Weedmaps Archives - Page 2 of 3 - Green Market Report

Debra BorchardtMay 4, 2022
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10min2270

Stifel analysts had some sobering thoughts on the cannabis industry in the company’s recent first-quarter outlook report. The most positive comments went to Weedmaps as the analysts wrote, “We believe WM Technology is currently the best positioned public cannabis company to capitalize on category growth, with the ability to lead growth with unmatched capital efficiency, with the shares continuing to undervalue our robust growth outlook.”

The analysts said that their long-term outlook remained robust, but the near-term challenges are significant: decelerating category growth, oversupply, outsized pressure on lower-income consumer spending, rising input cost inflation, and increased capital costs. The average cannabis stock is down 34.5% year-to-date versus the S&P 500 which is -13%. 

Silver Linings

On a positive note, Stifel wrote, “We estimate the 1Q22 North American regulated cannabis sales grew 10%. We estimate Cronos Group and WM Technology’s 1Q22 revenue growth will dramatically outperform the category (+86%, 35% respectfully).” Even though the analysts tweaked their estimates for 2022 U.S. state-licensed sales, they still believe it will grow to $27.2 billion, +13% year-over-year, down from the previous $28.6 billion estimates. The year is also off to a good start as they believe first-quarter U.S. state-licensed cannabis sales grew +8% with key Western markets declining in 1Q22. 

Weedmaps

Analyst W. Andrew carter is keeping his Buy rating on WM Technology, Inc. (NASDAQ: MAPS), but is cutting his price target to $10 per share. The analysts wrote, “Our outlook suggests WM Technology will showcase a differentiated growth profile profitably capitalizing on cannabis category growth while utilizing its significant capital advantage to expand the platform’s reach and evolve its comprehensive SaaS offering for cannabis operators. We estimate 28% CAGR revenue growth (FY21-FY23E) predicated on increasing penetration, growing wallet share, and participating in the growth of six key U.S. markets we estimate will grow to over $13 billion in 2023.” The actual numbers could be even better because the analysts don’t include a significant contribution from the Canadian adult-use market or new adult-use markets like New York and Connecticut. “We believe our outlook will prove conservative given the resources for advertising, product development, and M&A. We believe the current U.S. environment provides WM Technology the ability to enhance its platform and deepen its moat without competition from well-resourced technology companies, thereby enhancing the ability to capitalize on our $100 billion U.S. state licensed category estimate.”

Hydroponics Dry Up

The hydroponics business that showed so much promise has dried up for the time being. The analysts reduced their outlooks for both ScottsMiracle-Gro and Hydrofarm. “Our outlook now includes a deeper and longer hydroponics category recession with the category not resuming growth until 4Q22.” However, the two stocks still have buy ratings but lowered price targets. 

 

Scotts

The Scotts Miracle-Gro Company (SMG) now has a price target of $130 per share and was lately selling at $105. They wrote, “We believe the long-term earnings growth profile is dramatically undervalued. We believe this earnings growth will come into focus following F2Q22 earnings with our outlook suggesting 11% CAGR from the F2Q22 trough through FY24.”  On a positive note, Stifel said that the Hawthorne business is undervalued within the current structure with capital allocation increasingly inefficient and likely crowding out investors. “But we believe the company will be unable to execute a separation potentially unlocking value even as hydroponics category conditions improve given the investment behind RIV Capital (RIV-CNQ). We believe the investment behind RIV Capital is a mistake and will require additional commitments from ScottsMiracle-Gro. We believe a standalone Hawthorne would be unable to support continued investments. We believe RIV Capital’s anchor investment Etain was expensive, and we view the strategy outlined by RIV Capital as undifferentiated with the investment potentially driving concern/scrutiny from Hawthorne customers.”

