Emerge Commerce Ltd.

Good morning and welcome to the eMERGE Commerce third quarter 2025 results conference call. At this time, all lines are on listen only mode. Following the presentation, we will conduct a question and answer session for analysts. If at any time during this call you require immediate assistance, please press star zero for the operator. This call has been recorded on November 26, 2025. Your hosts today are Ghassan Halazon, founder and chief executive officer, and Dasha Anenko, Chief Financial Officer. Before we begin, I am required to provide the following statement respecting forward-looking information, which is made on behalf of eMERGE and all of its representatives on this call. Certain statements made on this call will contain forward-looking information. These forward-looking statements generally can be identified by the use of words such as intend, believe, could, expect, estimate, forecast, may, and other words of similar meaning. This forward-looking information is based on our opinions, estimates, and assumptions in light of our experience and perception of historical trends, current conditions, and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Actual results could differ materially from a conclusion forecast expectation, belief, or projection in the forward-looking information. certain material factors and assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. We caution investors not to rely on the forward-looking information. Additional information about the material factors that could cause actual results that differ materially from the conclusion, forecast, or projection in the forward-looking information and material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are contained in emergency filings with the Canadian Provincial Securities Regulators. During today's call, all figures are in Canadian dollars unless otherwise stated. And with that, I'd like to turn the call over to Mr. Ghassan Halassan, founder and CEO.

Thank you very much. Good morning, everyone. We appreciate you taking the time to participate in our third quarter 2025 conference call. Joining me today is Dasha Inenko, our CFO. This morning, I will walk through the exceptional progress we continue to make at Emerge and share some insights across our key businesses, our more focused acquisition strategy, as well as our Q4 and full year outlook, among other updates. Following my remarks, Dasha will provide additional details on our financial results, after which I will conclude the call with some closing remarks and open up the line for analyst questions. Let's get going. Q3 was another statement quarter for Emerge. Revenue for the quarter grew by 58% to $7 million versus 4.4 million in Q3 2024. driven by the undeniable momentum we continue to see at T2G in its second quarter under Emerge ownership, in addition to the continuous positive growth we achieved at True Local, a flagship grocery brand. Q3 marks our sixth consecutive quarter of positive organic revenue growth. Worth noting that while Q3 is usually a strong quarter historically for T2G during golf season, It tends to be a more seasonal quarter for some of our other brands, most notably True Local, given it is not uncommon for some customers to pause memberships while on their summer vacation. Summer seasonality is a standard occurrence for subscription or membership e-commerce models. Notwithstanding, both True Local and the golf vertical exhibited positive organic growth year over year, accompanied by much improved profitability, which is another key priority for us. P2G in particular drove high double-digit revenue growth in its second quarter under Emerge. But simply, P2G is really exceeding all our expectations so far. Q3 adjusted EBITDA for Emerge improved to $261,000, a positive swing of $514,000 year-over-year, and approximately 4.4% above the high end of the $200,000 to $250,000 range. EBITDA range we provided in our preliminary Q3 results announced last month. Year-to-date, through the first three quarters, Emerge has delivered adjusted EBITDA of $1.25 million, compared to an adjusted EBITDA loss of $485,000 for the comparative period in 2024, a substantial positive swing of $1.7 million year-over-year. This brings me to another point. Whereas 2024 was our first year of return to positive organic revenue growth, we can now say with confidence that 2025 will be our first year of return to positive adjusted EBITDA emergence. Beyond the P&L, our cash position grew to $4.1 million at September 30, 2025 versus $1.6 million at September 30, 2024. an increase of $2.5 million over the last year, highlighting exceptional cash flow generation, another major priority for us. Notably, we delivered positive cash flow from operations of 919,000 in Q3 versus operating cash outflow of 414,000 in Q3-24. Year-to-date, Emerge has generated $2.5 million in cash flow from operations compared to cash outflow of negative $411,000 in the first nine months of 2024. The cash buildup at Emerge is a function of our overall sales and profit growth, in addition to the favorable structuring of the T2G transaction, which included an eight-year inventory payment plan, further bolstering cash flow. It is important to state clearly that the cash flow generation we are seeing exceeds management's expectations, and that is, of course, always a good thing. Moving on, allow me to provide a brief update on some recent warrant expiries and exercises. A few days ago, on November 24, 2025, approximately 12.2 million debenture warrants with an exercise price of 25 cents expired on exercise and were delisted. This follows our announcement in July 25 that approximately 12.3 more warrants expired on exercise. Combined, approximately 24.5 million warrants have expired on exercise between July and November 2025. Any remaining warrants are set to expire between now and year end. At this time, the company expects to enter 2026 with zero warrants outstanding. Of course, practically speaking, this translates to a dramatically more streamlined capital structure and minimize warrant overhang for shareholders. In addition, I should note approximately 2.7 million out of the money warrants were exercised at 10 cents by a group of supportive long-term investors, raising approximately $270,000 in cash proceeds back in July of 25. As you may have seen, I also opted to exercise my 91,000 out of the money options at 11 cents in alignment, although expiry of those securities is not until October 2027. Now for a brief update on the debt side. Emerge maintains a longstanding relationship with our existing lender, dating back to November 2019, and we remain in good standing. Worth noting, our senior credit facility has been reduced from a peak of $25 million to $5.85 million as of today, a dizzying debt reduction that took a lot out of us by all means. But we got it done, and that's all that matters. We believe that our materially improved profitability and balance sheet, as well as our reduced net debt level in a more favorable interest rate cycle, could lead to the possibility of securing cheaper, longer-term debt refinancing options, further driving savings, and improving cash flow. We are currently in discussions with a number of major Canadian banks and other lenders exploring various possibilities. To be abundantly clear, we are not seeking to increase our debt. After all, we spent the last few years eliminating close to 80-plus percent of our net debt position. Our goal is to actually reduce our cost of capital, in other words, reduce interest expense, and grow cash flow that we can pour back into our business to drive organic growth and into future accretive acquisitions similar to T2G. Speaking of acquisitions, building off our success in acquiring and accelerating T2G, which continues to perform exceptionally in Q3, emerged selectively advancing a creative acquisition opportunity in our grocery and golf verticals, where we have amassed deep expertise, brand awareness, and substantial customer databases, as well as adjacent B2B or e-commerce enablement technologies that can help supercharge the existing portfolio to new heights, both by driving organic growth and contributing consistent cash flows. Emerge's focus is exclusively on profitable acquisition candidates with $750,000 to $2 million in adjusted EBITDA with a long-standing track record of revenue stability and cash flow generation. Similar to T2G, we intend to remain disciplined with acquisition pricing and structure. Ultimately, we also want to ensure that our next acquisition immediately enhances our balance sheet and specifically our net debt to EBITDA ratio for purposes of securing cheaper, longer-term debt refinancing, as previously outlined. Next up, a few words on our Q4 outlook and full-year outlook. For Q4 2025, management expects to achieve another quarter of double-digit revenue growth and positive adjusted EBITDA. The Q4 holiday season is generally a high sales volume period, particularly at true local, including for B2B slash corporate gifting orders. as well as under par as golf courses introduced discounted preseason 2026 offers. Emerge is now on track to achieve its full-year 2025 objectives of strong revenue growth, positive adjusted EBITDA, and positive cash flow. This will be the first time achieving all three milestones simultaneously under our new operating model. I will now turn the call over to Dasha for a review of our financial results.

