Good morning, welcome to the EMERGE Commerce fourth quarter 2022 results conference call. At this time, all lines are in listening mode. Following the presentation, we will conduct a question and answer session for analysts. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, April 27th, 2023. Your hosts today are Ghassan Halazon, Founder and Chief Executive Officer, and Jonathan Leong, Chief Financial Officer. Before we begin, I am required to provide the following statement respecting forward-looking information, which is made on behalf of EMERGE and all of its representatives on this call. Certain statements made on this call will contain forward-looking information. These forward-looking statements generally can be identified by the use of the words such as intend, believe, could, expect, estimate, forecast, may, and other words of similar meaning.
This forward-looking information is based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in these circumstances. Actual results could differ materially from a conclusion, forecast, expectation, belief, or projection in the forward-looking information. Certain material factors and assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. We caution investors not to rely on the forward-looking information.
Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information and material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are contained in EMERGE filings with Canadian Provincial Securities Regulators. During today's call, all figures in Canadian dollars, unless otherwise stated. With that, I'd like to call over to Mr. Ghassan Halazon, Founder and CEO. Please go ahead, sir.
Thank you very much. Good morning, everyone. We appreciate you taking the time to participate in our fourth quarter and full year 2022 results conference call. Joining me today is Jonathan Leong, our CFO. This morning, I'll walk you through EMERGE's results and share some insights on our business as well as our key priorities for the balance of 2023. Following my remarks, Jonathan will provide further details on our financial results. We will conclude by opening up the call to analysts for questions. Despite the persisting macro climate challenges in the e-commerce space and the technology sector at large, 2022 was a year of growth and progress for EMERGE Commerce.
For the full year 2022, gross merchandise sales or GMS for short, which represents the total dollar value of purchases on our platform, grew to a record CAD 117.8 million compared to CAD 58.3 million in 2021, an increase of 102%. Revenue increased to a record CAD 58.2 million in 2022 compared to CAD 34.8 million in 2021, an increase of 67%. Adjusted EBITDA tripled to a record CAD 3.6 million in 2022 compared to CAD 1.2 million in 2021. Cash flow from operations increased to CAD 1.1 million in 2022 compared to negative CAD 3.4 million in 2021.
As previously stated, one of our main priorities in 2022, and even more so in 2023, is to drive stronger cash flow from operations. We are particularly pleased with this positive CAD 4.5 million swing in cash flow from operations in 2022 versus 2021. Despite this, we continue to believe that our EBITDA to cash flow conversion remains subpar, primarily due to the interest expense related with our debt. We will discuss the steps we are taking to improve EBITDA to cash flow conversion a little later on. Turning to our results from Q4 2022, typically our strongest quarter of the year for our discount-centric and retail brands, driven by the holiday shopping season. Q4 GMS increased 25% year-over-year to a record CAD 32.8 million.
Q4 revenue grew to CAD 15.2 million from CAD 14.9 million in the prior year. Q4 Adjusted EBITDA was CAD 0.7 million compared to CAD 1.4 million in 2022. We would like to highlight that Adjusted EBITDA in Q4 does not account for the majority of the recently announced cost saving measures and synergies that were executed during and after the quarter. Irrespective, this marks our 5th consecutive quarter of positive Adjusted EBITDA and 11th out of the 12 quarters. Cash flow from operations in Q4 increased to a quarterly record of CAD 3 million in 2022 compared to CAD 2 million in 2021. A terrific result. I will now provide a brief update on some of our progress subsequent to quarter end. First, an update on BattlBox. On March 31, 2023, EMERGE announced the pending sale of BattlBox, expected to close shortly.
Pursuant to the sale, EMERGE will receive cash consideration of approximately $6 million US on closing of the transaction, subject to certain distribution and debt adjustments. The buyer will assume an aggregate of approximately $1.2 million US in outstanding liabilities. Upon closing, EMERGE will no longer have any deferred payment obligations owed to former BattlBox Group shareholders. While BattlBox remains a terrific brand, we factored in the increasingly complex supply chain dynamics in today's volatile macro climate, necessitating large investments in inventory. Our decision here signifies that we plan to generally favor asset-light businesses with strong EBITDA cash flow conversion for this next phase, while doubling down on what we characterize as recession-resilient verticals. The go-forward EMERGE portfolio, particularly our Canadian-based businesses, also has the inherent geographical advantage of shared resources, facilities, and audiences.
EMERGE originally acquired BattlBox Group in October 2021, which included both the BattlBox and Carnivore Club brands. Carnivore Club is not included in this transaction and will remain an EMERGE brand, working closely with truLOCAL under the meat and grocery vertical. Carnivore Club has developed a reputable brand in the artisanal meat subscription space that we view as adjacent to truLOCAL's premium meat subscription service. Historically, Carnivore Club was managed under BattlBox leadership. Moving forward, it'll be housed under truLOCAL, where we anticipate more impactful synergies. Following the transaction, EMERGE retains seven brands across four main verticals: pets, meat and grocery, golf, and experiences in Canada and in the U.S., namely WholesalePet, truLOCAL, Carnivore Club, UnderPar, JustGolfStuff, WagJag, and BeRightBack.
