EMERGE Commerce Ltd. (ECOM) Earnings Call Transcript & Summary

Hello, everyone. I'm Ghassan Halazon for those of you who don't know me, CEO of EMERGE. I'm joined by Jonathan Leong, our CFO. Great to be with you all for this year-end webcast. Really appreciate you taking the time. I know everyone is probably quite busy wrapping up loose ends ahead of the holidays. And hope you've all been in good health, have been keeping busy as we have and looking forward to spending some quality with family and friends time over the holidays. So today, we wanted to sort of spend some time with you all and wrap up the year giving everyone key updates around the business as well as talking through our priorities for 2023. It's been a very busy, active year. In many ways, it's been a tricky year in the macro climate and the markets, as you all know, and are seeing not only with EMERGE, not only with e-commerce, not only with technology, but really broadly and globally. But pertaining to EMERGE specifically, we thought it would be a good idea to spend a bit of time updating everyone on where we're at right now in the road map, what are the things we're focused on and what we have in store for 2023. So with that, I'm going to share our presentation and dive right in. So just a quick recap for newcomers -- and I should say I [ appreciate ] all your attendance and taking time here. It's always nice to see the following that we have and the support, and really at end of the day, the interest in EMERGE. So thank you for that. Today, EMERGE is sitting north of $100 million in gross merchandise sales. That was a milestone that we had announced last year that we think is a big starting point into the big leagues of e-commerce. And gross merchandise sales, as we've said before, is the total amount of dollar value we process across our platform. Today, we have about 94 employees, which is -- we continue to focus on that metric of $1 million plus per employee in gross merchandise sale. I've been a student of the e-commerce space for a decade plus, really a dozen years at this point and we really pride ourselves on our ability to keep things lean and mean. And we encourage e-commerce investors and interested parties in the broader sector to really compare what that looks like, how that shakes up as a ratio. It's something we look at. And frankly, we think that employee to GMS ratio is key to continue to operate efficiently, especially in markets like these. 9 brands, 5 verticals across Canada and the U.S. We have a good mix. We continue to look at sort of the pet business that we recently acquired, which is going very well, our subscription businesses as well as our consumer marketplaces in areas like grocery and golf. So you guys are generally aware enough to speak on our portfolio. So I'll keep going. So let's talk a bit about sort of the performance of the business through Q3, which ended September 30. It was our actual results here. And as you can see -- just to sort of benchmark a bit, 2019, as most of you recall, is the sort of last pre-pandemic year. So that was an end of an era, so to speak. But for e-commerce, specifically, we like to benchmark against 2019 and really sort of get a directional sense as to where we are post pandemic. Now the thing to keep in mind with these numbers, these are actual EMERGE numbers. So obviously, they are not inclusive of pro forma results of our -- the vast majority of our portfolio from prior years. So here's a numbers for you that gives it a more apples-to-apples comparison, because, obviously, it's very clear that just purely on EMERGE numbers, there's been significant growth and progress. You're looking at revenues of $4 million back in 2019 and sort of -- kind of growing all the way up to -- through 3 quarters of this year, $42 million plus, on track to achieve anywhere between $55 million to $60 million in revenue, right. Same story -- GMS carries through that logic. And really, the big story this year is sort of our switch from marginal EBITDA profitability to very meaningful EBITDA profitability, having almost achieved $3 million heading into Q4, which puts us on track if you take sort of a general run rate north of -- or in and around sort of the $4-plus million range in EBITDA is possible. And as you look at that and compare where we've come from when we went public, it's kind of a major, major difference. I don't know if any of you track this, but I'll give you a fun fact of the day. And today is actually 2 years on the dot for EMERGE since going public through the IPO in December 14 in 2020. That was a very different time, of course. The stay-at-home craze, so to speak, the e-commerce peak craze, all of that was in play. And of course, that's reversed tremendously, especially this year. But if we just compared actual P&L results, the company, EMERGE, in 2020 was a $9 million revenue company. And this year, inclusive of Q4, normally our largest quarter for holiday shopping season for various verticals, you're looking at a business that has significantly grown almost sixfold by the end of this year versus the time we went and IPO-ed at $0.75 a share. That's the revenue side of the formula. The EBITDA side of the formula says that in 2020, our last private year for the most part, with the exception of the last 2 weeks of the year, EMERGE did $800,000 in adjusted EBITDA positive. And now, we're on track to be in and around that $4 million mark depending on sort of Q4 and so forth. So tremendous. Another 5, 6x growth in EBITDA since those periods. Now going back to my pro forma point. Something we don't have here, but just generally an interesting number for all of us to look at and keep tabs of is that EMERGE pro forma, inclusive