Q2 2026 Emerge Commerce Ltd Earnings Call

August 27, 2026

Speaker #1: Good morning, and welcome to the Emerge Commerce Q2 2026 results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a Q&A session for analysts.

Operator: Good morning, and welcome to the Emerge Commerce Q2 2026 results conference call. At this time, all lines are in a 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 27 August 2026. Your hosts today are Ghassan Halazon, Founder and Chief Executive Officer, and Mike Murphy, 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.

Operator: Good morning, and Welcome to the Emerge Commerce Q2 2026 Results Conference Call. At this time, all lines are in a 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 27 August 2026. Your hosts today are Ghassan Halazon, Founder and Chief Executive Officer, and Mike Murphy, 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.

Speaker #1: If at any time during this call you require immediate assistance, please press door zero for the operator. This call is being recorded on August 27, 2026.

Speaker #1: Your host today: Argusson Halazon, Founder and Chief Executive Officer, and Mike Murphy, Chief Financial Officer. Before we begin, I am required to provide the following statement regarding forward-looking information.

Speaker #1: 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.

Speaker #1: These forward-looking statements generally can be identified by the use of words such as "intent," "believe," "could," "expect," "estimate," "forecast," "may," and other words of similar meaning.

Speaker #1: 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.

Operator: 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 under circumstances. Actual results could differ materially from the conclusion, forecast, expectation, belief, or projection in the forward-looking information. Certain material factors and assumptions were applied in drawing the conclusion or making the forecast or projection as reflected in the forward-looking information. We caution investors not to rely on the forward-looking information.

Speaker #1: as well as other factors that we currently believe are appropriate and reasonable in the circumstances. As your results could differ materially from the conclusion, forecast, expectation, belief, or projection in the forward-looking information.

Speaker #1: 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.

Speaker #1: Additional information about the material factors that could cause actual results to differ materially from projections in the forward-looking information, and the 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.

Operator: Additional information about the material factors that could cause such results that differ materially from the conclusion, forecast, or projection in the forward-looking information and material factors or assumptions that were applied in drawing these conclusions or may be a forecast or projection as reflected in the forward-looking information are contained in Emerge's filings with Canadian provincial securities regulators. During today's call, all figures are in Canadian dollars unless otherwise stated. With that, I would like to turn the call over to Mr. Ghassan Halazon, Founder and CEO.

Speaker #1: During today's call, all figures are in Canadian dollars unless otherwise stated. And with that, I would like to turn the call over to Mr. Ghassan Halazon, Founder and CEO.

Speaker #2: Thank you. Good morning, everyone. We appreciate you taking the time to participate in our second quarter 2026 conference call. Joining me today is Mike Murphy, our CFO.

Ghassan Halazon: Thank you. Good morning, everyone. We appreciate you taking the time to participate in our Q2 2026 conference call. Joining me today is Mike Murphy, our CFO. This morning, I will walk through our exceptional Q2 results at Emerge and share some insights across our key businesses, as well as our priorities for the balance of 2026. Following my remarks, Mike 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 questions. Historically, Q2 has been our strongest quarter at Emerge. This Q2 proved to be no different. In fact, in many ways, this was our best quarter in years across revenue, gross margin, and adjusted EBITDA, with positive cash flow generation on full display. Let's dive in.

Speaker #2: This morning, I will walk through our exceptional Q2 results at Emerge and share some insights across our key businesses, as well as our priorities for the balance of 2026.

Speaker #2: Following my remarks, Mike 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 questions.

Speaker #2: Historically, Q2 has been our strongest quarter at Emerge. This Q2 proved to be no different. In fact, in many ways, this was our best quarter in years, across revenue, gross margin, and adjusted EBITDA, with positive cash flow generation on full display.

Speaker #2: Let's dive in. Q2 revenue grew by 7.4% to $9.1 million, our ninth consecutive quarter of positive revenue growth. This is the first time Emerge has eclipsed $9 million in revenue since early 2023, at the start of our turnaround efforts.

Ghassan Halazon: Q2 revenue grew by 7.4% to CAD 9.1 million, our ninth consecutive quarter of positive revenue growth. This is the first time Emerge has eclipsed CAD 9 million in revenue since early 2023 at the start of our turnaround efforts. Worth noting, Tee 2 Green, or T2G for short, was acquired in early April 2025, so Q2 growth this year is more apples to apples as a result. As outlined in my shareholder letter at the start of 2026, the current Emerge strategy entails combining moderate, stable organic growth from our existing portfolio with higher growth rates driven by accretive acquisitions. Speaking of acquisitions, Q2 was Viral Loops' first full quarter under Emerge ownership following our acquisition that was completed in late Q1.

Speaker #2: Worth noting, T to Green, or T to G for short, was acquired in early April 2025. So, Q2 growth this year is more apples to apples as a result.

