VerticalScope Holdings Inc.

Hello everyone and welcome to the Vertical Scope Holdings Inc Q4 and Full Year 2025 Earnings Call. My name is Emily and I'll be coordinating your call today. After the presentation you will have the opportunity to ask any questions, which you can do so by pressing Start followed by the number 1 on your telephone keypad. I would now like to hand over to Diane Yu, 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 2025 earnings call. I'm joined by Chris Goodridge, our Chief Executive Officer, and Vince Bellissimo, our Chief Financial 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 period ended December 31st, 2025, which is available under the company's profile on CDER+, 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 Chris Goodrich, CEO of Vertical Scope. Chris?

Thanks, Diane, and good morning, everyone. Thanks for joining us today. Throughout 2025, the digital landscape underwent a significant structural evolution as AI began to reshape how users discover and interact with content across the open web. While this change has naturally impacted historical search to programmatic patterns, the hallmark of Vertical Scope has always been our ability to adapt, evolve, and seize the opportunities that arise from change. Our team is operating with a high degree of focus and a clear-eyed strategy to win in an AI-centric world. The speed of our execution is a direct reflection of the scrappiness and curiosity inherent in the Vertical Scope DNA. And I want to thank every one of our team members for staying true to the authenticity that makes our communities great. These values are exactly what will drive our next chapter of growth. Our strategy in 2026 continues to have four key components. First is growing our direct connections, both with our users and advertisers. Second, diversifying our revenue sources. Third, AI-driven product growth. And fourth, leveraging our strong liquidity position and cash generation to make disciplined investments to accelerate our growth. Despite the enormous amount of change happening around us, we've built a stable and resilient foundation from which to grow. Our monthly active users reached 86 million in Q4, representing a sequential increase from 83 million in Q3. This result is the product of a deliberate strategy. We're prioritizing the growth of our high-intent direct user base while simultaneously scaling our ability to acquire new audiences. We expect this stability to continue through Q1 and provide a foundation to expand our overall NAU as the year progresses. I'll offer a few comments on our results in Q4, and then Vince will walk you through the details. Although we continue to see our year-over-year performance impacted by search-driven traffic patterns that emerged in Q1 last year, our Q4 results represent a turning point for Vertical Scope. We're reporting sequential improvements across every one of our key performance indicators, MAU, ARPU, revenue, adjusted EBITDA, and free cash flow. First, our revenue improved 5% sequentially in Q4 and came in at 15.4 million. Year-over-year revenue was down 23%, almost entirely as a result of lower programmatic advertising compared back to a very strong Q4 for both traffic and CPMs last year. Open market programmatic CPMs showed some uncharacteristic softness in the quarter and didn't enjoy their normal seasonal spike. We think our experience there is largely in line with industry trends, but we also expect this to improve in 2026 and get back to more ordinary seasonal patterns. Direct advertising was relatively stable, coming in 1% lower year over year in Q4. However, our added focus on this channel is setting us up for a great start to the year with our direct bookings for 2026 already up double digits over last year as of the end of February. We're seeing strength across automotive and outdoor brands that are seeking to reach our authentic audiences, and we've also won significant new mandates with insurance customers and telco customers in both the U.S. and Canada. E-commerce had a third straight quarter of growth. It was up 21%, and we continue to see a lot of opportunity to build out our e-commerce business in 2026, led by our AI-focused product initiatives on Fora. And finally, we continue to demonstrate strong profitability in Q4, with adjusted EBITDA margins hitting 45% and our free cash flow conversion reaching 101%. Our financial discipline will give us the flexibility to continue to adapt and make investments to accelerate growth. Turning to our product development initiatives, our team has been hard at work to unlock the growth potential of AI across our platform, and we're seeing tangible results from these efforts. Vertical Scope is well-positioned to build new AI-driven offerings, given our enormous data sets and high-quality user-generated content. AI is allowing our teams to build new products and scale them faster than