LFLY Leafly Holdings Inc

Delivered Q3 2023 revenue of $10.6 million

Reported Q3 2023 net loss of $2.2 million and adjusted EBITDA1 loss of $0.2 million

Leafly Holdings, Inc. (“Leafly” or “the Company”) (NASDAQ: LFLY), a leading online cannabis discovery marketplace and resource for cannabis consumers, today announced financial results for its third quarter ended September 30, 2023.

“Our third quarter results reflect our progress toward building a sustainable business in a challenging market," said Yoko Miyashita, CEO of Leafly. “Cannabis markets continue to experience pain points of various types, but the industry continues to evolve. The Leafly platform plays an important role, providing the technology retailers need to drive consumer sales and e-commerce shopping experiences. With a strategic focus on profitability, we are carefully managing expenses which we believe will set us up for growth as the cannabis market matures and recovers."

Third Quarter Financial Results

• Revenue was $10.6 million, compared to $11.8 million in Q3 2022.
• Gross margin was 89%, an improvement over Q3 2022 gross margin of 87%.
• Total operating expense was $10.9 million, a 33% reduction from $16.3 million in Q3 2022, reflecting operational rigor and continued focus on cost discipline.
• Net loss for Q3 2023 was $2.2 million, compared to net income of $15.5 million for Q3 2022, which included a $22.3 million non-cash benefit from change in fair value derivative liabilities.
• Adjusted EBITDA1, a non-GAAP measure, was a loss of $0.2 million compared to adjusted EBITDA loss of $5.2 million in Q3 2022.
• Ended the quarter with $14.5 million, excluding restricted cash, essentially flat compared to Q2 2023.

1 The non-GAAP financial measures EBITDA and adjusted EBITDA are presented in this release. See the reconciliations of such non-GAAP financial measures to their most comparable GAAP measures in the table included in this release below.

“We continue to focus on operating with efficiency and managing costs," said Suresh Krishnaswamy, CFO of Leafly. "Our third quarter results are a reflection of the difficult environment our retail and brand customers are facing, driven by lack of access to banking and capital, license delays, and margin compression. We are supporting our customers to provide value aligned with their needs, while also right-sizing their services for maximum impact given their budget constraints."

Key Performance Metrics

 

Three Months Ended September 30,

 

 

2023

 

 

2022

 

 

Change

 

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending retail accounts

 

4,466

 

 

 

5,637

 

 

 

(1,171

)

 

 

-21

%

Retailer ARPA

$

644

 

 

$

556

 

 

$

88

 

 

 

16

%

Third Quarter Business Highlights

• On September 29, 2023, the Company received formal notice from The Nasdaq Stock Market LLC that it regained compliance with the minimum bid price rule.
• Retailer average revenue per account (“ARPA”) was $644, an increase of $88 from Q3 2022, and also increased over Q2 2023. The increase was largely driven by the roll-out of new rate cards and churn of lower ARPA accounts.
• The Company completed rolling out new rate cards and price increases in select markets to select clients to better align pricing with the value the Company delivers to its various partners.
• Leafly introduced a new API for order integration, which provides seamless integration between cannabis point of sale systems and Leafly, leading to less friction for retailers.
• The Company introduced scheduled delivery to enhance the ordering experience and drive customer retention and loyalty.
• The Company introduced new, consumer life-cycle management to improve the consumer shopping experience and help generate sales for retailers.

Financial Outlook

Today, Leafly is issuing fourth quarter 2023 guidance. Based on current business trends and conditions, the financial outlook is expected to be around $9.5 million in revenue and adjusted EBITDA loss is expected to be around $1.3 million.

Leafly has not provided a quantitative reconciliation of forecasted GAAP net income (loss) to forecasted total adjusted EBITDA within this communication because the Company is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. These items include, but are not limited to: depreciation and amortization expense from new assets; impairments of assets; changes in the valuation of any derivatives; the valuation of, and changes in, grants of equity-based compensation; and gains or losses on modification or extinguishment of debt. These items, which could materially affect the computation of forward-looking GAAP net income (loss), are inherently uncertain and depend on various factors, many of which are outside of Leafly’s control. For more information regarding the non-GAAP financial measures discussed in this communication, please see “Non-GAAP Financial Measures” below.

