EMERGE Delivers 120% Revenue Growth in Q2 2022, Achieves Third Consecutive Quarter of Over $1M Adjusted EBITDA

• EMERGE reported over $28M in quarterly Gross Merchandise Sales¹ ("GMS") in Q2 2022, an increase of 144% YoY
• Q2 Revenue grew to $15.1M compared to $6.8M in Q2 2021, an increase of 120% YoY
• Q2 Adjusted EBITDA¹ of $1.1M compared to $0.08M in Q2 2021, an increase of 1,238% YoY
• Third consecutive quarter of positive Adjusted EBITDA¹ greater than $1M

TORONTO, Aug. 25, 2022 /CNW/ - EMERGE Commerce Ltd. (TSXV: ECOM) ("EMERGE" or the "Company"), a diversified acquirer and operator of niche e-commerce brands, today announced results for the three and six months ended June 30, 2022.

Ghassan Halazon, Founder and CEO, EMERGE commented, "Q2 marks the third consecutive quarter that we have delivered greater than $1 million in Adjusted EBITDA¹, demonstrating our continued commitment to disciplined operations. Our focus for the balance of 2022 is to unlock savings and drive meaningful profitability."

"Sales volume driven by our diversified brand portfolio remains substantially above pre-pandemic levels, despite persisting macro challenges and sector-wide headwinds. This is a testament to the quality businesses we have acquired, and the team's efforts in unlocking this next phase of growth," added Mr. Halazon.

Q2 2022 Financial Highlights

• GMS¹ grew to $28.0 million for the three months ended June 30, 2022, an increase of 144% from $11.5 million in Q2 2021, driven by the BattlBox Group and WholesalePet acquisitions
• Q2 2022 revenue increased to $15.1 million, up 120% from $6.8 million in Q2 2021
• Positive Adjusted EBITDA¹ of $1.1 million for Q2 2022 compared to $0.08 million in Q2 2021, an increase of 1,238%
• Cash on hand at June 30, 2022 was $5.4 million

Outlook

In the wake of the challenging macro environment, management's operational priority for the balance of the year is to optimize profitability and cash flow, primarily through cost savings and synergies.  

M&A and Debt Financing Update

The Company continues to advance a number of acquisition opportunities but remains cautious with M&A activity. The Company anticipates the recent market climate could result in more attractive acquisition opportunities and pricing.

To date, the Company has been able to leverage its existing debt facility to finance acquisitions and is currently advancing its plans to re-finance its current debt facility.

"In the current macro environment, we plan to be diligent but are prepared to act decisively should we see accretive opportunities that enhance our cash flow profile in the immediate term," continued Mr. Halazon.

Conference Call

Management will host a conference call on Thursday, August 25 at 8:30 am ET to discuss its second quarter results. To access the conference call, please dial [phone] or [phone] and provide conference ID 13646148.

Alternatively, the conference call can be accessed online at: https://app.webinar.net/30v29Yq9Jg8 

Selected Unaudited Financial Highlights

The tables below set out selected financial information and should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements and MD&A for the three and six months ended June 30, 2022, which are available on SEDAR.

		Three months ended June 30,	Three months ended June 30,	Six months ended June 30,	Six months ended June 30,
		2022 $	2021 $	2022 $	2021 $
Gross Merchandise Sales^1		28,005,003	11,484,575	58,193,854	22,835,458
Total revenue		15,051,771	6,829,908	30,836,676	13,910,222
Adjusted EBITDA^1		1,073,195	80,216	2,142,873	349,756
Net (loss) income		(820,833)	(2,228,855)	(3,645,953)	(4,237,323)
Basic and diluted (loss) per share		(0.01)	(0.02)	(0.04)	(0.05)

(1)	Non-GAAP Financial Measure. Refer to section "Non-GAAP Financial Measures" below for additional information.

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

	Three months ended June 30,	Three months ended June 30,	Six months ended June 30,	Six months ended June 30,
	2022 $	2021 $	2022 $	2021 $
Net (loss) income	(820,833)	(2,228,855)	(3,645,953)	(4,237,323)
Add back:
Finance costs	947,006	401,453	1,847,383	789,459
Income taxes	387,453	8,424	191,971	25,361
Amortization	1,824,561	767,665	3,620,025	1,535,416
EBITDA	2,338,187	(1,051,313)	2,013,426	(1,887,087)
Share-based compensation	93,084	875,786	226,899	1,316,760
Transaction cost	143,157	449,605	327,869	880,906
Foreign exchange and other losses (gains)	(931,667)	(16,251)	(479,103)	(37,720)
Fair value change in contingent consideration	(569,566)	(177,611)	53,782	76,897
Adjusted EBITDA	1,073,195	80,216	2,142,873	349,756

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

	Three months ended June 30,	Three months ended June 30,	Six months ended June 30,	Six months ended June 30,
	2022 $	2021 $	2022 $	2021 $
Revenue	15,051,771	6,829,908	30,836,676	13,910,222
Adjusted for:
Merchant costs deducted from net revenue	13,800,013	5,021,582	28,986,101	9,886,239
Sales added to deferred revenue and value of orders fulfilled not included in revenue	911,524	2,452,880	2,501,012	5,356,617
Deferred and other adjustments to revenue recognized	(1,633,543)	(2,669,216)	(3,877,155)	(6,011,109)
Advertising revenue	(125,545)	(150,579)	(253,563)	(306,511)
GMS	28,005,003	11,484,575	58,193,854	22,835,458

About EMERGE

EMERGE is a diversified acquirer and operator of profitable niche e-commerce brands. Our subscription and marketplace e-commerce properties provide our members with access to pet products, premium meat, outdoor gear, golf, and other curated experiences. Our portfolio houses online destinations across North America including WholesalePet.com, trulocal.ca, BattlBox.com, UnderPar.com, JustGolfStuff.ca, CarnivoreClub.co, WagJag.com, BeRightBack.ca and Wanlow.com. EMERGE was named one of the fastest growing companies in Canada by the Startup 50, and the Globe and Mail's 2020 Canada's Top Growing Companies.

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

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 three and six months ended June 30, 2022 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 and Annual Information Form which are incorporated herein by reference 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.

James Bowen, CFA, EMERGE Commerce Ltd., 416-519-9442, [email protected]