- Q2 Revenue of $6.2M compared to
$8.6M in Q2 2022. Revenue for Q2 2022
would have been $7.1M when excluding
revenue from US operations and trading that were eliminated in
2022.
- Q2 Gross Margin improved to 51.3% compared to 44.1% in Q2 2022,
marking the Company's 2nd consecutive quarter with Gross
Margin exceeding 50%
- Q2 Adjusted EBITDA1 increased to $0.13M compared to $0.09M in Q2 2022, marking the Company's
7th consecutive quarter of positive Adjusted EBITDA, and
13th out of the last 14 quarters
- Q2 Cash Flow from Operations increased to $0.8M compared to $0.2M in Q2 2022
- Senior Credit Facility down to $15.85M from $25M a
year ago
TORONTO, Aug. 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 six months ended June 30, 2023. Copies of the interim financial
statements and MD&A are available on the Company's profile on
SEDAR at www.sedarplus.ca.
"Despite the macro climate, we're pleased to have delivered
another quarter of positive Adjusted EBITDA and positive cash flow
from operations, both exceeding last year. Q2 also marks our second
consecutive quarter with gross margin exceeding 50%, reflecting the
team's various gross margin enhancement initiatives. Our revenue in
Q2 2023 was down vs. Q2 2022 in large part due to the unprofitable
truLOCAL US operations and trading divisions eliminated in late
2022, in addition to what we view as more normalized post-pandemic
revenue levels reflected in recent quarters. We expect the second
half of 2023 to offer a more apples-to-apples revenue comparison.
Notwithstanding, EMERGE'S overall revenue remains significantly
higher than pre-pandemic levels (2019), with some of our brands
showing healthy organic growth year over year,"
commented Ghassan Halazon, Founder and CEO, EMERGE.
Q2 2023 Financial Highlights
- Q2 GMS1 was $20.2M compared to $22.1M in Q2 2022. GMS for Q2 2022 would have
been $20.6M when excluding GMS from
US operations and trading that were eliminated in 2022
- Q2 Revenue from continuing operations was $6.2M versus $8.6M
in Q2 2022. Revenue for Q2 2022 would have been $7.1M when excluding revenue from US operations
and trading that were eliminated in 2022
- Q2 Gross Margin improved to 51.3% compared to 44.1%
in Q2 2022
- Q2 Adjusted EBITDA1 of $0.13M for 2023, compared to $0.09M in 2022, marking the Company's
7th consecutive quarter of positive Adjusted EBITDA, and
13th out of the last 14 quarters
- Q2 Cash Flow from Operations increased to $0.8M compared to $0.2M in Q2 2022
- Net Loss from Continuing Operations of
$1.6M for Q2 2023 compared to net
loss of $0.9M in Q2 2022. The
increase in net loss is primarily attributable to losses from
foreign exchange and other gains (losses) of $0.5M in Q2 2023 compared to a gain on foreign
exchange and other gains (losses) of $0.9M in Q2 2022
- Cash on hand at June 30,
2023 was $2.8M
This marks EMERGE's second financial report which classifies
BattlBox as discontinued operations, with prior period results also
restated to reflect the reclassification where noted. The Company
completed its sale of BattlBox in April
2023.
Sale of WagJag
In July 2023, the Company entered
into an agreement to sell WagJag and BeRightBack. In August 2023, pursuant to the sale of WagJag and
BeRightBack (the "Transaction"), the Company received cash
consideration of $1M on closing of
the Transaction.
EMERGE originally acquired the business for $500,000 from Torstar Corp in 2017. The Company
expects further HQ cost reductions in association with the sale of
WagJag, given the reduced overheads required to service the
go-forward brand portfolio.
Following the Transaction, EMERGE retains 5 brands across 3 main
verticals (Pets, Grocery, and Golf) in Canada and the U.S., namely WholesalePet,
truLOCAL, Carnivore Club, UnderPar, and JustGolfStuff.
Senior Debt Update
The Company entered into an amendment agreement to the Company's
amended and restated credit agreement dated October 27, 2022, with its existing lender (the
"ARCA") pursuant to which, inter alia, the Company repaid the
lender $400,000 from proceeds of the
Transaction.
The Company's senior credit facility is currently at
$15.85M, down from $25M a year ago.
The Company remains in good standing with its existing lender,
which it has worked with since November
2019, and continue explore options to refinance the
debt.
