WM Technology, Inc. Q3 FY2022 earnings call

• Executive leadership change: Chris Beals, CEO, left effective immediately; search for new CEO launched, with an office of the CEO comprised of existing leadership in the interim.
• Q3 financials: Revenue of $51 million, down 1% y-o-y; net income and adjusted EBITDA losses of $10 million; gross margin rate 92%; adjusted OpEx affected by bad debt and other charges.
• Operational focus: Need for more focus, streamlined operations, rigorous prioritization of initiatives, streamlined decision-making, and leveraging systems effectively to get back to operational excellence and profitability.

WM Technology Inc.'s Q3 revenue was $51 million, a 1% decline versus the prior year. Reported net income and adjusted EBITDA were both a loss of $10 million. California contributed 53% of total Q3 revenue. There was 25% plus growth in paying clients during the quarter, but this was offset by a decline in revenue per paying client. Q3 gross margin rate was 92%. Adjusted OpEx was impacted by bad debt expense, with adjusted OpEx excluding bad debt growing 27% year-over-year and adjusted EBITDA being $1 million when excluding bad debt.

• Second half revenue expected to decline closer to the mid-single-digit percentage area.
• Q4 adjusted EBITDA expected to be further impacted by bad debt expense, though lower than Q3.
• 2023 plans aim to achieve profitability and positive cash flow, with focus on creating more focus across teams, streamlined operations, and clear line of sight to positive cash flow.

• Continued challenges across end markets.
• Client liquidity challenges leading to revenue per paying client decline.
• Prolonged time for return to growth across licensed cannabis end markets.
• Macro environment and regulatory uncertainties affecting the business.

Q: Hey, guys. Thanks for taking questions. Doug, I wanted to ask you so in the press release I think you were quoted saying something along the lines of like we need to be more focused and more streamlined. What does that mean to you? Is it narrower product focused? Is it about getting costs realigned? Like what's contemplated in that when you talk about focus and streamlining the business?

A: Yeah. It's all basic textbook like operational things. It starts with that prioritization that we mentioned and putting a clear focus on what we're trying to accomplish here. We're trying to outline clear objectives internally, decentralize decision-making, and restructuring our internal orgs, to allow us to move faster. And then, we need discipline on spend and make better trade-offs to deal with these headwinds. So that's really where the focus is going to be. Our strategy is largely intact. I spent a lot of time with Chris working through that over the years. It mainly comes down to execution. And the simple fact is, we had all of our company dials turned up to a 10. And with the market pressure and the economic headwinds, we definitely turned down some of those dials. So it's just about the logic in which we do that.

Q: Hi. Good afternoon. Doug, I'm wondering if you could talk a little bit about what you're seeing in the end markets. You've been involved with the company and the industry for a long time. And in what ways is this current market environment familiar? And in what ways is it new? How tied is kind of the current challenge to the dynamics that's going on specific to California? If you could touch on that a little bit. And then just any update on kind of the Big East rollout what you're seeing in the New York, New Jersey area would be helpful?

A: Yes. So California, obviously, is feeling the commoditization of the plant and a very much robust black market that is definitely putting price pressure on everything and making operations hard for everyone. It is happening a little bit in other states like Colorado and Oklahoma, but we expect that force to show itself in all the other states in time. But for most of the operators in California it's definitely, a lot of headwinds, a lot of cost cutting a lot of preparing for what's going to come next year. Even in the East Coast states that are coming online, they have a lot of black market problems as well that will put downward pressure on prices out there. And obviously the licenses in New York for example have taken a little bit longer than expected. And obviously that doesn't help with the forces that I just mentioned. So just like everything in cannabis, we've been in this game a long time. Even though it says, it's going to open things tend to take a lot longer and it's a lot more nuanced as governments work with local governments to kind of roll out their policy and then have to again deal with a robust black market. So again for us we just have to build the tools to help you guys survive and then we have to have the ground game because one thing that I can help bring to the table a little bit is a broader understanding of the plant. And when you get into a world where margin and everything gets crushed it really comes down to your ability to understand how to deliver quality to price which is something that I can help some of our clients do.