Hydrofarm

Hydrofarm Holdings Group Inc. (HYFM) now has a price target of $13 per share, but was lately selling at $9.56. “We believe that Hydrofarm is between a rock and hard place in the current environment with the category leader actively touting increased promotion and hydroponics category conditions deteriorating. But Hydrofarm is not at the mercy of the current environment, and we believe Hydrofarm is positioned to emerge stronger for a reacceleration in category growth as supply normalizes while new state cannabis systems present more fulsome hydroponics category growth opportunities.”  Having said that the analysts think that the significant underperformance has pushed the shares to a level undervaluing the profit growth relative to peers in similar verticals. “We believe our outlook will prove conservative with enthusiasm likely to build for the platform’s earnings power as well as the ability to profitably capitalize on cannabis category growth.”

Bad Buzz

Stifel was pretty downbeat on Canopy Growth Corporation (WEED.CN). The analysts have a Sell rating on the company and a target price of C$6 per share. It was recently trading at C$7.82.  The report wrote, “Even with additional cost savings, our outlook underscores the growing risk with Canopy not able to satisfy its C$600 million convertible debt maturity in cash while maintaining its minimum liquidity requirement. We expect additional actions to complement the recent cost savings initiatives, but we believe there are no actions Canopy can take to drive the equity price higher with the core issue, the need to reaccelerate revenue growth, increasingly difficult. When Constellation invested C$5 billion into Canopy Growth, the platform enjoyed an unmatched capital advantage for capitalizing on cannabis sector growth; through mismanagement and poor stewardship, in our view, by Constellation Brands, Canopy Growth is now at the mercy of a difficult environment with non-Constellation investors bearing outsized risk.”

The other sell rating is reserved for Aurora Cannabis Inc. (ACB) with a lowered target price of C$3.00. “Our outlook suggests Aurora will not return to y/y revenue growth until 2H23. While our outlook for profitability conforms to the company’s guidance, the outlook is uninspiring with our estimates suggesting just C$10 million in FY24 EBITDA implying an EV/FY24E EBITDA multiple of over 80x. The company cash needs are manageable but ongoing, and the company has $329 million of convertible debt due in February 2024 that we believe the company will have to manage the balance sheet through additional equity issuances yielding additional dilution.”

In Closing

While some of the Stifel report is pretty downbeat, it really just seems like a reality check. Companies with mountains of debt coming due is certainly worth commenting on and if those companies don’t have growing revenue, then that’s a problem. The industry itself continues to grow which is why the analysts said the long-term outlook is good. It’s these near-term hurdles that some companies will be unable to jump.


Andrew WardApril 4, 2022
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9min2150

It’s a well-accepted anecdotal fact that cannabis and music go together. From the jazz clubs to the headbangers ball to underground hip hop shows and beyond, where there’s music playing, pot’s often being consumed. 

That long-lasting bond has recently come in handy for brands looking to connect with legal consumers. Federal regulations prohibit cannabis from online ads, forcing marketers and brands to ramp up creativity. In recent years, cannabis brands have become increasingly present at music festivals and concerts through sponsorships, activations and other consumer-facing endeavors.

“When executed correctly and compliantly, live event marketing collaborations can absolutely drive sales and brand awareness, as well as form lasting consumer relationships and promote brand loyalty,” said Andreas Neumann, Jushi Holdings Inc (OTCMKTS: JUSHF) (CNSX: JUSH) chief creative director and 2020 Grammy award winner for Best Album Package. 

While short on data, cannabis leaders say they’ve witnessed the potential in live events marketing and partnerships with cannabis-friendly artists. 

Live Event Marketing Grows In Cannabis

Like cannabis and its various medical claims, most seem to accept anecdotal feedback regarding the return on investment (ROI) for live event sponsorships. While additional findings would conclude the debate, most already agree on its efficacy.

“While legal cannabis is still a relatively young industry, the effectiveness of event marketing has been proven over and over in many other industries, including CPG,” said Glass House Brands Inc (OTCMKTS: GLASF) President Graham Farrar.

The uptick in cannabis at events has been noticeable, particularly in states with legalized adult-use and/or relaxed public consumption laws. 

