- Q1 Revenue of $7.0M compared to
$9.7M in Q1 2022. Revenue for Q1 2022
would have been $7.7M when excluding
revenue from US operations and trading that were eliminated in
2022
- Q1 Gross Margin improved to 51.4% compared to 42.4% in Q1
2022
- Q1 Adjusted EBITDA1 of $0.3M compared to $0.5M in Q1 2023, marking the Company's
6th consecutive quarter of positive Adjusted EBITDA, and
12th out of the last 13 quarters
- Q1 Net Loss improved to $2.1M compared to $2.8M in Q1 2022
- Q1 Cash Flow from Operations increased to $0.8M compared to negative $1.3M in Q1 2022
TORONTO, May 29, 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
months ended March 31, 2023. Copies
of the interim financial statements and MD&A are available on
the Company's profile on SEDAR at www.sedar.com.
This marks EMERGE's first financial report which classifies
BattlBox as discontinued operations, with prior period results also
restated to reflect the reclassification. The Company completed its
sale of BattlBox in April 2023.
"As has generally been seen across the e-commerce sector, our Q1
revenue was down vs. Q1 2022, a quarter during which some of our
brands benefited from 'stay-at-home' sales due to the Omicron
variant prevalent at the time. Notwithstanding, our overall revenue
remains significantly higher than pre-pandemic levels, with some of
our brands showing reasonable organic growth. Notably, we are
seeing strong double-digit growth in some of our discount-centric
brands, which we believe are well suited for this weaker macro
climate. We are especially pleased with our improvements in gross
margin, net income, and positive cash from operations. We expect
that the cost measures and gross margin initiatives that we have
executed in recent quarters will continue to support a healthier
bottom line," commented Ghassan Halazon, Founder and CEO,
EMERGE.
Q1 2023 Financial Highlights
- Q1 GMS1 was $21.0M compared to $24.2M in Q1 2022. GMS for Q1 2022 would have
been $22.2M when excluding GMS from
US operations and trading that were eliminated in 2022
- Q1 Revenue from continuing operations was $7.0M versus $9.7M
in Q1 2022. Revenue for Q1 2022 would have been $7.7M when excluding revenue from US operations
and trading that were eliminated in 2022
- Q1 Gross Margin improved to 51.4% compared to 42.4% in
Q1 2022
- Q1 Adjusted EBITDA1 of $0.3M for 2023, compared to $0.5M in 2022, marking the Company's
6th consecutive quarter of positive Adjusted EBITDA, and
12th out of the last 13 quarters
- Q1 Cash Flow from Operations increased to $0.8M compared to negative $1.3M in Q1 2022
- Net Loss of $2.1M for Q1
2023 compared to net loss of $2.8M in
Q1 2022
- Cash on hand at March 31,
2023 was $2.8 million
Events Subsequent to March 31, 2023
Sale of BattlBox
In March 2023, EMERGE entered into
an agreement to sell its subsidiary BattlBox LLC ("BattlBox"). In
April 2023, the sale was completed,
with the Company receiving cash consideration of US$6,008,666, and the buyer assuming an aggregate
of US$1,161,537 in deferred
consideration liabilities. The Company no longer has any deferred
payment obligations owed to former BattlBox shareholders.
EMERGE originally acquired BattlBox Group in October 2021, which included both the BattlBox
and Carnivore Club brands. Carnivore Club is not included in the
transaction, and will remain an EMERGE brand, working closely with
truLOCAL, under the Meat/Grocery vertical.
Following the transaction, EMERGE retains 7 brands across 4 main
verticals (Pets, Meat/Grocery, Golf and Experiences) in
Canada and the U.S.,
namely WholesalePet, truLOCAL, Carnivore Club, UnderPar,
JustGolfStuff, WagJag and BeRightBack.
Debt Update
In March and April 2023, the
Company entered into an amendment of its credit facility with its
existing lender (the "ARCA") pursuant to which, the Company repaid
$7,000,000 of its senior credit
facility from the proceeds of the sale of BattlBox, with the lender
agreeing to relax certain financial covenants to offer the Company
additional flexibility. Interest expense savings from debt
repayment are expected to be $1M
annually. The credit facility is currently at $16.5M, down from $25M in the prior year. The Company remains in
good standing with its existing lender, which it has worked with
since November 2019.
Cost Optimization and Gross Margin Initiatives
In late 2022 and early 2023, the Company announced savings and
cost reductions, resulting in a combined annualized total of
$2M in anticipated savings. The
Company continues to explore additional cost savings, with a focus
on non-revenue impacting areas.
As part of overall efforts to drive additional cash flow, the
initiative includes reducing overhead expenses, and maximizing
cross-functional synergies amongst EMERGE HQ and portfolio
brands.
The Company has also taken numerous steps to improve gross
margin, including exiting low margin revenue streams such as
truLOCAL's trading and US initiatives, and price increases
through various measures, with gross margins improving in Q1
2023 to 51.4% compared to 42.4% in Q1 2022.
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, iii) extract further operational efficiencies, and iv)
enhance EBITDA to cash flow conversion.
Conference Call
Management will host a conference call on Tuesday, May 30 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 41194865.
Alternatively, the conference call can be accessed online at:
https://app.webinar.net/rYbzgkbKRNo
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, 2023, which are available
on SEDAR.
|
|
Three months ended
March 31,
|
|
|
|
2023
$
|
2022
$
|
Gross Merchandise
Sales1
|
|
|
20,973,817
|
24,246,578
|
Total
revenue
|
|
|
7,024,246
|
9,708,132
|
Adjusted
EBITDA1
|
|
|
315,429
|
484,709
|
Net (loss) from
continuing operations
|
|
|
(2,114,892)
|
(2,919,248)
|
Net (loss)
|
|
|
(2,129,713)
|
(2,825,120)
|
Basic and diluted
(loss) per share from continuing operations and total
|
|
|
(0.02)
|
(0.03)
|
|
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
March 31,
|
|
|
|
2023
$
|
2022
$
|
Net (loss)
income
|
|
|
(2,129,713)
|
(2,825,120)
|
Add
back:
|
|
|
|
|
Finance
costs
|
|
|
1,059,299
|
900,201
|
Income taxes
|
|
|
(122,862)
|
(83,568)
|
Amortization
|
|
|
1,227,247
|
1,192,885
|
EBITDA
|
|
|
33,971
|
(815,602)
|
Share-based
compensation
|
|
|
77,205
|
133,815
|
Transaction
cost
|
|
|
146,515
|
184,712
|
Foreign exchange and
other losses (gains)
|
|
|
42,917
|
452,564
|
Impairment of
goodwill
|
|
|
-
|
623,348
|
Net loss (income) from
discontinued operations
|
|
|
14,821
|
(94,128)
|
Adjusted
EBITDA
|
|
|
315,429
|
484,709
|
The following table highlights GMS and a reconciliation of the
Company's reported results to its adjusted measures:
|
|
Three months ended
March 31,
|
|
|
|
2023
$
|
2022
$
|
Revenue
|
|
|
7,024,246
|
9,708,132
|
Adjusted
for:
|
|
|
|
|
Merchant costs deducted
from net revenue
|
|
|
14,518,202
|
15,186,088
|
Sales added to deferred
revenue and value
of orders fulfilled not included in revenue
|
|
|
1,593,715
|
1,723,988
|
Deferred and other
adjustments to revenue recognized
|
|
|
(1,928,954)
|
(2,243,612)
|
Advertising
revenue
|
|
|
(233,392)
|
(128,018)
|
GMS
|
|
|
20,973,817
|
24,246,578
|
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, golf, and other curated experiences. 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/
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 months
ended March 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.