EMERGE Reports Third Quarter 2023 Results

• Q3 Revenue of $5.4M compared to $5.9M in Q3 2022 when excluding revenue from US operations and trading that were eliminated in 2022 (Q3 2022 $6.3M revenue prior to exclusion of these items)
• Q3 Gross Margin improved to 51% compared to 46% in Q3 2022, marking the Company's 3^rd consecutive quarter with Gross Margin exceeding 50%
• Q3 Adjusted EBITDA¹ of $0.18M compared to $0.20M in Q3 2022, marking the Company's 8^th consecutive quarter of positive Adjusted EBITDA, and 14^th out of the last 15 quarters

TORONTO, Nov. 28, 2023 /CNW/ - EMERGE Commerce Ltd. (TSXV: ECOM) ("EMERGE" or the "Company"), a diversified acquirer and operator of niche e-commerce brands, today announced results for its three and nine months ended September 30, 2023. Copies of the interim financial statements and MD&A are available on the Company's profile on SEDAR at www.sedarplus.ca.

"Considering the seasonal nature of Q3 for some of our key businesses, and the ongoing macro climate, we're pleased to have delivered another quarter of positive Adjusted EBITDA. Q3 also marks our third consecutive quarter with gross margin exceeding 50%, reflecting the team's numerous gross margin enhancement initiatives. Our revenue in Q3 2023 was down vs. Q3 2022 in part due to the unprofitable US operations and trading divisions eliminated in late 2022, in addition to what we view as more normalized post-pandemic revenue levels reflected lately. Most of our key businesses remain substantially higher than pre-pandemic (2019) levels, and we are seeing strong sales momentum lately across numerous brands, especially during the Black Friday shopping period," commented Ghassan Halazon, Founder and CEO, EMERGE.

Q3 2023 Financial Highlights

• Q3 GMS¹ was $18.2M compared to $20.1M in Q3 2022 when excluding GMS from US operations and trading that were eliminated in 2022 (Q3 2022 $20.4M GMS prior to exclusion of these items)
• Q3 Revenue from continuing operations was $5.4M versus $5.9M in Q3 2022 when excluding revenue from US operations and trading that were eliminated in 2022 (Q3 2022 $6.3M revenue prior to exclusion of these items)
• Q3 Gross Margin improved to 51% compared to 46% in Q3 2022
• Q3 Adjusted EBITDA¹ of $0.18M for 2023, compared to $0.20M in 2022, marking the Company's 8^th consecutive quarter of positive Adjusted EBITDA, and 14^th out of the last 15 quarters
• Net Loss from Continuing Operations of $0.5M for Q3 2023 compared to net income of $1.8M in Q3 2022. The increase in net loss is primarily attributable to unfavourable variances from foreign exchange and other gains (losses) and remeasurement of contingent consideration in Q3 2022.
• Cash on hand at September 30, 2023 was $2.3M

This marks EMERGE's first financial report which classifies WagJag as discontinued operations, with prior period results also restated to reflect the reclassification where noted. The Company completed its sale of WagJag in August 2023.

Brand-Level Updates

The EMERGE portfolio currently houses 3 verticals: Grocery/ Meat, Pets and Golf.

Our premium meat subscription business, and our largest brand by revenue, truLOCAL.ca, is seeing our most significant improvement in profitability in 2023 YTD following our various cost savings initiatives over the last 12 months. Gross margins are also materially stronger this year-to-date, in large part due to the elimination of the loss-making trading and US divisions in late 2022, in addition to the team's margin improvement efforts. Revenue has come down from peak-pandemic levels, but remains substantially above pre-pandemic (2019) levels.

Our B2B Pets marketplace, WholesalePet.com ("WSP"), remains highly profitable and cash flow generative. While WSP has come down from its peak pandemic highs, the business continues to be significantly larger and more profitable than its pre-pandemic (2019) levels, continuing to build on its 22-year track record. The business is also benefiting from improved take-rates, driven by a commission increase exercise in the 2^nd half of the year.

Our Golf business includes UnderPar, our golf experiences business and JustGolfStuff, our products business. UnderPar continues to be adversely affected from the post-pandemic boom in the sport of golf that has reduced the need for golf course discounts on the platform to attract customers. However, the business is seeing encouraging signs lately, particularly this holiday season, that a number of prominent golf courses are returning to the platform, and we believe the recessionary environment ahead could be conducive to drive more golf course supply on the marketplace.

JustGolfStuff, our golf products business, remains our fastest growing brand across EMERGE, driving high double-digit organic growth year-to-date, and currently being optimized for profitability. JustGolfStuff is also seeing strong early momentum with its US expansion.

