Q2 2024 WM Technology Inc Earnings Call
[music].
Good afternoon, everyone and welcome to W. M technology, Inc's second quarter 'twenty 'twenty four earnings conference call.
I would now like to turn the call over to your host Simon Yao director of Investor Relations.
Speaker Change: Hi, everyone. Thank you for joining our fiscal 'twenty 'twenty four second quarter results, we have our executive chair.
Speaker Change: And our interim CFO, Susan anchored with us today.
Speaker Change: By now everyone should have access to our earnings announcement, the supporting slide deck on our Investor Relations website.
Speaker Change: During this call we will make forward looking statements about our business outlook strategies and long term goals.
Speaker Change: 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.
Speaker Change: Our actual results could differ materially from expectations reflected in any forward looking statements.
Speaker Change: For a discussion of risks and other important factors that could affect our actual results. Please refer to our SEC filings available on Sec's website.
Speaker Change: Investor Relations website as well as the risks and other important factors discussed in today's earnings release.
Speaker Change: We specifically disclaim any intent or obligation to update these forward looking statements, except as required by law.
Speaker Change: For the benefit of those who maybe listening to the replay or archived webcast. This call was held on August eight 2024.
Speaker Change: 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.
Speaker Change: We will also discuss non-GAAP financial measures alongside those prepared in accordance with GAAP.
Speaker Change: non-GAAP financial measures should be considered in addition to but not a substitute for the information prepared in accordance with GAAP.
Speaker Change: You can find a reconciliation of these measures to our GAAP results in our earnings presentation on our Investor Relations website.
Speaker Change: And finally today's call is being webcast from our Investor Relations website, an audio replay will be there soon.
Speaker Change: With that I will now turn it over to Doug.
Doug: Thanks, Kevin and Hello to everyone joining us today before we get started I'd like to introduce and welcome Susan Aircard, our interim CFO, who has been with US since the beginning of March Susan brings a wealth of financial leadership experience.
Speaker Change: Key partner in getting us to where we are today, we're glad to have her on the team.
Speaker Change: I would also like to thank Duncan greater for many years. He has been with US most recently as our CTO, leading us through a period of transition in the last year and a half.
Speaker Change: We have begun our search for a new CTO and I am pleased that tuck in we will continue to provide support as an adviser during this transition.
Speaker Change: The cannabis industry continues to be dynamic as we have witnessed in the first half of this year.
Speaker Change: On a federal level, we are hopeful as an industry, but the recommendation of the Doj HHS and DEA to reschedule candidates as a schedule III drug moves forward, but we are realistic about the possibility that the nuance of the ultimate rule may not be what we need to support the industry and then it may be blocked altogether.
Speaker Change: Which have been the face of many of the other promises of government reform for our industry.
Speaker Change: There has also been a lot of activity in the rapidly growing intoxicating have market. So far we have largely stayed out of this market segment, because we view it as an accident of poor drafting and the farm Bill unexpected the federal government to close this loophole before now.
Speaker Change: But if that does not happen, we will work to find a way to provide our consumers access to this market in the safest way possible, while continuing our support of our licensed cannabis operators in markets.
Speaker Change: <unk> has long been a strong and vocal proponent of sensible candidates regulation, which we believe results in not just a better functioning industry, but also safer products to the consumer and a more stable sales revenue base, but ultimately we need some more tax revenue for the state.
Speaker Change: Candidates like wine, not plutonium and let the industry grow instead of taxing and regulating it into oblivion as always we will continue to support and advocate for our clients and consumers.
Speaker Change: Turning to our performance I am proud of our team's accomplishments over the first half of the year. We've continued to just take the same approach and mentality that I hadn't filled sense returning to leadership team agreed maps and that is to focus on what we can control and win where we need to win while playing the long game and setting our business up for success as the industry evolves.
Speaker Change: This is evidenced by our Q2 results with revenues of $45 9 million adjusted EBITDA of $10 1 million and ending cash of $41 3 million Susan will touch more on our financial results later, but I'm pleased that we were able to report another quarter of strong financial results further solidifying our financial position and runway.
