Welcome everyone to the annual general meeting of shareholders of VerticalScope Holdings. Please note that the meeting is being recorded. I would like to introduce Diane Yu, Chief Legal Officer and Corporate Secretary of the company, who will provide some introductory remarks before the formal portion of this meeting. Diane, please go ahead.
Good afternoon, and welcome to the 2023 annual general meeting of the shareholders of VerticalScope Holdings Inc. My name is Diane Yu, and I am the Chief Legal Officer and Corporate Secretary of the company. Before we begin the formal proceedings, I would like to introduce the following members of our board who are present at today's meeting. We have Rob Laidlaw, Wayne Bigby, Philip Evershed, Cory Janssen, and Michael Washinushi. In addition to myself, the following members of management are present for today's meeting: Rob Laidlaw, the founder, Chief Executive Officer, and Chair of the Board of Directors, Chris Goodridge, the President and Chief Operating Officer, and Vincenzo Bellissimo, the Chief Financial Officer. This meeting is being held as a completely virtual meeting.
The meeting will be conducted in the same manner as an in-person meeting, and our goal is to replicate the experience you would have had if we were able to come together today in person. We would like to remind you that only registered shareholders and duly appointed proxy holders who have signed in using a control number are able to ask questions during the meeting. Instructions on how to ask questions are on your screen. In order for us to run the meeting efficiently, I will pause before calling for a vote on any matter of business to allow time for any questions on that matter of business. General questions will be addressed during the question period following the conclusion of the formal business to be conducted at the meeting and the business update. Voting at today's meeting will be conducted by online ballot for all matters.
Registered holders of subordinate voting shares and multiple voting shares, who we will refer to as registered shareholders for ease, and their duly appointed proxy holders who have signed in using a control number, may vote on the online platform with respect to each item of business once I advise that the polls are open and until I declare that the polls are closed. Instructions on how to vote are on your screen. Please remember that if you have already voted by proxy and you vote again during the online ballot, your online vote will revoke your previously submitted proxy. If you have already voted by proxy and do not wish to revoke your previously submitted proxy, do not vote again during the meeting.
We have two matters of business to be considered at this meeting, being the election of the directors and the reappointment and remuneration of the company's auditor for the coming year. The results of the votes on each matter will be announced prior to the close of the meeting. Each item of business requires that a majority of the votes cast by holders of subordinate voting shares and multiple voting shares voting together as a single class, with each multiple voting share representing ten votes per share and each subordinate voting share representing one vote per share, be voted in favor of in order for the resolution to pass. I will now hand the meeting over to Rob Laidlaw, our Founder, Chief Executive Officer, and Chair of the Board of Directors to conduct the formal business of the meeting. Rob, please go ahead.
Thanks, Diane. Welcome all to the annual general meeting of the shareholders of VerticalScope Holdings Inc. The meeting is now called to order. In accordance with the bylaws of the company, I will preside as chair of this meeting, and Diane Yu will act as secretary of this meeting. I appoint Rebecca Prentice of TSX Trust Company to act as scrutineer for the meeting. In order to make the best use of our time, certain shareholders have been asked to move and second motions relating to the business to be conducted at this meeting. That is not intended in any way to limit your right to participate in this meeting. I now declare that the polls are open for voting on each item of business.
The notice calling this meeting and the management information circular describing the business of the meeting have been made available to holders of subordinate voting shares and multiple voting shares of the company as of May 1, 2023. Copies of the 2022 audited annual financial statements of the company and the auditor's report thereon, as well as the related management's discussion and analysis, are available on the company's website and under the company's profile on SEDAR. Accordingly, I will dispense with the reading of the notice of the meeting. Prior to the commencement of this meeting, the scrutineer filed a preliminary report on attendance, and the secretary has confirmed to me that there is a quorum of shareholders present at this meeting. Accordingly, the meeting is duly and properly constituted for the transaction of business.
