VerticalScope Holdings Inc.

My name is Brica and I will be your moderator for today. All lines are on mute for the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind and would like to remove your request to speak, please press star and two. And for operator assistance at any point, it's star zero. Thank you. I would now like to pass the conference over to your host, Diane Yu, Chief Legal Officer, to begin. So, Diane, please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to the Vertical Scope Holdings first quarter 2024 Earth 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 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 31st, 2024, which is available under the company's profile on CDER+, as well as on the company's website. You were 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 Holdings. Rob?

Thanks, Diane. Good morning, everyone, and thank you for joining us today. The strength and profitability of our business model was on display in Q1. We carried the momentum that we have been building through 2023 to deliver impressive results, including 78% growth in adjusted EBITDA. Our teams have been hard at work, and I'm very proud of their accomplishments. We delivered both organic revenue and MAU growth in the quarter, while ramping up our capital deployment strategy to include share buybacks and M&A, including closing our first acquisition of the year in recent weeks. I am pleased to report that all trends have continued into Q2, while MAU growth percentages year over year are continuing to accelerate. I'd like to take this opportunity to really talk through what I think is happening in the market and why this has become a perfect storm for Fora and will drive years long organic growth for our business. Over the past year, we have witnessed a radical shift in online consumer behavior. This change in behavior resulted from some bad actors and particularly around product reviews. Starting with the massive boom of e-commerce during COVID, thousands of online publishers rushed into the business of product reviews in order to cash in on robust affiliate commission revenues. They took the Wirecutter model, a legitimate and reputable product review website, and simplified it into its easiest form. Write articles, make them look authoritative, and then search engine optimize the hell out of it. The problem was, They were never even touching the product. And they were really just giving ratings based on the highest commission rate available. Suddenly, every mass media publisher was doing reviews of everything from air fresheners to vacuum cleaners to car batteries and motorcycle helmets. And it was working. You would see recognizable brand name publisher sites alongside random websites you've never heard of. And you would never remember writing hundreds of these reviews per month using offshore freelancers. And then suddenly, in November 2022, with the launch of ChatGPT, a whole new level was unlocked. In a nearly fully automated fashion, they were now able to write thousands or even tens of thousands of reviews per day. The internet was flooded. And that is when the shift happened. Suddenly, users started searching for and appending to their search queries words like forums and Reddit. Why? Because they didn't want to get 10 search results from these bogus or fake product reviews. They wanted authentic user-generated content from forums and Reddit, authentic perspectives from real-world owners. You see, what happened is more people started actively seeking out forums. Instead of being limited to enthusiasts nerds and geeks, forums became more mainstream. Suddenly, our content was needed and became authoritative. Google even introduced a new section on their search results called Perspectives, which just recently in March was renamed Forums, where they gave premium placement to real-world user reviews and content. And the traffic on Fora started to jump. In Q1, MAUs were up 24% versus last year, to 75.7 million, and that number is continuing to accelerate. This isn't a small change. We are in the middle of a radical shift caused by the proliferation of AI and low-quality content. Users have turned to and embraced forums and user-generated content. Our strategy of authenticity is playing out. It's something I've believed in for years, but it's always been limited to being niche, but now it's becoming mainstream. Users are coming to us and seeking us out. And the Reddit IPO has legitimized this space. It's brought more attention to online forums. They are helping to showcase the value of what we've built. We benefit in so many ways from the growth of Reddit as users become comfortable with online forums and want to go deeper on topics of interest. They are a great comparative for our business, but we also have separate and distinct value to our users. we are both benefiting from the shift in consumer behavior towards user-generated content. Next, I will speak briefly about LLMs and the opportunities around licensing deals and the importance of our data in this competitive marketplace. The Fora platform has incredible momentum right now. We have over 2 billion posts of content with the ability to increase that through both organic initiatives and M&A. Given the shift in the market that I just spoke about, we have to be very deliberate here in understanding the true value of these authentic perspectives. It is not a time for short-term thinking. These are real world users sharing in-depth knowledge on very niche and high value products over the past 10 plus years. When I go back to the earlier days of Vertical Scope, as we were aggressively buying and starting online communities, We had one focus. It was on high value consumer products and particularly enthusiast niches. We focused on communities and automotive where people were discussing car purchases, aftermarket parts and high value repairs. We became number one in power sports and outdoors for motorcycles, ATVs, fishermen and hunters. We also have communities for high end home theaters, audio, luxury wristwatches, snowboarders and so many more. We never focused on memes or news or pop culture. Instead, there was a common focus, consumers buying products that they needed and they deserve to hear from other real world owners. It was categories where spending a little extra time online to research and get the really good information was worthwhile. Today, with the flood of AI and low quality content, the authentic perspectives shared on our forums are incredibly valuable. This is the reason that AI and LLMs will love our data and will pay for it. They need it because the consumers want it. Our strong balance sheet and organic revenue growth allow us to be long-term stewards of the business and our communities. I have very high conviction in the importance of our data and will ensure that when we sign any LLM licensing deals, it will be from a position of strength with a view towards long-term shareholder value. Next, as we look at our product outlook, we are well positioned, have a strong balance sheet, an incredible team, and are continuing to invest in the floral platform. Having over 1,000 forum communities on one common platform is incredibly powerful. And with increased consumer interest in online forum communities, we are able to scale quickly. We have three pillars that we are focused on. The first is our forum mobile app. We believe the opportunity is timely to drive increased growth on our app, improve the user experience, and drive user engagement and repeat visitation. We believe we can grow content contribution, and in particular, rich content, such as photos and videos from our users' mobile devices. While the app still remains small in overall terms, we are working hard on responding to our users' requested features while improving user retention for the long term. The second is our focus on products that our community members own, repair, and love. I've already talked about poor quality product reviews on mass media websites, many of them written by AI. This is where our forms really shine. We deliver authentic content from real world owners And we will be focusing on exposing more of this content in a user-friendly manner to those who are shopping for enthusiast products and want to hear from other people, real people that are just like them. And third, we are continuing to focus on delivering better user experiences and to modernize online forms, particularly for new and novice users that are increasingly finding communities like ours and those on Reddit. We want them to join and learn from the extensive knowledge that is in these helpful communities. The results speak for themselves. Our forum communities are winning of scale, and the benefits of the Fora platform are clear. We grew MAUs by 24% year over year, and that momentum has accelerated into Q2. Last year, we added video advertising to the platform. And the growth and demand there has been robust, with sequential growth from Q4 to Q1, and again, accelerating into Q2. Lastly, I will spend a minute on our capital allocation strategy that we discussed last call. It consists of three pillars, reduced debt, buyback shares, and a creative M&A. In the first quarter, we generated free cash flow of $5.2 million. In turn, we chose to reduce our debt during the quarter by $3 million, of which 2.4 million was voluntary repayments. Year to date, we have repurchased approximately 117,000 shares at an average price of Canadian dollars, $7.44. We had a very short trading window due to the timing of Q4 and the blackout period. We believe our stock price continues to be disconnected from the value of our business And looking at the performance of our closest competitor, Reddit, we believe there is a lot of upside to the value we've created. Lastly, we completed our first M&A transaction, a tuck-in deal in Q2. We will have more tuck-ins to do this year, all in the forum space and likely all from our own proprietary pipeline. Nothing massive, just great, solid online communities. that will reward our shareholders with growth and free cash flow for years to come. Free cash flow is the focus, and we do not anticipate doing any technology deals or share deals. While we love the idea of adding more scale to our business, discipline and focus is critical here. And when we can't find great deals, we're thrilled to be buying back shares or reducing debt. With that, I'll turn it over to Vince and Chris.