Speaker Change: I wanted to stress how much of a competitive advantage. It is to continue building our balance sheet. This is not the time for heroes and risk so aggressive moves for speculative growth on wise we.
Susan: We have identified areas for organic and natural growth that we believe we can get after in the near term and enter 2025.
Speaker Change: To drive cash to the bottom line.
Speaker Change: Variability in our industry is what matters until the industry in its markets mature.
Speaker Change: That said growth is not where it needs to be even in this environment. So we must do better.
Speaker Change: Plenty of bright spots, but they are typically offset by the headwinds in challenged markets.
Speaker Change: Next quarter, we will speak to some of the new initiatives underway that we believe will allow us to get back to meaningful growth in 2025.
Speaker Change: Before I turn it over to Susan I want to thank our team for their hard work. So far this year operationally, we have improved each quarter and I feel great about our team's absolute focus around the first principles that define what success means to us <unk>.
Speaker Change: I have enjoyed being in the trenches with this group tackling the problems that we face internally and as an industry.
Susan: As a team we are excited about the updates, we're making to our product roadmap and we'll talk more about that next quarter.
Susan: With that I will turn it over to Susan.
Susan: Thanks, Doug over the last few months I've had the opportunity to work closely with Doug and the talented we've mapped team.
Susan: <unk> deep understanding of our company and the candidates industry.
Speaker Change: And then pressed by the strong foundation that has been built and the potential that lies ahead with.
Speaker Change: We've accomplished a lot over the past several months and I'm committed to supporting our initiatives as we continue to drive the company forward.
Speaker Change: Turning to our financial results.
Speaker Change: <unk> finished the second quarter with $45 9 million in net revenues, which represents a $2 5 million or 5% decline when compared to the same period last year.
Speaker Change: This decrease was driven by lower spend on our featured in deal listings product as our clients continue to face constrained marketing budgets and in part due to the impact on revenue from certain products will sunset in Q4 of last year.
Speaker Change: On a sequential basis net revenues were up 3% over Q1, driven by increased client spend related to promotional activity associated with the industry for 20 holiday.
Speaker Change: Q2 average monthly paying clients.
Speaker Change: 45 <unk>.
Speaker Change: Climbed about 10% when compared to the prior year period.
Speaker Change: This decline reflects the removal of paying clients from our platform.
Speaker Change: Some delinquent.
Speaker Change: The client count impacts related to the products, we sunset at the end of last year as well as expected client churn due to continued industry challenges such as price deflation and the <unk>.
Speaker Change: Ongoing consolidation in our industry.
Speaker Change: As a result of the lower average monthly paying client count the average monthly net revenue per paying client in Q2 increased 5% to 3033 when compared to the prior year period since the clients using the aforementioned sunset products and the clients churn.
Speaker Change: <unk> had a lower average selling price and monthly net revenue.
Speaker Change: Turning to our expenses.
Speaker Change: Cost of revenues and sales and marketing expenses declined, 31% and 12% respectively versus the prior year and were a result of eliminated costs associated with our discontinued products. In addition to decreased wage expenses related to lower head count.
Speaker Change: These reduced costs, however were offset primarily by an increase in general and administrative expenses.
Speaker Change: Due to elevated legal and audit services related to our SEC filings in May.
Speaker Change: Also secondarily, we saw marginal increases across product development and depreciation and amortization.
Speaker Change: Net income for the quarter came in at $1 2 million, which was slightly down from $2 million in Q2 of last year.
Speaker Change: Our Q2, adjusted EBITDA of $10 1 million and adjusted EBITDA margin of 22%.
Speaker Change: Our expectations and demonstrate the operational discipline, we continue to maintain throughout the organization.
Speaker Change: Relative to our Q2 guidance upside in adjusted EBITDA was a result of better than expected revenue as well as lower than expected provision for credit losses, which reflects our team's efforts and focus on AR and collections.
Speaker Change: We generated $5 5 million in cash in the quarter and closed with $41 3 million in cash and we remain debt free.
Speaker Change: Continue to maintain a strong liquidity position and positive cash flow and we are well positioned as we move into Q3.
Speaker Change: We do expect Q3 cash flow to be impacted by certain one time payments such as the potential FTC settlement as described in our 8-K at the end of July.
