WM Know-how, Inc. (NASDAQ:MAPS) This autumn 2022 Earnings Convention Name March 16, 2023 5:00 PM ET
Firm Contributors
Greg Stolowitz – Vice President, Investor Relations
Doug Francis – Govt Chair
Arden Lee – Chief Monetary Officer
Juan Feijoo – Chief Working Officer
Convention Name Contributors
DJ Hynes – Canaccord Genuity
W. Andrew Carter – Stifel Monetary Corp.
Tom Champion – Piper Sandler
Operator
Thanks for standing by. Welcome to the WM Know-how, Inc. Fourth Quarter 2022 Earnings Convention Name. [Operator Instructions] As a reminder, right this moment’s program is being recorded. And now I wish to introduce your host for right this moment’s program, Greg Stolowitz, Vice President of Investor Relations.
Greg Stolowitz
Hello, everybody. Thanks for becoming a member of us right this moment to debate our fiscal 2022 fourth quarter outcomes. We have now our Govt Chair, Doug Francis; and our CFO, Arden Lee with us right this moment.
By now everybody ought to have entry to our earnings announcement. This announcement can also be on our Investor Relations web site together with the supporting slide deck.
Throughout this name, we’ll make forward-looking statements together with statements about our enterprise outlook, methods and long-term objectives. These statements should not ensures of future efficiency. They’re topic to quite a lot of dangers and uncertainties a few of that are past our management. Our precise outcomes might differ materially from expectations mirrored in any forward-looking statements.
For a dialogue of dangers and different vital components that might have an effect on our precise outcomes, please consult with our SEC filings out there on the SEC’s web site in our Investor Relations web site in addition to the chance and different vital components mentioned in right this moment’s earnings launch. We particularly disclaim any intent or obligation to replace these forward-looking statements besides as required by legislation. For the good thing about those that possibly listening to the replay or archived webcast, this name was held and recorded on March 16, 2023. Since then, we could have made bulletins associated to the matters mentioned, so please consult with the corporate’s most up-to-date press releases and SEC filings.
Additionally throughout this name, we’ll talk about sure non-GAAP monetary measures and it is not to monetary data ready in accordance with GAAP. These non GAAP monetary measures must be thought of along with, however not as an alternative choice to the knowledge ready in accordance with GAAP. Reconciliation of those measures to Our GAAP outcomes may be present in our earnings presentation out there on Investor Relations web site. And at last, this name in its entirety is being webcast from our Investor Relations web site. And an audio replay shall be out there on our web site in a number of hours.
With that, I would like to show the decision over to Doug.
Doug Francis
Thanks, Greg, and thanks everybody for becoming a member of us. Our fourth quarter outcomes got here in the place we anticipated. We posted $49 million in This autumn income, $2 million in This autumn adjusted EBITDA and ended the 12 months with $29 million in money, whereas persevering with to be debt free. Additional, we grew our paying shoppers by double digits versus final 12 months regardless of challenges in our finish markets.
In my first quarter again on the helm, our group’s focus was stabilizing income and getting again to our working tradition of driving profitability. And whereas there may be nonetheless work to do, we’re happy with the progress we have made thus far and are assured we have now the fitting group and technique in place.
Like many corporations, we face challenges within the present surroundings. Inflation is consuming into shopper and enterprise spending energy. The upper price of capital is slowing progress, and the worry of a looming recession is entrance and heart on people minds. The hashish business is dealing with extra headwinds as we cope with over regulation, the gradual rollout of latest licenses throughout the nation, an absence of presidency assist mixed with excessive taxes from all ranges of presidency, commoditization of hashish merchandise, frozen capital markets, restricted entry to banking, and a thriving black market.
Hashish corporations want all the assistance they will get proper now. And once they’re letting us know that Weedmaps continues to be top-of-the-line methods to interact in energetic hashish group and purchase focused customers. Our omni-channel method of built-in digital, in-store occasions, group engagement and road activations can create hyper native visitors for our shoppers.
Given the character of our customers, every person engagement that we ship to our shoppers, whether or not on-line or offline, creates significant worth, particularly in instances like these. As we have been getting again to our roots and specializing in making the plant entrance and heart, each manufacturers and retailers alike need to affiliate their model with Weedmaps, given how we interact and assist form the tradition of hashish.
