WM Technology Inc - Ordinary Shares - Class A Aktie

Good afternoon, everyone, and welcome to WM Technologies First Quarter 2026 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to your host, Simon Yao, Director of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us to discuss our first quarter 2026 results. Today, we are joined by our CEO, Doug Francis; and our CFO, Susan Echard. By now, everyone should 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 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 website and our Investor Relations website. We specifically disclaim any intent or obligation to update these forward-looking statements, except as required by law.

For the benefit of those who may be listening to the replay or archived webcast, this call was held on May 11, 2026. Since then, we may have made announcements related to the topics discussed, so please refer to the company's most recent press releases or SEC filings.

We will also discuss non-GAAP financial measures alongside 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 release and presentation. Finally, today's call is being webcast from our Investor Relations website, and an audio replay will be available shortly.

With that, I will now turn it over to Doug.

Good afternoon, everyone, and thank you for joining us today. I want to start by acknowledging the recent federal action to reschedule medical cannabis to Schedule III. In April, the DOJ through acting Attorney General, Todd Blanche, issued a final order moving FDA-approved marijuana products subject to state medical cannabis licenses from Schedule I to Schedule III under the Controlled Substances Act. This represents an important milestone for the cannabis industry and a meaningful recognition of the role medical cannabis plays for patients across the country.

Beyond this medical cannabis action, the broader federal rescheduling process remains ongoing with the DEA expected to begin a new administrative hearing on June 29, 2026. At the same time, the full impact of these developments will take time to unfold. There are still important questions around implementation, how the benefits may flow through to operators and what this could mean for the broader cannabis industry, including adult-use markets. We view any progress at the federal level as constructive and are encouraged to continue to see continued movement towards a more rational regulatory framework for cannabis in the United States. At this time, we do not expect the rescheduling to materially affect our operations. Even with that progress, the operating environment for cannabis businesses remain difficult.

Operators continue to navigate price compression driven by oversupply and competition, pressure on consumer discretionary spending, elevated tax burdens, limited access to capital and regulatory uncertainty across both federal and state markets. These pressures continue to impact client budgets, business stability and the pace at which operators can invest for growth.

In response, we remain focused on the fundamentals of our business, disciplined execution, product innovation, marketplace strength and maintaining the flexibility to support the industry as it evolves. Against that backdrop, we are pleased with our first quarter results, which came in, in line with our revenue expectations and reflected another quarter of disciplined execution in a constrained environment.

We continue to improve our platform, supported the clients and customers who rely on Weedmaps and reinforce the role our marketplace plays within the cannabis ecosystem. I also wanted to address our recent voluntary delisting from NASDAQ. As we have shared, this was a strategic decision intended to provide Weedmaps with greater flexibility to pursue opportunities across the cannabis ecosystem.

We serve a highly regulated industry and major U.S. exchange policies have continued to limit the scope of opportunities available to companies operating in and around cannabis. We believe this decision better aligns our company profile with the realities of the industry we serve and provides greater flexibility to execute against our long-term strategy.

We are now free to put our balance sheet to work in 2 key ways. First, we may invest in strategic clients and partner companies across the cannabis supply chain to empower groups who have high conviction in the value of the Weedmaps ecosystem.

And second, we plan to begin development and expansion of our technology platform and services into areas previously prohibited by Nasdaq. We are incredibly excited about this strategic unlock and are focused on growth. As we think about the next phase of Weedmaps, our focus remains on building a platform that can better serve the full cannabis ecosystem, including retailers, brands, MSOs and consumers. That means continuing to improve the core marketplace while investing in new products and capabilities that align with where the industry is headed.

I would like to thank the team for their resilience in navigating the cannabis headwinds largely with our arms tied behind our back. It has been a very long time coming, but with tailwinds from the rescheduling process and our strategic unlocks from our delisting, we are free to make the obvious bets that are long overdue. Our priorities remain clear: allow our balance sheet and expanded capabilities to better serve our most engaged clients, continue to expand our marketplace and ecosystem and continue operating with discipline while positioning the company for the next phase of the industry's evolution.