Speaker Change: Our share count across our class a and B common stock was $152 million as of August four 2024.
Speaker Change: A reconciliation of non-GAAP metrics to their nearest GAAP result, as well as the details of our share classes and share count calculation are provided in our earnings presentation posted on our Investor Relations website.
Now turning to our Q3 outlook.
While we are encouraged by some positive trends and our team's progress in developing markets. We do anticipate some fluctuations in our results due to seasonality and therefore expect Q3 net revenues to be approximately $44 million in Q3, adjusted EBITDA to be approximately $7 million.
Speaker Change: With that I'll now turn the call back over to the operator to conclude our call.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
[music].
[music].
Operator: Good afternoon, everyone, and welcome to WM Technology Inc.'s second quarter 2024 earnings conference call. I would now like to turn the call over to your host, Simon Yao, Director of Investor Relations.
Good afternoon, everyone and welcome to W. M technology, Inc's second quarter 'twenty 'twenty four earnings conference call I would now like to turn the call over to your host Simon Yao director of Investor Relations.
Simon Yao: Hi everyone, thank you for joining us for our fiscal 2024 second quarter results. We have our Executive Chair, Doug Francis, and our Interim CFO, Susan Eckert, with us today.
Speaker Change: Hi, everyone. Thank you for joining our fiscal 2024 second quarter results, we have our executive chair, Doug Frances and our interim CFO, Susan Eckert with us today.
Simon Yao: 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 statement.
Speaker Change: By now everyone should have access to our earnings announcement, the supporting slide deck on our Investor Relations website.
Simon Yao: During this call we will make forward looking statements about our business outlook strategies and long term goals.
Simon Yao: 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.
Simon Yao: Our actual results could differ materially from expectations reflected in any forward looking statements.
Simon Yao: For a discussion of risk and other important factors that can affect our actual results, please refer to our SEC filing available on our SEC website and our investor relations website as well as the risk 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 August 8, 2024.
Simon Yao: For a discussion of risks and other important factors that could affect our actual results. Please refer to our SEC filings available on our SEC website, and our Investor Relations website as well as the risks and other important factors discussed in today's earnings release.
Simon Yao: We specifically disclaim any intent or obligation to update these forward looking statements, except as required by law.
Simon Yao: For the benefit of those who maybe listening to the replay or archived webcast. This call was held on August eight 2024.
Simon Yao: Since then, we may have made an announcement related to the topic discussed, so please refer to the company's most recent press releases and SEC filings. We will also discuss non-GAAP financial measures alongside bills 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 capital results in our earnings presentation on our industrial relations website. And finally, today's call is being webcast from our investor relations website, and the audio replay will be there. With that, I will now turn it over to Doug.
Simon Yao: 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.
Simon Yao: We will also discuss non-GAAP financial measures alongside those prepared in accordance with GAAP.
Simon Yao: non-GAAP financial measures should be considered in addition to but not a substitute for the information prepared in accordance with GAAP you.
Simon Yao: You can find a reconciliation of these measures to our GAAP results in our earnings presentation on our Investor Relations website and.
Speaker Change: And finally today's call is being webcast from our Investor Relations website, an audio replay will be there soon.
Simon Yao: With that I will now turn it over to Doug.
Doug Francis: Thanks Simon, and hello to everyone joining us today. Before we get started, I'd like to introduce and welcome Susan Eckhart, our interim CFO, who has been with us since the beginning of March. Susan brings a wealth of financial leadership experience and has been a key partner in getting us to where we are today. We're glad to have her on the team.
Doug: Thanks, Tom and Hello to everyone joining us today before we get started I'd like to introduce and welcome Susan Aircard, our interim CFO, who has been with US since the beginning of March Susan brings a wealth of financial leadership experience and it has been a key partner in getting us to where we are today, we're glad to have her on the team.
Doug Francis: I would also like to thank Duncan Grazer for the many years he has been with us, most recently as our CTO, leading us through a period of technological transition in the last year and a half. We have begun our search for a new CTO, and I am pleased that Duncan will continue to provide support as an advisor during this transition. The cannabis industry continues to be dynamic, as we have witnessed in the first half of this year.
