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 second quarter (“Q2”) ended June 30, 2022.
“I am incredibly proud of what our team accomplished this quarter and in our first full year as a public company,” commented Rob Laidlaw, Founder and CEO of VerticalScope. “We have delivered on our promises and we are seeing the results of our efforts reflected in our Q2 numbers. Revenue growth accelerated in the quarter and was up 51% compared to prior year and was the best quarter we’ve ever had at $21.8 million. The power of our business model is proving itself and it’s showing up in our bottom line. Even with the investments we are making in our platform, Adjusted EBITDA was up 51% to $9.3 million in the quarter. Our advertising customers continue to see the incredible value of our intent-based niche audiences and the real business results that our platform can achieve for them. Advertising revenue was up 43% with double-digit growth in both direct and programmatic. We are particularly pleased with the results of our e-commerce business in the quarter which achieved 68% growth. We are still in the early innings of unlocking the tremendous value that exists within our communities.”
Financial Highlights for the Three Months Ended June 30, 2022. All comparatives, unless otherwise noted are versus the same period in the prior year:
- Q2 revenue grew 51% year over year to a record breaking $21.8 million driven by aggressive growth contributions from both Digital Advertising and E-commerce channels. Quarterly revenue growth of 51% accelerated from the 26% year-over-year growth realized for the three months ended March 31, 2022.
- Digital Advertising revenue in Q2 grew by 43% to $14.2 million, an increase of $4.3 million compared to Q2 of last year driven by double digit growth contributions from both Programmatic and Direct advertisers.
- The growth in E-commerce revenue we started to experience in March 2022 accelerated in Q2, with the channel posting 68% year-over-year growth in the quarter and recognizing $7.6 million in revenue.
- Adjusted EBITDA grew to $9.3 million in Q2, up 54% year over year driven by top line revenue growth. Adjusted EBITDA margin was 43% in the quarter, an increase of 1 percentage point compared to prior year. Adjusted EBITDA for the twelve months ended June 30, 2022 grew to $31.9 million.
- Free Cash Flow generated in the quarter was $7.2 million, an increase of $2.5 million, or 51% year over year, and resulting in a strong Free Cash Flow Conversion of 78% .
- Net loss in the quarter was $7.0 million, compared to a net loss of $4.4 million in the prior year. The less favorable position is largely driven by incremental expenses associated with acquisitions, specifically amortization and the revaluation of contingent considerations totaling $8.8 million in the quarter
- For the three months ended June 30, 2022, we signed and closed a total of 4 acquisitions, all asset deals, for a total consideration of $2.8 million.
Laidlaw added, “MAU trends continued to improve throughout Q2, with overall growth of 15% to achieve 109 million MAU. On an organic basis, we saw a decline of 4.4% in line with our expectations. Despite the difficult macro environment that we face, we remain optimistic about our investments continuing to drive growth in both advertising and ecommerce in the 2nd half of this year. Our profitable financial model is a differentiator, and will position VerticalScope very well to navigate any economic headwinds that may arise.”
Chris Goodridge, President and COO, commented that, “Four acquisitions were completed in Q2 with $2.8 million in total cash consideration paid and covering niche interest categories in home, cooking and outdoors. In the current macro environment we will continue to be judicious in our capital deployment decisions but will act quickly when strategic fit and valuation align. Our pipeline and financial capacity remain very strong.”
Earnings Announcement
Management will host a conference call and webcast to discuss the Company's financial results at 8:00 am EST on Wednesday, August 10, 2022.
Live Call Registration and Webcast:
https://events.q4inc.com/attendee/853034064
Joining by telephone:
Canada: 1 833 950 0062
United States: 1 844 200 6205
All other locations: +1 929 526 1599
Participant Access code: 124042
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, investments in our platform, 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, and Free Cash Flow Conversion 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.
"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.
“Average Revenue Per Monthly Active User” (“ARPU”) is defined as our average revenue over a given period divided by the average MAU over the same period. Similarly, each of our revenue streams can be used as the numerator in this measure to determine the ARPU for each revenue stream. We believe that measuring ARPU is reflective of how we are monetizing the users across our communities.