ever before. We continue to roll out translations, and it's proving to be a steady source of growing traffic. Our mobile app also continues to gain users every day, and we're starting to unlock new multi-community experiences to drive stronger network effects, improving both engagement and retention. And our AI-powered community assistant, Fora Frank, is making an incredible impact in our communities and driving deeper engagement and posting activity. In fact, we're seeing close to a 40% increase in posting rates for new users when they've received a reply from Fora Frank. Going forward, we see many opportunities to expand Frank's capabilities, driving engagement higher and powering new commerce experiences. One of our AI initiatives that we're most excited about was beta launched in Q4 and is quickly having a noticeable impact on our results. We call it Audience Engine. It's built by our team and uses AI and advanced data signals to identify and engage high intent users across multiple platforms and monetize them in the most efficient way possible. It expands our historical strength in building intent-based communities beyond organic search and allows us to proactively attract users aligned with our vertical expertise. This capability complements our existing high-quality communities. Our form audiences remain deeply engaged, and we're now adding scale on top of that engagement. It also reinforces the core vertical scope flywheel. More relevant users mean better advertiser and commerce outcomes, which funds further audience expansion. The early results are impressive. Audience engine has gone from initial beta launch in Q4 to hitting a run rate of 1.4 million in annual IP dot in January, and the current growth rate has us on a path to double that by the end of Q2. This is a really high margin source of revenue, and we expect to maintain high margins as we scale up the operation with AI rather than headcount. There will be a lot more to come on that in the quarters ahead. Turning to data licensing, while this has not yet emerged as a primary revenue driver, we're maintaining a patient and disciplined approach to ensure we're maximizing the long-term value of our content and data. We're encouraged by industry progress towards more robust legal and technical frameworks, such as the RSL Collective, which is building early momentum among platforms and publishers. However, the current landscape remains a challenge as large language models continue to bypass traditional robots.txt protocols in terms of use. Industry leaders like Reddit and traditional publishers are taking legal action against these practices and will remain vigilant in protecting our rights and platform as well. To that end, we implemented Tolbit's technology last September to block and redirect unauthorized AI bot traffic. While monetization through the platform is in its early stages for all partners, the insights we've gained are powerful. Between the launch in late September and the end of January, we blocked and redirected a staggering 415 million scrape attempts from the leading LLMs. Perhaps the most telling metric is this. Tolbit now works with over 7,000 online properties that Vertical Scope alone accounts for over 20% of all AI bot requests through their entire platform. To us, this is a clear signal of market demand. We'll continue to aggressively block these unauthorized attempts until we reach commercial agreements that fairly value our content. We remain in active engagement with major AI players, but we're prepared to pursue all avenues to ensure our assets are protected and properly valued. Finally, before passing the call over to Vince, I'll touch briefly on capital allocation. We completed two additional tuck-in acquisitions in the fourth quarter, bringing our total to six for 2025. These were disciplined high-value additions that fit squarely within our enthusiast ecosystem. We entered 2026 with our strongest liquidity position in several years and with very low leverage. Our philosophy on capital remains clear. We believe the highest return use of our cash is an investment in growth. This includes discipline M&A pipeline focused on assets that accelerate our core strategy, specifically those that deepen user connections, fuel AI-driven innovation, and further diversify our revenue through high-growth channels like e-commerce. We'll continue to be opportunistic but rigorous, ensuring that every acquisition is accretive to the high margins and robust free cash flow generation that have become the hallmarks of Vertical Scope's business model. In closing, 2025 is a year of strengthening our foundation and reestablishing our core growth drivers. We've built a resilient cash flow positive machine and with a strong balance sheet to support our ambitions, we're ready to take a leap forward in 2026. With that, I'll turn it over to Vince to walk through the numbers in more detail.

