Ionik adds to its marketing technology platform and capabilities
Toronto, Ontario–(Newsfile Corp. – November 19, 2024) – PopReach Corporation (dba Ionik) (“Ionik” or the “Company“) (TSXV: INIK) (OTCQX: INIKF) announces that it has acquired Rise4 Inc. (“Rise4“), a performance marketing company headquartered in Guelph, Ontario (the “Transaction“) for a total aggregate purchase price of approximately US$19.9 million, consisting of a combination of cash, debt and stock, plus the earn-out consideration outlined below under the “Key Terms of the Transaction“.
Founded in 2022, Rise4 is a team of 15, led by several 15-year plus veterans of the performance marketing space, focused on omnichannel user acquisition, content creation and search monetization.
Key Transaction Benefits
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Financial Growth: Rise4 contributes meaningful revenue, Adjusted EBITDA1 and Adjusted Free Cash Flow1 today and is experiencing a high growth rate given its early stage, which will improve Ionik’s organic growth rate going forward.
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Synergistic Performance Marketing Technology: Performance marketing involves acquiring high quality, high intent users, providing those users with the information and outcome they are searching for and connecting those users to the advertisers seeking to reach them. Rise4 has built a performance marketing platform that achieves these objectives while delivering profitability to publishers and high quality conversions for advertisers. The Rise4 platform extends Ionik’s marketing technology platform on both sides of the marketing funnel in terms of new user acquisition capabilities and new, diversified revenue channels.
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First Party Data: Rise4 adds immediate scale to Ionik’s growing first party data asset and accelerates that growth by opening up additional user acquisition channels and new user journeys providing additional data points within the Ionik ecosystem.
1 Please refer to “Non-IFRS Measures” section of this press release
Selected Unreviewed and Unaudited Rise4 Financial Information
The following table sets out certain unreviewed and unaudited Rise4 financial information for the 12 months ended December 31, 2023:
|
all figures in US Dollars |
Twelve months ended Dec 31, 2023 |
|
Net Revenue |
19,526,920 |
|
Gross Profit |
3,515,856 |
|
Adjusted EBITDA2 |
2,395,360 |
|
Net Profit (Loss) |
1,602,507 |
2 Please refer to “Non-IFRS Measures” section of this press release
Management Commentary
“Rise4 adds yet another set of capabilities to Ionik’s marketing technology platform and introduces new business models to the business, fitting in perfectly with our existing performance marketing solutions and adding to our first party data asset,” said Ted Hastings, CEO of Ionik. “We expect significant operational efficiencies will be achieved as part of this acquisition right out of the gate. In addition, we have added a high caliber team of industry veterans to the Ionik family. This acquisition was once again funded from our existing debt facility with the continued support of our syndicate of lenders upon review of our expanding business model and recent financial performance.”
Key Terms of the Transaction
Pursuant to the definitive transaction agreement (the “Transaction Agreement“) entered into on November 18, 2024 among Ionik, Rise4 Inc. and the shareholders of Rise4 (the “Sellers“), Ionik acquired all of the issued and outstanding shares of Rise4 from the Sellers in exchange for aggregate consideration of approximately US$19.9 million, being comprised of US$8.5 million in cash (the “Cash Consideration“), US$9.5 million in non-interest bearing vendor take-back debt (the “VTB Debt“) and the issuance of 23.0 million common shares of Ionik (the “Consideration Shares“), with an approximate value of US$1.9 million based on the November 15, 2024 closing price per share of C$0.115 (the “Closing Price“) and a C$:US$ exchange rate of 1.4079. The net current liabilities assumed by Ionik on Rise4’s balance sheet as at Closing is $NIL.
Additionally, as earn-out consideration, the Sellers shall be entitled to 25% of Rise4’s Adjusted EBITDA for the five-year period following closing of the Transaction (the “Closing“), up to a maximum of US$25.0 million (the “Earn-Out“). Earn-Out payments will be made at the end of the five-year term; however, in any year that Rise4’s EBITDA (i) exceeds US$3.0 million but is less than US$7.0 million, the portion of the Earn-Out attributable to the EBITDA above US$3.0 million will be paid within ninety days after the end of that year; or (ii) exceeds US$7.0 million, the entire Earn-Out attributable to the US$7.0 million will be paid within ninety days after the end of that year.
The Purchaser’s obligations to make payment of the VTB Debt shall mature on November 30, 2026. The VTB Debt is secured by a security interest granted to the Sellers over the assets of Rise4, and such security interest ranks subordinate to Ionik’s senior lenders. Further, the Sellers shall have the right to convert the VTB Debt into common shares of Ionik at US$0.78 per share representing a premium to the Closing Price of approximately 955%. The maximum number of common shares of Ionik that may be issued on conversion of the VTB Debt is 12,179,487.