of all of our brands, 9 brands that we have today and our verticals and our businesses, in 2019, if we collectively added all of those up on a pro forma basis, our revenue at that time would have been $36 million, okay. So whether we end the year at $55 million, $57 million or $60 million, wherever we end up, that is a good benchmark for investors to keep in mind as to -- when we hear pre-pandemic and then we hear peak pandemic, call it a year ago or 1.5 years ago, and then we say brands have come off, that's the sort of historical or at least the headline news that kind of has brought e-commerce down to earth. You got to remember that EMERGE -- I can't speak for other e-commerce companies, but EMERGE'S brands, pro forma in 2019 did $36 million. And you can do the math and see where we end this year and compare that sort of growth over a 2- to 3-year period. Let's keep moving. So a bit about sort of key investment highlights and some of these are implicit. And for those of you who know us, you've heard these in one way or the other. But I did want to sort of connect a few dots. Firstly, in e-commerce, scale really does matter and so it does matter in other industries as well. But especially in e-commerce, you really don't get the benefit of synergies and savings without that scale. You need volume, right? And that's that minimum entry point scale of $100 million that we recently eclipsed last year and have maintained/potentially can grow depending on Q4. So we feel that that's very much in check. We have the volume to start moving on synergies and savings. And in fact, we have started to, as we'll talk about. The majority of what we're buying, if you look at since going public -- and I gave WholesalePet as an example, which is about 45% of our overall sales -- is very sticky. It tilts towards B2B in WholesalePet's case because those are really long-term tenures on these key clients, some of them have been with us for 10 years plus. Imagine that. And so we're really trying to zoom in on the stickier side of e-commerce. Not all models are equal and nor are we perfect. We're honing our model. We're figuring out what makes sense, what we buy that looks longer term and better. And we want to do more of that, right? Diversifying has always been a strength of ours in this market. Some days you have -- in this case, the pet industry doing great, offsetting maybe something else that's taking a bit more time. We talked a bit about some of the golf and the discount challenges during the pandemic due to limited supply. We actually now think that in a world that's cooling down, in an economy and a consumer wallet that's weakening, we actually think discount golf and discount experiences could come back into play. And we're starting to see some signs of that in Q4. Another important point I'd like to make here is that we've actually spent the last 5, 6 years, but really the last few years honing our model, making those investments in HQ and in the team, in our data set up and in our infrastructure. When you're sitting on an asset base like ours that does anywhere between $7 million to $8 million in EBITDA, excluding our HQ and our overheads and ultimately our HoldCo, that HoldCo cost, that public cost, that setup cost kind of weighs down on something that's $7 million without it, $2 million or $3 million brings you down to $4 million. That's very meaningful impact on your overall picture. As EMERGE continues to grow, we do not foresee that HQ and PubCo cost growing proportionately. So we think the majority of those costs have already been taken and that level is not going to grow in proportion to the EBITDA growth from future acquisitions and so forth. So I wanted to point out that we've made those investments, in fact, we've fine-tuned them. We found some savings, if anything. And now we think that, that baseline is there, and we want to layer on that EBITDA and ultimately the cash flow. You know our team quite well. We'll spend a bit more time. And you know this is obviously despite the bringing back down to earth effect, where Shopify itself is down 80%. I'm still -- full disclosure, I'm still a shareholder there. And despite Amazon's woes and Wayfair's woes in the sector, this is a tremendous opportunity worth $5.7 trillion today and on track to double as you start thinking 5 years out, 7 years out. E-commerce factually is only heading in one direction, and if the pandemic sort of moved it, but not as fast as we thought, that's not a bad thing. That's actually a net positive versus pre-pandemic, right? Because of $36 million or $37 million in pro forma revenue that we had was growing at a more standard clip, we probably wouldn't have been in the $55 million to $60 million zone, which is where we are now. So speaking of the sector, and this is super interesting. We all know the big numbers. We know the space is large and growing. But I kind of want to zoom in a bit on this point that the reason EMERGE exists is what's happening in what we call the long tail of e-commerce, right? We have these small- to medium-sized e-commerce companies. Shopify has in excess of 1 million store -- merchant stores. Actually, I saw the other day, it's closer to 2 million lately. Amazon has 6 million third-party sellers on their little, what they call, SBA stores on Amazon. And this long tail of mostly bootstrap profitable little businesses -- and when I say a little, they may have $1 million to $2 million, $3 million, $4 million, $5 million in EBITDA. So they're not actually little. They're little in the context of overall e-commerce. That opportunity is what EMERGE decided we were going to go after. And as you probably heard by now, if you follow the sector, one of