I direct that the confirmation of mailing of the notice of the meeting and management information circular received from TSX Trust Company and the scrutineer's complete report on attendance be attached to the minutes of the meeting. We will now proceed with the presentation of the company's audited consolidated financial statements for the year ended December 31, 2022, and the auditor's report thereon, which are available under the company's profile on SEDAR. I declare that the company's audited consolidated financial statements for the year ended December 31, 2022, and the auditor's report thereon have been received. The next item of business of this meeting is the election of the directors of the company. The number of directors to be elected at this meeting is five.
The management information circular contains the names and backgrounds of the five individuals that have been nominated by the company for election as directors until close of business of the next annual general meeting. I now declare the meeting open for nominations. In the interest of expediency, I will ask Diane Yu, Chief Legal Officer and Corporate Secretary of the company, to make the nominations on behalf of management of the company.
I nominate each of the persons specified in the management information circular delivered with the notice of meeting, namely Rob Laidlaw, Wayne Bigby, Cory Janssen, Michael Washinushi, Philip Evershed, to serve as directors of the company and to hold office until the close of the next annual meeting of shareholders of the company, or until their respective successors are duly elected or appointed.
As the company did not previously receive timely notice of any further nominations of persons for election as directors of the company, as required by the advance notice provisions of the company's Bylaw Number three, I declare the nominations closed. In order that a vote may be held on the matter, I request a motion that the 5 persons nominated as directors of the company be so elected.
I so move. I second the motion.
Before I call for a vote on the nominated directors, I will pause for a moment to allow for any questions on the matter to be submitted.
I confirm that we have not received any questions relevant to this motion.
Thank you. Registered shareholders and duly appointed proxy holders who have signed in using a control number can now vote by online ballot. I will now proceed with the next item of business and report on the votes at the conclusion of this meeting. We will now proceed with the reappointment and fixing of the remuneration of the auditor of the company. In order that a vote may be held on the matter, I request a motion that KPMG LLP be reappointed as the auditor of the company until the close of the next annual meeting of the shareholders of the company, and that the board of directors of the company be authorized to fix their remuneration.
I so move.
I second the motion.
Before I call for a vote on the motion, I will now pause for a moment to allow for any questions on this matter to be submitted.
I confirm that we have not received any questions relevant to this motion.
Thank you. Registered shareholders and duly appointed proxy holders who have signed in using a control number can now vote by online ballot. We've now dealt with all items of business, and I declare that the polls are closed for voting. I'm pleased to confirm that the scrutineer has reported to me that all matters put to a ballot have been passed with the requisite shareholder approval. Accordingly, I hereby declare the nominated directors elected, the auditors reappointed, and the board of directors authorized to fix the auditors' remuneration. A press release will be issued forthwith following this meeting. This concludes the formal business brought before the meeting. As there's no further business that may be properly considered at this meeting, I declare the meeting to be terminated.
Management will now present an overview of the company's key accomplishments in 2022. Rob?
Thanks, Diane, and thanks everyone for joining us today. I am Rob Laidlaw, founder and CEO of VerticalScope, and this company has been my baby and my passion for more than 20 years, and my team and I are excited to welcome you to our second AGM as a public company. At VerticalScope, our mission is to enable people around the world that share common interests and passions to connect, geek out, and share knowledge about the things that they love. We have recently undertaken a revitalization of our value statement, aiming to further advance our culture at VerticalScope. We are proud to introduce our three core company values, authentic, scrappy, and curious. These values embody the essence of who we are as an organization and guide our actions and decision-making processes.
Through these shared values, we are creating a workplace where our team members feel empowered, engaged, and inspired to make a positive impact within our organization and beyond. We have built the leading digital platform for online enthusiast communities. Our communities are unique because they are hyper-specific to our members' interests, and we maintain over 1,200 communities, ranging from mountain bikes to complex home theater systems to paddle boarding and hundreds of individual models of cars, trucks, motorcycles, ATVs, and snowmobiles. When you pull all 1,200-plus communities that we own together, they have massive scale with an average of over 111 million monthly active users in 2022. These communities are hubs of authenticity, where our users share personal experiences, perspectives, and reviews about the hobbies and products that they love. Our users like to register. They join the community, and they become members.
