TORONTO--(BUSINESS WIRE)--VerticalScope Holdings Inc. (“VerticalScope” or the “Company”) (TSX: FORA), a technology company that has built and operates a cloud-based digital platform for online enthusiast communities, today announced financial results for the first quarter (“Q1”) ended March 31, 2022.
“We had a very strong start to 2022 with both revenue and monthly active users (MAU) setting new records,” commented Rob Laidlaw, Founder and CEO of VerticalScope. “As previously announced, our platform served over 113 million MAU in Q1, up 12.6% compared to prior year. Our revenue exceeded $20 million in the quarter, growing 26% compared to prior year. Advertising revenue continued to be strong, growing 49% compared to last year with gains in both direct sales and programmatic advertising driven by our community sites on the Fora platform. E-commerce revenue, although down 3% in the quarter, experienced improving trends as we lapped pandemic-related gains in 2021. These trends continued to improve as the quarter progressed with March e-commerce revenue up 38% compared to prior year. We are very well positioned to grow e-commerce revenue in the coming quarters.”
Financial Highlights for the Three Months Ended March 31, 2022. All comparatives, unless otherwise noted are versus the same period in the prior year:
- Revenue was $20,048K, an increase of $4,130K, or 26%.
- Adjusted EBITDA for the three months ended March 31, 2022 was $7,282K a decrease of $391K, or 5%, compared to $7,673K for the three months ended March 31, 2021. Excluding the following noted variances for the three months ended March 31, 2022 when compared to the same period in 2021, Adjusted EBITDA would have increased by $3,676K, or 82%: (i) $478K in incremental public company costs; (ii) a $3,206K decline in fitness e-commerce revenue driven by a prior year surge in the category as a result of COVID-19; (iii) $383K in negative contributions from the Threadloom acquisition completed during three months ended December 31, 2021.
- Adjusted EBITDA Margin was 36%, a decrease of 12 percentage points compared to the three months ended March 31, 2021. Excluding the noted variances above, Adjusted EBITDA Margin would have been 41%, an additional increase of 5 percentage points compared to the same period last year.
- Net loss was $11,871K, compared to net income of $848K for the three months ended March 31, 2021. The decrease in net income year over year is as a result of the variances noted above as well as: (i) $11,798K in incremental costs associated with acquisitions including amortization, contingent considerations and one-time business acquisition and related costs; (ii) $2,387K in incremental share based compensation tied to the omnibus incentive plan; (iii) $623K in severance in the period tied to acquisition integration and cost reductions related to subscription product automation.
- Free Cash Flow was $5,556K, a decrease of $930K, or 14% compared to the three months ended March 31, 2021. Excluding the noted variances above with respect to public company costs, fitness e-commerce revenue and Threadloom, Free Cash Flow would have been $6,417K, an increase of $3,136K or 96% compared to the three months ended March 31, 2021.
Notable Events
- On January 14, 2022, the Company filed a final short form base shelf prospectus with the securities regulatory authorities in each of the provinces and territories of Canada. The base shelf prospectus will allow the Company to qualify the distribution of up to $500 million Canadian dollars of securities during the 25-month period that this prospectus remains in effect. The Company's ability to pursue funding through the base shelf prospectus is intended to provide financing flexibility to execute on its M&A pipeline and strategy.
- As at March 31, 2022 there were 1,270 communities running on the Fora platform which represent 84% of designated forum community MAU. Fluctuations to this percentage are expected as acquired communities are onboarded and prepared for migration to the Fora platform.
- On March 31, 2022 the Company announced Paul Lee as its new Chief Product Officer. Mr. Lee was the Co-Founder and CEO of Threadloom Inc. which was acquired by the Company during the three months ended December 31, 2021. Prior to Threadloom Mr. Lee was a Senior Product Manager at Google.
- For the three months ended March 31, 2022, the Company signed a total of 8 acquisitions, all asset deals, 7 of which were closed in the period for a total consideration of $995K. Since its IPO in June 2021 the Company has completed 29 acquisitions and deployed $84 million of capital excluding contingent considerations. These acquisitions are performing as expected and there is no change in the annualized estimate shared in the November 9, 2021 press release titled "VerticalScope Announces Three Additional Acquisitions".
Laidlaw added, “We are very pleased with the performance of our business in the quarter. We are seeing continued positive momentum in Advertising, and while we see softness in e-commerce shopping compared to the prior year, we anticipate returning to year-over-year revenue growth in the e-commerce segment in Q2. MAU trends in Q2 are expected to be similar to the results we saw in Q1, with strong overall MAU growth driven by acquired properties, and a small organic decline (-4.6% in Q1) as we compete for user-attention with the war in Ukraine, and fewer users shopping online for products due to increased in-store shopping, widespread supply chain challenges, and demand that was brought forward or inflated by the pandemic in categories such as Fitness.”