the biggest themes in the space is that of what they call e-commerce aggregators or consolidators of e-commerce assets, right? These are buyers, like EMERGE, that leverage scale to put pieces together, to buy businesses together in e-commerce and put them into a bigger portfolio that gains from the savings, the synergies and upsell and so forth. Now that's where the similarities end. Because if you think of the 3 -- really the 2 types of dominant aggregator models out there, you have on the one hand the Amazon aggregation model, which is led by companies like Thrasio. A unicorn has raised $1 billion to buy little Amazon stores. And you have folks like OpenStore more recently that are doing a methodical roll-up on Shopify kind of stores. The way we always envisioned EMERGE was, number one, we were not about the number of deals we were acquiring. So we were less interested in a lot of these little small ones that were disparate and that were reliant, frankly, on big platforms like Amazon. If you notice EMERGE has gone after what we call niche market leaders with a track record of organic growth and EBITDA today that's meaningful. So we tend to say we look at $1 million to $5 million EBITDA opportunities. But in the end, the biggest thing for us is that stickiness factor, and we're getting more and more focused there. We don't want to buy EBITDA for the sake of it. We want to buy platforms that have stood the test of time. As I said, WholesalePet. You might have never heard of it. We hadn't. But it landed on our desk, and it was a 20-year business with 20% CAGR over that period and it was in an excellent industry. Pets is only going in one direction, one of the few largely resilient sectors in e-commerce post coming down from the peak. You have the customer tenures through the roof, as I said 10-year plus tenures. And you had a core management team that's continued on with us and a plan to continue to grow this vertical. That's very different than buying a 3-person shop on Amazon that does $200,000 in EBITDA and buying 50 of those in 2 years, right? So our mindset has been left by fewer, higher-quality brands and businesses with inherent cash flow advantages, which we haven't perfected quite yet, but we are getting better and better. And WholesalePet is kind of that latest frontier that we've shown is the function of our evolution in terms of our capital allocation. I won't spend too much time on this slide. I've already recapped kind of our approach and our growth. You can see the post public acquisitions that we've made. They're on the subscription and B2B side. Versus prior to going public, we acquired some consumer marketplaces in previous years. The main thing to highlight today, our revenue is about anywhere -- or let's call it, our sales volume overall tracks 55% to 60% U.S. and 40% to 45% Canada. We expect the U.S. to continue to be a big part of our business. And this is one of the advantages we highlighted a little later that we might as well touch on. But obviously, as a Canadian-based first company, our HQ is here. The vast majority of our resources at HQ and support resources, and frankly, teams are based in Canada, largely in Ontario. But we do have a presence and we have tight dedicated teams in the U.S. But to that extent, selling in USD right now with a cost base in Canada is obviously a favorable thing and a nice tailwind that we've continued to benefit from. In fact, that's one of the reasons we saw net income positive in Q3, it was driven by that sort of ForEx, the same thing with EBITDA. On an adjusted EBITDA basis, we factor that out. But I just wanted to point out that, that's been a good tailwind for the business. And I don't know what your thoughts are on currency, but we think we're in a good spot to continue to benefit here in the near term. This is a slide that we've expanded on since last time. You all know the types of businesses we acquire. Obviously, we've been heads down this year and focused inwards on savings and synergies and on the balance sheet, which we'll talk about. That's obviously a key priority for us. But these are some of the reasons and these are some of the ways we structure our deals at EMERGE, and we think this is the same playbook that will continue once we're ready to resume our M&A. So let's deep dive a bit more into some synergies and savings, and let's chat a bit about some corporate updates. Our model all along has been to build up scale so that we can extract synergy and savings. There are multiple live examples here. I can highlight a few. I had talked previously, for some of you that may have tuned, about payment processing as a potential area of huge savings. And the logic is when we're -- we bought these companies last year, we bought 3 of them, which comprise the majority of our sales. Each of them was on a different payment processor, whether it would be Stripe or Braintree, Moneris. And we've yet to put all of these on together. Obviously, this is a live project. And to the extent that -- as the team believes, if we can extract even a 0.5% improvement in credit card fee -- if you take $100 million -- even let's simplify, $115 million, $120 million in sales that we process across the network, once this is technically fully completed, 0.5% of that is $600,000 in EBITDA, right? And then that's just one example. And it may not come in one piece. It may be in a few parts. We may move a few brands for certain reasons. We may integrate something a bit later. But overall, there is that sort of potential for a 0.5% improvement, which, by the way, has been confirmed to be a possibility. Logistics. We are now moving towards or at least -- I can speak for our Canadian brands, which is about, as I