VerticalScope Q1 Earnings Call Highlights

Key Points

• Revenue fell in Q1 as programmatic advertising remained weak, with total revenue down 15% year over year to $11.6 million and digital ad revenue down 22%. Management said the quarter was likely the low point for 2026 comparisons, with sequential improvement expected later in the year.
• Direct advertising, e-commerce, and AI initiatives are helping diversify growth. Direct advertising rose 7% and now makes up more than 40% of digital ad mix, while e-commerce revenue increased 25% and new AI tools, including Fora Frank and an AI-powered commerce feature, are starting to generate revenue.
• Traffic and cash flow held up despite pressure, with monthly active users stabilizing around 85 million and cash flow remaining solid at 86% conversion of adjusted EBITDA to free cash flow. VerticalScope also continued debt reduction, making a $12 million voluntary repayment and targeting net leverage below 1x by year-end.

VerticalScope TSE: FORA reported lower first-quarter revenue as programmatic advertising remained under pressure, but management said improving traffic trends, growth in direct advertising and e-commerce, and new artificial intelligence initiatives position the company for stronger performance as 2026 progresses.

On the company’s Q1 2026 earnings call, Chief Executive Officer Chris Goodridge described the quarter as one of “focused execution,” saying VerticalScope is working to grow direct connections with users and advertisers, diversify revenue sources, expand AI-driven products and use its liquidity for disciplined investments.

“The strength of our core operating model continues to build our balance sheet and increasingly is creating optionality,” Goodridge said.

Revenue Declines on Programmatic Advertising Weakness

Chief Financial Officer Vince Bellissimo said first-quarter revenue was $11.6 million, down 15% from the prior year. Digital advertising revenue fell 22% to $9 million, driven primarily by a 34% decline in programmatic revenue. Bellissimo attributed the programmatic decline to lower impression volumes and weaker CPMs.

Management said Q1 was the company’s toughest year-over-year comparison and represented both a seasonal and structural low point for 2026. Bellissimo said the company expects programmatic advertising to return to historical sequential growth patterns as the year progresses, helped by stabilized organic traffic, improving yields and contributions from AudienceEngine.

Direct advertising grew 7% year-over-year in the quarter and now accounts for more than 40% of VerticalScope’s digital advertising mix, up from 30% a year earlier, according to Goodridge. He said the company is seeing strength in automotive, outdoors and powersports, along with new mandates in insurance and telecom in the U.S. and Canada.

“As the open web gets noisier and more saturated with AI-generated content, brands are placing a premium on reaching real people in brand safe, contextually relevant environments,” Goodridge said.

Traffic Stabilizes as Company Diversifies Sources

VerticalScope’s monthly active users averaged about 85 million in Q1, stable with the fourth quarter. Goodridge said MAUs rose to 90 million in March and continued to grow in April, with those patterns holding in early May.

Goodridge said the company is benefiting from increases in direct traffic and AudienceEngine, a capability designed to bring in new users and profitable revenue. During the Q&A session, he said alternative audience channels include social channels and display networks, though he declined to provide specific channel details, citing proprietary aspects of the strategy.

Management also pointed to recent changes by Google to its AI Overviews and AI Mode products as a possible traffic tailwind. Goodridge said those changes are designed to surface more links to authentic voices and first-hand perspectives from online discussions, including forum conversations.

“We’ve seen in the past that when Google makes product changes that point users towards forums and authentic user-generated content, that our communities benefit,” Goodridge said, while noting it remains early.

AI Initiatives Target Revenue Growth and Efficiency

Goodridge said VerticalScope is pushing to become an “AI-native company” and highlighted a partnership with AltaML, under which four deployed AI engineers will be embedded directly into the company’s operations. He said the goal is to build production-grade agentic workflows across the business to unlock revenue opportunities and improve operating leverage.

Bellissimo said VerticalScope identified and executed on an additional $1.5 million in estimated annualized cost savings after the quarter, centered on headcount, software and technology costs. Those savings are expected to be redeployed into capital investments in AI through the AltaML partnership.

The company expects to invest about $2 million in capital expenditures toward AI initiatives this year, in addition to an existing $1 million capitalized run rate for ongoing platform development, Bellissimo said.

Goodridge also highlighted Fora Frank, an AI product that he said has become part of the company’s community experience and is improving thread engagement. He said a new AI-powered commerce feature launched in the latest product release is already delivering more than $500,000 of annualized revenue within weeks of launch.

E-Commerce Grows, but Organic Contribution Flat

E-commerce revenue increased 25% in the first quarter. Bellissimo said the growth was largely driven by incremental contributions from Ritual Technologies, which VerticalScope acquired in April 2025. In response to an analyst question, Bellissimo said e-commerce revenue would have been flat year-over-year excluding acquisitions.

Management characterized e-commerce as a high-conviction growth area tied to VerticalScope’s high-intent user base. Bellissimo said AI-driven commerce experiences have expanded affiliate revenue opportunities and are expected to support momentum in the second half of the year.

Total average revenue per user increased 3% year-over-year despite an 18% decline in MAU, which Bellissimo said reflected the quality of the audience and growth in higher-yield streams such as direct advertising and e-commerce. Digital advertising ARPU declined 5% to $0.03, reflecting a shift in audience mix as the company diversifies traffic sources.

Cash Flow Holds Up as Debt Repayment Continues

VerticalScope reported a net loss of $3.1 million for the quarter, compared with a net loss of $2.4 million a year earlier. Bellissimo said the loss reflected lower revenue and $5.1 million in non-cash depreciation and amortization, largely related to acquired intangibles.

Adjusted EBITDA was $2.3 million, down 36%, with margins compressing to 20% from 27% a year earlier. Bellissimo said Q1 is typically the company’s margin low point and reiterated that management continues to target full-year adjusted EBITDA margins above 30%.

The company converted 86% of adjusted EBITDA to free cash flow, matching the prior-year rate. Operating cash flow rose 20% to $3.5 million, and VerticalScope ended the quarter with $19.6 million in cash.

In April, the company made a $12 million voluntary repayment against its revolver, reducing the drawn balance to $32 million and bringing implied net debt to about $27 million. Bellissimo said the company intends to remain aggressive on voluntary debt repayments and expects to exit 2026 with net leverage below 1x on a credit agreement basis.

Management also discussed ongoing data licensing opportunities. Goodridge said VerticalScope’s TollBit integration blocked 275 million unauthorized scrape attempts across its communities over the past three months from AI crawlers tied to major large language models. He said discussions are more advanced than before and that he expects to see a profit-and-loss impact this year, while adding that the company continues to take a patient approach to ensuring an appropriate value exchange.

Looking ahead, Bellissimo said Q2 will still reflect difficult programmatic comparisons, though the year-over-year gap is narrowing. He said direct advertising trends, AI-driven commerce, traffic diversification and AltaML-related operating leverage support an improving trajectory as the year progresses.

About VerticalScope TSE: FORA

VerticalScope Holdings Inc is a technology company that operates a cloud-based digital community platform comprising hyper-focused apps, forums, marketplaces, editorial, and e-commerce rating and brand review websites.

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