Speaker #2: As outlined in my shareholder letter at the start of 2026, the current Emerge strategy entails combining moderate, stable organic growth from our existing portfolio with higher growth rates driven by accretive acquisitions.

Speaker #2: Speaking of acquisitions, Q2 was viral loops first full quarter under Emerge ownership. Following our acquisition that was completed in late Q1. With that said, viral loops is a relatively low revenue contributor with approximately a million dollars annual revenues and was primarily acquired to enhance our overall financial profile, namely to contribute positively to margins, profitability, and cash flow in addition to driving customer acquisition across our consumer e-commerce portfolio.

Ghassan Halazon: With that said, Viral Loops is a relatively low revenue contributor with approximately CAD 1 million annual revenues, and was primarily acquired to enhance our overall financial profile, namely to contribute positively to margins, profitability, and cash flow, in addition to driving customer acquisition across our consumer e-commerce portfolio, all of which it did in Q2. Gross margins increased by 2.5% to 39% from 36.5%. Management anticipates that the year-over-year gross margin improvements achieved in Q2 2026 to continue in Q3, in part because of the higher margins contributed by Viral Loops, in addition to the conclusion of the fair value of inventory accounting at T2G that adversely impacted Emerge's gross margins for most of 2025. Adjusted EBITDA improved to CAD 1.03 million versus CAD 962,000, marking the seventh consecutive quarter of positive adjusted EBITDA.

Speaker #2: All of which it did in Q2. Gross margins increased by 2.5% to 39%, up from 36.5%. Management anticipates that the year-over-year gross margin improvements achieved in Q2 2026 will continue in Q3, in part because of the higher margins contributed by viral loops.

Speaker #2: In addition to the conclusion of the fair value of inventory accounting at T to G, that adversely impacted Emerge's gross margins for most of 2025.

Speaker #2: Adjusted EBITDA improved to $1.03 million versus $962,000, marking the seventh consecutive quarter of positive adjusted EBITDA. Notably, this is the first time our adjusted EBITDA has officially eclipsed the $1 million mark since Q4 2021—which feels like a lifetime ago.

Ghassan Halazon: Notably, this is the first time our adjusted EBITDA has officially eclipsed the CAD 1 million mark since Q4 2021, which feels like a lifetime ago. Our cash position grew to CAD 4.8 million at 30 June 2026 from CAD 3.5 million last Q2, an increase of CAD 1.3 million year over year. We are especially pleased that the business achieved positive all-in cash flow in both Q2 and year to date as we continue to build a stronger, more durable Emerge. Now, a few updates from some of our key brands. First, Tee 2 Green. Now in its second year under Emerge, Tee 2 Green continues to validate our Emerge acquisition and integration playbook. Since acquiring the business in April 2025, we have applied our operating model and digital capabilities to substantially accelerate growth, enhance profitability, and improve cash flow generation.

Speaker #2: Our cash position grew to $4.8 million at June 30, 2026, from $3.5 million last Q2, an increase of $1.3 million year over year. We're especially pleased that the business achieved positive all-in cash flow in both Q2 and year to date as we continue to build a stronger, more durable Emerge.

Speaker #2: Now, a few updates from some of our key brands. First, T to G. Now in its second year under Emerge, T to G continues to validate our Emerge acquisition and integration playbook.

Speaker #2: Since acquiring the business in April 2025, we've applied our operating model and digital capabilities to substantially accelerate growth, enhance profitability, and improve cash flow generation.

Speaker #2: Leveraging our broader golf ecosystem, including over 400,000 golf subscribers, helped drive T to G's revenue growth rate to nearly 10%—or rather, 10 times its pre-acquisition growth rate.

Ghassan Halazon: Leveraging our broader golf ecosystem, including over 400,000 golf subscribers, helped drive Tee 2 Green's revenue growth rate to nearly 10x its pre-acquisition growth rate. I will say that again, to nearly 10x its pre-acquisition growth rate. The transaction's eight-year inventory payment structure also meaningfully strengthened our cash flow profile and balance sheet. In year 2 so far, the business continues to perform exceptionally, and we continue to see additional growth opportunities through further optimization and deeper integration within our golf portfolio. Second, an update on truLOCAL, our leading premium meat and seafood subscription service across Canada. truLOCAL was a big benefactor in 2025 with the Buy Canadian movement, gaining an influx of new customers, driving strong, cost-effective growth, in turn, allowing us to reduce our ad spend and capture more profits. That resulted in truLOCAL more than doubling its adjusted EBITDA in 2025.

Speaker #2: I'll say that again: to nearly 10x its pre-acquisition growth rate. The transaction's eight-year inventory payment structure also meaningfully strengthened our cash flow profile and balance sheet.

Speaker #2: In year two or so, so far, the business continues to perform exceptionally and we continue to see additional growth opportunities through further optimization and deeper integration within our golf portfolio.