said, 45% of our sales, we are really making a push to get all logistics under one warehouse, and 2023 is definitely the year for that. We've already made moves with a few of our brands. We've already consolidated a bunch of customer service teams and brands under one roof, same with marketing. So we've made a lot of progress behind the scenes quietly in a difficult macro year, which I think has served us well. And I think that part of the thesis has been all along that we can actually accelerate these brands. What's interesting when you look at these examples that we've talked about before, which makes a lot of sense on paper but take a bit more time is when we went and acquired these brands, most of them last year, it takes time while we're -- you know our philosophy has always been decentralize, to partner with management long term. And so we will be pushing them while they're chasing their own goals to try these other areas that we think are conducive for organic growth. But in a market like this now, where we're doubling down and we've been with these groups for a year, a year plus, 2 years, we're really, really starting to zoom in on where these areas can be extracted. I think we're doing a much better job in recent weeks and months, preparing and planning to extract value starting Q4 and into the New Year. So we're very excited about those possibilities. And I feel like a lot of what we've been doing now will only start showing up from Q4 onwards, right, in terms of savings and improvements. So just touching on Q3, which is, to some extent, old news by now, but we'll do it quickly for those of you who are new to the story. GMS revenue, EBITDA, as we said, all speak for themselves. The net income is obviously largely driven by ForEx and by a reversal in contingent consideration. So wouldn't read too much into the strong positive net income, but we like to highlight things transparently. The EBITDA is really sort of the biggest thing to highlight, in that we moved from Q3, which is traditionally a seasonally down quarter for a number of our brands -- in the summer, subscription brands especially, they tend to either pause a service when they're traveling. They don't get that monthly box delivered. So Q3 has always been a trickier quarter, but we've really moved from a minus $0.5 million to plus $800,000 in EBITDA, which I think is positive. It's our 10th out of the last 11 quarters of positive EBITDA. So I think that's now becoming the norm, which is good. And sort of that next frontier is how we start converting EBITDA better to cash flow, which we'll talk about here shortly. The other thing that we completed recently was that $2.78 million convertible debenture, which was co-led by Echelon and Raymond James. They did a great job considering the macro climate. We've seen a lot of smaller companies unable to do this. So we were pleased and we're glad we were able to close on $2.78 million. It goes towards what would be a cheaper interest rate versus our current senior debt. And most of the proceeds are intended to reduce our senior debt for, in this case, a cheaper interest, longer-term component, which is a -- it's a 3-year note. It's a starting point, frankly, in a bigger discussion and a bigger strategic plan to really start improving the balance sheet, reducing interest payments and ultimately delevering the balance sheet to give us the benefit of converting all that EBITDA to bigger cash, right? Right now, I feel and we believe a lot of our EBITDA -- when you look at a company that's doing $4 million in EBITDA, you say, "Where is the cash?" Right? "Where is the cash going?" And the issue is that with our interest rates on our current debt facility -- which we paid down by $1 million recently, we're going to continue to pay that down is the plan -- you eat into a lot of that EBITDA, right? And so that model that we built in a low interest rate environment, where e-commerce was flying and M&A was flying has now switched on us. So what do we do when something switches on us? We recalibrate. And that's what we're doing. We're bringing in cheaper interest. We're paying down some debt, and we're doubling down on what's working so that we can really size back the balance sheet to match our goals for tomorrow and for 2023. One of the areas that we are pushing to improve cash flow, not necessarily interest, but to improve cash flow is operationally through the $1 million or so in savings that we announced, which have taken effect starting Q4. And then on top of that, during earnings, we talked about there's another up to $1 million in savings under review that we're being extremely focused on, extremely aggressive on. We think that these are largely non-revenue impacting changes. In any case that we've eliminated revenue, it was specifically because we felt that was, what we call, empty calorie revenue. In other words, if there were resources and there was some revenue, but that revenue wasn't profitable, we really don't want it. We're not interested in it. And we don't care what the market says about that, right? We care that if it makes sense for the bottom line, it makes sense for cash flow, it will be good for shareholders long term. And these are the types of logical decisions that we need to double down on and focus on. And we think that ultimately long-term folks and long-term businesses will prevail. So we're very focused on making sure those savings start hitting the bottom line and ultimately start improving cash flow conversion. A quick update on Q4. The only thing that we have shared that I'm able to share here is our Black Friday results. We saw organic growth, again, meaning non-M&A driven growth of 17% year-over-year in GMS. Multiple