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 quarter ended September 30, 2021.
“Our third quarter results were driven by 27% growth in our Advertising Revenue versus the prior year, despite continued challenges from supply chain disruption, and inventory shortages.” commented Rob Laidlaw, Founder and CEO of VerticalScope. “We leveraged the strength of our Fora platform to deliver continued organic year-over-year Revenue and MAU growth. We also accelerated the pace of our M&A activity with the announcement of three significant transactions, and have a strong pipeline of deals that we anticipate closing in the fourth quarter of 2021, and into the first quarter of 2022. We have high conviction that we will be able to deploy all of our net IPO proceeds of C$135M within one year of our IPO date at highly accretive EBITDA multiples.”
Financial Highlights for the Three Months Ended September 30, 2021. All comparatives, unless otherwise noted are versus the same period in the prior year:
– Revenue was $14.0M, an increase of 5%.
– Advertising revenue of $10.1M grew by 27% despite ongoing challenges with supply chain disruption and inventory shortages particularly in the Automotive and Powersports categories.
– E-commerce revenue of $3.9M declined by 27%. E-commerce revenue was negatively impacted this quarter by supply chain disruption, and out-of-stock products, while results in the prior period were elevated due to COVID-19 induced increases in online shopping.
– Adjusted EBITDA was $5.6M. Adjusted EBITDA decreased by 2% when excluding the following variances: (i) a $248K adverse impact from the strengthening Canadian vs. U.S. dollar; (ii) $1,158K in incremental public company and Omnibus incentive plan costs; (iii) benefits from COVID-19 relief and SR&ED totaling $899K in the quarter versus $412K in the prior year.
– Cash flows from operating activities were $3.0M, an increase of $0.6M, or 23%.
– Free Cash Flow was $4.3M for the quarter, and $15.5M for the nine months ended September 30, 2021 an increase of $4.2M, or 37%, compared to the nine months ended September 30, 2020. Excluding the following noted variances for the nine month period year-to-date, Free Cash Flow was $17.1M, an increase of $7.0M or 69% compared to the nine months ended September 30, 2020: (i) a $807K adverse impact from the strengthening Canadian vs. U.S. dollar; (ii) $1,653K in incremental public company and Omnibus incentive plan costs; (iii) benefits from COVID-19 relief and SR&ED totaling $899K versus $1,176K in the prior year.
– At the end of the third quarter, we had migrated 92.2% of our forum communities to Fora. Due to MAU growth through acquisition, at the end of October we have 87.7% migrated to Fora.
– MAUs for the third-quarter were 93.8M, an increase of 8.5%. Communities on the Fora platform grew 12.0%.
– We ended the quarter with $69.9M of cash and cash equivalents on our balance sheet, and $75M available under our existing credit facility to fund our M&A pipeline.
Laidlaw added, “We are very proud of the work our team has put in this quarter. Development velocity on the Fora platform has accelerated, and it is reflected in the MAU growth we are experiencing including 98M MAU’s in the month of October. In terms of new projects, we are excited about our Fora Marketplace initiatives that are currently in the testing phase, and looking forward to the progress we can make in 2022 across our entire Commerce platform. We believe it’s early-innings in our Commerce playbook, and that this will become a significant part of our organic revenue growth.”
Chris Goodridge, President and COO, commented that, “We are very excited to announce today three significant acquisitions, with Hometalk, The Streamable and Threadloom. These acquisitions add five large communities to our portfolio, accelerate the execution of our commerce playbook and add world class talent to our organization. We are also seeing impressive revenue growth on our two previously announced largest transactions including Paddling.com and ProBoards, where revenues have increased double-digit percentages since our acquisition.”
Earnings Announcement
Management will host a conference call and webcast to discuss the Company’s third quarter 2021 financial results at 10:00am EDT on Wednesday, November 10, 2021.
Live Call Registration:
https://www.incommglobalevents.com/registration/q4inc/9054/verticalscope-holdings-inc-q3-earnings-call/
Joining by telephone:
Canada: 1 833 950 0062
United States: 1 844 200 6205
All other locations: +1 929 526 1599
Participant Access code: 503080
Webcast: https://event.on24.com/wcc/r/3411367/2104781C0E930FC7DA37363E11D4F7FB
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 nearly 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. Forward-looking information, including the Company’s plans for organic growth and financially-accretive M&A, 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. Such risks and uncertainties include, but are not limited to, the factors discussed under “Risk Factors” in the supplemented PREP prospectus dated June 14, 2021, 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. These 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
“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, 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 on sale of assets, gain on sale of investments, foreign exchange loss (gain), and other charges that include direct and incremental business acquisition related costs and costs directly incurred in connection with the Company’s initial public offering that are not deducted from the equity proceeds.
