Good morning and welcome to the EMERGE Commerce Q3 2025 Results Conference Call. At this time, all lines are on listen-only 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 November 26, 2025. Your hosts today are Ghassan Halazon, Founder and Chief Executive Officer, and Dasha Enenko, 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 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 the 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's filings with the Canadian provincial securities regulators. During today's call, all figures are in CAD unless otherwise stated. With that, I'd like to turn the call over to Mr. Ghassan Halazon, Founder and CEO.
Thank you very much. Good morning, everyone. We appreciate you taking the time to participate in our Q3 2025 Conference Call. Joining me today is Dasha Enenko, our CFO. This morning, I will walk through the exceptional progress we continue to make at EMERGE and share some insights across our key businesses, our more focused acquisition strategy, as well as our Q4 and full-year outlook among other updates. Following my remarks, Dasha will provide additional details on our financial results, after which I will conclude the call with some closing remarks and open up the line for analyst questions. Let's get going. Q3 was another statement quarter for EMERGE.
Revenue for the quarter grew by 58% to CAD 7 million versus CAD 4.4 million in Q3 2024, driven by the undeniable momentum we continue to see at Tee 2 Green in its second quarter under EMERGE ownership, in addition to the continued positive growth we achieved at truLOCAL, our flagship grocery brand. Q3 marks our sixth consecutive quarter of positive organic revenue growth. Worth noting that while Q3 is usually a strong quarter historically for Tee 2 Green during golf season, it tends to be a more seasonal quarter for some of our other brands, most notably truLOCAL, given it is not uncommon for some customers to pause memberships while on their summer vacations. Summer seasonality is a standard occurrence for subscription or membership e-commerce models. Notwithstanding, both truLOCAL and the golf vertical exhibited positive organic growth year over year, accompanied by much-improved profitability, which is another key priority for us.
T2G, in particular, drove high double-digit revenue growth in its second quarter under EMERGE. Put simply, T2G is really exceeding all our expectations so far. Q3 adjusted EBITDA for EMERGE improved to $261,000, a positive swing of $514,000 year over year, and approximately 4.4% above the high end of the $200,000-$250,000 EBITDA range we provided in our preliminary Q3 results announced last month. Year to date, through the first three quarters, EMERGE has delivered adjusted EBITDA of $1.25 million, compared to an adjusted EBITDA loss of $485,000 for the comparative period in 2024, a substantial positive swing of $1.7 million year over year. This brings me to another point. Whereas 2024 was our first year of return to positive organic revenue growth, we can now say with confidence that 2025 will be our first year of return to positive adjusted EBITDA at EMERGE.
Beyond the P&L, our cash position grew to CAD 4.1 million at September 30, 2025, versus CAD 1.6 million at September 30, 2024, an increase of CAD 2.5 million over the last year, highlighting exceptional cash flow generation, another major priority for us. Notably, we delivered positive cash flow from operations of CAD 919,000 in Q3 versus operating cash outflow of CAD 414,000 in Q3 2024. Year to date, EMERGE has generated CAD 2.5 million in cash flow from operations, compared to cash outflow of negative CAD 411,000 in the first nine months of 2024. The cash buildup at EMERGE is a function of our overall sales and profit growth, in addition to the favorable structuring of the Tee 2 Green transaction, which included an eight-year inventory payment plan, further bolstering cash flow. It is important to state clearly that the cash flow generation we are seeing exceeds management's expectations, and that is, of course, always a good thing.
Moving on, allow me to provide a brief update on some recent warrant expiries and exercises. A few days ago, on November 24, 2025, approximately 12.2 million debenture warrants, with an exercise price of CAD 0.25, expired unexercised and were delisted. This follows our announcement in July 2025 that approximately 12.3 million warrants expired unexercised. Combined, approximately 24.5 million warrants have expired unexercised between July and November 2025. Any remaining warrants are set to expire between now and year-end. At this time, the company expects to enter 2026 with zero warrants outstanding. Of course, practically speaking, this translates to a dramatically more streamlined capital structure and minimized warrant overhang for shareholders. In addition, I should note approximately 2.7 million out-of-the-money warrants were exercised at CAD 0.10 by a group of supportive long-term investors, raising approximately CAD 270,000 in cash proceeds back in July of 2025.
As you may have seen, I also opted to exercise my $91,000 out-of-the-money options at $0.11 in alignment, although expiry of those securities is not until October 2027. Now, for a brief update on the debt side. EMERGE maintains a long-standing relationship with our existing lender, dating back to November 2019, and we remain in good standing. Worth noting, our senior credit facility has been reduced from a peak of $25 million to $5.85 million as of today. A dizzying debt reduction that took a lot out of us, by all means, but we got it done, and that's all that matters. We believe that our materially improved profitability and balance sheet, as well as our reduced net debt levels in a more favorable interest rate cycle, could lead to the possibility of securing cheaper, longer-term debt refinancing options, further driving savings and improving cash flow.
