VerticalScope (FORA) investor relations material

Executive summary

• Q3 revenue fell 11% YoY to $13.1M as lower search-driven programmatic advertising and custom-content revenue outweighed a partial-quarter AudienceEngine contribution; net income was $0.14M.

• AudienceEngine was discontinued as its lower monetization and working-capital needs outweighed its traffic contribution; its users generated revenue at about one-tenth the rate of core users.

• Two frontier AI-lab agreements create new data-licensing revenue streams expected to begin in Q4; one is a lumpy training license and one is usage-based.

Financial highlights

• Q3 revenue was $13.1M vs. $14.7M; 9M revenue was $38.5M vs. $42.8M.

• Q3 net income was $0.14M vs. a $0.42M loss; EPS was $0.01 vs. a $0.02 loss.

• Operating expenses fell $1.8M YoY, including lower acquired-intangible amortization and wage and consulting costs.

• Operating cash flow was $6.1M vs. $4.7M; free cash flow was $3.7M vs. $5.9M, with a working-capital release tied to AudienceEngine not expected to recur.

• Canadian tax incentives contributed ~$0.7M vs. $0.6M in the prior year and are not necessarily expected to recur.

Outlook and guidance

• FY Adjusted EBITDA margin guidance remains 30% or better; FY free cash flow conversion target is 80% or better, including applied AI investments.

• Q4 MAUs are expected below Q3 as AudienceEngine rolls off, with little expected top-line impact; seasonal ARPU improvement is expected to support Q4 revenue.

• Most training-license revenue is expected in Q4 after content acceptance; it is lumpy, not monthly recurring, and expected to flow almost entirely to the bottom line.

• The usage-based AI agreement began generating revenue in November across a subset of communities; it may expand if successful, with similar arrangements potentially developing in 2027.

• The November realignment is expected to reduce annualized costs by ~$4.4M; Q4 includes ~$1.6M in one-time termination costs excluded from adjusted results.