AGM 2022

Jun 2, 2022

Ladies and gentlemen, welcome to the annual general and special meeting of the shareholders of VerticalScope Holdings Inc. Please note that the meeting is being recorded. I would like to introduce Paul Rivett, Chair of the Board of Directors, who will preside as chair for this meeting. Paul, please go ahead. Thank you, Ryan. Good afternoon, and welcome to the 2022 annual general and special meeting of the shareholders of VerticalScope Holdings Inc. As Ryan said, my name is Paul Rivett. I am the Chair of the Board of Directors 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. In addition to myself, we have Rob Laidlaw, Wayne Bigby, Cory Janssen, Malgosia Green, Michael Washinushi, and Marina Glogovac. In addition to the CEO, Rob Laidlaw, the following members of management are present for today's meeting: Chris Goodridge, the President and Chief Operating Officer, Vince Bellissimo, the Chief Financial Officer, and Diane Yu, the Chief Legal Officer and Corporate Secretary. As we continue to be impacted by COVID, to mitigate risks to the health and safety of our communities, employees, and stakeholders, 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 if we were able to come together in person. We 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. 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 questions on the matter of business. We will also have a general question period following the conclusion of the formal business and the business update to be conducted at the meeting. Voting at today's meeting will be conducted by online ballot for all matters. Registered holders of subordinate voting shares and multiple voting shares, 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 the polls are closed. Instructions on how to vote are on your screen. Please remember that if you are already voted by proxy or 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 three matters of business to be conducted at this meeting. Being the election of directors, the reappointment and remuneration of the company's auditor for the coming year, and the adoption of Bylaw No. 4. 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 10 votes per share and each subordinate voting share representing one vote per share, be voted in favor in order for the resolution to pass. This 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 2nd, 2022. Copies of the 2021 audited 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 under the company's profile on SEDAR. Accordingly, I will dispense with the reading of the notice of 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, 2021, and the auditor's report thereon, which are available under the company's profile, as I said, on SEDAR. 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 on this matter. Thank you, Diane. I declare that the company's audited consolidated financial statements for the year ended December 31, 2021, and the auditor's report thereon, have been received. The next item of business at this meeting is the election of the directors of the company. The number of directors to be elected at this meeting is seven. The management information circular contains the names and backgrounds of the seven 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, Paul Rivett, Cory Janssen, Malgosia Green, Michael Washinushi, Marina Glogovac, 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. Thank you, Diane. As the company did not previously receive timely notice of any further nominations of persons for elections as director of the company, as required by the advance notice provisions of the company's Bylaw No. 3, I declare the nominations are closed. In order that a vote may be held on the matter, I request a motion that the seven persons nominated as directors of the company be so elected. I so move. I second the motion. Thank you, Diane. Thank you, Chris. Before I call a vote for 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 on this motion. Thank you, Diane. Registered shareholders and duly appointed proxy holders who have signed in using 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 that a motion that KPMG LLP be reappointed as the auditor of the company until the close of the next annual meeting of 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. Thank you, Diane. Thank you, Chris. 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've not received any questions on this motion. Thank you, Diane. 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 adoption of Bylaw No. 4 to codify and incorporate, by reference, the investor rights agreement between the company and certain shareholders as a bylaw of the company. The full text of Bylaw No. 4 and the investor rights agreement can be found at Appendix B of the management information circular and under the company's profile on SEDAR. In order that a vote may be held on the matter, I request a motion approving the adoption of Bylaw No. 4. I so move. I second the motion. Thank you, Diane. Thank you once again, Chris. 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 on this motion. Thank you, Diane. Registered shareholders or their duly appointed proxy holders can now vote by online ballot. All right. Thank you. We have now dealt with all items of business, and I declare the polls are closed for voting. I am 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, KPMG, reappointed, and the board of directors authorized to fix the auditors' remuneration and Bylaw No. 4 approved. A press release will be issued forthwith following this meeting. This concludes the formal business brought before the meeting, and as there is no questions, I will declare the meeting to be terminated and now turn the call over to Rob Laidlaw, our CEO and founder, and his management team to review the business of the company in 2021. Rob? Thanks, Paul, and thank you everyone for joining us today. I'm Rob Laidlaw, Founder and CEO of VerticalScope. 