Good afternoon, everyone, and welcome to WM Technology Inc.'s Third Quarter 2023 Earnings Conference Call. I would now like to turn the call over to your host Brian Camire, General Counsel..

Hi, everyone. Thanks for joining us to discuss our fiscal 2023 third quarter results. We have our Executive Chair, Doug Francis; and Interim CFO, Mary Hoitt with us today. By now everyone should have access to our earnings announcement and supporting slide deck on our Investor Relations website.

During this call, we'll 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 risks and uncertainties, some of which are beyond our control.

Our actual results could differ materially from expectations reflected in any forward-looking statements.

For a discussion of the risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website and our Investor Relations website as well as the risks and other important factors discussed in today's earnings release.

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 November 8, 2023.

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 our 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 there soon. Please note, we will not be holding a Q&A session on this call. With that I'll turn the call over to Doug..

Thanks Brian and hello to everyone joining us today. Last quarter we discussed the concept of controlling what we can control, which means measured execution in the face of multidimensional headwinds take the wins we use where you can get them and prepare for future catalysts.

I believe we did just that in the third quarter and demonstrated our teams continue to tune in with tight and more focused execution. Our team broadly navigated the continued headwinds in our legacy markets while driving our growth in our target markets including MSOs.

For the third quarter in a row, we beat expectations for revenue and adjusted EBITDA while generating positive cash flow. In Q3, we had revenue of $48 million and adjusted EBITDA of $11 million. We had a net loss of $3 million, primarily due to one-time non-cash expenses related to the sun-setting of some of our non-core offerings.

Our overall cash balance increased by $3 million and we ended the quarter with a cash balance of $28 million. Our focus on measured and profitable growth forced us to look at our current offerings. Our industry moves fast and with the macroeconomic and industry changes over the past year, we believe we should narrow our focus and not overreach.

To that end, we expect to sunset our WM AdSuite, WM CRM and WM Screens products on December 15, 2023 and continue to focus our efforts and investments on our marketplace. Continuing with the concept of what we can control, I wanted to call out a few highlights and accomplishments to that end.

In our legacy markets, we are working hard to align with the companies that we feel will survive. The massive headwinds continue and we were very active offering services to those who can pay. We think we do this better than most in our industry. Regulatory and industry frameworks vary state to state.

To win all markets we need to have the best data served up with high affinity and within the framework of our cannabis that's sold in that state. Some states require vertical integration, other markets have regulatory capture meaning monopoly power, while others have specific policies limiting the availability of third-party marketplaces.

The team is hard at work creating personalization and affinity with dynamic user interfaces that can solve for the best journey within a specific framework. A clear example is a product-centric experience rather than a find your local retailer for shopping in Florida where everyone is vertically integrated. We are currently building for 2024.

We are focused on improving the product offering and coverage data within our brands platform. Our team touched over 250 brands, added over 15,000 products to our brand catalog and curated over 200,000 menu items in Q3. We are working on major expansions to our product offering for brands and are excited about this category in 2024.

Historically, our engagement with MSO clients has been limited. We have spent the last few quarters focusing on our marketplace and getting ready to support their additional needs. Our initial conversation regarding MSO budgets for 2024 is going well. And we expect upside in this category for next year.

We are always focused on maximizing profitability and cash flow in the current environment. I'm very proud of how lean and focus our teams are operating. We will continue to be scrappy, while looking for opportunities to invest in internally or otherwise.

Last quarter I mentioned that our Board, have engaged a search firm to assist in the process of finding our next CEO. While that process remains ongoing, I'm confident in the abilities of the existing leadership team, to keep moving the business forward and continue to execute.

We have accomplished much in the last three quarters and installed operational philosophies that will carry us into the future. I would like to thank each team member for helping us get to this point. For our clients, the industry and our shareholders we are hopeful that the powers that be figure this out soon. Society deserves legalization.

With that, I'll turn it over to Mary..