Doug Francis: I'd also like to thank Duncan greater for the many years. He has been with US most recently as our CTO, leading us through a period of transition in the last year and a half.
Doug Francis: We have begun our search for a new CTO and I am pleased that Duncan will continue to provide support as an adviser during this transition.
Doug Francis: The cannabis industry continues to be dynamic as we have witnessed in the first half of this year.
Doug Francis: On a federal level, we are hopeful, as an industry, that the recommendation of the DOJ, HHS, and DEA to reschedule cannabis as a Schedule III drug moves forward, but we are realistic about the possibility that the nuance of the ultimate rule may not be what we need to support the industry and that it may be blocked altogether, which have been the fates of many of the other promises of government reform for our industry. There has also been a lot of activity in the rapidly-growing, intoxicating hemp market.
Speaker Change: On a federal level, we are hopeful as an industry that the recommendation of the Doj HHS and DEA to reschedule candidates as a schedule III drug moves forward, but we are realistic about the possibility that the nuance of the ultimate rule may not be what we need to support the industry and then it may be blocked altogether.
Doug Francis: What have been the face of many of the other promises of government reform for our industry.
Doug Francis: There has also been a lot of activity in the rapidly growing intoxicating have market. So far we have largely stayed out of this market segment, because we view it as an accident of poor drafting and the farm Bill unexpected the federal government to close this loophole before now.
Doug Francis: But if that does not happen, we will work to find a way to provide our consumers access to this market in the safest way possible, while continuing our support of the licensed cannabis operators in markets.
Speaker Change: <unk> has long been a strong and vocal proponent of sensible candidates regulation, which we believe results in not just a better functioning industry, but also safer products to the consumer and a more stable sales revenue base, but ultimately we need some more tax revenue for the state.
Speaker Change: Candidates like wine, not plutonium and let the industry grow instead of taxing and regulating it into oblivion, but as always we will continue to support and advocate for our clients and consumers.
Speaker Change: Turning to our performance I am proud of our team's accomplishments over the first half of the year. We've continued to just take the same approach and mentality that I hadn't filled sense returning to leadership team have read maps and that is to focus on what we can control and win where we need to win while playing the long game and setting our business up for success as the industry evolves.
Doug Francis: This is evidenced by our Q2 results with revenues of $45 9 million adjusted EBITDA of $10 1 million and ending cash of $41 3 million Susan will touch more on our financial results later, but I'm pleased that we were able to report another quarter of strong financial results further solidifying our financial position and runway.
Speaker Change: I wanted to stress how much of a competitive advantage. It is to continue building our balance sheet. This is not the time for heroes and risk so aggressive moves for speculative growth on wise we.
Speaker Change: We have identified areas for organic and natural growth that we believe we can get after in the near term and then to 2025.
Doug Francis: Continuing to drop cash to the bottom line, a somewhat rare ability in our industry, is what matters until the industry and its markets mature. That said, growth is not where it needs to be, even in this environment, so we must do better. We have plenty of bright spots, but they are typically offset by the headwinds in challenge markets.
Speaker Change: To drive cash to the bottom line.
Doug Francis: Rare ability in our industry is what matters until the industry in its markets mature.
Doug Francis: That said growth is not where it needs to be even in this environment. So we must do better.
Doug Francis: Plenty of bright spots, but they are typically offset by the headwinds in challenged markets.
Doug Francis: Next quarter, we will speak to some of the new initiatives underway that we believe will allow us to get back to meaningful growth in 2021. Before I turn it over to Susan, I want to thank our team for their hard work so far this year. Operationally, we have improved each quarter, and I feel great about our team's absolute focus on the first principles that define what success means to us. I've enjoyed being in the trenches with this group, tackling the problems that we face internally and as an industry. As a team, we are excited about the updates we are making to our product roadmap, and we'll talk more about that next quarter. With that, I will turn it over to Susan.
Doug Francis: Next quarter, we will speak to some of the new initiatives underway that we believe will allow us to get back to meaningful growth in 2025.
