key to long-term growth
• FOREX

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