The following table sets forth a reconciliation of Adjusted EBITDA and Free Cash Flow to net income (loss):
|
Three Months Ended
|
Six Months Ended
|
||||||
(in thousands of US dollars) |
2022 |
2021 |
2022 |
2021 |
||||
Net Income (loss) |
($7,001 |
) |
($4,357 |
) |
($18,872 |
) |
($3,509 |
) |
Interest expense |
658 |
|
3,416 |
|
1,237 |
|
4,510 |
|
Income tax expense (recovery) |
(380 |
) |
(1,315 |
) |
(1,573 |
) |
(849 |
) |
Depreciation and amortization |
10,055 |
|
4,517 |
|
19,816 |
|
9,100 |
|
EBITDA |
3,331 |
|
2,262 |
|
608 |
|
9,252 |
|
Share-based compensation |
2,816 |
|
566 |
|
5,669 |
|
1,032 |
|
Share performance related bonuses |
(690 |
) |
— |
|
(793 |
) |
— |
|
Unrealized loss (gain) from changes in derivative fair value of financial instruments |
76 |
|
17 |
|
44 |
|
71 |
|
Severance ⁽¹⁾ |
10 |
|
— |
|
634 |
|
105 |
|
Loss (gain) on sale of assets |
(4 |
) |
2 |
|
7 |
|
2 |
|
Foreign exchange loss |
29 |
|
57 |
|
60 |
|
113 |
|
Adjustment to contingent considerations |
3,239 |
|
— |
|
8,866 |
|
— |
|
Other Charges ⁽²⁾ |
508 |
|
3,142 |
|
1,503 |
|
3,145 |
|
Adjusted EBITDA |
9,316 |
|
6,045 |
|
16,598 |
|
13,719 |
|
Less capital expenditures |
(1,548 |
) |
(1,207 |
) |
(3,220 |
) |
(2,443 |
) |
Income taxes received (paid) |
(477 |
) |
(25 |
) |
(531 |
) |
23 |
|
Free Cash Flow |
$7,291 |
|
$4,813 |
|
$12,846 |
|
$11,299 |
|
(1) |
|
Severance is included in wages and consulting on the consolidated statements of loss and comprehensive loss. |
(2) |
|
Other charges are included in wages and consulting and general and administrative on the consolidated statements of loss and comprehensive loss. For the three months ended June 30, 2022, these charges include direct and incremental asset acquisition or business acquisition related costs. |
VERTICALSCOPE HOLDINGS INC.
|
||||
|
June 30, |
December 31, |
||
|
2022 |
2021 |
||
|
|
|
||
Assets |
|
|
||
|
|
|
||
Current assets: |
|
|
||
Cash and cash equivalents |
$10,454,719 |
|
$20,494,313 |
|
Restricted cash |
166,615 |
|
179,743 |
|
Trade and other receivables |
15,134,235 |
|
15,221,610 |
|
Lease receivable |
591,740 |
|
588,101 |
|
Income taxes receivable |
— |
|
317,040 |
|
Prepaid expenses |
1,900,728 |
|
1,103,283 |
|
Derivative instruments |
— |
|
18,325 |
|
|
28,248,037 |
|
37,922,415 |
|
|
|
|
||
Property and equipment |
1,207,049 |
|
986,683 |
|
Right-of-use asset |
2,173,636 |
|
2,629,130 |
|
Intangible assets |
86,211,304 |
|
98,805,989 |
|
Investments |
1,000,000 |
|
1,000,000 |
|
Goodwill |
52,950,295 |
|
53,436,546 |
|
Deferred tax asset |
22,820,264 |
|
20,662,839 |
|
Lease receivable |
1,279,216 |
|
1,586,014 |
|
|
|
|
||
Total assets |
$195,889,801 |
|
$217,029,616 |
|
|
|
|
||
Liabilities and Shareholders' Equity |
||||
|
|
|
||
Current liabilities: |
|
|
||
Accounts payable and accrued liabilities |
$7,750,581 |
|
$9,948,758 |
|
Income taxes payable |
1,990,264 |
|
1,075,699 |
|
Derivative instruments |
25,721 |
|
— |
|
Deferred revenue |
991,095 |
|
1,028,515 |
|
Current portion of long-term debt |
3,260,340 |
|
3,150,663 |
|
Lease liability |
1,197,196 |
|
1,200,836 |
|
Contingent considerations |
14,699,620 |
|
7,916,259 |
|
|
29,914,817 |
|
24,320,730 |
|
|
|
|
||
Deferred revenue |
7,450 |
|
13,917 |
|
Long-term debt |
61,722,921 |
|
75,972,078 |
|
Lease liability |
3,146,719 |
|
3,734,829 |
|
Deferred tax liability |
10,102,800 |
|
11,281,781 |
|
Contingent considerations |
7,546,463 |
|
5,463,741 |
|
Total liabilities |
112,441,170 |
|
120,787,076 |
|
|
|
|
||
Shareholders' equity: |
|
|
||
Share capital |
160,934,759 |
|
160,182,417 |
|
Contributed surplus |
20,899,469 |
|
15,568,994 |
|
Accumulated other comprehensive income |
(1,427 |
) |
3,327 |
|
Deficit |
(98,384,170 |
) |
(79,512,198 |
) |
|
83,448,631 |
|
96,242,540 |
|
Total liabilities and shareholders' equity |
$195,889,801 |
|
$217,029,616 |
|
VERTICALSCOPE HOLDINGS INC.
