Q1 2022 WM Technology Inc Earnings Call

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Yeah.

Good day, good afternoon, everyone and welcome to Wm Technology, Inc. First quarter 2022 earnings conference call.

At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

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And I'd like to turn the conference over to your host Tim O'shea Director of Investor Relations. Please go ahead.

Hi, everyone. Thanks for joining us today to discuss our fiscal 2022 first quarter results, we have our CEO , Chris <unk> and our CFO <unk> with US today by now everyone should have access to our earnings announcement.

This announcement is also on our Investor Relations website, along with the supporting slide deck. During this call. We will make forward looking statements, including statements about our business outlook strategies and long term goals. These statements are not guarantees of future performance. They 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 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 should any of these risks.

Materialize or should our assumptions prove to be incorrect actual financial results could differ materially from our projections or those implied by these forward looking statements forward looking statements represent our beliefs and assumptions only as of the date such statements are made we undertake no obligation to update any forward looking statements made during this call to reflect events or circumstances.

After today or to reflect new information or the occurrence of unanticipated events, except as required by law also during this call. We will discuss certain non-GAAP financial measures, which are not intended to be a substitute for our reported GAAP results. While we believe these non-GAAP measures are helpful to investors in understanding our business.

Not intended to be a substitute for our GAAP results. A reconciliation of these measures to our GAAP results can be found in our earnings release with that I'd like to turn the call over to Chris.

Thanks, Tim and Hello to everyone on today's call. We had a really strong first quarter and I'm pleased with our growth across a number of key areas. This quarter demonstrated that we're playing offense and creating distance from the pack as the leading technology provider and commerce driven marketplace in cannabis and has passed for 'twenty holiday provides clear evidence that consumer demand for cannabis remains strong despite.

Router macroeconomic concerns impacting other consumer discretionary sectors, we saw not only blow out crowds at $4 20 events across the country, but also broke our single day record for the highest ever order volume on we'd maps in this 420, let's get straight into the results we exceeded our growth goals announced in February for Q1, we grew revenue by 40% year over year.

And we continue to grow our user and client base uninterrupted in spite of continuing turbulence in some state cannabis markets. The power of the word maps marketplace and the value that we provide both users and clients as evidenced by the results. We drove in continues to give us confidence in our long term strategy. It is clear that our strategy is working with business results that reflect the <unk>.

Our growth we are driving across the <unk> marketplace and the client engagement, we're driving through our Wm business software solutions looking at Q1 <unk> growth continues to be a result of three areas that I'll walk through today.

Driving deep client engagement for the cannabis retailers and brands, we serve across all markets second innovating and expanding our we'd maps marketplace to continue to be the center of commerce for cannabis consumers, regardless of shopping demographic and third expanding the adoption of Wm business suite of business SaaS tools to enhance the client end user.

Your experience of accessing we'd maps, let's.

Let's start with how we drove client engagement in Q1, we.

We focused on delivering outsized value for our clients as I've talked about before our average revenue per paying client is a direct reflection of the returns that our clients are seeing from being on our marketplace, regardless of the continued choppiness in end markets.

We continued to expand our reach of clients across markets with over 250, new paying clients added in the quarter.

As new states come online like Montana, which opened for recreational sales in January and New Mexico, which started recreational sales in April we've been active in onboarding, new clients and educating them on the breadth of the Wm business platform. We are helping these retailers reach consumers and transact with them on the marketplace. We've completed the rollout of our admin 2.0 portal that I spoke to.

In February with this update clients now have a simple to use homepage user interface, providing visitor view and engagement trends. In addition to ROE as metrics. This surface also starts laying down the groundwork for self serve with elements for how clients can upgrade the quality of their digital presence on we'd maps view insights like top products across their listings and enable cross.

Product adoption and purchase up sell opportunities across our Wm business suite things like light menu integration and orders enablement, along with featured listings and deal listings.

We've continued to improve our deals offering with new enablement features to allow clients to publish deals at scale across their listings. We've also created a new promotions hub within admin to point out, allowing clients to create and manage all promotions, including online promo codes in store deals and online deals from one place.

We've also rolled out new promotions features within our Wm store E com and that allowing clients to showcase promotions more easily on their own channels powered by Wm store.

Moving onto our we'd maps marketplace. Our users are the core of our value proposition with clients and in Q1, we improve the user experience on our marketplace in several ways as we look to reinforce our positioning as the center for cannabis commerce.

