Press release

VerticalScope Sets New Record for Monthly Active Users, Fueling Double-digit Revenue Growth and Strong Cash Flow in the Third Quarter of 2024

0
Sponsored by Businesswire

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 third quarter ended September 30, 2024 (“Q3” or “the quarter”).

“Our team delivered another strong quarter in Q3 with momentum building in the business as we enter our strongest seasonal period to end the year,” said Rob Laidlaw, Founder, Chair and CEO of VerticalScope. “Our platform served 122 million MAU, a record level, growing by 21% over last year. Our record MAU’s are fueled by people who increasingly seek out the authentic perspectives found on our platform. Fora’s interest-based communities are at the heart of our accelerating advertising revenue, growing in Q3 by 22% compared to last year.”

Mr. Laidlaw continued, “The efficiency of our business model continued to shine through in Q3, with Adjusted EBITDA growing by 9% to $7.4 million and resulting in Free Cash Flow of $6.4 million. We started Q4 with great momentum as increased demand for programmatic and direct advertising is delivering strong CPM’s on our growing community sites.”

Financial Highlights for the Three Months Ended September 30, 2024

  • Revenue increased by 15% to $17.8 million, driven by a 22% increase in Digital Advertising revenue. The growth in Digital Advertising is attributed to strong performance from our programmatic channel, driven by new partnerships and a 21% increase in MAU.

  • Adjusted EBITDA increased by 9% to $7.4 million and Adjusted EBITDA margins were 42%, compared to 44% margins in the prior year.

  • Free Cash Flow generated was $6.4 million, an increase of 7%, and reflected a strong conversion rate of 86%.

  • Cash flow from operations of $5.9 million allowed us to further strengthen our balance sheet through strategic debt reduction. In Q3, the Company made a total of $5.6 million in principal payments towards our credit facility, of which $5.0 million was voluntary. Net leverage as defined by our credit facility improved to 1.3x compared to 1.5x at the beginning of the quarter.

  • Net Income of $1.2 million and Earnings Per Share of $0.06 were $1.7 million and $0.08 better than the prior year, respectively.

“The strong financial profile of VerticalScope supports our ongoing capital deployment strategy,” stated Vince Bellissimo, CFO of VerticalScope. “With net leverage now below 1.3x, we are in a great position to accelerate the growth of our business through tuck-in M&A, while returning capital to shareholders through share buybacks. Year-to-date we have used our free cash flow to purchase 326,000 shares for cancellation at an average cost of C$7.79 per share, while reducing debt by $17.3 million. We are continuing to ramp up our M&A outreach in search of high-return opportunities.”

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 Wednesday, November 13, 2024.

Live Call Registration and Webcast:

https://events.q4inc.com/attendee/861368726

Joining by Telephone:

Canada: 1 833 950 0062

United States: 1 833 470 1428

Participant Access code: 420561

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.

SOURCE VerticalScope Holdings Inc.

Related Links

http://www.verticalscope.com

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

 

(Unaudited)

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands of US dollars)

2024

2023

2024

2023

Net income (loss)

$1,207

($516)

$645

($7,025)

Net interest expense

986

1,299

3,223

3,880

Income tax expense (recovery)

442

(52)

874

(2,447)

Depreciation and amortization

4,428

4,901

13,493

16,688

EBITDA

7,062

5,633

18,235

11,096

Share-based compensation

385

1,249

1,174

3,631

Share performance related bonuses ⁽¹⁾

(3)

Unrealized loss (gain) from changes in derivative fair value of financial instruments

(23)

2

52

10

Severance ⁽²⁾

30

1,470

Gain on sale of assets

(5)

(160)

(10)

(171)

Loss (gain) on investments

(1)

(17)

(2)

Foreign exchange loss (gain)

(16)

(6)

12

(30)

Adjustment to contingent considerations

(1,051)

Other charges ⁽3

34

71

296

282

Adjusted EBITDA

7,437

6,819

19,740

15,236

Less capital expenditures

(494)

(710)

(1,327)

(1,827)

Income taxes paid

(530)

