WM Technology(MAPS) - 2023 Q3 - Quarterly Report

Forward-Looking Statements This section outlines forward-looking statements based on current expectations that are subject to substantial risks and uncertainties - The report contains forward-looking statements regarding future results, business strategy, market opportunity, and other operational plans[9] - Key areas covered by forward-looking statements include financial performance, client acquisition, product launches, competitive advantages, capital requirements, and the impact of macroeconomic conditions and regulatory changes in the cannabis industry[11] - The company explicitly states that these forward-looking statements are subject to risks and uncertainties and that actual results may differ materially[10][12] Part I - Financial Information Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the period ending September 30, 2023 Condensed Consolidated Balance Sheets Total assets decreased to $178.7 million as of September 30, 2023, from $199.0 million at year-end 2022 Condensed Consolidated Balance Sheet Data (in thousands) | | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $46,929 | $54,983 | | Total assets | $178,694 | $199,035 | | Total current liabilities | $31,088 | $46,323 | | Total liabilities | $63,912 | $84,258 | | Total stockholders' equity | $114,782 | $114,777 | Condensed Consolidated Statements of Operations Q3 2023 revenue was $47.7 million, with a net loss narrowing to $2.5 million from $10.5 million in Q3 2022 Q3 2023 vs Q3 2022 Statement of Operations (in thousands) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Net revenues | $47,725 | $50,500 | | Total operating expenses | $53,273 | $70,145 | | Operating loss | $(5,548) | $(19,645) | | Net loss | $(2,512) | $(10,464) | | Basic and diluted loss per share | $(0.02) | $(0.06) | Nine Months 2023 vs 2022 Statement of Operations (in thousands) | Metric | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | Net revenues | $146,584 | $166,246 | | Total operating expenses | $152,497 | $213,169 | | Operating loss | $(5,913) | $(46,923) | | Net loss | $(4,498) | $(21,849) | | Basic and diluted loss per share | $(0.03) | $(0.09) | Condensed Consolidated Statements of Cash Flows Net cash from operations was $12.4 million for the nine months ended September 30, 2023, a significant year-over-year improvement Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $12,410 | $(10,466) | | Net cash used in investing activities | $(8,870) | $(14,848) | | Net cash used in financing activities | $(4,402) | $(8,293) | | Net decrease in cash | $(862) | $(33,607) | | Cash – end of period | $27,721 | $34,170 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, revenue recognition, and impairment charges related to sunsetting products - The company operates an online cannabis marketplace (Weedmaps) and provides a suite of eCommerce and compliance SaaS solutions (Weedmaps for Business) to retailers and brands[31][32][33] - Approximately 52% of revenue for Q3 2023 and 54% for the nine months ended September 30, 2023, originated from California, indicating a geographic concentration risk[44] - The company recorded an impairment charge of $6.1 million on intangible assets and $2.3 million on property and equipment in Q3 2023 related to certain product offerings expected to be sunset in December 2023[58][61] Disaggregated Net Revenues (in thousands) | Revenue Source | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Weedmaps for Business and other SaaS | $10,877 | $12,383 | $33,847 | $38,093 | | Featured and deal listings | $32,945 | $34,644 | $101,840 | $116,709 | | Other WM Ad solutions | $3,903 | $3,473 | $10,897 | $11,444 | | Total net revenues | $47,725 | $50,500 | $146,584 | $166,246 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 5% year-over-year revenue decline to $47.7 million in Q3 2023, offset by cost reductions and improved profitability Key Operating and Financial Metrics Key metrics show a decline in paying clients and revenue per client, but a significant improvement in Adjusted EBITDA Key Metrics Comparison | Metric (in thousands, except client data) | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $47,725 | $50,500 | $146,584 | $166,246 | | Net loss | $(2,512) | $(10,464) | $(4,498) | $(21,849) | | Adjusted EBITDA | $10,671 | $(9,630) | $28,028 | $(11,178) | | Average monthly revenue per paying client | $2,938 | $3,019 | $2,932 | $3,433 | | Average monthly paying clients | 5,414 | 5,576 | 5,555 | 5,380 | Results of Operations Q3 2023 results show a 5% revenue decrease but a 24% reduction in operating expenses, driven by cost-cutting initiatives - Q3 2023 net revenues decreased by $2.8 million (5%) YoY, driven by lower revenue from Weedmaps for Business subscriptions and Featured Listings products[207] - Sales and marketing expenses for Q3 2023 decreased by $6.3 million (35%) YoY, primarily due to a $6.3 million reduction in personnel-related costs from lower headcount[209] - General and administrative expenses for Q3 2023 decreased by $14.3 million (43%) YoY, mainly due to an $8.9 million decrease in the provision for doubtful accounts and lower personnel costs[212] - Depreciation and amortization for Q3 2023 increased by $9.3 million (369%) YoY, largely due to an $8.4 million impairment loss on intangible assets and property related to the decision to sunset certain product offerings[213] Liquidity and Capital Resources The company holds $27.7 million in cash and generated $12.4 million from operations in the first nine months of 2023 Key Liquidity Figures (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash | $27,721 | $28,583 | | Accounts receivable, net | $12,314 | $17,438 | | Working capital | $15,841 | $8,660 | - For the nine months ended September 30, 2023, net cash provided by operating activities was $12.4 million, compared to net cash used of $10.5 million in the same period of 2022[234][235] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is marked as not applicable in the report - The company states that this item is not applicable[259] Item 4. Controls and Procedures Disclosure controls were deemed ineffective due to a material weakness in IT general controls, with remediation underway - Disclosure controls and procedures were deemed not effective as of September 30, 2023, due to a material weakness in internal control over financial reporting[260] - The material weakness relates to ineffective IT general controls (ITGCs) in user access and program change-management, where developers had excessive administrative rights and monitoring was insufficient[261] - Remediation actions, including removing excessive access and enhancing monitoring, have been implemented and the company expects the material weakness to be fully remediated by the end of the year ending December 31, 2023[262] Part II - Other Information Item 1. Legal Proceedings The company is cooperating with an SEC investigation regarding its calculation of monthly active users - The company is involved in an SEC investigation following a voluntary report of an internal complaint about the calculation and reporting of its monthly active users (MAUs) metric[267] - The SEC's Division of Enforcement has issued two subpoenas for documents and also subpoenaed several current and former employees for testimony, which took place in July and August 2023[267] - The company states it is fully cooperating with the investigation, but the outcome is uncertain and could lead to penalties, sanctions, and reputational harm[267] Item 1A. Risk Factors No material changes to previously disclosed risk factors are reported for the period - There have been no material changes to the risk factors disclosed in the 2022 Form 10-K and the prior Form 10-Q[269] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section is marked as 'None' in the report - The company reports no unregistered sales of equity securities during the period[270] Item 6. Exhibits This section lists filed exhibits, including employment agreements and officer certifications - The report includes several exhibits, such as an Executive Services Agreement, an Employment Agreement with Douglas Francis, and a Separation and Release Agreement with Randa McMinn[275] - Certifications from the Principal Executive Officer and Principal Financial Officer, as required by the Sarbanes-Oxley Act of 2002, are also filed as exhibits[275]