Executive Summary

Q4 2023 revenue was $9.745M, down 19.5% year-over-year and down 8% sequential, but slightly above prior guidance; adjusted EBITDA swung to a positive $1.161M as OpEx fell 48% YoY, reflecting rigorous cost controls .
Gross margin improved to 89% vs 88% a year ago, while net loss narrowed sharply to $0.455M from $5.767M in Q4 2022; ending cash rose to $15.3M, +5.7% QoQ, aided by collections discipline .
Management disclosed a going concern qualification tied to $29.7M convertible notes due January 2025 and noted potential NASDAQ listing noncompliance post-10-K, making capital structure resolution a critical 2024 focus .
Q1 2024 guidance: revenue ~$9M and adjusted EBITDA loss ~$1M; near-term top-line remains pressured by retailer churn and cautious brand spend, offset by ARPA stabilization and sales investments .
Potential stock catalysts: positive Q4 adjusted EBITDA vs guided loss, new Board appointments, tighter collections driving lower bad debt, and regulatory tailwinds (280E relief on potential rescheduling); risks include going concern and listing compliance .

What Went Well and What Went Wrong

What Went Well

Cost discipline drove a 48% YoY OpEx reduction in Q4 and a $25M full-year cut, enabling positive adjusted EBITDA of $1.161M in Q4 and sharply reduced full-year adjusted EBITDA loss to $2.279M from $23.210M in 2022 .
Gross margin improved to 89% (Q4), reflecting headcount reductions and platform cost reviews; management highlighted improved collections with bad debt expense as a % of revenue falling from 8.9% in Q3 to 4.3% in Q4 .
Strategic focus on higher-value customers and ARPA lift: retailer ARPA rose 21% YoY to $672, supported by new rate cards and churn of lower-ARPA accounts; CEO emphasized “offer the right product at the right price” to build a durable base .

Quote: “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.” — CEO, Yoko Miyashita .

What Went Wrong

Top-line pressure persisted: Q4 revenue declined 19.5% YoY (to $9.745M) and 8% sequential; ending retail accounts fell 30% YoY to 4,075 as Leafly removed nonpaying accounts and smaller retailers faced macro constraints .
Brand revenue softness: Q4 brand revenue was $1.4M (up sequentially on holiday season, but down YoY), with management remaining cautious on brand spend amid sector liquidity constraints .
Balance sheet and listing risks: going concern qualification due to the January 2025 note maturity and expected NASDAQ noncompliance notice post-10-K; management is evaluating capital/strategic options but outcomes remain uncertain .

Financial Results

Metric	Q2 2023	Q3 2023	Q4 2023
Revenue ($USD Millions)	$10.675	$10.583	$9.745
Basic EPS ($)	$(0.04)	$(1.10)	$(0.22)
Diluted EPS ($)	$(0.04)	$(1.10)	$(0.22)
Gross Margin (%)	88%	89%	89%
Adjusted EBITDA ($USD Millions)	$0.080	$(0.176)	$1.161
Total Operating Expenses ($USD Millions)	$10.188	$10.895	$8.568
Net (Loss) Income ($USD Millions)	$(1.436)	$(2.210)	$(0.455)
YoY Revenue Change (%)	-11%	-10.2%	-19.5%
Seq. Revenue Change (%)	N/A	N/A	-8%
Consensus Revenue ($USD Millions)	N/A	N/A	N/A
Consensus EPS ($)	N/A	N/A	N/A

Note: Wall Street consensus estimates via S&P Global were unavailable at the time of this analysis; comparisons to Street estimates are not provided.

Segment revenue breakdown

Segment	Q4 2022	Q3 2023	Q4 2023
Retail Revenue ($USD Millions)	$9.5	$9.3	$8.3
Brand Revenue ($USD Millions)	$2.7	$1.3	$1.4

KPIs

KPI	Q2 2023	Q3 2023	Q4 2023
Ending Retail Accounts (count)	5,261	4,466	4,075
Retailer ARPA ($)	$558	$644	$672
Bad Debt Expense (% of Revenue)	N/A	8.9%	4.3%