Thanks, Chris, and good morning, everyone. 2025 was a year of disciplined retooling, especially during this last six months of the year. We focused our execution on what we can control, our operational efficiency, our direct relationships, and our ability to generate significant free cash flow. We delivered on what we said we would, finishing the year with $21.1 million in adjusted EBITDA and converted these profits to cash at an impressive 94% conversion rate. Our disciplined approach to managing our operations continues to fuel a very strong financial position. providing us with the strategic optionality we need to drive our next phase of growth. Revenue in the year was $58.1 million, down 16% the prior year, and revenue in the quarter was $15.4 million, down 23% year-over-year. The quarter's results was largely driven by a 29% decline in digital advertising revenue as a result of lower revenue and the subsequent impact on programmatic impressions. This was partially offset by 21% growth in our e-commerce channel, including incremental contributions from our acquisition of Ritual Technologies. While programmatic was under pressure, we saw resilience in our direct advertising channel, which finished the quarter down 1% to prior year. The growing demand of these direct campaigns is a clear signal of the enduring value of our contextually relevant audience. Despite the top-line headwinds, we successfully maintained a 45% adjusted EBITDA margin in Q4 and generated $6.9 million in adjusted EBITDA and converted 101% of these profits to free cash flow, primarily driven by prior period cash tax refunds deposited in the quarter. Excluding these refunds, we converted adjusted EBITDA to free cash flow at a very healthy 94%. This performance was a direct result of the structural changes we made in mid-2025, where we pivoted toward smaller action-oriented teams that are focused on tangible results. By delivering greater than 40% adjusted with our margins across the second half of 2025, we have proven that our strategy and quick response is working, and we are now well positioned to drive further margin expansion in 2026. Operating expenses in the quarter were 16.9 million, down 2% from the prior year. Excluding non-cash items such as share-based compensation and depreciation and amortization, operating expenses were down 11% compared to the prior year, largely driven by savings generated from lower headcount and reductions in discretionary spending. This was further aided by operational optimizations within the Ritual platform as we further integrated the business into our infrastructure. As we look to 2026, we see further opportunities to optimize our operations through AI. We are looking beyond co-pilots and chatbots, and our focus is now on agentic workflows that connect directly to existing software and databases. This allows us to automate high-volume busy work without adding headcount, and we are working to give our non-technical team the tools and resources they need to get there. This is a new and exciting opportunity, and one we expect will have a meaningful impact on our cost structure. Turning to earnings, we generated an $8 million net loss in the year, primarily driven by a $21.2 million non-cash depreciation and amortization expense, largely related to acquired intangible assets. On a cash basis, our business remains extremely profitable. For full year 2025, we generated $18.5 million in cash flows from operating activity and free cash flow of $19.7 million, reflecting a 94% conversion from a , extending from a 92% conversion in the prior year. This is a direct reflection of the cash-generative nature of our business model, as well as our position approach to deploying capital towards internal initiatives and a very efficient corporate tax structure. driven by acquired tax assets and ongoing optimizations. This discipline allowed us to triple our cash position for the year and exit 2025 with $16.4 million in unrestricted cash, which is our highest year-end cash balance since 2021. Our $72 million in liquidity is also another multi-year high and supported by $56 million in funds available to draw at our revolving credit facility. We have a strong balance sheet thanks to our aggressive approach to deleveraging leading into 2025. Our net debt position is now $28 million with a very favorable cost to service as a result of our low leverage profile. Our leverage ratio as per our credit agreement is 1.4 times and is anticipated to trend downward as the year progresses. This gives us substantial optionality to deploy capital towards high conviction growth areas, including AI and targeted M&A. As we look ahead to 2026, our financial results will be driven by three key areas of focus. The first area of focus is protecting the profitability and high fee cash flow our business generates. We will work to leverage AI to build scalable processes that will in turn drive operating leverage and incremental margins to our results. In 2025, we generate 36% adjusted EBITDA margins and free cash flow conversions of over 90%. And our goal is to meet and even exceed these results in 2026. A reminder that our business does have seasonal patterns that see adjusted EBITDA margins at a low point in Q1 due to seasonal lows in revenue and growing sequentially from there to peak profitability in Q4 driven by seasonal activity in both e-commerce and digital advertising revenue. We experienced that in 2025 with Q1 adjusted EBITDA margins of 27% and Q4 margin of 45%, and we don't expect that pattern to change. Second area of focus is revenue growth, driven by three primary factors, MAU stability, yield expansion, and new channels of monetization. In terms of audience stability, we witnessed sequential growth in MAU during the second half of 2025, driven by stabilizing search traffic and our focus on initiatives aimed at driving direct users to our communities. Our MAUs will continue to experience difficult year-over-year comparables as we lap the March 2025 Google Core search algorithm update. As we fully cycle through these legacy traffic headwinds into the second half of the year, we move from a period of lapping to a period of leveraging our stabilizing MAU base. This creates a clear window for our underlying stability to translate to organic growth across both our MAU and programmatic revenue channels. Improving trends from our direct advertising channel are expected to drive higher yielding results across our platform. In Q4, direct sold campaigns were approximately 40% of digital advertising, which is a high watermark for the channel and speaks to the value of our authentic and contextually relevant audience in a world of AI content discovery. We are seeing encouraging trends to start the year, and these trends position the channel well to drive growth results as we move towards the second half of 2026. And finally, the path to revenue growth is expected to come from a combination of existing and new channels of monetization. We spoke about the encouraging trends from direct advertisers, and Chris highlighted the AI-driven scale of our audience engine. We will also continue to look for ways to unlock the value of our extensive archive of authentic human discussions, including expanding e-commerce across our platform and harnessing AI to create data-driven products and experiences aimed at growing our group and driving value for both our customers and users. A third area of focus will be our ongoing discipline towards capital stewardship. As a team, we pride ourselves on the financial strength we have been able to build, and we won't let that hard work go to waste. Our balance sheet gives us the flexibility to continue to make smart investments in AI-driven growth and optimization and remain opportunistic towards a creative M&A and other capital deployment opportunities that will maximize the value for our shareholders. In closing, we are very excited about the year ahead. AI continues to be a powerful unlock for our business, and we have only scratched the surface. We've seen improving engagement metrics from Fort Frank and the scale that our audience is expected to deliver for our business. Our teams will begin to adopt agentic-based tools that will further streamline our operations and drive meaningful operating leverage to our results. We believe in the enduring value of our communities and the authentic content we have, and we have a strong balance sheet that allows us to strategically invest in areas that drive long-term value for both our shareholders and employees. And with that, I'll turn it back to Chris for closing remarks.

