Emerge Commerce Ltd.

Good morning and welcome to the Emerge Commerce First Quarter 2026 Results Conference Call. At this time, all lines are noticeably moved. Following the presentation, we'll 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 is being recorded on May 28, 2026. Your hosts today are Esam Halazon, Founder and Chief Executive Officer and Mike Murphy, 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 indictified by use of words such as intend, believed, could, expect, estimate, forecast, make and other words of similar meaning. The forelooking information is based on our opinions, estimates and assumptions. In light of our experience and perception of historical trends, right conditions and expected future developments, as well as other factors that currently believe are appropriate and reasonable in the circumstances. Actual results could differ materially from a conclusion, forecast, expectation, belief or projection in the forelooking information. Certain material factors and assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forelooking information. We caution investors not to rely on the forelooking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forelooking information. In material factors assumptions that were applied in drawing a conclusion, are making a forecast or projection as reflected in the forelooking information are contained in emerged filings with Canadian Provincial Securities Regulators. During today's call, all figures are in Canadian dollars unless stating otherwise. And with that, I would like to turn the call over to Mr. Gasson Alassane, founder and CEO. Please go ahead.

Thank you very much. Good morning, everyone. Thank you for joining us today. We'll provide additional details on our financial results, after which I will conclude the call with some closing remarks and open up the line for questions. Q1 was an excellent quarter for Emerge, both operationally and strategically. I'll start with operations. Our Q1 results marked another strong quarter for Emerge, despite it being the most seasonal quarter for our golf business, as previously noted in our Q1 outlook. A few quick highlights to start us off. Q1 revenue grew by 17.5% to $5.9 million, our eighth consecutive quarter of positive revenue growth, essentially two full years of growth now. Adjusted EBITDA improved to $122,000 versus $32,000, marking the sixth consecutive quarter of positive adjusted EBITDA. Our cash position grew to $4.1 million at March 31, 2026, from $2.7 million last Q1, an increase of $1.4 million year over year. Now, a few updates from some of our key brands. First, T2Green, or T2G for short. We recently crossed the one-year anniversary of completing this golf acquisition, so it's worth reflecting on our results so far. B2G continues to validate our Emerge 3.0 acquisition and integration playbook. Since acquiring the business in April 2025, we've applied our operating model and digital capabilities to accelerate growth, enhance profitability, and improve cash flow generation. Leveraging our broader golf ecosystem, including our 400,000 golf subscribers, helped drive T2G's 2025 revenue growth rate to in excess of 30% year-over-year, nearly 10x its pre-acquisition growth rate. As previously reported, cash flow generated in T2G's first quarter following the acquisition exceeded the entire $1.1 million upfront cash consideration paid by Emerge. The transaction's eight-year inventory payment structure also meaningfully strengthened our cash flow position and balance sheet to start 2026. As we enter year two, we continue to see additional growth opportunities through further optimization and deeper integration within our golf portfolio. Second, an update on True Local, our leading premium meat and seafood subscription service across Canada. As we had shared, True Local was a big benefactor in 2025 of the bi-Canadian movement. gaining an influx of new customers, particularly in Q1 and Q2 of that year, driving strong cost-effective growth in terms, allowing us to reduce our ad spend and capture more profits then. That resulted in True Local more than doubling its adjusted EBITDA in 2025, which was instrumental in helping Emerge drive a $2 million improvement in adjusted EBITDA year over year. As the benefits and enthusiasm around peak support local subside in recent quarters, we're starting to see TrueLocal's cost per acquisition reverse back to its historical norms. The brand still exhibits highly favorable customer lifetime value for customer acquisition costs, just not as attractive as the peak level we saw last year. We will continue to prioritize high ROI marketing initiatives with an eye towards maximizing profitability as a top priority. while maintaining our market leadership position in the D2C meat and seafood subscription category in Canada. On the gross margin side, True Local has been seeing some cost pressures including the rising cost of meat and more recently some fuel surcharges as a result of the conflict in the Middle East. In general, True Local has exhibited strong pricing power with its loyal number base and the team has already actioned various gross margin and SG&A reduction initiatives aimed at offsetting Some of these variable costs. 