“While we have more regulations to contend with, it doesn’t change the value that live events can bring,” said Farrar. 

Additional regulations, like bans on sales and onsite consumption, can prove detrimental, but brands have not let them thwart live music marketing endeavors. 

Associating With Live Acts Reportedly Pays Off

As cannabis becomes more widely accepted, its presence grows at significant live events. So much so that the plant is sometimes front and center. 

In October 2021, Eaze’s Grass Lands served as the hub for all things cannabis during the three-day Outside Lands Festival. Grass Lands came complete with its own stage and a three-day live music and comedy lineup. Event partners included Cookies, PAX, and Autumn Brands.

In January 2022, Veritas Fine Cannabis sponsored the 10th anniversary of the Winter on the Rocks concert held at Denver’s Red Rocks Amphitheater. Diplo and Talib Kweli headlined the event. Veritas’ featured onsite activations to improve the concert experience, including free shuttle rides and live paintings by artist Morgan Mandala.

“Live event marketing enables us to position ourselves in front of a new audience, as these events bring people from various backgrounds together,” said Veritas Marketing Director Jordan Plunkett. 

The company also offered dispensary workers exclusive perks, including a performance by funk band Lettuce, catered meals, and early access to new products. 

Taylor Saralli, the company’s presentation manager, noted that Veritas engages in various live events each year, including activations with electronic artist Pretty Lights and art exhibits from Meow Wolf. 

Saralli, who considers live music one of the company’s most effective marketing tools, added, “Live events allow us to interact with, celebrate and create genuine relationships with our consumers and the budtenders who sell our products.”

Plunkett noted positive results from the Red Rocks event, including over 5,000 new consumer signups, 5,700 unique website visits, approximately 12% increase in social media engagement and roughly 300 new social media followers.

Others are reporting the benefits of live events. Juanjo Feijoo, COO & CMO for WM Technology Inc (NASDAQ: MAPS), didn’t offer financial figures but noted that activation partners had seen increased numbers from live event activations.

He noted that a 2021 live event collaboration at the multi-day Aftershock Festival with Sacramento-based dispensary and delivery service KOLAS paid off immensely. Their endeavor, the Loud Lounge, allowed guests to kick back while waiting for delivery orders. 

Feijoo said sales boomed for KOLAS, resulting in “The equivalent of two or three weekends of orders for them.” He attributed the success to finding consumers in one collective event.

Thinking Beyond The Show

Opportunities exist beyond the venue, offering brands and performers ample opportunity to collaborate. 

One example includes the September 2021 partnership between Denver’s Seed & Smith and electronic artists Big Gigantic. The company featured strains chosen by the band as part of the release of the company’s DART pod system. The company reported seeing a worthwhile ROI from the deal.

“Having that name attached to the DART certainly influenced some purchasing,” said Robbie Wroblewski, director of community outreach for Seed & Smith. The company did not provide financial data to support its report.

 


Debra BorchardtFebruary 23, 2022
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4min1230

WM Technology, Inc. (Nasdaq: MAPS) announced its financial results for the fourth quarter ending December 31, 2021. Total revenue increased to $54.2 million, up 22% from the fourth quarter of 2020 or 39% in the U.S. (when adjusting the prior fourth quarter to exclude revenue associated with Canada-based retail operators who failed to provide valid license information and were subsequently removed from the Weedmaps marketplace). This beat the Yahoo Finance average estimate for sales of $51 million and was higher than the third quarter’s sales of $50 million.

The net income was $78.4 million versus $10.1 million from the prior-year period. However, the total operating expenses were $59  million so the quarter was still operating at a loss. The company benefited from a change in the fair value of a warrant liability to the tune of $82 million.

For the full year, total revenue increased to $193.1 million, up 19% from the prior year or 48% in the U.S. (when adjusting the prior year to exclude revenue associated with Canada-based retail operators who failed to provide valid license information and were subsequently removed from the Weedmaps marketplace). Net income was $152.2 million as compared to $38.8 million from the prior year.The basic and diluted net income per share was $0.53 based on 66.0 million and 66.3 million of Class A Common Stock weighted average shares outstanding, respectively. This also beat analyst estimates, which was for $0.04.

“Our fourth quarter performance was the largest quarterly revenue in our Company’s history at $54 million, which represents a 39% year-over-year growth in our U.S. business. Further, we added over 300 new paying clients during the fourth quarter and expanded our share of licensees in the U.S.,” said Chris Beals, CEO and Chairman of WM Technology. “We believe our growth in the current environment underscores the value we continue to deliver to our clients and is evidence of how they fundamentally understand the importance of Weedmaps to grow their businesses. I’m excited by the opportunities ahead of us in 2022. We will continue to drive deep client engagement, establish Weedmaps as the center of commerce for cannabis consumers and expand adoption of WM Business as we look to attack new markets. Finally, I’d like to thank all of the team members at WM Technology for their collective contribution to our growth.”

2022 Outlook

The outlook for the fiscal year ending December 31, 2022, is expected to be as follows:

  • Full year Revenue is estimated to be between $255 million and $265 million, which represents 32-37% growth, with first-quarter revenue between $54 million and $56 million, which represents 31-36% growth
  • Full year Adjusted EBITDA is estimated to be between $15 million and $20 million and includes the impact of approximately $30 million in planned investments related to initiatives for growth in fiscal year 2023 and beyond. Adjusted EBITDA margins for the first quarter are expected to be breakeven

StaffDecember 3, 2021
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2min1110

WM Technology, Inc. (Nasdaq: MAPS) filed a Form S-1 with the Securities and Exchange Commission on December 2, 2021 to register for resale shares of Class A common stock of the company previously issued as partial consideration for previously announced acquisitions that occurred in the fiscal third quarter of 2021. Weedmaps said it would not receive any proceeds from the sales of the shares.

In the third quarter Weedmaps bought MembersRSVP, LLC and Text Ripple, Inc. collectively known as “Sprout” and the equity interests of Transport Logistics Holding Company also known as Merry Go Jane (“Cannveya and Canncurrent”). As part of the deal, Weedmaps issued a total of 1,938,798 shares of Class A common stock to certain stakeholders of the counterparties to such transactions.

Back in June, Weedmaps combined with the SPAC Silver Spike Acquisition Corp. and became known as WMH and Silver Spike changed its name to WM Technology, Inc.

As a result of the Business Combination, holders of units of WMH will be able to exchange such Units, together with corresponding shares of Class V common stock of the company, for Class A common stock of the Company during Quarterly Exchange Notice Periods, the first of which begins on the third business day after the Company announces its Q4 FY21 earnings. The company though has not released a date for that announcement. After any such exchange, such holders would be able to sell their shares of Class A Common Stock.


Julie AitchesonNovember 16, 2021
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6min1050

This week Weedmaps (NASDAQ: MAPS) releases “Cannabis in America”, a first-of-its-kind data and insights report on the cannabis marketplace, industry trends, and cultural revelations. This report represents a major step forward in Weedmaps’ intention to become an essential resource of direct-from-consumer data for policy makers, business owners, and investors. The report highlights topics such as the impacts of the Coronavirus pandemic and social justice movement on the cannabis industry as well as a strong trend of cannabis category experimentation, among other topics. The report also highlights the continuing trend of legalization across the country and a corresponding market growth that shows no signs of slowing down.  

Millenial Consumption Increased 57%

“Cannabis in America” shows that cannabis consumers are using and ordering more cannabis than ever before, with more than half increasing their consumption since the start of the pandemic. Generation Z was a particular stand-out demographic, increasing their consumption 125% year-over-year with overall cannabis deliver increasing by 97%. Millennials increased their consumption of cannabis by 57% since the start of the pandemic, placing them just one percentage point behind Gen Zers in increased consumption since the WHO declared Coronavirus a pandemic in March 2020, with Generation X not far behind at 52%. But it’s not only who is consuming cannabis that is significant, but what is being consumed. Weedmaps’ data point to a belief among 47% of cannabis consumers that edibles are becoming more popular, with Vape pends and Topicals not far behind. Millennials appear to be driving demand for products across all categories with a slight preference for concentrates. 

