VerticalScope Conference Call Summary Company Overview - **Company Name**: VerticalScope (OTCPK: VFOR.F) - **Industry**: Online Enthusiast Communities - **IPO**: Listed on TSX in 2021 - **Registered Members**: Over 70 million [2][3] Core Business Model - **Revenue**: $66 million in the last twelve months with $25 million EBITDA [3] - **Cash Flow Efficiency**: Nearly 90% EBITDA conversion to cash [3] - **User Engagement**: Core users are enthusiasts contributing over 2.3 billion posts [4] Strategic Advantages - **Tech Platform**: Utilizes a tech platform and data assets to unlock value through AI [1] - **Community Focus**: Dedicated spaces for niche interests, leading to high-quality content [5][6] - **Competitive Moat**: Authentic user-generated content and volunteer moderators enhance community engagement [5] Market Trends - **Evolution of the Web**: Transitioning from static content to social platforms, now entering the "Agentic Web" phase where AI systems require structured human-generated content [9][10] - **Data Quality**: High-quality data is becoming the currency in the new web landscape [10] Growth Drivers 1. **Direct Traffic Expansion**: Focus on growing direct audience connections, leading to three times higher engagement compared to search traffic [12] 2. **AI Product Innovation**: Leveraging AI to enhance user experience and engagement, including the introduction of an AI community assistant named Fora Frank [13][17] 3. **New Revenue Sources**: Exploring immersive brand experiences and data-driven revenue products, with advertising making up around 80% of total revenue [14][24] 4. **M&A Strategy**: Actively pursuing acquisitions of independently run communities to enhance growth [15][22] Financial Position - **Debt Reduction**: Reduced net debt by $46 million, achieving a net leverage ratio of 1.2 times [29] - **Flexible Debt Structure**: $100 million revolver with attractive rates [29] - **Cash Generation**: Strong cash flow supports growth and capital allocation strategies [30] Revenue Model - **Digital Advertising**: Primary revenue source through programmatic ads and direct sales [24][25] - **E-commerce**: Contributes under 20% of revenue, including affiliate revenue and subscriptions [26][27] - **Marketplace Revenue**: Recent acquisition of the Ritual food pickup app has driven double-digit growth in commerce [28] Leadership Changes - **CEO Transition**: New CEO appointed in June, with continued involvement from the founder as chair [31] - **Promotions**: Key leadership promotions to strengthen operational capabilities [32] Summary - VerticalScope is positioned for growth with a solid foundation, focusing on direct traffic, AI innovations, and strategic acquisitions. The company aims to capitalize on the evolving digital landscape where authenticity and intent are paramount [33]