Earnings call transcript: Emerge Commerce Q2 2025 sees 70% revenue growth

Emerge Commerce Ltd. reported a significant increase in revenue for the second quarter of 2025, with a 70% rise to $8.5 million. The company also saw improvements in other key financial metrics, including a positive swing in adjusted EBITDA and net income. The stock, currently trading at $18.48, has shown strong momentum with a 10% return over the past year. According to InvestingPro data, the company has demonstrated excellent financial health despite not being profitable over the last twelve months.

Key Takeaways

• Revenue increased by 70% year-over-year, reaching $8.5 million.
• Adjusted EBITDA improved to $958,000, marking a $1 million positive swing.
• Net income from continuing operations rose to $201,000, compared to a $620,000 loss in Q2 2024.
• The company acquired Tee2Green, boosting its golf business segment.
• Emerge reduced its net debt by approximately 80%.

Company Performance

Emerge Commerce has demonstrated robust performance in Q2 2025, buoyed by a substantial 70% increase in revenue to $8.5 million. This growth reflects the company’s strategic focus on expanding its grocery and golf verticals. The acquisition of Tee2Green, a golf apparel and equipment business, contributed to this expansion, delivering 31% organic revenue growth in its first quarter under Emerge’s management. The company has also benefited from the "support local" movement in Canada, which aligns with its recession-friendly business model.

Financial Highlights

• Revenue: $8.5 million, up 70% year-over-year
• Gross Merchandise Sales (GMS): $11.4 million, up 39% year-over-year
• Adjusted EBITDA: $958,000, a positive swing of $1 million year-over-year
• Net Income from continuing operations: $201,000, compared to a $620,000 loss in Q2 2024
• Cash position: $3.5 million at the end of Q2
• Cash flow from operations: $2 million

Outlook & Guidance

Emerge Commerce is optimistic about its future, expecting double-digit revenue growth in Q3 2025. The company aims to achieve a full-year positive adjusted EBITDA in 2025 and is exploring mergers and acquisitions in the grocery sector, particularly in niche areas like pet subscriptions and corporate gifting. The focus remains on maintaining strong cash flow and further reducing debt.

Executive Commentary

CEO Ghassan Halazan described Q2 as a "breakthrough quarter" for Emerge Commerce. He emphasized the company’s leadership position in the direct-to-consumer subscription market for meat and seafood, likening it to the "ButcherBox of Canada." Halazan also highlighted the importance of the TrueLocal brand, stating, "The name of the game for us is centering around our flagship brand, TrueLocal."

Risks and Challenges

• Market Saturation: As Emerge expands, it may face increased competition in niche markets.
• Supply Chain Issues: Disruptions could impact the company’s ability to deliver products efficiently.
• Economic Pressures: Changes in consumer spending due to economic conditions could affect growth.
• M&A Risks: Potential challenges in integrating new acquisitions could arise.
• Regulatory Changes: New regulations in e-commerce and subscription services may impact operations.

Q&A

During the earnings call, Telfer Henson from Liberty North Capital inquired about Emerge’s grocery M&A strategy. Management reiterated its focus on niche segments like meat and seafood subscriptions and discussed potential expansion into pet food subscriptions and corporate gifting.

Full transcript - Emerge Commerce Ltd (ECOM) Q2 2025:

Conference Moderator: Good morning, and welcome to the Emerge Commerce Second Quarter twenty twenty five Results Conference Call. At this time, all participant lines are in a listen only mode. Following the presentation, we will conduct a question and answer session for analysts. Also note that this call is being recorded on 08/27/2025. Your hosts today are Ghassan Halazan, Founder and Chief Executive Officer and Dasha Enenko, Chief Financial Officer.

Before we begin, I am required to provide the following statement respecting forward looking information, which is made on behalf of Emerge and all of its representatives on this call. Certain statements made on this call may contain forward looking information. These forward looking statements generally can be identified by the use of such words as intend, believe, could, expect, estimate, forecast, may and other words of similar meaning. This forward looking information is based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Actual results could differ materially from a conclusion, forecast, expectation, belief or projection in the forward looking information.

