Leafly(US:LFLY)2022-08-14 10:12Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $12 million, representing a 14% increase year-over-year and a 6% increase sequentially from Q1 2022 [6][31] - Total gross margin in Q2 was 88%, slightly down from 88.5% in Q2 2021 due to increased business platform expenses [37] - Total operating expenses were $19.5 million, an increase of 83.9% compared to $10.6 million in Q2 2021, primarily due to increased headcount and marketing costs [37][39] - Net income was reported at $14.8 million, benefiting from a $24.4 million change in the fair value of derivative liabilities [40] Business Line Data and Key Metrics Changes - Revenue from retail was $9.1 million, up 11.3% year-over-year, while revenue from brands was $3 million, up 22.2% year-over-year [31][32] - Retail ARPA (Average Revenue Per Account) in Q2 was $579, a 9.8% decline year-over-year, but showed slight improvement from the previous quarter [33] - Brand accounts grew by 6.4% over Q1, indicating a continued increase in the brand's subscriber and advertiser base [34] Market Data and Key Metrics Changes - The company reached 100% market penetration in New Jersey, with every dispensary having a menu on the Leafly platform [27] - In Arizona, ARPA increased by 25.9% quarter-over-quarter, showcasing strong market performance [34] - The company is experiencing higher churn rates in lower penetrated markets, such as Oklahoma, where marketplace dynamics have not developed sufficiently [54] Company Strategy and Development Direction - The overall strategy remains focused on maximizing efficiencies and prioritizing projects that yield the highest returns [9] - The company is implementing a hiring freeze and reducing operating expenses to navigate macroeconomic challenges [8][41] - Investments are being redirected to strengthen B2B integration and enhance the platform, while pausing additional product launches to focus on existing products [46] Management's Comments on Operating Environment and Future Outlook - Management acknowledges macroeconomic headwinds affecting advertising budgets and anticipates these factors will impact the second half of the year [7][8] - Despite current challenges, management remains bullish about the long-term prospects of the cannabis industry and believes in the company's growth potential [8][30] - The company expects revenue for the full year 2022 to be between $48 million and $51 million, reflecting a cautious outlook due to anticipated softening in ad spend [43][45] Other Important Information - The company ended the quarter with $35.4 million in cash and $31.9 million in restricted cash [42] - A new automated auction-based bidding tool for retailers has been rolled out in five states, leading to increased ad revenue in most of those markets [20][21] Q&A Session Summary Question: Can you discuss the churn levels and specific markets experiencing the greatest churn? - Management identified Oklahoma as a market with structural challenges leading to increased churn, particularly in lower ARPA markets [53][54] Question: What is the impact of the sales reorganization on new account additions? - The sales reorganization temporarily slowed down execution, impacting the rate of new account acquisitions, but there are signs of stabilization in Q3 [55][56] Question: What are the dynamics in Oklahoma regarding competitive marketplace conditions? - Management noted that Oklahoma has an oversaturation of licenses, which complicates the competitive dynamics and affects monetization [58][59] Question: Can you elaborate on the new retailer dashboard and its engagement? - The retailer dashboard is continuously evolving, and management emphasized the importance of driving adoption and usage among retailers to maximize benefits [68][72] Question: What are the expectations for ad spend in the current macroeconomic environment? - Management anticipates continued downward pressure on ad spend due to macroeconomic factors, particularly in discretionary spending [35][36]