VerticalScope Q2 Earnings Call Highlights

Key Points

• Q2 revenue fell 5% year over year to $13.8 million, but rose 20% sequentially, while adjusted EBITDA increased 4% to $4.5 million and margin expanded to 32%. Net loss narrowed to $800,000.
• Monthly active users grew 14% to 103 million, driven primarily by paid AudienceEngine traffic. Programmatic advertising’s decline narrowed to 8%, while AI-driven affiliate-commerce initiatives approached a $1 million annual revenue run rate.
• VerticalScope reduced operating expenses by 13% and repaid $12 million of debt, while investing $400,000 in AI during the quarter and maintaining its plan for roughly $2 million of AI investment in 2026. The company also advanced discussions on a potential ongoing AI-content licensing deal.

VerticalScope TSE: FORA reported second-quarter 2026 revenue of $13.8 million, down 5% from a year earlier but up 20% sequentially, as the company cited improving programmatic advertising trends, growth in paid audience acquisition and expanding AI-driven commerce initiatives.

Adjusted EBITDA rose 4% year over year to $4.5 million, while adjusted EBITDA margin expanded by 270 basis points to 32%. Net loss narrowed to $800,000 from $1.8 million in the prior-year quarter. Chief Executive Officer Chris Goodridge said the quarter showed that work undertaken over the past year was beginning to appear in the company’s financial results.

“Revenue trends are improving, adjusted EBITDA is growing, and margins are expanding,” Goodridge said, adding that the company was funding AI initiatives while maintaining cost discipline.

Audience growth driven by paid traffic

Monthly active users averaged 103 million during the quarter, an increase of 14% from a year earlier and the company’s first year-over-year MAU growth since changes in the search environment affected traffic. Goodridge said most of the increase came from AudienceEngine, VerticalScope’s paid traffic source, with a smaller contribution from direct users.

Google Search traffic has stabilized in recent months but remained significantly below the prior-year level, according to management. Goodridge said recent Google product changes intended to surface links to first-hand discussions had not yet contributed to VerticalScope’s growth.

Management said traffic acquired through AudienceEngine is profitable but monetizes at a lower rate than organic search traffic, contributing to a 16% year-over-year decline in average revenue per user to $0.045. Chief Financial Officer Vince Bellissimo said the reported ARPU decline also reflects the program’s accounting presentation: acquired visitors are included in MAU at their full count, while related revenue is recorded net of traffic acquisition costs.

Bellissimo said AudienceEngine is currently managed for yield and return on investment, with each campaign subject to a return threshold. The next stage, he said, will focus on directing acquired audiences toward VerticalScope products and apps to increase engagement on its platform.

Advertising decline narrows as commerce initiatives scale

Digital advertising revenue was $10.9 million in the quarter, down 5% year over year. Programmatic advertising revenue declined 8% from a year earlier, narrowing from a 34% decline in the first quarter. Goodridge characterized the move into a single-digit decline as the quarter’s most important trend, citing improved CPM and impression trends as well as the AudienceEngine ramp.

Direct advertising revenue was flat in the second quarter and increased 3% during the first half. Management said campaign launch timing affected quarterly results, while direct bookings as of the end of July were pacing 7% above the prior year. The company also added two new insurance advertising customers in July.

E-commerce revenue totaled $2.9 million. Bellissimo said e-commerce revenue grew 7% during the first half, reflecting a full six months of Ritual compared with a partial period in the prior year. Total e-commerce excluding Ritual increased 3% in the second quarter, while affiliate commerce revenue on the Fora platform rose 13% year over year.

Goodridge said AI-driven affiliate-commerce initiatives were approaching a $1 million annual revenue run rate, roughly double the level when the company last reported the metric. Management also said it sees potential for AudienceEngine to support commerce by directing users toward relevant products and discussions.

Cost reductions and AI investment

Total operating expenses declined 13% from a year earlier, including an 18% reduction in wages and consulting costs and a 14% decline in platform and technology expenses. Bellissimo said previously announced annualized savings of $1.5 million were now fully reflected in the company’s cost base.

VerticalScope said it is redeploying savings into AI-focused capital expenditures. The company invested $400,000 in AI-related capital spending during the second quarter and reiterated that it remains on track for approximately $2 million of incremental AI investment for the full year.

The company’s work with AltaML includes automated workflows across community, content and sales operations. Goodridge said AI is being used to improve content moderation, member engagement, question routing, advertising proposals and campaign management. Bellissimo said the expected efficiency benefits from AltaML’s applied AI workflows were not yet reflected in second-quarter results because the first phase was only beginning to enter production.

Management reiterated a target of more than 30% adjusted EBITDA margin on a full-year basis. Free cash flow conversion was 81% in the second quarter and 83% for the first half, including the increased AI-related capital spending.

Debt reduction, AltaML investment and content licensing

VerticalScope repaid $12 million on its revolving credit facility during the quarter, ending June with gross debt of $32 million and total liquidity of $75.3 million. The company later drew approximately $6 million on the revolver in July to make a $6.1 million secured debt investment in AltaML.

The AltaML investment is interest-bearing, matures in 18 months and can be extended to 30 months at AltaML’s option. VerticalScope also has an option to participate in AltaML’s next equity financing round. Bellissimo said the investment will be reported as a note receivable, while a related warrant will be valued under IFRS each quarter.

The company’s net leverage ratio ended the quarter at 1.24 times under its credit agreement. Following the July borrowing, Bellissimo said leverage moved to approximately 1.5 times and that the company expects to return toward low one-times leverage by year-end.

On AI content licensing, Goodridge said VerticalScope was in advanced discussions with a major technology company regarding a deal to compensate the company for its contribution to AI-generated responses. He said a potential agreement would be ongoing rather than a one-time payment, though management did not provide an estimate of its potential financial impact.

VerticalScope also filed a statement of claim against OpenAI in Ontario Superior Court of Justice in May. Goodridge said the company would provide updates as that legal matter develops.

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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