Earnings call transcript: VerticalScope Holdings sees Q4 2024 revenue growth

VerticalScope Holdings reported a strong fourth quarter of 2024, with revenue reaching $19.9 million, reflecting an 11% year-over-year increase. The company also achieved a full-year revenue of $69.1 million, marking a 13% organic growth. Despite a net loss of $700,000 primarily due to non-recurring expenses, the company’s adjusted EBITDA rose by 22% to $10.1 million, maintaining a 51% margin. Free cash flow also increased by 17% to $9.4 million, with a 93% conversion rate. According to InvestingPro data, the company maintains a healthy gross profit margin of 67% and a solid current ratio of 1.85, indicating strong operational efficiency and liquidity position.

Key Takeaways

• Revenue grew by 11% year-over-year in Q4 2024.
• Adjusted EBITDA increased by 22%, maintaining a 51% margin.
• Free cash flow conversion rate stood at 93%.
• Net loss of $700,000 due to non-recurring expenses.
• Operating expenses rose by $2.2 million in Q4.

Company Performance

VerticalScope Holdings demonstrated robust performance in the fourth quarter and full-year 2024, driven by significant revenue growth and improved profitability metrics. The company focused on enhancing mobile app user engagement, leveraging product reviews, and optimizing user experience through AI enhancements. These initiatives appear to have contributed to the positive financial results. InvestingPro analysis reveals that management has been actively buying back shares, demonstrating confidence in the company’s future prospects. With a market capitalization of approximately $64 million and trading near its 52-week low, the stock currently appears undervalued according to InvestingPro’s Fair Value model.

Financial Highlights

• Revenue: $19.9 million in Q4 2024, an 11% increase year-over-year.
• Full Year Revenue: $69.1 million, marking a 13% organic growth.
• Adjusted EBITDA: $10.1 million, up 22%, with a 51% margin.
• Free Cash Flow: $9.4 million, a 17% increase with a 93% conversion rate.
• Net Loss: $700,000, attributed to non-recurring expenses.

Outlook & Guidance

VerticalScope Holdings is targeting a 10% organic growth in monthly active users (MAUs) in 2025, with initiatives expected to take effect around Q2. The company plans to continue its focus on mergers and acquisitions (M&A) and share buybacks. Additionally, potential licensing deals for large language models (LLMs) are anticipated in 2025.

Executive Commentary

Rob Laidlaw, CEO, stated, "We are well positioned to capitalize on both organic and inorganic growth opportunities." This suggests a strategic focus on expanding both internal capabilities and external acquisitions. CFO Vince Bellissimo added, "Our goal is to try to make our business bigger and scale the size of the Fora platform," indicating an emphasis on growth and platform expansion.

Risks and Challenges

• Increased operating expenses may impact profitability if not managed effectively.
• The net loss due to non-recurring expenses highlights potential volatility in financial results.
• Macroeconomic uncertainties could affect digital advertising revenues.
• Competition in the digital advertising space remains a challenge.
• Dependence on AI and technology advancements requires continuous innovation.

Q&A

During the earnings call, analysts inquired about the impact of Google algorithm changes, which the company noted had minimal effect. The M&A strategy was also discussed, with a focus on deploying free cash flow for acquisitions. Additionally, potential macroeconomic uncertainties were addressed, with the company confirming the acquisition of Enthuse Digital for approximately $5 million.

Full transcript - Forian Inc (FORA) Q4 2024:

Operator: Hello, everyone, and a warm welcome to the VerticalScope Holdings Incorporated Q4 and Full Year twenty twenty four 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 will now hand the call over to Diane Yu, Chief Legal Officer to begin. Diane, please go ahead.

Diane Yu, Chief Legal Officer, VerticalScope Holdings: Thank you, operator. Good morning, everyone, and welcome to VerticalScope Holdings’ fourth quarter and full year twenty twenty four earnings call. I’m joined by Rob Laidlaw, our Founder, Chair and Chief Executive Officer Vince Bellissimo, our Chief Financial Officer and Chris Goodridge, our President and Chief Operating 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 twelve month periods ended 12/31/2024, 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 Rob Laidlaw, Founder, Chair and CEO of VerticalScope. Rob?