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 first of many AGMs 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 built the leading digital platform for these 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 beekeeping to luxury watches to paddle boarding, fishing, and remote-controlled cars. When you pull all 1,200-plus communities that we own together, they have massive scale. Over 113 million monthly active users in Q1. These communities are happier than ever as they live on our Fora software platform that we purpose-built over the past three years. Our users like to register, join the community, become members. There are over 55 million of them, and once they become a member, they can post and ask questions and really share their own knowledge. That generates an incredible amount of monetizable content for us. Lastly, we have a proven track record. Over 200 acquisitions prior to our IPO, and since then, we've completed another 30 acquisitions and deployed over CAD 110 million of our IPO proceeds. We're gonna keep doing more of them as they're incredibly accretive. 2021 was an incredible year for VerticalScope as we completed our CAD 140 million oversubscribed initial public offering in June of last year, and we followed up on that quickly by completing our $125 million USD credit facility. Why did we do this? Well, we saw the opportunity to be aggressive on M&A, and since then, we've deployed over CAD 110 million of capital and are very excited about the new communities we've been able to buy and put onto our platform. In fact, we just set a new record in Q1, 113 million monthly active users. This is really made possible by owning our Fora software platform, where we are able to grow these types of communities, and it makes our business very easy to scale. Over the last 12 months, we've generated nearly CAD 70 million in revenue, a mix of both advertising and commerce revenues, while continuing to deliver 40%+ Adjusted EBITDA margins and 79% free cash flow conversion. Underlying this incredible financial model, we have a disciplined and talented team, now over 300 people strong, delivering results for our users, our customers, our communities, and our shareholders. We are aggressively investing in the long-term growth of our business through three key pillars of investment on our Fora platform. The first is our commerce experiences. When users visit our communities, they're coming to talk about products. It doesn't matter whether it's a Rolex or Patek watch, a Range Rover, or a fishing rod. We want to get the products that matter in front of them more effectively. We recently launched our peer-to-peer marketplaces, where community members can buy and sell enthusiast products on over 900 of our sites, and the response has been incredible. Now we are also testing our product recommendations engine with the help of one of our Q4 acquisitions, Threadloom. We are helping users find the products they want, the reviews that matter, and the best merchants, all without leaving our community. Second, we are investing in the Fora mobile app. We've launched our closed alpha to over 100 users and are gathering feedback to continue developing the app and rolling it out to all 1,200-plus communities. The beauty of the app is that we can deliver a common experience, an upgraded UX, for people to find and participate in their favorite Fora communities from the convenience of a single mobile app. At first, we will increase engagement in the communities they already love, and then we will expand it to increase the number of communities our users participate in. Truck fans will join fishing and barbecue communities, mountain bikers will join camping and paddleboarding communities, and Mercedes owners will join WatchUSeek, our luxury watch community. Third, we are in the early stages of experimenting with user-generated communities. Our 50 million-plus members already love Fora and the communities they belong to. What if they could create their own community? What if they have a topic of interest that isn't already covered by our community list? We think that users' interests go beyond just that one passion, and we think we can grow our list of communities rapidly by opening up community creation to our loyal members. Now with the investments we're making into the Fora platform, we have this powerful competitive advantage for bringing on board new communities and growing them through our product-led strategy. Let's turn it over to Chris for an update on M&A. Thanks, Rob. At the time of our IPO in June, we indicated that our near-term pipeline was made up of over 20 targets that we could acquire at very attractive EBITDA multiples that we expected to complete within one year of the IPO. Since the IPO, we've signed 30 deals with over $110 million in capital deployed, and our strong balance sheet and free cash flow give us the financial capacity to continue to execute our M&A playbook. The highlight of our M&A activities over the past year were the three acquisitions we completed in November, in Hometalk, The Streamable, and Threadloom. Hometalk adds a very large community of DIYers to VerticalScope and great capabilities with newsletter deployment and video. The Streamable is a rapidly growing commerce property that helps users discover where to stream the video content they want in an increasingly fragmented and confusing OTT video market. These two acquisitions are on pace to contribute between CAD 10 million and CAD 14 million of adjusted EBITDA in 2022, in line with our original projections. With Threadloom, we've rapidly accelerated product development on Fora, as Rob discussed previously. We were so pleased with the contributions made by the Threadloom team in such a short period of time that we appointed Threadloom founder and CEO, Paul Lee, as VerticalScope's Chief Product Officer in March. Paul brings his deep product leadership experience from his time at Threadloom and Google to VerticalScope. 