With that, I will now turn it over to Susan.

Thanks, Doug. Now turning to our financial performance. Revenue for the first quarter was $43.6 million, down 2% year-over-year and up 1% sequentially, in line with expectations. Sequential growth was driven by increased client spend in March ahead of the 4/20 holiday. While we were pleased with our revenue performance relative to expectations, many of our clients continue to operate in a challenging environment.

Price compression, elevated tax burdens and broader financial stress continues to be more pronounced in the industry's largest, most mature markets, including California, Michigan and Colorado. These dynamics continue to weigh on client retention during the quarter. Average monthly paying clients were approximately 4,983, down 4% year-over-year and 3% sequentially. The decline was primarily driven by churn in mature markets, where operator financial pressure has contributed to business closures and account removals from the platform related to nonpayment. This churn was partially offset by continued new client acquisitions and growth in newer markets, including New York and Mississippi.

Average revenue per paying client for the first quarter was $2,914, a marginal increase compared to the first quarter of last year. While overall client spend remains under pressure, the metric benefited from the churn among lower spend clients, which had a favorable mix impact on the average.

Turning to expenses. Operating expenses for the quarter were $43.4 million compared to $42 million in the first quarter of last year. The year-over-year increase was primarily driven by a higher provision for credit losses, including a $3.9 million allowance for doubtful accounts as ongoing operator financial pressure continued to impact collections from certain delinquent accounts. We have continued to take a disciplined approach to accounts receivable management, including increased focus on payment plans and collection efforts.

While we continue to support clients through a difficult operating environment, we are also taking appropriate action where payment behavior no longer supports continued service. This increase was partially offset by lower costs in other areas as we continue to manage headcount, vendor spend and discretionary expenses.

We remain focused on maintaining flexibility in the business by controlling costs where appropriate and investing selectively in key areas of our business. This resulted in first quarter net income of $1.7 million. During the quarter, we incurred certain nonrecurring costs, including restructuring expenses, which were partially offset by a $1 million gain from the sale of a domain name. Excluding these items and other adjustments, adjusted EBITDA for the first quarter was $5.9 million.

Turning to cash flow. Net cash used in operating activities was $1.3 million in the first quarter, primarily reflecting slower collections to start the year and the timing of working capital. We ended the quarter with $57 million in cash and investments, consisting primarily of cash, short-term treasuries and bonds. Our share count across Class A and Class B common stock was 159 million as of March 31, 2026.

Looking ahead, we expect second quarter revenue to decline sequentially by low single digits from the first quarter. This outlook reflects continued client churn and account removals in mature markets as well as a more normalized level of client spend following the seasonal increase ahead of the 4/20 holiday. We remain focused on managing the business with discipline while continuing to support clients and invest selectively against our long-term priorities.

With that, I'll turn the call back to the operator.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Thank you for standing by, and welcome to the WM Technology, Inc. Fourth Quarter and Full Year 2025 Earnings Call. I'd now like to introduce your host for today's program, Simon Yao. Please go ahead, sir.

Good afternoon, and thank you for joining us to discuss our fourth quarter and full year 2025 results. Today, we are joined by our CEO, Doug Francis; and our CFO, Susan Echard. By now, everyone should 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 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 website and our Investor Relations website. We specifically disclaim any intent or obligation to update these forward-looking statements, except as required by law.

For the benefit of those who may be listening to the replay or archived webcast, this call was held on March 12, 2026. 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 alongside 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 release and earnings presentation.

Finally, today's call is being webcasted from our Investor Relations website, and an audio replay will be available shortly.

With that, I will now turn it over to Doug.