Webcast and Conference Call Information

Leafly will host a conference call and webcast to discuss the results today, Thursday, November 9, 2023 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). A live webcast of the call can be accessed from Leafly’s Investor Relations website at https://investor.leafly.com.

The live call may also be accessed via telephone at (833) 470-1428 toll-free domestically. Please reference conference ID: #065993. An archived version of the webcast will be available from the same website after the call.

About Leafly

Leafly helps millions of people discover cannabis each year. Leafly's powerful tools help shoppers make informed purchasing decisions and empower cannabis businesses to attract and retain loyal customers through advertising and technology services. Learn more at Leafly.com or download the Leafly mobile app through Apple’s App Store or Google Play.

Definitions of Key Performance Metrics

Ending retail accounts Ending retail accounts is the number of paying retailer accounts with Leafly as of the last month of the respective period. Retail accounts can include more than one retailer.

Retailer average revenue per account Retailer ARPA is calculated as monthly retail revenue, on an account basis, divided by the number of retail accounts that were active during that same month. An active account is one that had an active paying subscription with Leafly in the month. Leafly does not provide retailers with an ongoing free subscription offering but may offer a free introductory period with certain subscriptions.

Given that each of ending retail accounts and retailer ARPA are operational measures and that the Company’s methodology for calculating these measures does not meet the definition of a non-GAAP measure, as that term is defined by the U.S. Securities and Exchange Commission (the "SEC"), a quantitative reconciliation for each is not required or provided.

Cautionary Statement Regarding Forward Looking Statements

This document contains certain forward-looking statements within the meaning of the federal securities laws, including statements regarding the services offered by Leafly and the markets in which Leafly operates, business strategies, performance metrics, industry environment, potential growth opportunities, Leafly’s projected future results and financial outlook, and expected savings from cost-cutting measures. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “forecast,” “opportunity,” “outlook,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions (including the negative versions of such words or expressions).

Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions as of the date of this release and, as a result, are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements.

Many factors could cause actual future events to differ materially from the forward-looking statements in this press release, including but not limited to, Leafly’s inability to raise sufficient capital to execute its business plan; inability to continue to meet the continued listing requirements applicable to companies listed on the Nasdaq Capital Market; the size, demands and growth potential of the markets for Leafly’s products and services and Leafly’s ability to serve those markets; the impact of worldwide economic conditions, including the resulting effect on consumer spending at local cannabis retailers and the level of advertising spending by such retailers; the degree of market acceptance and adoption of Leafly’s products and services; and the other risks and uncertainties described in the “Risk Factors” section of the Annual Report on Form 10-K filed by Leafly with the SEC on March 29, 2023, and in Leafly’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, and in the other documents filed by Leafly from time to time with the SEC.

These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and Leafly assumes no obligation and, except as required by law, does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. Leafly does not give any assurance that it will achieve its expectations.

LEAFLY HOLDINGS, INC

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(in thousands, except per share amounts)

 

 

 

 

 

 

 

September 30, 2023

 

December 31, 2022

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

$

14,469

 

 

$

24,594

 

Accounts receivable, net of allowance for doubtful accounts of $1,400 and $908, respectively

 

3,409

 

 

 

3,298

 

Prepaid expenses and other current assets

 

2,339

 

 

 

1,792

 

Restricted cash

 

—

 

 

 

360

 

Total current assets

 

20,217

 

 

 

30,044

 

Property, equipment, and software, net

 

2,541

 

 

 

2,285

 

Restricted cash - long-term portion

 

249

 

 

 

248

 

Other assets

 

55

 

 

 

135

 

Total assets

$

23,062

 

 

$

32,712

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

$

1,609

 