Chris Goodridge, President and COO, commented that, “We completed a number of deals in the quarter for communities that will really benefit from the experience we can provide to members on the Fora platform. Although the pace of capital deployment slowed in the quarter compared to a very busy end to 2021, our M&A pipeline is very deep and we expect the pace of acquisitions to increase throughout the year.”
Earnings Announcement
Management will host a conference call and webcast to discuss the Company's financial results at 7:30 am ET on Wednesday, May 11, 2022.
Live Call Registration and Webcast:
https://events.q4inc.com/attendee/876704005
Joining by telephone:
Canada: 1 833 950 0062
United States: 1 844 200 6205
All other locations: +1 929 526 1599
Participant Access code: 329509
If you are unable to join live, an archived recording of the webcast will be available on the investor relations section of the VerticalScope website.
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 100 million monthly active users. VerticalScope is listed on the Toronto Stock Exchange (TSX: FORA).
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 and financially-accretive M&A, deployment of capital, performance of the Company’s acquisitions and the growth of revenue and MAU, 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 factors discussed under "Risk Factors" in the Company’s Annual Information Form dated March 31, 2022, which is available on the Company’s profile on SEDAR at www.sedar.com. 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, as described below. This press release also makes reference to Average Revenue Per User (“ARPU”) and MAU, which are operating metrics 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:
“Adjusted EBITDA” is calculated as net income (loss) excluding interest, income tax expense (recovery), and depreciation and amortization, or EBITDA, adjusted for share-based compensation, share performance related bonuses, unrealized gains or losses from changes in fair value of derivative financial instruments, severance, 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 and costs directly incurred in connection with the Offering that are not deducted from the equity proceeds.
“Free Cash Flow” means Adjusted EBITDA less capital expenditures and income taxes paid during the period.
VERTICALSCOPE HOLDINGS INC. |
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Condensed Consolidated Interim Statement of Financial Position |
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(In U.S. dollars) |
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(Unaudited) |
||||
|
March 31, |
December 31, |
||
|
2022 |
|
2021 |
|
|
|
|
||
Assets |
|
|
||
|
|
|
||
Current assets: |
|
|
||
Cash and cash equivalents |
$22,363,135 |
|
$20,494,313 |
|
Restricted cash |
176,748 |
|
179,743 |
|
Trade and other receivables |
12,699,497 |
|
15,221,610 |
|
Lease receivable |
606,889 |
|
588,101 |
|
Income taxes receivable |
— |
|
317,040 |
|
Prepaid expenses |
1,038,353 |
|
1,103,283 |
|
Derivative instruments |
50,530 |
|
18,325 |
|
|
36,935,152 |
|
37,922,415 |
|
|
|
|
||
Property and equipment |
1,019,511 |
|
986,683 |
|
Right-of-use asset |
2,408,491 |
|
2,629,130 |
|
Intangible assets |
91,880,841 |
|
98,805,989 |
|
Investments |
1,000,000 |
|
1,000,000 |
|
Goodwill |
53,436,546 |
|
53,436,546 |
|
Deferred tax asset |
21,920,715 |
|
20,662,839 |
|
Lease receivable |
1,473,839 |
|
1,586,014 |
|
|
|
|
||
Total assets |
$210,075,095 |
|
$217,029,616 |
|
|
|
|
||
Liabilities and Shareholders' Equity (Deficiency) |
||||
|
|
|
||
Current liabilities: |
|
|
||
Accounts payable and accrued liabilities |
$7,845,840 |
|
$9,948,758 |
|
Income taxes payable |
1,355,423 |
|
1,075,699 |
|
Deferred revenue |
855,042 |
|
1,028,515 |
|
Current portion of long-term debt |
3,254,615 |
|
3,150,663 |
|
Lease liability |
1,249,858 |
|
1,200,836 |
|
Contingent considerations |
12,606,357 |
|
7,916,259 |
|
|
27,167,135 |
|
24,320,730 |
|
|
|
|
||
Deferred revenue |
10,057 |
|
13,917 |
|
Long-term debt |
75,215,909 |
|
75,972,078 |
|
Lease liability |
3,514,048 |
|
3,734,829 |
|
Deferred tax liability |
