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Hello everyone, and welcome to the VerticalScope Holdings Incorporated Q4 and Full Year 2022 Earnings Call. My name is Emily, and I'll be coordinating your call today. [Operator Instructions]I will now turn the call over to our host Diane Yu, Chief Legal Officer. Please go ahead, Diane.
Thank you, operator. Good morning, everyone, and welcome to VerticalScope Holdings' fourth quarter and full year 2022 earnings call. I'm joined by Rob Laidlaw, our Founder, Chair and Chief Executive Officer; Vince Bellissimo, our Chief Financial Officer; and Chris Goodridge, our President and Chief Operating Officer.We'll begin with commentary on the quarter before opening the floor to questions. Before we begin, I'd like to remind everyone that today's presentation contains forward-looking information that involves known and unknown risks and uncertainties and other factors that could cause actual events to differ materially from current expectations. These statements should not be read as assurances of future performance or results. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements.A more complete discussion of the risks and uncertainties facing the company appears in the company's Management Discussion and Analysis for the 3- and 12-month period ended December 31st, 2022, which is available under the company's profile on SEDAR, as well as on the company's website. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. The company disclaims any intention or obligation, except to the extent required by law, to update and revise any forward-looking statements as a result of new information, future events or for any other reason.Our discussion today will include references to adjusted financial measures, including adjusted EBITDA, free cash flow, free cash flow conversion, and MAU, which are all non-IFRS measures. All references to currency in this presentation shall refer to USD unless otherwise specified.Now I will turn the call over to Rob Laidlaw. Founder, Chair and CEO of VerticalScope. Rob?
Thanks, Diane. Good morning, everyone, and thank you for joining us today. I would like to start off by expressing my gratitude to the exceptional team at VerticalScope for their hard work over the past few months. Our efforts have yielded significant progress on Fora, and we are more excited than ever about some of the product initiatives that we are currently focused on.On today's call, I'll give you just a brief overview of the financial results and let Vince and Chris provide more detail. We wrapped up 2022 with $80.5 million of revenue, up 22% versus the prior year, including $19.1 million in the fourth quarter, down about 11%. Most of the decline came from our Commerce channel where we continue to face post-COVID pullbacks combined with economic headwinds and reduced levels of commerce-related traffic. There is no quick fix for our commerce challenges, and therefore we reduced our team sizing in February 2023.Programmatic and direct advertising fared better than commerce, but still encountered some pullbacks in the quarter as advertisers reduced spend throughout late November and December. We believe that we have some additional levers to pull and continue to be optimistic about 2023 advertising revenue as we get those optimizations into place.Our 2022 adjusted EBITDA came in at $30.9 million, up 6% versus the prior year and inclusive of $7.2 million of fourth quarter adjusted EBITDA, which amounted to a 23% decline. The holiday shopping season showed weakness for us in key categories such as fitness, while streaming providers pulled back on new customer acquisition costs in what were both high-margin categories for us. The decline in adjusted EBITDA and in overall EBITDA margins in the fourth quarter positioned us to reduce our costs in February and become more selective about our growth initiatives. We value our margins and believe they are part of what makes VerticalScope a unique and special business in the tech space, and we plan to get them back to the 40%-plus level.MAUs in the quarter were $114 million, which was up 7% versus last year. However, we had to overcome a 5.9% organic decline as we saw pullback around some volatility with Google algorithms in the period. We expect that we will continue an organic decline for a few more quarters as we work towards achieving some of our product goals and work towards long-term organic growth.For 2023, we have strengthened our focus around 3 key product initiatives at VerticalScope: #1, revenue growth; #2, our mobile app; and #3, our product discovery engine. First, with respect to our revenue initiative, we are laser focused on growing our revenue through an improved and optimized advertising stack. We are wrapping up testing of multiple in-house and outsourced options, and once we are fully implemented during the second quarter, we believe we'll be able to achieve year-over-year gains in advertising that will offset some of the current environment pressures. We are also testing certain video advertising implementations, and while we are being extremely careful about the user experience on our communities, the early engagement, performance, and CPM data look promising. We will have more on this for you next quarter as we try to wrap up our test by the end of Q1.Second, on our mobile app. This is something we've been talking about for a while, but during the last few months the team has made some significant breakthroughs around retention and engagement. We are excited about the results and nearing our target of best-in-class retention, which will allow us to begin rolling it out to more communities and then to our entire Fora platform. Impressively, we are finding that user posting activity and even mobile app revenue are showing better-than-anticipated results, which we believe will provide a further content flywheel for our business over the long term. I will touch on why this is so important in a few minutes.Lastly, we are continuing our work on a product discovery engine that will bring a brand new user experience, to form communities, and allow them to discover cool products that enthusiasts will love to talk