|
|||||||||
|
|
Three Months Ended
|
Six Months Ended
|
||||||
|
|
2022 |
2021 |
2022 |
2021 |
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
Revenue |
|
$21,768,721 |
|
$14,423,474 |
|
$41,817,114 |
|
$30,341,866 |
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
||||
Wages and consulting |
|
8,455,869 |
|
5,692,682 |
|
18,228,747 |
|
11,712,543 |
|
Share-based compensation |
|
2,815,783 |
|
566,222 |
|
5,668,699 |
|
1,031,841 |
|
Platform and technology |
|
2,199,450 |
|
1,728,838 |
|
4,367,961 |
|
3,371,638 |
|
General and administrative |
|
1,702,474 |
|
4,115,181 |
|
4,010,529 |
|
4,859,335 |
|
Depreciation and amortization |
|
10,054,727 |
|
4,516,971 |
|
19,816,413 |
|
9,099,904 |
|
Adjustment to contingent considerations |
|
3,238,838 |
|
— |
|
8,866,083 |
|
— |
|
|
|
28,467,141 |
|
16,619,894 |
|
60,958,432 |
|
30,075,261 |
|
|
|
|
|
|
|
||||
Operating income (loss) |
|
(6,698,420 |
) |
(2,196,420 |
) |
(19,141,318 |
) |
266,605 |
|
|
|
|
|
|
|
||||
Other expenses: |
|
|
|
|
|
||||
Loss (gain) on sale of assets |
|
(4,129 |
) |
1,687 |
|
7,128 |
|
1,856 |
|
Interest expense |
|
657,797 |
|
3,416,472 |
|
1,236,702 |
|
4,509,978 |
|
Foreign exchange loss (gain) |
|
29,412 |
|
57,158 |
|
60,220 |
|
113,024 |
|
|
|
683,080 |
|
3,475,317 |
|
1,304,050 |
|
4,624,858 |
|
|
|
|
|
|
|
||||
Loss before income taxes |
|
(7,381,500 |
) |
(5,671,737 |
) |
(20,445,368 |
) |
(4,358,253 |
) |
|
|
|
|
|
|
||||
Income taxes (recovery) |
|
|
|
|
|
||||
Current |
|
1,111,552 |
|
308,111 |
|
1,763,010 |
|
319,014 |
|
Deferred |
|
(1,491,683 |
) |
(1,622,711 |
) |
(3,336,406 |
) |
(1,168,179 |
) |
|
|
(380,131 |
) |
(1,314,600 |
) |
(1,573,396 |
) |
(849,165 |
) |
|
|
|
|
|
|
||||
Net income (loss) |
|
($7,001,369 |
) |
($4,357,137 |
) |
($18,871,972 |
) |
($3,509,088 |
) |
|
|
|
|
|
|
||||
Other comprehensive income (loss) |
|
|
|
|
|
||||
|
|
|
|
|
|
||||
Items that may be reclassified to net income (loss): |
|
|
|
|
|
||||
Foreign currency differences on translation of foreign operations |
|
24,534 |
|
(2,647 |
) |
(4,754 |
) |
3,546 |
|
|
|
|
|
|
|
||||
Total comprehensive income (loss) |
|
($6,976,835 |
) |
($4,359,784 |
) |
($18,876,726 |
) |
($3,505,542 |
) |
|
|
|
|
|
|
||||
Income (loss) per share: |
|
|
|
|
|
||||
Basic |
|
($0.33 |
) |
($0.24 |
) |
($0.89 |
) |
($0.18 |
) |
Diluted |
|
(0.33 |
) |
(0.24 |
) |
(0.89 |
) |
(0.18 |
) |
VERTICALSCOPE HOLDINGS INC.