Thanks, Vince. I think at this stage we're ready to open it up to questions.

Thank you. We will now begin the question and answer session. If you'd like to ask a question today, please do so now by pressing start followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press start followed by two to remove yourself from the queue. Our first question today comes from Drew McReynolds with RBC. Drew, please go ahead.

Yeah, thanks very much. Good morning. Maybe just clarifying a few things on the 2026 outlook, either for you, Chris, or Vince. Just following the commentary on EBITDA margins, you know, obviously the obvious question is does that all translate to renewed EBITDA growth in 2026? So I guess we'll start there. And then secondly, on the outlook, it seems as if across most of the KPIs on a year-over-year basis, if I'm reading the commentary correct, the hope is to kick in the growth, you know, across most of your KPIs in the back half of 2026. Is that the right interpretation here?

Yeah. Hey, Drew. This is Vincent, and thanks for the question. On the adjusted EBITDA growth, you know, our cost base at the moment is very stable. And as we said, you know, during the call, we like to leverage additional tools, not to grow our cost base, but to actually contract it and really, you know, optimize our operations further. So based on that, you know, any incremental revenue we see from things like audience engine or the direct advertising side will make its way through to the bottom line and ultimately create, you know, year-over-year EBITDA growth.

Okay. Okay, thank you. And then, secondly, you know, maybe, maybe for you, Chris, like, obviously, just a, you know, eventful 2025, just with everything going on, when you look at your 1300 or so communities, and you know, you look at this new world, in terms of, you know, what your what your members are looking for, and how they interact. Are there different verticals that, you know, you would kind of deem incremental winners here as you kind of deploy AI, you know, across these communities. And then, you know, the flip side is, you know, are there other kind of verticals or communities where, you know, simply there's other substitutes for finding what people want? Just trying to understand how kind of the base of communities and how that evolves over time here, just given, you know, the 12 months of kind of experience in this new world under your belt?