And our clients know better than anyone cannabis consumers are seeking value and convenience more so than ever in this environment studies indicate 80% of cannabis consumers say prices the biggest factor driving their purchasing decisions with over 60% of cannabis consumers, saying, they're likely to switch retailers based on better pricing I noted last quarter, how we've increased the discover ability and transact.

The ability of deals and promotions for these users seeking value regarding convenience, we're piloting several new user enhancements, including express reorder in order again features allowing users users to easily select products. They previously purchased along with order type preferences, which allows users to more easily filter through available delivery and pickup options in their region.

We also continue to test menu personalization, leveraging our first party user affinity data, we expect to ramp these tests across more users and regions as the results to our user engagement and conversion actions have been validating.

Now, let's talk through how we're expanding the adoption of our Wm business platform. The Wm business platform anchors, our client experience and accessing the weed maps marketplace. The more solutions that leverage the easier. It is to drive consumer conversion in turn client utilization of these solutions drive some more fluid marketplace experience and a higher propensity to adopt additional wm business platform solutions.

Why that's the case is that as clients use more solutions across the <unk> business platform. This translates to things like more up to date menus more accurate product information and more omnichannel shopping options across multiple brands and retailers on the marketplace also the benefit of our users.

And I'll highlight a few areas that showcase the progress we've made.

One of our most powerful capabilities and how we use data to make the product inventory of our clients more transacting online, we employ machine learning and data augmentation to normalize and surface product level information that is necessary to convert consumers to transact whether it be in our marketplace or on third party websites powered by Wm store in Q1, we.

<unk> continued to expand our value add integrations and now have menu integration with the key point of sale companies serving candidates.

Nearly 70% of menus on word maps are now supported by our menu integrations and sharing real time inventory and accuracy of product information. We're also.

Focusing on expanding our orders integration with these same point of sale partners as well given the speed at which these point of sale systems have been integrating with us over the last year, we've decided to prioritize our partnered approach versus our own Wm retail point of sale solution or point of sale strategy previously had a dual owned and partnered focus our partner integrations have increasingly.

The core of that strategy over the last year and allowed us to collaboratively collaboratively service clients and ingest marketplace data more scalable with less investment.

Additionally, as we start to have a point of sale partners integrate and market parts of the Wm business platform navigating the inherent conflicts of being both a partner and a competitor has become increasingly challenging.

Looking forward I see an emerging opportunity position the <unk> business platform as a SaaS vendor to Canada point of sale and ERP providers.

Next we've also continued to drive penetration across orders, our Wm store menu embed in the CRM dispatch and connector solutions that we acquired last year.

And we're also expanding the breadth of solutions that we're offering to our clients to that end, we completed the acquisition of enlightened in the first quarter, which provides yet another offering for clients as part of the <unk> business platform and Layton operates a solution called smart hub, which is a subscription software offering that powers in store digital menus and kiosk enlighten also operates a solution called <unk>.

Suite, which provides in store digital AD inventory for brands to reach consumers at the physical point of purchase I am pleased to welcome the enlightened team to Wm technology and look forward to scaling our solutions together is incredibly synergistic acquisition for instance, we're already pairing it with Wm store to do a jointly powered in store experience moving forward the acquisition positions us to be a <unk>.

Tremendous partner to retailers and point of sale providers, where you can ingest and glenn's point of sale data onetime enrich it from our brand information catalogs and have that data power engaging and transact will experiences for consumers across the weed maps marketplace Web e-commerce and in store kiosk experiences. This example of yet another value add <unk>.

<unk>, we can provide to our software partners.

Looking back over what we delivered this quarter I think it's important to highlight a very key differentiator and competitive advantage for <unk> technology with an engineering product and design organization that number is nearly 300, we have what I believe to be the largest software development team focusing on the cannabis space, but not only that we've been incredibly successful at attracting marquee talent from top tier companies.

Across the technology space, we are attracted to the size of the opportunity we have our culture and our commitment to supporting adjustment socially conscious cannabis industry.

First quarter alone, we grew our engineering product and design head count by roughly 15% versus where we were at the end of Q4.

The end result of having a technical delivery team of our size that has leaned in and passionate is an incredible piece of software and feature delivery and we saw that this last quarter as we delivered new solutions at the fastest pace I've seen during my time here at Wm technology, when I talked back in February about us playing offense with our balance sheet and cash flow a big part of that focus was and continue.

