ECOM Emerge Commerce Ltd

• Annual Revenue of $23.8M compared to $27.6M in 2022, when excluding eliminated revenue from U.S. operations and trading (revenue in 2022 of $31.7M prior to exclusion of these items)
• Annual Gross Margin of 50% compared to 44% in 2022
• Annual Adjusted EBITDA¹ of $1.14M compared to $1.13M in 2022
• Annual Cash Flow from Operations of $2.0M compared to $1.1M in 2022
• Q4 Revenue of $6.2M compared to $7.8M in Q4 2022 when excluding eliminated revenue from U.S. operations and trading
• Q4 Adjusted EBITDA¹ of $0.5M compared to $0.3M in Q4 2022
• 2023 results include WholesalePet which has subsequently been sold in Q1 2024
• Senior credit facility was reduced to $5.85M from $15.85M in Q1 2024, and from $25M originally

TORONTO, April 29, 2024 /CNW/ – EMERGE Commerce Ltd. (TSXV: ECOM) ("EMERGE" or the "Company"), a premium e-commerce brand portfolio, today announced results for its three and twelve months ended December 31, 2023. Copies of the Annual Financial Statements and MD&A are available on the Company's profile on SEDAR at www.sedar.com.

"2023 was a foundational year for us to paydown debt and significantly reduce interest expense which has been a drag on our cash flow in the current interest rate environment. Over the last year or so, through a series of transactions, we have taken aggressive steps to reduce our senior credit facility to $5.85M down from $25M originally, and in the process, also eliminate the vast majority of deferred consideration owed to brands. While there is still more work to be done, we are pleased with our debt reduction efforts to date. This in turn, allows us to double down on truLOCAL, our strategic premium meat subscription business, as well as our golf vertical, where we are seeing good momentum lately. Operationally, we achieved strong growth in Adjusted EBITDA, particularly in Q4 2023, drove much improved gross margins, and nearly doubled positive cash flow from operations for the year. We believe the go forward business is in a good position to start driving organic growth in 2024 and beyond, with more streamlined operations and focused management efforts," commented Ghassan Halazon, Founder and CEO, EMERGE.

2023 Financial Highlights

• Revenue of $23.8M in 2023 compared to $27.6M in 2022, when excluding eliminated revenue from U.S. operations and trading (revenue of $31.7M prior to exclusion of these items)
• Gross Margin increased to 50% vs. 44% in 2022
• Adjusted EBITDA¹ of $1.14M compared to $1.13M in 2022
• Cash Flow from Operations improved to $2.0M compared to $1.1M in 2022
• Net loss of $21.3M in 2023 compared to a net loss of $17.4M. The increase in net loss is mainly attributable to a goodwill impairment charge of $16.7M, a non-cash charge, due to updated assumptions that reflect current macroeconomic conditions. Excluding the impairment charge, the net loss for the year would have been $4.6M
• Cash on hand at December 31, 2023 was $2.5M

Q4 2023 Financial Highlights

• Q4 Revenue of $6.2M compared to $7.8M in Q4 2022 when excluding eliminated revenue from U.S. operations (Q4 2022 Revenue of $8.00M prior to exclusion of these items)
• Q4 Gross Margin improved to 50% compared to $46% in 2022, marking the Company's 4^th consecutive quarter with gross margin of at least 50%
• Q4 Adjusted EBITDA¹ improved to $0.5M for 2023 compared to $0.3M in 2022, marking the Company's 9^th consecutive quarter of positive Adjusted EBITDA

Events Subsequent to December 31, 2023

Sale of WholesalePet

On January 31, 2024, EMERGE completed the sale of WholesalePet ("WSP") to Tiny Fund I, LP, a private partnership of Tiny Ltd., for aggregate gross cash consideration of US$9.25M subject to certain closing and post-closing adjustments, payments and obligations. Following the transaction, EMERGE no longer has any deferred payment obligations owed to WSP shareholders.

2023 results include WholesalePet. Q1 2024 will be the first financial report to classify WholesalePet as discontinued operations, with prior period results also reflect the reclassification where noted.

Debt Paydown and Refinancing

EMERGE utilized $10M from the WSP transaction proceeds to paydown its senior credit facility with its existing lender, the principal balance of which has been reduced to $5.85M, from $15.85M prior to the completion of the transaction, and $25M originally. The Company's interest expense savings following the aforementioned debt repayment is expected to be approximately $1.38M annually.

On January 31, 2024, the Company entered into a second amended and restated credit agreement with its existing lender. The Amended Facility provides a term of up to 24 months, which is comprised of an initial term of 18-months, plus an additional 6-month extension option (the "Extension"), which may be exercised upon mutual agreement between the Company and the lender. Inclusive of the Extension, the Amended Facility is expected to mature on January 31, 2026. The Company remains in good standing with existing lender, which it has worked with since November 2019.

Go Forward Business

Following the sale of WholesalePet, EMERGE retains 4 brands across 2 main verticals, Grocery and Golf, namely truLOCAL, Carnivore Club, UnderPar and JustGolfStuff. EMERGE expects further HQ cost reductions, given the reduced overheads required to service the go-forward brand portfolio.

truLOCAL, our premium meat subscription brand, is EMERGE's largest business by revenue. truLOCAL experienced our most significant increase in profitability in 2023, following our various cost savings initiatives and gross margin improvements. Carnivore Club, an artisanal meat subscription brand, is housed under truLOCAL, and currently being optimized for profitability.

EMERGE also operates a golf vertical, across Canada and the U.S., which includes UnderPar, our discounted experiences business, and JustGolfStuff, our fast-growing golf products and apparel business.

Top Priorities

The Company's top priorities in the near-term are to i) drive organic growth, ii) continue to reduce debt and interest expense, iii) extract further operational efficiencies, and iv) enhance profitability and 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 twelve months ended December 31, 2023, which are available on SEDAR.

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

The following table highlights Gross Merchandise Sales ("GMS") and a reconciliation of the Company's reported results to its adjusted measures:

About EMERGE

EMERGE (TSXV: ECOM) is a premium e-commerce brand portfolio in Canada and the U.S. Our subscription and marketplace e-commerce properties provide our members with access to unique offerings across grocery and golf verticals. Our grocery businesses include truLOCAL.ca, our premium meat subscription brand, and Carnivore Club, our artisanal meat brand. Our golf businesses include UnderPar, our discounted experiences business, and JustGolfStuff, our golf products & apparel brand.

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

Follow EMERGE:
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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 twelve months ended December 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.