 

$

1,625

 

Accrued expenses and other current liabilities

 

2,990

 

 

 

6,235

 

Deferred revenue

 

2,095

 

 

 

1,958

 

Total current liabilities

 

6,694

 

 

 

9,818

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Non-current portion of convertible promissory notes, net

 

29,272

 

 

 

28,863

 

Private warrants derivative liability

 

113

 

 

 

182

 

Escrow shares derivative liability

 

5

 

 

 

52

 

Stockholder earn-out rights derivative liability

 

25

 

 

 

204

 

Total non-current liabilities

 

29,415

 

 

 

29,301

 

Total liabilities

 

36,109

 

 

 

39,119

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit

 

 

 

 

 

Preferred stock

 

—

 

 

 

—

 

Common stock

 

—

 

 

 

—

 

Treasury stock

 

(31,663

)

 

 

(31,663

)

Additional paid-in capital

 

92,359

 

 

 

89,956

 

Accumulated deficit

 

(73,743

)

 

 

(64,700

)

Total stockholders' deficit

 

(13,047

)

 

 

(6,407

)

Total liabilities and stockholders' deficit

$

23,062

 

 

$

32,712

 

LEAFLY HOLDINGS, INC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

(in thousands, except per share amounts)

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

Revenue

$

10,583

 

 

$

11,781

 

 

$

32,507

 

 

$

35,251

 

Cost of revenue

 

1,163

 

 

 

1,515

 

 

 

3,747

 

 

 

4,411

 

Gross profit

 

9,420

 

 

 

10,266

 

 

 

28,760

 

 

 

30,840

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

2,563

 

 

 

6,403

 

 

 

10,326

 

 

 

21,529

 

Product development

 

2,533

 

 

 

3,406

 

 

 

8,133

 

 

 

10,927

 

General and administrative

 

5,799

 

 

 

6,489

 

 

 

17,475

 

 

 

20,730

 

Total operating expenses

 

10,895

 

 

 

16,298

 

 

 

35,934

 

 

 

53,186

 

Loss from operations

 

(1,475

)

 

 

(6,032

)

 

 

(7,174

)

 

 

(22,346

)

Interest expense, net

 

(720

)

 

 

(705

)

 

 

(2,157

)

 

 

(2,119

)

Change in fair value of derivatives

 

14

 

 

 

22,264

 

 

 

295

 

 

 

36,264

 

Other income (expense), net

 

(29

)

 

 

(73

)

 

 

(7

)

 

 

(962

)

Net (loss) income

$

(2,210

)

 

$

15,454

 

 

$

(9,043

)

 

$

10,837

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(1.10

)

 

$

8.69

 

 

$

(4.58

)

 

$

6.15

 

Diluted

$

(1.10

)

 

$

5.64

 

 

$

(4.58

)

 

$

5.45

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

2,011

 

 

 

1,779

 

 

 

1,974

 

 

 

1,763

 

Diluted

 

2,011

 

 

 

2,149

 

 

 

1,974

 

 

 

1,924

 

LEAFLY HOLDINGS, INC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(in thousands)

 

 

 

 

Nine Months Ended September 30,

 

 

2023

 

2022

Cash flows from operating activities

 

 

 

 

 

Net (loss) income

$

(9,043

)

 

$

10,837

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

697

 

 

 

276

 

Stock-based compensation expense

 

2,235

 

 

 

3,159

 

Bad debt expense

 

2,350

 

 

 

1,023

 

Loss on disposition of assets

 

63

 

 

 

—

 

Noncash amortization of debt discount

 

409

 

 

 

369

 

Noncash interest expense associated with convertible debt

 

—

 

 

 

243

 

Noncash change in fair value of derivatives

 

(295

)

 

 

(36,264

)

Other

 

(1

)

 

 

15

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(2,461

)

 

 

(675

)

Prepaid expenses and other current assets

 

(467

)

 

 

(2,222

)

Accounts payable

 

(16

)

 

 

173

 

