MAPS - NASDAQ

Thank you for standing by, and welcome to WM Technology, Inc. Second Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to your host, Simon Yao, Director of Investor Relations. You may begin.

Good afternoon, and thank you for joining us to discuss our second quarter 2025 results. Today, we are joined by our CEO, Doug Francis; and our CFO, Susan Echard. By now, everyone should have access to our earnings announcement and supporting slide deck on our Investor Relations website. During this call, we will make forward-looking statements about our business outlook, strategies and long-term goals. Keep in mind that forward-looking statements are not guarantees of future performance and are subject to a variety of uncertainties and risks, some of which are beyond our control. Our actual results could differ materially from expectations reflected in any forward-looking statement. For a discussion of risks and other important factors that could affect our actual results, please refer to our SEC filings available on our SEC website and our Investor Relations website. We specifically disclaim any intent or obligation to update these forward-looking statements, except as required by law. For the benefit of those who may be listening to the replay or archived webcast, this call was held on August 7, 2025. Since then, we may have made announcements related to the topics discussed, so please refer to the company's most recent press releases and SEC filings. We will also discuss non-GAAP financial measures alongside those prepared in accordance with GAAP. Non-GAAP financial measures should be considered in addition to, but not as a substitute for the information prepared in accordance with GAAP. You can find a reconciliation of these measures to our GAAP results in our earnings presentation on our Investor Relations website. And finally, today's call is being webcasted from our Investor Relations website, and an audio replay will be available shortly. With that, I will now turn it over to Doug.

Thanks, Simon, and thank you all for joining us today. I want to begin by thanking our team for their continued focus and resilience in what remains a challenging environment across the cannabis industry. When I returned to the company in a leadership role, we acknowledged that the challenges facing the industry weren't temporary or cyclical, they were structural. We need to let these forces play out, get the wins where we can and as I have said many times, play the long game. Our balance sheet gets stronger each quarter, allowing us to move decisively on near-term opportunities as well as help us attune for the future state of our industry. Against that backdrop, we've stayed grounded in the fundamentals, executing consistently, operating efficiently and investing thoughtfully. That discipline has allowed us to remain focused on what we can control even as external headwinds persist. Despite ongoing pressure in several of our key markets, which led to Q2 revenue landing slightly below our expectations, we delivered another consecutive quarter of adjusted EBITDA profitability and positive cash flow. That marks our 11th and eighth in a row, respectively, milestones that reflect the consistency and operational rigor we've maintained quarter-after-quarter. Our performance through the first half of this year speaks to that mindset and has strengthened our position to continue investing behind our platform, particularly at a time when capital across the industry is scarce and many are focused on near-term survival. Looking across the broader landscape, it's clear that these challenges persist and in some cases, are deepening. California's fragile industry recently had their excise tax increased to 19% of sales. Weedmaps has been lobbying alongside our clients there to push legislation to hopefully provide relief and freeze the tax at the prior level. Separately, the California legislator looks poised to pass a bill that regulates online cannabis marketplaces, which may impact how we monetize while increasing our risk and cost of doing business in the state. Lastly, in Michigan and many of the other early states who come online with cannabis programs, price compression, consolidation, taxes, overregulation, lack of black market enforcement and the proliferation of intoxicating hemp make running a cannabis business incredibly difficult and expensive. Those expenses tighten margins and cash flows for cannabis businesses, which impacts our revenue opportunity. These difficulties are why you see larger players exiting these markets. We will continue to work with our clients to help state and local governments see that the path to a successful cannabis industry is through reasonable, whole regulation, not impossibly burdensome over regulation and taxation. This fight will be ongoing. Specifically, you will see this revenue impact over the coming quarters. Amid these challenges, we're encouraged by the progress we're seeing in emerging markets. In New York, for example, we've been onboarding clients at an accelerating pace and the majority of operational retailers in the state are now on our platform. As this market continues to take shape, achieving meaningful retail density on our marketplace will be critical to its health and success, and we're pleased with our early progress. As we discussed last quarter, under the leadership of Sarah Griffis, our new CTO, we have made significant progress this year and have a slate of new products in the pipeline. Previously, I discussed vertical and horizontal expansion, and we are now working on new user-focused features and experiences as well. The company is energized, and we are excited about the coming quarters despite the many headwinds. We will discuss some of these new products over the coming months. We have been in beta and will launch expanded premium placement opportunities for brands, which will be our focus over the coming quarters. The results so far are very promising, and we are hopeful the new revenue generated from these products will offset some of the revenue headwinds we may face in legacy markets over the coming quarters. In the last few quarters, we said that we were considering opportunities to service the hemp market, and we had viewed hemp as a potential major product expansion area for us. While we are still working on the foundations of a hemp offering, we view the space as increasingly uncertain given some of the recent legislative activity on the federal and state level. As an example, Texas passed a bill that was an almost complete ban of intoxicating hemp that was vetoed by the governor and it is unclear whether an agreement on compromise will be reached in the current special legislative session. If there is no agreement, Texas will continue to have almost no regulations for intoxicating hemp products. A similar back and forth has been happening in the U.S. Senate, where a broad intoxicating hemp ban was initially included in the agricultural funding bill and then stripped out entirely. Once we have line of sight on how this will play out, we will begin moving more aggressively towards launching our product offering for hemp. We will be launching our new online head shop, [ Hedi ] in the near term and are currently working with our industry partners to merchandise and provide content for the platform. We are excited to showcase the many skilled glass artists across the country as well as help our users shop for the best brands in glass, devices and accessories. We are also expanding our AI and ML teams and capabilities, specifically around the product data that powers our industry. Our industry lacks standardization across product catalogs, and our team is making great progress to becoming the key dataset for the industry. This is incredibly important to us, and we are laser-focused on entrenching our data and ML tools into our partners' tech stacks and Weedmaps platform. We've come a long way and accomplished a great deal in the first half of the year, but we know there's still plenty of work ahead. We are finally reaching the level of internal scale that will allow us to increase our speed and deliver more products and initiatives through the rest of this year and into 2026. This remains a dynamic and evolving industry, and we're excited about the opportunities that lie in front of us as we continue to build for the long term. With that, I'll now turn it over to Susan.

