Ionik Acquires Nimble5

Rhea-AI Summary

PopReach (dba Ionik) (TSXV: INIK) (OTCQX: INIKF) has acquired Nimble5, a performance marketing company, for approximately US$33.7 million. The acquisition, funded through existing resources, expands Ionik's marketing technology platform. Nimble5, founded in 2016, specializes in omnichannel user acquisition and search engine marketing. Key benefits include:

1. Nimble5's meaningful Adjusted EBITDA and Adjusted Free Cash Flow
2. Synergistic performance marketing technology
3. Enhanced first-party data capabilities

The deal includes cash, debt, stock, and potential earn-out considerations. Nimble5's Adjusted EBITDA for 2023 was US$12.0 million. The transaction is subject to final TSX Venture Exchange approval.

Positive

• Acquisition expands Ionik's marketing technology capabilities
• Nimble5 generates meaningful Adjusted EBITDA and Adjusted Free Cash Flow
• Synergistic performance marketing technology enhances Ionik's platform
• Acquisition increases scale and reach of first-party data collection
• Nimble5's Adjusted EBITDA for 2023 was US$12.0 million

Negative

• Assumption of up to US$1.0 million in net current liabilities from Nimble5
• Potential shareholder dilution due to issuance of 30.0 million common shares
• Increased debt from US$11.0 million in vendor take-back financing

Ionik's marketing technology platform expanded, financed with existing resources

Toronto, Ontario--(Newsfile Corp. - September 3, 2024) - PopReach Corporation (dba Ionik) (TSXV: INIK) (OTCQX: INIKF) ("Ionik" or the "Company") announced that it has acquired Nimble5, LLC ("Nimble5"), a performance marketing company headquartered in San Diego, California (the "Transaction") for a total aggregate purchase price of approximately US$33.7 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 2016, Nimble5 is a team of 25 people, several of whom have more than 15 years' experience in the performance marketing industry specializing in omnichannel user acquisition and search engine marketing.

Key Transaction Benefits

• Financial Profile: Consistent with Ionik's acquisition criteria, Nimble5 generates meaningful Adjusted EBITDA¹ and Adjusted Free Cash Flow¹ that will help to accelerate Ionik's expansion to a level of relevant financial scale.
  
  
• Synergistic Performance Marketing Technology: Two core pillars of performance marketing are 1) search, social and native advertising, and 2) search monetization. Nimble5 has built a performance marketing platform delivering proven results for advertisers within those advertising ecosystems that connects seamlessly with Ionik's marketing technology platform and further extends its capabilities.
  
  
• First Party Data: Nimble5's performance marketing platform not only adds meaningful additional scale to Ionik's first party data asset, but also accelerates the growth and reach of first party data collection by leveraging its omnichannel user acquisition capabilities into other user journeys within Ionik.

¹ Please refer to "Non-IFRS Measures" section of this press release

Management Commentary

"Nimble5 brings a compelling search and social advertising technology platform to augment Ionik's capabilities in performance marketing," said Ted Hastings, CEO of Ionik. "This acquisition was funded from our existing debt facility which is a testament to the support we have from our syndicate of lenders after reviewing our business model and recent performance. The allocation of advertising budgets to social has recently surpassed that of search, which had us in the market for a team and technology to expand our capabilities and we found that fit with Nimble5."

Key Terms of the Transaction

Pursuant to the definitive transaction agreement (the "Transaction Agreement") entered into on September 3, 2024 among Ionik, Nimble5 Acquisition, Inc. (the "Purchaser"), a wholly owned subsidiary of Ionik, Nimble5 Holdings, Inc. (the "Seller"), and certain principals of the Seller (the "Principals"), the Purchaser acquired all of the membership interests of Nimble5 from the Seller in exchange for aggregate consideration of approximately US$33.7 million, being comprised of US$20.0 million in cash (the "Cash Consideration"), US$5.0 million in non-interest bearing vendor take-back debt (the "Non-Interest Bearing Debt"), US$6.0 million vendor take-back debt bearing interest at the rate of 10% per annum (the "Interest-Bearing Debt" and together with the Non-Interest Bearing Debt, collectively, the "VTB Debt") and the issuance of 30.0 million common shares of Ionik (the "Consideration Shares"), with an approximate value of US$2.7 million based on the August 30, 2024 closing price per share of C$0.12 (the "Closing Price") and a C$:US$ exchange rate of 1.3491. The Purchaser is also assuming up to US$1.0 million in net current liabilities on Nimble5's balance sheet.