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VERTICALSCOPE HOLDINGS INC. Condensed Consolidated Interim Statement of Financial Position (In U.S. dollars) (Unaudited) |
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September 30, |
December 31, |
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2021 |
2020 |
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Assets |
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Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$69,874,661 |
$4,603,609 |
|
Trade and other receivables |
|
7,914,000 |
14,664,272 |
|
Income taxes receivable |
|
142,590 |
536,423 |
|
Prepaid expenses |
|
1,233,956 |
270,763 |
|
Derivative instruments |
|
1,935 |
80,506 |
|
|
|
79,167,142 |
20,155,573 |
|
|
|
|
|
|
Property and equipment |
|
1,408,012 |
1,751,800 |
|
Right-of-use asset |
|
2,676,643 |
2,712,995 |
|
Intangible assets |
|
27,901,871 |
32,707,475 |
|
Investments |
|
2,199,999 |
2,449,999 |
|
Goodwill |
|
11,840,039 |
11,840,039 |
|
Deferred tax asset |
|
19,590,402 |
16,065,696 |
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Total assets |
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$144,784,108 |
$87,683,577 |
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Liabilities and Shareholders’ Equity (Deficiency) |
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Current liabilities: |
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Accounts payable and accrued liabilities |
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$4,156,983 |
$4,449,234 |
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Deferred revenue |
|
845,529 |
810,457 |
|
Current portion of long-term debt |
|
2,512,873 |
8,323,090 |
|
Lease liability |
|
608,255 |
708,248 |
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|
8,123,640 |
14,291,029 |
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|
|
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Deferred revenue |
|
19,105 |
58,477 |
|
Long-term debt |
|
47,153,057 |
93,142,219 |
|
Lease liability |
|
2,621,388 |
2,525,799 |
|
Deferred tax liability |
|
105,865 |
210,700 |
|
Total liabilities |
|
58,023,055 |
110,228,224 |
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|
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Shareholders’ equity (deficiency): |
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|
|
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Share capital |
|
146,970,996 |
34,183,524 |
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Contributed surplus |
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12,684,437 |
10,371,945 |
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Deficit |
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(72,894,380) |
(67,100,116) |
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86,761,053 |
(22,544,647) |
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Total liabilities and shareholders’ deficiency |
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$144,784,108 |
$87,683,577 |
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VERTICALSCOPE HOLDINGS INC. Condensed Consolidated Interim Statements of Comprehensive Loss and Other Comprehensive Loss (In U.S. dollars, except per share amounts) (Unaudited) |
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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Revenue |
$14,001,350 |
$13,345,481 |
$44,343,216 |
$36,741,439 |
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Operating expenses: |
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Wages and consulting |
5,515,705 |
4,539,356 |
17,228,248 |
14,620,558 |
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Share-based compensation |
1,665,206 |
1,126,943 |
2,697,047 |
1,552,906 |
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Platform and technology |
1,680,405 |
1,541,368 |
5,052,043 |
4,480,817 |
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General and administrative |
1,545,209 |
676,114 |
6,404,544 |
2,723,400 |
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Depreciation and amortization |
4,770,062 |
4,991,405 |
13,869,966 |
15,225,584 |
|
Impairment |
250,000 |
— |
250,000 |
— |
|
|
15,426,587 |
12,875,186 |
45,501,848 |
38,603,265 |
|
|
|
|
|
|
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Operating income (loss) |
(1,425,237) |
470,295 |
(1,158,632) |
(1,861,826) |
|
|
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Other expenses: |
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|
|
|
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Loss (gain) on sale of assets |
11,944 |
361 |
13,800 |
(408,952) |
|
Interest expense |
1,071,077 |
1,460,278 |
5,581,055 |
5,334,305 |
|
Loss (gain) on investments |
402 |
(530,046) |
402 |
(530,046) |
|
Foreign exchange loss (gain) |
190,231 |
39,225 |
299,709 |
48,047 |
|
|
1,273,654 |
969,818 |
5,894,966 |
4,443,354 |
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Loss before income taxes |
(2,698,891) |
(499,523) |
(7,053,598) |
(6,305,180) |
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Income taxes (recovery) |
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Current |
112,538 |
67,211 |
431,552 |
344,541 |
|
Deferred |
(522,707) |
396,105 |
(1,690,886) |
(1,822,803) |
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|
(410,169) |
463,316 |
(1,259,334) |
(1,478,262) |
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Net loss and comprehensive loss |
$(2,288,722) |
$(962,839) |
$(5,794,264) |
$(4,826,918) |
