VerticalScope Holdings Inc T.FORA

TD

[retiredcf]

Currently have a $16.00 target. GLTA

RECORD MAU AND REVENUE GROWTH ACCELERATED IN Q3

THE TD COWEN INSIGHT

The main comp (Reddit) has been on a tear, so FORA should be viewed as an attractive alternative to more value-conscious investors who want exposure to the growth in community forum audiences.

Event: Q3/24 results.

Impact: SLIGHTLY POSITIVE

Revenue growth accelerated to 15% Y/Y in Q3 versus 14% in Q2, powered by digital advertising growth up 22% (versus +20% in Q2). Monthly active users on the company's sites also increased to a new record high (see figures in Figure 1). Management signaled that advertising revenue growth is off to a strong start in Q4. We see no reason why this stock should remain below $10, and we still look forward to news on how VerticalScope can sell its data to LLM platforms for cash and AI partnership benefits.

EBITDA and FCF both came in slightly below our estimates, but margins remain above 40%. Some technology scaling costs (likely cloud fees) and compensation accruals (owing to the strong YTD results) accounted for the slight miss, which are factors that give us little concern as long as engaged users on the authentic sites continue to translate into strong revenue growth. FCF was also sufficient to fund both share buybacks and debt reduction in the quarter, with leverage down to 1.3x EBITDA.