VerticalScope Holdings Inc.

Hello. Thank you. Oh. Thank you. Music. Thank you. Thank you. We'll be right back. Thank you. Hello, everyone, and welcome to the Vertical Scope Holdings Incorporated Q4 and full year 2021 earnings call. My name is Emily, and I'll be coordinating the call today. During the presentation, you'll have the opportunity to ask a question by pressing star and then one on your telephone keypads. I will now hand the call over to our host, Diane Yu, Chief Legal Officer of Vertical Scope Holdings. Please go ahead.

Thank you, Emily. Good morning, everyone, and welcome to Vertical Scope Holdings' fourth quarter and full year 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 uncertainties and other factors that could cause actual events to differ materially from current expectations. These statements should not be read as assurances of future 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 statements. A more complete discussion of the risks and uncertainties facing the company appear in the company's management discussion and analysis for the three- and 12-month period ended December 31, 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 disclaims any intention or 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 recur to USD unless otherwise specified. Now I will turn the call over to Rob Leyva, founder and CEO of Vertical Scope Holding. Rob?

Thanks, Diane. Good morning, everyone. 2021 was an important year for Vertical Scope as we completed our initial public offering and continued to build on our mission to give enthusiasts and hobbyists safe communities to share knowledge and geek out on their passions. Our employees have worked tirelessly to deliver the strong results we are sharing with you today. And for that, I say thank you to all of them. We wouldn't be here without you. Vertical Scope is uniquely positioned in the market as we have a growing, EBITDA-positive, high free cash flow business that is driven by our user-generated communities that are on our 4L platform. We believe that we can continue to profitably grow our business both organically and through highly accretive acquisitions. In fact, with two of our larger acquisitions that we completed in mid-Q4 2021, the Streamable and Home Talk, we believe they are well positioned to contribute between 10 and 14 million of adjusted EBITDA to our business in 2022. Meanwhile, with Threadloom, we are off to a great start, building dedicated experiences to help people discover and buy the products they love in hyper-targeted enthusiast categories. With these three transactions, we have added communities that are growing revenue even faster than our own, amazing people and teams that are fitting in very well at Vertical Scope, and some incredible technology that advances and de-risks our 4L platform build. Turning to our Q4 and full year 2021 results, our business is growing very nicely and in line with our expectations and goals. We faced a variety of challenges in 2021 head-on, as the unwinding of the pandemic-induced shopping trend challenged our commerce business, and supply chain issues and semiconductor shortages continue to drag on many of our consumer categories, including automotive and power sports. Q4 was a record-breaking quarter, as we grew revenue by 6% year-over-year to 21.4 million, led by an increase of 35% in our digital advertising business and offset by a 30% decrease in our e-commerce revenue. For the full year 2021, that brought revenue growth to 16% for the year, including a 37% increase from digital advertising and a 12% decline in e-commerce revenue. We think that our e-commerce revenue will reverse its decline in Q2 2022 as we finish lapping the COVID-induced gains in the prior year in late Q1 and then look to grow on a year-over-year basis for the rest of the year. We believe that supply chain issues and chip shortages are affecting both advertising and e-commerce revenues, and that these headwinds will persist through the rest of 2022 as automotive manufacturer supply remains short and new supply chain challenges present themselves due to the war in Ukraine and sanctions on Russia. We remain in touch with all of our clients where we continue to be a valued partner, awaiting inventory issues to resolve in order to once again, step up spending. Turning to our adjusted EBITDA for the full year, we recorded $29 million of adjusted EBITDA, a 9% gain versus the prior year. This gain jumps to 18% if we exclude incremental public company costs, ethics impacts, and benefits from government subsidies. In Q4 specifically, we reported $9.4 million of adjusted EBITDA, down 16% versus last year, as we experienced higher costs due to increased headcount, incremental public company costs, and less favorable FX. While we are not immune to some of the inflationary pressures and technology staff wage increases being experienced more broadly, we have confidence that we can continue to grow our adjusted EBITDA like double digits in 2022 with some organic gains and more importantly, contributions from the new acquisitions we made in mid to late Q4. Our financial performance was driven by a record Q4 as we attracted 105.8 million monthly active users to our platform, up 18% versus 89.7 million in the prior year. During the month of December, we finished the year strong with 113.5 million active users. Our record MAUs were driven by a combination of 4% organic growth and the rest coming from acquired properties. For the full year 2021, we averaged 99 million monthly active users, an increase of 10% over the year prior. We do expect Q1 of 2022 to be more challenging for our organic MAU growth, as we see increased competition for user attention from the war in Ukraine and some unwinding of pandemic-induced traffic patterns that drove impressive numbers last year. We expect organic MAUs to be in the range of negative 4% for the first quarter, before returning to positive growth in Q2 onwards. But overall MAU growth in Q1 is expected to remain strong at between 10% and 15%. We concluded the year with 86% of our forum community MAUs on the FORA platform. This number will fluctuate going forward based on our acquisition activity and how quickly we are able to migrate those acquired communities over to FORA. On the product side, we are making some great strides forward. We have rolled out our small business subscription packages and introduced new marketplace experiences onto Fora. We expect to launch our Fora mobile app in the next few months to increase user engagement and drive more cross-community usage. The Threadloom team is already integrating well with our business and is far ahead of schedule on experimenting with some new strategies to better organize Forum products content and make product content more accessible to our users. 2022 is set to be an impressive year for the continued growth and evolution of our 4.0 platform, driven by our talented technology team. Now, I will turn it over to Vince to discuss the financial details, the financials in further detail.