As stigma around cannabis use continues to decrease, it is gaining a foothold in the daily lives of more and more Americans as well as the culture at large. According to the report, 72% of cannabis consumers say that everyone or almost everyone they know uses cannabis while more than half of cannabis non-consumers say they don’t mind members of their social circles using it. More than a quarter of those surveyed claim they would use cannabis in a workplace setting and a full 31% would use cannabis in a multigenerational social setting. 

The Weedmaps report does reveal a need for credible, consistent cannabis education as more than half of consumers get cannabis information from friends and family and 17% get cannabis information from celebrities or use cannabis or have cannabis businesses. While this helps reduce stigma and drive popularity, it does not always result in accurate, safe information about consumption. The need for education is reflected in another area of the study, which looks at a lack of understanding on behalf of non-consumers of how cannabis can impact their local communities. 39% say they are not sure how cannabis legalization laws may affect them personally while 61% say they are not sure what will happen once cannabis is legalized in their state.

Brand Loyalty

A strong trend of consumer brand loyalty may be accelerating growth, with more than 54% of consumers declaring loyalty to a favorite brand, nearly half of all consumers always buying branded products, and half of consumers believing that branded products offer the best results. 48% of consumers overall say they are creatures of habit and prefer to stick to what they are currently using, with a full 60% of baby boomers topping the list of those disinclined to experiment with new products or brands.

But it’s not just about the brand. The fight for social equity is a major concern for consumers, who are demanding that businesses address socioeconomic disparities within the cannabis industry. More than half of those surveyed believe that everyone should have access to opportunities in cannabis with an equal amount expressing the belief that increased equity stands to benefit everyone. Almost half expressed a desire to support women-owned cannabis businesses while nearly as many feel the same about minority-owned businesses. More than a third declared a desire to patronize LGBTQ+-owned businesses and 44% of consumers want to shop at veteran-owned businesses, reflecting an overall trend towards diversification. Weedmaps’ report does show a disconnect, however, between what people are saying they want and what they are willing to support, with only 27% stating support for social equity programs. With 2021 nearly in the rearview mirror and the uncertainties of 2022 looming ahead, analyses such as this that highlight the complexities and contradictions of consumer behavior play a key role in learning for the past and preparing for the future.

 


StaffNovember 11, 2021
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4min1530

WM Technology, Inc. (Nasdaq: MAPS) announced its financial results for the third quarter ended September 30, 2021. Revenue for WeedMaps increased to $50.9 million, up 9% from the third quarter of 2020 or 46% in the U.S. (when adjusting the prior third quarter to exclude revenue associated with Canada-based retail operators who failed to provide valid license information and were subsequently removed from the Weedmaps marketplace). Net income was $49.2 million as compared to $15.5 million from the prior year period.

The adjusted EBITDA was $10.4 million as compared to $16.5 million from the prior year period. Basic net income per share was $0.32 based on 64.2 million of Class A Common Stock weighted average shares outstanding. Diluted net income per share was $0.02 based on 68.3 million Class A Common Stock weighted average diluted shares outstanding.

“Our third quarter results reflect the momentum we are seeing as we focus on executing and investing against our growth opportunities. We achieved revenue growth in the U.S. of 46% year-over-year, maintained healthy EBITDA profitability and also had double-digit year-over-year growth across a number of our key metrics. Our ability to outpace our end-market growth is especially notable given the challenges many of our clients faced given what we believe is accelerating consumer demand shifts to non-licensed channels,” said Chris Beals, CEO and Chairman of WM Technology. “Additionally, we continue to accelerate investment in both organic and inorganic growth in our platform during the third quarter as we look towards 2022. In addition to the acquisition of Sprout announced in mid-September, we also acquired the parent company to Cannveya and CannCurrent. These acquisitions complement the suite of integrated solutions we provide through our WM Business offering that help both large and small clients. We are very excited to welcome each of these teams and technology to the WM Technology family and are more excited than ever at the near and long-term opportunity for WM Technology.”

