LFLY - Earnings call 3 2023 | Leafly Holdings, Inc.

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Operator

Good afternoon. Thank you for attending the Leafly Third Quarter 2023 Earnings Call. My name is Victoria, and I will be your moderator today. [Operator Instructions] I would now like to pass the conference over to your host, Josh deBerge. Thank you.

Josh. proceed, may You

Josh deBerge

welcome QX and Earnings to afternoon, XXXX Leafly's Call. Good

After are on website prepared Miyashita; recorded. of Suresh our the an A me our along earnings live CEO, host remarks Yoko a will call been press Today's Joining on copy Krishnaswamy. presentation today Yoko can at Q&A. found and investor.leafly.com. Suresh and have with release, which, accompanying CFO, be

the safe Private forward-looking contain which made harbor statements, of provisions the of Litigation Today's call will XXXX. Securities pursuant are Act Reform to

statements services seek such financial Forward-looking and operates, offered Leafly, expect, as will. the and industry include or performance environment, opportunities plan, words results strategies, future outlook weekly anticipate, intend, which and by Leafly's statements regarding projected growth potential can the markets be believe, business metrics, by in identified

statements views These any not be these to only relied views and date, update as today undertake and not of at representing we do our duty subsequent our upon as any reflect statements.

their by that reliance actual risks uncertainties materially nature, matters statements, such caution undue not Forward-looking on to to from cause statements. to differ you place that results and are and we could subject expectations, address

could with please periodic in and the SEC other March our of a XX-K with our Form factors filed our press For refer XX, SEC. and filings results, the annual on discussion other release, important actual to that today's the material XXXX, discussed risks affect the risks report on

in at release the been and the non-GAAP call and turn accordance Yoko. available call, of GAAP A Generally is is Principles. financial me that, website with which investor.leafly.com. included Accepted reconciliation our the measures are not During will let with filed our prepared which to in also on over we SEC non-GAAP press With discuss the also has earnings results Accounting

Jason Helfstein

Thank you, Good afternoon. Josh.

progress industry. a in towards third reflect sustainable Our building business results our quarter this evolving

and burn the long of base our million. and operational ahead around Adjusted relationships Leafly from financial driving objectives, consumer guidance. We enabled focus with strengthen a had solidifying resilient us healthier, our will EBITDA provide This us focused managing has rigor term. believe flat leading also profitability, with quarter remain $XXX,XXX a we our was more cannabis customers, $XX.X ended carefully with strategic to discovery experience, on cash continue key retailer and reduce in which negative for destination high-value of are the We're improve to the stronger the revenue essentially on QX as a we With minimal for our friction foundation expenses. e-commerce. clients,

progress our pain I'll markets talk Despite in to pressure of the Cannabis various experiencing these minute, areas, about continue headwinds points types. industry. which a in broader are

solve today's well must a price in and retailers as for markets. flower many increased to compression overall environment business cost operate inflation First, in local and as

These external factors and lack are traditional by liquidity. much-needed compounded of banking access

regulatory logjams in businesses. driving constraints addition, in In are many markets their

of of driving these spend platform our ability in affect out on also Leafly factors are and across base. customer to the a business All their negatively continuation

retailers and stand-alone continue operators unable environments. We in with also see to these market constrained consolidation operating

to as is retailers customer billion strengthening This sales place demand consumer the and the grow. is base opportunity and by by continues $XX for long-term cannabis cannabis cannabis industry. unwavering year us this $XX to XXXX. masked the why to across in in show taking the gives factors Forbes are focused U.S. our on are outside These What track growth grow that Leafly legal nurturing we that the is budget-constrained on confidence remain intently billion to and struggle. broad continue brand Estimates expected to reach

cases to where collaboratively make difficult we them weeks spent We've work made or decision with and pay but have unable to to are plan, make work that and reviewing has accounts efforts the they past in team had to remove ability payment to Our our the solidify continues. from many our payments their a retailers, platform.

