ECOM Emerge Commerce Ltd

• Record Annual Revenue of $58.2M compared to $34.8M in 2021, an increase of 67%
• Record Annual Adjusted EBITDA¹ of $3.6M compared to $1.2M in 2021, an increase of 189%
• Annual Cash Flow from Operations of $1.1M compared to negative ($3.4M) in 2021
• Q4 Revenue of $15.2M compared to $14.9M in Q4 2021, an increase of 2%
• Q4 Adjusted EBITDA¹ of $0.7M compared to $1.4M in Q4 2021, a decrease of 51%
• Q4 Cash Flow from Operations of $3.0M compared to $2.0M in Q4 2021, an increase of 47%

TORONTO, April 27, 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 twelve months ended December 31, 2022. Copies of the Annual Financial Statements and MD&A are available on the Company's profile on SEDAR at www.sedar.com.

"During 2022, we managed to grow revenue by 67%, almost triple our Adjusted EBITDA¹, and drive much improved positive cash flow from operations, including a record $3M in Q4. We have now generated positive Adjusted EBITDA¹ for the 11^th time out of our last 12 quarters. During and since Q4, we have also taken decisive cost reduction measures and synergies totalling up to $2M that we believe will serve our bottom line well in 2023. While the general macro climate remains challenged, for the most part, we are seeing that our collection of largely discount-driven, asset-light brands are proving to be resilient, and overall, remain significantly ahead of pre-pandemic revenue levels," commented Ghassan Halazon, Founder and CEO, EMERGE.

2022 Financial Highlights

• Gross Merchandise Sales ("GMS")¹ grew to a record $117.8M in 2022 compared to $58.3M in 2021, an increase of 102%
• Revenue increased to a record $58.2M, up 67% from $34.8M in 2021
• Adjusted EBITDA¹ increased to a record $3.6M compared to $1.2M in 2021, an increase of 189%
• Cash Flow from Operations of $1.1M compared to negative ($3.4M) in 2021
• Net loss of $17.4M in 2022 compared to a net loss of $6.6M. The increase in net loss is mainly attributable to a goodwill impairment charge of $14.2M, 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 $3.2M
• Cash on hand at December 31, 2022 was $5.9 million

Q4 2022 Financial Highlights

• Q4 GMS¹ grew to a record $32.8M in 2022 compared to $26.2M in Q4 2021, an increase of 25%
• Q4 Revenue increased to $15.2M, up 2% from $14.9M in 2021
• Q4 Adjusted EBITDA¹ of $0.7M for 2022, compared to $1.4M in 2021, which marks the Company's 5^th consecutive quarter of positive Adjusted EBITDA, and 11^th out of the last 12 quarters
• Q4 Cash Flow from Operations of $3.0M compared to $2.0M in Q4 2021, an increase of 47%
• Net Loss of $15.5M for Q4 2022 compared to a net loss of $1.2M in Q4 2021. The increase in net loss is mainly attributable to a goodwill impairment charge of $14.2M, a non-cash charge due to updated assumptions that reflect current macroeconomic conditions. Excluding the impairment charge, the net loss for the quarter would have been $1.3M

Events Subsequent to December 31, 2022:

Sale of BattlBox

On March 31, 2023, EMERGE entered into an agreement to sell its subsidiary Battlbox LLC. Pursuant to the sale, Emerge will receive cash consideration of US$6,008,666 on closing of the transaction, subject to certain distribution and debt adjustments, and the Buyer assuming an aggregate of US$1,161,537 in outstanding liabilities. As part of the transaction, EMERGE will no longer have any deferred payment obligations owed to former BattlBox Group 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.

EMERGE's go-forward e-commerce portfolio is expected to approach C$100M in Gross Merchandise Sales⁽¹⁾ annually, and remain profitable on an Adjusted EBITDA⁽¹⁾ basis.

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 has agreed to repay C$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 C$1M annually. The Company remains in good standing with its existing lender, which it has worked with since November 2019.

Cost Optimization and Synergies Measures

Further to the anticipated savings previously announced in late 2022, the Company announced additional savings and cost reductions of $1M, for a combined annualized total of $2M in anticipated savings implemented under this initiative.

As part of overall efforts to drive additional cash flow, the initiative includes reducing overhead expenses, improving margins, maximizing cross-functional synergies amongst EMERGE HQ and portfolio brands, and eliminating unprofitable revenue streams.

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 Thursday, April 27 at 8:30 am ET to discuss its fourth quarter results. To access the conference call, please dial (416) 764-8650 or (888) 664-6383 and provide conference ID 38803489.

Alternatively, the conference call can be accessed online at: https://app.webinar.net/v6kgYV15Ajy

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, 2022, 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 GMS and a reconciliation of the Company's reported results to its adjusted measures:

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 twelve months ended December 31, 2022 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.