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Loss per share: |
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Basic |
$(0.10) |
$(0.07) |
$(0.28) |
$(0.35) |
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Diluted |
(0.10) |
(0.07) |
(0.28) |
(0.35) |
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VERTICALSCOPE HOLDINGS INC. Condensed Consolidated Interim Statement of Cash Flows (In U.S. dollars) (Unaudited) |
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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Cash provided by (used in): |
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Operating activities: |
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Loss for the year |
|
$(2,288,722) |
$(962,839) |
$(5,794,264) |
$(4,826,918) |
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Items not involving cash: |
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|
|
|
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Depreciation and amortization |
|
4,770,061 |
4,991,405 |
13,869,965 |
15,225,584 |
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Interest expense |
|
1,071,077 |
1,460,278 |
5,581,055 |
5,334,305 |
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Loss (gain) on sale of assets |
|
11,944 |
361 |
13,800 |
(408,952) |
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Gain on sale of investments |
|
— |
(530,046) |
— |
(530,046) |
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Unrealized loss (gain) in derivative instruments |
|
7,895 |
(60,938) |
78,571 |
(29,009) |
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Loan forgiveness |
|
(899,289) |
— |
(899,289) |
— |
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Impairment of Investment |
|
250,000 |
— |
250,000 |
— |
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Income tax expense and deferred tax |
|
(410,169) |
463,316 |
(1,259,334) |
(1,478,262) |
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Share-based compensation |
|
1,665,206 |
1,126,943 |
2,697,047 |
1,552,906 |
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4,178,003 |
6,488,480 |
14,537,551 |
14,839,608 |
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Change in non-cash operating assets and liabilities |
|
(1,141,950) |
(1,397,636) |
5,358,486 |
1,113,874 |
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Interest paid |
|
(23,835) |
(2,366,924) |
(1,703,462) |
(5,539,831) |
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Income taxes received (paid) |
|
(22,484) |
(300,364) |
829 |
(488,301) |
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2,989,734 |
2,423,556 |
18,193,404 |
9,925,350 |
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Financing activities: |
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Repayment of initial term loan |
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(625,000) |
(2,062,500) |
(45,500,000) |
(4,125,000) |
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Repayment of delayed draw term loan |
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— |
(1,870,678) |
(7,714,977) |
(2,769,934) |
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Proceeds from issuance of share capital |
|
14,282,656 |
— |
110,308,011 |
— |
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Proceeds from exercise of share options |
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— |
— |
156,250 |
— |
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Credit facility financing fees |
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— |
— |
(1,274,597) |
— |
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Lease payments |
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(225,694) |
(209,232) |
(679,400) |
(616,372) |
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Proceeds from paycheck protection loan |
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— |
— |
— |
899,289 |
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13,431,962 |
(4,142,410) |
55,295,287 |
(6,612,017) |
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Investing activities: |
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Additions to property and equipment, right-of use and intangible assets |
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(2,286,916) |
(1,200,814) |
(8,229,084) |
(3,605,649) |
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Proceeds from sale of assets |
|
8,680 |
6,914 |
16,876 |
433,031 |
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Proceeds from sale of investments |
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— |
819,250 |
— |
819,250 |
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(2,278,236) |
(374,650) |
(8,212,208) |
(2,353,368) |
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Increase (decrease) in cash |
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14,143,460 |
(2,093,504) |
65,276,483 |
959,965 |
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Cash, beginning of the period |
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55,516,675 |
8,153,554 |
4,603,609 |
5,112,990 |
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Effect of movement of exchange rates on cash held |
|
214,526 |
8,712 |
(5,431) |
(4,193) |
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Cash, end of period |
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$69,874,661 |
$6,068,762 |
$69,874,661 |
$6,068,762 |
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View source version on businesswire.com: https://www.businesswire.com/news/home/20211109006628/en/