Good afternoon, everyone, and thank you for joining us today. Over the past year, we have remained focused on executing against a clear set of priorities, operating with discipline, strengthening our financial position and continuing to invest in the platform to support long-term growth.

While the cannabis industry continues to face significant structural headwinds, Weedmaps remains focused on the long game. For the full year 2025, we delivered $175 million in revenue, generating $40 million in adjusted EBITDA and ended the year with $62 million in cash, an almost 20% increase in our cash balance at the end of 2024. Our 2025 results reflected our team's ability to manage through industry cycles and the actions we have taken to reset and reinforce the business over the past several years. We are navigating a survival and balance sheet management mindset across the sector, but our strong liquidity allows us to invest thoughtfully.

Revenue for the fourth quarter came in at the top end of our prior guidance and adjusted EBITDA exceeded our guidance for the quarter. That said, both of these measures were down 10% or more compared to the fourth quarter of 2024, reflecting the continuation of the industry trends that we discussed last quarter, which persisted through the fourth quarter and into the start of this year. Susan will walk through how these trends affected our financial results in more detail.

Before I turn it over to her, I would like to provide our view of some of the macro trends and how we see them impacting our business. The cannabis landscape continues to be reshaped by consolidation. We see this led by 2 groups. On one hand, we have the MSOs who largely operate outside of the legacy states. And on the other, we have the large California-based retailers who continue to dominate and expand in the market. MSOs are prioritizing states where the operating and regulatory conditions support sustainable path to profitability, while battle-hardened California operators are adapting to operate on low margins in one of the industry's most competitive markets.

This trend creates two possible challenges for Weedmaps. First, consolidation reduces the number of operators in the market. And like most marketplaces, our platform tends to perform best in regions with a larger and more competitive base of operators as they compete for visibility on our platform. Second, product choice and shelf space become streamlined, making a narrower set of brands available to the user.

As these market dynamics persist, we remain focused on enhancing our product offerings, deepening our relationships with large California-based clients and MSO partners, improving adoption in states with regulatory capture and strengthening the overall marketplace experience. These efforts remain a strategic priority and we expect to make meaningful investments across our teams and technology throughout the year as we continue building for the future of Weedmaps.

On Schedule III, we remain cautious around its potential for Weedmaps despite the positive headlines. It is critical to understand that rescheduling will not make cannabis federally legal nor will it immediately allow Weedmaps to enter new business lines or launch new revenue strategies.

Being a company serving the cannabis industry market while being listed on a major U.S. exchange limits our strategic options relative to other technology businesses. We are restricted in how we can monetize and execute cannabis technology and how we can handle transactions and logistics. Without these capabilities, we are not able to provide customers a regular e-commerce experience like what they are used to outside of cannabis nor are we able to access the full benefit of our dual-sided marketplace. Unfortunately, Schedule III will not change this in the near term nor do we believe plant touching companies will be allowed on either of the U.S. exchanges anytime soon.

While the potential elimination of 280E tax will improve cash flows for some, the impact may be more limited than the current positive sentiment within the industry suggests. Many plant touching operators, including a majority of publicly traded MSOs have adopted certain legal positions, utilized accounting consolidation strategies or recorded allowances for uncertain tax liabilities.

As a result, most clients are already realizing cash flow benefits similar to what they would see if Section 280E did not apply. Rescheduling will just make the future of these benefits clearer and more certain, and rescheduling on its own will not erase these companies' historical tax liabilities, which, even if they are manageable, may slow down a client's ability to spend that newly free cash flow on growth rather than debt service.

Furthermore, the tax benefits of rescheduling are likely to disproportionately favor large operators and MSOs who will continue to consolidate the market, which, as I explained, could have an impact on the Weedmaps business model.

Ultimately, we want full legalization, and Schedule III is a step in that process. We are excited for the industry and the potential benefits rescheduling to provide, including extended research opportunities and greater regulatory clarity.

