VerticalScope Holdings Inc.

so by pressing start followed by the number one on your telephone keypad i will now hand the call over to diane you chief legal officer to begin diane please go ahead thank you operator good morning everyone and welcome to vertical scope holdings fourth quarter and full year 2024 earnings call i'm joined by rob laylaw 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 and 12-month periods ended December 31st, 2024, which is 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, 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. We are pleased to report another strong quarter, capping off an excellent year for Vertical Scope. In Q4 2024, we achieved double-digit revenue growth, continued strong adjusted EBITDA performance, generated robust free cash flow, all while executing against our strategic initiatives. The momentum in our business remains strong as we head into 2025, and I want to take a moment to thank our team for their exceptional work in delivering these results. To start, let's highlight our financial performance. Revenue grew by 11% year-over-year in Q4 to $19.9 million, reflecting the continued growth of our horror communities, improving advertiser demand, and our ability to scale efficiently. Adjusted EBITDA increased by 22% to $10.1 million, reflecting a 51% margin as we maintain disciplined cost management while investing in key growth areas. Free cash flow was strong at $9.4 million, a 17% increase year-over-year with a 93% free cash flow conversion, reinforcing our ability to invest in our platform, execute on M&A opportunities, and return capital to shareholders. One of the key drivers of our business remains the secular shift in consumer behavior towards user-generated community content. In Q4, monthly active users increased by 6% to a fourth quarter record 114 million. While MAUs were up 6% in the quarter, we did see some trends similar to what Reddit reported towards the back half of the quarter. This falls within the expected range of fluctuations, and while some was algo-driven, There was a lot going on in the world with U.S. elections. More importantly, we are excited about a number of great initiatives planned to grow MAUs in 2025 by double digits organically, with most of these kicking in around Q2. So we expect Q1 to be within the same neighborhood as last year's results of 112 million MAUs. One of the really promising areas we're looking forward to is international user growth, particularly around AI-powered language translations. We think this is a great opportunity to take our forms worldwide, especially in some of our key high-performing categories like automotive. Additionally, our team's work on user engagement is paying off as we are seeing improving and positive year-over-year growth in Q1 daily active users. which is an exciting indicator of increased user engagement and stickiness on our platform, and an area where we see a lot of low-hanging fruit to continue executing. Diving into our product and technology investments, we remain focused on three key pillars. One, enhancing the 4R mobile app. User engagement on the app continues to grow, and we are investing in new features to improve retention and content contributions. For a mobile app remains small, but will eventually be a powerful platform to build upon with great user engagement. This is a long-term investment for us that we're committed to seeing through. Two, leveraging our strength in product reviews. With continued concerns over AI-generated product reviews, we are doubling down on surfacing real-world user experiences. Users value the depth of discussion on our forums, and we are working to improve how we highlight these insights for those actively researching products and recently launched new product ownership experiences on six test communities with very positive engagement results. Three, optimizing the user experience. As more users discover online forums for the first time, we are committed to making their experience seamless and intuitive. From onboarding improvements to AI search enhancements and AI refined answers, we continue to modernize our platform while staying true to the authenticity that defines for us. Turning next to capital allocation, we are primarily focused on two of the three strategies we outlined in 2024, namely M&A and share buybacks. Notably, the third strategy, debt reduction, is no longer necessary with our leverage at a low of 1.1 times. In Q4, we generated free cash flow of $9.4 million, and we repurchased 238,100 shares at an average price of $8.09 Canadian. In 2025, we will balance M&A and share buybacks depending on what presents the best opportunity. But ideally, it would be M&A as we look to grow EBITDA and free cash flow and expand our business scale. Speaking of, M&A has come back into focus with the execution of our first deal of the year for 20 plus high quality enthusiast product communities from a single seller. We are excited about this first acquisition and feel that our pipeline for 2025 is robust. We continue to surprise ourselves at the discovery of new and interesting communities in the very deep form market and believe we have a unique understanding of how to acquire migrate, and integrate these niche communities onto a common tech platform. Finally, on the topic of AI and LLM licensing, we continue to evaluate partnership opportunities that align with our long-term strategy. We believe our data is highly valuable and will ensure that any agreements are structured in a way that maximizes shareholder value over the long term. We're also very excited about the opportunities to use our own structured data for the creation of new AI user experiences and improved community engagement. We will provide further updates as discussions progress over the next quarter or two. Close. Q4 was another strong quarter, and we entered 2025 with significant momentum. The shift towards user-generated, hands-on, real products content continues to benefit our business. and we are well positioned to capitalize on both organic and inorganic growth opportunities. We're excited for what's ahead and look forward to updating you on our progress in the quarters to come. With that, I'll turn it over to Chris and Vince.

