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

TORONTO--(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 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

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

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