Earnings call transcript: VerticalScope Holdings faces revenue dip in Q2 2025

VerticalScope Holdings reported a 13% decline in revenue for the second quarter of 2025, emphasizing challenges in digital advertising. The stock currently trades at $1.90, down significantly from its 52-week high of $4.03. According to InvestingPro analysis, the company appears undervalued at current levels. Despite the revenue drop, the company highlighted growth in its e-commerce sector and strategic innovations in AI.

Key Takeaways

• Revenue decreased by 13% year-over-year to $14.5 million.
• Digital advertising revenue fell by 21%, while e-commerce revenue surged by 41%.
• The company launched "Fora Frank," an AI-powered community assistant.
• VerticalScope is focusing on AI-driven innovation and organizational restructuring.

Company Performance

VerticalScope Holdings experienced a challenging second quarter, with a significant drop in digital advertising revenue contributing to an overall 13% decrease in total revenue. However, the company is seeing positive momentum in its e-commerce segment, driven by the acquisition of Ritual. As the digital landscape evolves, VerticalScope is adapting by investing in AI technologies to enhance user experience and operational efficiency.

Financial Highlights

• Revenue: $14.5 million, down 13% year-over-year
• Digital Advertising Revenue: $11.5 million, down 21%
• E-commerce Revenue: Increased by 41%
• Adjusted EBITDA: $4.3 million, representing a 30% margin
• Net Loss: $1.8 million
• Free Cash Flow: $3.7 million
• Cash from Operations: $6.4 million, up 4% year-over-year

Outlook & Guidance

VerticalScope has set its full-year Adjusted EBITDA guidance between $21 million and $24 million, anticipating a stronger performance in the latter half of the year. The company is focused on increasing direct traffic and growing its logged-in user base, while exploring new AI-driven revenue streams. For deeper insights into VerticalScope’s financial health and growth potential, InvestingPro subscribers have access to over 10 additional ProTips and comprehensive financial metrics, including detailed valuation analysis and peer comparisons.

Executive Commentary

CEO Chris Goodridge emphasized the importance of authentic voices and strong user connections in an AI-driven world. He noted, "Platforms with authentic voices, deep expertise, and strong user connections will stand out." CFO Vince Bellissimo highlighted the company’s financial resilience, stating, "Our profitable and highly cash generative business model continues to be the cornerstone of our financial strength."

Risks and Challenges

• Decline in digital advertising revenue could continue to impact overall financial performance.
• Shifting search traffic patterns and the rise of zero-click searches may affect web traffic.
• The company’s success depends on its ability to effectively implement AI innovations.
• Market competition remains intense, requiring constant innovation and adaptation.

Q&A

During the earnings call, analysts inquired about the company’s strategy for increasing logged-in user engagement and the potential for AI-powered advertising solutions. Executives highlighted the critical role of logged-in users for engagement and the cautious approach towards mergers and acquisitions.

Full transcript - VerticalScope Holdings Inc (FORA) Q2 2025:

Operator: Hello, everyone, and a warm welcome to the VerticalScope Holdings Q2 twenty twenty five Earnings Call. My name is Emily, and I’ll be coordinating your call today. After the presentation, you will have the opportunity to ask any questions, which you can do so by pressing star followed by the number one on your telephone keypad. I would now like to hand the call over to Diane Yu, Chief Legal Officer, to begin. Please go ahead, Diane.

Diane Yu, Chief Legal Officer, VerticalScope Holdings: Thank you, operator. Good morning, everyone, and welcome to VerticalScope Holdings’ Second Quarter twenty twenty five Earnings Call. I’m joined by Chris Goodridge, our Chief Executive Officer and Vince Bellissimo, our Chief Financial Officer. We’ll begin with commentary on the quarter before opening the floor to questions. Before we begin, I’d like to remind everyone that today’s presentation contains forward looking information that involves known and unknown risks and uncertainties and other factors that could cause actual events to differ materially from current expectations.

