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.
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KIDZ Price and Volume (1-year)
Financials
Q4-2024 revenue was up 23% YoY, beating our forecast by 22%; note that 2024-9M revenue was down 10% YoY
Gross margins increased 23 pp YoY to 56%, driven by higher direct vs reseller sales, and streamlined campaign execution, beating our estimate by 10 pp
G&A and other expenses as a percentage of revenue were relatively flat
Driven by higher revenue and gross margins, EPS rose 489% YoY to $0.015, exceeding our forecast of $0.008
Cash from operations and free cash flows were also up significantly. Healthy balance sheet, with no debt
Sector Outlook
Global digital ad spending in 2024 grew by approximately 13%, compared to 12% in 2023. In 2025, global digital advertising spending is expected to continue growing, though at a moderated pace (9-11% per consensus forecasts) compared to the previous year, primarily due to economic uncertainties, and increased data privacy regulations. We anticipate AI-driven personalization and programmatic advertising to be the primary drivers of growth in this sector. Additionally, we believe that mobile advertising, along with video and social media platforms, will remain the preferred ad channels.
It is estimated that global digital ad spending will grow at a CAGR of 9.5% from 2025 to 20234 (Source: Precedence Research)
During this period, North America is expected to lead with the highest market share of 37.15%
FRC Projections and Valuation
Historically, we estimate that KIDZ's revenue growth outpaced global digital ad spending growth by 1.2x on average
As 2024 revenue was significantly higher than expected, we are raising our 2025 revenue and EPS forecasts
As a result, our DCF valuation increased from C$0.75 to C$0.79/share
KIDZ remains one of the most undervalued stocks on our list of comparables, with a forward EV/R of 1.3x (previously 0.9x), significantly lower than the sector average of 2.9x (previously 3.0x)
As a result of our higher 2025 revenue forecast, our comparables valuation increased from C$0.41 to C$0.50/share
We are reiterating our BUY rating, and raising our fair value estimate from C$0.58 to C$0.64/share (the average of our DCF and comparables valuations). KIDZ's Q4 performance dramatically exceeded expectations, highlighted by record revenue, and significant margin expansion, signaling strong momentum and a clear advantage in the evolving kid-friendly advertising landscape.
Risks
Maintaining our risk rating of 4 (Speculative)
We believe the company is exposed to the following key risks:
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