Rob Laidlaw, Founder, Chair and Chief Executive Officer, VerticalScope Holdings: Thanks, Diane. Good morning, everyone, and thank you for joining us today. We are pleased to report another strong quarter, capping off an excellent year for VerticalScope. In Q4 twenty twenty four, we achieved double digit revenue growth, continued strong adjusted EBITDA performance, generated robust free cash flow, all while executing against our strategic initiatives. Momentum in our business remains strong as we head into 2025 and I want to take a moment to thank our team for their exceptional work in delivering these results.

To start, let’s highlight our financial performance. Revenue grew by 11% year over year in Q4 to $19,900,000 reflecting the continued growth of our Quora communities, improving advertiser demand and our ability to scale efficiently. Adjusted EBITDA increased by 22% to $10,100,000 reflecting a 51% margin as we maintain disciplined cost management while investing in key growth areas. Free cash flow was strong at $9,400,000 a 17% increase year over year with a 93% free cash flow conversion, reinforcing our ability to invest in our platform, execute on M and A opportunities and return capital to shareholders. One of the key drivers of our business remains the secular shift in consumer behavior towards user generated community content.

In Q4, monthly active users increased by 6% to a fourth quarter record 114,000,000. While MAUs were up 6% in the quarter, we did see some trends similar to what Reddit reported towards the back half of the quarter. This falls within the expected range of fluctuations and while some was also driven, there was a lot going on in the world with U. S. Elections.

More importantly, we are excited about a number of great initiatives planned to grow MAUs in 2025 by double digits organically with most of these kicking in around Q2. So we expect Q1 to be within the same neighborhood as last year’s results of 112,000,000 MAUs. One of the really promising areas we’re looking forward to is international user growth, particularly around AI powered language translation. We think this is a great opportunity to take our forms worldwide, especially in some of our key high performing categories like automotive. Additionally, our team’s work on user engagement is paying off as we are seeing improving and positive year over year growth in Q1 daily active users, which is an exciting indicator of increased user engagement and stickiness on our platform and an area where we see a lot of low hanging fruit to continue executing.

Diving into our product and technology investments, we remain focused on three key pillars. One, enhancing the Fora mobile app. User engagement on the app continues to grow and we are investing in new features to improve retention and content contribution. For our mobile app remains small, but will eventually be a powerful platform to build upon with great user engagement. This is a long term investment for us that we’re committed to seeing through.

Two, leveraging our strength and product reviews. With continued concerns over AI generated product reviews, we are doubling down on surfacing real world user experiences. Users value the depth of discussion on our forums and we are working to improve how we highlight these insights for those actively researching products and recently launched new product ownership experiences on six test communities with very positive engagement results. Three, optimizing the user experience. As more users discover online forms for the first time, we are committed to making their experience seamless and intuitive.

From onboarding improvements to AI search enhancements and AI refined answers, we continue to modernize our platform while staying true to the authenticity that defines for us. Turning next to capital allocation. We are primarily focused on two of the three strategies we outlined in 2024, namely M and A and share buybacks. Notably, the third strategy, debt reduction, is no longer necessary with our leverage at a low of 1.1 times. In Q4, we generated free cash flow of $9,400,000 and we repurchased 238,100 shares at an average price of CAD 8.09.

In 2025, we will balance M and A and share buybacks depending on what presents the best opportunity. But ideally, it would be M and A as we look to grow EBITDA and free cash flow and expand our business scale. Speaking of, M and A has come back into focus with the execution of our first deal of the year for 20 plus high quality enthusiast product communities from a single seller. We are excited about this first acquisition and feel that our pipeline for 2025 is robust. We continue to surprise ourselves at the discovery of new and interesting communities in the very deep foreign market and believe we have a unique understanding of how to acquire, migrate, and integrate these niche communities onto a common tech platform.

Finally, on the topic of AI and LLM licensing, we continue to evaluate partnership opportunities that align with our long term strategy. We believe our data is highly valuable and will ensure that any agreements are structured in a way that maximizes shareholder value over the long term. We’re also very excited about the opportunities to use our own structured data for the creation of new AI user experiences and improved community engagement. We will provide further updates as discussions progress over the next quarter or two. Close.

