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Cost Reductions

Following the sale of various non-core businesses over the last year, EMERGE is executing additional cost savings largely in relation to operating a more focused set of brands.

"We have taken measures to reduce our overhead expenses given our more streamlined operations that are now exclusively centered on our grocery and golf verticals. These cost reductions were partly reflected in our much improved profitability in Q1, with additional savings being actioned in Q2 as well," continued Halazon.

Brand-Level Commentary

truLOCAL, our premium meat subscription service, and EMERGE's largest business by revenue, continues to see strong net customer inflows, a leading indicator of future (deferred) revenue, increased Average Order Value ("AOV"), and reduced overhead expenses. The direct-to-consumer ("D2C") subscription business is showing encouraging signs year-to-date, with 'new initiative' revenue lines in the works as well to accelerate organic growth.

The golf division, which includes UnderPar and JustGolfStuff, continue to drive improved topline, margins and more efficient marketing spend.

Carnivore Club, EMERGE's smallest business, is being optimized for profitability, which includes the elimination of loss-making revenue.

Excluding Carnivore Club, EMERGE's Q1 2024 revenue would have been approximately in line with Q1 2023.

Q1 2024 Business Highlights 

Sale of WSP

In January 2024, EMERGE completed the sale of WSP to Tiny Fund I, LP, for aggregate gross cash consideration of US$9.25M subject to certain closing adjustments and obligations.

EMERGE now retains 4 brands across 2 main verticals, Grocery and Golf, in Canada and the U.S., namely truLOCAL, Carnivore Club, UnderPar, and JustGolfStuff.

$10M Debt Paydown and Extended Term

EMERGE utilized $10M from the WSP transaction proceeds to paydown its senior credit facility with its existing lender, the principal balance of which has been reduced to $5.85M, from $15.85M prior to the completion of the transaction, and $25M originally.

On January 31, 2024, the Company entered into a second amended and restated credit agreement with its existing lender, providing a term of up to 24 months, which is comprised of an initial term of 18-months, plus an additional 6-month extension option (the "Extension"), which may be exercised upon mutual agreement between the Company and the lender. Inclusive of the Extension, the Amended Facility is expected to mature on January 31, 2026.

Notable Events Subsequent to March 31, 2024

Convertible Note Amendment Resulting in $1.39M Debt Reduction

On April 29, 2024, 100% of the holders of EMERGE's 10% senior unsecured convertible debentures represented in person or by proxy at a meeting of debentureholders approved certain amendments to the terms of such debentures, including the creation of a redemption right and the extension of the maturity date of the debentures from November 2025 to November 2026. On the same date, EMERGE announced the redemption of $1,391,000 of principal amount of the debentures. On May 6, 2024, EMERGE completed this redemption by the issuance of 10,303,703 common shares in settlement of the principal amount and a further 360,629 common shares in settlement of the accrued and unpaid interest on the redeemed debentures, with all such shares issued at a price of $0.135 per share. The completion of the redemption effectively reduced EMERGE's debt by $1.39 million. The amendments, the redemption and the conversion of interest are also expected to save EMERGE approximately $140K in annualized interest expense during the extended term of the debentures. The amendments also provided for an adjusted debenture conversion price of $0.135 (reduced from $0.20), which may increase the possibility of further debt reduction.

Outlook

EMERGE is seeing robust sales trends through Q2 to date, and continues to execute towards a return to organic revenue growth plan in 2024, with a substantially improved profitability profile and reduced overall debt levels.

Top Priorities

The Company's top priorities in the near-term are to i) drive organic growth, ii) extract further operational efficiencies, and iii) opportunistically explore avenues to further pay down debt and reduce interest expense

Conference Call

Management will host a conference call on Tuesday, May 28 at 8:30 am ET to discuss its first quarter results. To access the conference call, please dial (416) 764-8650 or (888) 664-6383 and provide conference ID 66879377.

Alternatively, the conference call can be accessed online at: https://app.webinar.net/27o4Rx6jY8k

Selected Financial Highlights

The tables below set out selected financial information and should be read in conjunction with the Company's consolidated financial statements and MD&A for the three months ended March 31, 2024, which are available on SEDAR.

The following table highlights Adjusted EBITDA and a reconciliation of the Company's reported results to its adjusted measures:

The following table highlights GMS and a reconciliation of the Company's reported results to its adjusted measures:

About EMERGE

EMERGE (TSXV: ECOM) is a premium e-commerce brand portfolio in Canada and the U.S. Our subscription and marketplace e-commerce properties provide our members with access to unique offerings across grocery and golf verticals. Our grocery businesses include truLOCAL.ca, our premium meat subscription brand, and Carnivore Club, our artisanal meat brand. Our golf businesses include UnderPar, our discounted experiences business, and JustGolfStuff, our golf products & apparel brand.

To learn more visit https://www.emerge-commerce.com/

Follow EMERGE:
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Cautionary notice

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Non-GAAP Measures

This press release makes reference to certain non-GAAP measures. These non-GAAP measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of results of operations from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the financial information of the Company reported under IFRS. Gross Merchandise Sales ("GMS"), EBITDA, and Adjusted EBITDA should not be construed as alternatives to revenue or net income/loss determined in accordance with IFRS. GMS, EBITDA and Adjusted EBITDA do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers.

GMS as defined by management is the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of discounts and refunds. Management believes GMS provides a useful measure for the dollar volume of e-commerce transactions made through our platforms and an indicator for our business performance.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA as defined by management means earnings before interest and financing costs, income taxes, depreciation and amortization, transaction costs, foreign exchange gains/losses, discontinued operations, unrealized gains/losses on contingent consideration and share-based compensation. Management believes that Adjusted EBITDA is a useful measure because it provides information about the operating and financial performance of EMERGE and its ability to generate ongoing operating cash flow to fund future working capital needs and fund future capital expenditures or acquisitions.

A reconciliation of the adjusted measures is included in the Company's management discussion & analysis for the twelve months ended December 31, 2023 in the section "Non-GAAP Financial Measures" available through SEDAR at www.sedar.com.

Notice regarding forward-looking statements

This press release may contain certain forward-looking information and statements ("forward-looking information") within the meaning of applicable Canadian securities legislation, that are not based on historical fact, including without limitation statements containing the words "believes", "anticipates", "plans", "intends", "will", "should", "expects", "continue", "estimate", "forecasts" and other similar expressions. Readers are cautioned to not place undue reliance on forward-looking information.  Actual results and developments may differ materially from those contemplated by these statements.  The Company undertakes no obligation to comment on analyses, expectations or statements made by third-parties in respect of the Company, its securities, or financial or operating results (as applicable).  Although the Company believes that the expectations reflected in forward-looking information in this press release are reasonable, such forward-looking information has been based on expectations, factors and assumptions concerning future events which may prove to be inaccurate and are subject to numerous risks and uncertainties, certain of which are beyond the Company's control, including the risk factors discussed in the Company's MD&A, Prospectus Supplement and Annual Information Form and are available through SEDAR at www.sedar.com. The forward-looking information contained in this press release are expressly qualified by this cautionary statement and are made as of the date hereof. The Company disclaims any intention and has no obligation or responsibility, except as required by law, to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

On Behalf of the Board
Ghassan Halazon
Director, President and CEO

SOURCE EMERGE Commerce Ltd.

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