The outreach from our business has been nice. And we’re planning with key companions to inform the hashish story in our pursuit of legalization and secure entry. We have now a transparent plan to maximise our alternatives and what could also be a troublesome 2023 and lay the muse for wholesome progress in 2024 and past.
As I discussed final quarter, the important thing for us in 2023 is focus. We’re targeted on three issues: our market expertise with customers, delivering simple worth to our shoppers, and doing all of that with a objective of worthwhile and sustainable progress. First on our market. We’re getting again to what we do finest and the roots of what made Weedmaps particular by celebrating weed tradition and the magic of the plant. We are going to create differentiated content material showcasing the craft nature of hashish.
We are going to elevate the dialog about genetics and terpenes. For instance, we’re partaking with skilled scientists cultivators and breeders throughout the nation to inform the terpene and micro cannabinoid story throughout Weedmaps. Via instructional content material and by providing differentiated merchandise by means of our market will assist eradicate the excessive THC equates to the most effective weed fallacy. This may profit the manufacturers and retailers that we showcase on Weedmaps by highlighting variations different than simply THC ranges.
We’re additionally partaking with Dr. Bonni Goldstein, our former Medical Director and main hashish doctor to create instructional content material on the therapeutic results of hashish. Weedmaps has traditionally been and can proceed to be a secure place for customers to seek out hashish for wellness, and to assist deal with severe situations and illnesses.
We’re additionally working to enhance the purchasing expertise of our customers by enhancing our taxonomy, [indiscernible] and our search outcomes to make search extra intuitive throughout our platform. We are going to higher leverage our first-party person information to drive extra personalised experiences and affect our person journeys towards making the fitting buy from our shoppers.
We sit in a privileged place given the first-party datasets that we personal, and the rise of enormous language modeling and AI reinforcement studying instruments. Weedmaps has traditionally been the authoritative supply for all issues hashish, and can proceed constructing on that market fame by differentiating our content material, person expertise and information in 2023.
Subsequent, we’ll concentrate on delivering simple worth for our shoppers to enhance their returns. We plan to broaden our promoting options throughout product classes, giving our shoppers extra methods to succeed in our excessive intent customers mid funnel and impression our buy selections. We’re increasing the regional logic that drives our native advert choices to provide our shoppers extra choices on the place they present up in our search expertise.
We have now initiatives in flight to create new and differentiated deal sorts for our shoppers to succeed in customers searching for worth. We’re engaged on integrating our SaaS options as worth added options and extensions of our market to show — to offer extra utility to our customers and shoppers.
We are going to make it simpler for our shoppers to onboard, combine and develop with Weedmaps no matter their tech stack, and we’ll assist our shoppers with native activations, retailer appreciation excursions, model collaboration and unique merchandise drops [ph] to allow them to leverage the facility of Weedmaps model to inform their very own tales.
Lastly, we’ll concentrate on driving worthwhile and sustainable progress. We are going to concentrate on what we will management whereas getting ready to speed up our progress when markets enhance. Reasonably than a one measurement suits all method to markets, shoppers and options shall be disciplined in how we prioritize investments. We’ll be pulling again spend towards a few of our newer non-marketplace options, whereas we consider the product market match of those choices.
We’ll concentrate on driving a lean working mentality and every little thing that we do. We have already achieved the heavy lifting, eradicating extra layers of administration throughout the corporate, simplifying processes, and altering the way in which we work to drive gross sales and financial savings. We already restructured our office forward of the beginning of this 12 months, as troublesome as that was in order that we will hit the bottom working.
I am happy with what our groups have achieved during the last a number of months, and doing the exhausting work to set ourselves up for fulfillment in 2023. Productiveness is a 12 months spherical effort with no end line and that is our mindset in 2023. Earlier than I hand the decision to Arden, I additionally need to present a short replace on management. The Board and I’ve determined to place our CEO search on maintain for now, and I’ll proceed leaning in and dealing with our senior management group in the interim. Deeply invested and successive Weedmaps, and can proceed to drive our tempo as we do our half in driving worthwhile progress for the business.
