VerticalScope Holdings Inc.

Hello, everyone, and welcome to the Vertical Scope Holdings Inc. Q1 2022 earnings call. My name is Nadia, and I'll be coordinating the call today. If you would like to ask a question at the end of the presentation, please press star, followed by the number one on your telephone keypad. I will now hand over to your host, Diane Yu, Chief Legal Officer to begin. Diane, please go ahead.

Thank you, Nadia. Good morning, everyone, and welcome to Vertical Scope Holdings' first quarter 2022 earnings call. I'm joined by Rob Laidlaw, our Founder and Chief Executive Officer, Vince Bellissimo, our Chief Financial Officer, and Chris Goodrich, 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 appears in the company's management discussion analysis for the three-month period ended March 31, 2022, 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 refer to USD unless otherwise specified. Now I will turn the call over to Rob Laidlaw, founder and CEO of Vertical Scope.

Rob? Thanks, Diane. Good morning, everyone, and thank you for joining us today. The first quarter of 2022 was an impressive one for our business, led by revenue growth of 26% versus the prior year. The advertising business is performing incredibly well for us, growing by 49% versus last year, and led by the strength of the Fora platform. When we built Fora, we wanted it to be the fastest platform out there and deliver a great user experience. To achieve that, we had to reduce the number of ads loading on each page. With fewer ads and faster pages, we are able to attract higher paying advertisers who value performance and engagement. We are delivering a better experience for our users and our advertisers. and that drove a 76% increase in programmatic advertising and an 11% increase in direct advertising. The direct advertising business still has a lot of room for growth and it's facing heavy headwinds from chip shortage and supply chains in the automotive and power sports industries. In fact, automotive OEM spending is down nearly 70% when compared to 2019 activity. We are confident that we'll get back there But in the meantime, our programmatic business is proving out the resiliency of our model. We were also very proud of our e-commerce business, which declined by only 3% in the quarter versus a very tough comparable in last year's pandemic-influenced quarter. Impressively, and just to show the effect of lapping that tough January-February comparable, we were up 38% in the month of March. In our press release, we highlighted some of the challenges of the fitness category. on our e-commerce business, where we saw a year-over-year decrease in revenue of $3.2 million in the quarter, which was largely offset by e-commerce growth from acquisitions, including the streamable, and our organic growth. The pandemic brought forward significant demand in the fitness space, and while we have now lapped the impressive Q1 2021, the lack of commerce activity and consumer spending in the fitness category will still be a headwind on our growth numbers in future quarters, But with Q2 2021 fitness revenue being something in the neighborhood of 0.8 million, we will see much less of a drag on our results, and we are confident that we will post year-over-year growth in e-commerce moving forward. Our acquisitions are performing well, and we continue to believe that the two large acquisitions we did in Q4 of HomeTalk and The Stringable will deliver between 10 and 14 million of incremental EBITDA in 2022. With their strong performance, we have increased our expectations around contingent considerations as we expect the threshold for achievement of the earn out in 2022 to become more likely to occur. Adjusted EBITDA was down slightly in the quarter by 5% or 391,000. But if you adjust for 478K of public company costs that didn't exist in Q1 last year, we are back to positive and then have that really fitness category decline of $3.2 million and the $383,000 loss from Threadloon. As I mentioned, we're through the tough comparables on fitness. We lapped the IPO in June on the public company costs, and we continue to believe that Threadloon can break even by the end of 2022. So putting all this together, we think we're in pretty good shape on adjusted EBITDA going forward in light of the revenue growth we're seeing in the business. Touching on MAUs, they came in at 113 for the quarter, up 13% versus the prior year, and a new record. That's inclusive of a 4.6% organic decline due to increased competition for users' attention from the war in Ukraine and an impressive pandemic-induced quarter in 2021. We expect to see similar MAU trends in Q2 as we saw in Q1, as the headwinds from the war in Ukraine and reduced levels of online shopping activity affect the number of users visiting our communities for product reviews. Bottom line, people are out and about. They have their freedoms back, and this is creating an MAU headwind. Finally, I wanted to mention how excited we are to have Paul Lee as our new Chief Product Officer. Paul has worked on world-class products for Google and was an entrepreneur at Threadloom. He brings a depth of experience in building scaled products and teams, and we think he will be a game changer for the Flora platform. We're pleased to have him on board. With that, I will turn it over to Vince to walk you through the financials in more detail.