We are currently in discussions with a number of major Canadian banks and other lenders, exploring various possibilities. To be abundantly clear, we are not seeking to increase our debt. After all, we spent the last few years eliminating close to 80% of our net debt position. Our goal is to actually reduce our cost of capital, in other words, reduce interest expense, and grow cash flow that we can pour back into our business to drive organic growth and into future accretive acquisitions similar to T2G.
Speaking of acquisitions, building off our success in acquiring and accelerating T2G, which continued to perform exceptionally in Q3, EMERGE is selectively advancing accretive acquisition opportunities in our grocery and golf verticals, where we have amassed deep expertise, brand awareness, and substantial customer databases, as well as adjacent B2B or e-commerce enablement technologies that can help supercharge the existing portfolio to new heights, both by driving organic growth and contributing consistent cash flows. EMERGE's focus is exclusively on profitable acquisition candidates, with CAD 750,000 to CAD 2 million in adjusted EBITDA, with a long-standing track record of revenue stability and cash flow generation. Similar to T2G, we intend to remain disciplined with acquisition pricing and structure. Ultimately, we also want to ensure that our next acquisition immediately enhances our balance sheet and specifically our net debt-to-EBITDA ratio for purposes of securing cheaper, longer-term debt refinancing, as previously outlined.
Next up, a few words on our Q4 outlook and full-year outlook. For Q4 2025, management expects to achieve another quarter of double-digit revenue growth and positive adjusted EBITDA. The Q4 holiday season is generally a high sales volume period, particularly at truLOCAL, including for B2B/corporate gifting orders, as well as at UnderPar, as golf courses introduce discounted preseason 2026 offers. EMERGE is now on track to achieve its full-year 2025 objectives of strong revenue growth, positive adjusted EBITDA, and positive cash flow. This would be the first time achieving all three milestones simultaneously under our new operating model. I will now turn the call over to Dasha for a review of our financial results.
Thanks, Ghassan. Fiscal Q3 2025 marked our second quarter of reporting with Tee 2 Green, acquired in April 2025. In Q3 2025, our gross merchandise sales, or GMS for short, which is a non-GAAP measure representing the total dollar value of customer purchases of goods and services through our brands, excluding applicable taxes and net of discounts and refunds, grew 27% to CAD 9.3 million, compared to CAD 7.3 million in the same period last year. Following the Tee 2 Green acquisition, sales between Tee 2 Green and Just Golf Stuff were eliminated from reported GMS, with only sales to external customers included. Revenue for the quarter increased by 58% to CAD 7 million, up from CAD 4.43 million in the prior year period, driven by the strong performance of the Tee 2 Green acquisition, as well as positive organic growth at truLOCAL, which is EMERGE's largest business by revenue.
Gross profit for the quarter was CAD 2.4 million, compared to CAD 1.8 million in the comparative period. The reported gross profit includes a non-cash fair value inventory increment of CAD 170,000 recorded as part of the business acquisition accounting. Excluding this non-cash accounting adjustment, gross profit would have been CAD 2.6 million, translating to approximately 37% gross margin, compared to 40% in the prior period. Net income from continuing operations improved to CAD 20,000, compared to net loss of CAD 700,000 in the prior period. Net income was CAD 30,000, compared to net loss of CAD 730,000 in the same quarter last year. The reported net income from continuing operations and net income from the period include a non-cash fair value inventory increment of CAD 170,000 recorded as part of business acquisition accounting. Excluding this non-cash accounting adjustment, net income from continuing operations would have been approximately CAD 190,000.
Adjusted EBITDA was $260,000, an improvement of approximately $500,000 from an adjusted EBITDA loss of $250,000 in the prior year period. These improvements reflect the strong performance of the Tee 2 Green acquisition, positive organic growth across our grocery and golf verticals, reduced SG&A, and the discontinuation of unprofitable business lines. Finally, cash on hand as of September 30, 2025, was CAD 4.1 million, compared to CAD 1.6 million at the end of the same quarter last year. This improved cash balance was supported by CAD 920,000 cash generated from operating activities in Q3, compared to cash outflow of CAD 411,000 in the prior year period. I'll now pass the microphone back to Ghassan for some closing remarks.
Thank you, Dasha. In closing, Q3 underscores the very visible progress underway at EMERGE. We are executing with discipline, delivering consistent growth in top line and bottom line, and quite simply, generating cash at levels the company has never seen before. T2G's results continue to exceed all expectations in its second quarter under EMERGE ownership. truLOCAL is having a banner year as the power of its brand and community are in full display during the support local year. Our balance sheet is materially stronger than it has been in years. Our cash table is more streamlined than ever. These are not isolated results. They reflect a deliberate and durable shift in how we operate.