about. We are looking to launch this in the fourth quarter of this year, and we'll share more as we move further down our roadmap. We are excited about what this means for communities, creators and, of course, our millions of enthusiasts.The last topic I wanted to cover today was AI and specifically large language models and generative AI, such as ChatGPT. I've received a lot of investor and analyst inquiries about how ChatGPT and AI in general could affect our business. We are huge believers in the transformative power of AI, and our teams have already been building R&D experiments in this area. Some of these are live and providing valuable test data. Potential applications of AI are vast and exciting, including, but not limited to, improving the quality of answers to users' questions by utilizing large language models to understand and transform the unique content that has been generated within our UGC communities. Assisting users in crafting better questions through assisted composition, integrating Q&A chatbots for more natural communication, automating community moderation and administration, and enhancing operational efficiencies across various areas of our business, from customer support to outbound sales and even helping our nontechnical staff write code.We believe that AI presents challenges, but also increases the premium on user-generated content. Our work in mobile and product discovery make it easier for enthusiasts to share first-hand rich media, which are less easily summarized than text content. In fact, we believe our user-generated content will become more valuable as AI commoditizes secondhand or derivative content. It also reminds me of how important that direct one-to-one relationships our communities have with our users is and why our mobile app launch is important to our future to bring users directly into Fora when they are seeking information related to their hobby. We believe we will be able to serve our users and customers with better answers and experiences than ever before with the power of AI.With that, I'll turn it over to Chris and Vince to walk you through the details of our financial results.
Thanks, Rob, and good morning, everyone. As Rob indicated, the strength we experienced across the business in the first three quarters of the year did not repeat in Q4 as the macro challenges that we discussed in our last call translated to lower commerce activity, weaker programmatic rates, and reduced demand from direct advertising partners. The normal seasonal spike that we experienced in late November into December did not materialize this quarter.On an annual basis, 2022 revenue was $80.5 million, up 22% over prior year, with 68% of revenue coming from advertising and 32% from commerce. Advertising grew 25% in the year, with gains from both direct and programmatic, while commerce grew 17% over prior year with strength in thestreamable.com being a key growth contributor.Turning back to Q4 results. Our run of 7 consecutive quarters of double-digit advertising growth stalled in Q4. By mid-quarter, we started to see softer programmatic CPMs and the surge in direct spend that we typically experience in November and December did not materialize, as advertisers pulled back given the uncertain macro backdrop. For the quarter, advertising revenue was $14.2 million, which was 6% lower than prior year with programmatic down 5% and direct down 6%. Programmatic made up 57% of total advertising and direct contributed 43%. From an advertiser category perspective, automotive continued to show signs of modest improvement, but this wasn't enough to offset lower spending from the retail category, particularly in the month of December.Turning to e-commerce revenue, it was a challenging quarter for this part of the business with total revenue of $4.9 million, 24% lower than prior year. We continued to see lower transaction volume in consumer categories that have struggled since the post-pandemic reopening began categories like fitness, but we also experienced lower commission rates on thestreamable.com as certain streaming partners shifted their current focus to profitability over customer acquisition. During the quarter, our recurring revenue subscription business contributed 40% of our e-commerce revenue and is providing a partial hedge against the more transactional parts of the business that are more directly impacted by the current macro trends being experienced.Turning to our outlook for Q1 and for 2023. The negative trends we experienced in the second half of Q4 continued into Q1. Direct advertisers started the year cautious with spending commitments, programmatic CPMs continued to be challenged, and commerce transaction activity has not yet improved. However, we think Q1 will be a trough for the business as we are starting to see encouraging signs from many of our direct accounts that their pullback is temporary and spending will pick up in Q2 and for the balance of 2023. On the programmatic side, as Rob alluded to, we've been working hard on improvements to our programmatic technology that are showing strong results in testing and we expect will have a meaningful impact to our Q2 results and for the balance of the year. And we're also encouraged by our early tests with video formats. Video advertising attracts much higher CPMs than standard display, and we think we have a solution that will be attractive to our direct partners, but that can also be monetized through programmatic channels. We'll have more to report on the impact of these initiatives on our next call.Turning briefly to M&A. We were relatively quiet in 2022 with 14 deals completed and $4.4 million of capital deployed. Our pipeline remained strong, and we've progressed to deeper due diligence on a few deals that we're taking a really close look at. But consistent with our approach over the past year, we will only pull the trigger on the best opportunities that are clearly accretive or provide outsized growth. There's a lot of opportunity to continue to scale the business with M&A, but we won't waver from our disciplined approach.And with that, I'm going to turn it over to Vince to walk you through the rest of our financial results.
