Disclosure: Kidoz Inc. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
The analyst’s rating and fair value are one click away. Free FRC account, no credit card.
Already have an account?
KIDZ Price and Volume (1-year)
Q3 revenue was down 19% YoY (Q2: down 12% YoY), missing our forecast by 9%. However, gross margins increased 15 pp YoY to 53%, driven by higher direct vs reseller sales, and streamlined campaign execution, beating our estimate by 2 pp
G&A expenses were up 1% YoY, and in line with our estimate. As a result of higher gross margins, and lower G&A expenses, EBITDA and EPS improved, despite remaining negative
Healthy balance sheet, with no debt. No outstanding options are in-the-money
It is estimated that global digital ad spending will grow 12.2% this year, compared to 12.0% in 2023, and 9.3% in 2022
Historically, we estimate that KIDZ's revenue growth outpaced global digital ad spending growth by 1.3x on average
As Q3 revenue was lower than expected, we are lowering our revenue and EPS forecasts. We anticipate profitability next year, with management confident about achieving it this year
As a result, our DCF valuation decreased from C$0.83 to C$0.75/share.
KIDZ is the most undervalued stock on our list of comparables. KIDZ’s forward EV/R of 0.9x (unchanged) is significantly lower than the sector average of 3.0x (previously 3.3x)
Our comparables valuation decreased from C$0.46 to C$0.41/share, driven by our lower revenue estimate
We are maintaining our BUY rating, and adjusting our fair value estimate from C$0.65 to C$0.58/share (the average of our DCF and comparables valuations). While Q3 results were disappointing, prompting us to lower our fair value estimate, KIDZ's strong positioning in the kid-friendly advertising market, management's solid guidance for Q4, the potential benefits of COPPA 2.0, and the anticipated push for Prado lead us to expect multiple near-term catalysts for the stock.
We believe the company is exposed to the following key risks:
Appendix
