EMERGE Delivers 172% Revenue Growth in Q3 2021, Prepares for Acquisitions in Q4
- EMERGE reported quarterly revenue of $6.1 million, up 172% compared to $2.2 million in Q3 2020
- Subsequent to quarter-end, EMERGE closed two acquisitions, BattlBox Group and WholesalePet.com, which combined have generated over US$62 million of Gross Merchandise Sales(1), revenue of over US$26 million, and Adjusted EBITDA of over US$6 million (unaudited) prior to their acquisition(2)
TORONTO, Nov. 29, 2021 /CNW/ - EMERGE Commerce Ltd. (TSXV: ECOM) ("EMERGE" or the "Company"), a leading acquirer and operator of niche e-commerce marketplaces and subscription brands, today announced results for the three and nine months ended September 30, 2021.
"Our third quarter continued the trend of triple-digit revenue growth, driven by our acquisition strategy. Q3 was a planned investment quarter for EMERGE as we made key investments in team and infrastructure to lay the foundation for our two most profitable acquisitions to date, BattlBox Group and WholesalePet.com, both having subsequently closed in Q4, and in the process, propelling EMERGE comfortably north of $100 million in annual GMS(1)," commented Ghassan Halazon, Founder and CEO, EMERGE.
"Our diversified portfolio continues to prove largely resilient in the face of this uncertain macro climate, delivering triple-digit revenue growth, led by truLOCAL, our premium meat subscription brand, where sales remain substantially higher than pre-pandemic levels and JustGolfStuff, our golf products brand, that has already surpassed 2x its 2020 total GMS, partially offset by continued supply-side issues at UnderPar.com during Q3."
"Based on results to date, Q4 is shaping up to be a special quarter, driven by strong performance from our latest acquisitions, as well as organically, including in golf experiences where we are seeing supply-side headwinds abating. We expect to achieve record GMS, revenue and positive Adjusted EBITDA(1) in Q4 2021, and for 2021 overall."
Q3 2021 Financial Highlights
- Gross Merchandise Sales ("GMS")(1) increased to $9.2 million for the three months ended September 30, 2021, an increase of 19% from $7.7 million in Q3 2020.
- Q3 2021 revenue increased to $6.1 million, up 172% from $2.2 million in Q3 2020, mainly driven by the acquisition of truLOCAL.
- EMERGE reported negative Adjusted EBITDA(1) of $0.51 million for Q3 2021 compared to $0.06 million in Q3 2020. The decline in Adjusted EBITDA is partially attributable to a planned increase in corporate investment in preparation for acquisitions in Q4.
- Q3 2021 results do not include results from our subsequent acquisitions Battlbox Group and WholesalePet.com. On a pro forma(1) basis, inclusive of BattlBox Group and WholesalePet.com, GMS(1) would be approximately $92.5 million, revenue would be approximately $45.6 million, and Adjusted EBITDA(1) would be approximately $3.7 million on a Q3 year-to-date basis (prior to normalizations for pre-acquisition period).
- EMERGE ended Q3 with $16.8 million in cash prior to the acquisitions in Q4. Post-acquisitions, EMERGE had approximately $6 million in cash.
Q3 2021 Business Highlights
- In July, EMERGE partnered with plant-based food company, Modern Meat, a portfolio company of Modern Plant Inc. ("Modern Plant Based Foods"), to offer plant-based meat alternatives to truLOCAL's loyal customers base, in addition to the premium selection of meats that truLOCAL customers have come to know and love.
- In August, EMERGE signed and announced a definitive agreement to acquire BattlBox, LLC and its affiliates Carnivore Club, LLC and Carnivore Club Subscription Box Canada Inc. (collectively, "BattlBox Group").
- In September, truLOCAL launched Corporate Gifts, a curated program that enables companies to gift gourmet steak box to their employees and clients.
Events Subsequent to Q3 2021
- On October 6, 2021, EMERGE closed the acquisition of BattlBox Group and Carnivore Club
- On November 8, 2021, EMERGE refinanced its $8 million term loan and upsized its credit facility to $25 million
- On November 16, 2021, EMERGE acquired WholesalePet.com a profitable B2B e-commerce platform
"The landmark acquisition of WholesalePet.com, marks our entry into the $10 billion dollar pet ecommerce industry and our first foray into B2B e-commerce. WholesalePet.com has a 20-year track record of consistent organic growth, operating at 75% EBTIDA margins, and impeccable cash flow conversion. This transaction is a major step forward towards achieving positive operating cash flow in 2022. It is an asset-light model which carries no inventory, with minimal reliance on marketing, and a veteran team joining us that will help shape our strategic planning in this key vertical," continued Halazon.
