Unless otherwise stated, all amounts are in US dollars.
TORONTO, May 13, 2025--(BUSINESS WIRE)--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 first quarter ended March 31, 2025 ("Q1" or "the quarter").
"In Q1, we navigated some challenges, including a more uncertain macro environment, softness in video advertising rates and recent changes to Google's search algorithm which affected traffic on Fora communities. As a result, revenue was 8% lower than prior year," said Rob Laidlaw, Founder, Chair and CEO of VerticalScope.
Mr. Laidlaw continued, "Like other user-generated platforms, we're adapting to an evolving search experience, one that requires optimizing our strategy for AI Overviews, and integrating our own proprietary AI-driven enhancements to improve engagement, accessibility and monetization over time. We are better equipped to handle these algorithm changes with the Fora platform, and the integration of AI, allowing us to roll out important upgrades very quickly. Despite the traffic volatility causing MAU's to be 8% lower in the quarter, we remain confident in our business model, the strength of our communities, and the long-term opportunities ahead."
Financial Highlights for the Three Months Ended March 31, 2025
Revenue decreased 8% to $13.6M. This decline was primarily driven by weaker performance in programmatic video ads and a slower start for direct advertising due to timing-related shifts in campaign launches.
Adjusted EBITDA decreased 30% to $3.6M, with a 27% Adjusted EBITDA Margin compared to 36% in the prior year, primarily driven by lower revenue and higher compensation and consulting costs, including strategic support for AI initiatives and SEO optimizations.
Operating Cash Flow was $3.0M, and Free Cash Flow was $3.1M, reflecting an 86% Free Cash Flow Conversion. During the quarter, we deployed $5.5M in capital towards acquisitions, adding 23 online communities to our platform.
Net loss increased by $1.4M to $2.4M, compared to a net loss of $1.0M in the prior year, resulting in a loss per share of $0.11. The increase was primarily driven by revenue declines and an $0.8M increase in share-based compensation, which included one-time performance-based incentives.
"While Q1 presented challenges on the top line, our disciplined approach continues to deliver strong cash flow," said Vince Bellissimo, CFO of VerticalScope. "We generated $3.0M in Operating Cash Flow and $3.1M in Free Cash Flow, with a healthy conversion rate of 86%. These results reflect our ability to navigate a shifting environment while investing in growth initiatives. We remain focused on disciplined capital allocation and will deploy capital toward opportunities that we believe will drive long-term shareholder value. Year-to-date we have deployed $7.3M in capital towards M&A, and approximately $1.8M towards repurchasing 516K shares under our NCIB."
"We’ve completed four acquisitions so far in 2025, and the newly added communities are already seeing performance gains from our advertising technology and platform integration. With a strong balance sheet and proven playbook, we’re well positioned to capitalize on market volatility and continue scaling through strategic M&A," added Chris Goodridge, President and COO of VerticalScope.
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, May 14, 2025.
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.
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), realized and unrealized other 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.
The following table sets forth a reconciliation of Adjusted EBITDA and Free Cash Flow to net loss:
(Unaudited)
Three Months Ended
March 31,
(in thousands of US dollars)
2025
2024
Net loss
($2,416)
($985)
Net interest and financing expense
748
1,163
Income tax recovery
(454)
(124)
Depreciation and amortization
4,424
4,565
EBITDA
2,302
4,619
Share-based compensation
1,252
421
Share performance related bonus ⁽¹⁾
—
(3)
Unrealized loss (gain) from changes in derivative fair value of financial instruments
(50)
56
Gain on sale of assets
—
(4)
Gain on sale of investments
—
(16)
Foreign exchange loss
56
27
Realized other loss
68
—
Unrealized other loss
26
—
Other charges ⁽2⁾
(12)
127
Adjusted EBITDA
3,641
5,227
Less capital expenditures
(446)
(435)
Income taxes received (paid)
(75)
377
Free Cash Flow
$3,120
$5,169
(1)
Share performance related bonus is included in wages and consulting on the condensed consolidated interim statements of loss and comprehensive loss.
(2)
Other charges are included in general and administrative on the condensed consolidated interim statements of loss and comprehensive loss. For the three months ended March 31, 2025 and March 31, 2024, these charges include non-recurring legal related costs.
VERTICALSCOPE HOLDINGS INC.
