WM Technology, Inc.

Good afternoon, everyone, and welcome to the WM Technologies, Inc. Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. If you require any further assistance, please press star, then zero. I would now like to turn the conference over to your host, Greg Stolowitz, VP, Investor Relations and Corporate Development. Please go ahead.

Hi, everyone. Thanks for joining our Q3 2021 earnings conference call. We have Chris Beals, our CEO, and Arlen Lee, our CFO, with us today. By now, everyone should have access to our earnings announcement. This announcement is also on our investor relations website, along with a supporting slide deck. During this call, we'll make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today, which may change over time. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors outlined in our most recent 10Q filed with the SEC and future reports filed with the SEC. Also during this call, we'll discuss certain non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for our GAAP results. Please refer to our earnings release on our investor relations website for reconciliation of GAAP to non-GAAP financial measures, as well as additional context in our key operating metrics. And finally, this call in its entirety is being webcast from our investor relations website, and an audio replay will be available on our website in a few hours. With that, I'd like to turn the call over to Chris.

Thanks, Greg, and thanks, everyone, for joining us this afternoon. I'm excited to take you through our operating results and the developments during the third quarter. Before we begin, we want to honor all of the veterans, their families, and friends around the world on this Veterans Day. On behalf of the entire WM Technology family, we appreciate everything you do for this country, and thank you for your sacrifices and service. Thematically, I want to note at the outset something very critical. With the recent introduction of a Republican-led federal cannabis legalization bill in the House last week, I think we've reached another milestone in the advancement on our journey to full cannabis legalization at the federal level. I think at this point it's now become clear that federal legalization isn't just an inevitability. It is one that is coming close at an ever-accelerating rate. However, federal legalization should not be confused with state deregulation. Even in a world with federal legalization, the disparate state cannabis regimes we see today will likely continue to evolve in the fashion we currently see. This is quite similar to the differences we see among states for a number of highly regulated goods, where the states have a vested interest in both public health and the state economy. Nonetheless, it bears repeating that federal legalization opens an incredible array of exciting product and monetization opportunities for WM technology. Conversely, the continuing patchwork of state regulation underscores the need for the scalable, flexible technology solutions we provide to enable businesses to scale across jurisdictions. And so the thing I really want to highlight here is that how we are positioning the company and what we are working on both visibly and behind the scenes from a strategy and product delivery viewpoint are intended to put us in the best possible position to reap the benefits that federal legalization will bring to our business while also reaping the greatest benefits now in the era prior to federal legalization. Moving to our business, WM Technology delivered a strong third quarter, as we saw year-over-year growth that significantly outpaced cannabis and market growth, while continuing to deliver on new organizational initiatives and software roadmap execution that set us up incredibly well for long-term growth and success. Our Q3 revenue finished at $51 million, growing at 9% year-over-year on a reported basis and 46% year-over-year when excluding Canada from last year's numbers. I'll go into a little more detail on the call, but we had high double-digit year-over-year growth across all of our metrics, with nearly 40% growth in monthly active users and double-digit U.S. growth in both average monthly paying clients and average revenue per paying client. I'm proud of our results. This quarter demonstrated the strength and resiliency of the Weedmaps marketplace and the WM Business offering as we achieved double-digit growth, despite deceleration in our client in-markets as reported in third-party data. For example, California, which is our largest market, saw lower in-market retail sales in Q3 versus the prior quarter, with only modest year-over-year growth. We saw a similar dynamic across a number of other in-markets. To be clear, we do not believe that there's been a pullback in consumer demand for cannabis in these markets. In fact, we believe that there continues to be strong and growing demand, even as consumers return to in-office work across regions. Rather, we believe the deceleration has been driven largely by consumer demand shifts or switching to non-licensed channels. While licenses continue to be issued across our end markets, license density is not where it needs to be, and the pace of license issuance remains sluggish, which is contributing to a thriving illicit market. And further, there's been a lot written in the press about how producers are dealing with the current supply glut by, in some cases, diverting product to unlicensed market channels at significant price discounts, which is only further fueling the consumer demand shift. As a reminder, WM Technology provides software and services to operators that have licenses required in their jurisdiction. Given that, the consumer demand shift to non-licensed operators has a direct impact on our business client base. A number of our clients struggled during the quarter as a result of this demand shift, and our priority was on meeting them where they were. We simplified the process of creating promotional deals on Weedmaps, allowing clients to target users seeking promotions with higher velocity. We introduced self-serve ad tools in several additional markets to allow our clients an easier setup process to run more targeted ad campaigns across our platform. We drove wider availability of menu and orders integrations with third-party point-of-sale providers, to ensure easier menu setup and orders and WM store enablement so that clients can more easily convert user traffic to transactions, whether it be on the Weedmap site or on their own owned and operated domains. The orders integration also greatly simplified workflows for retailers by directly inputting the orders into the retailer's point of sale. We expanded our cost per click or CPC pricing tests in additional markets to enable more performance-based buying options for our clients. These are just some of the examples of the efforts we took to maximize demand and traffic for our clients in the current environment. And again, as I mentioned at the outset, a lot of these changes are intended to both capture and reap the benefits now, but also position us incredibly well for when federal legalization comes. On the user side, we continue to drive improvements in the Weedmaps user experience by increasing the accuracy of menu and product information across our marketplace and surfacing deals and promotions in more intuitive ways for end users. We enabled online order ahead functionality in our iOS app within days of Apple lifting these app store restrictions. We launched our second annual Best of Weedmaps marketing program heading into Q3, recognizing retailers who meet quality thresholds and delivering great shopping experiences on Weedmaps with nearly 100% increase in retailer clients being recognized for excellence in user service, providing a win-win for both our users and in recognizing clients. While it's difficult to predict whether the in-market dynamics we saw in Q3 have bottomed out, we remain more bullish than ever in our growth opportunities and strategic positioning to capture both user and client-driven growth. Many industry observers have sized cannabis as a $20 billion to $25 billion license market in the U.S. today. However, these are the same observers that note that license demand is only a fraction of the total market. It's rare to have such a visible, total addressable market where growth is not only a function of new consumer demands, but also shifting existing consumer demand across channels. This total addressable market will get unlocked with the continued license issuance and new market openings, which are questions of when, not if. We're at the forefront of accelerating this demand shift to license markets through our policy efforts. Our government relations team continues to work towards expanding the market through efforts at both the state and local levels to liberalize license issuance, enable delivery, and reduce irrational restrictions on how our clients can operate. Based on this policy work, we still believe there is significant license issuance to come in our existing markets. My confidence in capturing outsized growth also rests on the outsized ROI that we continue to provide to our clients versus other user acquisition channels. This quarter's performance is clear evidence of that dynamic. We grow our average revenue per paying client by close to 20% year-over-year, along with the 46% year-over-year revenue growth I noted earlier in the U.S. and in the face of the slowdown. As we look towards unlocking long-term growth across these markets, our ability to capture this growth has only increased with the investments we've made this quarter and the capabilities we're building. We're investing ahead of the key East Coast state openings, places like New Jersey and New York, with on-the-ground efforts through our social equity workshops and work with local cannabis associations. We're also seeding awareness of the Weedmaps brand with consumers through efforts like the Kevin Durant partnership that we announced in August. This is also in addition to us expanding the pace of our hiring of employees located in East Coast markets. We're incredibly focused on expanding our business with client segments such as multi-state operators and brands, groups that have traditionally had outsized presence on the East Coast and yet remain underserved segments of the WM business suite. These clients are looking for ways to maximize their presence with consumers, improve the ability to quantitatively understand their operations, and reduce their operating and compliance costs. MSOs we speak with are seeking a one-stop shop to optimize their return on investment across all marketing channels, leveraging data and providing ways to retarget their users. They need the bespoke tech solutions to handle complex integrations across disparate systems as a result of consolidating acquisitions of multiple retailers and trying to change back office workflows. Brands we speak with are looking for ways to go direct to consumer to tell their brand story. They want to spend scalably and compliantly across the limited marketing channels available to cannabis businesses and consolidate that spend with one versus multiple vendors. They demand analytics and tools to measure the effectiveness of their marketing campaigns. They need better data and insights to improve how they target businesses and consumers. To meet these needs, WM Technology has been developing capabilities based on client feedback and are incredibly excited to begin piloting these solutions in Q4. We've developed a pilot program for clients seeking full-service multi-channel solutions spanning both Weedmaps and off Weedmaps channels. As many of you know, marketing today in cannabis is extremely burdensome given compliance that