Additionally, the Seller shall be entitled to earn-out consideration as follows: (i) 25% of Nimble5's Adjusted EBITDA for each year ending December 31, 2024 (prorated), December 31, 2025, December 31, 2026 and December 31, 2027 up to a maximum of US$10.0 million (the "Installment Earn-Out"); and (ii) US$30.0 million if Nimble5's Adjusted EBITDA in the 3-year period following closing of the Transaction ("Closing") is greater than US$25.0 million, or US$25.0 million if Nimble5's Adjusted EBITDA in such period is greater than US$20.0 million, but less than US$25.0 million (the "Lump Sum Earn-Out"). Payment of the Installment Earn-Out shall be made within 90 days following the end of each fiscal year in which such payment is earned and payment of the Lump Sum Earn-Out, if any, shall be made on the date that is 90 days following the third anniversary of Closing. Nimble5's Adjusted EBITDA for the financial year ending December 31, 2023 was US$12.0 million.

The Purchaser's obligations to make payment of the Non-Interest Bearing Debt shall mature on the third anniversary of Closing. The Interest-Bearing Debt shall mature on the earlier to occur of (i) an increase to Ionik's senior credit facility, (ii) December 15, 2024, if certain payments expected to be received by Nimble5 during the initial three (3) month period following Closing are made in accordance with their scheduled terms, and (iii) November 30, 2026. The VTB Debt, the Installment Earn-Out and the Lump Sum Earn-Out are secured by a security interest granted to the Seller over the assets of Nimble5, and such security interest ranks subordinate to the Ionik's senior lenders. Further, the Seller shall have the right to convert the Non-Interest Bearing Debt and the Lump Sum Earn-Out into common shares of Ionik at US$0.78 per share representing a premium to the Closing Price of approximately 875%.

The Consideration Shares and US$2.5 million of the Cash Consideration will be held back on Closing and released on the four-month anniversary and one-year anniversary of Closing, respectively, subject to reductions, if any, in connection with the Seller's obligations pursuant to the indemnification and net working capital adjustment provisions set forth in the Transaction Agreement.

The Seller and each of the Principals have, pursuant to the Transaction Agreement, agreed to customary standstill provisions for a period of at least two years following Closing. Furthermore, the Seller and each of the Principals have agreed to certain restrictions against the transfer of the Consideration Shares (collectively, the "Locked-Up Shares"), over a three year period, with 1/3rd of such Locked-Up Shares being released from restrictions every 12 months commencing on the one year anniversary of Closing.

The Cash Consideration is being funded through an advance under the Delayed Draw Term Loans made available to the Company pursuant to its syndicated credit facility previously announced on May 25, 2023.

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.

About Nimble5

Nimble5 uses proprietary AI powered software to create advertisements, manage advertisement placement, select targeted keyword placements, optimize return on advertising spend and channel users to the appropriate end advertiser.

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.sedar.com. 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.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/221907

FAQ

What is the total value of Ionik's acquisition of Nimble5?

Ionik (INIKF) acquired Nimble5 for a total aggregate purchase price of approximately US$33.7 million, consisting of a combination of cash, debt, and stock, plus potential earn-out considerations.

How is Ionik financing the Nimble5 acquisition?

Ionik (INIKF) is financing the Nimble5 acquisition through its existing debt facility, with the Cash Consideration funded through an advance under the Delayed Draw Term Loans made available to the Company pursuant to its syndicated credit facility.

What are the key benefits of Ionik's acquisition of Nimble5?

The key benefits of Ionik's (INIKF) acquisition of Nimble5 include: meaningful Adjusted EBITDA and Adjusted Free Cash Flow generation, synergistic performance marketing technology, and enhanced first-party data capabilities for Ionik's platform.

What was Nimble5's Adjusted EBITDA for the financial year ending December 31, 2023?

Nimble5's Adjusted EBITDA for the financial year ending December 31, 2023 was US$12.0 million.