These statements should not be read as assurances of future performance or results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. A more complete discussion of the risks and uncertainties facing the company appears in the company’s management discussion and analysis for the three and six month period ended 06/30/2025, which is available under the company’s profile on SEDAR plus as well as on the company’s website. You are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date of this presentation. The company disclaims any intention or obligation, except to the extent required by law, to update and revise any forward looking statements as a result of new information, future events or for any other reason.

Our discussion today will include references to adjusted financial measures, including adjusted EBITDA, free cash flow, free cash flow conversion and MAU, which are non IFRS measures. All references to currency in this presentation shall refer to USD unless otherwise specified. Now I will turn the call over to Chris Goodrich, CEO of VerticalScope. Chris?

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: Thanks, Diane, and thanks, everyone, for joining us bright and early this morning. I’m excited to be here for my first call as CEO of VerticalScope. After five years as COO, I’m grateful for the trust that Rob and the Board placed in me at such a pivotal time. Rob has been an incredible leader through many chapters of this company’s journey, and I’m thrilled he’ll continue to be deeply involved as Chair of the Board. We’ve also strengthened our leadership bench with Ezra Menaged stepping into the COO role and Mayor Welker becoming our CTO.

Both joined through our Hometalk acquisition in 2021 and both have a track record of innovation and strong execution. Their leadership, along with our experienced senior team, positions us very well for the road ahead. Now there’s no question the broader Internet is going through a period of rapid change, especially in content discovery. Google’s AI overviews and evolving search algorithms have shifted traffic patterns across the open web. Over the past couple of years, forms like ours and Reddit benefited from Google rewarding authentic human content.

More recently, zero click search has become a bigger factor, reducing the number of visitors referred from search results to the broader web. Traffic patterns are changing, and while it creates short term pressure on total MAUs, it also opens a significant long term opportunity. In an AI first discovery world, platforms with authentic voices, deep expertise and strong user connections will stand out. We believe forms like ours along with Reddit and YouTube will increasingly become a key step before consumers make decisions, creating higher value user interactions and stronger monetization potential. So with this backdrop, our strategy is simple: build stronger direct relationships with our users, make their experience richer and more useful with AI, and turn that engagement into diversified revenue streams.

On the user side, we’re putting greater emphasis on higher quality direct connections, things like scaling out our logged in users and our mobile app. Our logged in users are far more engaged and valuable, and we’re putting a much stronger emphasis on growing them. With more than 50,000,000 registered users, we already have a huge base to work with. And the more directly we connect with them, the less they need to rely on intermediaries to discover new form content. We’re seeing solid direct traffic growth, and we’ll have a lot more to share on this initiative in the coming quarters.

On the engagement side, AI is opening up some powerful new opportunities. We’re translating our content into multiple languages to reach entirely new audiences, and AI generated summaries are making it easier for new visitors to dive into long detailed threads. We’re particularly excited about our new AI powered community assistant that we call Fora Frank. It’s Fora’s proprietary AI that’s trained on our data set of over 2,300,000,000 posts. Fora Frank was initially rolled out to our communities to encourage posting and help users ask better questions.

Now users can tag Fora Frank much like the way people use Grok on the X platform and it opens up a whole new avenue of engagement and content discovery. We’re just scratching the surface with Fora Frank’s potential, and there are many more applications that we’re exploring. It’s a really powerful example of how AI can reshape the community experience and improve the value that we can add to our users. And finally, when you have an audience that’s both engaged and loyal and a platform where we own the data, the monetization opportunities expand. Beyond advertising, we’re building out branded content offerings, commerce and data driven products that leverage the trust and expertise inside our forums.

We believe that combination, more direct traffic, richer engagement and broader monetization creates a growth flywheel that will get stronger the more that we invest in it. I’ll offer a few comments on Q2 before passing to Vince for a deeper dive. Q2 performance was in line with our expectations in prior guidance. MAUs were $90,000,000 down from record levels last year due to shifting search patterns. Revenue was $14,500,000 down 13% year over year, largely from lower programmatic advertising from both display and video.