Certain material factors and assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information. We caution investors not to rely on the forward looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projections in the forward looking information and material factors or assumptions that were applied in drawing a conclusion or making a forecast or projections as reflected in the forward looking information are contained in Emergent’s filings with Canadian provincial securities regulators. During today’s call, figures are in Canadian dollars unless otherwise stated. At this time, I would like to turn the call over to Mr.

Kassan Halazan, Founder and CEO. Please go ahead, sir.

Ghassan Halazan, Founder and Chief Executive Officer, Emerge Commerce: Thank you very much. Good morning, everyone. We appreciate you taking the time to participate in our second quarter twenty twenty five conference call. Joining me today is Dasha Inenko, our CFO. This morning, I will walk through the exceptional operational progress we are making at Emerge and share some insights across our businesses, including the terrific performance of our recent acquisition, our new M and A playbook, our Q3 outlook, as well as our priorities for the 2025.

Following my remarks, Dasha will provide additional details on our financial results. After which, I will conclude the call with some closing remarks and open up the line for analyst questions. Let’s dive in. Q2 was a breakthrough quarter for Emerge Commerce and in many ways, the culmination of years of hard work, realignment and disciplined execution. In short, our Q2 results exceeded even our most aggressive expectations internally.

There is a lot to mention about the past few years and how we got here. But first, as the saying goes, I will let the numbers do the talking. Revenue for the quarter grew by 70% to $8,500,000 driven by the outstanding results we saw in Tea to Green’s first quarter under Emerge ownership. In addition to the continued positive organic growth, we achieved the TrueLocal, our flagship grocery brand. Q2 marks our fifth consecutive quarter of positive organic revenue growth.

Q2 adjusted EBITDA improved to $958,000 a positive swing of $1,000,000 year over year and the company’s largest adjusted EBITDA result to date since refocusing the business exclusively around grocery plus golf businesses. This also marks our second consecutive quarter of positive adjusted EBITDA and positions us well to achieve full year adjusted EBITDA positive in 2025, one of our key goals. Net income from continuing operations improved to $201,000 compared to a net loss of $620,000 in Q2 twenty twenty four. The reported net income from continuing operations includes a fair value inventory adjustment of $382,000 recorded as part of business acquisition accounting related to TIG Green or Tito G for short. Excluding this non cash accounting adjustment, net income from continuing operations in Q2 would be approximately $583,000 Our cash position grew to $3,500,000 at the end of Q2 versus $2,700,000 at the end of Q1.

This is despite spending $1,100,000 to close the T2G acquisition in April. The increase in cash quarter over quarter highlights the strong cash flow generation, specifically from operations. In fact, in Q2, Emerge generated $2,000,000 of cash flow from operations compared to cash outflow of negative $200,000 in Q2 twenty twenty four. Worth noting, Q2 is generally one of our stronger quarters for Emerge, particularly for our golf business in Canada with the kickoff of golf season and now even more so with the addition of Tee2Green. We also benefited from the favorable structuring of the Tee2G deal, which included an eight year inventory payment plan, further bolstering cash flow.

Our business model is uniquely positioned to thrive in the current macro backdrop. TrueLocal, our premium Canadian meat and seafood subscription business has been a benefactor of the support local movement sweeping the country this year, resulting in a large influx of new customers at very attractive customer acquisition costs not seen since the peak pandemic. On the other hand, our discount golf business is a recession friendly business as customers seek out more deals and golf suppliers rely more heavily on our discount marketplaces such as ours to move inventory. Now I will share a few pertinent updates from key strategic highlights during the quarter. On 04/04/2025, Emerge closed the acquisition of all the issued and outstanding shares of T2Green.