Doug Francis: Before I turn it over to Susan I want to thank our team for their hard work. So far this year operationally, we have improved each quarter and I feel great about our team's absolute focus around the first principles that define what success means to us <unk>.
Doug Francis: I have enjoyed being in the trenches with this group tackling the problems that we face internally and as an industry.
Susan: As a team we are excited about the updates, we're making to our product roadmap and we'll talk more about that next quarter.
Doug Francis: With that I will turn it over to Susan.
Susan Eckert: Thanks Doug. Over the last few months, I've had the opportunity to work closely with Doug and the talented WeedMaps team to gain a deep understanding of our company and the cannabis industry. I'm impressed by the strong foundation that has been built and the potential that lies ahead. We've accomplished a lot over the past several months, and I'm committed to supporting our initiatives as we continue to drive the company forward. Turning to our financial results, we finished the second quarter with 45.9 million in net revenues, which represents a 2.5 million, or 5%, decline when compared to the same period last year.
Susan: Thanks, Doug over the last few months I've had the opportunity to work closely with Doug and the talented <unk> team.
Susan Eckert: <unk> deep understanding of our company and the candidates industry.
Susan Eckert: And then pressed by the strong foundation that has been built and the potential that lies ahead with.
Susan Eckert: We've accomplished a lot over the past several months and I'm committed to supporting our initiatives as we continue to drive the company forward.
Susan Eckert: This decrease was driven by lower spend on our Featured and Deal Listings products as our clients continue to face constrained marketing budgets and in part due to the impact on revenue from certain products we sunsetted in Q4 of last year. On a sequential basis, net revenues were up 3% over Q1, driven by increased client spend related to promotional activity associated with the industry's 420 holidays. Q2 average monthly paying clients of 5,045 declined about 10% when compared to the prior year period. This decline reflects the removal of paying clients from our platform who've become delinquent.
Susan Eckert: Turning to our financial results. We finished the second quarter with $45 9 million in net revenues, which represents a $2 5 million or 5% decline when compared to the same period last year.
Susan Eckert: This decrease was driven by lower spend on our featured listings product as our clients continue to face constrained marketing budgets and in part due to the impact on revenue from certain products, we sunset in Q4 of last year.
Susan Eckert: On a sequential basis net revenues were up 3% over Q1, driven by increased client spend related to promotional activity associated with the industry for 'twenty holiday.
Susan Eckert: Q2 average monthly paying clients.
Susan Eckert: 45 declined about 10% when compared to the prior year period.
Susan Eckert: The decline reflects the removal of paying clients from our platform has become delinquent declined.
Susan Eckert: The client count impacts related to the products we sunsetted at the end of last year, as well as expected client churn due to continued industry challenges such as price deflation and the ongoing consolidation in our industry. As a result of the lower average monthly paying client count, the average monthly net revenue per paying client in Q2 increased 5% to $3,033 when compared to the prior year period, since the clients using the aforementioned Sunset products and the clients' churn typically had a lower average selling price and monthly net revenue. Turning to our exponents.
Susan Eckert: The client count impacts related to the products, we sunset at the end of last year as well as expected client churn due to continued industry challenges such as price deflation and the ongoing consolidation in our industry.
Susan Eckert: As a result of the lower average monthly paying client count the average monthly net revenue per paying client in Q2 increased 5% to 3033 when compared to the prior year period since the clients using the aforementioned sunset products and the clients churn chip.
Susan Eckert: <unk> had a lower average selling price and monthly net revenue.
Susan Eckert: Turning to our expenses.
Susan Eckert: Cost of revenues and sales and marketing expenses declined to 31% and 12%, respectively, versus the prior year and were a result of eliminated costs associated with our discontinued products in addition to decreased wage expenses related to lower headcount. These reduced costs, however, were offset primarily by an increase in general and administrative expenses due to elevated legal and audit services related to our SEC filings in May. Also, secondarily, we saw marginal increases across product development, appreciation, and amortization.
Susan Eckert: Cost of revenues and sales and marketing expenses declined, 31% and 12% respectively versus the prior year and were a result of eliminated costs associated with our discontinued products. In addition to decreased wage expenses related to lower head count.