Thanks Doug. Our third-quarter performance beat our expectations on top-line growth and profitability. Q3 revenue came in at $48 million, which compares to the $47 million expectation that we gave in August. Q3 adjusted EBITDA was $11 million, which compares to the $4 million expectation that we have.

We generated positive cash flow and ended Q3 with $28 million in cash up from $25 million in cash in Q2. Our average monthly paying clients of 5,414, was down about 3% from last quarter.

As with last quarter while our teams continue to win new clients churn related to delivery clients and client-facing billing issues continued to persist particularly in California and Oklahoma. With stricter enforcement of our collections policy, we have proactively removed clients in the platform after a period of non-payment.

We continue to work with clients in this soft macro environment, but we believe this will lead to a healthier client base in the long run. Revenue per client was $2,938 in Q3 down 3% from Q2, driven by client churn and lower upgrade of activity in our more mature markets.

This was impacted by new clients onboarded at lower levels of spend in our emerging markets, continuing the trend that we described last quarter. California represented 52% of our revenue in Q3, slightly down from 54% in Q2. Q3 adjusted EBITDA of $11 million reflected an 8% reduction in adjusted OpEx from last quarter.

We continue to see productivity, across our organization with a quarterly decline in our adjusted sales and marketing and adjusted product development costs, by 16% and 17% respectively. Our adjusted G&A which includes a $1 million non-cash charge, related to provisions for doubtful accounts decreased by 24% versus last quarter.

Relative to our Q3 guidance, upside in adjusted EBITDA was driven by a beat in our top line and continued efficiencies we are finding in the business across wage and non-wage.

In addition to savings from headcount reductions, we also realized higher levels of capitalization within our product development organization that led to a decrease in wage expenses.

As it relates to non-wage expenses, we realized lower-than-expected marketing expenses relating to advertising and events, as well as favorable costs from outside vendors in our product development organization.

Finally, our bad debt expense of $1 million reflects the fourth consecutive quarter in which our bad debt has declined, which we believe is related to the policies and procedures we have implemented over the past few quarters.

We recorded a net loss of $3 million, which was impacted by $12 million in D&A, including $8 million non-cash impairment charge related to the aforementioned sunsetting products, $2 million in stock-based compensation, and approximately $1 million benefit of other non-reoccurring charges.

Our GAAP OpEx, excluding cost of revenues and D&A, was $38 million in Q3, a reduction of 39% versus last year. More information on these charges is available in our earnings release and our Form 10-Q. We closed the quarter with $28 million in cash and as we have previously stated, we expect to end the year with more cash than we started the year with.

We continue to be debt-free and are comfortable with our liquidity position. Our share count across our Class A and B shares classes was $149 million at the end of the quarter.

A reconciliation of non-GAAP metrics to their nearest GAAP results as well as the details of our share classes and share count calculations are provided in our earnings presentation posted to our Investor Relations site.

Turning to outlook, we continue to be pleased with the progress we are making across three priority focus areas and are confident we are making the right strategic, operational, and financial decisions to set WM Technology up for the near-term and long-term.

With that said, we are acutely aware of the well-known challenges still facing our industry and the lack of progress on multiple fronts including regulatory enforcement, state GMV, and license growth.

We must continue to prudently plan for and spend against a realistic and responsible view of our topline and such we are planning for Q4 revenue to be $47 million, slightly down from this quarter as a result of anticipated continued and market headwinds. Our profitability, we expect Q4 adjusted EBITDA will be in the $5 million area.

We remain committed to our previous guidance of double-digit adjusted EBITDA margin in fiscal year 2023 and generating positive cash flow for the year. At this time, I will turn the call over to the operator to complete the call. As mentioned at the beginning of our call, we will not be doing a Q&A session.

Thank you for joining us today and we look forward to speaking with you again at our annual fiscal year 2023 earnings call..

Thank you for your participation in today's conference. This concludes the program. You may now disconnect..