Speaker #2: Second, an update on truLOCAL, our leading premium meat and seafood subscription service across Canada. truLOCAL was a big benefactor in 2025 with the Buy Canadian movement, gaining an influx of new customers and driving strong, cost-effective growth, in turn allowing us to reduce our ad spend and capture more profits.

Speaker #2: That resulted in True Local more than doubling its adjusted EBITDA in 2025. As the benefits and enthusiasm are at their peak, 'support local' has subsided. In Q1 and Q2, we are starting to see True Local's cost per acquisition revert back to its historical norms.

Ghassan Halazon: As the benefits and enthusiasm around peak support local subsided in Q1 and Q2, we are starting to see truLOCAL's cost per acquisition revert back to its historical norms. The brand still exhibits highly favorable CLTV to CAC ratios, just not as attractive as the peak levels we saw last year. We will continue to prioritize high ROI marketing initiatives. On the margin side, truLOCAL continues to see some cost pressures, including the rising cost of meat and some fuel surcharges as a result of the conflict in the Middle East. In general, truLOCAL has exhibited strong pricing power with its loyal member base, and the team has already actioned various gross margin and SG&A reduction initiatives aimed at offsetting some of these variable costs.

Speaker #2: The brand still exhibits highly favorable CLTV to CAC ratios just not as attractive as the peak levels we saw last year. We will continue to prioritize high ROI marketing initiatives.

Speaker #2: On the margin side, True Local continues to see some COGS pressures, including the rising cost of meat and some fuel surcharges as a result of the conflict in the Middle East.

Speaker #2: In general, True Local has exhibited strong pricing power with its loyal member base and the team has already actioned various gross margin and SG&A reduction initiatives aimed at offsetting some of these variable costs.

Speaker #2: 2026 is True Local's 10th year in business, and we have launched a number of initiatives and giveaway contests powered by Viral Loops to drive customer acquisition and celebrate this milestone with our members and suppliers.

Ghassan Halazon: 2026 is truLOCAL's 10th year in business. We have launched a number of initiatives and giveaway contests powered by Viral Loops to drive customer acquisition and celebrate this milestone with our members and suppliers. Now, for an update on the debt side. Our senior credit facility matures in October 2027. The current outstanding balance on the credit facility is CAD 5.85 million, down from CAD 25 million originally. The variable interest rate currently sits at 11%. For clarity, this amendment does not preclude Emerge from refinancing its credit facility at a cheaper rate at any time should we secure more favorable terms. Emerge is making meaningful progress towards refinancing its senior debt, which remains one of our key priorities.

Speaker #2: Now for an update on the debt side. Our senior credit facility matures in October 2027. The current outstanding balance on the credit facility is $5.85 million, down from $25 million originally.

Speaker #2: The variable interest rate currently sits at 11%. For clarity, this amendment does not preclude Emerge from refinancing its credit facility at a cheaper rate at any time, should we secure more favorable terms.

Speaker #2: Emerge is making meaningful progress towards refinancing its senior debt, which remains one of our key priorities. Management is increasingly encouraged by the developments to date and believes the significantly improved financial profile of the business puts us in a strong position to secure a materially lower-cost, longer-term financing facility.

Ghassan Halazon: Management is increasingly encouraged by the developments to date and believe the significantly improved financial profile of the business puts us in a strong position to secure a materially lower cost, longer-term financing facility. Management views this as an important step in further strengthening our balance sheet and supporting Emerge's long-term growth objectives. We continue to maintain a strong long-term relationship with our lender, dating back to 2019, and remain in excellent standing. Our focus now is on reducing our cost of capital, lowering interest expense, and directing incremental cash flow into organic growth opportunities and highly accretive acquisitions. Next up, I'll share our Q3 outlook. For Q3 2026, Emerge expects to deliver another quarter of revenue growth, improved gross margins, and positive adjusted EBITDA.

Speaker #2: Management views this as an important step in further strengthening our balance sheet and supporting Emerge's long-term growth objectives. We continue to maintain a strong, long-term relationship with our lender, dating back to 2019.

Speaker #2: And remain in excellent standing. Our focus now is on reducing our cost of capital, lowering interest expense, and directing incremental cash flow into organic growth opportunities and highly accretive acquisitions.

Speaker #2: Next up, I'll share our Q3 outlook. For Q3 2026, Emerge expects to deliver another quarter of revenue growth, improved gross margins, and positive adjusted EBITDA.

Speaker #2: Management anticipates that the year-over-year gains in gross margin that we saw in Q2 will continue in Q3, in part because of the higher margins contributed by viral loops in addition to the conclusion of the fair value of inventory accounting at T to Green that adversely impacted Emerge's gross margins for most of 2025.