Outlook
Since December 2020, when EMERGE completed its go public listing, the Company has executed three transformative acquisitions, truLOCAL, BattlBox Group and WholesalePet.com.
EMERGE is on track to achieve record GMS, revenue and Adjusted EBITDA growth in Q4-2021, and for 2021 overall, with growth driven by investments largely made in Q3, positive contribution from its acquisitions, stronger performance, notably from the golf experiences business, and new product-related revenues.
The Company had record GMS(1) of $5.1 million in October 2021, a 190% increase compared to October 2020. Subscription-based sales comprised 83% overall GMS in October, compared to 0% in October 2020. BattlBox Group achieved $2 million GMS(1), strong positive Adjusted EBITDA(1), and an 85% customer repeat rate during its first month under EMERGE ownership.
EMERGE continues to advance its growing acquisition pipeline of niche e-commerce businesses.
The Company's main goals remain to: (i) acquire additional niche e-commerce brands with a track record of growth and profitability; (ii) achieve organic growth for the existing portfolio of brands; and (iii) invest in the team and infrastructure to support further acquisitions and scaling.
Conference Call
Management will host a conference call on Monday, November 29, 2021 at 8:30 am ET to discuss its third quarter results. To access the conference call, please dial (416) 764-8650 or (888) 664-6383 and provide conference ID 71022723.
Alternatively, the conference call can be accessed online at: https://produceredition.webcasts.com/starthere.jsp?ei=1514916&tp_key=0bd087832c
Selected Unaudited Financial Highlights
The tables below set out selected financial information and should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements and MD&A for the three and nine-months ended September 30, 2021, which are available on SEDAR.
Three $ |
Three months |
Nine months |
Nine months |
|
Gross Merchandise |
9,200,599 |
7,746,067 |
32,036,057 |
21,104,007 |
Total revenue |
6,059,079 |
2,226,314 |
19,969,301 |
6,846,725 |
Adjusted EBITDA1 |
(512,109) |
62,196 |
(162,353) |
701,691 |
Net (loss) income |
(1,103,122) |
(1,291,668) |
(5,340,445) |
(1,831,911) |
Basic and diluted (loss) per share |
(0.01) |
(0.02) |
(0.06) |
(0.03) |
(1) |
Non-GAAP Financial Measure. Refer to section "Non-GAAP Financial Measures" below for additional information. |
(2) |
BattlBox Group based on the normalized twelve-month period ending May 31, 2020. WholesalePet.com based on the twelve-month period ending September 30, 2021 (unaudited) |
The following table highlights Adjusted EBITDA and a reconciliation of the Company's reported results to its adjusted measures.
Three months $ |
Three $ |
Nine months |
Nine months |
|
Net (loss) income |
(1,103,122) |
(1,291,668) |
(5,340,445) |
(1,831,911) |
Add back: |
||||
Finance costs |
373,206 |
427,528 |
1,162,665 |
1,256,800 |
Income taxes |
(357,932) |
53,559 |
(332,571) |
206,272 |
Amortization |
768,043 |
355,223 |
2,303,459 |
1,142,227 |
EBITDA |
(319,805) |
(455,358) |
(2,206,892) |
773,388 |
Share-based compensation |
128,973 |
417,803 |
1,445,733 |
1,354,922 |
Transaction cost |
2,070 |
150,560 |
882,976 |
150,560 |
Foreign exchange and other |
(66,727) |
(50,809) |
(104,447) |
(47,179) |
Fair value change in |
(256,620) |
- |
(179,723) |
(1,530,000) |
Adjusted EBITDA |
(512,109) |
62,196 |
(162,353) |
701,691 |
About EMERGE
EMERGE is a leading 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, outdoor gear, golf, and other curated experiences. Our portfolio houses some of North America's most coveted online destinations including Wholesalepet.com, trulocal.ca, BattlBox.com, UnderPar.com, JustGolfStuff.ca, CarinvoreClub.co, WagJag.com, and BeRightBack.ca. EMERGE was named one of the fastest growing companies in Canada by the Startup 50, and the Globe and Mail's 2020 Canada's Top Growing Companies.
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 and nine months ended September 30, 2021 in the section "Non-GAAP Financial Measures".
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 filing statement which are incorporated herein by reference 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.
SOURCE EMERGE Commerce Ltd.
James Bowen, CFA, EMERGE Commerce Ltd., 416-519-9442, [email protected]
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