brands achieved double-digit growth: WholesalePet, UnderPar, Just Golf Stuff and WagJag. Black Friday isn't as big for our subscription brands for obvious reasons. It's a bigger commitment. It's a bigger sort of long-term membership type base. In one case, it's groceries with truLOCAL. So this isn't typically the biggest time of the year for them, that weekend and so forth. But no, we were quite pleased with it. I think overall, e-commerce -- the e-commerce sector and the retail sector -- I think there was an article that we referenced in our PR that was through the Adobe Annual Study, showed that the sector was up 2% on Black Friday. So we're quite pleased with these results, and obviously, we still have a good half of December left. And it's a big season for us. So we haven't closed Q4 yet. But this is going to be our final push here to wrap up with strength. Management team. You know us well by now. And I think this is a tight group that's working very well together as a core group from an operational perspective. I wanted to highlight Ian McKinnon for those of you who had not heard of him joining the Board back in June. Ian notably was on the Board as a Director of Constellation Software from 2006 to 2018. So he had a front row seat to Mark Leonard's genius and really sort of one of the most prolific not only technology, not only roll-up stories in Canada, but really one of the most prolific Canadian companies of all time. And so it's been amazing having Ian not only doing his sort of Board duties, Chair -- Committee Chair of Governance, helping us grow up in various areas, but he's actually had a very hands-on approach in supporting management and supporting and mentoring myself into thinking through how to grow the org chart up, how to double down on -- careful analytics and capital allocation strategies. So I think we're doing a lot of growing up and a lot of thinking around how this scales, and it's great to have his experience on board. I want to point you to the cap table on the right here. And we'll wrap up this presentation in the next couple of minutes, take some Q&A. Feel free to plug in some of your questions. I can see a few starting to come in. Type them in, and I'll try to address as many as we can in the last 15 minutes or so. But I wanted to talk about price and I wanted to talk about sort of the overall equation, because I think that's on a lot of people's mind, where I get these comments around, "We're seeing EMERGE. We're seeing the operational performance. We're seeing the revenue growth and the EBITDA growth. And there's pretty clear communication. But it's just the share price thing has continued to lag." And for the most part, we like to say we're very long-term focused. Share price is detached from fundamentals, et cetera, et cetera. But I think it's important that you guys all get context as to the way we see things. There's a few things that have impacted share price since we went public 2 years ago when we were 1/6th the size, right? One is the untangling of the stay-at-home e-commerce trend. This is a pure macro trend. We may have never deserved to be a $1 plus or $1.40 plus stock at the time that we were being rated that way prior to all of our acquisitions, right? Shopify is down 75% to 80%, so forth. So that's one effect that's hit us, and of course, it largely attacked the small cap industry. So that's a macro thing. We don't talk about that. We don't control that. If things go back and we do very well on the macro and e-commerce is super hot, which we expect it will be at some point, that's not our doing either, right, up or down. That's part 1, right? And I think part 2 of the equation is really sort of this balance sheet discussion, right? I talked about it, so I don't want to rehash too much. But the fact is that our balance sheet, our debt facility -- and thankfully, we have a very good relationship with our lender. We've never skipped a payment. We've never breached the covenant. We've been with them for 3-plus years, and they continuously lent us capital to deploy towards our plan of scaling the business. At the same time, we're in a year now where we are committing to start to pay that capital down. And I think that as the markets/investors weigh what was a largely debt-driven M&A strategy in a higher interest rate environment, no doubt that's causing strain on the share price. And I think to the extent that you as an investor get to know us, get to know how we're performing, get to know how we're communicating. If you believe that we're going to work things out on the balance sheet, that's where we think there is value, right? Because to the extent that we come back with a refinancing of a partner or figuring out other ways to plug the balance sheet via savings, operating savings, agreements with the lenders that give us more room as we've shown we've been able to do, all of these things mean that the equity, which today is valued at $10 million market cap or thereabout, start to be in a position to transform substantially if you believe that the company's balance sheet can be in good shape. And that's more something an investor has to weigh. We're not going to tell you what to think. We're certainly not going to tell you what we're working on that we're not allowed to or not permitted to share. But certainly like we're not just sitting back here just looking at this and saying, "Let's just put our heads down and not tackle the balance sheet." That is a big, big priority, and that's what we've been focused on. We've been very vocal about that. And that convertible note, even at face value may not look like it. It is a first step, right, where we've sort of started to attack capital towards