In the meantime, we continue to focus on what we can control, building a broad marketplace where consumers can discover the brands and the products they want and ultimately transact with our retail partners. We are optimistic about several growth levers. We have several product updates underway designed to enable product-first discovery and shopping journeys. We believe this mode of engagement with the platform will allow retailers and brands to offer consumers an e-commerce experience more similar to what they find when shopping in other industries.

We're pleased with the early momentum we've seen in New York, and hope to leverage our learnings and experiences to grow our presence in other new markets like Minnesota and Texas and the regulatory capture markets where we've historically had less of a presence.

I want to thank our team for their continued focus and execution during a challenging period for the industry. While there is still work ahead, we believe the investments we are making today position Weedmaps well for the next phase of the industry's evolution.

With that, I'll turn it over to Susan.

Thanks, Doug. Now turning to our financial performance. Revenue for the fourth quarter was $43 million, a decline of 10% year-over-year reflecting the persistent challenges our clients face across our core markets. In these regions, severe pricing compression, competition from the illicit markets and elevated excise tax burdens continue to weigh on our clients' margins and marketing budgets, limiting their ability to spend on our platform. This dynamic was reflected in lower spend across our featured and deals listings, which tend to be more sensitive to shifts in marketing spend.

These conditions have driven contraction and consolidation across several of the industry's largest markets, particularly California and Michigan, where both total retail sales and average retail prices declined year-over-year throughout 2025.

We saw encouraging growth in newer markets such as New York and Ohio, where our teams prioritized client penetration as retailers come online in those states. While this growth did not offset the pressure in our more mature markets, we are pleased with the early momentum we have seen in these states.

As a result, full year revenue was $175 million compared to $185 million in 2024, representing a year-over-year decline of approximately 5%. Average paying clients in the fourth quarter were 5,120, down approximately 2% both year-over-year and sequentially, reflecting the consolidation in operator exits in the markets such as California, Michigan and Oklahoma, partially offset by growth in newer markets like in New York where our client count nearly doubled compared to the prior year. For the full year, average paying clients were 5,190, up 2% compared to 2024.

Average revenue per paying client for both the fourth quarter and the full year was approximately $2,800, down from prior year levels. This is attributed to lower spend from certain existing clients amid tighter marketing budgets as well as the addition of clients in newer markets who typically begin at lower initial spend levels. Against a softer revenue backdrop, we remain disciplined in managing our cost structure throughout the year.

Total operating expenses increased modestly by 2% to $174 million for the full year compared to $170 million in 2024, primarily due to certain nonrecurring items.

Full year sales and marketing and product development expenses declined by $2 million and $8 million, respectively, driven by lower headcount-related costs and reduced advertising spend following restructuring actions taken earlier in the year to optimize and refocus these teams. These reductions were more than offset by higher general and administrative expenses, which increased approximately $6 million year-over-year. This increase included a couple of onetime items, including a $2.3 million noncash loss contingency recorded in the second quarter related to a contractual obligation with our server provider, as well as a $2.8 million legal settlement disclosed as a subsequent event in our 2025 Form 10-K.

Additionally, in the fourth quarter, we recorded a noncash asset impairment charge of approximately $7.8 million, largely related to our goodwill assets. As a result, net income for the full year was $3 million. Despite our revenue decline year-over-year, our cost control efforts resulted in a non-GAAP adjusted EBITDA for the full year of $40 million compared to $43 million for 2024.

In the current industry environment, maintaining tight cost control enables us to navigate these challenges while preserving the flexibility to invest in key organic growth initiatives. Our operating model allows us to manage expenses and maintain profitability while self-funding operations and continuing to invest in the business.

Looking ahead, many of the industry dynamics that impacted our clients in 2025 have carried into the early part of this year and are expected to persist through 2026. As a result, we expect first quarter revenue to decline sequentially by mid- to high single digits from the fourth quarter. We plan to continue investing opportunistically across the business. And given the potential variability and the timing of these investments, we will not be providing adjusted EBITDA guidance for 2026. The company remains committed to preserving financial flexibility and disciplined capital allocation as we assess the opportunities ahead.