T2G is a profitable discount golf apparel and equipment business with a thirty eight year track record of operations focused on the Canadian market. T2G achieved revenue of $6,400,000 adjusted EBITDA of 1,000,000 and net income of $700,000 in 2024 unaudited. P2G is proving to be highly synergistic with Emerge’s extensive golf database in the early going, which includes Underpar and Just Golf Stuff, along with a 400,000 golf subscriber database to help scale T2G’s business cost effectively. Emerge was able to utilize the cash proceeds from the Card of Work Club asset sale as well as the sale of the shop domains to Shopify towards closing the T2G acquisitions without the need for a capital raise to complete the deal. T2G’s first quarter under Emerge ownership, Q2 twenty twenty five, delivered exceptional organic revenue growth of 31% year over year and adjusted EBITDA growth of 37%, exceeding management expectations.

D2G has historically been a low growth business and was modeled internally as such. The strong performance was fueled by Emerge’s targeted digital advertising and cross brand synergies within its golf vertical. Cash flow generated by T2G in its first quarter under Emerge comfortably exceeded the $1,100,000 upfront cash payment made by Emerge to complete the transaction. Safe to say, T2G’s first ninety days under Emerge ownership are what we call a home run-in business. Now for an update on the debt side.

Alongside the acquisition of T2G on 04/04/2025, the company also entered into a credit facility amendment with its existing lender. The amended facility provides an eighteen month extension and an additional six month extension option provided that the lender consent is obtained. Inclusive of the six month extension, the amended facility would mature in April 2027. The company remains in good standing with its existing lender, which it has worked with since November 2019. In addition, the recent interest rate cuts as well as the highly anticipated upcoming rate reductions are expected to result in meaningful cash savings for the business given our variable rate under the facility.

We also believe that our materially improved profitability coupled with the addition of T2G’s accretive profile as well as our reduced net debt levels in a more favorable interest rate cycle could lead to the possibility of securing cheaper, longer term alternative debt refinancing options, further driving savings and improving cash flow. To be abundantly clear, we are not seeking to increase our debt. After all, we spent the last few years eliminating close to 80% of our net debt position, by no means a trivial fate. Our goal is to actually reduce our cost of capital. In other words, reduce interest expense and grow cash flow that we can pour back into our business and into future accretive acquisitions similar to T2G.

Speaking of acquisitions, I wanted to take a moment to outline the new and improved Emerge M and A strategy for this next phase. In our previous life, Emerge was set up to be a decentralized vertical agnostic e commerce holding company with little to no synergy amongst the brands by design. Clearly, that model had its challenges and ultimately proved troublesome once the artificial pandemic highs reversed and interest rates skyrocketed. Moving forward, Emerge is relaunching our opportunistic acquisition program, focused solely on the grocery and golf verticals, where we have amassed deep expertise, bench strength, brand awareness and substantial customer databases. Target acquisition criteria include: one, durable businesses with a track record of five to fifty years in business two, has to be cash flow generative in its first year under Emerge three, stable organic growth and four, target EBITDA of $750,000 to $2,000,000 We intend to pay a fair price and require flexible terms that build in an appropriate buffer.

Based on the above criteria, we are pleased to share that Emerge has amassed a deep and growing pipeline of over 14 companies in both direct to consumer as well as B2B areas in grocery and golf across Canada and The U. S. Next, some commentary on our Q3 outlook. We are pleased to share that the trends we are seeing in Q3 to date continue to be positive. For Q3 twenty twenty five, Emerge management expects to achieve another quarter of double digit revenue growth and positive adjusted EBITDA.

TrueLocal, our Canadian meat and seafood subscription brand is expected to be a benefactor of the Buy Canadian movement with continued momentum despite the fact that Q3 is historically a seasonal quarter for this business, given some members pause memberships while on vacation. Notwithstanding, we are seeing continued positive organic growth year over year. Our discounted golf experiences and products vertical, which includes Under Par, Just Golf Stuff and now T2G, is expected to continue to gain from the weakening macro climate, given the recession friendly nature of the business model. D2G in particular continues to exhibit strong double digit growth and overall momentum in its second quarter under EMERGE. Next, I will take a moment to list our top priorities for the remainder of 2025.