and to and Oregon. lesser in The most been a from regional efforts significant impacts have degree in Oklahoma, these California

this such footing as immediate metrics platform has reinforce the ending believe revenue, considering consequences build necessary operators. current we to important and some healthy our of and retail is While that environment for ensure work work we accounts and this financial our with

majority which result, As no on that are of accounts ARPA a XXXX, rose came and with XX.X% retailers. a tail ended from our from is ending platform longer retail Thus the quarter-over-quarter. the we QX of decline long lower-paying QX accounts

rate to of continue in the accounts the expect ending decline moderate, term. but retail in We near

and time incentivizing from retaining focused subscriptions attracting retailers contracts. Evergreen to our companies spending on are shift annual to stronger and We're attention and

our we've realigned addition, costs. In support

share For the more our a to have the more we of lower consultative gives one-to-many clients, approach. tier approach implemented spend of top-performing service a wallet. our ability cost-optimized us take to as look clients we increase This with

value cross-training ad find the the includes force, of base retailers broader we're continue products better as a bolster products brand sales of deliver know to our selling of brand This Also, customers. to also value. platform. now to by We we monetization ways as advertising our well traditional Leafly that these

customers Leafly. both reliance partners scaling with without work of integration, to accessibility integration retailer for and tools resources. us operational and retailers. reduce significant down metric and product single point-of-sale the continue our order allows making performance and we efficiency seamlessly launched retailers. to improvements This cannabis drive to open availability for This allowing for a business orders, our And we enhancements to additional rapid make several Leafly breaks barriers September, to bolsters on friction any order for to drive our integration, new important API system of In most suite to improved

allowing discounts API, entire retailers retailers deals, that means cart-based can a There and to deal an using component experience. integration are key shopping more QX, we of continue brands order are service easily Deals seamlessly and currently functionality. apply to X,XXX that XX POS systems to our order activate than shoppers. more In the launched order which be to

We also a improvements our tool functionality, Leafly. made customization across introducing to increases of that ad ads

number we an and in increase on of number side, orders the both platform On the placed of the saw experience in the consumer year-over-year. shoppers

That's the intentional shopper a to funnel focus and on lower more greater result conversion. mid- efficiency of

cycle past automates consumer also our via reorder order We management, e-mail notifications again push history. for life to which easier their consumers enhanced and it based in-app on making purchase

strands consumer to better, as experience course, to our translate friction have shopping is reduce made And added effect consumers many made experience easier improvements now to it We've the the comprehensive recently we shop strain to retailer well. of by database. the for of most the to improvements and

and July volume in continues make seen celebrating adult growth their Tuesday retailers and we of Ohio state as signs in market use, We're to evolving. The X. We've the XX% Maryland from show to on great order folk increase to revenue of so. in XXth sales partnered a market XX% REC transition on day quarter-over-quarter the legalized a increase adult-use the the do with with first to had to rec. medical legalize

orders and limitations able products General's under and office, consumers' into the is New temporary Attorney to by ability New legal and York's to display shop a advertising New agreed went market reduce to York. stay in their in limited greatly online. retailer offer challenged regulations long-awaited research adult-use licensed York paid and regulations these to and September, Leafly to product We retailers the but transmit retailers' promote ability pricing effect

the as informed reinforces the in in leader helps consumers. have legalization facing. cannabis reach QX, significant win in in also at relieve journey to finally, the This And consumers retailers we challenges X be It been information commitment a moments resources and operational federal that long some our retailers critical level weekly establish very provide the had give access of to New and should shoppers market. U.S. the York channels to of

focused with that us opportunity the resilient. opportunities of industry the continue develops. full and recommended on August, that the Human the The for Committee as of Controlled that to build keep III U.S. formerly business operating folks. the rigor and rightsized and growth opportunity a bill, lies under rescheduling and and challenges Senate Substances evolving banking In Act Banking and cannabis are Schedule up passed to and Services We team this have to nimble remain focus the Senate Health safer and Department the presents ahead

to bring shopping e-commerce retailers, and to brands ensuring the we sales local experiences, North providing drive to We need and an value continue they important consumers, across cannabis remain America. the player that in technology markets unique and