(131)

(273)

(937)

Free Cash Flow

$6,414

$5,978

$18,140

$12,472

(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 nine months ended September 30, 2024 and September 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)

 

 

September 30,

 

December 31,

 

2024

 

2023

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

Cash

$5,834,336

 

$6,015,184

Restricted cash

95,166

 

93,840

Trade and other receivables

13,382,859

 

14,175,352

Lease receivable

494,655

 

595,961

Income taxes receivable

253,225

 

797,465

Prepaid expenses

875,783

 

804,692

Derivative instruments

 

51,303

Other current assets

1,508,473

 

 

22,444,497

 

22,533,797

 

 

 

 

Property and equipment

541,445

 

754,293

Right-of-use asset

1,702,645

 

2,123,739

Intangible assets

41,168,092

 

52,480,458

Goodwill

52,635,164

 

52,635,164

Other assets

266,309

 

283,278

Deferred tax asset

18,622,827

 

21,786,506

Lease receivable

 

354,288

 

 

 

 

Total assets

$137,380,979

 

$152,951,523

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$8,544,464

 

$5,563,354

Income taxes payable

85,330

 

229,770

Derivative instruments

550

 

Deferred revenue

1,217,345

 

1,157,049

Current portion of long-term debt

2,611,217

 

3,614,396

Lease liability

1,137,565

 

1,227,160

 

13,596,471

 

11,791,729

 

 

 

 

Long-term debt

40,000,227

 

54,431,100

Lease liability

1,368,764

 

2,248,029

Deferred tax liability

639,761

 

3,609,683

Other long-term liabilities

26,612

 

185,399

Total liabilities

55,631,835

 

72,265,940

 

 

 

 

Shareholders’ equity:

 

 

 

Share capital

166,184,037

 

167,705,234

Contributed surplus

23,048,942

 

22,435,738

Accumulated other comprehensive loss

(197,795)

 

(145,494)

Deficit

(107,286,040)

 

(109,309,895)

 

81,749,144

 

80,685,583

Total liabilities and shareholders’ equity

$137,380,979

 

$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

September 30,

 

Nine Months Ended

September 30,

 

 

2024

 

2023

 

2024

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$17,786,704

 

$15,509,334

 

$49,197,664

 

$43,045,765

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Wages and consulting

 

7,260,759

 

6,229,028

 

21,023,470

 

21,257,863

Share-based compensation

 

385,403

 

1,249,310

 

1,174,219

 

3,630,859

Platform and technology

 

1,920,206

 

1,525,203

 

5,139,085

 

5,237,261

General and administrative

 

1,180,123

 

1,039,564

 

3,640,927

 

3,077,919

Depreciation and amortization

 

4,427,753

 

4,901,141

 

13,493,365

 

16,688,368

Adjustment to contingent considerations

 

 

 

 

(1,051,222)

 

 

15,174,244

 

14,944,246

 

44,471,066

 

48,841,048

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

2,612,460

 

565,088

 

4,726,598

 

(5,795,283)

 

 

 

 

 

 

 

 

 

Other expenses (income):

 

 

 

 

 

 

 

 

Gain on sale of assets

 

(5,306)

 

(160,339)

 

(10,024)

 

(171,148)

Net interest expense

 

985,549

 

1,299,049

 

3,223,363

 

3,879,773

Loss (gain) on investments

 

(712)

 

103

 

(17,110)

 

(1,792)

Foreign exchange loss (gain)

 

(15,993)

 

(6,117)

 

11,648

 

(30,316)

 

 

963,538

 

1,132,696

 

3,207,877

 

3,676,517

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

1,648,922

 

(567,608)

 

1,518,721

 

(9,471,800)

 

 

 

 

 

 

 

 

 

Income tax expense (recovery)

 

 

 

 

 

 

 

 

Current

 

427,461

 

111,331

 

679,826

 

317,146

Deferred

 

14,827

 

(163,430)

 

193,756

 

(2,764,172)

 

 

442,288

 

(52,099)

 

873,582

 

(2,447,026)

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$1,206,634

 

($515,509)

 

$645,139

 

($7,024,774)

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Foreign currency differences on translation of foreign operations

 

(65,147)

 

63,363

 

(52,301)

 

21,555

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

$1,141,487

 

($452,146)

 

$592,838

 

($7,003,219)

 

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$0.06

 

($0.02)

 

$0.03

 

($0.33)

Diluted

 

0.06

 

(0.02)

 

0.03

 

(0.33)

 

VERTICALSCOPE HOLDINGS INC.