Susan Eckert: These reduced costs, however were offset primarily by an increase in general and administrative expenses.
Susan Eckert: Due to elevated legal and audit services related to our SEC filings in May.
Susan Eckert: Also secondarily, we saw marginal increases across product development and depreciation and amortization.
Susan Eckert: Net income for the quarter came in at 1.2 million, which was slightly down from 2 million in Q2 of last year. Our Q2 Adjusted EBITDA of $10.1 million and Adjusted EBITDA Margin of 22% beat our expectations and demonstrates the operational discipline we continue to maintain throughout the organization. Relative to our Q2 guidance, upside and adjusted EBITDA were a result of better than expected revenue, as well as a lower than expected provision for credit losses, which reflects our team's efforts and focus on AR and collections.
Susan Eckert: Net income for the quarter came in at $1 2 million, which was slightly down from $2 million in Q2 of last year.
Susan Eckert: Our Q2, adjusted EBITDA of $10 1 million and adjusted EBITDA margin of 22%.
Susan Eckert: Our expectations and demonstrate the operational discipline, we continue to maintain throughout the organization.
Susan Eckert: Relative to our Q2 guidance upside in adjusted EBITDA was a result of better than expected revenue as well as lower than expected provision for credit losses, which reflects our team's efforts and focus on AR and collections.
Susan Eckert: We generated $5.5 million in cash in the quarter and closed with $41.3 million in cash, and we remain debt-free. We continue to maintain a strong liquidity position and positive cash flow, and we are well-positioned as we move into Q3. We do expect Q3 cash flow to be impacted by certain one-time payments, such as the potential of both UC's elements as described in our 8K at the end of July. Our share count across our Class A and B common stock was $152 million as of August 4, 2024.
Susan Eckert: We generated $5 5 million in cash in the quarter and closed with $41 3 million in cash and we remain debt free.
Susan Eckert: We continue to maintain a strong liquidity position and positive cash flow and we are well positioned as we move into Q3.
Susan Eckert: We do expect Q3 cash flow to be impacted by certain one time payments such as the potential FTC settlement as described in our 8-K at the end of July.
Susan Eckert: Our share count across our class a and B common stock was $152 million as of August four 2024.
Susan Eckert: A reconciliation of non-GAAP metrics to their nearest GAAP result, as well as the details of our share classes and share count calculation, are provided in our earnings presentation posted on our Investor Relations website. Now, we turn to our Q3 Outlook. While we are encouraged by some positive trends and our team's progress and developing markets, we do anticipate some fluctuations in our results due to seasonality and therefore expect Q3 net revenues to be approximately 44 million, and Q3 adjusted EVIDA to be approximately 7 million. With that, I'll now turn the call back over to the operator to conclude our call. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Susan Eckert: A reconciliation of non-GAAP metrics to their nearest GAAP result, as well as the details of our share classes and share count calculation I provided in our earnings presentation posted on our Investor Relations website.
Operator: Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music [inaudible] Thanks for watching, and don't forget to like, share, and subscribe to the channel.
Operator: Now turning to our Q3 outlook.
Operator: While we are encouraged by some positive trends and our team's progress in developing markets. We do anticipate some fluctuations in our results due to seasonality and therefore expect Q3 net revenues to be approximately $44 million.
Operator: Q3, adjusted EBITDA to be approximately $7 million.
Simon Yao: Good afternoon, everyone, and welcome to WM Technology's 2nd quarter 2024 earnings conference call. I would now like to turn the call over to your host, Simon Yao, Director of Investor Relations.
Operator: With that I'll now turn the call back over to the operator to conclude our call.
Simon Yao: Hi, everyone. Thank you for joining us for our fiscal 2024 second quarter results. We have our Executive Chair, Doug Francis, and our Interim CFO, Susan Eckert, 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. However, 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.
Simon Yao: Our actual results could differ materially from expectations reflected in any forward-looking statement. For discussions of risk and other important factors that could affect our actual results, please refer to our SEC filings available on our SEC website and our investor relations website as well as the risk and other important factors discussed in today's earnings release. We specifically do not have 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 August 8, 2024.
