Leafly Holdings, Inc. Reports Fourth Quarter and Full Year 2023 Financial Results
- None.
- Revenue declined in Q4 2023 compared to Q4 2022.
- Net loss was reported for both Q4 2023 and full year 2023.
- Adjusted EBITDA showed improvement but still resulted in a loss for 2023.
- The company's cash position decreased from the previous year.
- Convertible notes maturing in 2025 pose a liquidity concern for the company.
- Going concern qualification may impact the Company's financial statements for 2023.
- First-quarter 2024 guidance indicates revenue of around $9 million with an adjusted EBITDA loss of approximately $1 million.
Insights
Leafly Holdings' reported Q4 2023 revenue and full-year financials reflect a strategic pivot towards operational efficiency, which has begun to yield tangible results. The reduction in operating expenses by $25 million, coupled with a narrowed operating loss from $28.0 million in 2022 to $7.1 million in 2023, indicates a disciplined approach to cost management. This is particularly noteworthy given the 30% decline in ending retail accounts, which suggests that the increase in retailer ARPA (average revenue per account) is a result of a more focused and potentially more profitable customer base, despite the overall drop in revenue. The net loss figures also paint a picture of improvement, with a decrease from $5.8 million in Q4 2022 to $0.5 million in Q4 2023.
However, the liquidity position raises concerns, especially with the going concern qualification due to the inability to repay convertible notes maturing in January 2025. Investors should be wary of the implications this has for the company's financial stability and the potential need for restructuring or refinancing. The forecast for Q1 2024 indicates that Leafly expects the trend of reduced losses to continue, but stakeholders should remain cautious and monitor the company's ability to manage its cash burn and secure additional funding if necessary.
The cannabis industry is experiencing significant turbulence, as highlighted by Leafly's financial results. The company's strategy to improve efficiency and reduce costs is a critical response to the broader market conditions. Leafly's focus on operational discipline, as evidenced by the significant cost savings and the strategic culling of underperforming retail accounts, demonstrates an attempt to build a more sustainable and resilient business model in a volatile market.
Despite the decrease in brand revenue, the improvement in gross margin from 88% to 89% indicates a strong underlying business capable of maintaining profitability on a per-unit basis. The increase in retailer ARPA suggests that Leafly's efforts to optimize its revenue mix are paying off. This, combined with the overhaul of revenue operations, may position the company to capitalize on the high-intent consumer segment it aims to serve. The evolution of the company's deals functionality is another area where Leafly is looking to innovate and drive growth.
The inclusion of a going concern qualification in Leafly's financial statements is a red flag that must be carefully considered. It underscores the importance of the company's efforts to resolve its liquidity issues and the potential legal and financial ramifications if it fails to address the maturity of its convertible notes. Stakeholders should be aware of the legal intricacies of debt restructuring or refinancing and the potential impact on shareholder value.
Furthermore, the cannabis industry operates within a complex legal framework and Leafly's ability to navigate these regulations is important for its long-term success. As the company looks to invest in growth areas, the evolving legal landscape will play a significant role in determining the opportunities and challenges it will face. Investors should keep a close eye on legislative developments that could affect Leafly's operations and market potential.
Delivered Q4 2023 revenue of
Reported Q4 2023 net loss of
Focus on operational discipline in 2023 resulted in full year
“We saw continued turbulence across the cannabis industry and in our business in 2023. Leafly’s focus has been on improving our efficiency as a business, and we are proud of the progress we made in 2023 on our path to profitability, while at the same time, continuing to deliver value for our partners,” said Yoko Miyashita, CEO of Leafly. “We believe we are now better equipped to offer the right product at the right price to the right customer, and serve as a trusted matchmaker, connecting retailers and brands with high-intent consumers.”