Despite the recent challenges we’ve experienced with video ads, we’ve made some product changes that strengthened performance in June, and we expect video trends to be much stronger in the back half of the year. Direct advertising was around $400,000 lower than last year, largely due to campaign timing, But we’re seeing an encouraging pickup in Q3 that bodes well for the coming quarters. We’re starting to use AI to provide insight reports, leveraging our form data to some of our major brand clients, and it’s opening up new lines of discussion. We think there’s an opportunity to turn AI insights into a subscription product and are confident that new revenue opportunities will be surfacing soon from our data. E commerce revenue was up 41% in Q2, with most of the growth coming from our Ritual acquisition, which closed in April, while our core commerce business was relatively stable.

Overall, I’m pleased with how quickly Ritual has fit into our operations and the growth potential it’s showing. With Ritual in the fold and as additional product initiatives pick up, we expect e commerce will continue to grow by double digits in the second half of the year. The profitability of our business continues to be a real strength. Adjusted EBITDA was $4,300,000 with 87% conversion to free cash flow. Our balance sheet is strong.

We’ve got low leverage and we’ve got ample liquidity to fund growth. Turning quickly to M and A. We only closed one deal in the quarter with the Ritual acquisition in early April, but we’ve seen a notable pickup in inbound opportunities. I think this is largely because of the broader traffic trends in the open web. If you’re an independent community owner without the benefit of a tech platform, AI roadmap and an engineering team to execute, it’s going to be tough to compete.

We’re keeping our eyes open, but our near term focus is on reigniting our organic growth. This will put us in an even stronger position to execute on the best M and A opportunities down the road. In closing, our team is energized for this next phase. The value of our communities, their expertise, authenticity and engagement is only going to grow as the digital landscape evolves. AI disruption is here, but we see it as a catalyst for a consumer shift that makes forms more valuable than ever.

We have the team, the platform and the strategy to navigate this change and emerge stronger. And with that, I’ll turn it over to Vince to walk through the numbers and comment on our outlook.

Vince Bellissimo, Chief Financial Officer, VerticalScope Holdings: Thanks, Chris, and good morning, everyone. We appreciate you all joining the call today. Over the last quarter, we have made a number of organizational moves aimed at better aligning our business in a world of AI supported content discovery. Our profitable and highly cash generative business model continues to be the cornerstone of our financial strength and provides us with the flexibility to invest in long term initiatives aimed at driving ARPU, engagement and audience growth across our platform. Turning to our results.

Revenue for the quarter was 14,500,000.0 down 13% year over year due to lower overall MAUs and partially offset by improving ARPU across digital advertising and e commerce channels. Digital advertising revenue totaled CAD11.5 million, down 21 from the prior year, primarily driven by a 26% decline in programmatic revenue to £7,300,000 This decline was largely due to lower impression volumes and softer performance from our video advertising unit, which faced headwinds from browser level policy changes implemented in the 2024. As we lap these changes, we expect to see growth contributions from the video advertising unit in the second half of the year. Our direct advertising channel has held up well despite a noisy macro backdrop, declining 9% or 400,000 in the period. This decline was mainly due to the timing of campaigns rather than a drop in bookings.

Looking ahead, we’re encouraged by rising demand for customized content for major brands and OEMs, a trend that underscores the critical role of authentic audience connection in an AI driven landscape. These high ARPU campaigns, often featuring video content, are designed to precisely target our niche and highly valuable audience. Additionally, as Chris noted earlier, there is a strong interest in data driven products designed to help brands better understand consumer sentiment and feedback. Once fully developed, we expect these offerings will provide actionable insights for brands aiming to enhance existing products and innovate new ones. Our communities are uniquely positioned to connect brands with right audiences and support the generation of future advertising growth.

Turning to e commerce. E commerce revenue grew by 41% or August in the quarter. This growth was largely driven by the April 2025 acquisition of Ritual Technologies, including their well known food pickup app, which serves markets in Canada, The U. S. And Australia.