It is all the time darkest earlier than the daybreak. And although 2023 shall be difficult, we imagine that the way forward for the hashish business is vivid and thrilling for these with a imaginative and prescient, knowhow and willingness to take it on. Actual Weedmaps have deep information of the plant, the provision chain and the place the business is headed. We all know how you can leverage that perception into our market and know-how. And we all know how you can leverage information to not solely purchase prospects, however to showcase the merchandise that can maintain them coming again.
We imagine that Weedmaps is in an important place to seize alternative throughout all worth chain segments if and when broader legalization arrives. Till then we’ll proceed executing towards our focus priorities, and main from the entrance as we take the business by means of this subsequent stage of progress. It is time like these had been the facility of Weedmaps model, the worth of our market and the energy of our management place inside hashish really signed with our customers and shoppers.
With that, I will flip it over to Arden.
Arden Lee
Thanks, Doug, and whats up to everybody on right this moment’s name. Our fourth quarter efficiency mirrored the expectations we had on progress heading into the quarter and the actions we took to drive profitability all through the quarter. This autumn income got here in at $49 million leading to a 5% decline for complete second half income, in keeping with our prior steerage.
This autumn adjusted EBITDA was a optimistic $2 million. Whereas our adjusted EBITDA continues to be impacted by provision for uncertain accounts, we noticed these non-cash prices slim in This autumn as we anticipated. Adjusted EBITDA prior to those prices was $4 million, reflecting the price discount actions we took all through the quarter. Whereas our progress continues to be impacted by and market headwinds, that are driving diminished ranges of spend by shoppers, we proceed to broaden our shopper base.
Our paying shoppers grew by 19% versus final 12 months. And when taking a look at spend ranges by present shoppers, we’re seeing indicators of stabilization, with our web greenback retention persevering with to carry that stage is in keeping with the prior quarter. Our web greenback retention inside California, which continues to be our largest area at 54% of This autumn income expanded in This autumn versus the prior quarter.
This autumn adjusted EBITDA of $2 million mirrored a 9% discount in adjusted OpEx versus final 12 months. We rationalize quite a lot of areas throughout the corporate decreasing entry administration layers inside our gross sales and advertising groups, and eliminating our cross useful [indiscernible] in favor of a brand new centralized working construction.
Our adjusted gross sales and advertising and G&A declined by 14% and a 11% because of this, with product improvement rising by 11% versus final 12 months. We reported a web lack of $61 million for the quarter, which incorporates $6 million in stock-based compensation together with roughly $56 million in different non-recurring prices. The majority of which is said to the valuation allowance we took towards our deferred tax property, which is a non-cash cost, together with severance funds related to the headcount discount we executed through the quarter.
Extra data on these prices is accessible in our earnings launch and shall be in our Kind 10-Okay. We shut the 12 months with $29 million in money, proceed to be debt free and are snug with our liquidity place. In mild of current occasions, we’re monitoring our banking scenario intently and really feel snug with the safety of our money deposits.
We didn’t have relationships or any direct publicity with Silicon Valley Financial institution or Signature Financial institution. Our absolutely diluted share rely throughout our Class A and V share lessons was 148 million on the finish of the quarter. A reconciliation of adjusted EBITDA to web loss in addition to the small print of our share lessons and share rely calculation are supplied in our earnings presentation posted to our Investor Relations website.
Lastly, as famous in our launch, we have now reported in our Kind 10-Okay, a fabric weak spot on our basic IT controls associated to inside person entry and alter administration over sure programs which are related to our monetary reporting. I can let you know no misstatements have been recognized in our audit on account of these deficiencies, and we have already begun a remediation efforts.
In line with our outlook, we’re assured that the sharp concentrate on our market, shopper worth and profitability will assist us navigate by means of the continued finish market headwinds impacting our expert markets. We count on to broaden our paying shopper base given the alternatives we see, but in addition count on to see continued pressures on income per shopper throughout a number of of our expert markets on account of the continuing declines throughout our finish markets.