Key cross-checks: Q4 revenue above Q3 guidance ($9.5M) and adjusted EBITDA beat (turned positive vs guided loss) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Millions)	Q4 2023	~$9.5	Actual: $9.745	Beat vs guidance
Adjusted EBITDA ($USD Millions)	Q4 2023	~$(1.3)	Actual: $1.161	Beat vs guidance
Revenue ($USD Millions)	Q1 2024	N/A	~$9.0	New (sequentially lower vs Q4 actual)
Adjusted EBITDA ($USD Millions)	Q1 2024	N/A	~$(1.0)	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 and Q1 prior)	Current Period (Q4 2023)	Trend
AI/technology initiatives	Emphasis on order API (beta), deal capabilities, consumer checkout improvements (Q2)	Prototype “AI Budtender” leveraging first-party data; broader enhancements in deals engine and order API rollout	Expanding tech stack; early-stage AI adds potential UX differentiation
Retailer integration and friction reduction	Order API introduced; 50 POS systems using API by Q3; scheduled delivery launch (Q3)	Wider order API rollout; reduced integration time; improved deal engine to increase variety and ease	Continued friction reduction to drive conversion/orders
Macro/regulatory (280E, rescheduling)	Federal reform developments (HHS rescheduling recommendation; SAFE Banking progress) (Q3)	Anticipated DEA rescheduling potentially aiding retailer cash flow and marketing spend	Potential tailwind; timing uncertain
Regional trends	Maryland adult-use transition drove revenue/order growth (Q3); Ohio legalization passed (Q3)	Missouri revenue nearly doubled YoY; Maryland +27% monthly revenue post adult-use; Ohio seen as $1B+ opportunity; Germany adult-use legalization imminent	Select markets providing growth offsets to broader industry pressure
Collections/bad debt	Tightened collections, proactive removal of nonpaying accounts (Q3)	Bad debt % down to 4.3% vs 8.9% in Q3; 60% auto-charged; stricter overdue protocols	Improving cash discipline; healthier revenue base
Capital structure/listing	Regained minimum bid price compliance (Sep 2023) (Q3)	Going concern qualification due to notes due Jan 2025; expected NASDAQ noncompliance notice post-10K; exploring note solutions	Elevated risk; active remediation efforts

Management Commentary

“We are proud of the progress we made in 2023 on our path to profitability… better equipped to offer the right product at the right price to the right customer.” — CEO, Yoko Miyashita .
“Our retail ARPA in Q4 was up 21% year-over-year to $672… we don’t expect ARPA to move significantly from this level over the short term.” — CFO, Suresh Krishnaswamy .
“We ended the quarter with $15.3 million in cash… we expect cash burn in Q1 to be around $1.5 million, which includes a $1.2 million interest payment on our convertible notes.” — CFO .
“We expect to have a going concern qualification… due to our $29.7 million convertible notes coming due in January 2025… based on our current liquidity position, our inability to repay the notes when due.” — CFO .
“We look forward to sharing more about [our AI Budtender] later this year and how it should enhance the user experience.” — CEO .

Q&A Highlights

Collections discipline: 60% of revenue auto-charged; net terms for largest accounts; proactive outreach from 3 days overdue; removal of nonpaying accounts to improve base durability .
Governance and listing: Two industry veterans appointed to Board/Audit Committee (Monat, Nannetti); management expects this to restore NASDAQ Audit Committee composition compliance .
Capital structure: Management began exploring note solutions in Q4 (partial conversion in Dec 2023) and is evaluating options to address Jan 2025 maturity and listing status .
Operating cadence: ARPA stabilization expected; brand revenue cautious; added eight salespeople to pursue top-line growth amid tight budgets .

Estimates Context

Wall Street consensus (S&P Global) for Q4 2023 revenue and EPS was unavailable at the time of this analysis; as a result, beats/misses vs Street are not provided. Management beat its own Q4 guidance on both revenue and adjusted EBITDA, delivering a positive adjusted EBITDA vs a guided loss .

Key Takeaways for Investors

Q4 execution exceeded internal guidance: revenue slightly above guide and adjusted EBITDA turned positive — a material surprise driven by OpEx discipline and improved collections; this is supportive for near-term sentiment despite top-line pressure .
ARPA stabilization and a refocused sales motion (new heads, tailored price points) can rebuild paying accounts over 2024, but macro constraints and lingering brand spend caution cap near-term growth visibility .
Balance sheet risk is the central overhang: going concern and expected NASDAQ notice necessitate timely capital structure actions (refinance, convert, or raise); monitor updates on note negotiations and listing remediation .
Regulatory momentum (potential DEA rescheduling, Germany adult-use, state rollouts like Ohio) offers medium-term demand and ad-spend tailwinds; positioning in newer markets (MO, MD, OH) is a lever to offset mature-market churn .
Product/tech differentiation (order API, deals engine, emerging AI Budtender) targets friction reduction and conversion improvements; sustained delivery on product roadmap is key to ARPA growth and share-of-wallet with higher-value customers .
Trading lens: near-term moves likely tied to capital structure headlines and NASDAQ compliance; upside catalysts include any credible refinancing/conversion plan and continued adjusted EBITDA strength; downside risk if capital solutions lag.
Medium-term thesis: Leaner cost base and disciplined collections underpin a path to sustainable profitability once top-line stabilizes; execution in growth markets and product enhancements can reaccelerate revenue when sector liquidity improves .

Leafly Holdings, Inc. /DE (LFLY)·Q4 2023 Earnings Summary