Thanks, Chris, and thanks, everyone, for listening in this morning. To start, I would like to recap some of the key accomplishments in 2022 that had a positive impact on our financial position and long-term growth strategy. Our 2021 acquisitions were successfully integrated into the VerticalScope family and have made a meaningful contribution to our operations and financial results. The onboarded talent from these acquisitions have increased the caliber of our engineering product and design teams and have helped accelerate our product-led growth strategy. In addition, we continued to strengthen our financial position and drive long-term value for our shareholders by using our strong free cash flow to pay down debt, reinvest in our platform, and fund M&A.Despite mounting pressures to the top line, we have continued to generate healthy margins and free cash flow conversion. Our adjusted EBITDA margin for both Q4 and 2022 was 38%, down 6 percentage points, respectively, when compared to prior year. Key drivers of the year-over-year decline include a weak Q4 when compared to our record performance in the prior year, the full-year impact of employees and consultants onboarded from 2021 acquisitions, and the impacts of wage inflation to our average cost per head. Our free cash flow conversion in the year was 70%, down from 81% in the prior year, driven by an incremental $3.6 million in taxes paid in the period.Total operating expenses for the year increased by 43%, or $31.3 million driven by an $18 million increase in depreciation and amortization expense, largely attributed to the amortization of 2021 acquired intangibles and an $8.9 million increase in wages and consulting costs driven by the full-year impact of employees onboarded from the 2021 acquisitions. Our average headcount grew 13% in 2022 to 289 employees compared to 255 employees in the prior year. Wage inflation in the first half of the year was also a contributing factor to the year-over-year increase, with the market cooling subsequently due to [ macro-driven ] layoffs in the tech sector.Now turning to our financial position and cash flow generation. We ended the year with $8.8 million in unrestricted cash and $57 million in principal outstanding on our credit facility. Including $16 million in contingent considerations relating to the acquisition of thestreamable.com, our net debt position was $73 million or just over 2x full year 2022 adjusted EBITDA. Note that the long-term portion of thestreamable.com contingent consideration payable in the second year of the earn-out period was reduced to $1.1 million, a reduction of $6.3 million when compared to the $7.4 million liability recorded at the end of Q3. The revaluation of this contingency was driven by the pullback [ in attribution ] from streaming partners indicated by Rob and Chris earlier and its estimated impact to 2023 results.The current $15 million portion of the contingent consideration was subsequently paid in January of this year, funded entirely with a draw from our revolving credit facility. In the year we generated $20.6 million in cash from operations compared to $19.6 million in the prior year. Key uses of cash included $21.5 million in voluntary payments towards our outstanding debt, $4.4 million in acquired intangibles across 14 asset deals, and $4.7 million deployed towards internally developed software. Subsequently, in February of this year, we have made a $3 million prepayment against our revolver, leaving $52 million available to draw.Our net loss in the year was $24.8 million, which was $12.5 million less favorable when compared to prior year. Amortization relating to intangibles was the primary driver of the loss in both periods with $37.3 million in amortization recognized in the year versus $19.2 million recognized in the prior year. Excluding amortization of intangibles, the year would have generated earnings of $12.5 million and a basic and diluted earnings per share of $0.59.We are confident in our disciplined approach to protecting our profitability, which has enabled us to stay ahead of the challenging macro conditions we've faced. As Rob and Chris mentioned earlier, our Q4 revenue was down 11% year over year due to sector and macro-driven headwinds that surfaced in the second half of Q4 and persisted into Q1. In response, we announced organizational changes in February on February 1st, impacting 60 employees or 22% of our total workforce. We focused our efforts on areas most impacted by these macro headwinds with 58% of the impacted employees coming from the commerce team. We anticipate approximately $6 million in annualized savings from the restructuring across wages, consulting, and G&A.To address the macro headwinds we are currently facing, we are also in the process of implementing improvements to our ad tech, and we are in early stages of testing a new video ad unit. We are pleased with the optimized ad tech and anticipate that the changes will be completed by the end of Q1 and start to contribute to our overall performance in Q2 and beyond. Additionally, we anticipate continual increase in revenue generated from direct advertising, which will help drive performance in the upcoming quarters. Overall, we're expecting to see a consolidated sequential growth in revenue starting from Q2 and into the back half of the year.And now we'll pass it back to Rob to wrap things up. Rob?
