Emerge Commerce Ltd.

Good morning, and welcome to the Emerge Commerce Second Quarter 2026 Results Conference Call. At this time, all lines are in a 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 is being recorded on August 27, 2026. Your hosts today are Ghassan 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 Enorge 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. and the circumstances. Ashar results could differ materially by the conclusion, forecast, expectation, belief or projection in the forward-looking information. Certain material factors and assumptions were applied in drawing the conclusion or making the forecast or projection as reflected in the forward-looking information. The caution investors must rely on the forward-looking information. Additional information about the material factors that would cause factor results to differ materially from the conclusion, forecast or projection, in the form of zipping information, and material factors or assumptions that were applied in drawing a conclusion, or moving a forecast or projection as reflected in the form of zipping information, are contained in emergency filings with Canadian Provincial Securities Regulators. During today's call, all figures are increasing dollars unless otherwise stated. and with that, I would like to turn the call over to Mr. Ghassan Halazon, founder and CEO.

Thank you. Good morning, everyone. We appreciate you taking the time to participate in our second quarter 2026 conference call. Joining me today is Michael Murphy, our CFO. This morning, I will walk through our exceptional Q2 results that emerged and share some insights across our key businesses as well as our priorities for the balance of 2026. Following my remarks, Mike 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 questions. Historically, Q2 has been our strongest quarter at Emerge. This Q2 proved to be no different. In fact, in many ways, this was our best quarter in years across revenue, gross margin, and adjusted EBITDA. with positive cash flow generation on full display. Let's dive in. Q2 revenue grew by 7.4% to $9.1 million, our ninth consecutive quarter of positive revenue growth. This is the first time the emergency eclipsed $9 million in revenue since early 2023 at the start of our turnaround efforts. Worth noting, T2 Green or T2G for short was acquired in early April 2025. So Q2 growth this year is more apples to apples as a result. As outlined in my shareholder letter at the start of 2026, the current eMERGE strategy entails combining moderate stable organic growth from our existing portfolio with higher growth rates driven by accretive acquisitions. Speaking of acquisitions, Q2 was Viral Loops' first full quarter under Emerge ownership, following our acquisition that was completed in late Q1. With that said, Viral Loops is a relatively low revenue contributor with approximately $1 million annual revenues and was primarily acquired to enhance our overall financial profile, to contribute positively to margins, profitability, and cash flow in addition to driving customer acquisition across our consumer e-commerce portfolio, all of which it did in Q2. Gross margins increased by 2.5% to 39% from 36.5%. Management anticipates that the year-over-year gross margin improvements achieved in Q2 2026 to continue in Q3, in part because of the higher margins contributed by Viral Loops, in addition to the conclusion of the fair value of inventory accounting at T2G that adversely impacted Emerges gross margins for most of 2025. Adjusted EBITDA improved to $1.03 million versus $962,000. marking the seventh consecutive quarter of positive adjusted EBITDA. Notably, this is the first time our adjusted EBITDA has officially eclipsed the $1 million mark since Q4 2021, which feels like a lifetime ago. Our cash position grew to $4.8 million at June 30, 2026, from $3.5 million last Q2, an increase of $1.3 million year over year. We're especially pleased that the business achieved positive all-in cash flow in both Q2 and year-to-date as we continue to build a stronger, more durable Emerge. Now, a few updates from some of our key brands. First, T2G. Now in its second year under Emerge, T2G continues to validate our Emerge Acquisition and Integration Playbook. Since acquiring the business in April 25, We've applied our operating model and digital capabilities to substantially accelerate growth, enhance profitability, and improve cash flow generation. Leveraging our broader golf ecosystem, including over 400,000 golf subscribers, helped drive T2G's revenue growth rate to nearly 10% or rather 10x its pre-acquisition growth rate. I'll say that again, to nearly 10x its pre-acquisition growth rate. The transaction's eight-year inventory payment structure also meaningfully strengthened our cash flow profile and balance sheet. In year two or so, so far, the business continues to perform exceptionally, and 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.