The company also forecast that revenue is estimated to be between $50 million and $52 million in the fourth quarter and adjusted EBITDA is estimated to be between $3 million and $5 million.

Users Grow

Monthly active users increased to 13.9 million on September 30, 2021, or 37% compared to the prior-year period (or 28% when adjusting the current period to exclude the MAUs attributed to the Learn section of weedmaps.com that we were not able to track during the prior period). Average monthly revenue per paying client increased to $3,817 or 7% compared to the prior-year period (or 18% when excluding revenue from Canada-based retail operators who failed to provide valid license information from the prior year period). Average monthly paying clients(1)(4) increased to 4,444 or 2% compared to the prior year period (or increased 24% when excluding Canada-based retail operators who failed to provide valid license information from the prior-year period).

 

 


Debra BorchardtSeptember 14, 2021
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4min1430

WM Technology, Inc., better known as Weedmaps  (Nasdaq: MAPS) is buying Sprout, a leading, cloud-based CRM & marketing platform for the cannabis industry. Weedmaps did not disclose the valuation of the deal. Sprout is a cannabis CRM and marketing software platform used by dispensaries and cannabis brands across the United States, Canada, and Puerto Rico. Sprout’s cannabis CRM platform includes an entire suite of omnichannel marketing solutions including customer relationship management, text & email marketing, loyalty, mobile wallets, QR codes, mobile surveys, mobile coupons, advanced customer segmenting, and analytics.

“Our strategy focuses on establishing WM Business as the software solution of choice for cannabis businesses. With the addition of Sprout, we are one step closer to realizing this vision of providing an all-in-one seamless and integrated solution to run, manage, and grow one’s cannabis business,” said Chris Beals, CEO and Chairman of WM Technology, Inc. “This acquisition will allow our clients to better target, reach, acquire and retain customers at scale. I also want to welcome Jaret Christopher, Sprout’s exceptionally talented Founder and CEO, and everyone at Sprout to our team.”

WM Technology says its acquisition of Sprout reinforces the company’s end-to-end operating system as one of the most comprehensive software solutions available in the cannabis market today. WM Technology’s acquisition of Sprout will strengthen the company’s position between retailers and consumers in the legal cannabis industry.

“We’re incredibly excited to join WM Technology. We look forward to leveraging the breadth and scale of users, retailers and brands on the Weedmaps marketplace to accelerate the reach of Sprout as part of WM Business,” said Jaret Christopher, Founder and CEO of Sprout.

Sports Deal

Last month, Weedmaps announced a multi-year agreement with Kevin Durant and Thirty Five Ventures as well as a sponsorship deal with Boardroom. Weedmaps will become an official sponsor of Thirty Five Ventures’ sports business media network, Boardroom, as part of the agreement. In addition to its sponsorship agreement, Boardroom will collaborate with Weedmaps to produce an original content series, which is tentatively slated for debut in 2022. The multi-year agreement also comprises ongoing integrations with Boardroom, including: Out of Office podcast, development and distribution of original content, co-branded collaborations and events, exclusive merchandise, and more.

“As the largest technology provider in the sector, we are serious about our responsibility to lead the national discussion around cannabis and the need for cannabis regulations to be updated across the board,” said Chris Beals, Chief Executive Officer of Weedmaps. “This partnership with Kevin Durant, Rich Kleiman, and the team at Thirty Five Ventures is a pivotal step forward in our ongoing efforts to break down stigmas surrounding cannabis, especially in the sports industry.”