Given these headwinds and basic uncertainties within the present macro surroundings, we won’t be offering full 12 months steerage on income or adjusted EBITDA. We count on Q1 income, which is our seasonally lowest quarter shall be barely down versus This autumn at $47 million given seasonality associated to the This autumn holidays.
On profitability, we count on double-digit adjusted EBITDA margins and optimistic money move in 2023. We already took actions throughout This autumn to create clear line of sight to optimistic money move no matter finish market dynamics. We’re beginning this 12 months with a run fee stage of adjusted OpEx that is in keeping with the place we had been after we closed our go public transaction, and previous to accelerating funding. And yesterday, we have now a presence in additional areas with an expanded shopper base and platform capabilities and the place we had been again then.
We are going to make investments primarily based on how our progress is trending and do not anticipate important investments to attain our progress priorities. We additionally see continued alternatives to attain productiveness which is able to give us capability to fund progress investments. To that finish, we count on Q1 adjusted EBIT DA shall be roughly $4 million as we ramp investments heading into the 420 vacation.
[Indiscernible] within the first half will proceed to be impacted by remaining severance and termination prices associated to the headcount reductions we took final quarter. With that stated, we’re dedicated to driving optimistic money move this 12 months. And we have now clear line of sight to delivering towards that dedication given the price reductions we have already achieved and the main target method will take this 12 months on new investments.
In closing, I need to thank our group at Weedmaps and Doug for his ongoing management as we get entering into 2023. As Doug famous, 2023 shall be a 12 months to recollect as we drive a spotlight at our priorities.
Let’s now open up the decision for questions.
Query-and-Reply Session
Operator
[Operator Instructions] And our first query comes from the road of DJ Hynes from Canaccord. Your query please.
DJ Hynes
Hey guys, thanks for taking the questions. Arden, so very nice progress within the margin entrance and This autumn and what’s implied in Q1. As we take into consideration the historic monetary profile of enterprise, is that aspirationally the place you assume you will get again to? And as we take into consideration the dials are turning to get there, is it extra broad primarily based self-discipline? Are there particular areas the place we’re taking a extra calculated step again?
Arden Lee
Sure. [Indiscernible] thanks for that query. Respect that. So, a pair issues, and let me know if I do not cowl absolutely your questions. We talked previously about our enterprise mannequin being inheritive — inherently money move, generative. And after we’ve gone by means of cycles of accelerating funding, how we have been in a position to form of present shortly after that funding acceleration ends the money move form of technology that our enterprise mannequin helps, proper.
So again in fiscal 2019, after we went — final went by means of an funding acceleration 12 months. You will see in fiscal 2020, I feel that is what you are referencing, the EBITDA and money move that we had been in a position to generate, coming off the heels of that. We do not assume there’s any purpose why we will not get again to these ranges. Clearly, we have achieved a number of heavy lifting, as Doug referenced, during the last quarter. We hit the bottom working after we began the 12 months. We took a number of these troublesome actions over the course of This autumn to set ourselves up to take action.
Come January and by way of your second query round, the place do we discover these alternatives, I would say: a, there is a basic form of mindset of let’s discover productiveness and function leanly throughout the corporate. Now, with that being stated, a number of the price reductions that we took in This autumn had been very surgical round sure areas. And what I characterize these areas, as is: a, we eradicated a number of extra form of administration layers and infrastructure that we had created.
So we have now created quite a lot of cross useful orgs throughout the corporate, that candidly we’re slowing [technical difficulty] potential to get our groups to maneuver on the velocity at which they needed to. After which should you regarded on the different areas the place we have actually accelerated funding, it is a number of our go-to-market form of groups. And so what we have achieved is been rather a lot smarter spherical, form of pruning our go-to-market assets to form of align with the market alternative that we see within the near-term.
After which on the margin, I would say that there have been sure areas that had been form of good to haves, however not essentially have to have on this space on this surroundings. And so we took a tough have a look at how our groups had been working and attempt to see the place we might, once more, take away redundancy to get extra productiveness.
DJ Hynes
Sure, sure. Okay, received it. After which simply as a follow-up. So at what stage do you assume we would see a flooring in that month-to-month income for taking part in shopper metric? And I suppose the query actually is like, how are you internally enthusiastic about modeling and budgeting for that over the course of ’23?