Yeah, thanks, Drew. It's a great question. And I think what we've seen with our platform, kind of where we really retain, you know, that traffic is in, you know, with the queries that are a lot more complex, right, where they have a lot of nuance involved. where, you know, the discussion and the opinion, really the opinion of the user base is really valuable. The surface type questions where we would get incidental traffic from, you know, AI overviews for the most part is capturing that and has captured that. And that really is the experience we saw in 2025. And so, when we think about the core, and what we have, both, you know, the direct user base, but also what comes to us through search channels. It really is those questions where there are no other answers, where the opinions of the membership really, really matter. And if you think about, you know, where we started the business in categories like auto, and then you go into things like home improvements, these types of areas where you get into really niche topics, really specific types of expertise that is really only found within our communities. And so that's the stable core that we, you know, we have and, you know, where we're feeling confident in the overall stability and the role really that the communities play. The other thing I think that's really important about the community aspect, you know, as opposed to, you know, the AI answers that you would see is that exact point around interaction, right? The dialogue with other people that are sharing their lived experience, right? AI can certainly, you know, replace, you know, basic questions around, you know, things like recipes or, you know, a price of a certain product, these types of things. But when you need to go a lot deeper and you really want to experience what someone else has experienced, there's no substitute for community, right? And so, you know, with a lot of these things, you can see things go in waves and pendulums swing in different directions. And, you know, we think the strength of that core, really across the verticals we focused on, you know, that the pendulum can swing back in the favor of that human authentic content. And And just to comment on AI and what it can do on the platform, we see it very much as a complement to that, right, not a substitute. And that's incredibly important to think about. So when we talk about, for Frank, it's not there to just generate a bunch of, you know, AI posts. It's there to actually be a tool for our communities to be able to, you know, engage further, right, to help them find the content that can be buried within threads within the communities. And then if you take a step even further where, you know, we believe things are going on the Internet towards agents that are performing a lot of tasks on behalf of people, you can see some really powerful use cases with respect to Fora Frank, you know, whether that could be as a shopping companion, kind of helping people make purchases, maybe even helping them complete the purchases, like really using the leverage and the power of the community. So... You know, when we talk about this great data foundation we have and user-generated content foundation we have to make those things possible, we really do think we're in a special position to win in this space. So I agree it was a noisy 2025, but, you know, our team's feeling very, very optimistic given the strength, the underlying strength of our communities.

That's a really good context, Chris. Thanks for that. And one last follow-up. You know, as we think about the e-commerce segment, just for the broader company, and, you know, you alluded to kind of agentic commerce as an opportunity. You know, what are your expectations for, you know, and it's not really a financial question, although it could be like, how should we think about kind of the blue sky here on e-commerce through the medium term? Like is this something that could, you know, materially drive e-commerce revenues higher just given just the evolving, you know, landscape that you're seeing?

Yeah, we certainly think so over the long term, although I think it's fair to say that, you know, even with all the investments that you're seeing, you know, in the AI experiences, whether that's ChatGPT or Gemini, like the protocols have been built and the big players like the Shopify's of the world are heavily invested in it and trying to see, you know, make transactions happen in those experiences. But I think it's fair to say that even in those environments, it hasn't really taken off yet, right? But there are a lot of bets being made, a lot of investment being made. We see ourselves as really potentially, you know, complementing that because people are in our communities, you know, discussing those products or services. A natural extension from that is to make it really easy, you know, for them to compare products and to actually purchase. And that's really unlocked with those agendic capabilities, right? So I think the right characterization is to say it's early, but it's early for everyone. But we're really cognizant of where that's going, and we want to make sure we can play in that space.

Okay, that's great stuff. Thank you.

Thank you. The next question comes from Gabriel Lung with Beacon Securities. Please go ahead.

Good morning, and thanks for taking my questions. Chris, you know, with 60-plus days of the year now under your belt, I'm curious, are you seeing any I guess industry trends that's making you more cautious, more optimistic about how sort of MAU and ARPU metrics will play out in Q1 and maybe over the course of the year, especially relative to 2025?