Looking ahead, our focus is clear: continue to drive sustainable growth in our core verticals, expand profit margins through operational efficiencies, pursue disciplined and accretive acquisitions, and lower our cost of capital to unlock even more cash flow. We are committed to executing with precision this holiday shopping season and concluding what is turning out to be a truly transformative year for the company. Finally, I would like to offer my sincere gratitude to our resilient and determined team, board, shareholders, and trusted partners as we deliver what we consider to be another exceptional quarter. Thank you all for your time today and interest in EMERGE Commerce. We will now open the call for analyst questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by the two. If you are using a speakerphone, please lift the hands up before pressing any keys. One moment, please, for your first question. Your first question comes from Doug Cooper with Beacon Securities. Your line is now open.
Hey, good morning, and congratulations on a great quarter. I understand the seasonality in the business, but can you give me a segment of the revenue by category, golf and grocery?
Yeah, hi, Doug. Good morning. Thanks for the question. Just at a high level, these two verticals right now are split approximately 55-60% revenue on the truLOCAL side and about 40-45% golf. To be clear, that is the revenue picture, not the gross merchandise sale picture, which varies from that. Now, seasonally, the mix of revenue differs. As we mentioned, Q3 would be a period where truLOCAL's revenue is a bit lower than other quarters, given the summer seasonality. Overall, that's the general mix. truLOCAL being the largest revenue, effectively call it about 55% of overall. Tee 2 Green being, by the way, the largest golf business by revenue. We mentioned that last year, when we acquired it, it was about CAD 6.4 million in last year's unaudited numbers.
Obviously, we've seen tremendous double-digit growth this year, so I think investors can extrapolate accordingly. The rest would be UnderPar and Just Golf Stuff.
Okay, so that's for the year, but do you have it actually for the actuals for this quarter?
Right, yeah. Approximately this quarter, Q3, we're looking at about almost half of the revenue is truLOCAL, and the rest is essentially golf. Approximately closer to 50/50 this quarter, given truLOCAL is on the lower side.
Got it. Okay, and then Q4, the outlook, you expect another strong quarter, EBITDA positive. Is it possible to get a bit more qualitative in terms of directionally versus Q3? Up, down, flat? Because I'm assuming maybe truLOCAL picks up a little bit in Q4 and golf drops, I guess, in Q4. Maybe you could just.
Yeah, certainly. It's somewhat nuanced. I'll try to compartmentalize it for you, Doug. Big picture, directionally similar to Q3 and overall, truLOCAL, as we said, gains from not only the holiday gifting, but then you have the added layer of B2B and corporate ordering. That business grows not only against Q3, but against most quarters of the year, with the exception of Q1, which tends to be one of truLOCAL's best quarters because it's sort of the new you, new health start of the year for protein and healthy living, which is what truLOCAL embodies. You tend to get a bigger number out of truLOCAL. On the golf side, it's nuanced because Tee 2 Green doesn't have its kind of golf season roadshows and pop-up stores that are front and center from about March, April to October, really.
We do not have that element, but we do make up for it somewhat with the UnderPar side of the business, as we mentioned, with the pre-sale tickets for 2026. Overall, on a blended rate, somewhere in and around sort of what we see from Q3 is a reasonable assumption. Just to kind of connect the full dots as this picture evolves, Q2 is really the quarter where golf season starts, and Tee 2 Green in particular, as well as the rest of golf, has sort of an exceptionally strong quarter seasonally. The rest is quite somewhat balanced, depending on brand, but overall balanced with what we just saw here.
Okay. Just on the truLOCAL side, the grocery side, given the economic environment, are you seeing any impact on that side of the business, positive or negative?
Yeah, you know what? It's been a tremendous year for truLOCAL. And just to contextualize a bit of history for folks that haven't heard this before, but obviously, truLOCAL had jolted up during the peak pandemic. It was artificial highs, came down from those peaks, way down. Over the last few years, we've sort of doubled down on growing the business again and right-sizing the SG&A. This year, we've been very fortunate at seeing the cost per acquisition for customers come way down for most of this year. There are still some inherent advantages. As a result of that, we've chosen to keep marketing lean and efficient since we're acquiring customers for cheaper and prioritize not only organic growth, but also profitability, where we're seeing double the profitability approximately this year at the truLOCAL level.
That's been a huge contributor to profit growth this year. Just in terms of pressures, I think it's not lost on anyone that COGS, things like the price of beef, chicken, all of this stuff has gone up. We've been very methodical with aligning our pricing strategy. We've increased prices starting pretty much back in spring and into the fall. We've increased prices. What I would say is an attestament really to the truLOCAL brand and ethos is that we really haven't seen any material change to our churn dynamics. They continue to remain very strong. In fact, we've even received some compliments and thank yous from customers despite us increasing prices on them, which is quite rare. Again, a testament to the brand.