Q4 was another strong quarter and we entered 2025 with significant momentum. The shift towards user generated, hands on, real products content continues to benefit our business and we are well positioned to capitalize on both organic and inorganic growth opportunities. We’re excited for what’s ahead and look forward to updating you on our progress in the quarters to come. With that, I’ll turn it over to Chris and Vince.

Chris Goodridge, President and Chief Operating Officer, VerticalScope Holdings: Thanks a lot, Rob, and good morning, everyone. Building on Rob’s comments, Q4 capped off a strong year for VerticalScope, marking four consecutive quarters of double digit organic revenue growth led by continued strength in our advertising business. Total revenue in Q4 was $19,900,000 up 11% over last year with gains driven by both MAU growth and ARPU expansion. Our advertising business continues to be our growth engine and we’re really encouraged to see double digit growth in both programmatic and direct channels in the quarter. E commerce revenue also improved sequentially by 14% compared to Q3.

For the full year, total revenue was $69,100,000 up 13% organically over last year, again fueled by advertising which was up 20% and made up 87% of total revenue. These gains more than offset declines in e commerce revenue which was lower by 18%, but made up just 13% of total revenue in the year. Looking more closely at our advertising results, ad revenue was $17,400,000 in Q4, up 15% compared to prior year with strength across programmatic and direct sales. Programmatic revenue increased year over year by 17% in Q4 as a result of higher impressions due to MAU growth and stronger CPMs and made up 66% of total ad revenue in the quarter. Overall, we are really pleased with the advancements our programmatic team has made this year.

Our capabilities and revenue sources continue to expand, allowing us to grow programmatically consistently at a higher rate than our audience growth. In Q4, we received demand from over 35 different supply side connections representing thousands of individual advertisers and resulting in competitive auctions that are supporting higher CPMs. At a little under 10% of our total programmatic revenue, video still holds a lot of future growth potential, which we will continue to balance against providing an outstanding user experience. Turning to our direct advertising business. Our sales team delivered an increase of 11% in direct revenue in Q4 and direct sales were 34 of our total ad revenue in the quarter.

Momentum that we experienced at the end of Q3 carried through the quarter as we saw increased spending across categories including automotive, powersports, outdoors and retail customers. Turning to e commerce. As I mentioned off the top, e commerce saw sequential improvement over Q3 and is no longer a headwind to our overall revenue. Representing just 13% of total revenue in Q4, e commerce was $2,400,000 down 9% or approximately $200,000 from prior year, but was up 40% compared to Q3 as a result of improved affiliate commerce sales. 57% of e commerce revenue in Q4 was subscription based.

Looking ahead, there’s clearly uncertainty in markets generally as a result of the recent trade disputes, which seem to change hour by hour. Despite these challenges, we continue to see opportunities to grow, including through the AI initiatives Rob spoke about earlier. Our direct bookings into 2025 are up year over year with continued strength in the categories I mentioned earlier along with a pickup in U. S. Insurance business.

Programmatic CPMs are also holding up well so far in Q1. We’ve got a very resilient business model and can easily adapt if we start to experience a more challenging economic environment. And lastly, just a few words on M and A. We were pleased to announce our agreement to acquire Enfuse Digital’s communities, it’s a vibrant group of forums that collectively reached 3,500,000 monthly active users last year across a number of complementary interest categories, including musical instruments, sailing and recreational vehicles. We expect these communities to thrive as a part of Fora.

Beyond this transaction, our M and A pipeline continues to build and we expect 2025 to be a stronger year for deals as we look to capitalize on our financial position to build greater scale. With that, I’ll now turn it over to Vince to walk you through the rest of our financial results.

Vince Bellissimo, Chief Financial Officer, VerticalScope Holdings: Thanks, Chris, and good morning, everyone, and thank you for joining the call today. We delivered great financial results this year, driven by our strategic focus to organic revenue growth, operational excellence and a disciplined approach to capital allocation. Our balance sheet is stronger than ever and our focus now turns to accelerated Rev growth both through exciting organic initiatives and tuck in M and A. With that, let’s turn to the key financial highlights for the period. In the fourth quarter, we recorded a net loss of $700,000 This was primarily driven by two non recurring expenses.

