Mr. Ghassan Halazon reports

EMERGE REPORTS FULL YEAR 2023 AND Q4 RESULTS

Emerge Commerce Ltd. has released results for its three and 12 months ended Dec. 31, 2023. Copies of the annual financial statements and management's discussion and analysis are available on the company's profile on SEDAR+.

"Two thousand twenty-three was a foundational year for us to pay down debt and significantly reduce interest expense which has been a drag on our cash flow in the current interest rate environment. Over the last year or so, through a series of transactions, we have taken aggressive steps to reduce our senior credit facility to $5.85-million down from $25-million originally, and in the process, also eliminate the vast majority of deferred consideration owed to brands. While there is still more work to be done, we are pleased with our debt reduction efforts to date. This in turn, allows us to double down on truLOCAL, our strategic premium meat subscription business, as well as our golf vertical, where we are seeing good momentum lately. Operationally, we achieved strong growth in adjusted EBITDA [earnings before interest, taxes, depreciation and amortization], particularly in Q4 2023, drove much improved gross margins, and nearly doubled positive cash flow from operations for the year. We believe the go-forward business is in a good position to start driving organic growth in 2024 and beyond, with more streamlined operations and focused management efforts," commented Ghassan Halazon, founder and chief executive officer, Emerge.

2023 financial highlights:

• Revenue of $23.8-million in 2023 compared with $27.6-million in 2022, when excluding eliminated revenue from U.S. operations and trading (revenue of $31.7-million prior to exclusion of these items).
• Gross margin increased to 50 per cent versus 44 per cent in 2022.
• Adjusted EBITDA of $1.14-million compared with $1.13-million in 2022.
• Cash flow from operations improved to $2-million compared with $1.1-million in 2022.
• Net loss of $21.3-million in 2023 compared with a net loss of $17.4-million. The increase in net loss is mainly attributable to a goodwill impairment charge of $16.7-million, a non-cash charge, due to updated assumptions that reflect current macroeconomic conditions. Excluding the impairment charge, the net loss for the year would have been $4.6-million.
• Cash on hand at Dec. 31, 2023, was $2.5-million.

Q4 2023 financial highlights:

• Q4 revenue of $6.2-million compared with $7.8-million in Q4 2022 when excluding eliminated revenue from U.S. operations (Q4 2022 revenue of $8-million prior to exclusion of these items).
• Q4 gross margin improved to 50 per cent compared with $46 per cent in 2022, marking the company's fourth consecutive quarter with gross margin of at least 50 per cent.
• Q4 adjusted EBITDA improved to $500,000 for 2023 compared with $300,000 in 2022, marking the company's ninth consecutive quarter of positive adjusted EBITDA.

Events subsequent to Dec. 31, 2023

Sale of WholesalePet

On Jan. 31, 2024, Emerge completed the sale of WholesalePet (WSP) to Tiny Fund I LP, a private partnership of Tiny Ltd., for aggregate gross cash consideration of $9.25-million (U.S.) subject to certain closing and postclosing adjustments, payments and obligations. Following the transaction, Emerge no longer has any deferred payment obligations owed to WSP shareholders.

Two thousand twenty-three results include WholesalePet. Q1 2024 will be the first financial report to classify WholesalePet as discontinued operations, with prior-period results also reflect the reclassification where noted.

Debt paydown and refinancing

Emerge utilized $10-million from the WSP transaction proceeds to pay down its senior credit facility with its existing lender, the principal balance of which has been reduced to $5.85-million, from $15.85-million prior to the completion of the transaction, and $25-million originally. The company's interest expense savings following the aforementioned debt repayment is expected to be approximately $1.38-million annually.

On Jan. 31, 2024, the company entered into a second amended and restated credit agreement with its existing lender. The amended facility provides a term of up to 24 months, which comprises an initial term of 18 months, plus an additional six-month extension option, which may be exercised upon mutual agreement between the company and the lender. Inclusive of the extension, the amended facility is expected to mature on Jan. 31, 2026. The company remains in good standing with existing lender, which it has worked with since November, 2019.

Go-forward business

Following the sale of WholesalePet, Emerge retains four brands across two main verticals, grocery and golf, namely truLOCAL, Carnivore Club, UnderPar and JustGolfStuff. Emerge expects further HQ cost reductions, given the reduced overheads required to service the go-forward brand portfolio.

truLOCAL, Emerge's premium meat subscription brand, is Emerge's largest business by revenue. truLOCAL experienced its most significant increase in profitability in 2023, following the company's various cost-savings initiatives and gross margin improvements. Carnivore Club, an artisanal meat subscription brand, is housed under truLOCAL, and currently being optimized for profitability.

Emerge also operates a golf vertical, across Canada and the United States, which includes UnderPar, its discounted experiences business, and JustGolfStuff, its fast-growing golf products and apparel business.

Top priorities

The company's top priorities in the near term are to i) drive organic growth; ii) continue to reduce debt and interest expense; iii) extract further operational efficiencies; and iv) enhance profitability and cash flow conversion.

Selected financial highlights

The attached table sets out selected financial information and should be read in conjunction with the company's consolidated financial statements and MD&A for the three and 12 months ended Dec. 31, 2023, which are available on SEDAR+.

About Emerge Commerce Ltd.

Emerge is a premium e-commerce brand portfolio in Canada and the U.S. Its subscription and marketplace e-commerce properties provide its members with access to unique offerings across grocery and golf verticals. The company's grocery businesses include truLOCAL.ca, its premium meat subscription brand, and Carnivore Club, its artisanal meat brand. Emerge's golf businesses include UnderPar, its discounted experiences business, and JustGolfStuff, its golf products and apparel brand.

We seek Safe Harbor.