While the acquisition has provided a solid boost to e commerce revenue, it also brings added value through its dedicated team with expertise in mobile products and marketplace experiences. Excluding contributions from Ritual, the channel was flat year over year. With about half of the channel’s activity driven by subscriptions, this performance highlights our loyal subscriber base and the resilience they provide against traffic volatility. E commerce continues to be a growth lever for our business going forward, including new commerce driven experiences and using AI solutions such as Fora Frank to serve relevant discussions to our users and keep them engaged on our platform. Adjusted EBITDA for the quarter was 4,300,000 reflecting a margin of 30% compared to $7,100,000 and a margin of 42% in the prior year.

Margin compression during the quarter reflects our continued investment in strategic areas, including AI, audience growth, engagement and data products, all aimed at building a foundation for long term growth across our sites and communities. We also made significant progress in adopting an AI first approach, encouraging employees to integrate AI driven tools into their daily workflows. These tools have enabled us to streamline internal resources, forming smaller, more agile teams focused on execution. Operating expenses for the quarter increased by 12% or $1,800,000 reaching $16,400,000 This increase was largely driven by a $1,600,000 in onetime costs relating to acquisitions and restructuring in the quarter. As a business, we pride ourselves on our ability to generate healthy and sustainable free cash flow, and this quarter was no different.

We converted adjusted EBITDA to cash at a rate of 87% compared to 93% in the prior year. Free cash flow for the period was 3,700,000 and cash from operations was $6,400,000 up 4% year over year, inclusive of nonrecurring working capital impacts from the acquisition of Ritual Technologies. In the current environment, cash remains a critical asset, and our focus going forward is to maximize our liquidity and be ready to move quickly on M and A if the right opportunity arises. As of the end of the quarter, we had CAD64.1 million in liquidity comprising of CAD8.1 million in unrestricted cash and CAD56 million available to draw from our revolving credit facility at very favorable rates compared to the current market for a business of our size. Our net leverage is a comfortable 1.22 times based on a net debt of $36,000,000 as defined by our credit agreement, which includes pro form a impacts from recent cost cutting initiatives.

In line with the trends we are seeing in adjusted EBITDA and free cash flow, we reported a net loss of $1,800,000 in the quarter compared to net income of $400,000 in the prior year. This loss was primarily driven by a 2,100,000 decline in revenue and $1,600,000 in one time related operating expenses. Excluding these onetime costs, our net loss would have been $200,000 underscoring the resilience of our core business model while we continue to invest in growth initiatives across our platform. Looking ahead, there is no change in the full year guidance we shared in April. We’re confident in our ability to grow and strengthen our communities, bringing together passion and like minded enthusiasts to talk about the things they love.

Our strong balance sheet and solid free cash flow provide us with financial flexibility to navigate the rapidly changing landscape of AI content discovery. These strengths position us to execute on our priorities and work towards delivering sustained long term value for our shareholders and employees. With that, I’ll pass it back to Chris to close things out. Chris?

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: Thanks, Vince. Let’s turn it right over to questions.

Operator: Thank you. We will now begin the question and answer session. Our first question today comes from Aravinda Galappatthige with Canaccord Genuity. Please go ahead, Aravinda.

Aravinda Galappatthige, Analyst, Canaccord Genuity: Good morning. Thanks for taking my questions. Just wanted to go back to some of the earlier comments that Chris made about logged in uses. Chris, can you just remind us of some of the initiatives there? And I may have missed whether you disclosed the proportion of your MAUs that are kind of direct traffic or already logged in users if there was an updated number that you provided?

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: Aravinda, thanks. We’re not providing that updated number today. I expect that you’ll start to see more metrics like that coming for us in in the coming quarters as, you know, some of these initiatives really take hold. But, you know, what I would say is a significant portion of our engagement on our platform is coming from logged in direct connections. The logged in user is is a lot more valuable to us.

We can communicate with them more directly. We can send them push notifications. They can subscribe to, you know, newsletter updates, all those types of things, to really, you know, push that, you know, continued usage of the platform. It’s also the time they spend, the contributions they make to the community as far as posts. All those things make those users a lot more valuable and really underpin kind of the foundation of the community.

