Leafly Holdings, Inc. (LFLY) Q2 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights several concerns: payment delinquencies affecting revenue, a 6.4% decline in retail accounts, and an inability to provide specific guidance on returning to growth. Although there are positive aspects like operational efficiency and partnerships, the financial results show a year-over-year revenue decline and risks related to convertible notes. The Q&A section reveals uncertainty about future growth and Nasdaq compliance. These factors suggest a negative sentiment, likely leading to a stock price decrease of -2% to -8% over the next two weeks.
Key Financial Performance
Revenue $8.7 million, down 18.3% year-over-year; decline driven by the removal of non-paying retail accounts from the platform.
Retail Revenue $7.3 million; year-over-year decline primarily due to account removals concentrated in Florida, California, and Oklahoma.
Brand Revenue $1.4 million, down 25% year-over-year; seasonal decline post-4/20 holiday as brands returned to Q1 spending levels.
Average Revenue Per Account (ARPA) $684, up 23% year-over-year; increase due to lower ARPA accounts being removed from the platform.
Gross Margin 89%, improved from 88% year-over-year.
Operating Expenses (OpEx) $8.4 million, down 17.5% year-over-year; focus on cost management.
Net Loss $1.3 million, improved from $1.4 million net loss in Q2 of '23.
Adjusted EBITDA $483,000, compared to $80,000 in Q2 of '23; positive EBITDA driven by recovery of bad debt.
Cash Position $13.6 million in cash, excluding restricted cash.
Bad Debt Expense as a Percentage of Revenue 2.4% year-to-date, improved from 6.5% average for full year 2023.
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Operating Highlights
Brand Subscription Offering Revamp: Revamped brand subscription offering with new tiers to incentivize upgrades, leading to a significant shift of GMV to subscribing brands.
Ohio Recreational Program Launch: Ohio's recreational program launched ahead of schedule, with potential annual sales projected at $2.8 billion by 2030.
Washington D.C. Medical Program Expansion: Expansion of the medical program in Washington D.C. allows consumers to self-certify for qualifying medical conditions.
Uber Eats Partnership Expansion: Expanded partnership with Uber Eats into Alberta, Canada, allowing cannabis delivery to consumers.
Operational Efficiency: Achieved positive adjusted EBITDA of $483,000, reflecting ongoing focus on collection efforts and recovery of bad debt.
Cost Management: Operating expenses decreased by 17.5% year-over-year, with continued focus on aligning costs to revenue opportunities.
Focus on Hemp-Derived Cannabinoids: Exploring opportunities in hemp-derived cannabinoids to connect consumers with cannabis products.
ATM Offering Program: Launched an at-the-market offering program to raise capital opportunistically based on market conditions.
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Risk or Challenges
Payment Delinquencies: Payment delinquencies account for just under 40% of the monthly recurring revenue lost in the quarter, indicating a significant risk related to customer financial stability.
Capital-Depressed Industry: The inability to pay among customers is a symptom of the capital-deprived industry, which poses ongoing challenges until macroeconomic conditions improve.
Retail Account Decline: A 6.4% reduction in retail accounts quarter-over-quarter reflects a concerning trend in customer retention and market competitiveness.
Regulatory Challenges: The company is cautiously optimistic about upcoming regulatory changes, such as Florida's ballot initiative and DEA rulemaking, which could impact market dynamics.
Economic Factors: The overall economic environment and its impact on consumer spending and business operations remain a significant risk factor for the company's revenue stability.
Convertible Notes: The company has $29.4 million in convertible notes due in January 2025, which presents a financial obligation that could affect liquidity and operational flexibility.
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Guidance & Outlook
Operational Efficiency: Leafly is committed to enhancing operational efficiency on the path to profitability, focusing on creating value at the intersection of consumers, brands, and retailers.
Brand Subscription Offering: Revamped brand subscription offering with tiers to incentivize upgrades to paying tiers, leading to a significant shift of GMV to subscribing brands.
