Leafly(US:LFLY)2022-11-12 17:23Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $11.8 million, an increase of 8.1% year-over-year, driven by the expansion of advertising products and partnerships [8][39] - Retail revenue was $9 million, up 5% year-over-year, while brand revenue reached $2.7 million, up 20% year-over-year [39] - Total gross margin for Q3 was 87.1%, a decrease of 130 basis points from 88.4% in Q3 2021, primarily due to increased business platform and web infrastructure expenses [44] Business Line Data and Key Metrics Changes - Retail revenue growth was impacted by a challenging environment, with a sequential decline in average revenue per account (ARPA) of 10% year-over-year [39][40] - The number of ending retail accounts grew by 18% year-over-year, with significant account additions in Florida, California, and New Mexico [39][25] - Brand revenue faced an 8% sequential decline compared to Q2, attributed to brands pulling back on digital advertising [42] Market Data and Key Metrics Changes - The cannabis industry is experiencing a slowdown, with Q3 retail sales estimates showing flat to 1% growth compared to Q2 [9][10] - The company noted a significant increase in new retail leads in Ontario, with a 260% rise following the announcement of the Uber Eats partnership [23] Company Strategy and Development Direction - The company announced a 21% headcount reduction to realign its cost structure and preserve capital in response to the challenging macro environment [13][14] - Focus on optimizing existing products and partnerships to drive incremental revenue, with a strong emphasis on technology integrations [16][30] - The company is optimistic about the long-term prospects of the cannabis industry, forecasting growth to $42 billion over the next four years [36] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding Q4, noting healthy interest from advertisers but continued pullbacks in brand spending [38][52] - The company is positioned to capture future opportunities while managing costs amid macroeconomic headwinds [50][68] - Management highlighted the importance of the upcoming legalization momentum and its potential impact on the business [18][36] Other Important Information - The company ended Q3 with $27.8 million in cash and expects annualized cash cost savings of approximately $16 million starting in 2023 [51][49] - The company plans to provide full-year 2023 financial guidance in March 2023 [52] Q&A Session Summary Question: Insights on retail account cancellations and new additions - Management reported strong retail account growth of 18% year-over-year, with significant additions in California and newer markets [55] Question: Impact of recent partnerships on new retail accounts - Management indicated that partnerships with BLAZE and Onfleet have been critical for growth, particularly in California [57] Question: Guidance for next year and revenue expectations - Management provided insights on Q4 expectations, indicating a cautious outlook but confidence in achieving growth despite challenges [64][68] Question: Economics of partnerships and ARPA growth - Management noted that partnerships have allowed for higher entry price points for new retailers, which could lead to increased ARPA over time [59][84] Question: Expansion potential of the Uber Eats partnership - Management expressed excitement about the Uber Eats partnership but did not provide specific details on expansion beyond Toronto at this stage [75] Question: Strategy on promotional pricing and its impact - Management emphasized a focus on account growth over ARPA at this stage, tailoring strategies to local market dynamics [78][82]