Thanks, Doug. Now turning to our Q2 financial performance. Revenue for the second quarter was $44.8 million, representing a decline of 2% from the prior year period. The slight year-over-year decline was primarily driven by lower revenue from our featured and deal listings products as ongoing market headwinds continue to pressure client margins and limit discretionary marketing spend. This decline was partially offset by an increase in display advertising revenue, reflecting our team's efforts to retain and reallocate our clients' marketing budget towards other ad solutions to diversify their spend and visibility across our platform. Despite the ongoing challenges contributing to revenue softness, our team remains focused on the areas within our control, particularly driving client acquisition and retention across our marketplace. We increased our average monthly paying clients by 4% to 5,241, up from 5,045 in the prior year period, driven by new client acquisition in certain emerging markets such as New York and Ohio. Average monthly revenue per paying client declined 6% to $2,852 compared to $3,033 a year ago. The decrease reflects a combination of reduced spend from existing clients in more mature markets and the onboarding of new clients at lower initial spend levels. We expect this metric to fluctuate going forward driven by these same dynamics. Turning to our expenses. Our GAAP OpEx, which includes cost of revenues and depreciation and amortization, totaled $42.9 million for the second quarter, a decrease of approximately $1.8 million or 4% versus the prior year period. The decline was primarily driven by reduced spend across our digital advertising channels and lower personnel costs following recent restructurings within our sales and marketing and product development teams. General and administrative expenses increased by approximately $2.2 million, largely due to a onetime noncash loss contingency related to a contractual purchase obligation with our server provider. This charge will be reassessed periodically and is added back in our calculation of non-GAAP adjusted EBITDA. Despite the challenging revenue environment, our focus on cost and operational discipline enabled us to remain profitable, delivering Q2 net income of $2.2 million and non-GAAP adjusted EBITDA of $11.7 million, up 81% and 16%, respectively, from the prior year period. Turning to the balance sheet. We ended the quarter with $59 million in cash, an increase of $5.7 million from the end of Q1, reflecting another quarter of strong cash generation. This marks our eighth consecutive quarter of cash growth, and we continue to operate with no debt, giving us flexibility to navigate near-term uncertainty while investing in long-term initiatives. Our share count across Class A and B common stock was 156.5 million as of June 30, 2025. A reconciliation of non-GAAP metrics to their nearest GAAP results as well as the details of our share classes and share count calculation are provided in our earnings presentation posted on our Investor Relations website. Turning to our financial outlook. Given current market conditions and continued softness in key markets, we expect third quarter revenue to be approximately $41 million to $43 million and non-GAAP adjusted EBITDA to be in the range of $5 million to $7 million as we opportunistically ramp investments to support future growth. Amid ongoing market volatility, we remain focused on disciplined execution, sustaining profitability and positioning the business for long-term success. With that, I'll turn the call back to the operator.