10,694,934 |
|
11,281,781 |
|
Contingent considerations |
6,400,888 |
|
5,463,741 |
|
Total liabilities |
123,002,971 |
|
120,787,076 |
|
|
|
|
||
Shareholders' equity (deficiency): |
|
|
||
Share capital |
160,649,416 |
|
160,182,417 |
|
Contributed surplus |
17,831,470 |
|
15,568,994 |
|
Accumulated other comprehensive income |
(25,961 |
) |
3,327 |
|
Deficit |
(91,382,801 |
) |
(79,512,198 |
) |
|
87,072,124 |
|
96,242,540 |
|
Total liabilities and shareholders' deficiency |
$210,075,095 |
|
$217,029,616 |
|
VERTICALSCOPE HOLDINGS INC. |
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Condensed Consolidated Interim Statement of Income and Comprehensive Income |
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(In U.S. dollars, except per share amounts) |
|||
(Unaudited) |
|||
|
Three months ended March 31 |
||
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
Revenue |
$20,048,393 |
|
$15,918,392 |
|
|
|
|
Operating expenses: |
|
|
|
Wages and consulting |
9,772,878 |
|
6,019,861 |
Share-based compensation |
2,852,916 |
|
465,619 |
Platform and technology |
2,168,511 |
|
1,642,800 |
General and administrative |
2,308,055 |
|
744,154 |
Depreciation and amortization |
9,761,686 |
|
4,582,933 |
Adjustment to contingent considerations |
5,627,245 |
|
— |
|
32,491,291 |
|
13,455,367 |
|
|
|
|
Operating income (loss) |
(12,442,898 |
) |
2,463,025 |
|
|
|
|
Other expenses: |
|
|
|
Loss (gain) on sale of assets |
11,257 |
|
169 |
Interest expense |
578,905 |
|
1,093,506 |
Foreign exchange loss (gain) |
30,808 |
|
55,866 |
|
620,970 |
|
1,149,541 |
|
|
|
|
Loss before income taxes |
(13,063,868 |
) |
1,313,484 |
|
|
|
|
Income taxes (recovery) |
|
|
|
Current |
651,458 |
|
10,903 |
Deferred |
(1,844,723 |
) |
454,532 |
|
(1,193,265 |
) |
465,435 |
|
|
|
|
Net income (loss) |
($11,870,603 |
) |
$848,049 |
|
|
|
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
Items that may be reclassified to net income (loss): |
|
|
|
Foreign currency differences on translation of foreign operations |
(29,288 |
) |
6,193 |
|
|
|
|
Total comprehensive income (loss) |
($11,899,891 |
) |
$854,242 |
|
|
|
|
Income (loss) per share: |
|
|
|
Basic |
($0.56 |
) |
$0.06 |
Diluted |
(0.56 |
) |
0.06 |
VERTICALSCOPE HOLDINGS INC. |
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Condensed Consolidated Interim Statement of Cash Flows |
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(In U.S. dollars) |
||||
(Unaudited) |
||||
|
Three months ended March 31 |
|||
|
2022 |
|
2021 |
|
|
|
|
||
Cash provided by (used in): |
|
|
||
|
|
|
||
Operating activities: |
|
|
||
Income (loss) for the year |
($11,870,603 |
) |
$848,049 |
|
Items not involving cash: |
|
|
||
Depreciation and amortization |
9,761,686 |
|
4,582,933 |
|
Interest expense |
578,905 |
|
1,093,506 |
|
Loss (gain) on sale of assets |
11,257 |
|
169 |
|
Unrealized loss (gain) in derivative instruments |
(32,205 |
) |
53,678 |
|
Income tax expense (recovery) |
(1,193,265 |
) |
465,435 |
|
Adjustment to contingent considerations |
5,627,245 |
|
— |
|
Share-based compensation |
2,852,916 |
|
465,619 |
|
|
5,735,936 |
|
7,509,389 |
|
Change in non-cash operating assets and liabilities |
134,510 |
|
3,526,983 |
|
Interest paid |
(525,373 |
) |
(74,375 |
) |
Income taxes paid |
(54,694 |
) |
48,737 |
|
|
5,290,379 |
|
11,010,734 |
|
|
|
|
||
Financing activities: |
|
|
||
Repayment of initial term loan |
(625,000 |
) |
(2,062,500 |
) |
Repayment of delayed draw term loan |
— |
|
(6,642,643 |
) |
Lease payments |
(162,059 |
) |
(217,757 |
) |
|
(787,059 |
) |
(8,922,900 |
) |
|
|
|
||
Investing activities: |
|
|
||
Additions to property and equipment, right-of-use and intangible assets |
(2,667,099 |
) |
(1,236,271 |
) |
Proceeds from sale of assets |
7,115 |
|
2,763 |
|
|
(2,659,984 |
) |
(1,233,508 |
) |
|
|
|
||
Increase (decrease) in cash |
1,843,336 |
|
854,326 |
|
|
|
|
||
Cash, beginning of the period |
20,494,313 |
|
4,603,609 |
|
|
|
|
||
Change in restricted cash balances |
2,995 |
|
— |
|
Effect of movement of exchange rates on cash held |
22,491 |
|
8,276 |
|
|
|
|
||
Cash, end of period |
$22,363,135 |
|
$5,466,211 |
|