2026 is True Local's 10th year in business, and a number of initiatives and giveaway contests are lined up to celebrate the special milestone with our members and suppliers. Next, I'll take a moment to outline a series of strategic steps taken during Q1 to strengthen the company. First, an update on the debt side. On February 18, 2026, eMERGE entered into an amendment with our existing member, on our senior credit facility, extending the maturity to October 2027. The current outstanding balance of the credit facility is $5.85 million, down from $25 million originally. The variable interest rate currently sits at 11%. Worth noting, as a result of this refinancing, the Q1 balance sheet as of March 31, 2026, now has the senior credit facility reclassified under long-term liabilities from current liabilities as it was reflected in the Q4 financials as of December 31, 2025. For clarity, this amendment does not preclude emerge from refinancing our credit facility at a cheaper rate at any time should we secure more favorable terms. We believe that our materially improved financial profile, including our much improved adjusted EBITDA, the net debt levels, could lead to the possibility of securing cheaper, longer-term debt refinancing options, further driving savings and improving cash flow. We continue to maintain a strong, long-term relationship with our lender, dating back to 2019, and remain in excellent standing. Our focus now is on reducing our cost of capital, lowering interest expense and directing incremental cash flow into organic growth opportunities and highly accretive acquisitions. Speaking of acquisitions, we announced another strategic deal in Q1 2026. On March 10, Emerge acquired Viral Loops from Wishbond. Viral Loops is a profitable B2B referral technology platform with a 10-year track record. In 2025, Viral Loops generated approximately $1.3 million in revenue with 86% gross margins, $800,000 in adjusted EBITDA, and approximately $700,000 in cash flow. We acquired the business for $2.3 million total consideration or approximately 2.9 times adjusted EBITDA, an attractive entry multiple for a high-margin cash generative asset. This is our first acquisition under Emerge B2B, a vertical setup to enhance Emerge overall and a natural extension of our platform. Viral Loops gives us a proven referral engine that we can deploy across grocery and golf to drive more efficient, lower-cost customer acquisition. As an example, we recently launched TrueLocal's 10 Years, 10 Prizes contest, leveraging Viral Loops' contest platform. While it is still early days, we are encouraged by the strong early results. Financially, the impact is immediate. The business is accretive to earnings and cash flow, lifting our consolidated margins, and introduces recurring non-seasonal revenue. We funded the acquisition entirely from the concurrent $2.7 million private placement we completed around closing. Stepping back, this is exactly the type of acquisition we were looking for. Profitable. asset light and immediately accretive, while also strengthening our balance sheet and improving our net debt to EBITDA profile. Just as importantly, it adds a strategic capability that we believe can drive incremental growth across the entire Emerge platform over time. Next up, I will share our Q2 outlook. For Q2 2026, Emerge expects continued momentum across revenue and adjusted EBITDA. Q2 2026 is a seasonally strong quarter overall, including peak season for the golf business, particularly at T2G, which was our largest EBITDA contributor in 2025. Q2 will also be the first full quarter to include viral loops, expected to contribute positive adjusted EBITDA and cash flow. For reference, Emerge acquired T2G on April 5, 2025, and viral loops on March 10, 2026. Finally, it's worth mentioning that we are also making some investments at the HQ level and across our portfolio, including in Fire Loops, to drive and support current and future growth. One notable investment on the personnel side is the addition of Mike Murphy, a CFO at Emerge. Mike brings over 25 years of finance and leadership experience across public and private equity-backed companies. He has served as CFO and Senior Advisor to multiple businesses, including at Diane Durham, Acasta, and Quizzo, where he scaled the finance organization during a period of rapid growth from approximately $20 million in annualized revenue to over $150 million. Mike's depth of experience scaling public companies and leading high-performing finance teams will be instrumental as we execute on our next phase of growth and capital allocation. Speaking of Mike, time for an update on the finance side. Mike, please go ahead.

