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VerticalScope Achieves Record MAUs, Continued Double-Digit Growth and Strong Cash Generation for Second Quarter of 2024

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Revenue increased 14% to $16.7 million

Adjusted EBITDA increased 29% to $7.1 million

Free Cash Flow increased 58% to $6.6 million

122 Million Monthly Active Users in Q2, up 23% from prior year

Unless otherwise stated, all amounts are in US dollars.

TORONTO–(BUSINESS WIRE)–$FORA #VerticalScope–VerticalScope Holdings Inc. (“VerticalScope” or the “Company”) (TSX: FORA; OTCQX: VFORF), a technology company that has built and operates a cloud-based digital platform for online enthusiast communities, today announced financial results for the second quarter ended June 30, 2024 (“Q2” or “the quarter”).


“We are happy to report that VerticalScope continues to deliver improving financial and operating results,” said Rob Laidlaw, Founder, Chair and CEO of VerticalScope. “Our results were driven by a 23% increase in Q2 monthly active users (MAU) to a record 122 million, including 42% growth on our forum communities, reaching a total of 83 million. Increasingly, users are seeking out the authentic perspectives being shared in our Fora communities to discuss their hobbies and inform their purchase decisions.”

Mr. Laidlaw continued, “Revenue in the quarter was $16.7 million, driven by a 20% increase in digital advertising revenue, with particular strength in programmatic ads. Demonstrating the operating leverage of our model, our Adjusted EBITDA increased 29% to $7.1 million and we generated $6.6 million in Free Cash Flow, enabling us to further reduce our debt, and providing incremental capital for future deployment.”

Financial Highlights for the Three Months Ended June 30, 2024

  • Revenue increased by 14% to $16.7 million, driven by a 20% increase in Digital Advertising revenue. The growth in Digital Advertising is attributed to incremental contributions from video, a 23% increase in MAU, and strong performance from our programmatic channel compared to prior year.
  • Adjusted EBITDA increased by 29% to $7.1 million and Adjusted EBITDA margins expanded to 42%, compared to 37% margins in the prior year period.
  • Free Cash Flow generated was $6.6 million, an increase of 58% year over year, and reflected strong conversion of 93%, up from conversion of 76% in the prior year.
  • Cash flow from operations of $6.2 million allowed us to further strengthen our balance sheet through strategic debt reduction. In Q2, the Company made a total of $6.5 million in principal payments towards our credit facility, of which $5.9 million was voluntary. Net leverage as defined by our credit facility improved to 1.5x compared to 1.8x at the beginning of the quarter.
  • Net Income of $0.4 million and Earnings Per Share of $0.02 in Q2 were $2.4 million and $0.12 better than prior year, respectively.

“The improving financial profile of VerticalScope supports our ongoing capital deployment strategy,” stated Vince Bellissimo, CFO of VerticalScope. “Our near-term focus is on reducing debt, executing share buybacks through our Normal Course Issuer Bid, and pursuing high-quality, accretive M&A opportunities. 2024 to date we have purchased 122,300 shares for cancellation at an average cost of C$7.42 per share, while reducing debt by $13.1 million.”

Earnings Conference Call and Webcast

Management will host a conference call and webcast to discuss the Company’s financial results at 8 a.m. ET on Thursday, August 8, 2024.

Live Call Registration and Webcast:

https://events.q4inc.com/attendee/425995407

Joining by Telephone:

Canada: 1 833 950 0062

United States: 1 833 470 1428

Participant Access code: 991440

If you are unable to join live, an archived recording of the webcast will be available at: https://investors.verticalscope.com/.

About VerticalScope

Founded in 1999 and headquartered in Toronto, Ontario, VerticalScope is a technology company that has built and operates a cloud-based digital platform for online enthusiast communities in high consumer spending categories. VerticalScope’s mission is to enable people with common interests to connect, explore their passions, and share knowledge about the things they love. Through targeted acquisitions and development, VerticalScope has built a portfolio of over 1,200 online communities and over 120 million monthly active users.

