• Per eMarketer, global digital ad spending will grow by 13.2% this year, up from 10.7% in 2023, and 9.1% in 2022. From 2021 to 2023, KIDZ's revenue growth outpaced global digital ad spending growth by 1.3x on average.
  • While we have revised our 2024 revenue growth forecast downward (16% to 13%), we now anticipate EPS turning positive this year, instead of next year.
  • KIDZ maintains a healthy balance sheet, with no debt.
  • KIDZ’s forward EV/R is 1.6x vs the sector average of 3.3x, a 50% discount.

Key Financial Data (FYE - Dec 31)

 

 

 

(US$)

 

2023

2024E

2025E

Cash

 

     1,469,224

     2,096,387

     2,987,313

Working Capital

     3,220,646

     4,023,712

     5,108,130

Total Assets

 

   11,807,080

   12,611,600

   13,729,547

LT Debt to Capital

0.0%

0.0%

0.0%

Revenue

 

   13,326,824

   15,039,000

   17,250,000

Net Income

 

   (2,012,056)

        344,003

        611,378

EPS

 

-0.02

0.00

0.00

*See last page for important disclosures, rating, and risk definitions. All figures in US$ unless otherwise specified.

Financials

Q1 revenue was up 7% YoY, missing our forecast by 11%


However, gross margins increased 13 pp YoY to 53%, beating our estimate by 11 pp

G&A expenses were down 5% YoY, falling 8% below our estimate, primarily from slashing consultant fees


EBITDA and EPS remained negative

However, as a result of higher gross margins, and lower G&A expenses, EBITDA and EPS improved significantly, surpassing our estimates

Source: FRC/Company


Healthy balance sheet, with no debt

Source: FRC/Company

No outstanding options are in-the-money

Sector Outlook

Source: eMarketer

It is estimated that global digital ad spending will grow 13.2% this year, up from 10.7% in 2023, and 9.1% in 2022



Source: FRC/Various

From 2021 to 2023, KIDZ's revenue growth outpaced global digital ad spending growth by 1.3x on average

For conservatism, we anticipate KIDZ’s revenue will grow by 13% in 2024, and 15% in 2025, outpacing global digital ad spending growth forecasts by 1.2x

FRC Projections and Valuation


As Q1 gross margins were higher than expected, we are raising our 2024 and 2025 EPS forecasts


Source: FRC

We now expect EPS to turn positive this year instead of next year

As a result, our DCF valuation increased from C$0.94 to C$0.98/share

Digital AdTech Companies

Source: S&P Capital IQ/FRC

KIDZ’s forward EV/R of 1.6x (previously 1.2x) is significantly lower than the sector average of 3.3x (previously 3.0x)

Our comparables valuation decreased from C$0.54 to C$0.52/share, driven by our lower revenue estimate, partially offset by the higher average sector EV/R

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

Appendix