Condensed Consolidated Interim Statements of Financial Position
(In U.S. dollars)
(Unaudited)
March 31,
December 31,
2025
2024
Assets
Current assets:
Cash
$5,014,293
$5,189,315
Restricted cash
93,915
97,244
Trade and other receivables
11,954,451
14,874,882
Lease receivable
187,936
326,267
Income taxes receivable
442,085
784,332
Prepaid expenses
891,834
761,652
18,584,514
22,033,692
Property and equipment
417,458
482,276
Right-of-use asset
1,426,728
1,564,687
Intangible assets
39,279,536
37,597,990
Goodwill
52,635,164
52,635,164
Other assets
116,556
154,497
Deferred tax asset
18,487,560
17,937,708
Total assets
$130,947,516
$132,406,014
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities
$4,454,083
$6,864,256
Income taxes payable
423,025
426,778
Derivative instruments
95,417
145,068
Deferred revenue
987,415
1,125,592
Current portion of long-term debt
606,257
687,875
Lease liability
800,189
946,626
7,366,386
10,196,195
Long-term debt
41,000,000
38,000,000
Lease liability
1,031,312
1,180,878
Deferred tax liability
—
315,607
Other long-term liabilities
26,612
26,612
Total liabilities
49,424,310
49,719,292
Shareholders' equity:
Share capital
166,275,747
163,250,013
Contributed surplus
23,639,378
25,413,119
Accumulated other comprehensive loss
(145,494)
(145,494)
Deficit
(108,246,425)
(105,830,916)
81,523,206
82,686,722
Total liabilities and shareholders' equity
$130,947,516
$132,406,014
VERTICALSCOPE HOLDINGS INC.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
(In U.S. dollars, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
2025
2024
Revenue
$13,565,517
$14,723,444
Operating expenses:
Wages and consulting
7,162,204
6,940,033
Share-based compensation
1,251,993
421,241
Platform and technology
1,639,598
1,543,535
General and administrative
1,060,465
1,192,625
Depreciation and amortization
4,423,575
4,564,628
15,537,835
14,662,062
Operating income (loss)
(1,972,318)
61,382
Other expenses (income):
Gain on sale of assets
(340)
(3,620)
Net interest and financing expense
747,818
1,162,932
Gain on sale of investments
—
(16,398)
Foreign exchange loss
55,655
27,380
Realized other loss
67,577
—
Unrealized other loss
26,453
—
897,163
1,170,294
Loss before income taxes
(2,869,481)
(1,108,912)
Income tax expense (recovery)
Current
411,484
88,618
Deferred
(865,456)
(212,937)
(453,972)
(124,319)
Net loss
($2,415,509)
($984,593)
Other comprehensive loss
Items that may be reclassified to net loss:
Foreign currency differences on translation of foreign operations
—
26,245
Total comprehensive loss
($2,415,509)
($958,348)
Loss per share:
Basic
($0.11)
($0.05)
Diluted
(0.11)
(0.05)
VERTICALSCOPE HOLDINGS INC.
Condensed Consolidated Interim Statements of Cash Flows
(In U.S. dollars)
(Unaudited)
Three months ended March 31
2025
2024
Cash provided by (used in):
Operating activities:
Net loss
($2,415,509)
($984,593)
Items not involving cash:
Depreciation and amortization
4,423,575
4,564,628
Net interest and financing expense
747,818
1,162,932
Gain on sale of assets
(340)
(3,620)
Gain on sale of investments
—
(16,398)
Unrealized loss (gain) in derivative instruments
(49,651)
55,668
Unrealized other loss
26,453
—
Income tax recovery
(453,972)
(124,319)
Share-based compensation
1,251,993
421,241
3,530,367
5,075,539
Change in non-cash operating assets and liabilities
235,553
1,443,964
Interest paid
(724,547)
(1,162,852)
Income taxes received (paid)
(75,030)
377,086
2,966,343
5,733,737
Financing activities:
Repayment of term loan
—
(625,000)
Proceeds from issuance of revolving loan
3,000,000
—
Repayment of revolving loan
—
(2,375,000)
Repurchase of share capital for cancellation
—
(233,226)
Lease payments
(323,279)
(360,982)
Proceeds from sublease
140,940
150,078
2,817,661
(3,444,130)
Investing activities:
Additions to property and equipment and intangible assets
(5,902,344)
(434,611)
Proceeds from sale of assets
340
4,114
Proceeds from sale of investments
—
16,398
(5,902,004)
(414,099)
Increase (decrease) in cash
(118,000)
1,875,508
Cash, beginning of period
5,189,315
6,015,184
Change in restricted cash balances
3,329
4,266
Effect of movement of exchange rates on cash and restricted cash held
