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LH

Leafly Holdings, Inc. /DE (LFLY)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 revenue was $8.72M, down 18.3% YoY and 3.6% QoQ, but adjusted EBITDA swung to +$0.48M, materially ahead of prior guidance for a ~$1.1M loss; gross margin held at 89% as cost discipline continued .
  • Management highlighted a collections-driven upside: “recoveries against previously written-off customers” produced positive adjusted EBITDA; bad debt metrics improved and delinquencies are trending down, helping stabilize profitability even as top line remains muted .
  • KPIs showed continued account churn (ending retail accounts 3,595; -6.4% QoQ), but ARPA rose 23% YoY to $684 as lower-ARPA accounts came off the platform; management sees cancellations moderating in Q3 .
  • Q3 outlook: revenue around $8.4M and adjusted EBITDA loss of less than $1.0M; liquidity remains a key overhang with $29.4M of convertibles due Jan 2025 and ongoing Nasdaq compliance considerations .
  • Stock reaction catalysts: meaningful upside vs prior EBITDA guidance and improving collections vs ongoing revenue pressure and balance-sheet risk; near-term narrative hinges on stabilization of retail accounts and progress on refinancing .

What Went Well and What Went Wrong

What Went Well

  • Positive adjusted EBITDA beat vs guidance: “posting $483,000 in positive adjusted EBITDA… well ahead of guidance,” driven by recoveries and tighter collections .
  • Gross margin resilience at 89% with operating expenses down 17.5% YoY to $8.4M (efficiency focus preserved profitability levers) .
  • ARPA up 23% YoY to $684 as lower-ARPA accounts churned; brand subscription tiers and pay-gated features reoriented engagement to paying brands with early positive mix effects .

What Went Wrong

  • Revenue declined 18.3% YoY and 3.6% QoQ to $8.72M, with retail revenue down to $7.3M and brand revenue still below prior-year levels despite a 4/20 seasonal bump .
  • Continued account churn: ending retail accounts fell to 3,595 (-245 QoQ), with FL/CA/OK ~40% of declines; “payment delinquencies remain the largest segment of canceled customers,” reflecting industry capital constraints .
  • Liquidity and listing risks persist: $29.4M convertibles due Jan 2025; management noted ATM usage post-Q2 and ongoing lender talks; Nasdaq compliance process continues to be a watch item .

Financial Results

MetricQ2 2023Q1 2024Q2 2024
Revenue ($USD Millions)$10.68 $9.05 $8.72
Gross Profit ($USD Millions)$9.44 $8.07 $7.76
Gross Margin %88% 89% 89%
Total Operating Expenses ($USD Millions)$10.19 $9.82 $8.41
Net Loss ($USD Millions)$(1.44) $(2.39) $(1.28)
Adjusted EBITDA ($USD Millions, non-GAAP)$0.08 $(0.87) $0.48
Diluted EPS ($)$(0.73) $(1.09) $(0.55)

Segment revenue

MetricQ2 2023Q1 2024Q2 2024
Retail Revenue ($USD Millions)$8.80 $7.90 $7.30
Brand Revenue ($USD Millions)$1.80 $1.20 $1.40

KPIs

KPIQ4 2023Q1 2024Q2 2024
Ending Retail Accounts (#)4,075 3,840 3,595
Retailer ARPA ($)$672 $677 $684

Balance sheet/liquidity snapshots

  • Cash and cash equivalents: $13.57M at 6/30/24 vs $14.10M at 3/31/24 .
  • Convertible notes: $29.08M current at 6/30/24; maturities due January 2025 .

Estimates vs actuals

  • S&P Global consensus for Q2 2024 was unavailable at time of analysis; comparison anchored to company guidance (see Guidance Changes) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/OutcomeChange
RevenueQ2 2024“Around $8.6M” (guided on May 9) Actual: $8.72M Above prior guidance
Adjusted EBITDAQ2 2024“Loss of ~$(1.1)M” (guided on May 9) Actual: +$0.48M Beat; swing to positive
RevenueQ3 2024N/A“Around $8.4M” New
Adjusted EBITDAQ3 2024N/A“Loss of <$(1.0)M” New

Notes:

  • Q2 outperformance vs prior guidance driven by bad debt recoveries and stronger collections; management said adjusted EBITDA and cash were “well ahead of guidance” .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’23 and Q1’24)Current Period (Q2’24)Trend
AI/technology initiativesPrototype “AI Budtender” in development leveraging first‑party data (Q4’23) Focus on product monetization and brand tiers; no new AI disclosures (Q2) Steady/neutral
Macro/capital constraintsIndustry capital scarcity and nonpaying account removals (Q4’23–Q1’24) Delinquencies remain key driver of churn; collections improved with net recovery (Q2) Improving collections; macro still tight
RegulatoryAnticipated DEA rescheduling; FL ballot; NY ruling benefits; Germany liberalization (Q1’24) Cautious optimism on DEA rescheduling; FL ballot; DC medical expansion (Q2) Constructively evolving
Regional expansionsOhio rec opportunity highlighted (Q4’23–Q1’24) Ohio rec launch “ahead of schedule”; Uber Eats delivery in Alberta; DC expansion (Q2) Positive momentum
Brand monetizationBrand revenue weaker in 2H’23; revamp planned (Q4’23–Q1’24) Launched pay‑gated brand tiers; 4/20 seasonal boost; brand rev up QoQ (Q2) Improving mix; seasonal
Nasdaq/ListingNoncompliance notice expected; plan to regain compliance (Q1’24) No new resolution provided (Q2)Unchanged risk
Liquidity/debt$29.7M converts due Jan’25; going concern noted; collections focus (Q4’23–Q1’24) ATM launched late June; modest raise post-Q2; ongoing lender talks; converts $29.4M due Jan’25 (Q2) Ongoing overhang

Management Commentary

  • “Our adjusted EBITDA and cash [were] well ahead of guidance, posting $483,000 in positive adjusted EBITDA this quarter,” driven by “recoveries against previously written-off customers” and tighter collections .
  • “We are seeing green shoots associated with these efforts [to stabilize revenues] and will have more confidence as we see the results… over the next few quarters” .
  • “At the end of Q2… ending retail accounts totaled 3,595… cancellations are lower, and we expect a decrease in ending retail accounts to moderate” .
  • “We ended the quarter with $13.6 million in cash… we launched an at-the-market… offering program… [and] continue to have conversations with our lender… regarding our… convertible notes… due in January of 2025” .
  • On markets: “Ohio’s recreational program [launched] ahead of schedule… we expanded our partnership with Uber Eats into Alberta, Canada… cautiously optimistic about Florida’s ballot initiative” .

Q&A Highlights

  • Collections/bad debt: Net recovery in Q2; YTD bad debt 2.4% of revenue vs 6.5% FY23; delinquent accounts trending down; processes to remain tight .
  • Retail account trajectory: Sequential decline concentrated in FL/CA/OK (~40% of decline); cancellations lower in Q3 to-date; expectation that decreases moderate .
  • Brand strategy: Introduced pay‑gated tiers to shift engagement/GMV to paying brands; early results show improved mix; 4/20 seasonal uplift framed Q2 brand spend .
  • Liquidity actions: ATM facility launched in late June; modest capital raised post-quarter; ongoing lender discussions on Jan’25 converts .

Estimates Context

  • S&P Global consensus estimates for Q2 2024 (EPS, revenue, EBITDA) were unavailable at time of analysis due to data access limits. As a result, we benchmarked outcomes versus company guidance and sequential/YoY performance instead .
  • Management characterized Q2 revenue as “in line with guidance” and adjusted EBITDA as ahead of guidance (swing to positive) .

Key Takeaways for Investors

  • Profitability lever intact: Cost control, 89% gross margin, and improved collections produced a surprise positive adjusted EBITDA vs guided loss; near‑term upside depends on sustaining collections discipline while stabilizing accounts .
  • Top-line still pressured: -18.3% YoY revenue with continued account churn; watch for moderation in cancellations and early signs that revamped brand tiers lift monetization .
  • Liquidity is the swing factor: $13.6M cash vs $29.4M converts due Jan’25; ATM provides flexibility but scale of need suggests refinancing/restructuring risk remains central to the equity case .
  • Guidance frames Q3: Revenue guide (~$8.4M) implies continued softness; EBITDA guide (loss <$(1.0)M) suggests some giveback from Q2’s collections‑aided upside; execution on stabilization projects is key .
  • Regulatory tailwinds possible: Ohio rec launch, DC expansion, potential DEA rescheduling and Florida ballot could unlock demand/marketing spend over time; near‑term impact likely gradual .
  • KPI watchlist: Ending retail accounts (stabilization), ARPA durability, brand revenue trajectory post-tiering, and bad debt ratios will signal path back to sustainable growth .
  • Trading implication: Balance sheet overhang caps multiple; any credible convert solution plus evidence of account stabilization could re-rate the stock; misses on liquidity milestones or renewed churn likely weigh on sentiment .

Appendix: Additional Data Points

  • Q3 2024 outlook: revenue around $8.4M; adjusted EBITDA loss of less than $1.0M .
  • Cash and cash equivalents at 6/30/24: $13.57M; expected Q3 cash burn “a little more than” the $1.2M interest payment (ex‑working capital) .
  • Q2 2024 segment revenue: Retail $7.3M; Brand $1.4M .
  • Q2 2024 EPS: $(0.55) diluted; shares 2.327M diluted average .
  • Q2 2024 non‑GAAP reconciliation highlights: add-backs included $0.607M SBC, $0.204M transaction expenses, $(0.014)M derivative FV change .