Management Transition

The Company will be appointing Kyle Burt-Gerrans as Chief Financial Officer and Corporate Secretary effective January 2024. Kyle succeeds Jonathan Leong, who will be stepping down to pursue other opportunities.  Jonathan will remain with the Company until January 2024 and ensure an orderly and smooth transition of his responsibilities.

Kyle has been the Company's Director of Financial Reporting since July 2021, leading the financial reporting of the Company.  He is a Chartered Professional Accountant with over 10 years in financial reporting and accounting and holds a Bachelor's degree from Queen's University. 

"On behalf of the EMERGE team, I'd like to congratulate Kyle on his upcoming promotion to CFO in January. Over the last few years, Kyle has been an instrumental senior financial leader at EMERGE, working closely with management and our auditors, so this was a natural progression for him with us. This transition also aligns with our plans of operating with a leaner HQ team and structure to support our more focused brand portfolio moving forward. We'd also like to extend our sincere gratitude to Jonathan for his partnership over the years. We will continue to work closely with Jonathan throughout the transition period, and wish him nothing but the best in his future endeavours," commented Halazon.

Top Priorities

The Company's top priorities in the near-term are to i) continue to pay down debt, ii) drive organic growth from the existing portfolio, iii) extract further operational efficiencies, and iv) enhance EBITDA to cash flow conversion.

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 and nine months ended September 30, 2023, which are available on SEDAR.

		Three months ended September 30,	Three months ended September 30,	Nine months ended September 30,	Nine months ended September 30,
		2023 $	2022 $	2023 $	2022 $
Gross Merchandise Sales^1		18,183,339	20,533,597	56,308,167	64,070,788
Total revenue		5,449,793	6,322,037	17,614,619	23,710,064
Adjusted EBITDA^1		178,783	200,561	658,691	846,605
Net (loss) income from continuing operations		(522,209)	1,734,030	(4,175,573)	(1,947,841)
Net (loss) income		349,497	1,766,687	(3,735,037)	(1,879,266)
Basic and diluted income (loss) per share from continuing operations		(0.00)	0.02	(0.04)	(0.02)
Basic and diluted income (loss) per share from discontinued operations		0.01	0.00	0.00	0.00

Results from BattlBox and WagJag have been reclassified to discontinued operations.

(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 September 30,	Three months ended September 30,	Nine months ended September 30,	Nine months ended September 30,
	2023 $	2022 $	2023 $	2022 $
Net (loss) income	349,497	1,766,687	(3,735,037)	(1,879,265)
Add back:
Finance costs	862,272	1,064,749	2,780,124	2,911,901
Income taxes	(589,461)	(309,957)	(1,320,464)	(297,793)
Amortization	876,681	1,190,185	3,264,015	3,529,337
EBITDA	1,498,989	3,711,664	988,638	4,264,180
Share-based compensation	28,167	85,108	143,731	312,007
Transaction cost	63,487	126,349	267,544	454,218
Foreign exchange and other losses (gains)	(540,154)	(1,886,443)	2,547	(2,365,546)
Fair value change in contingent consideration	-	(1,803,460)	(303,233)	(1,749,678)
Net loss (income) from discontinued operations	(871,706)	(32,657)	(440,536)	(68,576)
Adjusted EBITDA	178,783	200,561	658,691	846,605

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

	Three months ended September 30,	Three months ended September 30,	Nine months ended September 30,	Nine months ended September 30,
	2023 $	2022 $	2023 $	2022 $
Revenue	5,449,793	6,322,037	17,614,619	23,710,064
Adjusted for:
Merchant costs deducted from net revenue	12,821,169	14,471,532	39,233,270	41,416,974
Sales added to deferred revenue and value of orders fulfilled not included in revenue	1,339,824	1,426,098	4,654,201	4,535,584
Deferred and other adjustments to revenue recognized	(1,356,220)	(1,672,988)	(5,105,459)	(5,550,143)
Advertising revenue	(71,227)	(13,082)	(88,464)	(41,691)
GMS	18,183,339	20,533,597	56,308,167	64,070,788

About EMERGE

EMERGE is a diversified acquirer and operator of quality niche e-commerce brands in Canada and the U.S. Our subscription and marketplace e-commerce properties provide our members with access to offerings across our pets, premium meat/grocery, and golf verticals. EMERGE was named one of Canada's Top Growing Companies by Globe and Mail in 2022 (and 2020), and one of the fastest growing companies in Canada by the Startup 50 in 2020.

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

Follow EMERGE LinkedIn | Twitter | Instagram | Facebook 

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 nine months ended September 30, 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.

Ghassan Halazon or Jonathan Leong, EMERGE Commerce Ltd., 416-479-9590, [email protected]