Okay. Final one for me. Just on the balance sheet, you indicated you're in conversations with some banks and some refi. When do you think that might come all together? Is that a Q1 thing?
Yeah, we're looking at that more near-term than kind of long-term, I would say. Whether it ends up materializing in Q1 or Q2, hard to say. I will say that we are having those discussions. We are exploring what's available to us. We do believe there are significant savings, as I outlined previously. It also, the other dynamic here is as we juggle and consider other acquisition opportunities, whether that fits in alongside or after or before, these are things we're weighing. One way or the other, Doug, I think what everyone should know is that we are prioritizing strengthening our debt-to-EBITDA, which already has come a long way over the last few years.
Whether it's acquiring accretively first and then refining, or whether it's refining and then acquiring accretively, one way or the other, we're looking to do those things in the near to medium term, not so much the long term. These are immediate things we're working on.
Right. Thanks very much and congrats.
Thank you, Doug.
Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Fred Barnachawy with DeshCap. Your line is now open.
Good morning, all, and congrats on another great quarter. Can you talk about the organic growth and your growth by acquisition? I understand you don't break this out officially, but any insights would help here.
Yeah, thanks, Fred. Appreciate the question. I think if I understood correctly, you're asking about the breakout of organic versus acquisition-driven growth. Yeah, correct. We do not officially break it out, but I can provide some level of context into how we're thinking of this next phase and currently how our results generally look like. I think our goal, as we've reactivated our acquisition program now, is essentially to shoot for low double-digit organic growth, which is kind of where we are now. Again, there's some seasonality and different times of year. Generally, we're looking at organically growing low double-digit, high single digit, and then layering on high double-digit via acquisition, right?
When you're seeing sort of 58% growth, essentially our goal is that organically year over year, apples to apples, we're looking at somewhere in and around the 10% zone, 10-15%, depending again on time of year and whether we're pushing the growth engine stronger when we see lower CPAs, for example. The vast majority of the growth starts coming accretively through an acquisition like Tee 2 Green. I will say that we obviously have the ability to accelerate organic growth, and that is a choice we think through quite a bit these days. The thing to recognize is if we prioritize higher organic growth, which we don't necessarily need right now, given the cash flow generation is in full swing, if we were to decide higher organic growth, it would come at the cost of higher profitability today.
We would sacrifice profit to drive more growth, certainly an option available to us, just not an option that we prioritize right now, right? One day down the line, if you think of it, as we grow our EBITDA and cash flow through additional acquisitions, not all brands are equal. I've made it clear multiple times now that we view a brand like truLOCAL as a very strategic brand with incredible CLTV, the customer acquisition cost. Something like that deserves more marketing, more growth, and can certainly be tilted that way, the direction where truLOCAL can be growing 20%, 30%, even 40%, but it'll sacrifice profit. We would be okay with that if our cash flow position was even bigger, say a few acquisitions down the line. These are the more interesting dilemmas we hopefully will have if we continue to execute.
For now, we're happy with what I mentioned in terms of the organic growth and then supercharging the high double-digit growth that we're seeing through acquisitions.
Great. Thank you. On that Tee 2 Green acquisition, I know it's been done in April, and it seems to be performing exceptionally well. What is a realistic timeframe for your next acquisition, and do you know what vertical it'll be in?
Yeah, similar to what I mentioned to Doug, Fred, essentially these are things we're hands-on. I mean, we kind of put our heads down for a couple of quarters with T2G. It's working better than planned. I was going to say as planned, but really better than planned. Obviously, over the last few quarters, we've been busy screening and exploring and advancing different opportunities at varying levels. I think our new acquisition program/strategy is one of precision. While we have a pretty deep pipeline at this point, we're really zoning in on a couple of specific opportunities, specific formulas as to what the doctor ordered, so to speak.
You saw with the surgical precision that we delivered with Tee 2 Green, we want to achieve something that, as I said, gives us real cash flow, real synergy with the portfolio, and ultimately really do so in a disciplined way. In terms of which vertical, I'll tell you which vertical it won't be. Anything outside of grocery, golf, and any e-commerce enablement technology that could supercharge the overall portfolio. We'll leave it at that. We have a few opportunities within here, so we're not going to comment on which one specifically, but it's really only those areas that we're zoning in on, and we're not going to lose focus of that right now.
I think there's huge TAMs across grocery and golf, and obviously e-commerce enablement and technology that powers and gives us an edge is always something we'd be looking at opportunistically, especially and only if it is cash flow positive on day one.
Thank you.
Thanks very much, Fred.
There are no further questions at this time. I will now turn the call over to Ghassan Halazon for closing remarks.
That's a wrap for today, ladies and gentlemen. Once again, thank you everyone for tuning in. We wish everyone a happy and healthy holiday season ahead. Of course, don't forget to shop local and buy Canadian. Thank you, everyone.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect.