Leafly Holdings, Inc.

Good afternoon. Thank you for attending the Leafly Q1 2024 earnings call. My name is Matt and I'll be your moderator for today's call. All lines be muted during the presentation portion of the call. I would like to pass the conference over to our host, Joshua Leafly. Josh, please go ahead.

Good afternoon and welcome to Leafly's Q1 2024 earnings call. Joining me on the call today are CEO Yoko Miyashita and CFO Suresh Krishnaswamy. Today's prepared remarks have been recorded. A copy of our press release can be found on our website at investor.lethley.com. Today's call will contain forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Forward-looking statements include statements regarding the services offered by Lethley, the markets in which Lethley operates, business strategies, performance metrics, industry environment, potential growth opportunities, and legally projected future results and financial outlook, and can be identified by words such as expect, anticipate, focus, intend, plan, believe, seek, or will. These statements reflect our views as of today only, should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements by their nature address matters that are subject to risk, and uncertainties that could cause actual results to differ materially from expectations, and we caution you not to place undue reliance on such statements. For a discussion of the material risk and other important factors that could affect our actual results, please refer to the risk discussed in today's press release, our 2023 annual report on Form 10-K filed with the SEC on April 1st, 2024, and our other periodic filings with the SEC. During the call, we will also discuss non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP and non-GAAP results is included in our earnings press release, which has been filed with the SEC and is also available on our website at investor.weasley.com. We'll answer a few pre-submitted questions at the end of this call. With that, let me turn the call over to Yoko.

Good afternoon. Leafly remains steadfast in our commitment to enhancing operational efficiency on our path to profitability while ensuring sustained value delivery for our customers. Our efforts have been concentrated on strengthening our resilience as a business and nurturing relationships with our customers, which we believe empowers them to leverage the full spectrum of tools offered through the Leafly platform. At the same time, We're also increasing our efforts on customer acquisition, designed to regrow and strengthen our network of retail customers. Our revenue in the first quarter was in line with guidance at $9 million. Our net loss was $2.4 million, and our adjusted EBITDA and cash finished ahead of guidance, which reflects our continued focus on building a path to profitability. As we previously mentioned, we prioritized collection efforts and made the tough decision to continue removing underperforming and nonpaying retailers after reaching a peak in nonpaying customers in Q3 of last year. We believe we have a process that is effective in enforcing payment terms and are encouraged by reactivation metrics such as payment of past due amounts to come current and reactivate on our platform. As we work through what we believe is the worst of the challenges with delinquencies, we're working to turn around the decline in retail accounts by focusing on acquisition. At the end of the first quarter, Leafly had 3,840 retail accounts, marking a 5.8% reduction quarter over quarter and reflecting a moderating decline in our ending retail accounts sequentially. As we noted in our year-end earnings, We recently brought on board six new market managers and two new acquisition managers who are intensely focused on enhancing penetration in key markets and pursuing new market opportunities. Our market managers are armed with an enhanced product portfolio that now includes a product price point for any retail customer, regardless of their size or scale. This allows us to pitch the right product to the right customer at the right price which we believe should result in the growth of ending retail accounts sequentially as we move deeper into 2024. These new markets and acquisition managers continue to ramp. We will continue to emphasize protecting and growing existing accounts and combining that with renewed investments in hunting and win-back of prospective customers to increase retail penetration. Increased supply also improves the consumer shopping experience. which ultimately creates our virtuous cycle. All of these efforts require us to effectively demonstrate and communicate the power and value proposition of our platform to our retail clientele, and we focused on improving how we tell that story. Part of communicating value to our retail partners is by demonstrating our ongoing commitment to reduce retailer friction and enhance the consumer experience. Over the quarter, we introduced a range of improvements across the platform, including promo code functionality, which provides our retailers with yet another way to attract the attention of price-conscious shoppers. We also redesigned our information-only listings to drive greater value for our paying customers and introduced live chat for our retailers, enhancing their customer support experience and reflecting our focus on customer satisfaction that we believe helps better meet our customers' needs. We also make changes to our retailer menu embeds with the goal of making them more SEO optimized. Previously, we've mentioned a revamp of our deals engine, including the introduction of new deal types, augmenting the volume and diversity of deals within our marketplace. We've now improved our deals sorting functionality to give consumers easier visibility into the deals retailers are offering. Last week, we witnessed a historic step forward in ending prohibition in the U.S. when the DEA formally agreed that cannabis should be moved from Schedule I to Schedule III under the Controlled Substances Act. While observers, advocates, and commentators all speculate what this will actually mean for the industry, what we celebrate is the formal acknowledgement of the medical potential of cannabis. Along with the acknowledgement, that cannabis does not warrant a classification assigned to the most addictive and harmful drugs in circulation today. We celebrate the potential for more research to drive informed policy and a pathway for cannabis operators to free up cash and invest in their businesses, including making necessary investments in marketing to educate and attract the many consumers looking for relief from this plant. Along with the DEA's actions in the ensuing rulemaking process to formalize the rescheduling, Florida voters will decide this November whether to legalize recreational adult use. And in New York, we have renewed hope for the rollout of legal cannabis following the recent positive court ruling in Lee's favor that will allow us to offer our full scope of services to new licensees. Paired with the steady issuance of new retail licenses in the state, we believe we can now maximize our value proposition to retailers and consumers in a market we all believe should have meaningful upside. On an international scale, Germany celebrated 420 for the first time with fewer restrictions on cannabis, with legalization that went into effect in April. Germany is an economic powerhouse in Europe, and we believe Germany's actions will be a potential trigger across the European Union. They have a strong base of advocates pushing for change, and Leafly plays a role by providing content on our platform accessible globally that solves an education gap that currently exists. It is the collection of these pivotal moments that propel industry momentum. and also contribute to the normalization of cannabis consumption worldwide. As the industry continues its upward trajectory, we remain steadfast in our commitment to leveraging our robust platform to cater to discerning high-value consumers, providing them with trusted premium content while facilitating connections with local retailers and brands. I'll now turn it over to Suresh.