Ghassan Halazon: Management anticipates that the year-over-year gains in gross margin that we saw in Q2 will continue in Q3, in part because of the higher margins contributed by Viral Loops, in addition to the conclusion of the fair value of inventory accounting at Tee 2 Green that adversely impacted Emerge's gross margins for most of 2025. The company continues to make targeted investments across its portfolio, including at the HQ level, to drive and support current and future growth, both organic and inorganic. Q3 is a seasonally strong quarter for the golf business, particularly Tee 2 Green, while it is generally a slower period for truLOCAL during the summer holiday period. Seasonality at Viral Loops is less pronounced. Now, I'll turn it over to Mike for some financial commentary.

Speaker #2: The company continues to make targeted investments across its portfolio, including at the HQ level, to drive and support current and future growth, both organic and inorganic.

Speaker #2: Q3 is a seasonally strong quarter for the golf business, particularly T to Green. While it is generally a slower period for True Local during the summer holiday period, seasonality at Viral Loops is less pronounced.

Speaker #2: Now, I'll turn it over to Mike for some financial commentary.

Speaker #3: Thanks, Hassan, and good morning, everyone. As Hassan mentioned, Emerge had a very successful second quarter, where we continued this trend of year-over-year revenue and adjusted EBITDA growth.

Mike Murphy: Thanks, Ghassan Halazon, and good morning, everyone. As Ghassan Halazon mentioned, Emerge had a very successful second quarter where we continued this trend of year-over-year revenue and adjusted EBITDA growth. Our gross merchandise sales or GMS grew 4% to CAD 11.8 million compared to CAD 11.4 million the first quarter of 2025. As a reminder, GMS is a non-GAAP measure that provides useful measure for the dollar value of e-commerce transactions made through our platforms, which gives additional insight into business performance. GMS represents the total dollar value of customer purchases of goods and services through our brands, excluding applicable taxes and net of discounts and refunds. Note that GMS does not consider any retail sales, which is a growing part of our business via Tee 2 Green. Revenue for the quarter grew over 7% to CAD 9.1 million from CAD 8.5 million in 2025.

Speaker #3: Our gross merchandise sales or GMS grew 4% to 11.8 million compared to 11.4 million in the first quarter of 2025. As a reminder, GMS is a non-GAAP measure that provides useful measure for the dollar value of e-commerce transactions made through our platforms.

Speaker #3: Which gives additional insight into business performance. GMS represents the total dollar value of customer purchases of goods and services through our brands, excluding applicable taxes and net of discounts and refunds.

Speaker #3: Note that GMS does not consider any retail sales, which is a growing part of our business via T to Green. Revenue for the quarter grew over 7% to $9.1 million from $8.5 million in 2025.

Speaker #3: Revenue growth for the quarter was primarily driven by strong performance from T to Green, as well as the inclusion of the Viral Loops results for the first full quarter of operations post-acquisition.

Mike Murphy: Revenue growth for the quarter was primarily driven by strong performance from Tee 2 Green, as well as inclusion of the Viral Loops results for the first full quarter of operations post-acquisition. Overall, Emerge achieved positive overall organic growth in Q2. Gross profit for the quarter increased to CAD 3.5 million versus CAD 3.1 million in 2025. Gross margin percent for the quarter was 39% versus 36.5% in 2025. Excluding one-time non-cash inventory fair value increment adjustments related to Tee 2 Green purchase equation of approximately CAD 41,000 in the quarter, gross margin would have been approximately 39.4% for the second quarter of 2026. Note that all of Tee 2 Green's fair value increment has now been recorded in cost of sales, and we expect Tee 2 Green's and the company's gross margin profile to revert back to historically higher levels.

Speaker #3: Overall, Emerge achieved positive overall organic growth in Q2. Gross profit for the quarter increased by 3.5 million, to 3.5 million versus 3.1 million in 2025.

Speaker #3: Gross margin percent for the quarter was 39%, versus 36.5% in 2025. Excluding one-time non-cash inventory fair value increment adjustments related to the T to Green purchase equation of approximately $41,000 in the quarter, gross margin would have been approximately 39.4% for the second quarter of 2026.

Speaker #3: Note that all of T to Green's fair value increment has now been recorded in cost of sales, and we expect T to Green's and the company's gross margin profile to revert back to historically higher levels.

Speaker #3: Net income from continuing operations for the quarter was $0.2 million, which is comparable to where it was in the first quarter of 2025. For the quarter ended June 30, 2026, Emerge reported adjusted EBITDA of $1.03 million, compared to adjusted EBITDA of $0.96 million, an improvement of $0.07 million and an increase of 7.3%.

Mike Murphy: Net income from continuing operations for the quarter was CAD 0.2 million, which is comparable to where it was in the first quarter of 2025. For the quarter ended 30 June 2026, Emerge reported adjusted EBITDA of CAD 1.03 million compared to adjusted EBITDA of CAD 0.96 million, an improvement of CAD 0.07 million and an increase of 7.3%. This reflects the company's efforts to prioritize a disciplined approach to managing overheads and marketing budgets, in addition to making accretive acquisitions and importantly, constantly focusing on operational improvements. Q2 is historically a period of cash inflow as the golf vertical hits its peak golf season. During the quarter ended 30 June 2026 and 2025, the company generated CAD 1.5 million and CAD 2.1 million respectively from operating activities.