Thanks, Hassan. Good morning, everybody. Emerge had a successful first quarter where we continued the trend of year-over-year revenue and adjusted epitaph growth. Our gross merchandise sales, or GMS, grew 5% to $8.4 million compared to $8 million in the first quarter of 2025. As a reminder, GMS... is a non-GAAP measure that provides a useful measure for the dollar value of e-commerce transactions made through our platforms, which gives additional insight into business performance. GMS represents the total dollar value of customer purchases of goods and services through our brands, excluding applicable taxes and net of discounts and refunds. Revenue for the quarter grew 17.5% to $5.9 million from $5 million in 2025. The revenue growth for the year was primarily driven by the acquisition of Tea to Green, which saw continued strong performance in the quarter, and the inclusion of Viroloops results post its acquisition during the quarter. Overall Emerge achieved positive overall organic growth in Q1 as well. Gross profit for the quarter increased by 6% to $2.1 million versus $1.9 million in 2025. Gross margin for the quarter was 34.9% versus 38.6% in 2025, excluding a one-time non-cash inventory fair value increment adjustment related to T to green. The purchase equation of approximately $40,000. Gross margin would have been 35.6% for the quarter ended March 31, 2026. Note that today, 95% of TD Green's fair value increment has been recorded in cost of sales, and the remaining 5% fair value bump is expected to hit cost of sales in the second quarter of 2026, after which we expect TD Green's gross margin profile to revert back to its historically higher levels. Net loss from continuing operations for the quarter was $0.12 million versus a loss from continuing ops of $0.02 million in the first quarter of 2025. Note that Q1 2025 included a $0.4 million accrual reversal, so adjusting for this, the results from continuing operations have improved significantly. Again, the primary driver was the inclusion of Key to Green and the Viroloops stub period in Q1 2026, as well as stronger operating performance. For the quarter end of March 31, 2026, Emerge reported an adjusted EBITDA of 0.12 million compared to an adjusted EBITDA of 0.03 million in the same period of the prior year, an improvement of 0.09 million. This reflects the company's efforts to prioritize a disciplined approach to managing overheads and marketing budgets, as well as making accretive acquisitions. Q1 is generally a period of cash outflow as the company settles holiday season payables and fills up its golf inventory in preparation for golf season. During the quarters ended March 31, 2026 and 2025, the company used $0.3 million and $0.6 million from operating activities, respectively. The improvement in operating cash flows was primarily due to timing of payments and improved profitability. Q1, 2026 cash flows from investing activities were negative 1.9 million and cash flows from financing were 2.2 million, driven mainly by the acquisition of viral loops and the acquisition financing raised in Q1. Finally, cash on hand as at March 31, 2026 was 4.1 million versus 2.6 million at the end of Q1, 2025. I'll now pass it back to Hassan for some closing comments.

Thank you, Mike. In closing, we're quite pleased with the momentum we're seeing across the Emerge platform. Over the past several years, we've worked hard to reposition the company around profitable growth, disciplined capital allocation, and cash flow generation. We believe the results are increasingly reflecting the strength of that strategy, with eight consecutive quarters of organic revenue growth, six consecutive quarters of positive adjusted EBITDA, and an improving balance sheet. Importantly, we are now entering a new phase for Emerge, one where we believe we can continue growing organically while also selectively executing on highly accretive acquisition opportunities that strengthen both our financial profile and strategic capabilities. The acquisitions of T2Green and Viral Loops are strong examples of this approach. Both transactions were completed at attractive valuations and are immediately accretive and provide meaningful long-term strategic value to the broader Emerge ecosystem. As we look ahead to the balance of 2026, we remain focused on driving profitable growth across our portfolio, improving margins and cash flow, reducing our cost of capital, and continuing to evaluate opportunities that can create long-term shareholder value. Finally, I would like to take this opportunity to thank our board, dedicated staff, customers, suppliers, and shareholders for their unwavering support. With that, operator, we can now open the line for any questions.

Thank you. At this time, we'll take questions from analysts. If you'd like to ask a question, please press star 1 on your telephone keypad. If you'd like to withdraw your question, press star 2. Again, to ask a question, press star 1. One moment, please, for your first question. Your first question comes from Fred B. from DeskCap. Please go ahead.

Hello, all. Congratulations on a strong quarter. It seems P2G has shown very strong growth in its first year under eMERGE. Any insights on how golf season has been going so far in Q2, and maybe any comments around its organic growth profile?

Thanks. Nice to hear from you, Freddie. Yeah, sure. I mean, to the extent that we can comment at a high level, I sort of want to reiterate a bit of what I had in my comments there, maybe expand a little bit. So T2 Green obviously had a phenomenal year one as we recap. You know, we've taken that business, that growth profile from about 3% prior to the acquisition to north of 30%. We did that through pretty much all of last year under our ownership. Q1, although seasonal, was no different in terms of momentum. And now Q2, which is peak season, you know, the big part of Key to Green during this time of season is the road shows, the pop-up stores. So they'll have a couple of shows live across Ontario every weekend, Thank you very much. All of it so far is panning out really nicely. We continue to see growth momentum in the business and expect this to be a really strong organic area for growth this year.