Now Suresh. I'll over turn it to

Suresh Krishnaswamy

continues what discussed, Yoko welcome, you, industry cannabis challenges. be the Yoko, Thank rise to with To everyone. reiterate and

the greatest their areas to business has and to margins, business. pressure invest year, our we retailers to own continue the this We could on struggle led we where realize see of our shifted our priorities with Earlier in return. this

partnering believe largest improving and right for focus across continue priorities platform We is while this we meant on environment, business. costs our to and usability the market with of closely This in these our decision more the mindful will consumers. being this current customers

decline XX.X% related Now for to removal was constraints $X.X ending Leafly's to retail was expected quarter the customers. million. customer third These Retail declines of in $X.X quarter, the and nonpaying down was accounts. results. year-over-year. revenue our than our and million, was primarily In $XX.X revenue to revenue million the due brand were budget account lighter Revenue

softening revenue. experienced we further addition, In a in brand

the includes last our improving customer our working quarters. X their We're optimize on and of diligently them supporting succeed. have over products help credit base and helping been We to understand healthier processes value the building and businesses customers collections that a

ARPA. in to QX X,XXX budgets. accounts of match the some X,XXX the we're were them In tail, accounts the retail assisting lower tighter retailers coming end their rightsizing QX smaller at in platform with longer are to compared 'XX. cases, Most the services off Ending of

$XXX. coming As retail a coupled price in in the result our was ARPA smaller up of XX% these year-over-year our with August, to accounts increases site, QX off

Touching briefly brands. on

conservative seems the of in seen holiday but revenue health term, a this remain on to Near the part possible of leveling upcoming We XXXX business. performance for monitor the period not be this have brand out. in estimates spend. brand we pickup indicator the spend area brands for in a We'll our as business

financial our in the implemented due compared count March. gross down head quarter margin improved reductions Continuing third a XX% to total the statement, to XX.X% earlier, year in primarily to

an cost expenses, XX% million, For year-over-year. focus We increased with operating on savings. totaled started $XX.X QX XXXX down

results above and expenses. reductions of this cost-cutting provided achieved million. the QX count was operating in negative head $X.X both guidance Adjusted EBITDA meaningful year, seen for efforts negative we've $X.X as Through we our million,

level to cash. the Turning levels quarter, balance year the same the excluding cash, similar with in and around end quarter We cash, last the to as we're in targeting restricted sheet. ended $XX.X million

guidance. our to Now

of impact For $X.X revenue retail $X.X quarter's EBITDA estimate fourth of approximately the we million reflects account ending adjusted QX 'XX, an lower quarter and expect base. The of around a primarily negative revenue million. full

expect top and environment but pace. impact to very decline continue in the with accounts ending the customers. investing near for in We In its line, largest more and on light cannabis our the moderate retail relationships our a difficult term, are carefully in we managing expenses at of

can staying profitability. remain and We're committed we focusing control on to path the to what on

We the questions. for will call open Operator? now up

Operator

Our with Instructions] comes from [Operator line Vivien TD the Azer of first Cowen. question

Unknown Analyst

first I retailers? bit is loss top on just was conversations a my in accounts. there's This guess and below with outsized increase can pretty Obviously, James went offer you incremental the a Vivien. any how color Casey guide, on price for the line question,

things extra any expectations? maybe and there how your provide color can trended So you versus

Yoko Miyashita

the question. for James, Thanks it's here. Yoko

where set of to some And we were come highly as the ahead. me the take that as taken at knew the on them step we retailers. of out a factored we within increases. forecast, markets that. anticipated specific consideration They painted price what performance looking And Let well specific -- and back put as all markets with have targeted into just we could into for really a do those result bull's we market our context eye these of out churn set

So quite has we're received pleased actually increases. with our price market how the

whether a the susceptible see the retailers. reason been of ability in our higher most churn budget spend was market afford we to value report at for that's you And their increases. they've is across consistent lower reasons. And terms that conditions lower-tier and will the did what Now price

higher base. really done, proud been I'm But a that across across see that's others than work it actually how increases. the did churn relates approach and to that's targeted price we tier of client as the gone our quite the overall, So of rate

