Toronto-based VerticalScope has laid off approximately 60 employees as the company looks to “streamline its operations and focus investments on key growth initiatives.”
The cuts, which impact 22 percent of VerticalScope’s team, were announced by the company following market close on February 1.
This reduction comes as the firm’s business has declined in recent months amid the broader economic downturn and e-commerce slowdown, as indicated by preliminary, unaudited fourth-quarter and 2022 financial results the company also shared in the announcement.
With these cuts, VerticalScope joins Lightspeed Commerce and Thinkific in shedding staff this year.
“Like many businesses in our space, we grew our headcount aggressively over the last few years,” said VerticalScope founder and CEO Rob Laidlaw. “With the economic uncertainty that lies ahead, we must prioritize our biggest opportunities and make sure we have the proper cost structure in place to pursue them.”
The economic downturn, fuelled by rising inflation and interest rates, has impacted publicly-traded tech companies and startups alike. With these staff cuts, VerticalScope joins other public Canadian tech firms like Lightspeed Commerce and Thinkific in shedding staff this year as companies across the country push to reduce costs and target profitability.
Meanwhile, plenty of Canadian startups have also made similar moves over the past month, from smaller companies like Notch and #paid, to larger players like Clearco, Hootsuite, and, Benevity, in what has already been a heavy 2023 for tech layoffs. Per Layoffs.fyi, over 250 tech companies globally have cut nearly 83,000 employees in the first month of this year alone—more than half the amount laid off during all of 2022.
Founded in 1999, VerticalScope offers a software platform for online communities of enthusiasts in high-consumer spending categories like automotive, powersports, outdoor, home, health, and technology. Through a combination of organic growth and acquisitions of websites like Health Media Today, VarageSale, and Paddling.com, VerticalScope has built a portfolio of over 1,200 online communities and more than 100 million monthly active users.
VerticalScope has traded on the Toronto Stock Exchange as ‘FORA’ since going public in 2021 amid strong demand from investors. But since then, economic conditions have worsened and tech stocks have taken a beating. Today, VerticalScope’s shares are trading at $8.41 CAD at time of publication, more than 70 percent below the company’s initial $22 initial public offering (IPO) target.
Amid this environment, VerticalScope’s business deteriorated in Q4. VerticalScope expects to generate $19.1 million USD in revenue during the fourth quarter, a nearly 11 percent year-over-year decrease. This was driven by a reported fall in the firm’s digital advertising and e-commerce revenue, by 5.5 percent and 23.5 percent, respectively. VerticalScope also expects to record adjusted earnings before interest, taxes, depreciation, and amortization of $7.2 million in Q4 2022—a nearly 23 percent drop compared to the same period in 2021.
VerticalScope president and COO Chris Goodridge attributed these preliminary fourth-quarter results to “macroeconomic weakness through the holiday shopping period,” which he said “translated to lower advertising rates as well as reduced volume from e-commerce partners.”
During the 2022 holiday season, sales overall reportedly fell short of expectations. According to Adobe Analytics, online sales during the holidays rose slightly, but were boosted by discounts, and as CNBC reports, retailers are bracing for a difficult 2023.
Laidlaw believes these layoffs will strengthen VerticalScope’s position as the company navigates the downturn. “These are tough changes to make, but I am confident that they provide for the most effective and focused use of our resources and strengthen our position as we move forward,” he added.
The company expects these cuts and other undisclosed cost-saving initiatives at the firm to save the company about $6 million annually.
Feature image courtesy VerticalScope.