WM Technology Q3 2025 Earnings Call - Navigating Price Compression and Regulatory Headwinds Amid Industry Consolidation

Susan Echard, CFO, WM Technology: Good afternoon, everyone, and welcome to WM Technology Third Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode for the duration of the call. I would now like to hand the call over to your host, Simon Yao, Director of Investor Relations.

Simon Yao, Director of Investor Relations, WM Technology: 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 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. 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.

Doug Francis, CEO, WM Technology: Good afternoon, everyone, and thank you for joining us today. Our third-quarter revenue was in line with guidance. When we look deeper into the data, we see that several key markets continue to feel the impact from price and margin compression. 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. While the state-level battles rage 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. These changes, challenges, and uncertainties also present potential opportunities. While we have been critical of the federal hemp loophole 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 quarter or two, we believe it’ll 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 brand’s offering to better align with the state of the industry. We must also continue our efforts with growth with MSOs and in a limited license stage, 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 would be possible without our teams and partners who continue to deliver every day. With that, I’ll turn it over to Susan.

Susan Echard, CFO, WM Technology: 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 result, 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-$43 million and adjusted EBITDA of $5 million-$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.

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