Speaker #3: This reflects the company's efforts to prioritize a disciplined approach to managing overheads and marketing budgets, in addition to making accretive acquisitions, and importantly, constantly focusing on operational improvements.

Speaker #3: Q2 was historically a period of cash inflow, as the golf vertical hits its peak golf season. During the quarter ended June 30, 2026 and 2025, the company generated $1.5 million and $2.1 million, respectively, from operating activities.

Mike Murphy: Q2 is historically a period of cash inflow as the golf vertical hits its peak golf season. During the quarter ended 30 June 2026 and 2025, the company generated CAD 1.5 million and CAD 2.1 million respectively from operating activities. The prior period's cash flows were higher in large part due to the impact of the eight-year inventory payment plan associated with Tee 2 Green acquisition, which resulted in minimal cash flows used for inventory purchasing in the prior quarter to 2025. Q2 2026 cash flows from investing activities were -CAD 0.2 million, driven mainly by a deferred payment related to the Tee 2 Green acquisition.

Speaker #3: The prior period cash flows were higher in large part due to the impact of the eight-year inventory payment plan associated with T to Green acquisition, which resulted in minimal cash flows used for inventory purchasing in the prior quarter 2025.

Mike Murphy: The prior period's cash flows were higher in large part due to the impact of the eight-year inventory payment plan associated with Tee 2 Green acquisition, which resulted in minimal cash flows used for inventory purchasing in the prior quarter to 2025. Q2 2026 cash flows from investing activities were -CAD 0.2 million, driven mainly by a deferred payment related to the Tee 2 Green acquisition. Cash flows used in financing activities were CAD 0.6 million, which included interest payments, accretion related to long-term debt, convertible debentures, and deferred acquisition costs, as well as a payment of some of the inventory payment plan related to the Tee 2 Green acquisition. Finally, cash on hand has improved in line with the improvement in the business. 30 June 2026, it was CAD 4.8 million, versus CAD 3.5 million at the end of Q2 2025.

Speaker #3: Q2 2026 cash flows from investing activities were negative $0.2 million, driven mainly by a payment related to the deferred payment for the T to Green acquisition. Cash flows used in financing activities were $0.6 million, which included interest payments, accretion related to long-term debt, convertible debentures, and deferred acquisition costs, as well as a payment of some of the inventory payment plan related to the T to Green acquisition.

Mike Murphy: Cash flows used in financing activities were CAD 0.6 million, which included interest payments, accretion related to long-term debt, convertible debentures, and deferred acquisition costs, as well as a payment of some of the inventory payment plan related to the Tee 2 Green acquisition. Finally, cash on hand has improved in line with the improvement in the business. 30 June 2026, it was CAD 4.8 million, versus CAD 3.5 million at the end of Q2 2025. I will now pass the microphone back to Ghassan Halazon for some closing comments.

Speaker #3: Finally, cash on hand has improved in line with the improvement in the business. At June 30, 2026, it was $4.8 million, versus $3.5 million at the end of Q2 2025.

Speaker #3: I will now pass the microphone back to Hassan for some closing comments.

Mike Murphy: I will now pass the microphone back to Ghassan Halazon for some closing comments.

Speaker #2: Thanks, Mike. To wrap up, I would like to highlight three things. First, we are continuing to demonstrate that the Emerge turnaround is translating into durable, profitable growth.

Ghassan Halazon: Thanks, Mike. To wrap up, I would like to highlight three things. First, we are continuing to demonstrate that Emerge turnaround is translating to durable, profitable growth. Q2 was a particularly strong quarter with revenue growth, gross margin expansion, adjusted EBITDA eclipsing CAD 1 million for the first time since Q4 2021, and positive all-in cash flow this quarter and year to date. Second, while there is still work to do, our balance sheet is in a meaningfully stronger position than it was a few years ago. Our next priority on this front is to lower our cost of capital and ultimately reduce interest expense and improve cash flow to drive future growth, both organically and via opportunistic acquisitions. Third, we remain focused on executing the Emerge 3.0 strategy with precision, driving healthy organic growth overall while selectively pursuing accretive acquisitions that can supercharge top line margins and cash flow.

Speaker #2: Q2 was a particularly strong quarter, with revenue growth, gross margin expansion, adjusted EBITDA eclipsing $1 million for the first time since Q4 2021, and positive all-in cash flow.

Speaker #2: This quarter and year to date. Second, while there's still work to do, our balance sheet is in a meaningfully stronger position than it was a few years ago.

Speaker #2: Our next priority on this front is to lower our cost of capital, and ultimately reduce interest expense and improve cash flow to drive future growth, both organically and via opportunistic acquisitions.

