WM Technology, Inc.

posted on our investor relations website. Now turning to our Q3 outlook. While we are encouraged by some positive trends and our team's progress in developing markets, we do anticipate some fluctuations in our results due to seasonality and therefore expect Q3 net revenues to be approximately $44 million and Q3 adjusted EVITA to be approximately $7 million. With that, I'll now turn the call back over to the operator to conclude our call.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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Music Music Music Music Music Good afternoon everyone and welcome to WM Technology Inc's second quarter 2024 earnings conference call. I would now like to turn the call over to your host, Simon Yao, Director of Investor Relations. Hi everyone.

Thank you for joining our fiscal 2024 second quarter results. We have our Executive Chair, Doug Francis, and our Interim CFO, Susan Eckerd, with us today. By now, everyone should have access to our earnings announcement and supporting spy deck on our Investor Relations website. During this call, we will make forward-looking statements about our business outlook, strategies, and long-term goals. Keep in mind that forward-looking statements are not guarantees of future performance and are subject to a variety of risks and uncertainties, some of which are beyond our control. Our actual results could differ materially from expectations reflected in any forward-looking statements. For discussions of risks and other important factors that could affect our actual results, please refer to our SEC filings available on our SEC website and our Investor Relations website as well as the risk and other important factors discussed in today's earnings release. We specifically disclaim any intent or obligation to update these forward-looking statements, except as required by law. For the benefit of those who may be listening to the replay or archived webcast, this call was held on August 8, 2024. Since then, we may have made announcements related to the topics discussed, so please refer to the company's most recent press releases and SEC filings. We will also discuss non-GAAP financial measures alongside those prepared in accordance with GAAP. Non-GAAP financial measures should be considered in addition to, but not a substitute for, the information prepared in accordance with GAAP. You can find our reconciliation of these measures to our GAAP results in our earnings presentation on our Investor Relations website. And finally, today's call is being webcasted from our Investor Relations website and the audio replay will be there soon. With that, I will now turn it over to Doug.

Thanks, Simon, and hello to everyone joining us today. Before we get started, I'd like to introduce and welcome Susan Eckhart, our interim CFO, who has been with us since the beginning of March. Susan brings a wealth of financial leadership experience and has been a key partner in getting us to where we are today. We're glad to have her on the team. I would also like to thank Duncan Grazer for the many years he has been with us, most recently as our CTO leading us through a period of tech transition in the last year and a half. We have begun our search for a new CTO, and I am pleased that Duncan will continue to provide support as an advisor during this transition. The cannabis industry continues to be dynamic as we have witnessed in the first half of this year. On a federal level, we are hopeful as an industry that the recommendation of the DOJ, HHS, and DEA to reschedule cannabis as a Schedule III drug moves forward. But we are realistic about the possibility that the nuance of the ultimate rule may not be what we need to support the industry and that it may be blocked altogether, which have been the fates of many of the other promises of government reform for our industry. There has also been a lot of activity in the rapidly growing intoxicating hemp market. So far, we have largely stayed out of this market segment because we view it as an accident of poor drafting in the farm bill and expected the federal government to close this loophole before now. If that does not happen, we will work to find a way to provide our consumers access to this market in the safest way possible while continuing our support of the licensed cannabis operators and markets. WeedMaps has long been a strong and vocal proponent of sensible cannabis regulation, which we believe results in not just a better functioning industry, but also safer products to the consumer and a more stable sales revenue base that ultimately leads to more tax revenue for the state. We can't just like wine, not plutonium and let the industry grow instead of taxing and regulating it into oblivion. As always, we will continue to support and advocate for our clients and consumers. Turning to our performance, I am proud of our team's accomplishments over the first half of the year. We've continued to take the same approach and mentality that I instilled since returning to leadership team of WeedMaps. And that is to focus on what we can control and win where we need to win while playing the long game and setting our business up for success as the industry evolves. This is evidenced by our Q2 results with revenues of $45.9 million, adjusted EBITDA of $10.1 million, and ending cash of $41.3 million. Susan will touch more on our financial results later, but I am pleased that we were able to report another quarter of strong financial results, further solidifying our financial position and runway. I want to stress how much of a competitive advantage it is to continue building our balance sheet. This is not the time for heroes and risk, so aggressive moves for speculative growth are unwise. We have identified areas for organic and natural growth that we believe we can get after in the near term and into 2025. Continuing to drop cash to the bottom line, a somewhat rare ability in our industry, is what matters until the industry and its markets mature. That said, growth is not where it needs to be, even in this environment, so we must do better. We have plenty of bright spots, but they are typically offset by the headwinds in challenged markets. Next quarter, we will speak to some of the new initiatives underway that we believe will allow us to get back to meaningful growth in 2025. Before I turn it over to Susan, I want to thank our team for their hard work so far this year. Operationally, we have improved each quarter, and I feel great about our team's absolute focus around the first principles that define what success means to us. I've enjoyed being in the trenches with this group, tackling the problems that we face internally and as an industry. As a team, we are excited about the updates we are making to our product roadmap, and we'll talk more about that next quarter. With that, I will turn it over to Susan.