Fourth Quarter Financial Results
-
Revenue was
$9.7 million $12.1 million -
Retail revenue was
$8.3 million $9.5 million -
Brand revenue was
$1.4 million $2.7 million -
Gross margin was
89% , an improvement over Q4 2022 gross margin of88% . -
Total operating expense was
$8.6 million 48% reduction from$16.3 million -
Net loss was
$0.5 million $5.8 million -
Adjusted EBITDA1, a non-GAAP measure, was
$1.2 million $4.2 million -
Ended the quarter with
$15.3 million
| 1. | The non-GAAP financial measures EBITDA and adjusted EBITDA are presented in this release. See the reconciliations of such non-GAAP financial measures to their most comparable GAAP measures in the table included in this release below. |
Full Year Financial Results
-
Revenue was
$42.3 million $47.4 million -
Total operating expenses were reduced by over
$25 million $44.5 million $69.5 million -
Operating loss narrowed to
$7.1 million $28.0 million -
Net loss for 2023 was
$9.5 million $5.1 million -
Adjusted EBITDA1, a non-GAAP measure, was a loss of
$2.3 million $23.2 million
“Our focus on running a lean business resulted in significant operating improvements in 2023, with a nearly
Key Performance Metrics
|
Three Months Ended December 31, |
|
|||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
Change
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ending retail accounts |
|
4,075 |
|
|
|
5,806 |
|
|
|
(1,731 |
) |
|
|
-30 |
% |
Retailer ARPA |
$ |
672 |
|
|
$ |
554 |
|
|
$ |
118 |
|
|
|
21 |
% |
Fourth Quarter Business Highlights
-
Retailer average revenue per account (“ARPA”) was
$672 $118 - The Company ended the year with 131 employees, compared to 204 at the end of 2022.
- Leafly bolstered its collections efforts, and strategically focused on removing underperforming and non-paying retailers to build a healthier, more durable customer-base.
- The Company started overhauling its revenue operations, which is expected to reduce the cost of the Company’s support structure, and will allow its sales teams to focus on revenue generation and growth.
- The Company continued to make improvements to its deals functionality providing even more opportunities for retailers and brands to utilize a variety of deal types to attract more shoppers.
Cash and Liquidity
The Company ended the year with
Financial Outlook
Today, Leafly is issuing guidance for the first quarter of 2024. Based on current business trends and conditions, we expect first quarter revenue of around
| 2. | Leafly has not provided a quantitative reconciliation of forecasted GAAP net income (loss) to forecasted total adjusted EBITDA within this communication because the Company is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. These items include, but are not limited to: depreciation and amortization expense from new assets; impairments of assets; changes in the valuation of any derivatives; the valuation of, and changes in, grants of equity-based compensation; and gains or losses on modification or extinguishment of debt. These items, which could materially affect the computation of forward-looking GAAP net income (loss), are inherently uncertain and depend on various factors, many of which are outside of Leafly’s control. For more information regarding the non-GAAP financial measures discussed in this communication, please see “Non-GAAP Financial Measures” below. |
Webcast and Conference Call Information
Leafly will host a conference call and webcast to discuss the results today, Thursday, March 28, 2024 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). A live webcast of the call can be accessed from Leafly’s Investor Relations website at https://investor.leafly.com.
The live call may also be accessed via telephone at (833) 470-1428 toll-free domestically. Please reference conference ID: #975173. An archived version of the webcast will be available from the same website after the call.
About Leafly
Leafly helps millions of people discover cannabis each year. Leafly's powerful tools help shoppers make informed purchasing decisions and empower cannabis businesses to attract and retain loyal customers through advertising and technology services. Learn more at Leafly.com or download the Leafly mobile app through Apple’s App Store or Google Play.
Definitions of Key Performance Metrics
Ending retail accounts
Ending retail accounts is the number of paying retailer accounts with Leafly as of the last month of the respective period. Retail accounts can include more than one retailer. We believe this metric is helpful for investors because it represents a portion of the volume element of our revenue and provides an indication of our market share. Management believes this metric offers useful information in understanding consumer behavior, trends in our business, and our overall operating results.
Retailer average revenue per account (“ARPA”)
Retailer ARPA is calculated as monthly retail revenue, on an account basis, divided by the number of retail accounts that were active during that same month. An active account is one that had an active paying subscription with Leafly in the month. Leafly does not provide retailers with an ongoing free subscription offering but may offer a free introductory period with certain subscriptions. We believe this metric is helpful for investors because it represents the price element of our revenue. Management believes this metric offers useful information in understanding consumer behavior, trends in our business, and our overall operating results.
Given that each of ending retail accounts and retailer ARPA are operational measures and that the Company’s methodology for calculating these measures does not meet the definition of a non-GAAP measure, as that term is defined by the
Cautionary Statement Regarding Forward Looking Statements
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the services offered by Leafly and the markets in which Leafly operates, business strategies, performance metrics, industry environment, potential growth opportunities, projected future results, financial outlook, expected results from cost saving measures, management objectives, and initiatives undertaken to improve our liquidity and capitalization. These forward-looking statements generally are identified by the words “believe,” “expect,” “intend,” “strategy,” “future,” “forecast,” “opportunity,” “outlook,” “plan,” “may,” “should,” “will,” "seek," "focus," "continue,” "potential," “likely,” and similar expressions (including the negative versions of such words or expressions).
Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions as of the date of this release and, as a result, are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained herein. These cautionary statements are being made pursuant to federal securities laws with the intention of obtaining the benefits of the “safe harbor” provisions of such laws.
There may be events in the future that Leafly is not able to predict accurately or over which it has no control. Many factors could cause actual future events to differ materially from the forward-looking statements in this press release. The risks and uncertainties described in the “Risk Factors” section of Leafly’s Annual Report on Form 10-K for the year ended December 31, 2022 filed by Leafly with the SEC on March 29, 2023, in Leafly’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023, and in the other documents filed by Leafly from time to time with the SEC provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by Leafly in such forward-looking statements.
These examples include, but are not limited to:
- Leafly’s ability to raise sufficient capital or obtain financing or secure other sources of liquidity in the future to execute its business plan and pay its debt and other obligations when due;
- the size, demands and growth potential of the markets for Leafly’s products and services and Leafly’s ability to serve those markets;
- the impact of macro-economic conditions, including the resulting effect on consumer spending at local cannabis retailers and the level of advertising spending by such retailers;
- the degree of market acceptance and adoption of Leafly’s products, services and pricing changes;
- Leafly’s ability to attract and retain customers;
- Leafly’s success in retaining or recruiting officers, key employees or directors;
- Leafly’s ability to regain compliance with the Nasdaq Stock Market LLC’s (“Nasdaq”) continued listing requirements and maintain the listing of Leafly’s shares of common stock and warrants on the Nasdaq Capital Market, which will be subject to certain approvals by Nasdaq, among other contingencies and factors;
- the impact of the regulatory environment and complexities with compliance related to such environment, including compliance with restrictions imposed by federal (under which cannabis is illegal) or applicable state law and slower legalization efforts at the state level;
- the substantial doubt regarding our ability to continue as a going concern because we do not currently have the ability to repay our convertible notes due in January 2025; and
- other factors impacting Leafly’s business, operations and financial performance.
Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and Leafly assumes no obligation and, except as required by law, does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. Leafly does not give any assurance that it will achieve its expectations.
LEAFLY HOLDINGS, INC CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED (in thousands, except per share amounts) |
|||||||
|
As of December 31, |
||||||
|
2023 |
|
2022 |
||||
ASSETS |
|
|
|
||||
Current assets |
|
|
|
||||
Cash and cash equivalents |
$ |
15,293 |
|
|
$ |
24,594 |
|
Accounts receivable, net of allowance for credit loss of |
|
2,635 |
|
|
|
3,298 |
|
Prepaid expenses and other current assets |
|
1,074 |
|
|
|
1,792 |
|
Restricted cash |
|
— |
|
|
|
360 |
|
Total current assets |
|
19,002 |
|
|
|
30,044 |
|
Property, equipment, and software, net |
|
2,554 |
|
|
|
2,285 |
|
Restricted cash - long-term portion |
|
251 |
|
|
|
248 |
|
Other assets |
|
28 |
|
|
|
135 |
|
Total assets |
$ |
21,835 |
|
|
$ |
32,712 |
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
||||
Current liabilities |
|
|
|
||||
Accounts payable |
$ |
813 |
|
|
$ |
1,625 |
|
Accrued expenses and other current liabilities |
|
2,503 |
|
|
|
6,235 |
|
Deferred revenue |
|
1,764 |
|
|
|
1,958 |
|
Total current liabilities |