Condensed Consolidated Interim Statements of Cash Flows

(In U.S. dollars)

(Unaudited)

 

 

 

Three Months Ended

September 30,

Nine Months Ended

September 30,

 

 

2024

 

2023

 

2024

 

2023

 

 

 

 

 

 

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

Net income (loss)

 

$1,206,634

 

($515,509)

 

$645,139

 

($7,024,774)

Items not involving cash:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

4,427,753

 

4,901,141

 

13,493,365

 

16,688,368

Net interest expense

 

985,549

 

1,299,049

 

3,223,363

 

3,879,773

Gain on sale of assets

 

(5,306)

 

(160,339)

 

(10,024)

 

(171,148)

Gain on investments

 

(712)

 

 

(17,110)

 

Unrealized loss (gain) in derivative instruments

 

(22,850)

 

2,163

 

51,853

 

10,430

Income tax expense (recovery)

 

442,288

 

(52,099)

 

873,582

 

(2,447,026)

Adjustment to contingent considerations

 

 

 

 

(1,051,222)

Share-based compensation

 

385,403

 

1,249,566

 

1,174,219

 

3,630,859

 

 

7,418,759

 

6,723,972

 

19,434,387

 

13,515,260

Change in non-cash operating assets and liabilities

 

(30,613)

 

(1,851,469)

 

1,828,266

 

1,589,499

Interest paid

 

(979,387)

 

(1,215,173)

 

(3,212,715)

 

(3,307,424)

Income taxes paid

 

(530,034)

 

(130,602)

 

(272,505)

 

(936,981)

 

 

5,878,725

 

3,526,728

 

17,777,433

 

10,860,354

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Repayment of term loan

 

(625,000)

 

(625,000)

 

(1,875,000)

 

(1,875,000)

Proceeds from issuance of revolving loan

 

 

 

 

15,000,000

Repayment of revolving loan

 

(5,000,000)

 

(1,750,000)

 

(13,250,000)

 

(9,000,000)

Repurchase of share capital for cancellation

 

(34,411)

 

(73,673)

 

(703,496)

 

(73,673)

Lease payments

 

(334,034)

 

(360,936)

 

(1,035,677)

 

(1,105,020)

Proceeds from sublease

 

148,342

 

150,807

 

446,298

 

450,958

Proceeds from leasehold improvement allowance

 

 

 

 

106,426

 

 

(5,845,103)

 

(2,658,802)

 

(16,417,875)

 

3,503,691

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Additions to property and equipment and intangible assets

 

(493,599)

 

(707,790)

 

(1,527,395)

 

(1,824,618)

Proceeds from sale of assets

 

5,666

 

160,338

 

11,747

 

181,295

Proceeds from sale of investments

 

712

 

 

17,110

 

Payment of contingent considerations

 

 

 

 

(15,000,000)

 

 

(487,221)

 

(547,452)

 

(1,498,538)

 

(16,643,323)

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash

 

(453,599)

 

320,474

 

(138,980)

 

(2,279,278)

 

 

 

 

 

 

 

 

 

Cash, beginning of the period

 

6,320,979

 

6,126,110

 

6,015,184

 

8,766,769

 

 

 

 

 

 

 

 

 

Change in restricted cash balances

 

(2,305)

 

2,078

 

(1,326)

 

29,104

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

 

(30,739)

 

(13,393)

 

(40,542)

 

(81,326)

 

 

 

 

 

 

 

 

 

Cash, end of period

 

$5,834,336

 

$6,435,269

 

$5,834,336

 

$6,435,269