To invest in the incredible engineering product and design team. We have that is such a critical piece of our success looking.

Looking forward I'm excited by the work our teams are doing and the opportunities that we have in front of US we are creating the new within cannabis technology and driving innovations in ways that will be more visible over the course of this year.

Let me touch on something I am incredibly excited about we're piloting a new in App messaging feature, allowing our CRM clients to reach their followers on the weed maps marketplace with things like exclusive deals and product promotions. How this works is that clients are sprout CRM solution. We acquired in Q3, we'll be able to conduct marketing campaigns targeting their followers on we'd maps.

And have these users directly received campaigns within their inbox on the wheat maps iOS and Android apps. This beta essentially allows our clients to reach their shoppers as they're making purchasing decisions on we'd maps, leading to higher conversion and lower cost to the client and other channels and options.

<unk> also unlocks a potentially large growth flywheel for our marketplaces businesses increase their use of in App messaging and incentivize their customers to follow them on we'd maps, which in turn drives more end user engagement across our marketplace.

I'll turn now to another area that I believe is game changing for our brands clients. We recently launched a new insight solution, the beta providing brands clients with powerful and actionable intelligence on brand and product rankings retailer placements in performance and product pricing insights all of which is powered by our proprietary first party menu data. This brand's insights product meets an acute pain.

For cannabis brands that we don't believe is being served anywhere today.

From these areas. We're also rolling out scheduled orders functionality, allowing users to receive orders that set delivery windows and continuing to work towards rolling out dynamic delivery or what's otherwise known as ice cream truck model capabilities for our clients with delivery operations and we continue to unlock valuable integrations for our clients such as menu and orders integration with leaf logics in biotech.

That are rolling out in the near future we.

We are also preparing to launch a new Wm business offering in Canada centered around our Wm store Wm dispatch an enlightened solutions, but will also include new payments functionality.

Our learnings on payments in Canada will inform the approach we've taken the us whenever regulations enable us to monetize payments. Our teams also continue to be laser focused on what we call winning the big East, which is our initiative focused on owning critical new East Coast States coming online while it's still very early days, we message resonating with clients in the Tri State area, we've already on boarded over 40%.

Of licensees in New Jersey for instance, we continue to be bullish about these markets, though as a reminder, the revenue contribution we expect from New Jersey. This year is not material given the nascency of the market.

Finally, I'd be remiss, if I didn't take a moment to talk about another historic for 'twenty holiday and what the success of that holiday means not only for Wm technology, but the broader cannabis industry itself I've seen estimates that this year's 420 drove over $150 million in legal sales, which is an increase of over 35% from last year in New Jersey, We saw long lines on opening day of Rex.

Sales of the day after for 'twenty and we'd maps, we've had our highest volumes of orders placed this past four 'twenty eclipsing prior all time highs with double digit growth in volume versus last year's four 'twenty heading into 2020, we launched our new tumble weed series in April featuring killer, Mike, which is being broadcast by Vice TV is a multipart Darkies series that features local cannabis culture.

Across cities like Las Vegas, San Francisco, Chicago, and New York, we coupled tumbleweeds with content integration within the weed maps App that has allowed our users to access exclusive content merchandise and promotions related to tumble weeds Tumbleweeds content integration launched on for 'twenty and contributed 27% increase in App downloads during the 420 week versus.

Nicole weekly averages since the start of this year, we've seen states with a combined population of 10 million residents legalize adult recreational use and that excludes states like New York with 12, or 20 million residents and it's important to call. This out and remind everyone. What an exciting time and we're at in this country, let alone the world with respect to cannabis reform and I think it serves to highlight.

What we've been saying all along which is the consumer demand for cannabis remains healthy in fact, the healthiest, it's ever been and while we at Wm technology continued to lead the push to continue to make legalized cannabis more accessible is up to our federal state and local governments to do their share to increase license density. So that we drive more consumer demand away from non licensed operators to <unk>.

License channels with that I'll now turn the call over to art <unk>, our CFO , Thanks, Chris and Hello to everyone on today's call.

Today's environment continues to be incredibly dynamic.

The human tragedy overseas and inflation fears at home are driving concerns on the health of the consumer and discretionary spending.

And while these dynamics are weighing on the business outlook for many companies. The same does not hold true for Wm Tech.

<unk> demand for candidates remains strong.

Access to licensed cannabis products continues to improve and the visibility of our opportunities is only getting clearer with each quarter that goes by.

