Leafly(US:LFLY)2023-11-11 20:46Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 was negative $200,000, ahead of guidance of negative $500,000, with minimal cash burn and ending the quarter with approximately $14.5 million in cash [15][26][52] - Revenue for Q3 was $10.6 million, down 10.2% year-over-year, with retail revenue at $9.3 million and brand revenue at $1.3 million [49] - Total gross margin improved to 89% compared to 87.1% a year earlier, primarily due to headcount reductions [25] Business Line Data and Key Metrics Changes - Ending retail accounts in Q3 were 4,466, a decline from 5,637 at the end of Q3 2022, with a significant portion coming from lower-paying retailers [6][50] - Average Revenue Per Account (ARPA) rose 15.5% quarter-over-quarter and 16% year-over-year to $644 [24][49] - Brand revenue has not seen a pickup and remains conservative in estimates for future performance [51] Market Data and Key Metrics Changes - The cannabis market is projected to reach $33 billion in legal sales in the U.S. this year, with expectations to grow to $50 billion by 2028 [5] - Significant regional impacts were noted in California and Oklahoma, affecting metrics such as ending retail accounts and revenue [16][17] - The market is evolving with new adult-use regulations in states like New York and Maryland, contributing to a 33% increase in order volume and a 21% increase in revenue [46][20] Company Strategy and Development Direction - The company is focused on strengthening relationships with high-value clients and reducing retailer friction to drive operational efficiency [15][22] - A new open API for order integration was launched to enhance accessibility for retailers and improve operational performance [7] - The company aims to build a healthier customer base by tightening credit and collections processes and incentivizing retailers to shift to annual contracts [44][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in the cannabis industry, including inflation and increased operational costs for retailers [42] - The company is committed to managing expenses carefully while focusing on profitability and maintaining a strong cash position [27][41] - Management expressed optimism about the long-term growth opportunities despite current market pressures [47] Other Important Information - The company has implemented cart-based deals to enhance the shopping experience and improve ad functionality for retailers [45] - Regulatory changes at the federal level are expected to alleviate some operational challenges for retailers [9] Q&A Session Summary Question: Insights on price increase conversations with retailers - Management indicated that price increases were targeted and anticipated some churn, but overall received positive feedback from the market [28][29] Question: Trends on new offerings like the API for order integration - Management noted that reducing friction for retailers is crucial for operational efficiency and adoption of the platform [30] Question: Conversations with larger companies regarding potential mergers or sales - Management highlighted significant reductions in operating expenses and a focus on maintaining profitability [32][34] Question: Bad debt expense outlook - Management acknowledged an increase in bad debt expense but emphasized proactive management to mitigate this issue [70][89] Question: Account activity in newer states - Management reported positive account activation and increased spending in states like Maryland, indicating growth potential [66][68]