Speaker #2: Third, we remain focused on executing the Emerge 3.0 strategy with precision—driving healthy organic growth overall, while selectively pursuing accretive acquisitions that can supercharge top-line margins and cash flow.

Ghassan Halazon: Third, we remain focused on executing the Emerge 3.0 strategy with precision, driving healthy organic growth overall while selectively pursuing accretive acquisitions that can supercharge top line margins and cash flow. We believe the progress we have made over the past several years has put Emerge in a much stronger position, and we are excited about the opportunities ahead. As always, I would like to take this opportunity to thank our board, employees, customers, suppliers, lenders, and shareholders for their unwavering support. With that, operator, we can now open the line for any questions.

Speaker #2: We believe the progress we have made over the past several years has put Emerge in a much stronger position, and we are excited about the opportunities ahead.

Ghassan Halazon: We believe the progress we have made over the past several years has put Emerge in a much stronger position, and we are excited about the opportunities ahead. As always, I would like to take this opportunity to thank our board, employees, customers, suppliers, lenders, and shareholders for their unwavering support. With that, operator, we can now open the line for any questions.

Speaker #2: As always, I would like to take this opportunity to thank our board, employees, customers, suppliers, lenders, and shareholders for their unwavering support. With that, operator, we can now open the line for any questions.

Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press *star* followed by *one*. One minute is allotted per question.

Operator: Thank you. Ladies and gentlemen, we will now begin the questioning and answer session. Should you have a question, please press star followed by the one on your touchtone phone. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star one should you wish to ask a question. Your question is from Fred B. from Deschap. Your line is now open.

Speaker #1: Should you wish to cancel your request, please press Start, followed by the appropriate key. If you are using a speakerphone, please lift the handset before pressing any keys.

Speaker #1: Once again, that is star one. Should you wish to ask a question? And your question is from Fred B. Gomez. Your line is open.

Speaker #4: Hello, Hassan. It's Fred from DashCap. I'm just going to ask a couple of quick questions, please. First of all, congrats on a great quarter.

Fred B.: Hello, Ghassan Halazon. It's Fred B. from Deschap. I am going to make it quick. Just a couple of questions, please. First of all, congrats on a great quarter. With the recent outcomes of the trade war between Canada and the US, are you starting to see positive impacts for truLOCAL as you had last year?

Speaker #4: Now, with the recent outcomes of the trade war between Canada and the U.S., are you starting to see positive impacts for True Local as you had last year?

Speaker #2: Thanks, appreciate it, Fred. Nice to hear from you. It is an interesting one. I mean, we are obviously watching all the trade wars and the tariff headlines, and the real impact it's having.

Ghassan Halazon: Thanks. Appreciate it, Fred. Nice to hear from you. It is an interesting one. I mean, we are obviously watching all the trade wars and the tariff headlines and the real impact it is having in real time, I might add. From our business perspective, particularly truLOCAL, I would say it is still a little too early to tell. We do not want to get ahead of ourselves. We obviously see spikes in traffic for searches related to local food. It is a bit early to call out major impact on customer acquisition or anything like that, but it is definitely something we are eyeing. It does not look like this rhetoric and, frankly, some of these actions that are being taken now, it does not look like that is about to cool down anytime soon.

Speaker #2: In real time, I might add. And from our business perspective, particularly TRU Local, I would say it's still a little too early to tell.

Speaker #2: I mean, we don't want to get ahead of ourselves. We obviously see spikes in traffic for searches related to local—local food. It's a bit early to call out major impact on customer acquisition or anything like that, but it's definitely something we're eyeing.

Speaker #2: It doesn't look like it's this rhetoric, and frankly, some of these actions that are being taken now—it doesn't look like that's about to cool down anytime soon.

Ghassan Halazon: It does not look like this rhetoric and, frankly, some of these actions that are being taken now, it does not look like that is about to cool down anytime soon. We are watching it closely and, if it continues, there might be a similar round two to that madness, which ultimately, as everyone knows, benefited truLOCAL and other local DNA companies. I will say, though, that regardless, as I pointed out earlier, the customer lifetime value metrics that we are seeing on truLOCAL relative to their customer acquisition cost remain very favorable.

Speaker #2: So we're watching it closely, and if it continues, there might be a sort of similar round two to that madness, which ultimately, as everyone knows, benefited truLOCAL and other local DNA companies.

Ghassan Halazon: We are watching it closely and, if it continues, there might be a similar round two to that madness, which ultimately, as everyone knows, benefited truLOCAL and other local DNA companies. I will say, though, that regardless, as I pointed out earlier, the customer lifetime value metrics that we are seeing on truLOCAL relative to their customer acquisition cost remain very favorable. So in a sense, we are seeing that CAD 2,000-plus CLTV on customers relative to, I would say, broadly the CAD 150 to CAD 175 customer acquisition cost range. So we are deeply in the money with customers and if anything, we are already, regardless of whether we get an additional macro bump or not, starting to think about and drive higher marketing to build in more subscribers to a business model and a brand that we think deserves to scale more. So we are on it, and we are monitoring the situation.