Thanks, Vince. Operator, we'll now open it up for questions.
[Operator Instructions] Our first question today comes from the line of Drew McReynolds with RBC Capital Markets. Drew, please go ahead.
Yes. Couple for me. First, just with respect to the outlook in terms of the visibility you have as of today, so great to see Q1 as a potential trough. Is that outlook largely contingent on an improving assumption going forward, or really contingent on all the company-specific initiatives you're putting through?And then second on the MAU organic decline, there's 2 or 3 dynamics behind that. I wonder if you can just unpack those dynamics within the context of moving forward through the rest of the year.And then finally, just 1 for Vince on the CapEx for 2023. Just wondering what kind of range we should pencil in for modeling purposes.
Drew, really appreciate the questions. Chris, do you want to talk about the outlook and I can talk about MAUs?
Yes, sounds great. So on the outlook, Drew, really the confidence that we have in Q2 improvement and beyond, it's all driven by internal initiatives, the things that we're actually working on in front of us. We're not anticipating some huge change in behavior. Although on the direct side we are seeing indications of an increased willingness to spend, the programmatic side though it isn't an expectation of some macro event changing things favorably. It's really just the internal work we're doing to improve the stack.
Yes. And Drew, on the MAU declines, so a lot of these algorithms took place around, call it, September, October. So a lot of it is pretty well baked into the Q4 numbers. Overall, I think there's some expectation here that it's going to take a couple of quarters, particularly around some of those commerce properties and these product review algorithms. So we're not expecting things to necessarily get better, but I don't think they'll get substantially worse either, and we could have a surprise if some of our recoveries work out, and we're able to surprise in a positive way. Vince, do you want to take the question on CapEx?
Yes. And then, Drew, on CapEx, I would use a $4.5 million to $5 million placeholder for 2023. The majority of that driven by the internally-developed software investment.
The next question comes from Vince Valentini with TD Securities.
First, the contingent consideration, Vince. Can you just clarify for me, I think I caught you, but the first year $15 million through Streamable, they earned that and you paid it in Q1 of this year. But the second phase of $15 million you've written down, but you said it went from $7.4 million to $1.1 million, so I just wasn't quite reconciling that with the second $15 million hit. So maybe you can just clarify it for me.
Yes. So you're correct. We did pay out the $15 million in Q1 of this year. And the write-down for year 2, that comparison to $7.4 million, $7.4 million is what we had on the books at the end of Q3 based on estimates and our forward-looking results for that property or forward-looking estimates for that property. That's been written down to $1 million. And basically, at the moment, sits below the lowest tier on their earn-out grid. So that signals a very low probability at the moment for achieving anything in the year 2 earnout.
So you had already taken the year 2 $15 million down to $7.4 million as of Q3?
Correct. Or said differently, we had initially estimated $7.4 million. The $15 million would have been earned in year 2, and now we've taken that down to $1 million.
Okay. That makes sense. Second, just to follow-up on Drew's question a bit more on the Q2 outlook. I know you're not expecting a macro improvement. It's internal initiatives. I get that. But to what extent do you actually have advanced bookings and visibility? A lot of media companies say there's not much visibility these days and ads are coming in last second, so they don't even know what's going to happen a month out. Do you actually have a pretty good pipeline of your direct advertisers who have already committed for spending in April and May and maybe even June?