Arden Lee
Sure, so for us, we count on to proceed to see strain towards that quantity. And I suppose the reply to your query, DJ is a bit nuanced. And why I say that’s, in idea, after we’re coping with wholesome market dynamics, we wish to see that quantity not develop an excessive amount of, as a result of we’re persevering with to broaden in new areas, proper.
And as we talked about previously, as we’re increasing in new areas, these are typically decrease spend ranges versus our expert areas. Now, the problem that we’re having on this surroundings, as we talked about for the previous few quarters, is that throughout our scaled markets, particularly California, Colorado, Oklahoma, as people have seen with a third-party information, finish market GMV continues to say no, continues to say no on a quarter-over-quarter foundation. When you have a look at the information year-to-date in 2023, thus far, it has been sequentially down for the higher a part of the Q1 thus far interval.
And so we’re very aware of that dynamic by way of how transforming out plan and planning towards these expert markets or the expert states of California, Oklahoma and Colorado. What I’ll say although, is exterior of these three states, we’re seeing very wholesome demand tendencies amongst your shoppers. We’re seeing wholesome demand tendencies, by way of not solely our potential to develop our paying shopper base, but in addition spend ranges throughout these areas.
So for us, what does that imply? We have got our eyes focus particularly on these three states to only to get a learn round shopper tone and well being of our shoppers, as a result of it is nonetheless touching go clearly in these three states, however exterior of that it is enterprise as ordinary as getting after the chance.
DJ Hynes
Okay, received it. Thanks for the colour.
Operator
Thanks. [Operator Instructions] And our subsequent query comes from the road of Andrew Carter from Stifel. Your query please.
W. Andrew Carter
Hey, thanks. Good night. Good afternoon. So first query I might ask by way of what you are seeing on the money wants, I feel the money burn within the quarter was $4 million versus the form of adjusted $4 million quantity, how a lot was money prices? How a lot is form of left to go in money prices and assist us perceive if there’s something due on the distributions given the particular shareholder class? Or on the money foundation?
Doug Francis
Sure, sure. So Andrew, I can take that one. So a pair issues. In order we referenced earlier on the decision, we nonetheless have some residual prices, money prices associated to the price discount efforts that we took in This autumn. So we talked, or we filed in our aka final quarter, the severance prices associated, the headcount reductions that we took. The majority of these will hit within the first half. So we talked about just below $11 million of money prices after we thought our [indiscernible] December, we have paid out over the course of This autumn.
However 1 / 4 of these, we nonetheless have some residual price [indiscernible] to go. In your query round tax distributions, our tax distributions have been averaging at a few buck, 1 / 4 or so. And so we do not count on a lot motion within the very near-term on that entrance. What I’ll say is, we have absolutely thought by means of the severance prices which have — which are left to go by way of our liquidity and money administration and planning and the like.
And, as you talked about, on the decision, we really feel very snug with our liquidity place. We have sized our price base at a stage the place we have now clear line of sight in the direction of producing optimistic money move, no matter what occurred in California, Colorado, Oklahoma. And I’ve touched on the dynamics that we’re seeing in a few of these different states.
W. Andrew Carter
Okay, second query has so third-party form of metrics, we have a look at related internet [indiscernible] reveals the time on the platform is down fairly considerably and accelerated year-to-date. That may be partially a operate of the in markets themselves. But in addition what’s form of your sense of the MAU base? I do know, you are still form of evaluating that, going again to attract board what you’re disclosed, however your gross sales groups additionally, clearly need to be armed with one thing to the worth. So something you may assistance on that? And do you assume you are investing on the proper stage? Behind that the demand technology either side of the funnel, clearly.
Doug Francis
Sure, I’ll take that. That is Doug. We just lately employed a brand new CMO who’s an absolute Professional on that. So we have been digging in. There isn’t any doubt there’s absolute strain throughout the board, on {the marketplace}, however we’re nonetheless dialing in to see what the most effective metric is that displays the well being of our market. However once more, the tip markets are robust. We’re feeling it. However there are pockets of what we used to do nice at Weedmaps, which is form of inform the plant story.