Accrued expenses and other current liabilities

 

(3,246

)

 

 

(2,141

)

Deferred revenue

 

137

 

 

 

77

 

Net cash used in operating activities

 

(9,638

)

 

 

(25,130

)

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Additions of property, equipment, and software

 

(1,042

)

 

 

(2,194

)

Proceeds from sale of property and equipment

 

27

 

 

 

—

 

Net cash used in investing activities

 

(1,015

)

 

 

(2,194

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from exercise of stock options

 

—

 

 

 

158

 

Proceeds from convertible promissory notes

 

—

 

 

 

29,374

 

Proceeds from business combination placed in escrow and restricted

 

—

 

 

 

39,032

 

Trust proceeds received from recapitalization at closing

 

—

 

 

 

582

 

Issuance of common stock under ESPP

 

168

 

 

 

—

 

Repurchase of common stock and settlement of forward purchase agreements

 

—

 

 

 

(31,303

)

Transaction costs associated with recapitalization

 

—

 

 

 

(10,761

)

Advances (repayments) of related party payables

 

1

 

 

 

(17

)

Net cash provided by financing activities

 

169

 

 

 

27,065

 

 

 

 

 

 

 

Net decrease in cash, cash equivalents, and restricted cash

 

(10,484

)

 

 

(259

)

Cash, cash equivalents, and restricted cash, beginning of period

 

25,202

 

 

 

28,695

 

Cash, cash equivalents, and restricted cash, end of period

$

14,718

 

 

$

28,436

 

LEAFLY HOLDINGS, INC NON-GAAP FINANCIAL MEASURES - UNAUDITED (in thousands)

Earnings Before Interest, Taxes and Depreciation and Amortization (EBITDA) and Adjusted EBITDA

To provide investors with additional information regarding our financial results, we have disclosed EBITDA and Adjusted EBITDA, both of which are non-GAAP financial measures that we calculate as net loss before interest, taxes and depreciation and amortization expense in the case of EBITDA and further adjusted to exclude non-cash, unusual and/or infrequent costs in the case of Adjusted EBITDA. Below we have provided a reconciliation of net (loss) income (the most directly comparable GAAP financial measure) to EBITDA and from EBITDA to Adjusted EBITDA.

We present EBITDA and Adjusted EBITDA because these metrics are a key measure used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of investment capacity. Accordingly, we believe that EBITDA and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider either in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and both EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and
• EBITDA and Adjusted EBITDA do not reflect interest or tax payments that may represent a reduction in cash available to us.

Because of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including net (loss) income and our other GAAP results.

A reconciliation of net (loss) income to non-GAAP EBITDA and Adjusted EBITDA is as follows:

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2023

 

2022

 

2023

 

2022

Net (loss) income

 

$

(2,210

)

 

$

15,454

 

 

$

(9,043

)

 

$

10,837

 

Interest expense, net

 

 

720

 

 

 

705

 

 

 

2,157

 

 

 

2,119

 

Depreciation and amortization expense

 

 

276

 

 

 

127

 

 

 

697

 

 

 

276

 

EBITDA

 

 

(1,214

)

 

 

16,286

 

 

 

(6,189

)

 

 

13,232

 

Stock-based compensation

 

 

997

 

 

 

771

 

 

 

2,235

 

 

 

3,159

 

Transaction expenses allocated to derivatives

 

 

55

 

 

 

—

 

 

 

55

 

 

 

874

 

Severance

 

 

—

 

 

 

—

 

 

 

754

 

 

 

—

 

Change in fair value of derivatives

 

 

(14

)

 

 

(22,264

)

 

 

(295

)

 

 

(36,264

)

Adjusted EBITDA

 

$

(176

)

 

$

(5,207

)

 

$

(3,440

)

 

$

(18,999

)

Source: Leafly Holdings, Inc.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231109375813/en/

Media Josh deBerge josh.deberge@leafly.com 206-445-9387

Investors Stacie Clements IR@leafly.com