EMERGE's go forward e-commerce portfolio is expected to approach CAD 100 million in gross merchandise sales annually and remain profitable on an Adjusted EBITDA basis. Second, an update on the debt front. In March and April 2023, the company entered an amendment of its credit facility, with its existing lender, pursuant to which the company has agreed to repay CAD 7 million of its senior credit facility from the proceeds of the sale of BattlBox, with the lender agreeing to relax certain financial covenants to offer the company additional flexibility. Interest expense savings from debt repayment are expected to be CAD 1 million annually, slightly exceeding cash flow from BattlBox Group in 2022. EMERGE continues to explore various options for debt refinancing and/or further debt paydown in 2023, with the goal of doing so sooner rather than later.
The company remains in good standing with its existing lender, which it has worked with since November 2019. EMERGE has proven it can be Adjusted EBITDA positive consistently, with 11 out of the last 12 quarters being positive. Despite this, the rising interest rate environment has us reconsidering the level of debt we are comfortable operating with. As such, we are exploring various options to continue to reduce our senior debt, with the ultimate goal of improving EBITDA to cash flow conversion. Third, an update on our cost optimization and synergies measures. Further to the anticipated savings previously announced in late 2022, we announced additional savings and cost reductions of CAD 1 million for a combined annualized total of CAD 2 million in anticipated savings implemented under this initiative.
As part of overall efforts to drive additional cash flow, the initiative includes reducing overhead expenses, improving margins, maximizing cross-functional synergies, and eliminating unprofitable revenue streams. A large portion of these cost reductions and synergies occurred in late 2022 and in Q1 2023. As such, a meaningful number of these savings were not captured in Q4. Our top priorities. Finally, the company's top priorities in the near term remain to continue to pay down debt and reduce interest expense. 2. drive organic growth. 3. extract further operational efficiencies. And 4. enhance EBITDA to cash flow conversion. To wrap up, I would like to sincerely thank and congratulate our team, board, and trusted partners across North America on another strong quarter and a stronger full year, with some key milestones achieved to pave the way for our next chapter together.
I will now turn the call over to Jonathan for a review of our financial results.
Thanks, Ghassan. Good morning, everyone. Our fiscal 2022 results include our first full year with both BattlBox Group and WholesalePet compared to 2021. Our gross merchandise sales or GMS grew 102% to CAD 117.8 million in 2022, while the fourth quarter, it increased 25% to CAD 32.8 million, up from CAD 26.2 million in the comparative period last year. As a reminder, GMS is a non-GAAP measure and represents the total dollar value of customer purchases of goods and services through our brands, excluding applicable taxes and net of discounts and refunds. Revenue for the year grew 67% to CAD 58.2 million in 2022. For the fourth quarter, our revenue increased to CAD 15.2 million, up 2% from CAD 14.9 million in Q4, 2021.
Gross profit for the year increased to CAD 23.8 million versus CAD 15.1 million in the prior year. For the quarter, gross profit decreased slightly to CAD 6.1 million compared to CAD 6.4 million in the comparative period. Similar to the broader economy, we have noticed some inflationary pressures which we continue to monitor and continue to review and implement various measures aimed at increasing this gross margin. The net loss for the year was CAD 17.4 million and for the fourth quarter was CAD 15.5 million. This is compared to a net loss of CAD 6.6 million and CAD 1.2 million for the same periods in the prior year. The increase in net loss is mainly attributable to a goodwill impairment charge of CAD 14.2 million.
The goodwill impairment charge is a non-cash charge recorded after updating assumptions to reflect current macroeconomic conditions. Excluding the impairment charge, the net loss for the fourth quarter would have been CAD 1.3 million. Overall, for the year, Adjusted EBITDA increased significantly to CAD 3.6 million from CAD 1.2 million in 2021. The company reported Adjusted EBITDA for the fourth quarter of CAD 0.7 million compared to CAD 1.4 million in Q4 2021. This decrease for the quarter is mainly attributable to lower performance of BattlBox compared to the prior year. As Ghassan mentioned, this marks the fifth straight quarter of positive Adjusted EBITDA, and we continue to focus on improving operating efficiency and ultimately cash flow.
With respect to BattlBox and its sales subsequent to year-end, please note that it will be reflected as discontinued operations in our financial statements beginning in Q1 2023. With that, I will now pass it back to Ghassan for some closing comments.
Thanks, Jonathan. In closing, 2022 continued to be a challenging year for EMERGE as it has proven to be for most businesses. Notwithstanding, we are pleased with our brand portfolio's resilience and ability to generate robust revenue growth, positive Adjusted EBITDA, and enhanced cash flow from operations demonstrated by our results. EMERGE is taking key steps to strengthen the company's balance sheet. We believe both the cost reductions and synergies implemented recently as well as the sale of BattlBox are two big steps in the right direction. With a diversified portfolio of quality brands in largely recession resilient verticals, we plan to operate with rigor through the balance of 2023 and beyond. We believe a disciplined capital allocation approach and an inherently bottom line focused playbook will come handy during this macro climate. This concludes our prepared remarks. Operator, please open the line for questions.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session for analysts. Should you have a question, please press star followed by the one on your touch-tone phone. You'll hear three tone prime acknowledging your request, and your question will be pulled in the order they're received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Ladies and gentlemen, as a reminder, we are currently taking questions. If you have any questions, please press star one. There are no questions at this time, Mr. Halazon. Apologies about that. Your first question comes from Andy Nguyen with Raymond James. Please go ahead.
