Q3 2023 WM Technology Inc Earnings Call
[music].
Okay.
Good afternoon, everyone and welcome to W. M Technology Inc's third quarter 2023 earnings Conference call I would now like to turn the call over to your host Bryan can marry General counsel.
Hi, everyone. Thanks for joining us to discuss our fiscal 2023 third quarter results, we have our executive chair, Doug franchise, and interim CFO Mary Hoyt 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 will make forward looking statements about our business outlook and strategy 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 eight 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 information prepared in accordance with GAAP.
You can find a reconciliation of these measures to our GAAP results in our earnings presentation on our Investor Relations website.
And finally today's call is being webcast 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 multi dimensional headwinds.
Like the ones, where you can get them and prepare for future catalyst.
I believe we did just that in the third quarter and demonstrated our teams continue to tumor with tight and more focused execution.
Our team proactively 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 onetime noncash expenses related to the sunsetting of some of our noncore 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.
And we expect to Sunset, our Wm add suite 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 company as a refillable 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 of our industry.
Regulatory and industry frameworks various state to state to when our markets we need to have the best data served up with high affinity and within the framework of our candidates are sold in that state.
Some states require a vertical integration other markets have regulatory capture meeting monopoly power, while others have specific policies limiting the availability of third party marketplaces.
The team is hard at work, creating personal organization 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 foreigner 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 <unk> platform.
Our team touched over 250 brands added over 15000 products to our brand catalog ensure rented over 200000 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 MSR client telecom limitations, we have spent the last few quarters, focusing on our marketplace and getting ready to support their additional needs.
Our initial conversation regarding MSR budgets for 2020 forward 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 am very proud of how lean and focused our teams are operating and we will continue to be scrapping, while looking for opportunities to invest in internally or otherwise.
Last quarter I mentioned that our board has engaged a search firm to assist in the process of filing our next CEO.
So that process remains ongoing I am 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 <unk>.
For our clients the industry and our shareholders. We are hopeful that the powers that be figured this out to society deserves legalization.
That I will turn it over to Barry.
Thanks, Scott our third quarter performance beat our expectations on top line growth and profitability Timothy 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.
We had.
We generated positive cash flow and ended Q3 with $28 million in cash up from $25 million in cash in Q2.
Average monthly paying client of 5414 was down about 3% from last quarter.
As with last quarter, while our teams continue to win new client churn related to delivery clients and client facing billing issue continued to first tests, particularly in California and Oklahoma.
Stricter enforcement of our collections policy, we have proactively remove clients on the platform after a period of nonpayment we.
We continue to work with clients in the soft macro environment.
We believe this will lead to a healthier client base in the long run.
Revenue per client with 2938 in Q3 down 3% from Q2, driven by client churn and lower upgrade activity and a more mature market.
This was impacted by new clients on boarded at lower levels of spend.
<unk> market continuing the trend that we described last quarter.
Cornea 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.
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 noncash charge related to provisions for doubtful accounts.
Increased by 24% versus last quarter.
Relative to our Q3 guidance upside and adjusted EBITDA was driven by a beat in our topline and continued efficiencies we are finding in the business across wage and non wage and.
In addition to savings from head Count reduction, we also realized higher level capitalization within our product development organization.
Two a decrease and 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 cost from outside vendors.
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 reported a net loss of $3 million, which was impacted by $12 million and DNA, including $8 million noncash impairment charge related to the aforementioned sunsetting products $2 million in stock based compensation and approximately $1 million benefit other non reoccurring.
Charges.
Our GAAP opex, excluding cost of revenues and DNA with $38 million in Q3.
A reduction of 39% versus last year.
More information on those charges is available in our earnings release and our Form 10-Q.
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.
Our share count across our class a and B shares.
<unk> was $149 million at the end of the quarter.
A reconciliation of non-GAAP metrics to their nearest GAAP result.
Well as the details of our share classes and share count calculation.
And our earnings presentation posted to our Investor Relations site.
Turning to our outlook, we continue to be pleased with the progress we're making across the three priority focus areas and are confident we are making the right strategic operational and financial decisions.
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.
GMB and license growth.
We must continue to prudently plan for and spend again.
Realistic and responsible view of our topline and as such we are planning for Q4 revenue to be $47 million slightly.
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.
Fiscal year, 'twenty, three and generating positive cash flow for the year.
At this time I will turn the call over to the operator to complete the call Gus 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 'twenty three earnings calls.
Thank you for your participation in today's conference. This concludes the program you may now disconnect.