|
|||||||||
|
|
Three Months Ended
|
Six Months Ended
|
||||||
|
|
2022 |
2021 |
2022 |
2021 |
||||
|
|
|
|
|
|
||||
Cash provided by (used in): |
|
|
|
|
|
||||
|
|
|
|
|
|
||||
Operating activities: |
|
|
|
|
|
||||
Income (loss) for the year |
|
($7,001,369 |
) |
($4,357,137 |
) |
($18,871,972 |
) |
($3,509,088 |
) |
Items not involving cash: |
|
|
|
|
|
||||
Depreciation and amortization |
|
10,054,727 |
|
4,516,971 |
|
19,816,413 |
|
9,099,904 |
|
Interest expense |
|
657,797 |
|
3,416,472 |
|
1,236,702 |
|
4,509,978 |
|
Loss (gain) on sale of assets |
|
(4,129 |
) |
1,687 |
|
7,128 |
|
1,856 |
|
Unrealized loss (gain) in derivative instruments |
|
76,251 |
|
16,998 |
|
44,046 |
|
70,676 |
|
Income tax expense (recovery) |
|
(380,131 |
) |
(1,314,600 |
) |
(1,573,396 |
) |
(849,165 |
) |
Adjustment to contingent considerations |
|
3,238,838 |
|
— |
|
8,866,083 |
|
— |
|
Share-based compensation |
|
2,815,783 |
|
566,222 |
|
5,668,699 |
|
1,031,841 |
|
|
|
9,457,767 |
|
2,846,613 |
|
15,193,703 |
|
10,356,002 |
|
Change in non-cash operating assets and liabilities |
|
(2,271,881 |
) |
3,051,700 |
|
(2,137,371 |
) |
6,578,683 |
|
Interest paid |
|
(989,569 |
) |
(1,679,953 |
) |
(1,514,942 |
) |
(1,754,328 |
) |
Income taxes paid |
|
(476,711 |
) |
(25,424 |
) |
(531,405 |
) |
23,313 |
|
|
|
5,719,606 |
|
4,192,936 |
|
11,009,985 |
|
15,203,670 |
|
|
|
|
|
|
|
||||
Financing activities: |
|
|
|
|
|
||||
Repayment of initial term loan |
|
(625,000 |
) |
(42,812,500 |
) |
(1,250,000 |
) |
(44,875,000 |
) |
Repayment of delayed draw term loan |
|
— |
|
(1,072,334 |
) |
— |
|
(7,714,977 |
) |
Repayment of revolving loan |
|
(12,500,000 |
) |
— |
|
(12,500,000 |
) |
— |
|
Proceeds from issuance of share capital |
|
— |
|
96,025,355 |
|
— |
|
96,025,355 |
|
Proceeds from exercise of share options |
|
186,477 |
|
156,250 |
|
186,477 |
|
156,250 |
|
Credit facility financing fees |
|
— |
|
(1,274,597 |
) |
— |
|
(1,274,597 |
) |
Lease payments |
|
(151,708 |
) |
(235,949 |
) |
(313,767 |
) |
(453,706 |
) |
|
|
(13,090,231 |
) |
50,786,225 |
|
(13,877,290 |
) |
41,863,325 |
|
|
|
|
|
|
|
||||
Investing activities: |
|
|
|
|
|
||||
Additions to property and equipment, right-of-use and intangible assets |
|
(4,376,125 |
) |
(4,705,897 |
) |
(7,043,224 |
) |
(5,942,168 |
) |
Proceeds from sale of assets |
|
19,619 |
|
5,433 |
|
26,734 |
|
8,196 |
|
Acquisitions |
|
(56,457 |
) |
— |
|
(56,457 |
) |
— |
|
|
|
(4,412,963 |
) |
(4,700,464 |
) |
(7,072,947 |
) |
(5,933,972 |
) |
|
|
|
|
|
|
||||
Increase (decrease) in cash |
|
(11,783,588 |
) |
50,278,697 |
|
(9,940,252 |
) |
51,133,023 |
|
|
|
|
|
|
|
||||
Cash, beginning of the period |
|
22,363,135 |
|
5,466,211 |
|
20,494,313 |
|
4,603,609 |
|
|
|
|
|
|
|
||||
Change in restricted cash balances |
|
10,133 |
|
— |
|
13,128 |
|
— |
|
Effect of movement of exchange rates on cash held |
|
(134,961 |
) |
(228,233 |
) |
(112,470 |
) |
(219,957 |
) |
|
|
|
|
|
|
||||
Cash, end of period |
|
$10,454,719 |
|
$55,516,675 |
|
$10,454,719 |
|
$55,516,675 |
|