Unknown Analyst

delivery incremental That's get helpful. is drive platform? spend expect And API I early are offerings the trending? existing guess, should to And building sort scheduled one retail offer with more on of for order help guess, you another accounts is maybe any commentary that relationships, near there for how and just me. can can like new retailers we the Or on integration offering new I term? onto help in this the

Yoko Miyashita

of early part just delivery of drive set the for to reduced in of up, Because seamless, And retailers. of we was for that things retailers is terms One Why? makes flow important to integration, for pick we for order to out savings. the That's order efficiency friction make that operational order that this platform know to adoption the of them. do value our we continuing easier. cost flow retailers. It that's year

the and we to time anything can pickup is And friction ordering in process do valuable. to reduce

seamlessly drives monetizing our more the monetization building So drive foundation we for our that at for basis when because can we retail orders that's base. value, across further more look that as

Operator

comes line Holstein of from Jason Oppenheimer. The next with the question

Jason Helfstein

Two or to kind into flow? basically you've sell et kind impediment of can't having two, bare with, to effectively the positive to, would be to do of more with it merge cash companies want about that And conversations questions. you kind things -- where One, one. bones that doing might those are just an cut would been of to something. like imagine are there expenses then you What you that and there are larger companies number I need that Question any yet, do grow to want cetera.

talk maybe about So that.

Suresh Krishnaswamy

We made this operating reductions the first in expenses Jason, I'll take year. there. question significant

XX% lower was year-over-year. Looking QX at it,

XX% we're similar that's and maintain QX managing going savings forward a comp, to as business lower. for stock-based Excluding And well. the year-over-year

in relative seen EBITDA we've significant years. margins, adjusted to improvement So both and operating last especially the X

manage to very cash. at business bottom continue in to and year we're the to on looking said our cash line. the We're the levels going we're we to similar So end balance, focused

and more We're both always looking efficiently and count to spend work optimize line priorities. for in opportunities head with

line to And to with committed the of manage to say in I business going So path continue this we're on we're can our revenues. staying profitability.

Yoko Miyashita

question, consumers, it the execution how as play know As with relates we that focus and it second I to and role brands a nonendemic, on in the our driving with to differentiated seen unique business. we this relates connecting retailers think We remains work space, And really but we the and data. to on to our And that space times for that us, in vertical IP bringing this strategy driving for through difficult bear remain and that platform. long-term it's value is execution. focused overall, we've monetization Leafly believe

Operator

Jason?

Jason Helfstein

have any questions. Yes, I more don't

Operator

I check. just Okay. want double to

from Capital. the Our of Casey comes with next Ryan question line Westpark

Casey Ryan

policy do sort brick days wall a someone off Two the how to standpoint? mean? sort face XX questions, the get is to trying the for it I XX able from nonpaying think, I'm just being does ultimately XX or sense of long a access start not to days platform? to cycle Is or there? of of days, How with. structure of that you What

Suresh Krishnaswamy

Casey. Sure.

we've as our quarters relationships being doing managing accounts, of through especially environment. we over what difficult been this is with in proactive sort very couple customers of So the go last

we've ability payments, this is of so support of accounts. really pay. to And focusing healthier And a been to on all base

structurally of what terms does stopped is our good some contributors of that them services a in our Oregon, in accounts, of in accounts, is of mean So We the we're year. have last ARPA what our was challenged And this we California, signed across QX seeing accounts. number to nonpayment Oklahoma. one especially reduction from and the up lowest markets,

started challenges were we of of environment coming increased having A last with in the them quarter. changed terms into And the paying. year, lot see to in as this me

tightened working successful to are to with our accounts in to XX be services of going at the really numbers we help of our optimize understand that from processes, more significantly platform them we very their closely So platform, XX when the we with work down environment days. very within their our that them It's this and terms sub budget. value of really and up much using these days function fact look a

Casey Ryan

Good. That's actually helpful. Okay.