The first being 800,000 in share based compensation expense in the quarter tied to one time longer term incentives and $1,500,000 in financing fees related to the October 2024 amendment of our credit agreement. Excluding these non recurring expenses, our net income for the quarter would have been $1,600,000 or approximately $0.08 per share. There was a similar dynamic in the full year results with a minor loss posted for the period. Excluding the $1,500,000 in financing fees and $1,700,000 in non recurring longer term incentives recognized in the period, full year net income would have been $3,200,000 or approximately $0.15 per share. Overall, these incentives are part of an important strategy to align our revenue generating teams with sustainable long term growth objectives, and our strategy is working.

It’s also worth noting that while we saw a $2,000,000 increase in share based compensation in Q4 driven by these incentives, full year, we recognized $4,100,000 in share based compensation, which was $400,000 lower than prior year. Our operating expense in the quarter increased by $2,200,000 primarily due to the increase in share based compensation. However, for the full year, operating expenses decreased by $2,100,000 compared to the prior year, driven by a lower rate of amortization related to acquired intangibles and partially offset by a reversal of contingent considerations in the prior period. Our non IFRS operating expenses, which excludes items like share based compensation, depreciation and amortization, increased by only 2% in the quarter and 5% for the full year. This stable cost base is a result of our commitment to operational efficiency and has generated significant operating leverage as demonstrated in our performance.

Adjusted EBITDA grew by 22% in the quarter and 27% for the full year with expanded adjusted EBITDA margins of 5143% respectively. Our goal is to continue to drive 40% or better margins in our business as we continue to take a very focused approach to investing in areas that drive long term engagement or revenue growth across our platform. Accretive M and A will also be a driver of margin expansion as tuck in acquisitions are migrated to the For platform, driving profitable results from day one. A majority of these profits continue to convert to cash at impressive rates. Cash flows from operating activities in the quarter totaled $7,000,000 up 51 compared to prior year.

And full year cash flow from operations was $24,800,000 dollars up 60% compared to last year. Our adjusted EBITDA to free cash flow conversion was exceptional for both the quarter end of the year at 9392% respectively. Looking ahead, we aim to generate free cash flow conversions of 80% or better with expansion coming from an increased rate of amortization of required intangibles and the corresponding cash tax shelter this provides. Our net leverage is at a very manageable 1.1 times, and we do not anticipate it to increase in the foreseeable future. With our strong balance sheet, our primary focus will shift towards tuck in M and A, funded primarily by a strong free cash flow.

We will aggressively pursue deals that are accretive to our public company multiple. We see this as a significant opportunity to leverage our free cash flow to substantially grow our business and the scale of the Forre platform. Furthermore, we maintain the flexibility in favorable terms of our revolving credit facility with over 60,000,000 available to draw should the right accretive opportunity arise. If we utilize the facility, our priority will be to rapidly deleverage as we have proven in the past. In closing, this was a very strong year for our business.

As we celebrate these results, our focus is firmly on the exciting opportunities ahead. We will be investing in strategic AI initiatives to expand our audience, enhance user experience and develop new monetization channels. We will leverage our free cash flow to pursue accretive M and A and drive accelerated growth across our platform. All this is aimed at delivering sustainable long term value for our shareholders and employees. And with that, I will pass it back to Rob.

Rob?

Rob Laidlaw, Founder, Chair and Chief Executive Officer, VerticalScope Holdings: Thanks Vince. I think, look, we’re really proud of the quarter and the year and ready to answer any questions that all of you might have. So we can open it up for questions.

Operator: Thank you. We will now begin the Q and A session. Our first question today comes from Drew McReynolds with RBC Capital Markets. Drew, please go ahead.

Drew McReynolds, Analyst, RBC Capital Markets: Yes. Thanks very much and good morning. Maybe I’ll start with a big picture question and maybe for you, Rob. You highlighted kind of four of your strategic kind of priorities or pillars. At a high level, the environment continues to evolve.