Doug Francis: 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'll also discuss non-gap financial measures alongside those prepared in accordance with Gap. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, the 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 my investor relations website, and the audio replay will be there. With that, I will now turn it over to Doug.
Doug Francis: Thanks, Simon, and hello to everyone joining us today. Before we get started, I'd like to introduce and welcome Susan Eckhart, our interim CFO, who has been with us since the beginning of March. Susan brings a wealth of financial leadership experience and has been a key partner in getting us to where we are today. We're glad to have her on the team.
Doug Francis: I would also like to thank Duncan Grazer for the many years he has been with us, most recently as our CTO, leading us to a period of technological transition in the last year. We have begun our search for a new CTO, and I am pleased that Duncan will continue to provide support as an advisor during this transition.
Doug Francis: The cannabis industry continues to be dynamic, as we have witnessed in the first half of this year. On a federal level, we are hopeful, as an industry, that the recommendation of the DOJ, HHS, and DEA to reschedule cannabis as a Schedule III drug moves forward, but we are realistic about the possibility that the nuance of the ultimate rule may not be what we need to support the industry and that it may be blocked altogether, which have been the fates of many of the other promises of government reform for our industry.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Doug Francis: There has also been a lot of activity in the rapidly growing intoxicating hem market. So far, we have largely stayed out of this market segment because we view it as an accident of poor drafting in the farm bill and expected the federal government to close this loophole before now. But if that does not happen, we will work to find a way to provide our consumers access to this market in the safest way possible while continuing our support of the license cannabis operators in. Weedmasters has long been a strong and vocal proponent of sensible cannabis regulation, which we believe results in not just a better functioning industry but also safer products for the consumer and a more stable sales revenue base that ultimately leads to more tax revenue for the state. Street Cannabis should be like wine, not plutonium, and let the industry grow instead of poisoning it and regulating it into oblivion.
Doug Francis: As always, we will continue to support and advocate for our clients and consumers. Turning to our performance, I am proud of our team's accomplishments over the first half of the year. We've continued to take the same approach and mentality that I instilled since returning to the leadership team of Weedmaps, and that is to focus on what we can control and win where we need to win while playing the long game and setting our business up for success as the industry evolves.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Doug Francis: This is evidenced by our Q2 results, with revenues of 45.9 million, adjacent EBITDA of 10.1 million, and cash of 41.3 million. Susan will touch more on our financial results later, but I am pleased that we are able to report another quarter of strong financial results for this strengthening our financial position in runway. I wanted to stress how much of a competitive advantage it is to continue building our balance sheet.
Doug Francis: This is not the time for heroes and risk, so aggressive moves for speculative growth are unwise. We have identified areas for organic and natural growth that we believe we can achieve in the near term and into 2025. Continuing to drop cash to the bottom line, a somewhat rare ability in our industry, is what matters until the industry and its markets mature. That said, growth is not where it needs to be, even in this environment, so we must do better.
Doug Francis: We have plenty of bright spots, but they are typically offset by the headwinds in challenge markets. Next quarter, we will speak to some of the new initiatives underway that we believe will allow us to get back to meaningful growth in 2021. Before I turn it over to Susan, I want to thank our team for their hard work so far this year. Operationally, we have improved each quarter, and I feel great about our team's absolute focus around the first principles that define what success means to us.
Doug Francis: I've enjoyed being in the trenches with this group, tackling the problems that we face internally and as an industry. As a team, we are excited about the updates we are making to our product roadmap, and we'll talk more about that next quarter. With that, I will turn it over to Sue.
Susan Eckert: Thanks Doug. Over the last few months, I've had the opportunity to work closely with Doug and the talented WeedMaps team to gain a deep understanding of our company and the cannabis industry. I'm impressed by the strong foundation that has been built and the potential that lies ahead. We've accomplished a lot over the past several months, and I'm committed to supporting our initiatives as we continue to drive the company forward. Turning to our financial results, WeedMaps finished the second quarter with $45.9 million in net revenues, which represents a $2.5 million, or 5%, decline when compared to the same period last year.