To one, continue to drive organic growth across both our grocery and golf verticals two, to extract synergies and operational efficiencies to drive profitability, particularly with T2G three, to advance accretive tuck in acquisition opportunities in grocery and golf and four, to opportunistically export avenues to enhance cash flow and reduce interest expense. To sum up, Q2 was a remarkable turning point in this company’s history. We’ve delivered our strongest quarter of revenue growth, profitability and cash flow generation since we embarked on this refreshed journey centered around grocery and golf verticals. We are fortunate to house brands that are not only managing to survive, but in fact are thriving in this unprecedented macro climate. Our more streamlined strategy and direct oversight of our brands continues to pay dividends and we are excited to build on this momentum.

Finally, I would like to offer my sincere gratitude to our resilient and determined team, Board, shareholders and trusted partners as we deliver what we consider to be an exceptional quarter. We look forward to building on this momentum during the 2025. With that, I will now turn the call over to Dasha for a review of our financial results.

Dasha Enenko, Chief Financial Officer, Emerge Commerce: Thanks, Razan. So fiscal Q2 twenty twenty five marked our first quarter of reporting with T2G acquired in April 2025. In Q2 twenty twenty five, our gross merchandise sales or JMS for short, which is a non GAAP measure representing the total dollar value of customer purchases of goods and services throughout our brands, excluding applicable taxes and net of discounts and refunds grew 39% to $11,400,000 compared to $8,200,000 in the same period last year. Following the T2Green acquisition, sales between T2Green and Just Gold stock were eliminated from reported JMS with only sales to external customers included. Revenue for the quarter increased by 70% to $8,500,000 up from $4,980,000 in the prior period, driven by the strong performance of T2G as well as positive organic growth across both the grocery and golf verticals.

Gross profit for the quarter was $3,100,000 compared to $2,100,000 in the comparative period. The reported gross profit includes a fair value inventory increment of $380,000 recorded as part of business acquisition accounting. And excluding this non cash accounting adjustment, profit would have been $3,500,000 translating to a 41% gross margin approximately in line with the prior period. Net income from continuing operations improved to $200,000 compared to net loss of $620,000 in the prior period. Net income improved to $200,000 compared to net loss of $500,000 in the same quarter last year.

The reported net income from continuing operations and net income do include a non cash PR inventory increment of $380,000 recorded as part of business acquisition accounting. Excluding this non cash accounting adjustment, net income from operations would have been approximately $600,000 Adjusted EBITDA increased to $960,000 an improvement of approximately $1,000,000 from an adjusted EBITDA loss of $40,000 in the prior period. These improvements reflect the strong performance of the T2J acquisition, positive organic growth across our grocery and golf verticals, reduced SG and A and the discontinuation of unprofitable business lines. Finally, cash on hand as of 06/30/2025 grew to $3,500,000 compared to $2,300,000 at the end of the same quarter last year. This cash balance was achieved despite the $1,100,000 cash outlays for the T2Green acquisition supported by $2,000,000 in cash generated from operating activities in Q2 compared to a cash outflow of $500,000 in the prior period.

I’ll now pass the mic back to Ghazam for some closing remarks. Thank you.

Ghassan Halazan, Founder and Chief Executive Officer, Emerge Commerce: Thank you, Dasha. Approximately two years ago, Immersion was faced with some tough choices. The e commerce sector at large had come off the artificially high peak pandemic levels. At the same exact time, rising interest rates further burden our cash flows, a rather prevalent story in debt fueled growth by acquisition companies, particularly in the e commerce aggregator space where we saw most players completely wiped out. It was then and there that we made the painful but necessary decision to relentlessly prioritize paying down debt primarily by selling off non core assets and refocusing the business around fewer, more compelling vertical opportunities to build something lasting.