These dynamics were borne out in our Q1 results.

We delivered $57 million in revenue, which is 40% growth versus last year at approximately $1 $5 million higher than the top end of our guidance.

We completed the enlightened acquisition in Q1, we recognized less than $1 million of incremental revenue from that transaction during the quarter.

We now have over 5000 average monthly paying clients with over 250, new paying clients added this quarter or 28% growth versus last year.

Our average monthly revenue per paying client of approximately 3800 is 9% higher versus last year.

And we continue to grow our user base with over 50% growth in monthly active users versus last year.

Our Q1 performance is proof of the value that we continue to deliver to both our users and clients and the scale advantages we have versus other technology solutions providers in cannabis.

Moving down the P&L, our Q1 gross margin rate of 93% reflects the investments that we're making as we expand our new client solutions, such as our new multichannel, we mapped AD network offering along with several of our data initiatives.

Our reported operating expenses after cost of revenues and before D&A expense came in at $64 million for the quarter our.

Our reported Opex includes $7 5 million in stock based compensation, along with $2 3 million in other non recurring charges related to our recent transactions.

More information on these charges is available in our earnings release and earnings slide deck, and we'll be in our Form 10-Q.

Excluding these items our non-GAAP adjusted Opex for the quarter came in at $54 million or 78% increase versus last year our.

Q1, adjusted Opex increase was driven by continued investments in our go to market teams or engineering product and design <unk> as well as incremental expense that we incurred from the acquisition of enlightened.

We also continue to see elevated levels of bad debt expense due to clients, who continue to struggle in the current environment, which impacted our adjusted EBITDA by $3 million for the quarter.

Our Q1 adjusted EBITDA given the above factors was a loss of $1 million as a reminder, we anticipated our first half adjusted EBITDA margins would be breakeven to slightly positive, reflecting the strategic investments for 2023 and beyond that we discussed back in February .

With the opportunities we are seeing beyond this year, we believe the pull forward of these investments accelerates our dominance in key areas.

Our reported net loss was $31 million, which includes an $18 million change in the fair value of our warrant liability, resulting from the change in our accounting following the SEC statement earlier last year on accounting for these types of warrants.

Our fully diluted share count across just a class a and b share classes was $144 million at the end of the quarter.

A reconciliation of adjusted EBITDA to net income as well as the details of our share classes and share count calculations are provided in our earnings release and quarterly quarterly results presentation that we posted to our Investor Relations site.

We ended the quarter with $56 million in cash and zero debt. We continue to believe that our highest returns on capital will come from investing in opportunities to drive growth, whether organically or via investments like the enlightened transaction.

We also continued to be on the receiving end of more partnership and acquisition proposals and have the ability to be very selective and disciplined in how we think about strategic investments.

As we look ahead to Q2, our outlook on 2022 remains unchanged. We continue to expect 2022 revenue to grow to 255 million to 265 million, which represents 32% to 37% growth over our fiscal 2021 actual results.

While we see the potential for upside from the increasing visibility on these state openings traction against our innovation pipeline and our recent acquisition of enlighten. We are also mindful of the broader macro volatility that is weighing on the health of the consumer along with the continued business challenges facing our clients across a number of end markets.

We expect to drive consistent revenue growth across our subscription like products in line with our prior guidance as a reminder, over 90% of our revenue continues to be recurring in nature.

We continue to drive higher levels of spend across clients, where we see return dynamics supportive of net dollar expansion growth.

We are also expanding our client base as evidenced by our growth in paying clients this past quarter.

And we continue to see progress against the opportunities, we have with underpenetrated clients and across new solutions.

And while our guidance for the year did not assume a material growth from new East coast markets or Canada monetization, we're making progress on building our relevance in new Jersey and are rolling out a new product driven strategy in Canada as Chris spoke to earlier.

We also are evaluating our freemium strategy to scale adoption of our recent enlightened acquisition with a focus on installs versus revenue.

We do not expect that transaction to materially change our outlook for the year.

On February call I noted that we expect our growth to be more consistent throughout this year versus what we saw in fiscal 2021, given the absence of planned shifts in the business.

To that end our outlook for Q2 revenue is in the range of $60 million to $63 million.

Moving onto margin again, our outlook remains unchanged. We continue to expect fiscal 2022 adjusted EBITDA in the range of $15 million to $20 million, which includes our investments in support of fiscal 2023 priorities.

