Good day, and thank you for standing by. Welcome to the WM Technologies Second Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Greg Stolowitz, Vice President of Investor Relations. Please go ahead.

Hi, everyone. Thanks for joining us to discuss our fiscal 2023 second quarter results. We have our Executive Chair, Doug Francis; CTO, Duncan Grazier; and Interim CFO, Mary Hoitt with us today. By now everyone to have access to our earnings announcement and supporting slide deck on our Investor Relations website. During this call, we will make forward-looking statements about our business, outlook strategies and long-term goals. Keep in mind that forward-looking statements are not guarantees of future performance and 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 the 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 and our Investor Relations website as well as the risks and other important factors discussed in today's earnings release. We specifically disclaim any intent or obligation to update these forward-looking statements, except as required by law. For the of those who may be listening to the replay or archived webcast, this call was held on August 8, 2023. Since then, we may have made announcements related to the topics discussed, so please refer to the company's most recent press releases and SEC filings. We will also discuss non-GAAP financial measures along those prepared in accordance with GAAP. Non-GAAP financial measures should be considered in addition to, but not as a substitute for the information prepared in accordance with GAAP. You can find a reconciliation of these measures to our GAAP results in our earnings presentation on our Investor Relations website. And finally, today's call is being webcast from our Investor Relations website, and an audio replay will be there soon. With that, I'll turn the call over to Doug.

Thanks, Greg, and hello to everyone joining us today. I'd like to begin by welcoming Mary Hoitt, who joined us last month as our interim CFO. Mary has a wealth of experience that is already in play and will be invaluable to Weedmaps Technology as we continue to streamline and optimize our business. I'd also like to welcome our CTO, Duncan Grazier to the call, who will speak to what we are building at Weedmaps. Duncan has been on our team since 2019, became our CTO in Q4 of 2022 and is a key partner in driving focus across our organization. Duncan represents the future direction of our platform and has accomplished much in a short time as CTO I'm excited for you all to hear from him today. Finally, I'd like to thank our former CFO, Arden Lee for his time at the company. We wish him all the best in his future endeavors. Now turning to our results. We are pleased with our second quarter performance, which reflects our renewed focus and continued productivity over the past few quarters. For the second quarter in a row, we beat our expectations for revenue and adjusted EBITDA, while generating positive cash flow from operations. Our overall cash balance would have increased had it not been for payments related to last year's headcount reductions. In Q2, we had revenues of $51 million, net income of $2 million and adjusted EBITDA of $10 million. Our adjusted OpEx was 32% lower than a year ago. We are fully committed to continuing the operational discipline that has driven our return to profitability. As Mary will speak to, we feel comfortable with our financial and liquidity position. While there is more to do, we are pleased with the progress we have made, especially in what…

Thanks, Doug, and good afternoon, everyone. I'm excited to join you today to discuss our technology organization and how we are continuing to build the future of Weedmaps. I joined WM technology in 2019 to lead our efforts to set up our technology to be capable of scaling to a post-federal legalization industry. I want to start by giving a brief overview of the organization, how our technology platform has evolved in recent years and then talk about some of the most important initiatives where we see tech as a driving competitive advantage for our business. And as Doug mentioned, I will talk specifically about some of the key product and technology advancements we made in the past quarter to our marketplace. Our technology team consists of more 200 software engineers, product managers, data analysts, data engineers, user experience and user interface designers, and many other roles that develop, maintain and support the full stack technology that helps to run every function of our business. The scale of our technology team while maintaining profitability is an industry advantage. We can simply invest more in technology for our consumers and clients. At the highest level, our goal is to create a best-in-class experience for all Weedmaps users and our clients. We must not only maintain the most comprehensive and accurate menu and product offerings in the industry, but we also need to deliver a great user experience to drive growth for our clients. To do this, we build the underlying technology that enables us to deliver those experiences in a manner that is not only durable, scalable and resilient, but also supports the complexities and requirements of the regional cannabis industry. Over the past few years, we have evolved our organization several very specific ways to facilitate that growth, transitioning to…

Thanks, Duncan. I'm excited to be joining my first WM Technology earnings call. Our second quarter performance beat our expectations on top line growth and profitability. Q2 revenue came in at $51 million, which compares to $48 million expectation that we gave in May. Q2 adjusted EBITDA was $10 million, which compares to the $4 million expectation that we had. And as Doug said, we generated positive cash flow before making final payments related to last year's headcount reductions. We had 5,609 average monthly paying client in Q2, down less than 1% versus Q1. We were able to drive new client growth across both mature and emerging markets. However, these client wins were offset by churn, largely stemming from California and Oklahoma clients. In California, specifically, we saw churn from delivery clients facing economic headwinds or other clients facing billing issues that we removed from the platform as we implemented more stringent collection policies. Overall, we experienced net positive client growth in our emerging markets. Revenue per client was $3,022 in Q2, up 7% from Q1, driven by increased client spend in our mature states, offset by churn largely of smaller, lower revenue paying clients. As we have previously stated, we do expect the revenue per client will likely decline in the next few quarters as we onboard clients in emerging markets who begin with lower levels of spend on the platform. In California, revenue per client was up 6% versus last quarter. California represented 54% of our revenue in Q2, slightly down from 55% in Q1. Our monthly net dollar retention on listings revenue was 99.5% for the quarter. Q2 adjusted EBITDA of $10 million reflected a 32% reduction in adjusted OpEx versus last year, similar to Q1. We saw the largest declines in spend across sales and marketing…