Thanks, Gabe. So, yeah, you know, MAU started off the year, I'd say, relatively stable. We're, you know, the Google noise, there's still a little bit of that. We're offsetting that with direct and, you know, with our new audience engine product. So we think, you know, the stability can continue. With respect to ARPU, so the main drivers for us, obviously commerce is a factor, but, you know, advertising is still a bigger factor. The direct side of things, I think, is where we get sort of the most, Immediate feedback with respect to bookings, I mentioned earlier that really strong start to the year and it's not just one or two advertisers, we're seeing something quite broad. When I asked our sales leadership around what's driving that, one of the common responses I get is that our customers are really seeking out authentic audiences, authentic experiences, human connections. You know, if that trend continues, that really certainly sets us up well because that's what we offer. And so that has been a really good indicator for us. The programmatic side, we saw this kind of typical seasonal change with respect to CPMs to start the year, and we're seeing the typical seasonal progression higher as the quarter goes on. Obviously, a lot turns on how March continues to develop because March is is always the strongest month of the quarter as the annual budgets reset. But so far, the indicators we see are as we would expect.

That's awesome. I appreciate the feedback. And secondly, just in terms of M&A, given some of the trends we saw last year, I'm curious, you know, has, you know, has the, have you been seeing more inbound sort of M&A opportunities, number one, and number two is, are you seeing more favorable valuations attached to them?

Yeah, great, great questions. For sure. Inbound was actually quite, quite high through sort of the end of last year, you know, dipped a little bit over the holidays, and then we, you know, we saw it pick up. You know, we've, You know, one of the things about our pipeline and sort of the unique nature of the assets that we buy, we're usually one of the only buyers at the table. And so oftentimes the inbound is someone we've talked to two, three, four years ago, and that's certainly been the case. You know, some of those changes, obviously, that came through the system in 2025 have impacted a lot of those targets. And so by very nature, it makes the valuation discussion a little tricky. And is it LTM or run rate? And we're certainly thinking about things through a run rate lens. So it makes those conversations a little bit more complicated. The other thing is I'd say our focus is narrowed even more, right? Like we've always been very particular about the acquisitions we make. But I'd say we've narrowed it even further. Like we're looking for those assets that have really strong direct audience attributes like a lot of our communities. We're looking for, you know, revenue bases that are a little bit more diversified, so heavier e-commerce, more direct, these types of things. And so, you know, obviously the more you narrow your focus, you know, the longer it takes to land some of these things. But we do have some in the pipeline that we really like. And, you know, we expect to use some of that free cash flow to close on some of those as the year progresses.

That's great. Thanks for the feedback and congrats on the progress. Thank you.

Thank you. Our next question comes from Todd Copeland with CIBC. Todd, please go ahead.

Yeah. Hi. Good morning, everyone. I wanted to talk about the potential of AI for reducing your costs in 2026. Can you just give us an envelope on what the potential is there? So, you know, for example, if revenue is flat, you know, What's the operating leverage range and the key areas that you'll get the pickups from? Thank you.

Yeah. Hey, Todd. It's Vince, and thanks for the question. Yeah, so the opportunity ahead of us, you know, the way we see it is in today's world, a lot of our, you know, our technical teams have adopted, you know, AI, you know, from a coding perspective, from a Q&A perspective. But we're seeing, you know, less adoption across broader non-technical teams. We think new products in the world, you know, such as closed co-work will help us really drive more of an agentic approach to operations. So if you can picture a world where, you know, agents are talking or looking directly at your database, connecting directly to your email, ERP, and other things of that nature, and really help drive and automate some of that, you know, mundane, what we call busy work that really adds no value, both to the employee or the business. We think the opportunity is high, but it will take some time to roll this out. This isn't necessarily something you can do overnight. So this is something we're going to start looking at right now, and we expect to accelerate sort of the tools we use the second half of the year. And, you know, the primary cost buckets, there's two primary cost buckets that actually you'll see a benefit from that. Maybe the wages line as we, you know, not necessarily cut heads, but not necessarily have to add additional heads as we scale. And also things like software expense, right? We saw, you know, with the launch of Quote, you know, fast companies and evaluations and the hit they took. It's because the opportunity is real. rather than relying on a third-party software to automate some purchasing workflow or AR workflow, whatever it may be, we can now build these bots in-house that will really help automate that. So you'll see benefits to the wages line. You'll see benefits to our platform and tech line as well.