"Q2 was also a critical quarter to progress on debt paydown, in
large part facilitated by the sale of BattlBox, and more recently
supplemented by the sale of WagJag completed in Q3. Our senior debt
facility now sits at $15.85M, down
from $25M a year ago, expected to
result in substantial interest savings, exceeding $1M on an annualized basis. We plan to continue
to be relentless in both driving operational improvements and
paying down debt. We have a valuable e-commerce brand portfolio,
including multiple profitable businesses that deserve more
attention, and we believe our recent streamlining efforts will help
us focus on our most compelling opportunities," continued
Halazon.
Top Priorities
The Company's top priorities in the near-term are to i) continue
to pay down debt and reduce interest expense, ii) drive organic
growth from existing portfolio, iii) extract further operational
efficiencies, and iv) enhance EBITDA to cash flow conversion.
Conference Call
Management will host a conference call on Tuesday, August 29 at 8:30
am ET to discuss its second quarter results. To access
the conference call, please dial (416) 764-8650 or (888) 664-6383
and provide conference ID 27428178.
Alternatively, the conference call can be accessed online at:
https://app.webinar.net/Bj8ekNnknAv
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 six months
ended June 30, 2023, 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,
|
|
|
2023
$
|
2022
$
|
2023
$
|
2022
$
|
Gross Merchandise
Sales1
|
|
20,162,035
|
22,059,810
|
41,135,852
|
46,306,388
|
Total
revenue
|
|
6,165,929
|
8,632,604
|
13,190,175
|
18,340,736
|
Adjusted
EBITDA1
|
|
125,990
|
85,943
|
441,419
|
570,652
|
Net (loss) income from
continuing operations
|
|
(1,648,252)
|
(908,455)
|
(3,763,144)
|
(3,827,703)
|
Net (loss)
income
|
|
(1,954,819)
|
(820,833)
|
(4,084,532)
|
(3,645,953)
|
Basic and diluted
(loss) per share from continuing operations and total
|
|
(0.02)
|
(0.01)
|
(0.04)
|
(0.04)
|
|
Results from BattlBox
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 June 30,
|
Three months
ended June 30,
|
Six months
ended June 30,
|
Six months
ended June 30,
|
|
2023
$
|
2022
$
|
2023
$
|
2022
$
|
Net (loss)
income
|
(1,954,819)
|
(820,833)
|
(4,084,532)
|
(3,645,953)
|
Add
back:
|
|
|
|
|
Finance
costs
|
858,553
|
946,951
|
1,917,852
|
1,847,152
|
Income taxes
|
(608,141)
|
95,732
|
(731,003)
|
12,164
|
Amortization
|
1,222,941
|
1,216,707
|
2,450,188
|
2,409,592
|
EBITDA
|
(481,466)
|
1,438,557
|
(447,495)
|
622,955
|
Share-based
compensation
|
38,359
|
93,084
|
115,564
|
226,899
|
Transaction
cost
|
57,542
|
143,157
|
204,057
|
327,869
|
Foreign exchange and
other losses (gains)
|
508,221
|
(931,667)
|
551,138
|
(479,103)
|
Fair value change in
contingent consideration
|
(303,233)
|
(569,566)
|
(303,233)
|
53,782
|
Net loss (income) from
discontinued operations
|
306,567
|
(87,622)
|
321,388
|
(181,750)
|
Adjusted
EBITDA
|
125,990
|
85,943
|
441,419
|
570,652
|
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,
|
|
2023
$
|
2022
$
|
2023
$
|
2022
$
|
Revenue
|
6,165,929
|
8,632,604
|
13,190,175
|
18,340,736
|
Adjusted
for:
|
|
|
|
|
Merchant costs deducted
from net revenue
|
14,131,053
|
13,800,796
|
28,649,255
|
28,986,884
|
Sales added to deferred
revenue and value of orders fulfilled not included in
revenue
|
1,720,662
|
1,385,498
|
3,314,377
|
3,109,486
|
Deferred and other
adjustments to revenue recognized
|
(1,820,285)
|
(1,633,543)
|
(3,749,239)
|
(3,877,155)
|
Advertising
revenue
|
(35,324)
|
(125,545)
|
(268,716)
|
(253,563)
|
GMS
|
20,162,035
|
22,059,810
|
41,135,852
|
46,306,388
|
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
six months ended June 30, 2023 in the
section "Non-GAAP Financial Measures" available through SEDAR at
www.sedarplus.ca.
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.sedarplus.ca. 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.