Yes, it's Chris here. We do have pretty good visibility on that as far as Q2 is concerned. Agree with the overall comment, though, about looking beyond as far as the direct category goes into Q3 and Q4 the visibility is not as strong as it might have been in the past. However, the signals we're seeing at some key partners are encouraging that they moved past the past couple of quarters where there is, I think, a fair amount of uncertainty and there's greater willingness to spend. So we're seeing that in Q2, and we expect, all things being equal, for that to continue in subsequent quarters.
So Chris, is it more conversations, or is it writing checks and commitments?
Coming through in bookings and RFPs.
Okay. And a couple more. One, just a follow-up on ChatGPT. It's great that you're looking into it to use it as a positive for your business and to use AI to help you wherever possible. But I'm just curious in terms of the [ risk to ] exposure. Can you analyze and do you have a good sense as to how much of the traffic on your sites and maybe even then following through how much of the ad revenue that you generate comes from people who just pop in briefly or pop in once to ask a question about a certain topic and never come back or don't come back for 2 years, as opposed to the regular recurring and active users? Do you have a breakdown on that?
Vince, yes, I can take that one. I think it's a great question and probably needs a little more elaboration there, too. So yes, our traffic is typically split about half and half between what I would call people coming in, asking questions, and looking for some answers, and the other half being our loyal members. But I think the point of clarity is the types of queries that most of our users come to the forums for today, and there is still a small minority -- sorry, a small majority of our users are coming from organic search. They're looking for pretty nuanced and often personalized product recommendations. So they're asking whether they can fit a 22-inch wheel on their lowered Mercedes Benz, and what is the maximum width they can fit without bottoming up. And those are questions that require really a lot of thought and expertise and often real-world experience. So we think that AI will have a very long time to catch up on answering those types of questions, if it ever can.So I think the risk here of what they call hallucination or AI giving the wrong answer, which would be a pretty expensive mistake for this enthusiast really is why we think that that user-generated content, particularly around these expensive products and personalized and nuanced product decisions ultimately makes our UGC even more valuable. I think the challenge for Fora now is that when users come to our sites for those answers, we need to convert them into long-term users. So when we've got these 50%-plus of people coming in and asking these questions, we have to graduate them past the entry point being just search and move on to a more ideal world where they would come to us first through our mobile app, and then we can help direct them to the right authentic advice and the answers they need, including through the use of AI on our platform. So that's really the next step for us that one to one direct relationship with our users so that we can utilize AI to help them find the content and subject matter experts that they seek on our communities. So I think right now it's certainly something that is just a big product priority for us is getting that mobile app launched and into people's hands.
That's good, Rob. I'll just ask one more, which I might ask you to put on your cap as a significant shareholder and Board member as opposed to CEO is what's your perspective on privatization events that may be viewed as opportunistic somebody could offer 100 premium to where the share price is today it may seem good but still woefully bad compared to what you probably think the company's worth and what the -- where the IPO was done. Are there any thoughts in place at the Board as to how you would manage a process like that and whether you want to even encourage those kinds of conversations given the low starting point?
Yes. I think you've nailed a number of the challenges within that. And obviously, it's below our IPO. It's certainly below what we think the company is worth today. At the same time, there's been changes in the environment, right? The macro situation is different today than it was when we IPO'd, and we have to do what's best for our shareholders. So what I would say is that there are certainly conversations to be had, and we'll certainly look and do what's best for our shareholders over the long term. We went public for a reason. And if that thesis doesn't continue to play out and the stock continues to be under pressure, then I think as fiduciaries and responsible for the business, we have to look at what's best for our shareholders, and we'll do that.
Our next question comes from Adam Shine with National Bank Financial.
Vince was alluding to the $6 million of savings from the headcount reduction. Maybe Rob, Chris, or Vince, can you speak to whether some of that is actually being reinvested in the business pursuant to several initiatives that Rob was outlining? And then I'll just follow up with a couple more.
Chris or Vince, do you want to take that?
Yes, I can take it, Rob. Chris here. Adam, we're banking those savings, Adam. So the work that we're doing on the initiatives, those are resources that were already in place. And so we're thinking of that as $6 million as run rate savings going forward.
Okay. That's good to hear. And just -- I don't want to get into semantics. I know Vince and Drew earlier asked about the [indiscernible] heading into Q2. But maybe you could just speak to some of the trends within Q1. Have you seen any degree of improvement, let's say, going into or through March in the context of bookings? Or is this, in terms of your commentary, much more of a look ahead to Q2 specific to the context of the bookings and RFPs you're starting to see and the initiatives internally that you're going to put forward into Q2 specifically?
