VerticalScope Holdings Inc.

Hello, everybody, and welcome to the Vertical Scope Holdings Inc. Q2 2024 earnings call. My name is Sam, and I'll be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star followed by 1 on your telephone keypad. And I would now like to hand you 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 Vertical Scope Holdings' second quarter 2024 earnings call. I'm joined by Rob Leyva, 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 and analysis for the three- and six-month periods ended June 30, 2024, which is available under the company's profile on CDAR+, as well as on the company's website. We 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, 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. Our business performed well in the second quarter of this year, growing revenue by 14% and demonstrating the significant operating leverage we have by growing EBITDA by 29% to 7.1 million in the quarter. Our online forums were leading the way and raising the bar on audience growth by posting a 42% increase in monthly active users as an increasing number of users are turning to online forums to find the authentic perspectives that are trusted and valued in a world inundated with AI content. Overall MAU growth in the business was 23% versus last year. The advertising macro market remains tepid and subdued. For each sign of optimism and recovery, we see subsequent retreat. But our business is continuing to perform well, with overall digital advertising up 20%, with programmatic and video both performing well. The macro still has plenty of room to recover, and we believe there are strong prospects of future ad market recovery as the broader economy finds stability, and that will provide an additional tailwind for our growth. Speaking of a bumpy market, earlier this week we saw a few bumps in the road on the public markets. We think this type of market could be very beneficial to our M&A strategy. We are building up our balance sheet and reducing debt. knowing that our time will come with M&A when buyers and sellers may once again see eye to eye on price. We will be patient and not be rushed to do any transactions. We've been there before and learned our lesson, but at the same time, when the right opportunities arise, we will move swiftly. To hit on the point about the strength of our balance sheet, we are now sitting at 1.5 times leverage, as defined by our credit facility, and produced $6.6 million in free cash flow in Q2. We made $6.5 million of principal payments in the quarter, of which $5.9 million were voluntary. We are continuing to reduce our future interest payments by reducing debt while we build up our financial resources to be well prepared for opportunities that will come our way, whether those be investing in our own product strategy, buying online community forums, or share buybacks. Product-wise, we are continuing to invest in our Fora mobile app as we see an opportunity to really move the needle on our daily active users and overall user engagement. The app is still a small piece of our business, but we think it can be a meaningful one down the road. We've got a great team in place now that we have confidence can make it happen. We are also continuing to experiment with AI and looking at ways to make the user experience better on our communities, including around summaries, better thread titles, and search. We believe there are some sizable wins to be had from integrating these technologies into our 4L platform. Lastly, to answer the assumed question, we did not sign any LLM deals in the quarter and continue to have constructive conversations with multiple providers. We do not intend to provide any further comments on the timing of any potential deals on today's call. As a closing point, I am happy to note that the streamable turned positive on a year-over-year basis on revenue in July. While it's a much smaller property than it once was, we are happy to see it turn positive. With that, I'll turn it over to Vince and Chris.