WM Technology(MAPS) - 2024 Q1 - Quarterly Report

Part I - Financial Information This section presents the company's unaudited condensed consolidated financial statements, management's analysis of financial condition and results of operations, market risk disclosures, and internal controls assessment Item 1. Condensed Consolidated Financial Statements (Unaudited) The company reported a net income of $2.0 million for Q1 2024, a significant turnaround from a net loss of $4.0 million in Q1 2023; total assets slightly decreased to $165.8 million from $167.0 million at year-end 2023; cash provided by operating activities improved to $7.4 million; notably, the financial statements for the three months ended March 31, 2023, have been restated due to improper revenue recognition for certain customers, which reclassified $1.59 million from revenue to a reduction in general and administrative expenses (as a credit loss recovery) Condensed Consolidated Balance Sheets | Balance Sheet Items (In thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash | $35,717 | $34,350 | | Accounts receivable, net | $7,893 | $11,158 | | Total current assets | $50,261 | $51,486 | | Total assets | $165,849 | $167,021 | | Liabilities & Equity | | | | Total current liabilities | $29,995 | $33,715 | | Total liabilities | $59,021 | $63,870 | | Total stockholders' equity | $106,828 | $103,151 | Condensed Consolidated Statements of Operations | Income Statement (In thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 (As Restated) | | :--- | :--- | :--- | | Net revenues | $44,389 | $46,416 | | Total costs and expenses | $40,628 | $50,564 | | Operating income (loss) | $3,761 | $(4,148) | | Net income (loss) | $1,959 | $(3,969) | | Net income (loss) attributable to WM Technology, Inc. | $1,240 | $(2,475) | | Diluted income (loss) per share | $0.01 | $(0.03) | - The company achieved profitability in Q1 2024 with a net income of $2.0 million, compared to a net loss of $4.0 million in the prior-year period, driven by a significant reduction in total costs and expenses[20] Condensed Consolidated Statements of Cash Flows | Cash Flow Items (In thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 (As Restated) | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,402 | $2,157 | | Net cash used in investing activities | $(4,540) | $(3,226) | | Net cash used in financing activities | $(1,495) | $(1,612) | | Net increase (decrease) in cash | $1,367 | $(2,681) | | Cash – end of period | $35,717 | $25,902 | Notes to Condensed Consolidated Financial Statements - The company operates a leading online cannabis marketplace (Weedmaps) and provides a suite of eCommerce and compliance SaaS solutions (Weedmaps for Business) to retailers and brands[27][28][29] - A restatement of Q1 2023 financials was required due to improper revenue recognition for certain customers on a cash basis, resulting in a $1.59 million decrease in reported Net Revenues and a corresponding decrease in General and Administrative expenses, with no impact on net income[36][39][42] Disaggregated Net Revenues | Disaggregated Net Revenues (In thousands) | Q1 2024 | Q1 2023 (As Restated) | | :--- | :--- | :--- | | Weedmaps for Business and other SaaS solutions | $13,282 | $11,310 | | Featured and deal listings | $28,166 | $32,280 | | Other ad solutions | $2,941 | $2,826 | | Total net revenues | $44,389 | $46,416 | - The company has minimum purchase obligations of $5.3 million for the remainder of 2024, $7.3 million for 2025, and $7.5 million for 2026, primarily related to a three-year AWS Enterprise agreement[111] - The fair value of the warrant liability increased from $0.6 million at year-end 2023 to $1.4 million as of March 31, 2024, resulting in a non-cash loss of $0.9 million for the quarter[114][133] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported Q1 2024 net revenue of $44.4 million, a 4% decrease YoY, primarily due to lower revenue from Featured Listing and WM Deal products; despite the revenue decline, the company achieved net income of $2.0 million and Adjusted EBITDA of $9.6 million, driven by a 20% reduction in total operating expenses; average monthly paying clients decreased by 12% YoY to 4,937, attributed to industry-wide price deflation, while average monthly revenue per paying client increased by 9% to $2,997; the company generated $7.4 million in cash from operations and ended the quarter with $35.7 million in cash Key Operating and Financial Metrics | Metric (in thousands, except per client data) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net revenues | $44,389 | $46,416 | | Net income (loss) | $1,959 | $(3,969) | | Adjusted EBITDA | $9,599 | $7,130 | | Average monthly revenue per paying client | $2,997 | $2,743 | | Average monthly paying clients | 4,937 | 5,641 | - Average monthly paying clients decreased by 12% YoY, primarily due to elevated churn as the cannabis industry faces price deflation[188] - Average monthly revenue per paying client increased by 9% YoY, partly due to the sunsetting of certain lower-spend products in late 2023[185] Results of Operations - Net revenues decreased by $2.0 million (4% YoY), driven by a $4.1 million decline in 'Featured Listing and WM Deal' products, partially offset by a $2.0 million increase in 'Weedmaps for