There are over 60 million of them, and once they become a member, that's when they can post, ask questions, and share their own knowledge. That generates an incredible amount of monetizable content for us. Lastly, we have successfully executed on our acquisition strategy since our IPO and are seeing an increasing number of M&A opportunities in recent months. We are staying disciplined, managing our balance sheet, and expect to be opportunistic when the time and deal is right for our shareholders. This is a time when we can afford to be patient and selective.
Good afternoon, everyone. It's nice speaking to you today. This is Chris Goodridge here, the President and Chief Operating Officer of VerticalScope. Reflecting on 2022 and our accomplishments, we reached new highs in the business, thanks to the dedication of our very talented team. We surpassed CAD 80 million in total revenue for the first time, up 22% over prior year, with double-digit growth in both advertising and commerce. Our platform served over 111 million monthly active users in the year, 13% more in 2021, connecting enthusiasts who share authentic perspectives on the products that they love. The profitability of our business model and platform economics driven by efficiencies with Fora allowed us to realize a 38% adjusted EBITDA margin, and we converted 70% of that EBITDA to free cash flow.
With deteriorating economic conditions in the latter half of the year, we acted swiftly in Q4 and Q1 of this year to reduce costs across the business and focus our resources on the projects with the greatest potential to add value for our shareholders. These changes resulted in annualized savings of approximately CAD 6 million, and our business is now very well positioned to navigate a challenging operating environment, but also benefit from greater operating leverage as the impact of new revenue initiatives takes hold. We also maintained a very disciplined posture towards leverage, reducing our debt by CAD 21.5 million during the year while continuing to invest in long-term organic growth with the Fora platform. Capital deployed against acquisitions was limited to approximately CAD 4 million as we continue to be patient, given the disconnect between public and private valuations, a higher interest rate environment, and broader macro uncertainty.
We have over CAD 50 million of dry powder through our credit facility and cash on hand, and are prepared to act on opportunities that are clearly accretive for our shareholders. Finally, in the year, we made some big changes to our product development team. Paul Lee joined us as part of the Threadloom acquisition at the end of 2021 and was appointed Chief Product Officer in March of last year. Prior to Threadloom, he was a senior product manager at Google Shopping. Paul's completely changed the way product development is done at VerticalScope, with a heavy emphasis on experimentation and rigorous data analysis to find product-market fit for our new initiatives. We have high hopes for what Paul and our engineering, product, and design teams will achieve moving forward.
As we enter 2023, our approach to the business is laser-focused. Improve operating margins, grow organic revenue, and launch our Fora mobile app. On margins, as I discussed on the previous slide, we've made significant changes to our team to focus our investments and reduce cost. Our restructuring in February resulted in a 20% reduction to our overall team size. We're also benefiting from the integration of the acquisitions we made in 2021, which have allowed us to further rationalize operating expenses on items like SaaS and ad tech. These changes position us to deliver much better margins as the year progresses. On monetization, our teams have been busy improving ad experiences, including the introduction of video advertising across Fora. Video is one of the fastest-growing areas of digital advertising, and it attracts premium CPMs.
Our common tech platform has allowed us to rapidly scale our video offering during the month of May and will be a key driver of programmatic and direct revenue growth moving forward. Finally, we're really excited for the release of the Fora mobile app. We took our time with development to ensure our retention rates during testing on a single community were best in class. Now the testing is complete, the app will be rolled out across all four communities in the coming weeks. The beauty of the app is that we can deliver a common experience and upgraded UX for people to find and participate in their favorite communities from the convenience of a single mobile app. It will help with retention and engagement, but it will also help our users discover new communities that may be relevant for them.
With that, I'll pass it over to Vince, our CFO, to recap our financial performance.