StaffAugust 12, 2021
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4min1810

WM Technology, Inc.  (Nasdaq: MAPS) announced its financial results for the second quarter ending June 30, 2021. Revenue increased to $46.9 million, up 21% from the second quarter of 2020 or 55% when adjusting the prior second quarter to exclude revenue associated with Canada-based retail operators who failed to provide valid license information and were subsequently removed from Weedmaps marketplace.

WeedMaps reported a net income of $16.8 million versus $9.4 million from the prior-year period. Adjusted EBITDA was $8.5 million as compared to $10.4 million from the prior year period. Basic net income per share was $0.07 based on 63.7 million of Class A Common Stock weighted average shares outstanding. Diluted net loss per share was $(0.17) based on 71.3 million Class A Common Stock weighted average diluted shares outstanding. Cash totaled $91.7 million as of June 30, 2021.

“Our second-quarter results and momentum are evidence of the opportunities we have across our end-markets. We saw strong growth in both users accessing the Weedmaps marketplace, and clients leveraging our WM Business software offering within our U.S. end-markets. The growth in client monetization we are driving versus a year ago is evidence of WM Technology’s value proposition to our clients as they seek to grow their businesses compliantly and access hard-to-reach users. We have also seen positive developments with the pace of license issuance within our existing end-markets and the pace of new states passing regulations for adult-use,” said Chris Beals, CEO, and Chairman of WM Technology. “While we are proud of these results, we remain focused on executing against our plans to establish the Weedmaps marketplace as the center of commerce for cannabis consumers and WM Business as the software solution of choice for cannabis businesses.”

Users Increase

Weedmaps said that monthly active users (“MAUs”) increased to 12.3 million at the end of June or 75% compared to the prior-year period (or 56% when adjusting the current period to exclude the MAUs attributed to the Learn section of weedmaps.com that we were not able to track during the prior period). Average monthly revenue per paying client increased to $3,706 or 24% compared to the prior-year period (or 21% when excluding revenue from Canada-based retail operators who failed to provide valid license information from the prior-year period). Average monthly paying clients decreased to 4,221 or (2)% compared to the prior-year period (or increased 28% when excluding Canada-based retail operators who failed to provide valid license information from the prior-year period).

Arden Lee, WM Technology’s CFO, added, “Our $47 million in second quarter revenue represents a 55% increase over the second quarter of last year, when adjusting the second quarter of last year to exclude revenue associated with Canada-based retail operators who failed to provide valid license information and were removed from the Weedmaps marketplace during the second half of 2020. Our results reflect double-digit year-over-year increases in both Average Monthly Revenue per Paying Client and Average Monthly Paying Clients using WM Business within our U.S. end-markets. We are investing heavily on multiple product-driven growth opportunities and new market openings for 2022 and beyond, while capitalizing on solid operating momentum across our existing end-markets. We continue to expect total revenue and adjusted EBITDA of $205 million and $50 million for 2021, consistent with our prior guidance.”


Debra BorchardtDecember 14, 2020
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20min1120

This interview has been slightly edited for grammatical purposes.

Green Market Report Editor-in-Chief Debra Borchardt:  

So first, congratulations. That’s quite a feat to have pulled off this year. Certainly, SPACs have been the way to go. Most of the deals in cannabis this year have been with the public companies, not so much on the private side. So, kudos to you guys for doing that.

Weedmaps CEO Chris Beals:                         Thank you.

Green Market Report:   I had a question regarding your numbers in 2019 versus your numbers in 2020. It seemed your net income really dropped in 2019 and then it bounced back in 2020. And I was curious what you did to make that happen?