Yes, I can take that one, Adam.
[indiscernible].
Go ahead, Rob.
Okay, yes. Sorry, I was just going to try and give the most clear answers. Yes, look, I think trends are very slowly, I would call it, [ thawing ] throughout Q1. So I would say conversations with advertisers, bookings with advertisers are very Q2 and rest of 2023 focused. So from our perspective, I think maybe what came out in Q4 and went into Q1 was just a lot of economic uncertainty, advertisers pull back, and I think now they're starting to feel like they're getting their footing. They're seeing and understanding what the market is. They're getting their budgets back. Management teams, Boards at those companies are starting to give initiatives and directives, and they have budgets to spend. So, for us, as largely a performance-based platform, they're looking for alternatives like VerticalScope to spend dollars where they know they'll get a high ROI.
And Rob, just going back to some of the M&A of over a year ago and the context of some of the internal expertise that was brought in-house. Can you speak to how that is, I guess, helping in terms of some of the initiatives, whether that particular expertise is assisting not just on the app, but also in particular on this product discovery engine that you're alluding to?
Yes. So particularly pointing to the Threadloom acquisition, I would say they've just been critical and key not only towards moving those initiatives forward in terms of the mobile app and even rethinking some of what makes a great mobile app and how do we get it out there faster and really dialing us in on things like retention as opposed to the look and feel necessarily. So the Threadloom team has just been incredible for us. Really happy to have him onboard. And then with the Hometalk team, I think, they've also done a fantastic job and actually are responsible in a very large way for some of the advertising optimizations that we're making today. So been great working with that team. So, I think, again, we brought a lot of really talented people in. I think -- and they're having a big impact on VerticalScope. And I think our retention across those acquisitions has been very, very strong from an employee level as well.
Our next question comes from Andy Nguyen with Raymond James.
So I just want to zone into the auto industry spending. Where do you see that heading in terms of -- in 2023? I know the macro uncertainty is still there. But if you could please give some more color on that, that would be great.
Sure. Yes, it's Chris. I can take that one. Like I said, we've seen some modest improvement. We were coming from a relatively low base as we worked through COVID and all the supply chain issues that the automotive categories experienced for us. So we're seeing some modest improvement. We think some of that is tied to the continued need to launch new vehicles, particularly electric vehicles, as all of those -- all the major brands look to establish position in that market, so we think that should support continued need to advertise in the space. But we still think that we'll continue to see modest improvement with respect to our business throughout the year.
Got you. And one of my follow-up would be on the M&A side. So from your point of view, how is that looking like for 2023 as an acquirer and also how is the target looking like in terms of valuation and what are you looking for specifically?
Sure. On that one, as I said in the remarks upfront, we continue to be very disciplined on the things we're looking at. There is a lot of opportunity for us. We've been very patient. We've gone deep on diligence, and we're deep on diligence on a couple of opportunities. Valuation has to be accretive and/or the growth rate on the asset has to be really, really attractive for us to want to act. But we're also mindful of our leverage position, and we're going to do what's necessary to keep our leverage in a really comfortable place. So we have to satisfy all those requirements for us to act on a property. But again, we're keeping the pipeline very warm. There hasn't been a lot of activity in the space overall. And so it's not like the targets are being snapped up by others. So we'll continue to be patient, but we're prepared to act when we're able to satisfy all those criteria.
Our next question comes from Adhir Kadve with Eight Capital.
So just maybe on the corporate reorganization that you guys announced on February 1st, can you give us a sense of how that's shifted your priority through 2023 and where you will be focusing your efforts?
Yes. Adhjir, I can take that one. So I think -- like I think Vince alluded to, about 60% of that was focused on the Commerce team, and that was really a pullback on properties where we just felt there was less likelihood of those investments delivering results for our shareholders. And where we've moved and focused on is really those 3 areas that I identified in terms of revenue growth, mobile app, product discovery engine. Those are the 3 things really important to us for this year. And we want to get that product discovery engine out and launched by Q4. The mobile app is proceeding to roll out now and revenue growth has just been something we've been plugging away at every day and every week here.