Yeah. Just a quick follow-up. So when we see Block come out and say they're going to save 40% from automation, I mean, are you thinking about it in that magnitude, or is it, you know, smaller percentages?

Yeah, it's too early to tell. Clearly, there's a couple of youth cases out there that show that 40% is attainable. It's too early for us to tell, but we do think the savings will be meaningful.

Yeah. And then the second question I had is on your audience engines. if I understood the description correctly, you're sort of prompting more activity by users. I don't know if it helps bring new users to the forums. You talked about the higher engagement. How meaningful could that be for either malgrowth or, I guess, your ad rate perhaps increasing if you continue to see that type of pickup? Can you just talk about that potential? Thanks a lot.

Thanks, Todd. Chris here. Yeah, so we call it out because we do think it has high potential going from nothing to something fairly significant within a couple of months. And so we expect that to continue to pick up pace as we enter into Q2. And then, you know, seasonally, the back half of the year being stronger, you know, we can see the contribution from that continue to grow, right? And It is bringing in MAU, and it is also driving revenue as well. So it's the best of both. We focused on verticals where we have good experience at this stage and where we know we can monetize well, but we can see it continuing to expand. And, again, it's moving from a relatively kind of passive posture as it relates to traffic patterns and being more assertive with how we go out and find users. And it's a technology we control. So it's something we are really excited about. I think when we report back in – what is it, eight or nine weeks' time, not too long from now. We'll have more to share on it at that time. Todd, I think, you know, probably have a better view on how it's going to impact the back half of the year.

Great. Thank you. And, you know, I'll just point out that it's interesting to hear this. It's also interesting to hear how you're using Claude's co-work. I appreciate that transparency. Thanks a lot. Thanks, Todd. Appreciate the questions.

Thank you. We do not currently have any further questions registered, and so as a final reminder, if you would like to ask a question today, please do so now by pressing start followed by the number one on your telephone keypad. We'll just take a brief pause to allow for any additional questions. The next question comes from Vinda Gallipatiga with clinical ingenuity. Please go ahead.

Good morning. Thanks for taking my question. Just to follow up on that last question on audience engine, Chris, I was wondering if you can just sort of expand on exactly how that works, and also, how are you able to sort of delineate the sort of the run rate a bit on that, like be able to separate that just sort of high level?

Yeah. Thanks, Aravinda. So, effectively, it's using a capability to acquire audiences on third-party platforms and then bringing them into our environment. That's effectively what it is at its basic level. The monetization today is mainly programmatic, and so that's why we say high margin profile, similar margin profile to what we've historically had through programmatic, but where we hope to take it as a tool to go after even more precise audiences to support direct advertising. We see some commerce applications of it as well that we're exploring. And so in typical fashion for us, we're thinking immediately about how to immediate ROI out of what we do when we go out and acquire audiences. So that's been the focus as opposed to just you know, trying to just add MAU. That's not what we're trying to do. We're trying to add very highly targeted users that are going to monetize extremely well for us. And so that will be the focus. And as I mentioned to Todd, you know, in his question, you know, in just a few weeks' time, I guess we're on eight weeks' time, we'll have more to share on at Aravinda as it continues to scale.

Okay, thank you. And then just to clarify, you haven't made any acquisitions since the year-end closed, right?

Since the year-end closed, we have not.

Okay, just checking for forecasting purposes. And I think you provided the direct ad numbers was down 1%. What was the programmatic decline in Q4?

It was down 43%.

Okay, all right. Thank you. Thank you, guys. That's all I had. Thank you.

Thank you. We have not received any further questions, and so I'll hand the call back over to Chris for any closing comments.

Well, thanks again for everyone joining. We'll see you again in May for our Q1 call. Take care.

Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.