Good afternoon everyone and welcome to the WM Technology Inc.'s Third Quarter 2022 Earnings Conference Call. I would now like to turn the call over to your host Greg Stolowitz, Vice President of Investor Relations.

Hi everyone. Thanks for joining us today to discuss our fiscal 2022 third quarter results. We have our Executive Chair, Doug Francis; our COO, Juan Feijoo; and our CFO, Arden Lee with us today. By now everyone should have access to our earnings announcement. This announcement is also on our Investor Relations website along with the supporting slide deck. During this call, we'll make forward-looking statements including statements about our business outlook and long-term goals. These statements are not guarantees of future performance. They 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 statements. For a discussion of risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website including our quarterly report on Form 10-Q for the quarter ended September 30th, 2022 to be filed after this call in our Investor Relations website as well as the risks and other important factors discussed in today's earnings release. Should any of these risks materialize or should our assumptions prove to be incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events except as required by law. Also during this call, we will discuss certain non-GAAP financial measures. While we believe these non-GAAP measures are helpful to investors in understanding our business, they are not intended to be a substitute for our GAAP results. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measure can be found in our earnings release. With that, I'd like to turn the call over to Doug.

Thanks Greg and thanks everyone for joining today. Before Arden goes into an update on the quarter and our financial results, I wanted to spend some time on the announcement we shared earlier. Today, we announced a significant change to our executive leadership team. Chris Beals, our CEO, will be leaving the company effective immediate. We've launched the search for a new CEO and have established an office of the CEO comprised of our existing executive leadership team who will be reporting directly to me in the interim. That includes our COO Juan Jose [ph] along with Arden both of whom are on the call today. On behalf of the entire Board, I want to recognize and thank Chris for navigating the company over the past three and a half years as CEO on our way to becoming a public company and before that as our General Counsel. I thought that we had announced the adjustment back in 2008 on the vision of creating a marketplace connecting consumers with the best local cannabis. We were pioneers at the center of building the early rails in the industry to engage in commerce. We were known for our C to sell knowledge of the plant, the high ROI of our marketplace, a commitment to ending the prohibition against cannabis, and most importantly, being the best place to discover and find cannabis products. During my time as CEO, we had a bootstrap culture with a track record of being profitable and cash flow positive as we scaled the business to $100 million in revenue. While the complexities of our industry have certainly increased, we need to do a better job at executing our proven strategy and leveraging all of the strengths that have made us the industry leader. As a Co-Founder and one…

Thanks, Doug, and hello to everyone on today's call. Our Q3 performance comes in the face of continued challenges across our end markets. The risks we anticipated last quarter played out as expected throughout this quarter. Our Q3 revenue of $51 million declined 1% versus last year, and our reported net income and adjusted EBITDA were both a loss of $10 million. Our adjusted EBITDA was heavily impacted by reserves we took against our most aged client balances. We saw 25% plus growth in paying clients during the third quarter, though this growth was fully offset by a decline in our revenue per paying client. We expected these pressures given the continued liquidity challenges that our clients are facing. Moving down the P&L. Our Q3 gross margin rate of 92% is consistent with the prior quarter. Our reported operating expenses after cost of revenues and before D&A expense came in at $63 million for the quarter, and includes $2 million in stock-based compensation along with $6 million in other non-recurring charges, which include severance payments associated with the headcount reduction we executed in August. More information on these charges is available in our earnings release and earnings slide deck and will be in our Form 10-Q. Excluding these items our non-GAAP adjusted OpEx for the quarter came in at $56 million, or a 46% increase versus last year resulting in our adjusted EBITDA loss. The largest driver of adjusted OpEx growth came from the bad debt expense we incurred, which I'll touch on now. Excluding bad debt from both this quarter and the prior year period, our adjusted OpEx grew by 27% year-over-year and adjusted EBITDA was $1 million. Over the past year, we selectively worked with certain clients who are facing difficulties to help them navigate through the challenging…

[Operator Instructions] Our first question comes from the line of DJ Hynes from Canaccord. Your line is open.