|
5,080 |
|
|
|
9,818 |
|
|
|
|
|
||||
Non-current liabilities |
|
|
|
||||
Non-current portion of convertible promissory notes, net |
|
29,085 |
|
|
|
28,863 |
|
Private warrants derivative liability |
|
104 |
|
|
|
182 |
|
Escrow shares derivative liability |
|
4 |
|
|
|
52 |
|
Stockholder earn-out rights derivative liability |
|
20 |
|
|
|
204 |
|
Total non-current liabilities |
|
29,213 |
|
|
|
29,301 |
|
Total liabilities |
|
34,293 |
|
|
|
39,119 |
|
|
|
|
|
||||
Commitments and contingencies |
|
|
|
||||
|
|
|
|
||||
Stockholders' deficit |
|
|
|
||||
Preferred stock |
|
— |
|
|
|
— |
|
Common stock |
|
— |
|
|
|
— |
|
Treasury stock |
|
(31,663 |
) |
|
|
(31,663 |
) |
Additional paid-in capital |
|
93,403 |
|
|
|
89,956 |
|
Accumulated deficit |
|
(74,198 |
) |
|
|
(64,700 |
) |
Total stockholders' deficit |
|
(12,458 |
) |
|
|
(6,407 |
) |
Total liabilities and stockholders' deficit |
$ |
21,835 |
|
|
$ |
32,712 |
|
LEAFLY HOLDINGS, INC CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED (in thousands, except per share amounts) |
|||||||||||||||
|
Three Months Ended
|
|
Year Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Revenue |
$ |
9,745 |
|
|
$ |
12,112 |
|
|
$ |
42,252 |
|
|
$ |
47,363 |
|
Cost of revenue |
|
1,054 |
|
|
|
1,449 |
|
|
|
4,801 |
|
|
|
5,860 |
|
Gross profit |
|
8,691 |
|
|
|
10,663 |
|
|
|
37,451 |
|
|
|
41,503 |
|
Operating expenses |
|
|
|
|
|
|
|
||||||||
Sales and marketing |
|
2,178 |
|
|
|
5,551 |
|
|
|
12,504 |
|
|
|
27,080 |
|
Product development |
|
1,715 |
|
|
|
4,061 |
|
|
|
9,848 |
|
|
|
14,988 |
|
General and administrative |
|
4,675 |
|
|
|
6,710 |
|
|
|
22,150 |
|
|
|
27,440 |
|
Total operating expenses |
|
8,568 |
|
|
|
16,322 |
|
|
|
44,502 |
|
|
|
69,508 |
|
Income (loss) loss from operations |
|
123 |
|
|
|
(5,659 |
) |
|
|
(7,051 |
) |
|
|
(28,005 |
) |
Interest expense, net |
|
(621 |
) |
|
|
(692 |
) |
|
|
(2,778 |
) |
|
|
(2,811 |
) |
Change in fair value of derivatives |
|
14 |
|
|
|
559 |
|
|
|
309 |
|
|
|
36,823 |
|
Other income (expense), net |
|
29 |
|
|
|
25 |
|
|
|
22 |
|
|
|
(937 |
) |
Net (loss) income |
$ |
(455 |
) |
|
$ |
(5,767 |
) |
|
$ |
(9,498 |
) |
|
$ |
5,070 |
|
|
|
|
|
|
|
|
|
||||||||
Net (loss) income per share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
(0.22 |
) |
|
$ |
(3.34 |
) |
|
$ |
(4.74 |
) |
|
$ |
2.89 |
|
Diluted |
$ |
(0.22 |
) |
|
$ |
(3.34 |
) |
|
$ |
(4.74 |
) |
|
$ |
2.50 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
|
2,098,999 |
|
|
|
1,727,303 |
|
|
|
2,005,549 |
|
|
|
1,754,012 |
|
Diluted |
|
2,098,999 |
|
|
|
1,727,303 |
|
|
|
2,005,549 |
|
|
|
1,887,024 |
|
LEAFLY HOLDINGS, INC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (in thousands) |
|||||||
|
Year Ended December 31, |
||||||
|
2023 |
|
2022 |
||||
Cash flows from operating activities |
|
|
|
||||
Net (loss) income |
$ |
(9,498 |
) |
|
$ |
5,070 |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
||||
Depreciation and amortization |
|
986 |
|
|
|
449 |
|
Stock-based compensation expense |
|
2,955 |
|
|
|
3,917 |
|
Bad debt expense |
|
2,767 |
|
|
|
1,378 |
|
Loss on disposition of assets |
|
61 |
|
|
|
— |
|
Noncash amortization of debt discount |
|
546 |
|
|
|
506 |
|
Noncash interest expense associated with convertible debt |
|
— |
|
|
|
243 |
|
Noncash change in fair value of derivatives |
|
(309 |
) |
|
|
(36,823 |
) |
Other |
|
— |
|
|
|
46 |
|
Changes in operating assets and liabilities: |
|
|
|
||||
Accounts receivable |
|
(2,104 |
) |
|
|
(1,718 |
) |
Prepaid expenses and other current assets |
|
825 |
|
|
|
(580 |
) |
Accounts payable |
|
(813 |
) |
|
|
424 |
|
Accrued expenses and other current liabilities |
|
(3,826 |
) |
|
|
(983 |
) |
Deferred revenue |
|
(194 |
) |
|
|
(17 |
) |
Net cash used in operating activities |
|
(8,604 |
) |
|
|
(28,088 |
) |
|
|
|
|
||||
Cash flows from investing activities |
|
|
|
||||
Additions of property, equipment, and software |