We chose to focus on grocery and golf, focus being the keyword. Fast forward to today and Emerge has reduced its net debt position by approximately 80%, inclusive of our $3,500,000 cash position at the end of Q2, a remarkable faith to the that took tremendous discipline and focus. In parallel, we have reignited organic revenue growth for five quarters in a row. We drove close to $1,000,000 in adjusted EBITDA in Q2 alone, and we generated $2,000,000 in cash flow from operations with our overall cash position growing quarter over quarter and year over year without a capital raise. Underpinning our Q2 success is our carefully crafted acquisition of T2Green and subsequent supercharged playbook of this historically flat business to strong double digit growth and profitability.

That is the power of the new and improved Emerge playbook, focus, growth, synergy, lower debt, higher profit. We hope investors are satisfied to see that we continue to deliver on our key priorities with Precision, including in Peter Green’s first quarter under Emerge ownership. We now kick off a new chapter in this company’s history, the era of disciplined strategic growth. With that, thank you everyone for joining us today and for your continued interest in Emerge Commerce. We’ll now open up the call if there are any questions from analysts.

Conference Moderator: Thank you, And your first question will be from Telfer Henson at Liberty North Capital. Please go ahead.

Telfer Henson, Analyst, Liberty North Capital: Good morning, Hassan. How are you?

Ghassan Halazan, Founder and Chief Executive Officer, Emerge Commerce: I’m well. Thanks, Talfour. Nice to hear from you.

Telfer Henson, Analyst, Liberty North Capital: Is around your M and A strategy. Grocery is a relatively broad category. Do you have any specific verticals within grocery that are your focuses?

Ghassan Halazan, Founder and Chief Executive Officer, Emerge Commerce: Yeah. Thank you. And it and it’s a fair question. And, you know, one of the areas of focus for us is the word niche when we talk about ecommerce, you know. Going too broad is a is a recipe for for disaster.

We we certainly don’t wanna be competing with the big boys on things like, you know, same hour delivery and and, like, completely unreasonable expectations that require billions of dollars of investment. So the name of the game for us is centering around our flagship brand, TrueLocal, which essentially we view as the ButcherBox of Canada. ButcherBox, for those of you who don’t know, is a $500,000,000 revenue company in The U. S. Alone.

They’re the market leader there. We are the market leader in Canada. So our intent and our focus is to zone in on direct competitors. We have a number of smaller regional players in the true local segments. So think meat and seafood subscription in DC only or in Alberta only or in Ontario only.

We’re one of the only we are the only national player right now in DTC subscription for meat and seafood. So there’s a lot of geographical expansion possible there. We also are interested in adjacent synergistic areas. For example, D2C pet subscription, pet food subscription. So that I would equate that to the true local for pets.

We’re certainly speaking to a few groups around that category. If some of you have followed and might recall, we also have done very well during holiday seasons with corporate gifting. So in The U. S, there’s a company called Omaha Steaks, which some of you may have heard, which I believe is also a $500,000,000 to $1,000,000,000 corporate gifting platform for meat and seafood. And so we’ve done very well in the past, but we really haven’t organized in any meaningful way around corporate gifting.

So there’s certainly possibilities within the corporate gifting B2B space that we would consider. And then finally, anything that enables us to do what we do better or to take advantage of what we already do well and to monetize it, whether be that fulfillment or vendors we’re working with or certain technologies that could advance through local itself or our portfolio, we would certainly take a look there.

Telfer Henson, Analyst, Liberty North Capital: Thank you, Ghislain.

Ghassan Halazan, Founder and Chief Executive Officer, Emerge Commerce: Thank you, Telfer.

Conference Moderator: Thank you. And at this time, sir, it appears we have no other questions registered. Please proceed.

Ghassan Halazan, Founder and Chief Executive Officer, Emerge Commerce: Thank you. That’s it for today. Once again, appreciate everyone’s time and tuning in. Have a nice day. And most importantly, bye Canadian.

Thank you, everyone.

Conference Moderator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

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