Okay, great. And then maybe just a little bit of a more broader macro question. One thing we've seen is that advertisers are really trying to diversify away from your walled gardens and kind of spread their ad dollars to a larger publisher network. Can you give us a sense of how you guys are looking to capitalize on this and how you're thinking about this as we go into '23 and out into '24?
Yes. Chris, do you want to take that one?
Sure. It's a great question. And we observe -- we definitely observe the same phenomenon. And the number of competitors has continued to increase in the space as far as the number of platforms that are offering different solutions. What we think is incredibly unique about our business, we may not provide that macro mass reach that some of the major walled gardens provide, but what we do provide is this incredibly targeted, contextually relevant niche, with really high-quality content that gets very, very specific about products. So what that does for us it provides environments for advertisers that are more contextually relevant. So you're not going through a generic news feed that could be about who knows what, right? You're on pages that are talking about specific products that people want to buy. So that's -- the context part of it is really powerful, and we think will continue to support our model going forward. The other side of it is the data angle and the first-party data angle. In that we're not a generic publisher publishing on the open web. We're a platform that has tens of millions of registered users that come back to our property every month. So that is another critical component of unlocking value in the audience as we move forward and we think are 2 real distinguishing features of our business. And we think we'll be able to continue to attract those ad dollars and increase our share as that fragmentation away from walled gardens continues.
Excellent. And then last one for me, and I'll pass the line here, guys. Rob, you had mentioned a 40% margin that you'll be able to drive that, given all the stuff we've heard today. Can you give us a timeline on that to the extent you guys are willing to provide that?
I can't yet. But no, I don't want to dive too deep on that one, but it's a target for us. It's a goal. The team is working towards it, and it's going to come from revenue here, and we're just making sure that we've got the right things in place on those revenue optimizations to get there. So I would just call it as soon as possible, but certainly not in Q1.
The next question comes from Sid Dilawari with Comark Securities.
I just have a few. Just firstly on the mobile app. When is it really expected to roll out? Is it Q2 or is it back half of the year? And then just a second one on the mobile app. How is the functionality expected to work for it? Is it supposed to be somewhat of an aggregated platform where a user is able to ask questions and then go to specific communities from the aggregated platform? And then I just have a couple follow-ups after that.
Sure. I can take those on the mobile app. So the rollout will -- I think even by the end of Q1 you'll see it start to hit more of our communities -- some of our larger communities and become more verticalized. The full rollout is really -- I'm going to call it a little bit inconsequential because the way we build and the way we roll things out now we can roll it out to 10 large sites, we can do it to 100 smaller communities, and really get the whole thing out in chunks.I would expect the whole thing more to be during the summertime. That's an important one for us because a lot of people obviously are away from their desktops during the summer. So we're going to focus on rollouts throughout really from now through the summer as we start to hit more communities and obviously again most importantly user feedback. And the functionality, it is looking to be 1 app for all of our communities. It's an aggregator. We think it can really build the For a, a community brand, get people increasingly comfortable on our platform and engaging on all of their hobbies rather than maybe just the one that maybe we had a site or community for.
Okay, that's great. And then just quickly on e-commerce, maybe if I can push you a little bit further. Can you highlight some of the verticals that remained a drag? I know you mentioned fitness and streaming providers during the quarter. And how do you see some of these verticals that you have a huge revenue dependency on shipping out in 2023? And then one quick one for Vince. What was the pro forma leverage ratio at the end of the quarter?
Sure. I can take the [indiscernible] before turning to Vince. So, yes, the categories you mentioned are the bigger pieces for sure, with fitness -- although I'd say fitness the impact there will be relatively small for the rest of the year from an year-over-year perspective. Streaming will be a bigger impact to that year-over-year comparison. It performed exceptionally well throughout last year and so we think that will be one of the key categories that will have some headwinds associated with it for the rest of this year. There isn't any other particular category that I would call out as having a significant impact beyond those.
Vince, you want to...
Yes, sure. The pro forma net leverage at the end of the year was just over 2x. And it's aligned with that. So there's really not much less from a pro forma perspective now that we've lapped the 2021 acquisitions.
Those are all the questions we have registered, so I'll hand the call back to Rob Laidlaw for closing remarks.
Great. Thank you, everybody, for joining us today. As always, we appreciate your trust and support, and we'll see you next quarter. Thank you.
Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.