paying down the lender, getting this new debt at a cheaper rate than we had with the lender and now plotting a path to paying it down. We made the announcement that our goal was to drop the debt from -- the senior debt from $25 million to $19 million in 2023. And our goal is to increase EBITDA on the other side of the spectrum, right, via savings, via organic, via all these initiatives. So if you think EBITDA is going up and debt is going down and we achieve our goals, then our ratio of debt-to-EBITDA is much more conducive to what the market is looking for, then you ask yourself, "If that happens, what happens to the equity value of the company?" And that's an answer only you can determine by doing your own analysis, of course. Just to wrap up. We aren't here just to buy EBITDA and revenue. We're really here to take all of that asset base and leverage really new exciting things that we haven't had a chance to talk about because we're so -- as I see it, so early in the journey that -- there are areas of loyalty. That's a big area of interest. Why should our brands not gain from shopping on as a user shopping on different brands? If you have a truLOCAL box, would you be interested in golf, would you be interested in a ski resort on WagJag, would you be interested in -- you have a pet, and will you do more with pets over time. And so like there's a lot of areas here where this becomes super exciting. But you've got to get your basics in order. And I think that's what we've been doing this year and preparing for that sort of next phase of growth. Normally, I say if I've done my job right here to conclude, you will have heard of all of this already. Focus has been inwards this year in a year like this, getting those savings, getting those synergies, driving that core baseline business. We feel like the P&L is in good check. We feel like it's a big mandate and we've prioritize getting more of that EBITDA to convert the cash flow. It's part more savings and improvements in EBITDA operationally. It's also part tackling the balance sheet and the interest payments and the rate we're at and lowering our overall debt, but also potentially lowering our interest rate, right? I think the idea that I'll leave you with is, we have intended to -- we always talked about the $100 million revenue and really more importantly, the $10 million EBITDA mark. And we still very much believe that keeping our heads down for the next while, making sure we are prepared, our balance sheet is strengthened, that we are now then in a position to tackle the next couple of acquisitions, putting us in that $10 million EBITDA business. And I always say getting to $10 million EBITDA -- at the end of the day, no matter how you spin it or how -- what multiple you apply to us, we certainly don't believe a $10 million EBITDA company is a $0.10 stock. And we think that there's still quite a ways to go to get there. A lot of hard work, a lot of execution, frankly, has to happen. And that's the ultimate bet you're making. Because so many companies have been hit down 70%, 80%, 90%, especially in small cap and especially in Canada. So the real question is, who deserves to come up, who deserves to emerge really back and rise again? And so that's something only you as an investor can watch and diligence. And ultimately, we've always been available to answer your questions. So with that, let me take some questions and see if anyone has anything that we haven't touched on here that I can help you guys with.

Okay. So I'm collecting -- I see a few of these here. Firstly, which verticals are working really well for you? Do you see yourself doubling down there and maybe selling a noncore asset in this market? It's a good question, and it's a fair question. We did touch on this a little bit during our earnings call. I think the thought process is that -- no secret. We've been very pleased with the stickiness and the retention and the cash flows of our pet business, WholesalePet, which happens to be in many ways sort of our first foray into B2B and our first foray into pets. And we feel that, that is an area of interest, both the pet space as well as the B2B space and our learnings on that front. So I would first say that. The idea of whether we are open to asset sales. We don't preclude ourselves out of any process, quite frankly. I mean it's kind of something that we've actively focused on building these businesses into perpetuity, is kind of our model. But we are also rationale afterwards. If we learn that certain models or businesses are working better for us and that there is an opportunity or a tradeoff that works for us from a "what can we get for a business because some strategic group has come to us, and what can we do with that capital to double down where we are winning or to pay down more debt," these are all very logical areas that we would be open to in times like these. But I think first and foremost, we are very excited about the pet business. We are seeing some good stability and good visibility in the truLOCAL business, which we always viewed as an excellent brand and a huge opportunity. And as you guys know, our previous -- oh, sorry, our pre-public companies like UnderPar and WagJag, those are businesses that were actually hit hard during the pandemic given the limited supply. For example, in golf, everyone was playing golf. So the golf courses didn't need us as much. But in a world that -- if you believe like we do that the world is cooling and that consumer wallet is cooling, even for golf, which sounds hard to believe for the avid golfers out there, that tends to be good for our business. That's when golf courses need us for the discount. So we think there's value there as well. But