|
(1,345 |
) |
|
|
(2,470 |
) |
Proceeds from sale of property and equipment |
|
29 |
|
|
|
— |
|
Net cash used in investing activities |
|
(1,316 |
) |
|
|
(2,470 |
) |
|
|
|
|
||||
Cash flows from financing activities |
|
|
|
||||
Proceeds from exercise of stock options |
|
— |
|
|
|
158 |
|
Proceeds from convertible promissory notes |
|
— |
|
|
|
29,374 |
|
Proceeds from business combination placed in escrow and restricted |
|
— |
|
|
|
39,032 |
|
Trust proceeds received from recapitalization at closing |
|
— |
|
|
|
582 |
|
Issuance of common stock under ESPP |
|
168 |
|
|
|
— |
|
Repurchase of common stock and settlement of forward purchase agreements |
|
— |
|
|
|
(31,303 |
) |
Transaction costs associated with recapitalization |
|
— |
|
|
|
(10,761 |
) |
Advances (repayments) of related party payables |
|
94 |
|
|
|
(17 |
) |
Net cash provided by financing activities |
|
262 |
|
|
|
27,065 |
|
|
|
|
|
||||
Net decrease in cash, cash equivalents, and restricted cash |
|
(9,658 |
) |
|
|
(3,493 |
) |
Cash, cash equivalents, and restricted cash, beginning of year |
|
25,202 |
|
|
|
28,695 |
|
Cash, cash equivalents, and restricted cash, end of year |
$ |
15,544 |
|
|
$ |
25,202 |
|
LEAFLY HOLDINGS, INC
NON-GAAP FINANCIAL MEASURES - UNAUDITED
(in thousands)
Earnings Before Interest, Taxes and Depreciation and Amortization (EBITDA) and Adjusted EBITDA
To provide investors with additional information regarding our financial results, we have disclosed EBITDA and Adjusted EBITDA, both of which are non-GAAP financial measures that we calculate as net loss before interest, taxes and depreciation and amortization expense in the case of EBITDA and further adjusted to exclude non-cash, unusual and/or infrequent costs in the case of Adjusted EBITDA. Below we have provided a reconciliation of net (loss) income (the most directly comparable GAAP financial measure) to EBITDA and from EBITDA to Adjusted EBITDA.
We present EBITDA and Adjusted EBITDA because these metrics are a key measure used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of investment capacity. Accordingly, we believe that EBITDA and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.
EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider either in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:
- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and both EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
- EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and
- EBITDA and Adjusted EBITDA do not reflect interest or tax payments that may represent a reduction in cash available to us.
Because of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including net (loss) income and our other GAAP results.
A reconciliation of net (loss) income to non-GAAP EBITDA and Adjusted EBITDA is as follows:
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Net (loss) income |
|
$ |
(455 |
) |
|
$ |
(5,767 |
) |
|
$ |
(9,498 |
) |
|
$ |
5,070 |
|
Interest expense, net |
|
|
621 |
|
|
|
692 |
|
|
|
2,778 |
|
|
|
2,811 |
|
Depreciation and amortization expense |
|
|
289 |
|
|
|
173 |
|
|
|
986 |
|
|
|
449 |
|
EBITDA |
|
|
455 |
|
|
|
(4,902 |
) |
|
|
(5,734 |
) |
|
|
8,330 |
|
Stock-based compensation |
|
|
720 |
|
|
|
758 |
|
|
|
2,955 |
|
|
|
3,917 |
|
Transaction expenses allocated to derivatives and reverse stock split |
|
|
— |
|
|
|
— |
|
|
|
55 |
|
|
|
874 |
|
Severance |
|
|
— |
|
|
|
492 |
|
|
|
754 |
|
|
|
492 |
|
Change in fair value of derivatives |
|
|
(14 |
) |
|
|
(559 |
) |
|
|
(309 |
) |
|
|
(36,823 |
) |
Adjusted EBITDA |
|
$ |
1,161 |
|
|
$ |
(4,211 |
) |
|
$ |
(2,279 |
) |
|
$ |
(23,210 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Source: Leafly Holdings, Inc.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240328411550/en/
Media
pr@leafly.com
Investors
ir@leafly.com
Source: Leafly Holdings, Inc.
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