a Sort on time. of grasp

do you them out business, market Or when though they to think think be put think What pricing the action Leafly continue their what I sort think? destabilize of mean is? of question, accounts you from market lower platform some broader you a to do competitive cut that with economic the of essentially does pricing, diminished? even do ability off like these of Sort platforms. or a you do that lower they're even greatly do their could

Yoko Miyashita

Let me take that a stab with one.

of come they go that they closing we often is the like about they'll they'll the we've And seen is pay. reactivation. what what churn of on to have what terms off that history In for churn also when to -- ability in do, cycle back from us and

down, we break but That's we've seen, it's in pattern tail. don't especially something just that a long that

So for accelerate for them us, a to to conditions. sense we at at are lower we price what bring looking an them And opportunity on that as market view can point that that offerings, time difficult price what reactivation. through makes

So XX we're tough us. point pulling excited able the through launch cost offers to efficient price really customers months. bring those over back that sense and platform That's that the market some that's win-back over being at and letting conditions we're a of sort of for makes about last the onto

Casey Ryan

Okay. that's Yes, interesting. sort of actually

great of sort seen transition. And adds, guess, of account news news Okay. I say like activity net give or guess, sort good across the positive like yes, is country, in can some although, in direct medical aggregates can "Hey, states like, isn't your the would newer you there curious to... course, like good maybe some we I in where do terms what I is which it. about, maybe But Missouri and we've states, of the of what or you like markets account then just you sort do say, there say you I'm I'd states as them love Maryland understand way of negative, look growth you a feel Like you that? of framed is and --

Yoko Miyashita

net that account be market. spend can that Absolutely. or Absolutely. be so And by is can that And market net right? growth,

X overall. that's numbers, had so fascinating of the with I shared in example, complexity for terms on day And ground being coverage in where full I'm Maryland. the activation But industry started of going audience, proud of really levers we lot efforts aspect the think in the doing consumer cultivating Maryland, a some this of more Rex the early demand-side there. sort our that we of

And with then of be work that times we and a at July how natural pulling retailers as starting nearing date, this for were levers. to cycle there is to advertising develops to the market X sort them appropriate

we've But what new see approach the but we brought also to we've really growing that been market, leveraging activation both retailers account this focused in that is on spend consultative really able across last year. over that

Casey Ryan

Yes.

debt do you process. of think last Probably maybe Where in up, really sort Okay, levels further do the the guys goes good. That's think and it continue but ticked helpful. just sort goes it Suresh, it's focus into flattish? question of you as for you from the expense understandable current the bad long year? go the accounts tail next Or on up QX we of to as of QX sort you

Suresh Krishnaswamy

to we that were talking -- Just accounts? a you confirm, on about... Or question was are

Casey Ryan

bad on expense? was debt It

Suresh Krishnaswamy

tough a sir. absolutely, to was Yes, little just expense. debt bad the On hear. I

pick seen up that quarters. No the We last of over question. have couple

with very have have this, to we as proactive through, in that, managing going a lag. we with success you been right? that lately line the is some filter in of know, seen And think I

to next this So into looking from or these for that at year. going we're not time levels increase

trying this clients as to pay healthier So do from a right? we what and ensures to to durability are base of XXXX, time. into all we're to able We of is who who revenue are that over pay, go revenue looking build build do revenue

we quite value customers. bit a are So think our to of products

themselves a the through are disadvantage. a But going people they platform, see at environment decisions. So putting are when making we know and we off they're do tough difficult move do customers

off the to their is same them pay as we're to have doing -- budget. time, Yoko we're we've within to platform. that ones optimize said, do good over And working with their the platform. come spend rates what reactivation is back what And So the the pretty from seeing the seen at ability time,

in we So tighter we all the tick debt off start processes and working, next we say down that for seeing and place this as management go that bad to put are should into that level have year.

Operator

the from Benchmark with The Dan next comes line Kurnos question of Company.