Forward-Looking Statements

This news release contains forward-looking information within the meaning of applicable securities legislation that reflects the Company’s current expectations regarding future events. When used in this news release, words such as “should”, “could”, “intended”, “expect”, “plan” or “believe” and similar expressions indicate forward-looking statements. Forward-looking information, including the Company’s plans for organic growth, deployment of capital, investments in our platform, the growth of revenue and MAU, information regarding our financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, plans and objectives, is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company’s control. Although the Company believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurances can be given that actual results will be consistent with these forward-looking statements. Such risks and uncertainties include, but are not limited to, the implementation and effectiveness of the Company’s capital allocation strategy, the availability of high-quality M&A opportunities, and the factors discussed under “Risk Factors” in the Company’s Annual Information Form dated April 1, 2024, which is available on the Company’s profile on SEDAR Plus at https://sedarplus.ca. Actual results could differ materially from those projected herein. VerticalScope does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required under applicable securities laws.

Non-IFRS Measures

This press release references certain non-IFRS measures, including Adjusted EBITDA and Free Cash Flow, and Free Cash Flow Conversion as described below. This press release also makes reference to MAU, which is an operating metric used in our industry. These non-IFRS measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS.

The Company uses non-IFRS measures including:

“EBITDA” is calculated as net income (loss) excluding interest, income tax expense (recovery), and depreciation and amortization.

“Adjusted EBITDA” is calculated as EBITDA adjusted for share-based compensation, share performance related bonuses, unrealized gains or losses from changes in fair value of derivative financial instruments, severance, adjustments to contingent consideration liabilities measured at fair value through profit and loss, gain or loss on sale of assets, gain or loss on sale of investments, foreign exchange loss (gain), impairment and other charges that include direct and incremental business acquisition related costs.

“Adjusted EBITDA Margin” measures Adjusted EBITDA as a percentage of revenue.

“Free Cash Flow” means Adjusted EBITDA less capital expenditures and income taxes paid during the period.

“Free Cash Flow Conversion” is equal to Free Cash Flow for the period divided by Adjusted EBITDA for the period.

“Monthly Active Users” (“MAU”) is defined as the number of individuals who have visited our communities within a calendar month, based on data as measured by Google Analytics. To calculate average MAU in a given period, we sum the total MAU for each month in that period, divided by the number of months in that period.

The following table sets forth a reconciliation of Adjusted EBITDA and Free Cash Flow to net income (loss):

(Unaudited)

Three Months Ended

June 30,

Six Months Ended

June 30,

(in thousands of US dollars)

2024

2023

2024

2023

Net income (loss)

$423

($2,012)

($561)

($6,509)

Net interest expense

1,075

1,465

2,238

2,581

Income tax expense (recovery)

556

(661)

431

(2,395)

Depreciation and amortization

4,501

5,280

9,066

11,787

EBITDA

6,555

4,072

11,173

5,464

Share-based compensation

368

1,313

789

2,382

Share performance related bonuses ⁽¹⁾

(3)

Unrealized loss from changes in derivative fair value of financial instruments

19

8

75

8

Severance ⁽²⁾

34

1,440

Gain on sale of assets

(1)

(10)

(5)

(11)

Gain on sale of investments

(2)

(16)

(2)

Foreign exchange loss (gain)

(57)

28

(24)

Adjustment to contingent considerations

(1,051)

Other charges ⁽3

135

123

262

211

Adjusted EBITDA

7,076

5,481

12,302

8,417

Less capital expenditures

(399)

(571)

(834)

(1,117)

Income taxes received (paid)

(120)

(762)

258

(806)

Free Cash Flow

$6,557

$4,147

$11,726

$6,494

(1)

Share performance related bonus is included in wages and consulting on the condensed consolidated interim statements of income (loss) and comprehensive income (loss).

(2)

Severance is included in wages and consulting on the condensed consolidated interim statements of income (loss) and comprehensive income (loss).

