VerticalScope Holdings Inc.

Hello all and welcome to the Vertical Scope Holdings fourth quarter and full year 2023 earnings call. My name is Lydia and I'll be your operator today. If you'd like to ask a question during the Q&A you can do so by pressing star followed by the number one on your telephone keypad. I'll now hand you over to your host Diane Yu, Chief Legal Officer to begin.

Thank you, operator. Good morning, everyone, and welcome to Vertical Scope Holdings' fourth quarter and full year 2023 earnings call. I'm joined by Rob Laidlaw, our founder, chair, and chief executive officer, Vince Bellissimo, our chief financial officer, and Chris Goodridge, our president and chief operating officer. We'll begin with commentary on the corridor 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 and analysis for the three and 12-month period, ended December 31st, 2023, which is available under the company's profile on CEDAR Plus, 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, free cash flow, free cash flow conversion, and MAU, 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, chair, and CEO of Vertical Scope. Rob?

Thanks, Diane. Good morning, everyone, and thank you for joining us today. I was very pleased with the performance of the business in Q4. We continued on the momentum that we've been building throughout the year and saw some nice gains on both fora MAUs and on digital advertising revenue. These positive trends have accelerated in Q1 2024. Our business has recovered well since a challenging start to 2023. Digital advertising, which now accounts for 85% of our revenue, grew by 6.5% in the quarter. Our new video advertising platform was a key driver of this growth and we have been impressed with the advertiser demand for video in Q1. Our advertising business typically experiences its strongest quarter of the year in Q4 and the weakest in Q1. We are seeing video revenue actually sequentially grow between these two quarters. It's impressive and there's real excitement around this new platform addition from direct advertisers and programmatic partners alike. Commerce continues to remain challenging, but now that it's about 15% of our business, there is much less of a growth headwind for us and more of a future opportunity. Despite lower revenue, we have recently seen an uptick in streaming conversions and are introducing some new engagement tools and user subscription packages to these websites. We're continuing to put in the scrappy work required to build a bright, long-term future for these properties. Our product initiatives for 2024 are largely focused on three key areas on our forum communities. First, we are continuing to invest in the Flora mobile app. We are adding new user functionality based on feedback on a weekly basis and focused on delivering a high-quality user experience as we continue to observe that users who are on the app are more engaged in contributing more content than those on mobile web. We are very long-term focused on the mobile app and believe we have plenty more work to do, yet at the same time, happy to build momentum with our user base. Second, we are investing in our core forms experience on Fora and making it easy for our members to contribute valuable content. We have over 2 billion posts on our platform, And we think we can grow this number even faster, which in turn will drive further growth on MAUs. Third, we can continue to believe we have a unique characteristic in our online forums. We have authentic enthusiast audiences discussing products that they own and use and are very passionate about. By utilizing AI to improve the organization of post feeds, we believe there is immediate potential for increased engagement and time on site and on app. This is just one area where we think AI will help grow our communities. Next, I would like to highlight the impressive traffic growth on our forums, which grew by 18% in Q4, from 61 million to 72 million MAUs. Overall, Vertical Scope clocked in at 108 million MAUs in the quarter, which if you exclude the paid traffic, primarily driven last year by our commerce business from the year-over-year results, overall MAUs were up 5.4% versus 2023. We are seeing continued momentum and growth in Q1, and this should be further enhanced as Google increased its crackdown on low-quality AI-written content with its announced March algorithm updates. It is clear now that users are seeking authentic, real enthusiast opinions on products and services and they are finding them on forums like our own and those of reddit we are winning the minds of users versus the low quality ai content that is flooding the internet in the past few weeks we've had a number of questions around reddit with their upcoming ipo and in particular their deals with various ai llms we believe that we share similarly attractive characteristics as reddit in the value of our posts and content for AI training data. We also believe we are differentiated by the enthusiast audiences that are primarily posting about products they own and love on our communities. This unique data is highly valuable in an AI world, and we have to be extremely careful about how we treat it. We are in the early stages of this highly confidential process, but we are confident that AI will help us further unlock our platform's value. Before I turn it over to Vince and Chris to walk you through the quarter financials, I wanted to spend some time on capital allocation. Since last January, we have reduced our debt by over $17 million and today sit with a net debt position of less than $50 million with high confidence in our business prospects. We will continue to consider voluntary prepayments against our credit facility. However, we have strong conviction that there are attractive opportunities to put our free cash flow to work in other ways as well. As mentioned in our press release, we will be focusing on two key areas dependent on which is most accretive to our shareholders. First, we believe that the business we know best, have a high degree of confidence in, is our own. We believe there is an attractive opportunity and perhaps a very time-limited one with Reddit's upcoming IPO resetting our comparable set to repurchase our own shares through our approved NCIB program. We will be aggressively buying back shares if we can do so at attractive prices. Second, we believe that AI has welcomed a material improvement in our long-term revenue and traffic opportunity for our forum communities, and this makes tuck-in acquisitions very attractive. We will look to add more high-quality, product-focused forum communities to our platform at accretive multiples. Most sellers are seeing the same opportunities that we are and may be reluctant to sell to us at an accretive multiple. But we will remain disciplined in adding scale if multiples are not accretive. With that covered, I will turn it over to Vince and Chris to go into the numbers on Q4 and full year 2023. Chris?