🎙️ Podcast: WM Technology – CEO, Chris Beals
Q1 2022 earnings, M&A (Enlighten), policy, brands, dispensary density, specialty retail, interstate commerce, and more..
Chris Beals, CEO, WM Technology. Chris oversees all aspects of WM Technology’s business and is also a member of the company’s board of directors. Prior to becoming CEO, Chris was WM Technology’s President and General Counsel. Previously, Chris was with Colbeck Capital, Deutsche Telekom, Covington & Burling and Davis Polk.
WM Policy also regularly publishes research that covers some of the topic we discussed. Definitely check out “Minimizing the Illicit Market for Cannabis” that was published in April 2021.
Q1 2022 Results
Revenue increased to $57.5M, up 40% Y/Y
Monthly active users (MAUs) increased to 16.4M, up 52% Y/Y, MAU growth of 73% when adjusting the current period to exclude the MAUs attributed to the Learn section of weedmaps.com that were not trackable
Average monthly revenue per paying client of $3,810, up 9% Y/Y
Average monthly paying clients increased to 5,026, up 28% Y/Y
Gross Profit of $53.7M (93% gross margin), a 200bps margin reduction Y/Y given previously discussed growth investments and initiatives
Net loss was $(31.2M) vs $7.7M Y/Y from the prior year period
Adjusted EBITDA was $(1.0M) vs $9.0M Y/Y from the prior year period
Basic and diluted net loss per share was $(0.19)
Cash totaled $55.9M and the Company remains debt-free
Q2 2022 Guidance: $60–63M Revenue (28-34% Y/Y growth) and BE/Slightly Positive Adjusted EBITDAA
M&A. WM Technology recently completed the acquisition of Enlighten, which offers a SmartHub subscription that powers in-store digital menus and kiosks, and its AdSuite in-store digital solution allows brands to reach consumers at the point of purchase. Enlighten adds to the value included in the WM Business platform. WM Technology acquired Sprout, a cloud-based CRM & marketing platform for the cannabis industry in September 2021. Sprout empowers cannabis retailers to acquire new customers, retain existing ones and grow revenues. Sprout’s purpose-built, omni-channel software platform combines all-in-one CRM and marketing, third party integrations, a robust targeted messaging system across text, email and in-app, a loyalty program, compliance modules, and analytics.
Chris and Jeremy Jacobs (Enlighten CEO) spoke about the acquisition with Benzinga:
Agnostic to Consolidation in the Cannabis Industry. Consolidation in the Cannabis space is a positive for WM Technology as MSOs look for a one-stop shop for their technology needs that moves compliantly across state lines. More important to the growth of WM Technology is lowering the number of illicit operators. Chris points out that oligopolistic markets are not great for the company as the illicit market will make up 90-95% of total market.
Dispensary Density. Increasing licensure has the biggest impact on reducing the illicit markets. Based on WM Technology result using data plots and correlation rates, WM Technology has recommended that a ratio of at least 1 dispensary for every 10,000 people. This doesn’t apply to the store closures happening in Canada because they are limited in the availability of products because Ontario Liquor chooses the SKUs that dispensaries have to buy from, preventing stores from differentiate on quality, selection or pricing.
Brands. Chris believes that brands comes down to two things: 1) brand recall and 2) ability to recall brand characteristics/values (which he did really well with Cann). He believes brands are still in the early days of trying to educate consumers on product benefits (i.e. brands are still trying to convey product benefits beyond THC %, clinical effects).
Specialty Retail. Chris believes that we will start to see MSOs start to divest parts of their business and focus on certain parts of the supply chain as they’re not seeing the economies of scale/central office unification that made the roll-up play prevalent in Cannabis M&A. Structurally, specialty goods get sold in specialty stores (ex. tires sold in specialty tire stores. Note: automotive tires is a $100B+ market that’s expected to reach $120B by 2026, growing at a 3% CAGR that’s fairly consolidated—dominated by Bridgestone, Continental, Goodyear, Michelin, Pirelli). The time to sell in store is long enough that retailers do not want to comingle multiple complex goods.
Interstate Commerce. State-by-state, vertically-integrated markets are here to stay because States want to protect their interests. Cannabis lobbying organizations have become strong and are intent to protect the economic value that their cannabis license holders currently possess.
👋 The Highly Objective Podcast is hosted by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors.. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment. The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party. The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.