Speaker #2: I will say, though, that regardless—as I pointed out earlier—the customer lifetime value metrics that we're seeing on True Local, relative to their customer acquisition cost, remain very favorable.

Speaker #2: So, in a sense, we're seeing that $2,000-plus CLTV on customers, relative to, I would say broadly, the $150 to $175 customer acquisition cost range.

Ghassan Halazon: So in a sense, we are seeing that CAD 2,000-plus CLTV on customers relative to, I would say, broadly the CAD 150 to CAD 175 customer acquisition cost range. So we are deeply in the money with customers and if anything, we are already, regardless of whether we get an additional macro bump or not, starting to think about and drive higher marketing to build in more subscribers to a business model and a brand that we think deserves to scale more. So we are on it, and we are monitoring the situation.

Speaker #2: So we're deeply in the money with customers, and if anything, we're already, regardless of whether we get an additional macro bump or not, starting to think about and drive higher marketing to build in more subscribers to a business model and a brand that we think deserves to scale more.

Speaker #2: So, we are on it, and we're monitoring the situation.

Speaker #4: Great. Glad to hear that. Thanks for that. And on the financing side of things, it seems like management is upbeat about the possibility of a cheaper long-term debt financing.

Fred B.: Great. Glad to hear. Thanks for that. On the financing side of things, it seems like management is upbeat about the possibility of a cheaper, long-term debt financing. Are you able to share a sense of timing on that?

Speaker #4: Are you able to share a sense of timing on that?

Speaker #2: Yeah, I know. I recall—I can't remember if it was you who asked me a few quarters ago—but at the time, we were positive on it.

Ghassan Halazon: Yeah, I know, I recall. I cannot remember if it was you who asked me a few quarters ago, but at the time, we were positive on it and on our progress, and we are even more positive now. The reality is, in our conversations with lenders, they tend to watch how is our EBITDA tracking and what is the progress we are making. Obviously, Viral Loops was in large part achieved to really elevate our financial profile. So when you add this sort of consistent EBITDA, as well as consistent gross margin improvement and ultimately cash flow improvement on a go-forward basis, then we are really starting to feel like the picture is coming together. We are encouraged by the work we are doing on the debt side.

Speaker #2: And then in our progress, and we're even more positive now. And the reality is in our conversations, with lenders, they tend to watch how is our EBITDA tracking and sort of what is the progress we're making.

Speaker #2: Obviously, viral loops was in large part achieved to really elevate our financial profile. And so, when you add this sort of consistent EBITDA as well as consistent gross margin improvement, and ultimately cash flow improvement on a go-forward basis, then we really start to feel like the picture is coming together.

Speaker #2: We are encouraged by the work we're doing on the debt side. We're not going to comment on particulars yet, but just to be clear, this is for us what I would view as a near-term goal, and I think the sooner, the better, frankly.

Ghassan Halazon: We're not going to comment on particulars yet, but just to be clear, this is, for us, what I would view as a near-term goal, and I think the sooner the better, frankly. We're pushing ahead, and let's just say we're seeing positive signs in terms of the progress we've made, top line to bottom line. We'll keep advancing it, and we think it's one of the key priorities as we've raised during the earnings call and in our PR today.

Speaker #2: So we're pushing ahead, and let's just say we're seeing positive signs in terms of the progress we've made, top-line to bottom-line. We'll keep advancing it, and we think it's one of the key priorities, as we raised during the earnings call and in our PR today.

Speaker #4: Great, great. Sounds good. And just one final question, please. Now, your cash has been going up on the balance sheet. Would you consider paying down some of the debt, or maybe using that excess cash to do another acquisition?

Fred B.: Great. Sounds good. Just one final question, please. Your cash has been going up, the cash on the balance sheet. Would you consider paying down some of the debt or maybe using that excess cash to do another acquisition?

Speaker #2: Right. So it's a bit of an intertwined answer I'm going to give you because there are a few moving parts here.

Ghassan Halazon: Right. It's a bit of intertwined answer I'm going to give you because there are a few moving parts here. I'll say that realistically, if we enter a bank-style refinancing of our CAD 5.85 million, if we enter a cheaper, longer-term facility as we've been wanting to, realistically, we're going to start setting aside cash to pay down debt over the course of years. Historically, we really haven't done so. We paid down debt when we sold a few non-core businesses a few prior years ago, but since then, the senior facility's been at CAD 5.85 million. Realistically, we're thinking through how we're going to be paying this debt facility down over the next four or five, six, seven years kind of thing, once we hopefully successfully enter into a new refinancing. We wouldn't rush before then.

Speaker #2: So I'll say that, realistically, if we enter a bank-style refinancing of our $5.85 million—if we enter a cheaper, longer-term facility as we've been wanting to—realistically, we're going to start setting aside cash to pay down debt over the course of years, right?