Great. Thank you. Just one more question. With the addition of viral loops recurring revenue, how should we think about the evolution of seasonality in the business this year, and do you see Merge moving toward a more

Yeah, I think the question is on sort of the seasonality, if I got that right. Is that right, Freddie?

Correct, yeah. Given the addition of viral loops.

Right, right. Okay, gotcha. So, as we've indicated, one of the reasons we like viral loops from a financial perspective, beyond the EBITDA and the cash flow and the high gross margin, is the fact that it comes with recurring revenue that's a lot more stable throughout the year. A lot of times I hear that, you know, emerges results last, while solid overall, you know, we're a bit wonky in terms of timing of the revenues and the EBITDA, for example, Q2 was You know, monstrous last year versus, you know, much more tame Q1, et cetera. We do think Viral Loops will help with that, obviously. We're essentially, you could think of it as, just to use an example, you know, Viral Loops did about 800K EBITDA last year unaudited. You can sprinkle that EBITDA across the year relatively equally. There's minor seasonality, but in B2B and recurring revenue, you have the benefit of You know, that sticky sort of base where, you know, those amounts across the four quarters in relatively equal levels. And if you think of something like, say, Q1 here, where either that was $122K. So, you know, adding viral loops for the full quarter, which we did not have the benefit of this year, but we will next year. You're going to get, you know, that pro rata of EBITDA plugged in, and that's meaningful when you're doing 100 or 200K during the rest of the year. You're going to see that benefit. And then in Q2, obviously, that is still going to be the peak, but to some extent we're distributing our EBITDA across the year in a bit more evenly fashioned, but Q2 will still always be quite larger than the rest.

Great. Great. Thank you. Noted. Now, sorry, one final question, please. Given all the macro, you know, headwinds and your extension of the credit facility, what is a realistic path for you to refinance at a lower rate, and what kind of interest expense savings would you expect over the next 12 to 18 months?

Yeah, no, that's a good question. I mean, we've been very fortunate at Emerge, as I've outline to kind of see this type of growth both in top line and in adjusted EBITDA and of course our cash position has grown year over year. So we really think we're in a prime position now to be exploring and we are. We're advancing conversations. We're not disclosing the exact as of yet but you can think of it as banks and lenders essentially looking at evaluating our business in the now, looking at a TTM of $2 million plus in adjusted EBITDA when you include viral loops in there, pretty much $30 million or so in revenues, sort of the levels we're approaching on a pro forma basis, and then sort of seeing the progress that I mentioned and the outlook we have for Q2 as well as our improvement year over year in Q1. So we're excited, we're optimistic that there's an opportunity in the near term to unlock some savings. What do those savings look like? I think it's a function of the trade-offs we're willing to make, right? So today, our senior credit facility sits at about 11% interest rate, which was fine because of the flexibility it gave us in prior years. We think we're a growing-up company at this point. We think our results and our cash flow generation That we proved out last year in our million and a half and audited EBITDA last year. Thus now adding viral loops should position us for somewhere in the range of 3% to 5% interest savings potentially is what we're going after. What we end up securing is going to be a function of the overall package, making sure we're comfortable with it. You'll note that we've been with our lender for almost six years. We've never breached the covenant. We've never missed an interest payment. So we want to make sure whatever facility we enter into, we're comfortable, but we're also getting a better reflection, pricing, and longer-term maturity on a facility so that we can essentially grow up our debt side or balance sheet side along with the P&L that's proving to have grown up already. And then, sorry, maybe just to elaborate on that last point in terms of timing. It's really hard to pin down. We'd like to do this sooner rather than later, whether it's a quarter, whether it's two quarters. We're actively looking at this topic, and we're having those conversations, and we're advancing proposals and that sort of thing. But obviously, we're only going to pull the trigger when we're comfortable. And now that we have the benefit of the extension all the way to October 2027, we want to make sure we get this one right, hopefully sooner rather than later.

Right. That makes sense, and thanks for your commentary here, and congrats on another solid course.

All right. Thank you, Freddie.

Again, if you'd like to ask a question, please press star 1. And there are no further questions at this time. I will turn the call back over to Ghassan for closing remarks.

Okay, thanks, ladies and gentlemen. That's a wrap for today. Once again, appreciate everyone's time here tuning in. Enjoy summer, and don't forget to shop local, and most importantly, cheer for Team Canada at the FIFA World Cup. Thank you. Have a great day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.