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LH

Leafly Holdings, Inc. /DE (LFLY)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 revenue of $9.0M declined 19.6% YoY and 7.2% QoQ as Leafly continued to purge non‑paying retail accounts; adjusted EBITDA loss improved to $0.9M, reflecting disciplined OpEx execution .
  • Retail revenue was $7.9M and brand revenue $1.2M; gross margin improved to ~89% while total OpEx fell 34% YoY, underscoring an “asset‑light” model and cost rigor .
  • Q2 guidance: revenue around $8.6M and adjusted EBITDA loss ≈ $1.1M; OpEx ex‑SBC expected to be similar to Q1, and cash burn in Q2 expected to be ~ $1.5M .
  • Strategic and liquidity watch items: (i) DEA rescheduling could free $1–$2B of industry cash via 280E relief, a potential driver of ad/marketing spend; (ii) ~$29.7M convertible notes due Jan‑2025 now current; (iii) NASDAQ non‑compliance plan underway .

What Went Well and What Went Wrong

  • What Went Well

    • Cost discipline: Total operating expense fell 34% YoY to $9.8M; adjusted EBITDA loss narrowed to $0.9M from $3.3M in Q1’23 .
    • Margin resilience: Gross margin improved to ~89% (vs 88% in Q1’23), consistent with an asset‑light model; CFO expects to maintain attractive levels .
    • ARPA strength: Retail ARPA reached $677 (+22% YoY; +~1% QoQ), aided by removal of small/non‑paying accounts and pricing actions .
    • Management quote: “We remain committed to boosting our operational efficiency as we focus on stabilizing revenue and prioritizing ongoing value for our partners.” — CEO Yoko Miyashita .

  • What Went Wrong

    • Top‑line pressure: Revenue fell 19.6% YoY and 7.2% QoQ to $9.0M as non‑paying account removals and retailer budget constraints persisted .
    • Retail account attrition: Ending retail accounts declined to 3,840 (‑235 QoQ; ‑33% YoY), despite moderation in the pace of removals .
    • Liquidity/Listing risks: ~$29.7M notes due Jan‑2025 now current and not repayable on current trajectory; NASDAQ non‑compliance notice received, extension plan in process .

Financial Results

Core P&L, Margins and Per‑Share

MetricQ1 2023Q4 2023Q1 2024
Revenue ($USD Millions)$11.249 $9.745 $9.048
Gross Margin (%)88.0% 89.2% 89.2%
Total Operating Expenses ($USD Millions)$14.851 $8.568 $9.820
Net Loss ($USD Millions)$(5.397) $(0.455) $(2.387)
Net Loss per Share (Basic)$(2.79) $(0.22) $(1.09)
Adjusted EBITDA ($USD Millions)$(3.344) $1.161 $(0.867)
  • Revenue change: −19.6% YoY; −7.2% QoQ (management stated) .
  • EPS/Margins vs estimates: Wall Street consensus from S&P Global was unavailable for this session; see Estimates Context.

Revenue Mix

MetricQ1 2023Q4 2023Q1 2024
Retail Revenue ($USD Millions)$9.5 $8.3 $7.9
Brand Revenue ($USD Millions)$1.8 $1.4 $1.2

KPIs

KPIQ3 2023Q4 2023Q1 2024
Ending Retail Accounts (Count)4,466 4,075 3,840
Retailer ARPA ($/Month)$644 $672 $677

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 2024N/AAround $8.6M New
Adjusted EBITDAQ2 2024N/A≈ $(1.1)M New
OpEx (ex‑SBC)Q2 2024N/ASimilar to Q1 levels (management expectation) New
Cash BurnQ2 2024N/A~$(1.5)M expected (management expectation) New

Note: Prior quarter (Q4’23) provided guidance for Q1’24 (revenue around $9M; adj. EBITDA ≈ $(1)M) which the company met/beat on EBITDA and cash; Q2’24 is first issuance for that period .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q‑2: Q3’23; Q‑1: Q4’23)Current Period (Q1’24)Trend
Cost discipline/OpExQ3: OpEx down 33% YoY; tightening collections; ARPA mix up . Q4: OpEx down 48% YoY; 131 employees; overhauled rev‑ops .OpEx down 34% YoY; adj. EBITDA loss improved; expect OpEx ex‑SBC similar in Q2 .Stable efficiency; continued cost control.
Retail accounts vs ARPAQ3: Ending accounts fell; ARPA +16% YoY to $644 . Q4: Ending 4,075; ARPA $672 .Ending 3,840 (‑235 QoQ); ARPA $677 (+22% YoY) .Accounts declining moderating; ARPA stabilizing.
Brand revenueQ3: Softness; stabilization signs . Q4: $1.4M, sequential uptick but pressured .$1.2M; declines “slowly stabilizing” with new lower‑priced tier .Stabilizing at lower base.
Liquidity/convertible notesQ3: Notes due Jan‑2025; exploring options . Q4: Going‑concern tied to notes .Notes now current; not repayable on current position; partial conversion to equity; expect refinancing expenses .Elevated balance sheet risk; ongoing lender talks.
NASDAQ listingQ3: Expected non‑compliance on filing 10‑K .Received non‑compliance notice; pursuing 180‑day extension .Active remediation.
Regulatory tailwindsQ3: HHS rescheduling rec; SAFER Banking; Ohio/Maryland momentum . Q4: AI Budtender proto; Germany legalization pending .DEA rescheduling proposal; NY positive court ruling; Germany legalization went into effect .Improving sentiment; potential for spend lift.
Technology/AIQ4: AI Budtender prototype based on first‑party data .Platform enhancements (promo codes, live chat, SEO); no new AI update .Product iteration continues; AI follows later.