With that, I'll turn the call back to the operator.

Thank you. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Good afternoon, everyone and welcome to WM Technology, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to your host, Simon Yao, Director of Investor Relations.

Good afternoon and thank you for joining us to discuss our third quarter 2025 results. Today, we are joined by our CEO, Doug Francis; and our CFO, Susan Echard.

By now, everyone should 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 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 our SEC website and our Investor Relations website. We specifically disclaim any intent or obligation to update these forward-looking statements, except as required by law.

For the benefit of those who may be listening to the replay or archived webcast, this call was held on November 6, 2025. 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'll also discuss non-GAAP financial measures alongside 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 webcasted from our Investor Relations website and an audio replay will be available shortly.

With that, I will now turn it over to Doug.

Good afternoon, everyone and thank you for joining us today. Our third quarter revenue was in line with guidance. But when we look deeper into the data, we see that several key markets continue to feel the impact from price and margin compression. And in some cases, these issues appear to be worsening. For example, the average retail flower prices based on state published data are down roughly 9% year-over-year in California and more than 20% in Michigan. These headwinds have weighed on our client profitability and overall industry health, affecting all participants in the ecosystem, including spend on our platform while clients wait for the decline to bottom out.

Further, in some of these same markets, regulatory challenges and tax increases are magnifying the impact of these commercial forces. For instance, Michigan just added a wholesale excise tax of 24% on top of an existing 10% retail excise and 6% sales tax. This continues an unfortunate trend of elected officials viewing the cannabis industry as an unlimited revenue source to fill budget shortfalls despite the inevitable declines in market health caused by these policies. And while the state level battles weighed on, we have continued uncertainty at the federal level as we await clarity on the future of federal regulation of intoxicating hemp and for any progress on rescheduling cannabis. We expect that these combined market and regulatory pressures will culminate in a continued and perhaps accelerating industry consolidation, which forces us to reevaluate our client profile and how we can best provide value to our clients for the long term.

If the cannabis industry continues on its current trajectory, we think it may soon look like the beer industry with a handful of large conglomerates and many small artisan brands. In anticipation about the potential future, we are being increasingly selective with who we align ourselves with for the long term. In some cases, this means foregoing near-term revenue in order to improve our long-term prospects. But these changes, challenges and uncertainties also present potential opportunities. While we have been critical of the federal hemp loop hole and long expected federal action to close it, we seem to be at an inflection point. If Congress is not able to come up with a solution to outlaw or meaningfully regulate intoxicating hemp in the next 1 quarter or 2, we believe it will be viewed by the industry as de facto cannabis legalization. In that case, we stand ready to serve that market segment, which could present a substantial growth opportunity.

Similarly, while rescheduling of cannabis is unlikely to have an immediate impact on our business, such a significant move at the federal level might signal more substantial changes on the horizon that we are able to capitalize on by expanding the areas in which we can operate in a compliant fashion. Control what we can control has been our mantra for years now. There are many areas of the business where we see opportunity and have realized improvements. To that end, we are pleased with our performance in newer markets and seeing nice growth in both engagement and revenue, though currently not enough to offset losses from larger declining legacy markets. We have identified regions that we have deprioritized and now have the foundation, budget and bandwidth to get after, which includes international markets.

We continue to focus on developing our brands' offering to better align with the state of the industry. We must also continue our efforts for growth with MSOs and in the limited license states, which they have consolidated and dominated. If we succeed in these areas and continue our operational discipline, we will continue to build and add to our balance sheet, which remains a strong area for us. At the same time, we have our eyes on the horizon and are planning for how to take advantage of the many potential future states of the industry, some of which could begin to take shape soon as we move through this pivotal moment.