overall, yes, we will be pragmatic. We are being pragmatic and exploring what asset mix makes the most sense in the next phase. And I think that there are some real brands. We have some real market leaders/some incredible brands and teams, and ultimately, P&Ls that could yield significant value if it made sense for us. Another question. Where do you see the cash position and the debt level being early next year? Are you looking to resume acquisitions next year? It's a good question. It's one I frankly anticipated. So obviously, we had closed Q3 in and around the $4 million mark in cash. We subsequently raised the $2.78 million in November. And of course, we have made different payments out. One of the things that we've been actively reducing is working out some of these deferred payments for some of our existing brands. So in some cases, we've worked with them. We have a great relationship with all of them. We're working on good schedules that have given us some freedom. But we are chipping away at some of those and reducing our liabilities there. But we also have high season in Q4. So there's multiple moving parts as to where cash ends up. We don't give guidance on what we think cash will look like. But I've given you a sense of a few moving parts. But we feel like our -- we have a cash position that ended $4 million in Q3. And we're probably higher than that right now just given the peak holiday season. But again, every season is a little different. In terms of our debt level, yes, I mean our goal is to continue to pay down that debt. We paid our senior lender down by $1 million. So that's now down to $24 million. Our goal is to bring it down to $19 million in 2023, as we've outlined. Thank you for connecting with the shareholders. Is there a plan to keep the shareholders informed on a frequent basis given how the stock has reacted? Thank you, [ Yogi ]. I think we absolutely want to do it. I don't know if other small cap companies that have been hit as hard as we have, have put themselves in front of investors like we have here to end the year. We thought it was important and we thought that we owed it to you all to spend some time to answer some questions to keep you guys abreast. And you can expect that to continue. We are looking at whether more webcasts of this nature makes sense. I would like to hear feedback. If we get enough feedback that this webcast is useful, then surely we will invest more in it. But generally, yes, we are for more communication to the extent that we're able to, not less. So thanks for the question there. Did your M&A employee leave? Yes. Thanks for your question. Yes, George Marouchos, who head up M&A and joined us at the time of go public is no longer with the company. I think part of the thinking -- I really like George. I have a great relationship -- I actually have a great personal relationship with George. I've known him for many, many years. I think the thought process on both sides during a year like this one was that we knew that we were not going to be doing M&A. And as part of our bigger communications, last discussion to think through the cost side, I think the decision that was arrived that made sense. Once we reignite M&A, as I said, even if we're looking at some stuff in the background, probably not looking to do M&A till earliest spring of next year after we tackle some of the work that remains in front of us. Probably more like second half of next year is when we want to double down on M&A. So I think that made sense, and it's in line with our bigger thinking of cutting some costs and making sure that we're very prudent with our capital. Given the share price lag, would it make sense to sell EMERGE at a premium? And who are prime strategic buyers for EMERGE? So I'll tell you something, guys. Obviously, we had a press release the other day about us terminating our Investor Relations contract. That's another example of savings that are meaningful to the company. But that means that we don't get to screen these questions out. I just read them on the fly. And you're getting it live straight from me, which I hope you appreciate is, a, transparent; and b, at the very least, entertaining for you guys to see how I address these. But the end of the day, the space has heated up. It is what it is. To my point earlier on the slide about Shopify roll-ups, Amazon roll-ups, I'm speaking of companies -- and I know companies that have $100 million to $200 million in funding and I know companies that have $500 million to $1 billion in funding. And we speak -- and of course, these mostly private companies have yet to really be recalibrated. A lot of them are valued on revenue multiples. A lot of them don't have real EBITDA. And frankly, some of them that have $100 million or $200 million in funding are smaller than us in every measure. And that's probably because they started after us. But where this gets interesting in the [ sense ] of outreach we're getting is, "EMERGE is" -- "kind of has the GMS, has the revenue, has the EBITDA. But the balance sheet isn't great." But could there be that sort of interest? Now we're not actively running around chopping the company. I want to be super clear about that. It's natural that in a space that's super well-funded -- I think $15 billion have gone into roll-ups. There are more interesting opportunities out there. And we'll leave it at that. But I think aggregators, if I have to pin it into who would be a strategic buyer, aggregators of that sort are probably the prime candidate. The other candidate, obviously, in any EBITDA play is sort of the PE crowd. But I would say that, again, we are not formally doing any of these things. We know a lot of people in the sector naturally