Thanks, Doug. Over the last few months, I've had the opportunity to work closely with Doug and the talented WeedMaps teams to gain a deep understanding of our company and the cannabis industry. I'm impressed by the strong foundation that has been built and the potential that lies ahead. We've accomplished a lot over the past several months, and I'm committed to supporting our initiatives as we continue to drive the company forward. Turning to our financial results, WeedMaps finished the second quarter with $45.9 million in net revenues, which represents a $2.5 million or 5% decline when compared to the same period last year. This decrease was driven by lower spend on our featured and deal listings product as our clients continue to face constrained marketing budgets and in part due to the impact on revenue from certain products we sunset in Q4 of last year. On a sequential basis, net revenues were up 3% over Q1, driven by increased client spend related to promotional activity associated with the industry's 420 holidays. Q2 average monthly paying clients of 5,045 declined about 10% when compared to the prior year period. This decline reflects the removal of paying clients from our platform who've become delinquent, the client count impact related to the products we sunset at the end of last year, as well as expected client churn due to continued industry challenges such as price deflation and the ongoing consolidation in our industry. As a result of the lower average monthly paying client count, the average monthly net revenue per paying client in Q2 increased 5% to 3,033 when compared to the prior year period. Since the clients using the aforementioned sunset products and the client's churn typically had a lower average selling price and monthly net revenue. Turning to our expenses. Cost of revenues and sales and marketing expenses declined 31% and 12% respectively versus the prior year and were a result of eliminated costs associated with our discontinued products. In addition to decreased wage expenses related to lower headcount. These reduced costs, however, were offset primarily by an increase in general and administrative expenses due to elevated legal and audit services related to our SEC filings in May. Also, secondarily, we saw marginal increases across product development and appreciation and amortization. Net income for the quarter came in at 1.2 million, which was slightly down from 2 million in Q2 of last year. Our Q2 adjusted EBITDA of 10.1 million and adjusted EBITDA margin of 22% beat our expectations and demonstrates the operational discipline we continue to maintain throughout the organization. Relative to our Q2 guidance, upside and adjusted EBITDA was a result of better than expected revenue as well as lower than expected provision for credit losses, which reflects our team's efforts and focus on AR and collections. We generated 5.5 million in cash in the quarter and closed with 41.3 million in cash and we remain debt free. We continue to maintain a strong liquidity position and positive cash flow and we are well positioned as we move into Q3. We do expect Q3 cash flow to be impacted by certain one-time payments, such as the potential SEC settlement as described in our 8K at the end of July. Our share count across our Class A and V common stock was 152 million as of August 4, 2024. A reconciliation of non-GAAP metrics to their nearest GAAP result, as well as the details of our share classes and share count calculation, are provided in our earnings presentation posted on our investor relations website. Now turning to our Q3 outlook. While we are encouraged by some positive trends and our team's progress in developing markets, we do anticipate some fluctuations in our results due to seasonality and therefore expect Q3 net revenues to be approximately 44 million and Q3 adjusted EBITDA to be approximately 7 million. With that, I'll now turn the call back over to the operator to conclude our call.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.