Hey, guys. Thanks for taking questions. Doug, I wanted to ask you so in the press release I think you were quoted saying something along the lines of like we need to be more focused and more streamlined. What does that mean to you? Is it narrower product focused? Is it about getting costs realigned? Like what's contemplated in that when you talk about focus and streamlining the business?

Yeah. It's all basic textbook like operational things. It starts with that prioritization that we mentioned and putting a clear focus on what we're trying to accomplish here. We're trying to outline clear objectives internally, decentralize decision-making, and restructuring our internal orgs, to allow us to move faster. And then, we need discipline on spend and make better trade-offs to deal with these headwinds. So that's really where the focus is going to be. Our strategy is largely intact. I spent a lot of time with Chris working through that over the years. It mainly comes down to execution. And the simple fact is, we had all of our company dials turned up to a 10. And with the market pressure and the economic headwinds, we definitely turned down some of those dials. So it's just about the logic in which we do that.

Yeah. Yeah. Okay. And then switching gears a bit maybe more to kind of macro regulatory line of questioning. Just curious with the midterms tomorrow – like what are the key things that you're watching for that we can maybe draw signals from for the end market, Doug?

Well, again, every year that we go through this we have positive news. So we expect nothing different this year. And one of the things, I want to try and bring to the company is more of a ground game getting back to the culture. And so we're looking forward to executing getting go-to-market strategies going in these states. But again, as far as policy goes, it's typically always positive and we'll be ready to execute when the news comes up.

By the way, DJ we also have Juanjo, our COO on the call and I know, he has some incremental thoughts as well. So...

Hey, DJ. This is this is Juanjo as Arden said. The only thing I wanted to add to what Doug had said is the news has always been positive. Obviously, the polling seems generally positive as well in most of these states. But I think part of what we're particularly excited about is a number of medical states that are looking to turn rec are very positive states for us, right, when you think of the likes of Maryland, Arkansas, Missouri. And so while the time line of how these states turn from med to rec is always hard to predict, right? There's a lot of regulatory nuance. I think there's plenty of reason to be bullish if some of these ballot initiatives go the way we expect them to.

Okay. Sounds good guys. I appreciate the color. Thank you.

Thanks, DJ.

One moment for next question. [Operator Instructions] Our next question comes from line of Tom Champion from Piper Sandler. Your line is open.

Hi. Good afternoon. Doug, I'm wondering if you could talk a little bit about what you're seeing in the end markets. You've been involved with the company and the industry for a long time. And in what ways is this current market environment familiar? And in what ways is it new? How tied is kind of the current challenge to the dynamics that's going on specific to California? If you could touch on that a little bit. And then just any update on kind of the Big East rollout what you're seeing in the New York, New Jersey area would be helpful?

Yes. So California, obviously, is feeling the commoditization of the plant and a very much robust black market that is definitely putting price pressure on everything and making operations hard for everyone. It is happening a little bit in other states like Colorado and Oklahoma, but we expect that force to show itself in all the other states in time. But for most of the operators in California it's definitely, a lot of headwinds, a lot of cost cutting a lot of preparing for what's going to come next year. Even in the East Coast states that are coming online, they have a lot of black market problems as well that will put downward pressure on prices out there. And obviously the licenses in New York for example have taken a little bit longer than expected. And obviously that doesn't help with the forces that I just mentioned. So just like everything in cannabis, we've been in this game a long time. Even though it says, it's going to open things tend to take a lot longer and it's a lot more nuanced as governments work with local governments to kind of roll out their policy and then have to again deal with a robust black market. So again for us we just have to build the tools to help you guys survive and then we have to have the ground game because one thing that I can help bring to the table a little bit is a broader understanding of the plant. And when you get into a world where margin and everything gets crushed it really comes down to your ability to understand how to deliver quality to price which is something that I can help some of our clients do.

Got it. Thank you.

Thank you. [Operator Instructions] Now I'm not showing any further questions in the queue. I'd like to turn the call back over to our speakers for any closing remarks.

Right. Well, thanks operator. We appreciate everyone for joining today. And with that we'll wrap up today's call.

And this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.