So it’s a real strength. It is that kind of nerve center of the business, and we see opportunity to grow it. In various communities within our platform, we see very, very high levels of registered users or logged in users. So as high in some cases as 80%. And so and some of the capabilities with the team that we’ve kind of brought together, particularly that HomeTalk leadership I mentioned, are real specialists in growing those direct connections and the direct user base.

So, we’re pretty excited with the initiatives they’re working on. We’re seeing results already, and we’re seeing the gains, show up on a on a month to month basis. So it is a lot more kind of block and tackling from a marketing perspective. It’s a lot more getting more out of your user base and being more proactive with the content that you’re pushing out to those users as opposed to being passive and waiting for them to arrive through the search result. The mobile app is also part of the mix.

You know, it’s it’s to to this point, it’s really been our power users that have leaned in to the mobile app. We haven’t marketed in a big way, but we think we’ve got the app to a point where, it provides a really solid community experience, and so we’re gonna be amping up, the marketing of of the app as well. The good the good news about marketing is we already have a huge audience that we can market it against. So initially, a lot of our marketing efforts will be focused on on converting our existing user base into mobile app users before we look to any sort of external marketing initiatives. So those are primary things that I think we’re focused on with respect to direct audience.

Aravinda Galappatthige, Analyst, Canaccord Genuity: Thanks, Chris. And then just switching gears, any update on your content licensing plans? Anything in terms of how you’re looking at it? I know you’ve been in discussions for a while. Wanted to touch on that as well.

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: Yes. Thanks for that, Aravinda. It’s a space that we’ve seen evolve quite a bit, right, since this became a popular topic. And I really believe that our patience is going to pay off for a few reasons. First off, you know, of course, we saw a handful of deals right away.

We saw some of the the major platforms cut deals. We haven’t seen a lot since. And in in some cases, even a couple of the major platforms or one major platform in particular has turned to litigation, you know, to kind of defend their their interests. So, you know, we we think that’s quite interesting. We think the relationship between the LLMs and content owners, we think the dynamics will shift more and more towards, being more favorable for platforms and content owners for a couple of reasons.

The the first is, you know, the tools that are available, and this is really the main one. The tools that are available to actually spot, block, and then now monetize, that traffic are becoming more sophisticated, and we’re we’re looking really closely at a lot of those. So you see, Cloudflare making a lot of of noise about their offering. You know, Fastly’s got other offerings. So at the CDN level, where you’re actually able to to spot the bot traffic and then create a tool around it so that if they wanna access your content, they’re paying each time they do that.

We think that’s a pretty interesting model that we’re we’re looking at, and it and, you know, it could lead to, you know, some incremental revenue for us. The other side of it as well, though, is is we think from a data licensing perspective, and both Vince and I touched on this in our remarks, we see it more as just providing data to train LLMs. Right? Like, I think that’s a pretty simplified view of the the the opportunity for our our data. And and we touched on it with respect to how we’re we’re engaging with clients.

So we’re using AI today to provide really interesting insights to those clients. So information and and and kind of nuance that it’s able to pull out of our our datasets that you wouldn’t be able to to really do without the power of AI. It’s it’s it’s really kind of impressing a lot of of customers we work with and kinda leading to some new business for us. And in some cases, you know, we have some major brands that are interested in looking at ways to, you know, subscribe to a regular feed of that data, to help with things like marketing decisions or even product, development within within the OEMs. So we think it’s really cool.

Like I mentioned as well, we’re all we’re also using our form data to train our own AI, and we think that that eventually could be a much bigger part of our story.

Aravinda Galappatthige, Analyst, Canaccord Genuity: Thanks for that context, Chris. And then just lastly, Vince, I know you’ve maintained guidance, but sort of looking at sort of the the quarterly cadence, how should we think of margins? Obviously, Q4 is seasonally high. But are you still sort of thinking sort of low-30s more in that zone for Q3 and that kind of a pickup in Q4? Is that the shape we should be thinking of?

Vince Bellissimo, Chief Financial Officer, VerticalScope Holdings: Yes. Think hey, Aravinda. Thanks for the question. Yes, I think that’s correct, right, in terms of sort of the trajectory from a margin perspective. We’ve done quite a bit of work in the quarter to sort of optimize costs around many key areas.