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I would now like to turn the call over to your host Brian <unk> General Counsel.
Hi, everyone. Thanks for joining us to discuss our fiscal 2023 third quarter results, we have our executive chair, Doug tranches, and interim CFO Mary Hoyt 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 will 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 eight 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 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 webcast 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 will 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 multi dimensional headwinds.
The wins, where you can get them and prepare for future catalyst.
I believe we did just that in the third quarter and demonstrated our teams continue to tune mint with tight and more focused execution.
Our team proactively navigated the continued headwinds in our legacy markets, while driving on 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 onetime noncash expenses related to the sunsetting of some of our noncore 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.
And we expect to Sunset, our Wm add suite Wm, CRM and Wm screens products on December 15, 2023, and continue to focus our efforts and investments in our marketplace.
Continuing with the concept of what we can control I wanted to call out a few highlights and accomplishments to that Ed.
In our legacy markets, we are working hard to align with the company is 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 of our and our industry.
Regulatory and industry frameworks various 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 candidates are sold in that state.
Some states require a vertical integration other markets have regulatory capture meeting monopoly power, while others have specific policies limiting the availability of third party marketplaces.
The team is hard at work, creating personal organization 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 pfizer 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 <unk> platform.
Our team touched over 250 brands added over 15000 products to our brand catalog ensure rated over 200000 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 MSR clients has some limitations.
We have spent the last few quarters, focusing on our marketplace and getting ready to support their additional needs.
Our initial conversation regarding MSR budgets for 2020 forward 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 focused our teams are operating and we will continue to be scrapped while looking for opportunities to invest in internally or otherwise.
Last quarter I mentioned that our board has engaged a search firm to assist in the process of filing our next CEO, while that process remains ongoing I am 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'd 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 figured this out to society deserves legalization.
That I will turn it over to Barry.
Thanks, Doug.
Third quarter performance beat our expectations on top line growth and profitability Timothy 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 had.
We generated positive cash flow and ended Q3 with $28 million in cash up from $25 million in cash in Q2.
Average monthly paying client of 5414 was down about 3% from last quarter as with last quarter. While our teams continue to win new client churn related to delivery clients and client facing billing issues continue to persist.
Particularly in California, and Oklahoma.
Stricter enforcement of our collections policy, we have proactively remove clients on the platform after a period of nonpayment we.
We continue to work with clients in the soft macro environment.
We believe this will lead to a healthier client base in the long run.
Revenue per client with 2938 in Q3 down 3% from Q2, driven by client churn and lower upgrade activity and a more mature market.
This was impacted by new clients on boarded at lower levels of spend and our emerging market continuing the trend that we described last quarter, California represented 52% of our revenue in Q3.
Lee 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.
Our adjusted sales and marketing.
And adjusted product development costs by 16% and 17% respectively.
Our adjusted G&A, which includes a 1 million noncash charge related to provisions for doubtful accounts decreased by 24% versus last quarter.
Relative to our Q3 guidance upside and adjusted EBITDA was driven by a beat in our topline and continued efficiencies we are finding in the business across wage and non wage.
In addition to savings from head Count reduction, we also realized higher level 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 cost from outside vendors.
Our product development organization.
Finally, our bad debt expense of $1 billion.
What's 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 and DNA, including $8 million noncash impairment charge related to the aforementioned sunsetting products $2 million and stock based compensation and approximately $1 million of other non reoccurring.
Charges.
GAAP opex, excluding cost of revenues and DNA with $38 million in Q3.
A reduction of 39% versus last year.
More information on those charges is available in our earnings release and our Form 10-Q.
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.
Our share count across our class a and B shares.
<unk> was $149 million at the end of the quarter.
A reconciliation of non-GAAP metrics to their nearest GAAP result.
Well as the details of our share classes and share count calculation.
And our earnings presentation posted to our Investor Relations site.
Turning to our outlook, we continue to be pleased with the progress we're making across the three priority focus areas and are confident we are making the right strategic operational and financial decisions.
Wm technology upgrade 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.
DMD and license growth.
We must continue to prudently plan for and spend again.
Realistic and responsible view of our topline and as such we are planning for Q4 revenue to be $47 million slightly.
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 <unk>.
$5 million area.
We remain committed to our previous guidance of double digit adjusted EBITDA margin.
Fiscal year, 'twenty, three and generating positive cash flow for the year.
At this time I will turn the call over to the operator to complete the call Gus 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 'twenty three earnings calls.
Thank you for your participation in today's conference. This concludes the program you may now disconnect.