Thank you, Zan. Disco Q3 2025 marked our second quarter of reporting with T2Green acquired in April 2025. In Q3 2025, our gross merchandise sales, or GMS for short, which is a non-GAAP measure representing the total dollar value of customer purchases of goods and services through our brands, excluding applicable taxes and net of discounts and refunds, grew 27% to 9.3 million compared to 7.3 million in the same period last year. Following the T2 Green acquisition, sales between T2 Green and JustGolf staff were eliminated from reported GMS, with only sales to external customers included. Revenue for the quarter increased by 58% to 7 million, up from 4.43 million in the prior year period. driven by the strong performance of T2G acquisition as well as positive organic growth at True Local, which is Emerge's largest business by revenue. Gross profit for the quarter was $2.4 million compared to $1.8 million in the comparative period. The reported gross profit includes a non-cash care value inventory increment of $170,000 recorded as part of the business acquisition accounting. Excluding this non-cash accounting adjustment, gross profit would have been $2.6 million, translating to approximately 37% gross margin compared to 40% in the prior period. Net income from continuing operations improved to $20,000 compared to net loss of $700,000 in the prior period. Net income was $30,000 compared to net loss of $730,000 in the same quarter last year. The reported net income from continuing operations and net income from the period include a non-cash fair value inventory increment of $170,000 required as part of business acquisition accounting. Excluding this non-cash accounting adjustment, net income from continuing operations would have been approximately $190,000. Adjusted EBITDA was $260,000, an improvement of approximately $500,000 from an adjusted EBITDA loss of 250,000 in the prior year period. These improvements reflect the strong performance of the TTG acquisition, positive organic growth across our grocery and golf verticals, reduced SG&A, and the discontinuation of unprofitable business lines. Finally, cash on hand as of September 30, 2025 was 4.1 million, compared to 1.6 million at the end of the same quarter last year. This improved cash balance was supported by 920,000 cash generated from operating activities in Q3 compared to cash outflow of 411,000 in the prior year period. I'll now pass the microphone back to Hazan for some closing remarks.