As we look ahead, our focus is on balancing near-term execution with long-term opportunity. The cannabis industry continues to evolve. And while timing around regulatory process remains uncertain, the underlying demand and consumer adoption trends remain strong. We believe this creates an opportunity for Weedmaps to play an even greater role in shaping how the legal cannabis economy operates. We're proud of the consistency of our execution and the resilience of our platform even in a challenging environment. None of this will be possible without our teams and partners who continue to deliver every day.

With that, I'll turn it over to Susan.

Thanks, Doug. Now turning to our Q3 financial performance. Revenue for the third quarter was $42.2 million, down 9% year-over-year, but in line with our expectations. The decline reflects continued softness across core markets, as Doug mentioned, where persistent pricing compression and margin pressure are weighing on clients' budgets and in turn, their spend on our platform. Revenue across all product categories declined year-over-year with the majority of the decrease driven by featured and deal listings with higher visibility placements that tend to be the first area clients scale back when budgets tighten.

Given these industry challenges, we are pleased to have met our expected revenue goals for the quarter. Average monthly paying clients increased 2% year-over-year to 5,221, up from 5,100 in the prior year period, reflecting continued client acquisition in developing markets, partially offset by churn in more mature states. Average monthly revenue per paying client was $2,693, down 12% year-over-year, primarily reflecting overall revenue softness and the mix shift towards newer clients that typically enter at lower spend levels. This dynamic underscores our strategic focus on client acquisition and retention, broadening the monetization base of our platform and laying the groundwork for future revenue expansion as these markets scale.

Turning to expenses. GAAP operating expenses, including cost of revenues, totaled $40.2 million for the quarter, a 3% decrease from the prior year period. The year-over-year reduction was driven primarily by lower personnel-related costs across sales and marketing and product development, reflecting the continued benefits of our prior reorganization efforts and disciplined expense management. These savings were partially offset by higher media spend and event activity to support client acquisition and engagement initiatives. Our ability to manage costs effectively amid a softer revenue environment enabled us to remain profitable for the quarter, delivering net income of $3.6 million and adjusted EBITDA of $7.6 million. Profitability reflects our continued focus on expense discipline and operational efficiency even as we selectively reinvest in areas that support long-term growth.

Turning to the balance sheet. We ended the quarter with $62.6 million in cash, up 39% year-over-year, with Q3 representing our ninth consecutive quarter of positive cash generation. We continue to operate with no debt, providing flexibility to navigate near-term market volatility while investing in strategic initiatives that enhance our platform and client value. Our share count across Class A and B common stock was 157.2 million as of September 30, 2025. A reconciliation of non-GAAP metrics to their nearest GAAP results as well as details of our share classes and share count methodology are provided in our earnings presentation posted on our Investor Relations website.

Looking ahead to the fourth quarter, we expect revenue of $41 million to $43 million and adjusted EBITDA of $5 million to $7 million. This outlook reflects ongoing pressure in several mature markets, coupled with planned investments across key initiatives, as we balance near-term profitability with positioning the business for future growth opportunities.

With that, I'll turn the call back to the operator.

Thank you, Susan. This concludes today's call. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to WM Technology, Inc. Second Quarter 2025 Earnings Call. [Operator Instructions]

I would now like to turn the call over to your host, Simon Yao, Director of Investor Relations. You may begin.

Good afternoon, and thank you for joining us to discuss our second quarter 2025 results. Today, we are joined by our CEO, Doug Francis; and our CFO, Susan Echard. By now, everyone should 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 uncertainties and risks, some of which are beyond our control. Our actual results could differ materially from expectations reflected in any forward-looking statement.

For a discussion of risks and other important factors that could affect our actual results, please refer to our SEC filings available on our SEC website and our Investor Relations website. We specifically disclaim any intent or obligation to update these forward-looking statements, except as required by law.

For the benefit of those who may be listening to the replay or archived webcast, this call was held on August 7, 2025. 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 alongside 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 webcasted from our Investor Relations website, and an audio replay will be available shortly.