Business' revenue[217] - Total costs and expenses decreased by $9.9 million (20% YoY), with significant reductions across all categories: Cost of Revenues (-34%), Sales and Marketing (-20%), Product Development (-16%), and General and Administrative (-21%)[219] - The decrease in Sales and Marketing expenses was primarily due to a $3.6 million reduction in personnel-related costs, including a $1.8 million decrease in transaction-related bonuses[221] - The decrease in General and Administrative expenses was driven by a $1.1 million reduction in the provision for credit losses and lower personnel, insurance, and software costs[223] Liquidity and Capital Resources Liquidity Metrics | Liquidity Metrics (In thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash | $35,717 | $34,350 | | Accounts receivable, net | $7,893 | $11,158 | | Working capital | $20,266 | $17,771 | - Net cash provided by operating activities increased to $7.4 million in Q1 2024 from $2.2 million in Q1 2023[233][235] - Management believes existing cash and cash generated from operations will be sufficient to meet anticipated cash needs for at least the next 12 months[229] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include foreign currency fluctuations, interest rate changes, and inflation; however, management states that exposure to foreign currency risk is insignificant, and the company's cash-only portfolio is insensitive to interest rate changes; while inflation has not had a material effect to date, the company continues to monitor its potential impact on client spending and operating costs - The impact of foreign currency exchange rate fluctuations was insignificant for the three months ended March 31, 2024 and 2023[251] - The company's portfolio consists only of cash, making its fair value insensitive to interest rate changes; a hypothetical 100 basis point change in interest rates would not have a material effect[253] - As of March 31, 2024, the company held cash balances exceeding the FDIC insurance limit with five financial institutions, but management believes the risk of loss is not significant[254] Item 4. Controls and Procedures Management concluded that as of March 31, 2024, the company's disclosure controls and procedures were not effective due to multiple material weaknesses in internal control over financial reporting; these weaknesses span entity-level controls, IT general controls (including change management and access controls), and process-level controls in key financial cycles like order-to-cash; the weakness in the order-to-cash cycle directly led to the restatement of the first three quarters of 2023; a remediation plan is being developed - Management concluded that as of March 31, 2024, the company's disclosure controls and procedures were not effective[258] - Multiple material weaknesses were identified, including deficiencies in the control environment, risk assessment, and monitoring activities[263] - Specific material weaknesses include ineffective IT general controls for key financial systems (related to change management and access controls) and ineffective process-level controls for order-to-cash, procure-to-pay, and other key cycles[264] - The material weakness in the order-to-cash cycle resulted in an inadequate revenue recognition policy that led to the restatement of the unaudited financial statements for the first three quarters of 2023[264][266] Part II - Other Information This section details ongoing legal proceedings, confirms no material changes to previously disclosed risk factors, and addresses other required disclosures including equity sales and defaults Item 1. Legal Proceedings The company is cooperating with an ongoing SEC investigation that began after the company voluntarily reported an internal complaint regarding the calculation of its historical Monthly Active Users (MAUs) metric; the SEC has issued subpoenas for documents and employee testimony, which occurred in July and August 2023; the outcome is uncertain but could result in penalties or other sanctions - The company is cooperating with an SEC investigation following a 2022 internal complaint about the calculation and reporting of its Monthly Active Users (MAUs) metric[271] - The SEC's Division of Enforcement has issued two subpoenas for information and documents, and several current and former employees provided testimony in July and August 2023[271] - The internal investigation found no impact on the company's GAAP financial results or currently disclosed non-GAAP metrics; the company ceased reporting MAUs in Q3 2022[271] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - The risk factors disclosed in the company's 2023 Form 10-K have not materially changed[273] Other Items (2, 3, 4, 5) There were no unregistered sales of equity securities, defaults upon senior securities, or other material information to report under these items for the quarter; mine safety disclosures are not applicable - Item 2: No unregistered sales of equity securities[274] - Item 3: No defaults upon senior securities[274] - Item 5: No other information to report[275] Item 6. Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including the Certificate of Incorporation, Bylaws, officer certifications (pursuant to Sarbanes-Oxley Sections 302 and 906), and XBRL data files