We the AI first approach internally that’s really helped us consolidate team sizes in key areas like engineering. We’re harnessing AI tools, helps people helps us not only save costs, but helps our team work that much faster and deploy these initiatives to our platform so we can start realizing the results. So in the quarter alone, based on the initiatives that we that took place, equates to about $5,000,000 a year in annualized run rate savings, mostly around headcount. We’re also looking at areas like SaaS and consultants as well as optimizing our hosting environment. So that will continue to support margin expansion.

And if you were to look at our quarter, you would see that as the quarter progressed on month over month basis, you would see much favorable margins approaching close to 40%. That said, we’re still investing in our platform, right? There’s still a long way to go in a lot of these initiatives. They all come with a cost, computing costs, people costs, strategic costs with consultants, etcetera. So from a margin perspective, staying within sort of the 30% range for the year is still our target.

Aravinda Galappatthige, Analyst, Canaccord Genuity: Thank you. I’ll pass the line.

Operator: Thank you. Our next question comes from David McFadgen with Cormark Securities. Please go ahead.

David McFadgen, Analyst, Cormark Securities: Thank you. Sorry. Yes, just a couple of questions. So when you look at the MAUs, obviously, they’re down in the quarter. You know, you highlighted changes to search algorithms.

So when you talk about these changes to the search algorithms, is it is it primarily the, you know, the addition of AI now and and how AI is impacting search, or are there other factors?

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: Yeah. Thanks, I think what we saw in March, and we talked about this previously, you know, the biggest shift was was AI, added to to the search result. I think you’ll see a lot written about this. You know, that was that was a a relatively, you know, big change at that time. You know, I think our expectation is, you know, at at this stage that, you know, it’s more tweaks from from here, but, you know, we’ll see.

We know Google’s in a in a pretty heated competition with some of the, you know, the other, large language model, providers. So, yeah, we’ll see how that evolves. Again, I’ll just reiterate that the search traffic is is great for an overall MAU number, and you do monetize it, but you just don’t monetize it to the same extent that you do kind of that core audience. And you see that with with, you know, even platforms like Reddit. Right?

The logged in user is a lot more valuable. So that’s that’s that’s where we see a great opportunity going forward.

David McFadgen, Analyst, Cormark Securities: Okay. And then just on video advertising, you know, when you read through the MD and A, you called out the unit by default playback, as having an impact on the impressions or the value. Are there other factors at play here besides that main item?

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: That that was the main item that that caused the the change that, you know, we kinda had to navigate. What we’ve done is, you know, made product improvements, to aim actually improve the performance of the unit on mobile devices. And so we started to see that improve fairly nicely towards the June when it went through testing and rolled out. In July, now into August, we’re seeing much stronger performance compared to what we were seeing previously. You know, again, it’s another example of of kind of getting more out of that that core user base, and and how valuable they are.

And and, you know, the video advertising that we provide them is very relevant, and and we we see video as, you know, a a source of growth from here.

David McFadgen, Analyst, Cormark Securities: Okay. And then just on, just on the potential for acquisitions, I mean, wouldn’t it make sense to kinda put that on hold until the business starts growing again, as opposed to acquiring and, you know, you’re not sure when this can actually turn around?

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: You know, David, I think if you if you read into my comments a little bit more, I think that’s effectively what I’m saying as far as keeping an open mind. If we see opportunities that could accelerate our direct connections with users, that could accelerate our AI initiatives, that could improve commerce or monetization, I think we we’d look at those things. So anything that could actually be an accelerant. You know, buying an individual, community business, you know, you know, right now, you know, it would have to it would have to be really special and have some unique characteristics for us to to to really look at that. So, you know, I think, you know, and Vince reiterated this.

We see, you know you know, building up our cash position here, you know, creates some really great optionality for us. And so absent one of those types of acquisitions that really, you know, accelerates us along that, strategic path, we’ll continue to build up our cash.

David McFadgen, Analyst, Cormark Securities: Okay. Alright. Thanks.

Operator: Thank you. Our next question comes from Drew McReynolds with RBC. Drew, please go ahead.

