Leafly(LFLY) - 2024 Q1 - Quarterly Report

Part I Condensed Consolidated Financial Statements (Unaudited) Unaudited Q1 2024 financials show reduced net loss despite revenue decline, with balance sheet changes and notes highlighting going concern and Nasdaq compliance issues Consolidated Balance Sheets As of March 31, 2024, total assets slightly decreased, total liabilities increased due to reclassified convertible notes, and stockholders' deficit widened Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $14,100 | $15,293 | | Total current assets | $18,477 | $19,002 | | Total assets | $21,171 | $21,835 | | Convertible promissory notes, current | $29,221 | $0 | | Total current liabilities | $35,346 | $5,080 | | Total liabilities | $35,442 | $34,293 | | Total stockholders' deficit | $(14,271) | $(12,458) | Consolidated Statements of Operations Q1 2024 revenue decreased by 19.6% to $9.0 million, but net loss significantly narrowed to $2.4 million due to a 33.9% reduction in operating expenses Q1 2024 vs Q1 2023 Statement of Operations (in thousands, except per share amounts) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $9,048 | $11,249 | | Gross Profit | $8,072 | $9,903 | | Total Operating Expenses | $9,820 | $14,851 | | Loss from Operations | $(1,748) | $(4,948) | | Net Loss | $(2,387) | $(5,397) | | Net Loss Per Share (Basic & Diluted) | $(1.09) | $(2.79) | Consolidated Statements of Cash Flows Net cash used in operating activities dramatically improved to $0.9 million in Q1 2024, primarily due to lower net loss and favorable working capital changes Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(873) | $(9,226) | | Net cash used in investing activities | $(209) | $(525) | | Net cash (used in) provided by financing activities | $(114) | $112 | | Net decrease in cash | $(1,196) | $(9,639) | | Cash, cash equivalents, and restricted cash, end of period | $14,348 | $15,563 | Notes to Condensed Consolidated Financial Statements Notes highlight substantial doubt about going concern due to maturing convertible notes and Nasdaq non-compliance, with revenue primarily from U.S. retail advertising - The company has substantial doubt about its ability to continue as a going concern, as it does not have the ability to repay its $29.7 million of convertible notes maturing on January 31, 2025, with its current liquidity[36][39] - On April 9, 2024, Leafly received a notice from Nasdaq for non-compliance with continued listing standards, as it did not meet the minimum requirements for Stockholders' Equity, Market Value of Listed Securities, or Net Income[79] Revenue Breakdown by Segment (Q1 2024 vs Q1 2023, in thousands) | Segment | Q1 2024 Revenue | Q1 2023 Revenue | | :--- | :--- | :--- | | Retail | $7,871 | $9,470 | | Brands | $1,177 | $1,779 | | Total | $9,048 | $11,249 | - Subsequent to quarter end, on May 7, 2024, the company converted an additional $275,000 of its 2022 Notes into 96,813 shares of common stock[141] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 20% revenue decline offset by ARPA growth, significant expense reductions improving net loss, and reiterates going concern and Nasdaq compliance issues Key Metrics Key operating metrics show a strategic shift with a 33% decrease in retail accounts offset by a 22% increase in retailer Average Revenue Per Account (ARPA) Key Operating Metrics | Metric | Q1 2024 | Q1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Ending retail accounts | 3,840 | 5,702 | -33% | | Retailer ARPA | $677 | $553 | +22% | Results of Operations Q1 2024 total revenue decreased by 20% to $9.0 million, while total operating expenses fell 34% to $9.8 million due to significant cost reductions - The 20% decrease in total revenue was driven by a $1.6 million (-17%) decrease in Retail revenue and a $0.6 million (-34%) decrease in Brands revenue[155][156][157] - Total operating expenses decreased by $5.0 million (-34%) year-over-year, a result of reductions in force and cost-cutting activities initiated in early 2023[163][164] Non-GAAP Financial Measures Adjusted EBITDA loss significantly improved to $0.9 million in Q1 2024 from $3.3 million in Q1 2023, attributed to cost savings from restructuring Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net loss | $(2,387) | $(5,397) | | EBITDA | $(1,451) | $(4,489) | | Adjusted EBITDA | $(867) | $(3,344) | Liquidity, Capital Resources, and Going Concern Current capital resources are insufficient to fund operations for 12 months, raising substantial doubt about going concern due to inability to repay $29.7 million in 2022 Notes maturing in January 2025 - The company has $29.7 million of 2022 Notes maturing on January 31, 2025, and based on its current liquidity position, it would not be able to repay them when due[184] - Management concluded that substantial doubt exists about the company's ability to continue as a going concern within one year of the financial statement issuance date[185] - The company is non-compliant with Nasdaq's continued listing standards and intends to submit a plan to regain compliance, but there is no assurance an extension will be granted or that compliance will be achieved[189] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Leafly is not required to provide information regarding market risk - Leafly is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information otherwise required with respect to market risk[197] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period[200] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[201] Part II Legal Proceedings The company is involved in ordinary course legal proceedings with no material developments since the 2023 Annual Report - There have been no material developments to the legal proceedings reported in the 2023 Annual Report[202] Risk Factors There have been no material changes to the risk factors disclosed in the company's 2023 Annual Report - As of the date of this report, the company is not aware of any material changes in the risk factors disclosed in its 2023 Annual Report[203] Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q1 2024 - During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"[204] Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including certifications and new agreements