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.