Earnings call transcript: Emerge Commerce Q4 2024 shows revenue growth, reduced net loss

Emerge Commerce has reported its financial results for the fourth quarter of 2024, showcasing a robust performance with significant revenue growth and a reduced net loss. The company achieved an annual revenue of $20.4 million, marking a 4% increase from the previous year. Notably, Emerge Commerce’s strategic initiatives, including the acquisition of T2Green and the sale of Carnivore Club, have strengthened its market position. According to InvestingPro data, the stock currently trades at $16.36, with an "EXCELLENT" Financial Health Score of 3.85 out of 5, suggesting strong fundamental positioning despite recent market volatility.

Key Takeaways

• Emerge Commerce reported a 4% increase in annual revenue to $20.4 million.
• Net loss significantly reduced to $500,000 from $21 million in the previous year.
• Acquisition of T2Green contributed $6.4 million in revenue and $1 million in adjusted EBITDA.
• The company implemented a new business model, "Emerge 2.0," focusing on cost reduction and operational efficiencies.

Company Performance

Emerge Commerce delivered a commendable performance in 2024, with a focus on strategic acquisitions and operational improvements. The company’s annual revenue grew by 4%, driven by organic growth and the integration of T2Green. The sale of Carnivore Club, along with cost-cutting measures under the "Emerge 2.0" model, contributed to a substantial reduction in net loss. Emerge Commerce’s positioning in the Canadian market, particularly in the golf and grocery sectors, remains strong amidst economic uncertainties.

Financial Highlights

• Annual Revenue: $20.4 million, up 4% year-over-year.
• Q4 Revenue: $5.6 million, representing a 9% increase.
• Gross Profit: $8.2 million, up from $7.6 million in 2023.
• Net Loss: Reduced to $500,000 from $21 million in 2023.
• Adjusted EBITDA: Improved to -$464,000 from -$1.8 million.
• Cash on Hand: Increased to $3.1 million from $2.5 million in 2023.

Outlook & Guidance

Looking ahead, Emerge Commerce aims to accelerate revenue growth and enhance profitability. The company expects T2Green to significantly contribute to revenue and profitability in Q2 2025. Emerge Commerce plans to leverage its extensive golf subscriber database and capitalize on the "Buy Canadian" movement to drive future growth. InvestingPro analysts maintain a positive outlook, anticipating sales growth in the current year, though the company remains unprofitable over the last twelve months.

Executive Commentary

CEO Ghislain Hallizen emphasized the benefits of the company’s streamlined strategy, stating, "Focus has proven to be a wonderful thing." He also highlighted the potential of TrueLocal, saying, "TrueLocal really has a special opportunity to emerge as one of the faces of the support local movement in Canada."

Risks and Challenges

• Market Saturation: Increased competition in the e-commerce and subscription sectors could impact growth.
• Economic Uncertainty: Potential recessionary pressures may affect consumer spending.
• Supply Chain Disruptions: Ongoing global supply chain issues could impact product availability and costs.
• Currency Fluctuations: Changes in exchange rates may affect international revenue and expenses.

Emerge Commerce’s strategic adjustments and operational focus have positioned the company for continued growth, with a strong emphasis on enhancing revenue and profitability in the coming quarters.

Full transcript - Emerge Commerce Ltd (ECOM) Q4 2024:

Conference Moderator: Good morning, and welcome to the Emerge Conference fourth quarter and annual twenty twenty four results conference call. At this time, all lines are on listen only mode. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on 04/28/2025. Your host today are Gassan Halizen, founder and chief executive officer, and Dasha Enenco, 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 its representatives on this call. Certain statements made on this call will contain forward looking information. These forward looking statements generally can be identified by the use of words such 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 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 projection in the forward looking information, And materially factors and assumptions that were applied in in drawing a conclusion or making a forecast or projection as reflected in the forward looking information are contained in merge emerge filing with the nation provincial securities regulators. During this call, all figures are in Canadian dollars unless otherwise stated. And with that, I’d like to turn the call over to mister Ghislain Hallizen, founder and CEO.

Ghislain Hallizen, Founder and Chief Executive Officer, Emerge Commerce: Thank you very much. Good morning, everyone. We appreciate you taking the time to participate in fourth quarter and year end conference call. Joining me today is Dasha Inenko, our CFO. This morning, I will walk through the noteworthy operational progress that we are making at Emerge and share some insights on our business, including our recent acquisition as well as our priorities for the balance of 2025.