Obviously, your business model continues to impress. I guess the best way to ask this on a big picture is when you kind of think of your new products, the AI evolution, like what do you need to really kind of get right in 2025 to kind of meet your own internal growth objectives for the business? What’s the kind of the real important thing for the company to essentially kind of obviously execute on to, again, kind of get to where you want to get for the business, not just this year but through the medium term?

Rob Laidlaw, Founder, Chair and Chief Executive Officer, VerticalScope Holdings: Thanks for the question, Drew. So I think as I outlined, I mean, the Fora mobile app, while it’s still small, continues to really be an area where we think there’s great long term and medium term potential. And we think that that is a really interesting place to also kind of utilize some of these new AI initiatives. And I think when I talk about those AI initiatives, one of the most exciting parts is, you know, really being able to grow our community’s audiences. So grow MAUs, improve DAUs.

So those kinds of things have really become a focus for us is like how do we grow the overall audience and then how do we get that audience coming back more and more often. So when we talk about optimizing the user experience, we’re using a lot of AI now to do that and it’s working. And then the third is really around differentiation. And that one is, you know, leveraging our strength and product reviews. So that’s where we think we have a competitive advantage against, you know, players like Reddit, where we think our communities go a lot deeper on topics.

There’s a lot less noise. People are there, they’re very focused on, you know, whether it’s their car, their motorcycle, their RV, or even, you know, musical instruments. So that’s where I think, we kind of see our long term competitive moat is just people that want to go really, really deep on these products. And it just creates so much structured data, so much you know, really incredible, hands on real products content. It’s just, you know, real human hands, real interaction, real community.

So, you know, again for us it’s just kind of executing on all these initiatives that we think grow the size of the pie. And then on the other side, you know, we can just continue to scale through M and A. So that’s a really exciting part of our business is we can grow it in both ways. And I think we’ve got a great mix right now kind of long and short term initiatives. And again, we’re accelerating because of AI.

Drew McReynolds, Analyst, RBC Capital Markets: Yes. That’s really helpful. Thank you for that. And on the M and A playbook for 2025, just housekeeping, is there any kind of multiple or purchase price on enthused digital, maybe Vince you could provide? And then bigger picture on M and A, when you went public initially kind of threw out maybe a dollar amount of M and A you’d like to do over a period of time, seems like most of what you’re thinking of doing at least from a visibility perspective today is just reinvesting free cash flow as opposed to relievering, but maybe just kind of drill down into what the size of the M and A could look like for 2025?

Vince Bellissimo, Chief Financial Officer, VerticalScope Holdings: Yes. Hey, Drew, thanks and thanks for the question. Just starting with the purchase price for Enthuse Digital, what we negotiated with the seller was around $5,000,000 but as we noted in the disclosure, subject to change based on certain closing requirements, but that’s what’s been negotiated. All cash deal, no earnouts, very clean. So pretty much down the fairway from a structure perspective compared to what we’ve done in the past.

In terms of sort of M and A and what our objectives are for the year, yes, as we noted, look, it’s with debt being and leverage being at 1.1x, it’s very manageable. Our goal right now is to try to make our business bigger and scale the size of the Fora platform. So foreseeable, if the opportunity arises, we could easily deploy all of our free cash flow towards M and A. But again, that’s timing of that is difficult to predict because these deals sometimes come in spurts. But I would say, all LC being equal, deploying completely our free cash flow towards M and A would be the objective.

Drew McReynolds, Analyst, RBC Capital Markets: Okay. That’s great. Last one for me, just in terms of things you can’t control the macro outlook, obviously, a very uncertain whiplash type of environment. Thanks for the Q1 commentary. Just with respect to any other, I guess, expectations for whether it’s the resilience of digital advertising in this kind of environment?

Like what are some of the things you’re particularly focused on to kind of see if there is a downturn from a macro perspective?

Chris Goodridge, President and Chief Operating Officer, VerticalScope Holdings: Yes. Thanks, Drew. Whiplash, that’s a good word. I think I’ll reuse that one because it does seem to change day by day, what we read in the newspapers and everything else. But so far, we haven’t seen indication from advertisers about cancellations or pullbacks or anything like that.