Drew McReynolds, Analyst, RBC: Yes. Thanks very much. Good morning. I may have

David McFadgen, Analyst, Cormark Securities: missed this just in terms

Drew McReynolds, Analyst, RBC: of the MAU trends. And Chris, fully understands your three pronged strategy makes perfect sense focusing the logged in users and registered users. Are you providing MAU guidance for Q3 or for the rest of the year just as you report it? And then secondly, maybe back to you, Chris. Yeah.

Interesting on kind of the toll model and just how the the data ecosystem is evolving. When do you think, from a timing perspective, you begin to get, you know, enough clarity on kind of where all this lands, so then you can maybe more, you know, more lean into it more, than than maybe you are now? Just any sense of of that? Or is it still early days kind of post all the changes in March, for there to be a landing anytime soon?

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: Yes. Great questions, Drew. Thanks for that. I think the first thing I’d say on MAU, we’re not going to get in the habit of providing guidance on MAU on a regular basis. Our guidance this year was sort of, I think, unique.

The circumstances were unique. Overall, you know, traffic is is relatively stable. Right? At this stage, it’s the way we see it, and we see the opportunity to kinda grow that direct base. And, you know, if you’ll bear with us, we will start to hopefully share, you know, a lot more data and and thoughts you know, helping break down our user base over time so you can get a better feel for that.

So that that that’s that’s on the come. And I think it’ll help investors and and yourselves really understand kind of the kind of power of that core audience, we have. On on the licensing side, you know, I appreciate your comment that, you know, a lot has changed, and there there’s some you know, there’s a lot of dynamics at play that, we believe, can can shift the power more towards content owners and platforms. I think it’s just inevitable. And so we’re very active is what I’d say.

We’re very active in the conversations and understanding kind of the opportunity for us to start to turn that on. And I think we’ll have I expect we’ll have a lot more to say about it within months, not years.

Drew McReynolds, Analyst, RBC: Okay. Okay. I’ll leave it there. Thanks very much.

Operator: Thank you. Our next question comes from Todd Coupland with RBC. Please go ahead, Todd.

Todd Coupland, Analyst, RBC: Great. Thanks. Good morning, everyone. I wanted to ask you about the guidance. So if I have this right, adjusted EBITDA guidance is 21,000,000 to $24,000,000 and you’ve done $8,000,000 So could you just talk about where you think you’ll land within that range?

And what are the assumptions in the back half of the year at a high level? Thanks a lot.

Vince Bellissimo, Chief Financial Officer, VerticalScope Holdings: Hey, Todd. Thanks for the question. So yes, to reiterate, we’re not there’s no change to that 21,000,000 to $24,000,000 range that we provided back in April. A lot of what’s built into that guidance is based on the initiatives that the team is working on today, and then there’s been some rapid movement over the last, call it, six to eight weeks on things like AI driven solutions, direct traffic, etcetera. And we expect these to start we expect to start seeing results at least monetization results for these efforts in the coming quarters, so in Q3.

So our from an outlook perspective, it’s back half loaded, right? So and that’s no different than any other sort of year for our business where you start to see or you will see that seasonal high in Q4 from an EBITDA perspective. So I would say we’re tracking within that range. Whether it’s on the low end or high end is still to be deeded based on how quickly and how quickly these initiatives wrap and continue to drive results and contributions to our results. So more to come on that, but we’re still comfortable with the 21,000,000 to $24,000,000 range.

Todd Coupland, Analyst, RBC: Okay. For the fourth quarter, is there an implied assumption that your MAUs or however you’re measuring it, login or mobile or whatever the core assumptions there, is that assumed to improve materially in the fourth quarter?

Vince Bellissimo, Chief Financial Officer, VerticalScope Holdings: No.

Drew McReynolds, Analyst, RBC: Okay. Okay.

Todd Coupland, Analyst, RBC: And then just get a sense on what Frank might have, what kind of impact Frank might have on ad pricing. Do any you conceptual ranges on what that potentially could do in terms of ad pricing at this point?