3 deals added 27 more acquisitions of niche communities that continue to define the product-focused subject matter covered by VerticalScope, and allow us to leverage the improved UX and monetization that comes from our Fora platform. Turning to our current pipeline, with current market conditions, we're focused on being patient but opportunistic. We believe high-quality assets will continue to become available at increasingly attractive valuations in the coming quarters. We'll move very quickly for the right opportunities that will add the most value for our shareholders. We offer sellers a speedy transaction with high certainty of closing, thanks to our strong balance sheet, which is very valuable in what is becoming increasingly a buyer's market. The capital we deploy in M&A will increase in Q2 compared to Q1, but we expect our overall acquisition activity to be more heavily weighted to the second half of the year and expect to deploy between CAD 50 million and CAD 80 million by the time 2022 is complete. This year will present some great opportunities for VerticalScope to add more high-quality assets to our portfolio. With that, I'll pass it over to Vince to recap our financial performance. Thanks, Chris. We continue to see exciting growth trends driven by our investment in the Fora platform and our accretive M&A strategy that has deployed over $110 million in capital across 30 acquisitions since our IPO in June of last year. 2020 is off to a good start, with record-breaking revenue results for Q1 and the trailing 12-month period driven by audience growth and growth in digital advertising from both organic and acquired sources. Q1 was the highest Q1 on record, finishing up 26% year-over-year and capped off a record-breaking trailing 12-month period, which finished just shy of $70 million. Revenue growth in the quarter was led by digital advertising, which was up 49% year-over-year and reflects the fifth consecutive quarter of double-digit growth. Growth in digital advertising was driven by 76% growth for programmatic channels, led by contributions from 2021 acquisitions and overperforming ad units recognized by communities running on the Fora software platform due to things like faster page speeds, increased viewability, and a modern user experience. Our user-first approach has also benefited our direct advertisers, not only through better performing ads, but also with increased engagement and a common ad layout throughout the platform that is helping drive sustainable growth results. Direct advertising was up 11% in the quarter, which was predominantly organic and led by new and incremental spend from direct advertisers. Turning to e-commerce, the channel was up against a tough comparable, lapping a COVID-induced surge in Q1 of last year, especially in categories like home fitness, where demand was brought forward as a result of the pandemic. In Q1, e-commerce was down 3% compared to last year. Given the tough comparable, we see this as being a very good result. The channel experienced improving trends as the quarter progressed, with March finishing up 38% year-over-year and an expected return to growth for the channel in coming quarters and the year. It's very early days in our e-commerce playbook. Rob touched on our core commerce initiatives earlier on, and we're excited about the organic growth opportunities that these will present. Switching to Adjusted EBITDA and free cash flow. The power of our business model and our disciplined approach to managing our profitability really comes through in our results. We have consistently delivered Adjusted EBITDA margins of over 40% and a free cash flow conversion of over 80%, even while taking a step back on monetization and pausing M&A to deliver a user-first experience on our platform. The Fora platform will also help generate additional operating leverage with the unified code base, introducing opportunities for further automation and efficiencies in operating new communities that are migrated to the platform. Seasonally, Q1 is our lowest performing quarter of the year as advertisers recharge budgets and consumers dial back spending from Q4 highs. In line with e-commerce, we saw improving trends as the quarter progressed, with a return to 44% margins in March driven by growth in e-commerce. Overall, the free cash flow we generate will continue to be reinvested into the business to drive growth and long-term value for our shareholders through investments in our platform and the funding of M&A. Now I will turn it back to Rob for some closing remarks. Rob? Thanks, Vince. As you can see, it's been a great first year as a public company for VerticalScope, and we are fully aligned with our shareholders to deliver on our long-term growth goals. We will now pass it back to Paul for the question period. Thank you, Rob. I am confirming that we have not received any questions. All right. Thanks, Diane. On behalf of both the board of directors and management of the company, thank you everyone for joining us this afternoon. Have a safe and fun summer. All right. Goodbye. Ladies and gentlemen, thank you for attending today's meeting. You may now disconnect.