Speaker #2: So historically, we really haven't done so. We paid down debt when we sold a few non-core businesses a few years ago, but since then, it's just been the senior facility that's been at 5.85%.

Speaker #2: So realistically, we're thinking through what we're going to be how we're going to be paying this debt facility down over the next four or five, six, seven years kind of thing.

Speaker #2: Once we, hopefully, successfully enter into a new refinancing, we wouldn't rush before then. If we think that's a near-term possibility, we're exploring that to the max and advancing it as much as possible to hopefully come to fruition.

Ghassan Halazon: If we think that's a near-term possibility, we're sort of exploring that to the max and advancing it to the max to hopefully come to fruition. But we're not rushing to take the cash we have right now to pay down debt, only to pay down debt again as we enter this sort of facility. It's something we would consider in terms of excess cash as we go. If we continue to generate more cash flow and sit on it, obviously, the two main purposes other than first and foremost, operations and servicing working capital, which is in much better shape than it had been in prior years. Now is the two buckets you mentioned is, A, pay down of debt, B, acquisitions, and that's sort of the art of capital allocation and thinking through what's more valuable. Right?

Speaker #2: But we're not rushing to take the cash we have right now to pay down debt, only to pay down debt again right as we enter this sort of facility.

Speaker #2: So, it's something we would consider in terms of excess cash as we go, if we continue to generate more cash flow and sit on it.

Speaker #2: Obviously, the two main purposes, other than, first and foremost, operations and servicing working capital—which is in much better shape than it had been in prior years.

Speaker #2: Now, the two buckets you mentioned are: A, paydown of debt; and B, acquisitions. And that's sort of the art of capital allocation and thinking through what's more valuable, right?

Speaker #2: If we can go buy a business for three to four times EBITDA, for example—again, much like we've done with Pete the Greek or Viral Loops, where we've acquired companies below three times EBITDA, right?

Ghassan Halazon: If we can go buy a business for 3 to 4 times EBITDA, for example, again, much like we've done with Tee 2 Green or Viral Loops where we've acquired companies below 3 times EBITDA. If we can get something opportunistic that adds another half a million or 1 million in EBITDA, perhaps that's more attractive than just paying down debt by CAD 750K or 1 million. We have to make that assessment when we're live, and these are things we weigh and think about. But I would say the line of order here is advancing our senior debt refinancing, figuring out what that looks like, hopefully, once we're on the other side, understanding that this is our plan to pay down debt and make no question about it, just so we're abundantly clear here with the audience.

Speaker #2: If we can get something opportunistic that adds another half a million or a million in EBITDA, perhaps that's more attractive than just paying down debt by $750,000 or $1 million.

Speaker #2: We have to make that we have to make that assessment when we're live. And these are things we weigh and think about. But I would say the line of order here is advancing our senior debt refinancing, figuring out what that looks like, hopefully, once we're on the other side, understanding that this is our plan to pay down debt and make no question about it.

Speaker #2: And just so we're abundantly clear here with the audience, our goals are to reduce our debt over time. Even though our debt-to-EBITDA is in much better shape, we think part of the cash flow generation needs to go to debt paydown.

Ghassan Halazon: Our goals are to reduce our debt over time, even though our debt-to-EBITDA is in much better shape. We think part of the cash flow generation needs to go to debt pay down, and that is part of what we're committing to. But we're thinking through how that's going to come together, what those debt repayment schedules look like, and then balancing whatever is left for future acquisitions and of course, for organic growth.

Speaker #2: And that is part of what we’re committing to, but we’re thinking through how that’s going to come together, what those debt repayment schedules look like, and then balancing whatever is left for future acquisitions and, of course, for organic growth.

Speaker #4: Great, thank you. Your answers sound good, and congrats again.

Fred B.: Great. Thank you for your answers and congrats again.

Speaker #2: Thank you, Fred. Okay.

Ghassan Halazon: Thank you, Fred.

Speaker #1: Thank you. There are no further questions at this time. I will now hand the call back over to Ghislaine Halazon for the closing remarks.

Operator: Thank you. There are no further questions at this time. I will now hand the call back over to Ghassan Halazon for the closing remarks.

Speaker #2: Great, that's it for today. Once again, we appreciate everyone's time and interest in Emerge Commerce and the progress we're making. Enjoy what's left of summer, and don't forget to shop local and buy Canadian.

Ghassan Halazon: Great. That's it for today. Once again, we appreciate everyone's time and interest in Emerge Commerce and the progress that we're making. Enjoy what's left of summer, and don't forget to shop local and buy Canadian. Now more than ever. Thanks, everyone.

Speaker #2: Now, more than ever. Thanks, everyone.

Operator: Thank you. This concludes today's conference call. Thank you all for joining. You may now disconnect your lines. You may disconnect.