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: Not at this point on ad pricing specifically, but what what we’re seeing the kind of the value for, Frank, in the advertising context, it’s actually with our small business subscription product. So and what I mean by that is when when so when businesses subscribe to one of our communities, it gives them a bunch of privileges to post commercial messages. Right? So it’s effectively promoted promoted posts. And what you’ve seen on some of the major platforms that have adopted AI is it really does accelerate, you know, ad impression volume and and rate, because you make it a lot easier.

You remove a lot of friction for the for the user of the platform. And so in a lot in a lot of cases, these are, you know, niche small businesses that that work with us. And we think by having Frank be effectively a community assistant for those types of customers reduces their friction in a big way of of being able to use the kind of the promoted, subscription products. So, you know, hopefully, Todd will be able to give you something that is a lot more easy to think about from a modeling perspective as to how that could impact ARPU. But we see it as creating stickier relationships with those advertisers, getting them to use the platform more, and that leads to greater volume and stronger rates.

Todd Coupland, Analyst, RBC: Okay. Last question for me. I don’t know if you’re providing this, but of the 50,000,000 logged in, what’s what’s the mix between desktop and mobile at this point? Thanks a lot.

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: Yeah. It’s it’s it’s it’s a significantly significant tilt towards mobile.

Todd Coupland, Analyst, RBC: Okay. Great. Appreciate it, Chris. Thanks a lot.

Aravinda Galappatthige, Analyst, Canaccord Genuity: Thanks, Todd.

Operator: Thank you. Our next question comes from Gabriel Leung with Beacon Securities. Please go ahead.

Gabriel Leung, Analyst, Beacon Securities: Hi, good morning. Thanks for taking my questions. Just one quick follow-up. Just from a capital allocation perspective, Chris or Vince, can you just talk about how you’re prioritizing, I guess, your free cash flow generation over the near term, sort of split between investing in the business, M and A, share buybacks, etcetera?

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: Yes. Thanks, Gabriel. Our if I had to rank order them, number one is for sure investing in the core business and kind of reigniting that organic growth. That’s really the focus. Within reason, obviously, like we are really committed to the free cash flow model we have.

We think building up cash creates some optionality for us. So that is the main focus. As always, we keep an open posture to M and A. And like I mentioned earlier, if there’s things that really kind of accelerate us along that strategic path we’re taking, we’ll take a close look. We’ve got a lot of experience doing M and A, and we think it’s a real strength of the team.

With respect to kind of the core community acquisitions where we buy the communities and bring them onto the Fora platform, there will be a time and a place for those. But I think we want to we’d like to see how the kind of the broader landscape plays out over the next period. So and then lastly, on share buybacks, that’d be the lowest priority for us. We think our shareholders are far better served by accelerating the growth rate of the business than short term kind of gains from share buybacks.

Gabriel Leung, Analyst, Beacon Securities: I got you. Maybe just one follow-up. If we sort of look at your full year guidance and just looking into the back half, I know you kind of talked about it, but are you expecting any sort of material changes to your MAUs in the back half one way or the other, positive or negative? I’m curious to hear a bit more about your assumptions around MAU from the $90,000,000 you just reported.

Vince Bellissimo, Chief Financial Officer, VerticalScope Holdings: Yes. Thanks, Gabe. So from a modeling perspective, it’s very difficult to predict any sort of changes on the negative side. So I think our answer that is no, we’re not predicting any substantive negative changes from any sort of algorithms that are coming in the second half of the year, nor can we predict those. On the positive side, we are expecting some incremental contributions from the initiatives teams are working on, especially around a direct traffic perspective.

So there some upside that we expect in the back half of the year from those.

Drew McReynolds, Analyst, RBC: Got you. Thanks for that. Thank you.

Operator: Thank you. At this time, we have no further questions. And so I’ll hand back to Chris for closing remarks.

Chris Goodridge, Chief Executive Officer, VerticalScope Holdings: Well, thanks, everyone. Appreciate the engagement, particularly in mid August here at seven a. M. So thanks for the questions and the engagement. We look forward to speaking with everyone again next quarter.

Operator: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.

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