We also continue to expect our adjusted EBITDA margins for the first half will be breakeven to slightly positive as we frontload investments against growth opportunities for the back half of this year as well as the fiscal 2023 strategic opportunities. We spoke to you in February adjusted.

EBITDA profitability is core to our DNA as a company we have always maintained positive adjusted EBITDA annually throughout our 10 plus year history and will continue to maintain rigorous cost discipline in areas that are not points of strategic differentiation for us as a company.

In closing our strategy is working our teams are executing and the cannabis end markets continue to strengthen.

As we play offense, our scale advantages within the candidates tech ecosystem are creating a gravitational pull that is benefiting <unk> maps and our wm business platform.

And against that backdrop Wm Tech represents a differentiated and insulated story versus the broader technology space in today's macro environment.

With that let's open it up for questions.

Thank you Sir.

As a reminder to ask a question you would need to press star one on your telephone.

Your question. Please press the pound key.

Please stand by while we compile the Q&A roster.

I show. Our first question comes from the line of Tom Champion from Piper Sandler. Please go ahead.

Thank you good afternoon, guys and congrats on the strong results.

Can you just provide a little more context and detail on what youre seeing in the end markets I think at the macro level investors are debating inflation.

And.

Other cost increases.

Curious what youre seeing out there both with the consumer and.

Your licensed clients.

<unk>.

Overall, it just seems like a lot of uncertainty and I'm wondering if that plays into your.

<unk> guide after it.

Very strong start to the year in <unk> and then one more if I can please.

Chris It seems like there is a.

A long list of product improvements that you discussed in the <unk>.

Grips.

Maybe if you could isolate one or two that you think will really drive.

The results most what moves the needle here thanks guys.

Yes, great great.

So I think first of all the thing to highlight as Canada's cannabis demand in the aggregate level continues up into the right.

We're seeing sort of the number of people who were reporting consuming monthly in the U S. Continuing to increase after states legalize it's materially higher in Canada.

In some case roughly 10% higher than this year. So it's not just people new people consuming cannabis. It's the increase in the frequency in which people are consuming cannabis separately.

Ed.

Several states come online as states come online the speed with which they open varies and so that's been an incredibly strong trend.

One thing that's interesting in the data that we're seeing is we're seeing a increase in consumers choosing to shop through a centralized specialized marketplace, namely us and so our growth rates are returned user rates and sort of our performance. If you look at something like 420 had increasing increasingly outpaced what we're seeing for <unk>.

Canada's retailers, so were seeing a differentiated story.

And part of that is is that we're seeing a reduction in people's aversion to ordering cannabis online and having it delivered to their house and we are the best way to browse shop look for candidates and then easily compare deals and pricing we mentioned the price sensitivity and haven't come to your house and so we're seeing that come to bear I think one thing that's interesting is all.

So as we're seeing the number of retailers increase in states. We're seeing in some cases same store sales in those states decrease.

Not because of what's often talked about is the move to illicit market, which is there are more options for consumers and consumers are increasingly getting choosier about what store they frequent and the sort of friction in terms of them wanting to look at our new store has been greatly lowered.

So I would say overall, while there is there are the bumps and undoubtedly I think as long as tax rates remain high and you have areas in legalized states, where you have to drive a long distance to get to a legal store youre going to see outsized illicit market rates that still continues to be the case. The good news is is that.

Decreasing as a factor of time and separately the dominance of our marketplaces, increasing as a factor of time, which is the key piece.

In terms of.

The things we're working on.

<unk>.

I think a couple of things we are.

We are.

We're doing a bunch of work that much more tightly integrates. These these acquisitions, we completed and we're sort of taking the time to digest them and bundle them together, but bundling to them together to make the wm platforms, so making it easy to do single sign on across that making it easy for something like the inbox MVP where from your CRM.

You can directly run targeted campaigns to users in the marketplace. These are incredibly powerful things and we're already seeing really great validation from clients. When we present these solutions so along the lines of.

Wow, whereas the spend my entire time.

Our work on brands the brand segment and I highlighted this last quarter continue to be really underserved and so we're rolling out into beta brand analytics that help the brands.

I understand trends set wholesale pricing identified gaps in sort of their coverage and availability to consumers, but then separately on the enlighten acquisition really augments this beautifully.