(3)

Other charges are included in general and administrative on the condensed consolidated interim statements of income (loss) and comprehensive income (loss). For the three and six months ended June 30, 2024 and June 30, 2023, these charges include non-recurring legal related costs.

VERTICALSCOPE HOLDINGS INC.

Condensed Consolidated Interim Statements of Financial Position

(In U.S. dollars)

(Unaudited)

 

 

June 30,

December 31,

 

2024

2023

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

Cash

$6,320,979

$6,015,184

Restricted cash

92,861

93,840

Trade and other receivables

12,010,839

14,175,352

Lease receivable

584,117

595,961

Income taxes receivable

379,271

797,465

Prepaid expenses

952,722

804,692

Derivative instruments

51,303

 

20,340,789

22,533,797

 

 

 

Property and equipment

609,226

754,293

Right-of-use asset

1,840,603

2,123,739

Intangible assets

44,896,866

52,480,458

Goodwill

52,635,164

52,635,164

Other assets

271,412

283,278

Deferred tax asset

19,677,827

21,786,506

Lease receivable

49,312

354,288

 

 

 

Total assets

$140,321,199

$152,951,523

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities:

 

 

Accounts payable and accrued liabilities

$5,382,810

$5,563,354

Income taxes payable

318,225

229,770

Derivative instruments

23,400

Deferred revenue

1,380,268

1,157,049

Current portion of long-term debt

2,972,117

3,614,396

Lease liability

1,216,786

1,227,160

 

11,293,606

11,791,729

 

 

 

Long-term debt

45,348,944

54,431,100

Lease liability

1,556,125

2,248,029

Deferred tax liability

1,679,935

3,609,683

Other long-term liabilities

185,924

185,399

Total liabilities

60,064,534

72,265,940

 

 

 

Shareholders’ equity:

 

 

Share capital

166,272,039

167,705,234

Contributed surplus

22,691,997

22,435,738

Accumulated other comprehensive loss

(132,648)

(145,494)

Deficit

(108,574,723)

(109,309,895)

 

80,256,665

80,685,583

Total liabilities and shareholders’ equity

$140,321,199

$152,951,523

VERTICALSCOPE HOLDINGS INC.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

(In U.S. dollars, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

June 30,

Six Months Ended

June 30,

 

 

2024

2023

2024

2023

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$16,687,516

$14,664,619

$31,410,960

$27,536,431

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Wages and consulting

 

6,822,678

6,686,010

13,762,711

15,028,835

Share-based compensation

 

367,575

1,313,193

788,816

2,381,549

Platform and technology

 

1,675,344

1,706,851

3,218,879

3,712,058

General and administrative

 

1,268,179

954,940

2,460,804

2,038,355

Depreciation and amortization

 

4,500,984

5,279,603

9,065,612

11,787,227

Adjustment to contingent considerations

 

(1,051,222)

 

 

14,634,760

15,940,597

29,296,822

33,896,802

 

 

 

 

 

 

Operating income (loss)

 

2,052,756

(1,275,978)

2,114,138

(6,360,371)

 

 

 

 

 

 

Other expenses (income):

 

 

 

 

 

Gain on sale of assets

 

(1,098)

(10,020)

(4,718)

(10,809)

Net interest expense

 

1,074,882

1,465,252

2,237,814

2,580,724

Gain on investments

 

(1,895)

(16,398)

(1,895)

Foreign exchange loss (gain)

 

261

(56,642)

27,641

(24,199)

 

 

1,074,045

1,396,695

2,244,339

2,543,821

 

 

 

 

 

 

Income (loss) before income taxes

 

978,711

(2,672,673)

(130,201)

(8,904,192)

 

 

 

 

 

 

Income tax expense (recovery)

 

 

 

 

 

Current

 

163,747

95,279

252,365

205,815

Deferred

 

391,866

(756,227)

178,929

(2,600,742)

 

 

555,613

(660,948)

431,294

(2,394,927)

 

 

 

 

 

 

Net income (loss)

 

$423,098

($2,011,725)

($561,495)

($6,509,265)

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified to net income (loss):

 

 

 

 

 

Foreign currency differences on translation of foreign operations

 

(13,399)

(19,471)

12,846

(41,808)

 

 

 

 

 

 

Total comprehensive income (loss)

 

$409,699

($2,031,196)

($548,649)

($6,551,073)

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

Basic

 

$0.02

($0.10)

($0.03)

($0.31)

Diluted

 

0.02

(0.10)

(0.03)

(0.31)

VERTICALSCOPE HOLDINGS INC.