Thanks, Chris, and thank you to everyone who has joined the call today. To start, I would like to recap some of the key accomplishments in 2022 that have had a positive impact on our financial position and long-term growth strategy. Our 2021 acquisitions, namely Hometalk and The Streamable, were successfully integrated into the VerticalScope family and made a meaningful contribution to our operations and financial results. The talent onboarded from our acquisition of Threadloom increased the caliber of our engineering, product, and design teams and have helped accelerate our product-led growth strategy and the vision that will power the four communities, beginning with the mobile app that is set to launch in the coming weeks. In addition, we continue to strengthen our financial position and drive long-term value for shareholders by using our strong free cash flow to pay down debt and reinvest in our platform.
Revenue had a record-breaking year in 2022, increasing 22% year-over-year to CAD 80.5 million, with 68% of revenue coming from digital advertising and 32% coming from e-commerce. Digital advertising recorded seven consecutive quarters of double-digit growth leading into fourth quarter and grew 25% in the year with gains from both direct and programmatic advertising, while e-commerce experienced a return to growth from pandemic highs, up 17% over the prior year, driven by strong performance from The Streamable. As Q4 progressed, the negative macro trends in digital advertising and e-commerce experienced by others in the digital media space began to surface across our platform. For VerticalScope, these included negative traffic impacts as a result of search algorithm updates, a pullback in advertising demand as a result of macroeconomic conditions, and a reduction in streaming commissions as partners turned their focus to profitability rather than subscriber acquisition across respective platforms.
These headwinds accelerated into Q1 of 2023, creating a challenging operating environment and resulting in a 36% decline in revenue in the quarter, which was driven by a 25% decline in digital advertising and a 56% decline in e-commerce. Our team reacted quickly to these difficult conditions, launching multiple monetization initiatives across our platform. The ability to quickly scale these initiatives across all of our communities also demonstrates the power of our ongoing investment in the Fora platform. Early results from these initiatives are encouraging, and we are confident that they will drive sequential improving results as the year progresses. Now turning to our profitability and free cash flow generation. Adjusted EBITDA grew 6% to CAD 30.9 million, despite mounting revenue pressures to end the year.
Adjusted EBITDA margins decreased to 38% from 44% in the prior year, driven by a weaker revenue performance in Q4 compared to a record-breaking quarter in the prior year, wage inflation, and the full year impact of employees onboarded from the 2021 acquisitions. With our average head count for the year growing by 13%. To address the top-line pressures that continued into 2023, we took immediate action to reduce our operating expenses and protect our profitability. This included the organizational changes announced on February 1st that resulted in a 20% reduction in head count with a focus on areas that were hardest hit by current market conditions. These changes are also expected to generate approximately CAD 6 million annualized savings, while still allowing us to focus on core areas of investment.
Our discipline and quick response generated improving margins as the quarter progressed, and we expect this trend to continue into subsequent quarters, stemming from revenue growth and a cost structure that is better aligned with current macro conditions. Our commitment to operational efficiency has enabled us to consistently generate strong free cash flow, even during challenging economic conditions. In 2022, we generated over CAD 21 million in free cash flow, translating to a 70% conversion when compared to Adjusted EBITDA. Notably, despite revenue and margin pressures in Q1, we were still able to generate CAD 2.3 million in free cash flow, translating to a conversion of 80% in the period. Our key use of cash continues to be the repayment of debt as we focus on strengthening our balance sheet, positioning ourselves well for when macroeconomic conditions improve.
Since January 2022, we have repaid CAD 30 million in debt, CAD 8.5 million of which was repaid this year. In Q1 of 2023, we had a net debt position of CAD 60 million and a net leverage ratio of 1.93 times as defined by our credit agreement. In closing, we are encouraged by our improving consolidated results thanks to our optimization efforts and the roll-out of core initiatives. As a team, our goal is to continue to execute on our long-term growth strategy and deliver value for both our employees and shareholders. Now I will turn it back to Rob for closing remarks. Rob?
Thanks, Vince, and thank you to all of our shareholders for your continued support. We look forward to bringing you improving results through the rest of this year. We will now enter our question period. We will now pause for a moment for any questions to be submitted.
I confirm that we have not received any questions.
Thanks, Diane. On behalf of the board and management of the company, I would like to thank everyone for attending today.
Thank you for attending today's meeting. You may now disconnect