So we really feel inside like well being and wellness with Dr. Goldstein and a few of these different strikes, we have now prime of the funnel strikes that we will make which are opportunistic. After which these new options that we mentioned, like class primarily based permits us to actually penetrate decrease within the funnel. So we have now sufficient slot is arising right here. We expect we will get optimistic motion. However once more, nope, there isn’t any query there’s strain.
W. Andrew Carter
Acquired it. Last query, I suppose I will simply ask and this can be a realized you may’t management the market. However should you assume should you step again and take into consideration the unique thesis of the Go Public transaction, a number of it was the form of make the most of being a public hashish play and being form of most capital environment friendly. And should you’re not rewarded for that, do you see the strategic worth in remaining there and given you’ve got received money move perception, this can be a capital environment friendly platform, you are going to have extra choices than others. So simply something, I would love to listen to any commentary on that.
Doug Francis
Sure, I can begin on that one, Andrew. Hear, we’re targeted on executing the reply plan. We clearly went public for a purpose. We have now benefited from the flexibility to inform our story externally and with the ability to form of showcase the enterprise mannequin and the like. Clearly, it is a robust capital markets surroundings. However for us, we’re targeted on what we will management, what we management is executing towards the plan that we have now. And I will depart it at that.
W. Andrew Carter
Truthful sufficient. I will move it on.
Operator
Thanks. [Operator Instructions] And our subsequent query comes from the road of Tom Champion Callahan from PSC. Your query please.
Unidentified Analyst
Hello, thanks. That is Jim on for Tom. Thanks for taking the query. So I suppose first, one for Doug, so you’ve got been again with the corporate for about 4 months now. And there is a number of macro challenges you are form of coping with. Are you able to simply form of speak us by means of a few of your greatest takeaways, and what you’ve got discovered as far as you’ve got been getting again concerned with the enterprise? And I had one for Arden, it looks like the allowance for uncertain accounts form of retains arising, I suppose curious how we take into consideration the cadence of that by means of the steadiness of the 12 months. Thanks.
Doug Francis
Sure. So, that is Doug, It is actually a difficult market, that is for certain. However it’s actually a state-by-state and market-by-market story. In order I am getting on the market and speaking to people, the one factor that does come up is, as a result of a number of budgets are compressed within the business, they’re actually studying on Weedmaps, to inform their model story. So form of herald a few of the previous gang again within the firm has been thrilling as properly, as a result of we have been in a position to construct some relationships with the MSOs and types on the East Coast, that had been somewhat elusive to us.
So, what we’re actually doing now’s specializing in {the marketplace}, our information and our search. We’re actually growing our content material, which we predict will assist in all markets. Weedmaps actually used to actually be the supply of fact for the business. And thru our information integrations and bringing form of the professionals again round, that is actually our objective is to be the thought chief. And we hope that, that drives from state to state as we assist people discover ways to seek for hashish and how you can eat hashish the fitting manner.
However the primary takeaway that I’ve gotten from most people is that, it is robust. And since we have now full information of the provision chain. We had been already given counsel and recommendation form of past know-how. So, the primary takeaway, once more, is simply the assist that is wanted.
Arden Lee
Sure. And even on the second query you had, you are proper, we did have unhealthy debt expense once more, within the quarter, it was about simply over $2 million. We did name out in our November name that we anticipated unhealthy debt to stay elevated in This autumn and to start out normalizing over the course of 2023. Hear, it is nonetheless touching go, as I discussed earlier than, in these three states, and with finish market declines, trending the way in which they’re we proceed to be very form of vigilant round not solely collections and or gross, AR progress.
However how AR is transferring by means of varied ageing buckets, we have achieved rather a lot. We proceed to do rather a lot operationally to regulate. Like I stated, what we will management. One of many large strikes that we made beginning the 12 months was to place the accountability of our collections again into the fingers of a number of our account groups, as a result of they’re fairly profitable by way of managing that shopper relationship. So we’re seeing some good, good, good outcomes stemming out of that.
Operator
Thanks, girls and gents, in your participation in right this moment’s convention. This does conclude this system. Chances are you’ll now disconnect. Good day.