VerticalScope Holdings Inc.

Hello everyone and welcome to the Vertical Scope Holdings Inc Q3 earnings call. My name is Charlie and I'll be the coordinator for today's call. You will have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypad. I'll now hand over to your host Diane Yu, Chief Legal Officer of Vertical Scope Holdings to begin. Diane, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Vertical Scope Holdings' third quarter 2021 earnings call. I'm joined by Rob Laidlaw, our founder and chief executive officer, Vince Bellissimo, our chief financial officer, and Chris Goodbridge, our president and chief operating officer. We'll begin with commentary on the quarter before opening the floor to questions. Before we begin, I'd like to remind everyone that today's presentation contains forward-looking information that involves known and unknown risks and other factors that could cause actual events to differ materially from current expectations. These statements should not be read as assurances of different performance or results. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results performance or achievements to be materially different from those implied by such statement. A more complete discussion of the risks and uncertainties facing the company appear in the company's management discussion and analysis for the three-month period ended September 30th, 2021, which are available under the company's profile on CDAR, as well as on the company's website. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. The company claims any obligation, except to the extent required by law, to update and revise any forward-looking statements as a result of new information, future events, or for any other reason. Our discussion today will include references to adjusted financial measures, including adjusted EBITDA and free cash flow, which are non-IFRS measures. All references to currency in this presentation shall refer to USD unless otherwise specified. Now I will turn the call over to Rob Lailoff, founder and CEO of Vertical Scope. Rob?

Thank you, Diane, and good morning, everyone. It's a very exciting time for us at Vertical Scope. With the amazing support of our shareholders through our IPO in June, we've announced three major acquisitions that continue our mission of enabling people with common interests to connect, explore their passions, and share knowledge about the things that they love. Two of these transactions, HomeTalk and the Streamable, will be immediately accretive to EBITDA, and we expect them to deliver between $10 and $14 million of adjusted EBITDA next year. HomeTalk is a community of DIYers and creators that are passionate about their homes. This community serves over 6 million monthly active users. In the last 18 months, they've also launched Food Talk for foodies and home chefs, and UpStyleDaily.com for people that are much more fashionable than myself. The HomeTalk team has created superb video and email solutions, and their team of 35 people, including their senior team, will be joining Vertical Scope. The streamable is an incredible community of cord cutters. In the month of September, the site provided over 3 million users with the information they needed to find the best streaming provider for their needs. We are excited about the opportunity to launch a Aura-based forum within this community and we'll be welcoming the very talented and savvy entrepreneurs behind the site to our team as well and finally we also announced the acquisition of threadloom which will bring an incredible team and their years of experience and that technology that they have built to empower communities to enhance user engagement including helping users find the products and product reviews that they are seeking in these online communities with the technology that they've built we will rapidly advance our commerce playbook on our forum communities while adding significant user value. While it's not immediately a pre-dip to EBITDA, we couldn't be more excited about the long-term growth prospects for their technology on the Fora platform. Not only will we be able to grow revenue, but we will be doing so in a manner that will increase our MAUs and our pools. Between these three transactions, we have acquired three key ingredients, First and foremost, an incredible financial profile. These communities are experiencing growth rates that are even faster than our own. Second, amazing people and teams that we are excited to work together with to build Vertical Scope even larger in the future. And three, some awesome pieces of technology that will advance our own platform and de-risk much of our future commerce playbook. I want to give some kudos to our M&A team. They've worked around the clock, even prior to our IPO, to source thousands of potential transactions. They never lost faith when they heard targets that weren't interested in selling or when I told them that the deals were not a good fit or just plain too expensive. They stuck with it, kept hunting, and brought forward these transactions that we got really passionate about and are presenting to you today. And it's not just these. We have a full M&A pipeline. We have capital available to continue acquiring communities and we think we'll be able to close some additional transactions before year-end and into next year. So it is with the utmost confidence that I tell you we see no problem meeting our IPO guidance around deploying the full proceeds of our IPO within a 12-month time period. So now turning to our Q3 results. Before I turn it over to Vince to go through the details, I'll give you a few quick comments. Q3 was a great quarter for us. And not all of that story can be found in the numbers. We grew our team significantly. We added new team members in finance, legal, M&A, and our product and engineering groups. We took on new costs as a public company while facing FX headwinds. On the revenue side, not only did we face supply chain related challenges across both advertising and e-commerce, but we also faced some reopening headwinds as people across the globe were released from lockdowns and allowed to enjoy their summers outside. Still, in the face of that, we grew our MAUs by 8.5% overall and by 12% on our 4i communities. Last year in Q3, our commerce business was roaring as people were indoors and shopping online. This year, we have seen that others, including Amazon and Peloton, had a tough comparable when it came to e-commerce. I feel very confident that once we finally get through some of these supply chain challenges, that our business is well positioned for long-term growth and want to thank our team for their hard work on continuing to deliver against these headwinds. Our advertising business was strong, growing 27% in the quarter, despite the fact that some of our largest advertisers in the automotive and power sports industries delayed or canceled campaigns as they simply had no inventory to sell. With devices, our direct advertising business still grew 24%, while programmatic grew 29% versus last year. Our commerce business declined 27% versus last year. With fewer COVID lockdowns, online shopping slowed across the board as people got out of the house. This is even more pronounced in the fitness space where we have a leadership position on high dollar value purchases such as treadmills and rollers. Out of stock products were a major issue across the board. In simplest terms, we cannot earn a sales fee when the merchants do not have product to sell. Unfortunately, we expect this to continue for at least another two quarters until supply chains hopefully recover. This headwind is also a reason why we are increasing our focus on our digital goods efforts, including streaming, which are not affected by these supply chain challenges. Before I turn it over to Vince, I want to leave you with this. Our business is performing very well, and we bring to the market a unique mix, our cloud platform, our organic revenue, and MAU growth. And our M&A story is just beginning. You've got fast-growing tech with, let's call it, $30.5 million of adjusted EBITDA in the past 12 months, plus an additional $10 to $14 million a year of adjusted EBITDA from HomeTalk and the streamable for 2022. So for simplicity, just putting those together at the midpoint, you're looking at $42.5 million U.S., or 53.1 million Canadian of adjusted EBITDA. And then we've got Threadloan, which we think will further our organic revenue growth. With that, I'll turn it over to Vince to dive into the financial details.