Daniel Kurnos

Suresh, then and market this call I on of really up seen mean, XX% following with most speaking, and top I and But hypothetically comparison kind of the changing not that, models been we've Zillow focusing the of down guess sort of on spending filtering exactly Just this. we've the over clean on pricing here. a time the obviously

you you on and focus think with And how leverage they're market, rebound legal that of next down platform, want but yet profitability the from if at And we're or look you running right we're for seeing the on delta top conditions more you top-tier a do were how much much to get what the that where conversion of or the down at market that of your more year drive But now reasons, trading as expanding want macro kind in change? time effort maybe I seeing? or to a either like, were seeing them How down if the just this much perspective? business, that in either trade keep not from point just sense retail you're just pressure about might market? to might trade good with whatever to them, terms have even growth your to and of ARPA still time

Yoko Miyashita

very lot of And right? me is this what tend answer get we're opportunistic their we the in And top market, multistate we that things what behavior of managing the actually we'll our this of perspective MSOs, can your I to from largest way call mid-tier, sort smaller let if of multi-store retailers. At that of internal tail, the a really segment about. includes about seeing see the actually and very excited Dan, extremes, your bottom, some in talk operators. of measuring long

if like brand And footfall the see break get the get Leafly to spend, get to activation a in the the see down those to of recognition opportunity of a stores. through the players out, we where we some the lot platform word

So over that gotten of mid-tier this and I'll smartening sort out of most what the call really space optimization efficiencies. you around have up course of operator Still probably that the that's use year.

On the and top end, or on think there how about -- strategies we're those sophisticated MSOs, these they've very highly markets very conversations they've targeted clients had performance are in and focus. the of exited your themselves focused terms having most around abandoned ROI and

can makes the are so. where they sense it performance measurable activate So markets the what to products how and can that's that across do drive

So that necessary segment. and of we'd out drive I top is to think see like approach really that the but highly see tailored that that to growth

with right talked we've about hey, enough to loan the just about support them the point right the think and communicate, really right structure. on it's I the product, that bringing side, On price

market they've sort of But we this in don't markets. but for but do market peppering about watch, And am to XX -- size. what they stores share California, got smaller like own through large very they've operator throughout -- I midsized can sort a of got optimistic store X they're example, massive

you're them. tier, the understand create right about the that aligning ultimately, But think about for low the at the you're we value about that MSO delivering that whether and I and support price still right it's really or level the right can highest And and the there's truly a talking product for talking we at segment. communicating structure them do helping lot

Daniel Kurnos

Yoko, Got bit little really guess, last we That's And this it. quarter. helpful. about a talked I

You conversion, in flow mentioned the leverage the consumer it I able on to aspect, call mean through. today, better being just of kind higher too, briefly terms of

flow you I end is do a retail your or know cart or of reducing of those the things a out. right is through? like guess models on have low-hanging there's lift easy hikes? feels fruit further to being price to we on it of on that and I -- plays the pricing terms market things to can lot how other online, And focus retailer able add could as improve but maybe process see And thought friction, kind that reevaluate just the lot come of now in still Or

Yoko Miyashita

comment that traditional Yes think communicating a slightly truly pull rate. than where right? We're value, about take I'd there consumer is and yes. the through different you marketplaces But just I do can

So about form that value in driving that for the activation activation, brand. it's consumer really and retailer customer of

for friction, is thing on the focused is we're us, for one the benefit it miss sometimes you consumer. can mirroring So the making retailer there easier side, reducing a on consumer

That's well. what drives stickiness for the Leafly as platform

know, and features covering So e-com. X experience. in space, as helping enhance implementing new And sided we we're improve to wins, Absolutely that consumer you see those the as whenever and flow. on the side, that ability the

broadly, we lots implement as little and of try go. and learn test and to So things

Operator

There now additional Yoko are back to the time. no would for this questions conference like further I at to waiting pass remarks.

Yoko Miyashita

you We year-end on us. and sharing our we're call. with Thank you time joining appreciate for looking results our forward next to today, your

Operator

the your today's concludes of participation, for your rest enjoy Thank you call. and That day.

Leafly (LFLY) 9 Nov 232023 Q3 Earnings call transcript