Ability of a brand and say I want to promote my products with a REIT with a retailer a subset of retailers and have that appear within the largest marketplace for Qantas online we'd maps to have it appear if theyre using <unk> store within that retailers website and their E. Com presence on their own website and then having it appear on the.

In store for stores that are using enlighten kiosks, where you can go in and the menu ing and what's being promoted in the stores. It's just this really incredible scalability, where increasingly as we see these businesses.

Look to do more with tighter margins as competition increases.

It really highlights that strength, we have in terms of unlocking solutions, where they can do something once they can.

Control their menu or inventory data once and have it appear in multiple places a brand can remote promote in one place having appear in multiple places and then Thats a natural segue. The third thing, which is this admin to point out in the analytics, we mentioned for larger more scaled clients msos and <unk> being able to more easily centrally manage their stores and have good hit on how.

Those stores are performing so that was a lot, but semantically theyre really centered on a very limited number of key themes, we're keeping the team very focused.

Thanks, Chris.

Thank you.

Our next question comes from the line of Andrew Carter from Stifel. Please go ahead.

Hey, Thanks can you all hear me okay.

Yes.

Okay.

First question I wanted to ask about kind of backing.

Backing up on the end markets question.

40% in the quarter, we had some of your key markets up fairly flat are you seeing any major differences because I mean, you're in Colorado, and Oklahoma and California are the three of those I think Oklahoma is under the most pressure are you seeing any major differences, where youre seeing the kind of end market declines really kind of kind of reduce the investment by retailers or impact your business.

Mrs.

I think some degree it's sort of.

It's a bit more.

Within the state so sort of generalizing that to a to an entire state has been is a bit difficult.

I would say this I would say a lot theres, a theres more normalization to the behavior across a bunch of different states that I think is being given credit and a lot of the trade coverage.

I think these these factors have a bit more commonality than is being talked about I think.

That being said.

I think that.

Tax season hit, especially hard in California. This April where a lot of businesses sort of had a very large sort of state tax bill come due and that sort of quite a few people flat footed where maybe it was a newer cycle for them or that sort of thing that being said there is some really good news on the horizon, there, which is California looks likely poised.

To implement pretty material tax reduction and tax reform in cannabis.

And if that stays in the Governor's trailer bill that would take effect in July which would.

Frankly free up more capital for them to use on other things like.

SaaS solutions with us like augmenting their presence and visibility within within the marketplace and that sort of thing but to sum it up I think more commonality than people give credit for but I think on the <unk>.

<unk> side I think we're seeing.

Some we're seeing reduction and maybe a bit of a bottoming in this sort of volatility yes. The only thing I would add Andrew on top of what Chris said is within.

And some of those markets that you noted.

Operators are struggling to certain extent, but.

We think this is actually playing to our advantage in some ways because we do get the sense that some of these operators.

We are shifting the mix of their spend and where the net beneficiary of that right. So perfect case in point, you take California, our home state that's a market where our revenue per client trends continued to show growth versus last quarter and that is one area of upside surprise that we had in Q.

One.

Okay. Thanks building on that question about the kind of struggled to retailers I know that you noted the bad debt expense I think you gave us three given the cash flow statements 275, so as a percentage of revenue that's gone up three quarters in a row and the second side of it is.

Has consistently gone up I think it's 28 days trailing $12 37 in the quarter can you give us any comfort around the aging has this peak or just anything that we're going to do that you might just be clients can't pay it.

It could be losing a lot of gains anything you can give us some incremental cover.

Being the peak.

Yeah, Yeah, sure I'll take that so listen.

Mentioned before.

Specifically in California listen there are operators that are struggling and.

I don't think its any secret that a lot of the operators are.

Certainly telling their folks.

If it's not rent taxes or utilities than just pay whoever screw.

Screaming allowed us straight and so listen over the course of the quarter. We Unfortunately had to turn some plants off.

We also had to put a number of clients on to payment plans. We do think the worst is behind us.

As evidenced by the dialogue that we're having with these clients that have seen some operating challenges. It's also informed by some of the third party data that's out there as well as the owner.

Data that we're tracking on our marketplace.

A lot of that data showed that there was some strengthening of trends exiting Q1 and heading into Q2.

And at the end of the day, we want to be there for our clients.

Our platform is uniquely positioned to help our clients specifically the ones that are struggling to weather the storm and make it to the other side and so we do think that the.

That we're doing to get these clients under payment plans will pay off like I said, we do think that the worst is behind US. We do think that we'll see some reversal of trend in Q2.

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