Following my remarks, Dasha will provide further details on our financial results, after which I will conclude the call with some closing remarks. In early twenty twenty four, we outlined our key priorities for the year. Those being, one, to reignite organic revenue growth two, to significantly improve profitability and three, to substantially reduce debt. As we report our audited full year results this morning, we are pleased to share that we have clearly and decisively delivered on all three key objectives. Let’s dive in.

Our number one priority last year was to reignite growth. 2024 was the year we finally managed to reverse a multiyear come down from the artificially high peak pandemic levels. Revenue for the year grew to $20,400,000 versus $19,600,000 in 2023. Excluding Carnivore Club, a legacy noncore business that was subsequently sold in January 2025, Emerge’s revenue increased to $19,300,000 versus $17,700,000 in 2023, representing annual growth of 9%. Our number two priority was to enhance profitability.

We are pleased to share that annual adjusted EBITDA improved dramatically to negative $464,000 versus negative $1,800,000 in 2023, essentially a $1,300,000 positive swing, driven by our top line growth coupled with enhanced gross profit and streamlined overhead expenses in relation to our Emerge two point zero business model, which entails a more centralized approach with less required HQ resources to service our more focused grocery and golf portfolio. Perhaps nowhere is our progress more evident than in our Q4 results we reported this morning, the culmination of the team’s hard work all year round. Revenue growth accelerated to our highest level all year for our go forward business. Excluding Carnivore Cloud, Emerge’s revenue grew to $5,300,000 versus $4,600,000 representing growth of 15%. This marks our third consecutive quarter of positive organic revenue growth.

Worth noting, both TrueLocal and the Golf business achieved strong organic growth in Q4. Beyond top line progress, the team’s efforts in Q4 also translated into meaningful year over year gains across gross profit, adjusted EBITDA and net income. Our improved adjusted EBITDA result is particularly notable. Q4 adjusted EBITDA came in at negative $11,000 in Q4 versus negative $345,000 in the prior period. This close to breakeven result reflects the progress being made across the P and L, including the previously announced cost reductions that were partially reflected in Q4 and will fully be reflected in Q1 twenty twenty five onwards.

Management expects these savings and additional savings commissions since then should have a significant impact on our go forward profitability in 2025. Now I will share a few pertinent updates from events subsequent to year end. It’s been a busy start to 2025. In January, Emerge completed the asset sale of Carnivore Club for a total purchase price of $500,000 As mentioned, Carnivore Club was a legacy non core asset and Emerge was actively eliminating its revenue in 2024 while prioritizing the growth of our larger, more profitable businesses. In 2024 results include Carnivore Club.

Q1 twenty twenty five will be the first financial report to classify Carnivore Club as discontinued operations with prior period results to reflect reclassification where noted. On 04/04/2025, Emerge closed the acquisition of all the issued and outstanding shares of T2Green or T2G for short. 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 positive $700,000 in 2024, unaudited. PCG is expected to be highly synergistic with Emerge’s extensive golf business, which includes Under Par and Just Golf Stuff, along with a 400,000 plus golf subscriber database to help scale PGG’s business cost effectively.

Emerge was able to utilize the cash proceeds from the Carnival Club transaction as well as the sale of the shop domains to Shopify towards closing the T2G acquisition without the need for a capital raise to complete the deal. Now for an update on the debt side. In January 2024, we paid down a senior credit facility by $10,000,000 following the sale of Wholesale Pet, bringing the facility down to 5,850,000.00 from 15,850,000.00 and originally $25,000,000 Alongside the acquisition of T2G on 04/04/2025, the company also entered into a first amendment to the second amended and credit agreement dated 01/31/2024 with its existing lender, which amends the company’s current agreement. The amended facility provides an eighteen month extension and an additional six month extension option provided that 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 to 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 business given our variable rate under the facility. We believe that our improving operational results, coupled with the addition of Key2G’s profitable profile as well as our reduced overall debt levels following the sale of Wholesale Pat earlier in the year, along with a more favorable interest rate climate could lead to the possibility of securing cheaper alternative refinancing options, further driving savings and improving cash flow. Management is seeing continued operational momentum and expects to drive continued revenue growth and improved profitability in 2025. TrueLocal, our flagship Canadian meat and seafood subscription brand, has been a benefactor of the Buy Canadian movement sweeping the country with strong expected revenue growth, profitability and operational metrics overall.

