Unless otherwise stated, all amounts are in US dollars.
TORONTO, April 09, 2025--(BUSINESS WIRE)--VerticalScope Holdings Inc. ("VerticalScope" or the "Company") (TSX: FORA; OTCQX: VFORF), a technology company that has built and operates a cloud-based digital platform for online enthusiast communities, today issued a business update, including management commentary on recent market dynamics, platform performance, and an updated financial outlook for 2025.
The Company has published a shareholder letter providing additional details, which is available on the Company’s investor relations website and the Company’s profile on SEDAR Plus at https://sedarplus.ca.
Following the release of its strong Q4 and full year 2024 results, VerticalScope has observed some incremental headwinds impacting the business in early 2025. These include changes to the Company’s video advertising products and the impact of Google’s March core algorithm update, which has affected organic traffic to VerticalScope’s communities.
Video Advertising: Changes to classification of programmatic video ads that run in our forums has resulted in decreased bidder activity and lower costs per thousand impressions (CPMs), leading to reduced revenue from video ads in Q1 2025. Management now expects video advertising revenue to decline year-over-year in Q1, and to face continued headwinds through the balance of the year.
Traffic Trends: Google’s March core algorithm update has led to an approximate 10% decline in monthly active users (MAUs). The Company is actively working on recovery initiatives, but acknowledges that recovery timelines for algorithm impacts are uncertain and may extend over multiple quarters.
Given these factors, VerticalScope expects full year 2025 Adjusted EBITDA to be in the range of US$21-24 million. Free Cash Flow is anticipated to be in the range of US$20-22 million and a Free Cash Flow conversion of 85% or above while we rebuild our MAUs and invest in our AI-driven product roadmap.
Despite near-term challenges, VerticalScope remains confident in the resilience of its platform and long-term strategy. The Company continues to invest in its AI-driven product roadmap, including the development of AI-powered translations, answers, thread summaries, and enhanced search experiences within its FORA platform, and is seeing promising results.
VerticalScope has also completed four acquisitions year-to-date, totaling US$7.3 million in value, and continues to see attractive M&A opportunities in the current environment. The Company will remain disciplined in its capital deployment strategy and expects to maintain leverage in the range of 1.0–1.5x throughout 2025, aligned with prudent balance sheet management.
"As we enter this period of economic uncertainty, we are well-positioned with a strong balance sheet and low leverage," said Rob Laidlaw, Founder and CEO of VerticalScope. "While today’s update may not be welcome news, we felt it was important to share our revised outlook for 2025. As we navigate a challenging market backdrop, we are confident in our ability to adapt to market dynamics, execute our product roadmap, and deliver long-term value to our shareholders."
Founded in 1999 and headquartered in Toronto, Ontario, VerticalScope is a technology company that has built and operates a cloud-based digital platform for online enthusiast communities in high consumer spending categories. VerticalScope's mission is to enable people with common interests to connect, explore their passions, and share knowledge about the things they love. Through targeted acquisitions and development, VerticalScope has built a portfolio of over 1,200 online communities and over 100 million monthly active users.
Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the exchange) accepts responsibility for the adequacy or accuracy of this release.
The estimated results contained herein are subject to change upon completion of the Company’s Q1-2025 Financial Statements and the review of such financial statements, and such changes could be material due to, among other things, the completion of the Company’s financial closing procedures, final adjustments, review by the Company’s auditors, and other developments that may arise between now and the time the financial results are finalized. Accordingly, such estimated results are forward-looking statements within the meaning of applicable securities legislation and are subject to the limitations and risks described under "Forward-Looking Statements" below.
Forward-Looking Statements
This news release contains forward-looking information within the meaning of applicable securities legislation that reflects the Company's current expectations regarding future events. When used in this news release, words such as "should", "could", "intended", "expect", "plan" or "believe" and similar expressions indicate forward-looking statements. Forward-looking information, including the Company’s financial outlook (including revenue, Adjusted EBITDA and MAUs), plans for organic growth, deployment of capital, leverage, investments in our platform, new platform features, the growth of revenue and MAU, information regarding our financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, plans and objectives, is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company's control. Although the Company believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurances can be given that actual results will be consistent with these forward-looking statements. Such risks and uncertainties include, but are not limited to, the implementation and effectiveness of the Company's capital allocation strategy, investments in its platform, the availability of high-quality M&A opportunities, and the factors discussed under "Risk Factors" in the Company’s Annual Information Form dated March 31, 2025, which is available on the Company’s profile on SEDAR Plus at https://sedarplus.ca. Actual results could differ materially from those projected herein. VerticalScope does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required under applicable securities laws.
Non-IFRS Measures
This news release references certain non-IFRS measures, including Adjusted EBITDA and Free Cash Flow, and Free Cash Flow Conversion as described below. This news release also makes reference to MAU, which is an operating metric used in our industry. These non-IFRS measures are not recognized measures under IFRS and 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 further understanding of the Company’s results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS.
The Company uses non-IFRS measures including:
"EBITDA" is calculated as net income (loss) excluding interest, income tax expense (recovery), and depreciation and amortization.
"Adjusted EBITDA" is calculated as EBITDA adjusted for share-based compensation, share performance related bonuses, unrealized gains or losses from changes in fair value of derivative financial instruments, severance, adjustments to contingent consideration liabilities measured at fair value through profit and loss, gain or loss on sale of assets, gain or loss on sale of investments, foreign exchange loss (gain), impairment and other charges that include direct and incremental business acquisition related costs.
"Free Cash Flow" means Adjusted EBITDA less capital expenditures and income taxes paid during the period.
"Free Cash Flow Conversion" is equal to Free Cash Flow for the period divided by Adjusted EBITDA for the period.
"Monthly Active Users" ("MAU") is defined as the number of individuals who have visited our communities within a calendar month, based on data as measured by Google Analytics. To calculate average MAU in a given period, we sum the total MAU for each month in that period, divided by the number of months in that period.
For Fiscal Year (FY) 2024, the Company’s Adjusted EBITDA and Net Loss were US$29.8 million and US$15.9 thousand, respectively. For FY 2024, the Company’s Free Cash Flow, Free Cash Flow Conversion and cash flow from operating activities were US$27.6 million, 92% and US$24.8 million, respectively. Please refer to the Company’s management’s discussion and analysis for the year ended December 31, 2024 at "Cautionary Note Regarding Non-IFRS Measures" for further detail on these non-IFRS financial measure and a reconciliation of historical Adjusted EBITDA and Free Cash Flow to Net Income (Loss), which disclosures are incorporated by reference into this news release.