With that, I will now turn it over to Doug.

Thanks, Simon, and thank you all for joining us today. I want to begin by thanking our team for their continued focus and resilience in what remains a challenging environment across the cannabis industry. When I returned to the company in a leadership role, we acknowledged that the challenges facing the industry weren't temporary or cyclical, they were structural. We need to let these forces play out, get the wins where we can and as I have said many times, play the long game.

Our balance sheet gets stronger each quarter, allowing us to move decisively on near-term opportunities as well as help us attune for the future state of our industry. Against that backdrop, we've stayed grounded in the fundamentals, executing consistently, operating efficiently and investing thoughtfully. That discipline has allowed us to remain focused on what we can control even as external headwinds persist.

Despite ongoing pressure in several of our key markets, which led to Q2 revenue landing slightly below our expectations, we delivered another consecutive quarter of adjusted EBITDA profitability and positive cash flow. That marks our 11th and eighth in a row, respectively, milestones that reflect the consistency and operational rigor we've maintained quarter-after-quarter.

Our performance through the first half of this year speaks to that mindset and has strengthened our position to continue investing behind our platform, particularly at a time when capital across the industry is scarce and many are focused on near-term survival.

Looking across the broader landscape, it's clear that these challenges persist and in some cases, are deepening. California's fragile industry recently had their excise tax increased to 19% of sales. Weedmaps has been lobbying alongside our clients there to push legislation to hopefully provide relief and freeze the tax at the prior level. Separately, the California legislator looks poised to pass a bill that regulates online cannabis marketplaces, which may impact how we monetize while increasing our risk and cost of doing business in the state.

Lastly, in Michigan and many of the other early states who come online with cannabis programs, price compression, consolidation, taxes, overregulation, lack of black market enforcement and the proliferation of intoxicating hemp make running a cannabis business incredibly difficult and expensive. Those expenses tighten margins and cash flows for cannabis businesses, which impacts our revenue opportunity. These difficulties are why you see larger players exiting these markets.

We will continue to work with our clients to help state and local governments see that the path to a successful cannabis industry is through reasonable, whole regulation, not impossibly burdensome over regulation and taxation. This fight will be ongoing. Specifically, you will see this revenue impact over the coming quarters.

Amid these challenges, we're encouraged by the progress we're seeing in emerging markets. In New York, for example, we've been onboarding clients at an accelerating pace and the majority of operational retailers in the state are now on our platform. As this market continues to take shape, achieving meaningful retail density on our marketplace will be critical to its health and success, and we're pleased with our early progress.

As we discussed last quarter, under the leadership of Sarah Griffis, our new CTO, we have made significant progress this year and have a slate of new products in the pipeline. Previously, I discussed vertical and horizontal expansion, and we are now working on new user-focused features and experiences as well. The company is energized, and we are excited about the coming quarters despite the many headwinds. We will discuss some of these new products over the coming months.

We have been in beta and will launch expanded premium placement opportunities for brands, which will be our focus over the coming quarters. The results so far are very promising, and we are hopeful the new revenue generated from these products will offset some of the revenue headwinds we may face in legacy markets over the coming quarters.

In the last few quarters, we said that we were considering opportunities to service the hemp market, and we had viewed hemp as a potential major product expansion area for us. While we are still working on the foundations of a hemp offering, we view the space as increasingly uncertain given some of the recent legislative activity on the federal and state level. As an example, Texas passed a bill that was an almost complete ban of intoxicating hemp that was vetoed by the governor and it is unclear whether an agreement on compromise will be reached in the current special legislative session. If there is no agreement, Texas will continue to have almost no regulations for intoxicating hemp products.

A similar back and forth has been happening in the U.S. Senate, where a broad intoxicating hemp ban was initially included in the agricultural funding bill and then stripped out entirely. Once we have line of sight on how this will play out, we will begin moving more aggressively towards launching our product offering for hemp.