Condensed Consolidated Interim Statements of Cash Flows

(In U.S. dollars)

(Unaudited)

 

 

 

Three Months Ended

June 30,

Six Months Ended

June 30,

 

 

2024

2023

2024

2023

 

 

 

 

 

 

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

Net income (loss)

 

$423,098

($2,011,725)

($561,495)

($6,509,265)

Items not involving cash:

 

 

 

 

 

Depreciation and amortization

 

4,500,984

5,279,603

9,065,612

11,787,227

Net interest expense

 

1,074,882

1,465,252

2,237,814

2,580,724

Gain on sale of assets

 

(1,098)

(10,020)

(4,718)

(10,809)

Gain on sale of investments

 

(16,398)

Unrealized loss in derivative instruments

 

19,035

7,565

74,703

8,267

Income tax expense (recovery)

 

555,613

(660,948)

431,294

(2,394,927)

Adjustment to contingent considerations

 

(1,051,222)

Share-based compensation

 

367,575

1,312,681

788,816

2,381,293

 

 

6,940,089

5,382,408

12,015,628

6,791,288

Change in non-cash operating assets and liabilities

 

414,915

(257,500)

1,858,879

3,440,968

Interest paid

 

(1,070,476)

(1,061,062)

(2,233,328)

(2,092,251)

Income taxes received (paid)

 

(119,557)

(762,444)

257,529

(806,379)

 

 

6,164,971

3,301,402

11,898,708

7,333,626

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Repayment of term loan

 

(625,000)

(625,000)

(1,250,000)

(1,250,000)

Proceeds from issuance of revolving loan

 

15,000,000

Repayment of revolving loan

 

(5,875,000)

(4,250,000)

(8,250,000)

(7,250,000)

Repurchase of share capital for cancellation

 

(435,859)

(669,085)

Lease payments

 

(340,661)

(360,264)

(701,643)

(744,084)

Proceeds from sublease

 

147,878

150,586

297,956

300,151

Proceeds from leasehold improvement allowance

 

106,426

 

 

(7,128,642)

(5,084,678)

(10,572,772)

6,162,493

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Additions to property and equipment and intangible assets

 

(599,185)

(571,379)

(1,033,796)

(1,116,828)

Proceeds from sale of assets

 

1,967

11,533

6,081

20,957

Proceeds from sale of investments

 

16,398

Payment of contingent considerations

 

(15,000,000)

 

 

(597,218)

(559,846)

(1,011,317)

(16,095,871)

 

 

 

 

 

 

Increase (decrease) in cash

 

(1,560,889)

(2,343,122)

314,619

(2,599,752)

 

 

 

 

 

 

Cash, beginning of the period

 

7,908,036

8,479,087

6,015,184

8,766,769

 

 

 

 

 

 

Change in restricted cash balances

 

(3,287)

1,928

979

27,026

Effect of movement of exchange rates on cash and restricted cash held

 

(22,881)

(11,783)

(9,803)

(67,933)

 

 

 

 

 

 

Cash, end of period

 

$6,320,979

$6,126,110

$6,320,979

$6,126,110

 

Contacts

For further information

Investor and media inquiries:

VerticalScope — Vincenzo Bellissimo

Chief Financial Officer

Tel: 416-341-7166, IR@verticalscope.com

FNK IR — Matt Chesler, CFA

Tel: 646-809-2183, fora@fnkir.com

Related Links

http://www.verticalscope.com