Hi, Ghassan. Good morning.
Good morning, Andy.
Hey. Going forward, given the company portfolios you have under the corporate holding, what would be your main sort of the star player there for 2023? What would you be focusing on in terms of driving organic growth in your portfolio?
Yeah, thanks for the question, Andy. As you know, and as we've spoken about, quite often, if I were to sort of segment our businesses right now and sort of give you a sense of how we're looking at them and their respective opportunities. You know, I have to start with Wholesale Pet. As you know, it is our largest business by gross sales. At this point, almost north of half of our overall gross sales comes from the B2B pet marketplace, Wholesale Pet. More than its top line, it's obviously an extremely profitable and consistent business. Of course, not only is it profitable, but it has incredible EBITDA to cash flow conversion.
I would start there and say that pet business and of course the pet sector at large are extremely lucrative and appear to be generally recession resilient, as is covered in the media quite a bit these days. We're extremely bullish and positive on that business, which remains quite ahead of its pre-pandemic days, slightly below its peak pandemic. Of course, most of e-commerce has, you know, pretty much all of e-commerce as far as I can see, has come down somewhat from the peak. WholesalePet remains a very robust, profitable cash flowing business. Next up is sort of the meat subscription and grocery business, which now includes truLOCAL and Carnivore Club. Of course, truLOCAL is the larger brand that we've covered extensively.
truLOCAL, the main thing to note there is that this business continues to be, again, while below its peak pandemic, it continues to be in and around the 2x pre-pandemic phase. I think the big thing for 2023 right now is the fact that we've really zoned in on gross margins and on overhead reductions that have actually really started to show in truLOCAL year-over-year here in 2023 versus 2022. We're quite bullish that truLOCAL can turn, you know, a meaningful profit in 2023. We believe that revenue has the potential to start growing nicely again, you know, this year and in the coming years.
Of course, adding Carnivore Club to the mix with truLOCAL, that's now a segment that, you know, has further synergies and improvements. I'll say the sort of golf and experiences as we normally talk about, the main thing to bring up there is, you know, JustGolfStuff continues to be an explosive brand for us. It's still smaller, but it has a lot of potential, and it's growing. UnderPar continues to be challenged, although we are seeing certain signs as we indicated. You know, for example, Canada was up last year over the prior year. But it is still slower than our liking, so we don't think that business has yet to exhibit the comeback that we're looking for. That's sort of the golf side.
Then the experiences side, even if it's small, I'd like to point out, much like JustGolfStuff, we're seeing both that discount business, WagJag, we're seeing some really strong results that are probably due to the model being lending itself well to a recessionary environment. As you know, discounting and the voucher model online was created last recession in 2008 and 2009. We are seeing a nice early comeback from WagJag. Same with this explosive growth that we're seeing from JustGolfStuff. You know, that maybe gives you a bit of an overall picture of the go-forward portfolio.
Perfect. Thank you. My just follow-up question. How is Carnivore is gonna be brought into enhance the existing offering that truLOCAL has?
Yes.
Just what area are you looking for, like, in terms of synergy, between the two?
Yes. It's an interesting one actually. I know it's a smaller brand. We don't talk much about Carnivore separately. In fact, just to give you a sense, Carnivore did see some explosive growth as well in 2022 versus 2021, and mainly due to a big partnership in the U.S. with a major shopping channel or the largest shopping channel there. So we did see, like, really nice gains, but obviously Carnivore is also very active in Canada. The main thing I'd like to point out is, number one, on the sales side, truLOCAL has had early successes with charcuterie boxes and artisanal meats as add-on offerings on truLOCAL. We do have some early results there and a bit of cross-sell that we started off with.
On the sort of gross profit side, you know, sharing under the truLOCAL warehouse, which is currently, you know, sort of, in play, we're moving Carnivore down to the truLOCAL warehouse. We do expect some shipping and logistics savings. You know, obviously adding flyers in both boxes and reducing the customer acquisition cost potentially is something we're going to be testing out. And then naturally from a resourcing perspective, you know, Carnivore now gets the more support, which is the support of the truLOCAL team, a much bigger team than Carnivore's tight team here. There's some good synergy and some good upside.
I think our main focus with Carnivore as it has been lately with truLOCAL and all our other brands, is to make sure, more important than just the revenue side, is making sure that we strengthen EBITDA and improve cash flow as we've started to show with other businesses and as we hope you'll see in 2023.
Perfect. Thank you. I will press that delay.
Thank you.
Thank you, Andy.
There are no further questions at this time. Mr. Halazon, back over to you.
Thank you very much for joining us today and for your continued interest in EMERGE Commerce. We look forward to reporting on our progress throughout the balance of the year and beyond. Thank you, everyone.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.