and we know a lot of folks that are paying attention to EMERGE and kind of where we are from a market cap perspective. But we have nothing to report, and we will always do what's in the best interest of shareholders long term one way or the other. How are you thinking of acquisitions in 2023? I kind of answered that a bit. It's more like a second half of the year, where really the only thing I'll say is, ironically, because of this sort of, I guess, messy year, if you could put it that way -- not Messi Argentina, which I'm a fan, but it has been a messy 2022 for most. But I would say it's been a blessing in disguise in that it's allowed us to focus inwards. If we were under the traditional setup that we were when we went public. If go, go, go, let's buy, buy, buy other acquisitions. No time to digest. No time to integrate. And so I feel like we've done a very good job of, frankly, getting to know this existing asset base, getting to know the teams, the management team, to think through synergies, get these org charts and these incentives in line. This is a lot of work that, frankly, breaks in many cases in M&A plays that are rushing. So I feel like that's been good for us. And we will take another probably 1 to 2 quarters to really focus on ops, focus on the balance sheet, get ourselves set up and then hopefully be able to resume our M&A after that. Another question, this will be the final question. Actually, I see a few popping by. Let me see how many I can take. From what I understand, EMERGE shares could be very well trading below their intrinsic value, given the numbers you've outlined. When does the repurchase of shares make sense as part of the EBITDA conversion to cash flow process? I think it's a fair question. People have raised sort of the NCIB and the repurchase of shares before. I would say that it's something in the long-term best interest we imagine that is a good fit for EMERGE. But realistically, in the short to medium term, even if the optics are nice -- we're trying to really steer away from optics and PR versus actual results in line with what we need to be doing. It does -- it's probably not a good use of cash short term to be buying back shares when a lot of that cash would go to paying down debt and reducing our interest to the extent that it is made available. So I would say part A, focus inwards, focus on ops, focus on the balance sheet, whether that's a refinancing at a cheaper rate and a longer term as we think may be available, or potentially a noncore asset that we don't need disposing of those and bringing in more cash to double down where we're winning. Doing all of these things, first and foremost, is key. As the company starts freeing up cash and as we are in a better balance sheet and debt position that we feel compels us to have that free cash put back into repurchase of shares, we think that makes some lot of sense. And it has worked wonders for companies that have done it with discipline and with continuity rather than just to sort of put it out there as a program and do a bit of it, but really not be a good use of cash. Hopefully, that answers the question. What would get you more excited to do more M&A? What's the bottleneck now? Is it capital? Are prices too high? Or are you simply focused on improving assets? Very similar to what we've touched on. So we're excited about M&A. It's the best buyer's market I've ever seen in e-commerce over the last 12 years of being in this space. And listen, I've bootstrapped, I've acquired, I've sold, I've restructured. We've gone through the cycle in many ways even prior to EMERGE. So I can tell you definitively, this is the ultimate buyer's market. But -- and sorry. Let me sort of say, it's the ultimate buyer's market. The multiples seem to be coming down. We used to see 4, 5, 6x. We're even seeing 2, 3, 4x now, right? So they've definitely come down. But you've got to be buying the stuff that's the most quality. And you've got to be doubling down on the assets and the business models that work best from our learnings. We have more learnings than anyone or almost anyone in this space. We started aggregating e-commerce businesses way before any of these big names that I've mentioned that have all taken private money and big debt --big, big debt that they've taken compared to EMERGE. So we feel that we have the learnings to pour back internally. But we think it's a terrific market, and we think the next 2 years will be an absolutely phenomenal market for buying top-notch assets at a discount. I'm going to conclude there. There seems to be some more flowing in. And I think we're about 7 minutes over the 45-minute allotted time. But I will say this. Please, as always, send your questions to [email protected]. Myself and Jonathan, the CFO, and a few others around us, we do our weekly get together and look at all of these types of questions and make sure we answer them. Whether through our team or ourselves directly, you will get answers. But we really appreciate all the time and the patience and the terrific attendance here to wrap up the year and wrap up sort of what is a 2-year milestone for the company as a public company. We feel that we've grown this business by 6x plus in revenue. We've grown it by 6-plus times in EBITDA, more. We feel like we've done a really good job on the P&L. The balance sheet is the next frontier. We're taking the necessary steps we believe to unlock that value. And we'll always, always communicate clearly and transparently. And we really appreciate all your support and your partnership and your questions at any time. Thank you. Happy holidays from the EMERGE family. Have a great end to the year, and good luck all in 2023 and beyond. Take care.