VerticalScope Announces First Quarter 2022 Financial Results Record Setting Q1 Revenue and Monthly Active Users

Unless otherwise stated, all amounts are in U.S. dollars.

TORONTO--()--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.

Condensed Consolidated Interim Statement of Financial Position

(In U.S. dollars)

(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.

Condensed Consolidated Interim Statement of Income and Comprehensive Income

(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.

Condensed Consolidated Interim Statement of Cash Flows

(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

 

 

Contacts

Investor inquiries:
Chris Goodridge, President and COO
Tel: 416-341-7174, IR@verticalscope.com

Media inquiries:
Wojtek Dabrowski, Provident Communications
Tel: 647-825-5009, wojtek@providentcomms.com

Related Links
http://www.verticalscope.com

Release Summary

VERTICALSCOPE ANNOUNCES FIRST QUARTER 2022 FINANCIAL RESULTS

Contacts

Investor inquiries:
Chris Goodridge, President and COO
Tel: 416-341-7174, IR@verticalscope.com

Media inquiries:
Wojtek Dabrowski, Provident Communications
Tel: 647-825-5009, wojtek@providentcomms.com

Related Links
http://www.verticalscope.com