But if the rhetoric continues, if the uncertainty continues, that could very well change. We have no idea, right, how that could evolve. What I’d say about our business and how it’s done sort of historically through these periods, because of the nature of our customers, the performance driven nature of the way they work with us, we tend to have very tend to be very resilient through periods of economic turbulence. Our programmatic business, again, it’s more of a performance channel. So and it continues to be a very grow a significantly growing part of the digital or sort of the overall advertising ecosystem.

So there’ll be that sort of secular continued shift. I think that will play through any sort of economic turbulence. Obviously, the growth rate may not be quite as high depending on how that could evolve. But we think we’re really, really resilient. Like we mentioned on the cost base as well, like our cost base is in a great spot.

It’s lower. Our margins are high. We’ve got a lot of balance sheet flexibility. So with that in mind, if there is economic turbulence, we’ll see that as probably great opportunity to continue to grow. You think M and A could come at more attractive multiples, if that were to play out.

So we’re ready for really any scenario. We’ll continue to push our growth our organic growth agenda, but we’ll be opportunistic if the economic environment becomes more challenging.

Drew McReynolds, Analyst, RBC Capital Markets: Okay. That’s great. Thanks very much.

Operator: Our next question comes from Stephen Lee with Raymond James. Stephen, please go ahead.

Stephen Lee, Analyst, Raymond James: Thank you. Hey, guys. Rob, there was some algo changes in December from Google. Doesn’t seem to have impacted Q4, but is this something we ought to watch going forward?

Rob Laidlaw, Founder, Chair and Chief Executive Officer, VerticalScope Holdings: Hey, Stephen. Yes, thanks for the question. There’s definitely look it seems like every month there’s alligator changes. What we tend to focus on is larger shifts and there hasn’t been any larger shifts. There’s been, you know, what I would call some small rebalancing, you know, Google likely reacting to some negative publicity around Reddit and forums being so, you know, prominent in the search results.

I think tried to give a little bit of traffic back to those really niche expert publisher sites. Small scale, so, you know, Q4 as you saw was a little lower growth rate than what we experienced in Q3. And that’s kind of reflected in kind of how we think Q1 starts to look. We gave a little bit of kind of color on that in the earlier remarks. But generally, I would say these are expected fluctuations and rebalancing.

And what we’ve seen is just a very consistent trend that Google is very much favoring user generated content and understanding its value in the consumer discovery process. And particularly now, if people want to go deeper on topics they love and they want those nuanced answers that frankly AI just can’t give with any credibility. So they’re coming to forums, they want to find is this a good product from people that have actually used it. That’s what we call like real hands on real products and real reviews. So generally I would say, you know, we’re not going to see the 2030% type growth rates that we saw last year.

Just, you know, by nature we have some pretty, you know, strong quarters that we’re going to be lapping. But at the same time, we’re pretty excited about some of the initiatives that we’ve got going on. And, you know, the AI powered language translations is one that we think can have a really meaningful impact on our business and help us achieve that kind of, you know, call it 10% year over year organic MAU growth. So generally nothing that I’m concerned about at this point on MAUs or traffic and frankly, if we can continue to like double and triple down on DAUs and that’s kind of a new focus area for us, that will allow us to expand our communities at a pretty significant growth rate. So that’s an exciting part for us as well.

And, yeah, I think overall pretty comfortable with where we’re sitting from a traffic and algo perspective.

Stephen Lee, Analyst, Raymond James: Very helpful color, Rob. Thanks. And just to ask you on this 10 year over year organic MAU growth. So this is increasing by any churn that you usually see and then whenever you do M and A it would be on top of that. So like M2 for example, they would add 3,500,000 MAUs on top of that 10% organic MAU.

Is that right?

Rob Laidlaw, Founder, Chair and Chief Executive Officer, VerticalScope Holdings: Yes, that’s correct. And look, some of that organic MAU growth is going to come kind of like Q2 and onwards as we ramp up some of those MAU growth initiatives. But yes, I think overall we’re hoping to hit that kind of 10% for the full year and that’s organic. And then inorganic would kind of layer on top of that.