[Operator Instructions] Your first question comes from Andrew Carter of Stifel. Please go ahead.

Yes, thank you. Good evening. I wanted to ask on the $3,022 net spending client, could you quantify kind of what the bump was from April to that number? And what's a good - kind of a good ongoing number is? Was that kind of up? I know there's a lot of moving parts, but I'll start there.

Andrew, it's Greg. I'd say this, obviously, in our commentary, we talked about some of the churn we're seeing. A lot of that was in the tail. We saw really good momentum, especially in the beginning of the quarter for some of our larger clients increasing spend. And so a lot of - we were happy with that. It was reflective of the policies made of leading in and working with our clients. As we look on the go forward, obviously, you heard our guide. I would say we expect paying client count to be relatively flat, just given we're going to see some growth, but we're going to see some offsetting churn and that will impact the spend per client. So it will probably be more reflective of what it was in Q4 and Q1 versus what we saw in Q2.

And this is Doug. Additionally, as we go at the emerging markets, the average spend per client tends to be lower. So we'll realize some of that in the near term.

Yes. Perfect. I'll ask something different. The retention, what is kind of net retention like right now in emerging markets and kind of the spending profile because emerging markets a little bit of a selling proposition more so than California, where the brands are established?

Yes. We don't have - we obviously don't have a specific regional net retention or state-by-state number retention that we disclosed. I would just say we're continuing to increase clients in our emerging markets. The churn we saw, obviously, was in California and Oklahoma. So we're seeing really good retention growth in the emerging markets. The spend levels are obviously below our average and some of our mature states are above the average. And so those continue to increase, but they are obviously low in the average as we develop those markets.

And as these clients are facing headwinds, we're really working with them to develop these emerging markets because the health of the market really implicates the long-term outcome. So again, we're being opportunistic and supporting our industry where we can.

And the final question I'll ask you about the days receivable, I think it's down to 29. Can you - have you got it under controlled where there it's sizably within, I guess, what you would expect terms to be? Or is kind of the continued churn like kind of what levels are out there?

Yes. Look, we've obviously made - we feel pretty good progress on our receivables and our collection policies. We have implemented. We continue to plant slightly more stringent policies and are holding our clients to that. Doug talked about some of the revenue decisions we're making on his commentary. And so we feel it's in a good position. Obviously, our allowance for bad debt is coming down. There are still known and unknowns out there. And so we're not going to say we're in the clear completely, but we feel really good about the policy and procedures, both internally and how we're working with our clients about how that number has been trending.

Thanks. I'll pass it on.

Thank you. One moment for our next question. Your next question comes from Scott Fortune of ROTH MKM. Please go ahead.

This is Nick on for Scott. Thanks for taking the questions. First one for me, just on the client side. Can you just comment on what you've seen from your clients in terms of their appetite to kind of invest in advertising. Given kind of the more difficult macro backdrop, we've kind of seen a shift here to focus on margins and cash preservation. Obviously, the ROI of your offering is compelling. But I'm just wondering if you've seen any kind of discernible changes in client spend behavior in the past six months?

Yes. Obviously, that varies state to state. So each state is its own story. We definitely feel pressure across the board on our clients' budgets in general. That being said, there are a few players who are consolidating and taking advantage of these opportunities. So it's important for us to get those relationships tight with those folks because as you can see in some of our data that we did increase income in places like California. So it really is just a state-by-state story.

Okay. I appreciate the color. And then second for me, just kind of on the announcement from Mastercard to shutter cannabis transactions. Just kind of your puts and takes there from that announcement. And have you seen any impacts on the client side or any impacts from your business just off this announcement?

Yes. I mean it's obviously additional headwinds that as an industry, we continue to face. We know some companies out there have built technology, assuming they'd have that Mastercard ability in their stack. So that will be a challenge for them. Our industry is dynamic. We're used to this. So I imagine most of our clients will be able to bob and weave and come out okay, but this is definitely just another pain that they're going to have to deal with.

Great. That's it for me. I'll pass it on.

Thank you for your participation in today's program. This does conclude this conference. You may now disconnect.