Our discounted golf experiences and products vertical, which includes Underpar, 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. The addition of T2G starting Q2 twenty twenty five is expected to substantially enhance the company’s revenue, profitability and cash flow profile, and in the process, strengthen its balance sheet and potentially improve its cost of capital over time. Now moving to our top priorities in 2025, building on our progress in 2024. Our priorities are to one, accelerate revenue growth two, extract further operational efficiencies and synergy to drive profitability, and three, opportunistically explore avenues to enhance cash flow and reduce interest expense. To sum up, focus has proven to be a wonderful thing.

Our more streamlined strategy and direct oversight of our brands is starting to pay dividends, and we are excited to build on this momentum. Finally, I would like to offer our sincere gratitude to our resilient and determined team, Board, shareholders and trusted partners as we deliver another growth quarter, our third consecutive, and look to build on this momentum in the final quarter in 2025 and beyond. I will now turn the call over to Dasha for a review of our financial results.

Conference Moderator: Thank you, Ghazan. Good morning, everyone. Our fiscal twenty twenty four includes our first year reporting with our Bottlebox Group, Wag Jack and Wholesale Pet business compared to 2023. Our gross merchandise sales or JMS grew 7% to $33,000,000 in 2024, while for the fourth quarter, it increased by 13% to 9,600,000.0, up from 8,500,000.0 in the comparative period last year. As a reminder, GMS is a non GAAP measure and represents the total dollar value of customer purchases of goods and services through all our brands, excluding applicable taxes and net of discounts and refunds.

Revenue for the year grew 4% to 20,400,000.0 in 2024. And excluding Carnivore Club, which was sold in January 2025, annual revenue increased to $19,300,000 up from $17,700,000 in the prior year, representing year over year growth of 9%. For q four, our revenue increased to 5,600,000.0, up 9% from 5,100,000.0 in q four twenty twenty three. And excluding Carnival Club, which was sold in January 2025, revenue for q four was $5,300,000 up from $4,600,000 in the prior comparative period, representing growth of 15%. This marks the company’s third consecutive quarter of organic growth and the highest quarterly growth achieved in 2024.

Gross profit for the year increased to $8,200,000 versus $7,600,000 in the prior year. For the quarter, profit increased to $2,200,000 compared to $2,100,000 in the comparative period. The net loss for the year was $500,000 with positive net income for the fourth quarter of 230,000.00 This is compared to a net loss of $21,000,000 and $17,000,000 for the same period in the prior year. The improvement in net income is primarily attributable to a goodwill and intangibles impairment charge of $60,000,000 in prior fiscal period, in addition to improved operating results driven by sales growth, higher gross profit, and reduced SG and A expenses. Overall for the year, adjusted EBITDA loss decreased to 466,000 from 1,800,000.0 in 2023.

The company recorded adjusted EBITDA loss for the fourth quarter of ’11 thousand compared to 345,000 in Q4 twenty twenty three. These improvements reflect the company’s efforts to prioritize organic growth, focus on profitable operations, and discontinue unprofitable business lines. Finally, cash on hand as of 12/31/2024 was $3,100,000 versus $2,500,000 in 2023. I will now pass microphone back to Ghazam for some closing comments.

Ghislain Hallizen, Founder and Chief Executive Officer, Emerge Commerce: Thank you, Dasha. Twenty twenty four was by all means a transformative year, particularly so in Q4. We reignited organic revenue growth, improved profitability, streamlined the business, drastically reduced debt and grew our cash position year over year without a capital raise. We are seeing continued operational progress and momentum year to date, and the Tita Green acquisition is expected to supercharge our growth and profitability to new heights in 2025 starting Q2 onwards. Fortunately, our portfolio is exceptionally well positioned to gain from the challenging climate facing most businesses today.

TrueLocal really has a special opportunity to emerge as one of the faces of the support local movement in Canada, and we are seeing that potential start to reflect in our operating metrics, including a 193% increase in net used net new subscriptions in February 2025. Our Discount Golf business continues to strengthen as the economy weakens. We hope investors are satisfied to see that we have delivered on our 2024 key priorities with precision as well as the continued progress we have shared so far in ’25 to date. Thank you very much everyone for joining us today and for your continued interest in Emerge Commerce. We look forward to reporting our Q1 twenty twenty five results in late May.

Have a nice day, everyone. Thank you.

Conference Moderator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.

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