Thanks a lot, Rob, and good morning, everyone. Building on Rob's comments, Q4 capped off a strong year for Vertical Scope, marking four consecutive quarters of double-digit organic revenue growth led by continued strength in our advertising business. Total revenue in Q4 was 19.9 million, up 11% over last year, with gains driven by both MAU growth and ARPU expansion. Our advertising business continues to be our growth engine, and we're really encouraged to see double-digit growth in both programmatic and direct channels in the quarter. E-commerce revenue also improved sequentially by 14% compared to Q3. For the full year, total revenue is $69.1 million, up 13% organically over last year, again fueled by advertising, which was up 20%, and made up 87% of total revenue. These gains more than offset declines in e-commerce revenue, which was lower by 18%, but made up just 13% of total revenue in the year. Looking more closely at our advertising results, ad revenue is $17.4 million in Q4, up 15% compared to prior year, with strength across programmatic and direct sales. Programmatic revenue increased year over year by 17% in Q4 as a result of higher impressions due to MAU growth and stronger CPMs, and made up 66% of total ad revenue in the quarter. Overall, we are really pleased with the advancements our programmatic team has made this year. Our capabilities and revenue sources continue to expand, allowing us to grow programmatically consistently at a higher rate than our audience growth. In Q4, we received demand from over 35 different supply side connections representing thousands of individual advertisers and resulting in competitive auctions that are supporting higher CPMs. At a little under 10% of our total programmatic revenue, video still holds a lot of future growth potential, which we will continue to balance against providing an outstanding user experience. Turning to our direct advertising business, Our sales team delivered an increase of 11% in direct revenue in Q4, and direct sales were 34% of our total ad revenue in the quarter. Momentum that we experienced at the end of Q3 carried through the quarter as we saw increased spending across categories, including automotive, power sports, outdoors, and retail customers. Turning to e-commerce, as I mentioned off the top, e-commerce saw sequential improvement over Q3 and is no longer a headwind to our overall revenue. Representing just 13% of total revenue in Q4, e-commerce was $2.4 million, down 9%, or approximately $200,000 from prior year, but was up 14% compared to Q3 as a result of improved affiliate commerce sales. 57% of e-commerce revenue in Q4 was subscription-based. Looking ahead, there's clearly uncertainty in markets generally as a result of the recent trade disputes, which seem to change hour by hour. Despite these challenges, we continue to see opportunities to grow, including through the AI initiatives Rob spoke about earlier. Our direct bookings into 2025 are up year over year, with continued strength in the categories I mentioned earlier, along with a pickup in a US insurance business. Programmatic CPMs are also holding up well so far in Q1. We've got a very resilient business model and can easily adapt if we start to experience a more challenging economic environment. And lastly, just a few words on M&A. We were pleased to announce our agreement to acquire Enthused Digital's communities. It's a vibrant group of forums that collectively reached 3.5 million monthly active users last year across a number of complementary interest categories, including musical instruments, sailing, and recreational vehicles. We expect these communities to thrive as a part of FORA. Beyond this transaction, our M&A pipeline continues to build, and we expect 2025 to be a stronger year for deals, as we look to capitalize on our financial position to build greater scale. With that, I'll now turn it over to Vince to walk you through the rest of our financial results.