Management Commentary

  • Strategic focus: “Our efforts have been concentrated on strengthening our resilience as a business… increasing our efforts on customer acquisition, designed to regrow and strengthen our network of retail customers.” — CEO Yoko Miyashita .
  • Macro/regulatory: “The DEA… plan to reschedule cannabis… a pathway for cannabis operators to free up cash and invest in their businesses” — CEO ; “280E tax savings… estimated to range from $1B to $2B” — CEO .
  • Sales/go‑to‑market: “We brought on board 6 new market managers and 2 new acquisition managers… [with] a product price point for any retail customer” — CEO .
  • Liquidity and debt: “We will not have the funds available to repay [the $29.7M] notes when due… in ongoing dialogue with our lender… converted an additional portion of principal to equity” — CFO .
  • Outlook discipline: “OpEx excluding stock‑based comp [in Q2] to be at similar levels to Q1” and Q2 guidance of ~$8.6M revenue and ~$(1.1)M adj. EBITDA .

Q&A Highlights

  • Rescheduling impact: Management emphasized 280E relief could unlock $1–$2B for operators, potentially boosting marketing spend; Leafly sees opportunity to capture incremental demand .
  • Accounts/collections: Bad debt improved to 5.5% of revenue in Q1 (vs 6.5% FY23 average); tighter processes and lower delinquency pace expected to continue .
  • NASDAQ status: Company received non‑compliance notice; intends to submit a plan and request 180‑day extension; shares continue to trade .
  • Q2 guide framing: Q2 revenue around $8.6M and adj. EBITDA ≈ $(1.1)M; continued investment in sales and product to return to growth .
  • Commercial priorities: Broadened product suite with lower‑end price points to retain budget‑constrained customers and win new accounts; focus on reactivations .

Estimates Context

  • We attempted to retrieve S&P Global/Capital IQ consensus for Q1'24 and near‑term quarters; data were unavailable in this session due to provider rate limits. As a result, we cannot present “vs consensus” comparisons for revenue/EPS/EBITDA. We will update upon access restoration.
  • Management characterized Q1 revenue as “in line with guidance,” with adjusted EBITDA and cash ahead of guidance; guidance comparisons are against company guidance (not Street consensus) .

Key Takeaways for Investors

  • Cost structure reset is largely complete; gross margins ~89% and OpEx down ~34% YoY underpin improved adj. EBITDA trajectory despite near‑term top‑line pressure .
  • Retail account base is still contracting but at a moderating pace; ARPA is stabilizing at higher levels due to mix/pricing; success of new lower‑priced tiers and sales hires is key to re‑acceleration .
  • Liquidity remains the central risk: ~$29.7M notes due Jan‑2025 are now current and not repayable under current cash flow; outcomes hinge on lender negotiations and potential financing/strategic alternatives (PGP/Benchmark engaged) .
  • Regulatory catalysts (DEA rescheduling; NY ruling; EU momentum via Germany) could unlock industry marketing budgets in 2H24/2025, benefiting marketplace spend on Leafly .
  • Near‑term model: Q2 guide implies another sequential revenue step‑down and slightly larger adj. EBITDA loss; watch execution on account adds/reactivations and brand spend stabilization .
  • Trading lens: Balance sheet/going‑concern and NASDAQ listing remediation are stock overhangs; any positive resolution or concrete rescheduling progress could be meaningful catalysts .
  • Medium‑term: If top‑line stabilizes and cost discipline holds, adj. EBITDA breakeven path is credible; equity value sensitivity remains high to debt solution and marketplace re‑growth .

Appendix: Additional Q1 2024 Disclosures and Trend References

  • Balance sheet snapshot: Cash and cash equivalents $14.1M at Q1‑end (ex. restricted); current liabilities reflect convertible notes reclassified as current .
  • Cash flow: Q1 operating cash use $(0.873)M; total decrease in cash/cash equivalents/restricted cash $(1.196)M .
  • Guidance methodology: Company does not provide GAAP‑to‑non‑GAAP reconciliation for forward adjusted EBITDA due to uncertainty of reconciling items .

Citations:

  • Q1 2024 8‑K/Press release and financials
  • Q1 2024 earnings call transcript
  • Q4 2023 8‑K/Press release and financials
  • Q4 2023 earnings call transcript
  • Q3 2023 8‑K/Press release and financials
  • Q3 2023 earnings call transcript