- 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 3rd consecutive quarter with Gross
Margin exceeding 50%
- Q3 Adjusted EBITDA1 of $0.18M compared to $0.20M in Q3 2022, marking the Company's
8th consecutive quarter of positive Adjusted EBITDA, and
14th 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
8th consecutive quarter of positive Adjusted EBITDA, and
14th 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 2nd 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
Sales1
|
|
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
EBITDA1
|
|
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.