US$250,000 of the Cash Consideration will be held back on Closing and released on the one-year anniversary of Closing, subject to reductions, if any, in connection with the Sellers’ obligations pursuant to the indemnification and net working capital adjustment provisions set forth in the Transaction Agreement.
The Sellers have, pursuant to the Transaction Agreement, agreed to customary standstill provisions for a period of at least two years following Closing. Furthermore, the Sellers have agreed to certain restrictions against the transfer of the Consideration Shares and any common shares of Ionik issued in connection with the conversion of the VTB Debt (collectively, the “Locked-Up Shares“), over a three year period, with 1/3 of such Locked-Up Shares being released from such restrictions every 12 months commencing on the one- year anniversary of Closing.
The Transaction has been conditionally approved by the TSX Venture Exchange (the “Exchange“), subject to customary conditions, and remains subject to final acceptance by the Exchange.
Non-IFRS Measures
The Company prepares its financial statements in accordance with International Financial Reporting Standards (“IFRS“). However, the Company considers certain non-IFRS financial measures as useful additional information to assess its financial performance. These measures, which it believes are widely used by investors, securities analysts and other interested parties to evaluate its performance, do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to financial measures determined in accordance with IFRS. Non-IFRS measures include “Adjusted EBITDA” and “Adjusted Free Cash Flow”.
Adjusted EBITDA and Adjusted Free Cash Flow
Consolidated adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA“) is a non-IFRS measure of financial performance. The presentation of this non-IFRS financial measure is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with IFRS and may be different from non-IFRS financial measures used by other companies. Company management defines Adjusted EBITDA as IFRS Net income (loss) adding back finance costs, income taxes, depreciation amortization, gain/loss on disposal of assets and extinguishment of loans, fair value gain/loss on financial liabilities and contingent consideration, and excludes discontinued operations and the effects of significant items of income and expenditure which may have an impact on the quality of earnings, such as impairments where the impairment is the result of an isolated, non-recurring event. It also excludes the effects of equity-settled share-based payments, foreign exchange gains/losses, changes in deferred revenues, changes in deferred cost of sales, and other extraordinary one-time expenses.
Company management defines “Adjusted Free Cash Flow” as Adjusted EBITDA less capital expenditures, such as acquisition of property and equipment and additions to intangibles, and income taxes paid during the applicable period.
Management believes Adjusted EBITDA and Adjusted Free Cash Flow are useful financial metrics to assess operating performance on a cash basis before the impact of non-cash and extraordinary one-time items.
The following table presents the Company’s calculation of Rise4’s Adjusted EBITDA for the twelve months ended December 31, 2023, in US dollars:
|
Net Profit (Loss) |
1,602,507 |
|
Add: |
|
|
Interest and accretion expenses |
3,833 |
|
Current taxes |
672,062 |
|
Transaction costs |
22,336 |
|
Foreign Exchange |
94,622 |
|
Adjusted EBITDA |
2,395,361 |
About Rise4
Rise4 creates and manages advertisements across search, social, native and display channels to acquire users to high quality content experiences and ultimately connect those users to end advertisers. Its AI-powered marketing platform was built with a focus on traffic quality, compliance standards and performance optimization throughout the end-to-end marketing funnel.
About Ionik
Ionik, a Tier 1 Issuer on the TSX Venture Exchange, with shares also trading on OTCQX® Best Market, is a data-driven performance marketing technology company focused on assembling the most effective and complete suite of advertising, marketing and monetization solutions for brands, advertisers and publishers while building an extensive proprietary repository of opted-in first party data.
Additional information about the Company is available at www.sedarplus.ca.
PopReach Corporation (dba Ionik)
Sean Peasgood
Investor Relations
(647) 777-7564
Sean@SophicCapital.com
Jeff Collins
CFO
(416) 583-5918
jcollins@ionikgroup.com
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Cautionary Statement Regarding Forward-Looking Information
Certain information in this news release constitutes forward-looking statements and forward-looking information under applicable Canadian securities legislation (collectively, “forward-looking information”). Forward-looking information includes, but is not limited to, statements with respect to the business, financials and operations of the Company and is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events. Forward looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by the Company as of the date of this news release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements and future events to be materially different from those expressed or implied by such forward-looking information, including but not limited to the factors described in greater detail in the public documents of the Company available at www.sedarplus.ca. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. Investors are cautioned that undue reliance should not be placed on any such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the Company. The Company does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.
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