Susan Eckert: This decrease was driven by lower spend on our featured and deal listings product as our clients continue to face constrained marketing budgets and, in part, due to the impact on revenue from certain products we sunsetted in Q4 of last year. On a sequential basis, net revenues were up 3% over Q1, driven by increased client spend related to promotional activity associated with the industry's 420 holiday. Q2 average monthly paying clients of 5,045 declined about 10% when compared to the prior year period.
Susan Eckert: This decline reflects the removal of paying clients from our platform who've become delinquent, the client count impact related to the products we sunsetted at the end of last year, as well as expected client churn due to continued industry challenges such as price deflation and the ongoing consolidation in our industry. As a result of the lower average monthly paying client count, the average monthly net revenue per paying client in Q2 increased 5% to $3,033 when compared to the prior year period, since the clients using the aforementioned Sunset products and the clients' churn typically had a lower average selling price and monthly net revenue.
Susan Eckert: Turning to our expenses, cost of revenues and sales and marketing expenses declined to 31% and 12%, respectively, versus the prior year and were a result of eliminated costs associated with our discontinued products in addition to decreased wage expenses related to lower headcounts. These reduced costs, however, were offset primarily by an increase in general and administrative expenses due to elevated legal and audit services related to our SSD filings and meds.
Susan Eckert: Also, secondarily, we saw marginal increases across product development, and appreciation and amortization. Net income for the quarter came in at $1.2 million, which was slightly down from $2 million in Q2 of last year. This was due to adjusted EBITDA of 10.1 million, and adjusted EBITDA margin of 22%, which feed our expectations and demonstrate the operational discipline we continue to maintain throughout the organization. Relative to our Q2 guidance, the upside in adjusted EBITDA was a result of better-than-expected revenue as well as a lower-than-expected provision for credit losses, which reflects our team's efforts and focus on AR and collection.
Susan Eckert: We generated 5.5 million in cash in the quarter and closed with 41.3 million in cash, and we remain debt-free. We continue to maintain a strong liquidity position and positive cash flow, and we are well positioned as we move into Q3. We do expect Q3 cash flow to be impacted by certain one-time payments, such as the potential SEC settlement as described in our 8K at the end of July. Our share count across our Class A and B common stock was $152 million as of August 4, 2024.
Susan Eckert: A reconciliation of non-GAAP metrics to their nearest GAAP result, as well as the details of our share classes and share count calculation, are provided in our earnings presentation posted on our Investor Relations website. Now, we turn to our Q3 Outlook. While we are encouraged by some positive trends and our team's progress in developing markets, we do anticipate some fluctuations in our results due to seasonality and therefore expect 23 net revenues to be approximately 44 million and 23 just to be approximately 7 million. With that, I'll now turn the call back over to the operator to conclude our call.
Doug Francis: So far, we have largely stayed out of this market segment because we view it as an accident of poor drafting in the Farm Bill and expected the federal government to close this loophole before now. But if that does not happen, we will work to find a way to provide our consumers access to this market in the safest way possible, while continuing our support of the licensed cannabis operators and markets. Weedmasters has long been a strong and vocal proponent of sensible cannabis regulation, which we believe results in not just a better functioning industry but also safer products for the consumer and a more stable sales revenue base that ultimately leads to more tax revenue for the state. Treat street cannabis like wine, not plutonium, and let the industry grow instead of stifling it into oblivion.
Doug Francis: As always, we will continue to support and advocate for our clients and consumers. Turning to our performance, I am proud of our team's accomplishments over the first half of the year; we've continued to take the same approach and mentality that I instilled since returning to the leadership team of lead maps. And that is to focus on what we can control and win where we need to win while playing the long game and setting our business up for success as the industry evolves. This is evidenced by our Q2 results, with revenues of $45.9 million, adjusted EBITDA of $10.1 million, and ending cash of $41.3 million.
Doug Francis: Susan will touch more on our financial results later, but I am pleased that we were able to report another quarter of strong financial results, further solidifying our financial position and runway. I wanted to stress how much of a competitive advantage it is to continue building our balance sheet. This is not the time for heroes and risk, so aggressive moves for speculative growth are not wise. We have identified areas for organic and natural growth that we believe we can achieve in the near term and into 2025.