WM Technology(MAPS) - 2023 Q1 - Quarterly Report

Part I - Financial Information Item 1. Condensed Consolidated Financial Statements (Unaudited) The company's Q1 2023 financials show decreased revenue and total assets, but a significantly narrowed net loss and improved operating cash flow Condensed Consolidated Balance Sheets Total assets and liabilities decreased as of March 31, 2023, while stockholders' equity saw a slight increase Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash | $25,902 | $28,583 | | Accounts receivable, net | $15,401 | $17,438 | | Total current assets | $48,169 | $54,983 | | Total assets | $190,626 | $199,035 | | Liabilities & Equity | | | | Accounts payable and accrued expenses | $26,170 | $33,635 | | Total current liabilities | $39,708 | $46,323 | | Total liabilities | $75,387 | $84,258 | | Total stockholders' equity | $115,239 | $114,777 | Condensed Consolidated Statements of Operations Q1 2023 revenue declined year-over-year, but a significant reduction in operating expenses led to a much smaller net loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Revenues | $48,007 | $57,452 | | Total operating expenses | $52,155 | $71,712 | | Operating loss | $(4,148) | $(14,260) | | Net loss | $(3,969) | $(31,233) | | Net loss attributable to WM Technology, Inc | $(2,475) | $(13,893) | | Basic and diluted loss per share | $(0.03) | $(0.19) | Condensed Consolidated Statements of Cash Flows The company generated positive cash from operations in Q1 2023, a reversal from the prior year, though the overall cash balance decreased Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $2,157 | $(3,850) | | Net cash used in investing activities | $(3,226) | $(4,914) | | Net cash used in financing activities | $(1,612) | $(3,156) | | Net decrease in cash | $(2,681) | $(11,920) | | Cash – end of period | $25,902 | $55,857 | Notes to Condensed Consolidated Financial Statements Notes detail the company's business model, accounting policies, warrant liabilities, and the establishment of a full valuation allowance - The company operates a B2C online cannabis marketplace (Weedmaps) and a B2B suite of SaaS solutions (Weedmaps for Business) for cannabis retailers and brands[30][31][32] - A full valuation allowance was established against the company's net deferred tax assets in the fourth quarter of 2022 due to uncertainty about future taxable income[101] - The allowance for doubtful accounts increased to $13.4 million as of March 31, 2023, from $12.2 million at the end of 2022[61][62] - Warrant liabilities are measured at fair value, with changes recognized in the statement of operations, resulting in a gain of $0.7 million in Q1 2023, compared to a loss of $18.2 million in Q1 2022[80][145] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 16% revenue decline due to lower client spending, offset by significant cost reductions that drove positive Adjusted EBITDA Key Operating and Financial Metrics Q1 2023 saw lower revenue and average revenue per client, but a narrowed net loss, positive Adjusted EBITDA, and growth in paying clients Key Metrics Comparison (Q1 2023 vs Q1 2022) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Revenues | $48,007 thousand | $57,452 thousand | | Net loss | $(3,969) thousand | $(31,233) thousand | | Adjusted EBITDA | $7,130 thousand | $(953) thousand | | Average monthly revenue per paying client | $2,837 | $3,810 | | Average monthly paying clients | 5,641 | 5,026 | - The increase in average monthly paying clients was primarily due to new client acquisitions, but this was offset by a decline in average revenue per client due to spending declines in established markets and client liquidity challenges[210] Results of Operations A 16% revenue decrease in Q1 2023 was more than offset by a 27% reduction in operating expenses, improving the operating loss - Revenues decreased by $9.4 million (16%) YoY, primarily due to a decrease in revenue from featured and deal listing products[236] - Sales and marketing expenses decreased by $9.8 million (45%) YoY, mainly from reductions in personnel-related costs, website advertising, and outside services[238] - General and administrative expenses decreased by $6.6 million (23%) YoY, driven by lower personnel costs, insurance, and bad debt expense[241] - Other income was positively impacted by a $18.9 million favorable change in the fair value of warrant liability compared to the prior year period[244] Liquidity and Capital Resources The company generated positive operating cash flow and believes its current cash position is sufficient for the next 12 months Liquidity Position (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash | $25,902 | $28,583 | | Accounts receivable, net | $15,401 | $17,438 | | Working capital | $8,461 | $8,660 | - Net cash provided by operating activities was $2.2 million for Q1 2023, compared to net cash used of $3.9 million in Q1 2022[252][254][255] - The company expects to fund its liquidity requirements from cash on hand and cash provided by operating activities, and believes it has sufficient funds for at least the next 12 months[248] Quantitative and Qualitative Disclosures About Market Risk The company reports that its exposure to foreign currency, interest rate, and inflation risks is not material - The impact of foreign currency exchange rate fluctuations on assets and liabilities is considered insignificant[276] - The company's portfolio is insensitive to interest rate changes as it only holds cash, and a hypothetical 100 basis point change would not have a material effect[278] - Management does not believe inflation had a material effect on the business during the first quarter of 2023[279] Controls and Procedures Disclosure controls were deemed ineffective due to a material weakness in IT general controls, with remediation efforts underway - Disclosure controls and procedures were deemed not effective as of March 31, 2023, due to a material weakness in internal control over financial reporting[280] - The material weakness relates to ineffective IT general controls (ITGCs) in user access and program change-management over certain financial reporting systems[281] - Remediation actions are in progress, including removing privileged access and enhancing monitoring, with the company expecting remediation to be complete by the end of 2023[282] Part II - Other Information Legal Proceedings The company is cooperating with an ongoing SEC investigation related to its historical calculation of Monthly Active Users - The company is cooperating with an SEC investigation following a voluntary report of an internal complaint about the calculation of its historical Monthly Active Users (MAUs) metric[287] - The SEC has issued two subpoenas to the company for information and documents, as well as subpoenas to several current and former employees for testimony[287] - The internal investigation found no impact on the company's GAAP financial results or currently disclosed non-GAAP metrics[287] Risk Factors No material changes have been made to the risk factors disclosed in the company's 2022 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K[289] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the reporting period - None[290] Exhibits This section lists all exhibits filed with the quarterly report, including required officer certifications - Lists required filings such as officer certifications (31.1, 31.2, 32.1) and Inline XBRL documents[295]