We will be launching our new online head shop, [ Hedi ] in the near term and are currently working with our industry partners to merchandise and provide content for the platform. We are excited to showcase the many skilled glass artists across the country as well as help our users shop for the best brands in glass, devices and accessories.

We are also expanding our AI and ML teams and capabilities, specifically around the product data that powers our industry. Our industry lacks standardization across product catalogs, and our team is making great progress to becoming the key dataset for the industry. This is incredibly important to us, and we are laser-focused on entrenching our data and ML tools into our partners' tech stacks and Weedmaps platform.

We've come a long way and accomplished a great deal in the first half of the year, but we know there's still plenty of work ahead. We are finally reaching the level of internal scale that will allow us to increase our speed and deliver more products and initiatives through the rest of this year and into 2026. This remains a dynamic and evolving industry, and we're excited about the opportunities that lie in front of us as we continue to build for the long term.

With that, I'll now turn it over to Susan.

Thanks, Doug. Now turning to our Q2 financial performance. Revenue for the second quarter was $44.8 million, representing a decline of 2% from the prior year period. The slight year-over-year decline was primarily driven by lower revenue from our featured and deal listings products as ongoing market headwinds continue to pressure client margins and limit discretionary marketing spend. This decline was partially offset by an increase in display advertising revenue, reflecting our team's efforts to retain and reallocate our clients' marketing budget towards other ad solutions to diversify their spend and visibility across our platform.

Despite the ongoing challenges contributing to revenue softness, our team remains focused on the areas within our control, particularly driving client acquisition and retention across our marketplace. We increased our average monthly paying clients by 4% to 5,241, up from 5,045 in the prior year period, driven by new client acquisition in certain emerging markets such as New York and Ohio.

Average monthly revenue per paying client declined 6% to $2,852 compared to $3,033 a year ago. The decrease reflects a combination of reduced spend from existing clients in more mature markets and the onboarding of new clients at lower initial spend levels. We expect this metric to fluctuate going forward driven by these same dynamics.

Turning to our expenses. Our GAAP OpEx, which includes cost of revenues and depreciation and amortization, totaled $42.9 million for the second quarter, a decrease of approximately $1.8 million or 4% versus the prior year period. The decline was primarily driven by reduced spend across our digital advertising channels and lower personnel costs following recent restructurings within our sales and marketing and product development teams.

General and administrative expenses increased by approximately $2.2 million, largely due to a onetime noncash loss contingency related to a contractual purchase obligation with our server provider. This charge will be reassessed periodically and is added back in our calculation of non-GAAP adjusted EBITDA.

Despite the challenging revenue environment, our focus on cost and operational discipline enabled us to remain profitable, delivering Q2 net income of $2.2 million and non-GAAP adjusted EBITDA of $11.7 million, up 81% and 16%, respectively, from the prior year period.

Turning to the balance sheet. We ended the quarter with $59 million in cash, an increase of $5.7 million from the end of Q1, reflecting another quarter of strong cash generation. This marks our eighth consecutive quarter of cash growth, and we continue to operate with no debt, giving us flexibility to navigate near-term uncertainty while investing in long-term initiatives.

Our share count across Class A and B common stock was 156.5 million as of June 30, 2025. A reconciliation of non-GAAP metrics to their nearest GAAP results as well as the details of our share classes and share count calculation are provided in our earnings presentation posted on our Investor Relations website.

Turning to our financial outlook. Given current market conditions and continued softness in key markets, we expect third quarter revenue to be approximately $41 million to $43 million and non-GAAP adjusted EBITDA to be in the range of $5 million to $7 million as we opportunistically ramp investments to support future growth.

Amid ongoing market volatility, we remain focused on disciplined execution, sustaining profitability and positioning the business for long-term success.

With that, I'll turn the call back to the operator.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.