Stephen Lee, Analyst, Raymond James: Okay. Perfect. Thanks.

Operator: The next question comes from David McFadgen with Cormark Securities. David, please go ahead.

David McFadgen, Analyst, Cormark Securities: Great. Thank you. A couple of questions. So sorry, can you just walk us through, why you think or you expect MUs to be flat in Q1 and then all of a sudden pick up to maybe 10% in Q2?

Rob Laidlaw, Founder, Chair and Chief Executive Officer, VerticalScope Holdings: Hey, David. Yes, thanks. So I think your commentary on Q1 is accurate. And really the what we see happening is our initiatives that we’ve launched and we’ve been building up and experimenting and playing with, really in Q4 and Q1, will start to get scaled in Q2, Q3, etcetera. So our traffic growth will be a little bit, you know, more towards the back half of the year, including, you know, some parts of Q2.

But, yeah, we’re kind of let’s call it starting the year off, and lapping I think we were plus 12% in Q1 last year. So, it’s really just a matter of timing on when those initiatives and these are very much like our team building new things. It’s not driven by external factors. It’s very much internal and controllable, when those efforts are expected to launch. And with some of them, it takes time for them to ramp up.

Some of them have, you know, kind of engineering costs, some of them have, just scalability and, you know, you don’t want to launch necessarily on 1,200 sites at once. You want to try it on 10 and then 100 and then then 1,200. So, there is just some time factors there to make sure that everything goes smoothly.

David McFadgen, Analyst, Cormark Securities: Okay. When do you expect the enthused transaction to close?

Chris Goodridge, President and Chief Operating Officer, VerticalScope Holdings: Hey, David. It’s Chris here. I can take that. It’s just a matter of days. Yes, it’s a relatively short, interim period between signing and closing.

There’s a handful of conditions that need to be fulfilled. But it will be closed this month.

David McFadgen, Analyst, Cormark Securities: Okay. And then just on the LLM licensing, you said you’re still evaluating that. Do you expect to finalize the deal in 2025?

Stephen Lee, Analyst, Raymond James: Yes. David, I can take that one as well.

Chris Goodridge, President and Chief Operating Officer, VerticalScope Holdings: Yes, that’s our hope. We’ve done a lot of work including internally to kind of make sure our data is structured in a way that makes it licensable and easier to do these deals. And we’re hopeful that we’ll see some revenue in the business from licensing in 2025.

David McFadgen, Analyst, Cormark Securities: Okay. And then just on the EBITDA margin, you said you’re targeting margins of north of 40%. You achieved 51% in the fourth quarter. That’s quite a range from 40% to 51%. How likely is it that you can maintain EBITDA margin, say, high 40% or 50%?

Vince Bellissimo, Chief Financial Officer, VerticalScope Holdings: Hey, David, this is Vince. Thanks. Yes, so the range you commented on in 2024 is driven by the seasonality in our business, right? So historically 20% of the revenue lands in Q1 and margins follow suit and 30% in Q4. So you ramp as the year goes on and margins as a result of all of the operating leverage that we have in the business ramp accordingly as well.

Going forward, we still target 40% or better because we’re still investing in the platform and specifically on all those great initiatives that Rob talked about earlier on in the call. So that 40%, forty three % range I think is where we’re comfortable playing in today as we continue to invest. But as you see M and A later on, all of these deals are accretive. You could see that tick up towards 50%.

David McFadgen, Analyst, Cormark Securities: Okay. All right. Thanks, guys.

Operator: Thank you. At this time, we have no further questions. We have received no further questions. And so I’ll hand the call back to Rob Laidlaw for closing remarks.

Rob Laidlaw, Founder, Chair and Chief Executive Officer, VerticalScope Holdings: Great. Thank you. And thanks again, everyone, for joining us today. Thank you for the great questions. Feel free to reach out to us.

The management team is available if you have any further questions. And really to close, we’re really excited about 2025. We feel like we’ve got the right amount of product momentum, M and A momentum and we’re here to deliver results for our shareholders. So have a great rest of the week and we look forward to delivering some great results for the rest of 2025. Thank you.

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

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