can change from region to region. fragmented and incomplete data sources that don't talk to each other, and multiple channels to manage. With this program, we're aiming to accomplish three goals. First, we're leveraging our first-party consumer data and market sales data to help reduce and defriction the burden on cannabis retailers attempting to reach shifting consumer bases or specific consumer segments. Second, we're using this offering to establish ourselves as a consultative marketing partner to larger enterprise clients who are seeking this type of service model. And third, most importantly, We're creating a natural onboarding ramp for clients onto our loyalty and CRM solution, as well as for future data analytics offerings. In Q4, we'll be piloting this new initiative with a handful of enterprise-level clients in both the U.S. as well as Canada as we restart monetization in that region. We also will begin beta testing some of our new brand solutions in Q4. While there are thousands of cannabis brands, this client segment at less than 5% of our revenue is a largely untapped opportunity for WM Technology. Our new offerings will provide an array of tooling for brands to easily, effectively, and actionably market their catalog to consumers, receive data insights on the market and category performance to allow them to make real-time decisions on supply and demand management, and also access targeted messaging and user retargeting functionalities. In addition to these tools, we're working towards a partnership with Cookies co-founder Berner to launch a social app in the first quarter of next year that will focus on connecting cannabis consumers and brands. Given the restrictions on cannabis content currently enforced by mainstream social media platforms, we believe this partnership with Berner will not only be a great experience for our users, but a tremendous opportunity for brands, and for that matter, retailers, to effectively tell their story and connect with loyal cannabis consumers. Our ability to pilot these new solutions and bring them at scale to the market wouldn't be possible without the investments we've made this quarter. We continue to invest heavily in headcount across our regional go-to-market teams and and within our engineering product and design teams with over 75 new hires in Q3. As I noted last quarter, we're continuing to see dialogue from integration partners lead to opportunities to strategically deploy our balance sheet and pull forward growth. To that end, I'm incredibly pleased to report that we closed on some key acquisitions this quarter. We previously announced our acquisition of Sprout, which is an all-in-one CRM and targeted messaging solution that we're now offering as a premium upsell to our WM Business subscription. In September, we also signed and closed on the acquisitions of Canvea and Cancurrent. Canvea is a premium logistics compliance software solution that not only facilitates compliant fulfillment of delivery orders, but also helps handle complex workflows like dynamic delivery, sometimes referred to as ice cream truck model, which is currently a huge pain point for many delivery operators. Cancurrent is a service that builds custom integrations and connectors across different tech solutions based on customized workflows. One way to think of it would be as a power tool to speed connectors in industry with a lot of complex, regulatorily driven integrations and APIs. Both Canvay and Cancurrent will be offered as premium upsells to WM Business as well. These acquisitions fill critical gaps in the WM Business solution set and allow us to better serve our existing clients and to better target the MSO and brand client opportunities I mentioned earlier. I also want to welcome the founders and teams of these businesses to WM Technology. They joined our company and are excited by the possibilities of scaling their businesses, leveraging our market presence, and our positioning with retailers and brands. In addition to these acquisitions, we've made several investments in our strategic integration partners to aid in product integration and go-to-market efforts. I expect we'll have more opportunities in the near term as we continue to be on the receiving end of inbound dialogue from businesses that are interested in the possibilities of being part of the WM business portfolio of solutions. We'll approach these solutions in a disciplined manner as we evaluate how we can drive inorganic growth for WM Technology. While our end markets remain fluid, what is absolutely clear is that the long-term opportunity for WM Technology has never been more tangible. And our ability to get after that growth has been pulled forward in multiple ways with what our teams accomplished this quarter. I'm consistently hearing feedback from clients that they're pleased by the direction WM is taking in doubling down on providing more professional and integrated solutions to help them run their business. We're investing behind things like our data lake and sophistication of our technological architecture to enable us to accelerate the pace of bringing products to market based on feedback from our clients. We're also increasing the pace of hiring for what was already, I believe, the largest engineering team for any technology company in the sector. We're continuing to build for the future state where federal regulations will not only open markets but also unlock ways for us to monetize revenue in ways that we simply can't today. And the conversations I'm having with our existing and potential clients point loudly and clearly to the role that WM Technology occupies in cannabis. We are the leading purchase-driven intent marketplace, and the demand for our solutions on the business side is stronger than it's ever been. With that, I'll turn things over to Arden, who will talk through our financial results for the third quarter.