Hemp-Derived Cannabinoids: Exploring opportunities in hemp-derived cannabinoids to connect consumers with cannabis products.
Partnership Expansion: Expanded partnership with Uber Eats into Alberta, Canada, allowing for cannabis delivery.
Market Expansion: Positive developments in Ohio's recreational program and Washington D.C.'s medical program expansion.
Q2 2024 Revenue: Revenue was $8.7 million, in line with guidance.
Q3 2024 Revenue Guidance: Expect revenue of around $8.4 million.
Q3 2024 Adjusted EBITDA Guidance: Expect adjusted EBITDA loss of less than $1 million.
Long-term Profitability: Focused on building a long-term profitable business and leveraging the business model.
Cash Position: Ended Q2 with $13.6 million in cash, excluding restricted cash.
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Shareholder Return Plan
ATM Offering Program: In late June, Leafly launched an at-the-market (ATM) offering program to allow flexibility around offering common stock and raising capital.
Convertible Notes: Leafly has outstanding convertible notes totaling $29.4 million due in January 2025, and discussions are ongoing with lenders and financial advisors regarding these notes.
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Key Q&A
Q:How is the second half of the year shaping up? When can you get back to top line growth?
A:We did provide guidance for revenue and adjusted EBITDA for Q3, and we are not providing guidance beyond that. The team is hard at work to stabilize both the account base and revenues. We are seeing green shoots associated with the new sales efforts and product enhancements.
Q:How many new accounts did you add in the second quarter?
A:The gross account adds in Q2 were similar to those in Q1. We continue to have net declines in retail accounts, but we believe our work in delinquent accounts will help stabilize the account base.
Q:Can you provide an update on the status of your Nasdaq listing?
A:In late May, we submitted a proposed plan of compliance to Nasdaq, and we are continuing to work with them. Our stock continues to be listed and traded on the Nasdaq Capital Market.
Q:Review of Unclear Management Responses
A:Management did not provide specific guidance on when they expect to return to top line growth, and the response regarding the Nasdaq listing lacked specific details on compliance progress.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ATM
Chief Officer
Florida
Krishnaswamy
Lee President
Nasdaq
Officer today
Ohio
President Chief
access
account base
account platform
brand subscription
cannabinoids
capital
compliance
condition
connection
decline account
delta
effort recovery
feature
generation
hemp
holiday
launch
listing
mission consumer
need
number
program
project
quarter
revenue shoot
stock
tier
today QA
update
work
LFLY Transcript
Leafly Holdings, Inc. (LFLY) Q2 2024 Earnings Call Transcript
Unknown8-10
The earnings call highlights several concerns: payment delinquencies affecting revenue, a 6.4% decline in retail accounts, and an inability to provide specific guidance on returning to growth. Although there are positive aspects like operational efficiency and partnerships, the financial results show a year-over-year revenue decline and risks related to convertible notes. The Q&A section reveals uncertainty about future growth and Nasdaq compliance. These factors suggest a negative sentiment, likely leading to a stock price decrease of -2% to -8% over the next two weeks.
Leafly Holdings, Inc. (LFLY) Q1 2024 Earnings Call Transcript
Neutral5-10
Leafly Holdings Inc (LFLY) Q4 2023 Earnings Call Transcript
Unknown3-29
Leafly's earnings call presents a challenging outlook with declining revenue, high account churn, and significant financial hurdles, including convertible notes maturing soon and NASDAQ compliance issues. Despite some positive metrics like improved EBITDA and cash position, the overall sentiment is negative due to industry headwinds and financial instability. The Q&A section did not alleviate these concerns significantly, as management focused on efficiency and customer relationships without providing clear growth catalysts. The lack of strategic updates and continued financial pressures suggest a likely negative stock price movement in the short term.
Leafly Holdings Inc. (LFLY) Q3 2023 Earnings Call Transcript
Neutral11-11
LFLY Report
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