Chris Beals:                         So, we’ve gone through a cyclical approach to investment, just with building out this “business in a box” in sort of the tech platform. Keep in mind, we’ve essentially built this entire operating system in the last three years. Two things underpin that. One was that I believed in embarking on this strategy that we’ve seen increased economies of scale. So, we’d be able to launch successive pieces of software more cheaply because we’d increasingly be able to rely on parts of the sort of a software layer where the data normalization work we were doing to preceding pieces. But the other is we’d be able to lower our cost of acquisition or our cost of adoption by doing things like having self- onboarding occur and that sort of thing. One of the things that we’ve done is we go through successive waves of investment. So, we’ll invest heavily in building out the next suite of the platform and then work to make sure that we have adoption in product markets before we cycle forward. We also, periodically, we’ll have some heavier investment periods when we see the market’s open and given that the last few years from a macro view has been a bit muted in terms of the rapid expansion most people expected.

Green Market Report:   Back in 2019 you guys had some negative headlines about listing dispensaries that weren’t licensed and then you started 2020 on a mission to eradicate those unlicensed operators from Weedmaps. Is that complete?

Chris Beals:                         Not only is it complete, what we’ve done is something that frankly, I don’t think there’s any other sort of marketplace I’ve seen out there do it, which is we’ve been rolling out sort of this enhanced verification process for businesses that want to be on the site as opposed to say what you see with the Googles (NASDAQ: GOOGL) and others of the world relying on their section 230 defense and that sort of thing. In part, I think that’s a natural extension of the amount of work we do on the policy side that we build into sort of our software compliance stack. It’s all part of the same cycle, but yeah, so we have that enhanced verification with the marketplace side, but also that same sort of enhanced verification exists for businesses using the WM business.

Green Market Report:   Looking at the revenue, your revenue estimates from ’21 to ’22, you jumped from $205 million to $300 million, and then ’22 to ’23, you estimate a jump, another pretty big jump, from $300 million to $440 million. What is going to get you there? Because granted your previous increases have been pretty respectable, but they seem like they’ve been a little more consistent in the size. And then all of a sudden we have these huge jumps, but then you also say within your investor presentation that you’re not really relying on new markets. So, what’s going to be behind that big jump from ’21 to ’22? To me, it would seem like it would be reliant on these new markets, but you’ve said that you’re not really baking that in.

Chris Beals:                         So, we’ve driven over the last five years a 40% CAGR. And as you look on the go forward, that’s essentially a carry forward of that 40% CAGR. Although we have a large and very effective policy team, a lot of that allows us to build this compliance by design, and with the WM business suite, we typically sort of on the go forward look, take a fairly conservative view in terms of our estimates when markets will open, maybe aggressively conservative. Given what happened in this last election, but separately, we can’t have our go-forward projections be sort of reliant on the vagueries being exactly when a certain market opens. So, we built in the conservatism for that reason.

In terms of the “go-forward” what you see on the go forward is actually a continuation of that roughly 40% growth rate we’ve historically had. The other thing that’s worth noting is on the marketplace side, not only the largest and sort of most effective marketplace for cannabis, we also have a dominant position in terms of actual cannabis’ rivals. And so, a lot of us don’t realize this, but people who consume cannabis once a month or more are less than 10% of the population we’d estimate. When you look across the Weedmaps marketplace user base, over 90% of those users consume monthly. In fact, over 70% consume daily. And so, the thing that’s interesting is we’re actually right now by far the cheapest way for cannabis businesses to reach consumers, but we’re also the most effective once they do reach them.

We have about a 50 cent cost per click, which is a fraction of what it would cost to go out and try and aggregate demand on generalized platforms or out of the home. Separately, we’re driving an almost 15% conversion rate across our platforms and at best, you’re looking at likely a low single-digit conversion rate on the sort of any other platform, not to mention the fact that getting to these consumers is incredibly valuable. You sort of go out and sort of try and attract demand in a generalized sense. 90 to 95 cents on every dollar you spend are effectively wasted because you’re not actually hitting a cannabis consumer.

Separately, on the WM business suite, we offer this entire operating system for retailers for $500 a month. It offers a huge amount of benefits from a compliance and operational efficiency you’d bring because those pieces link together, but separately, if a business were to go out and buy those pieces individually, it would cost several times that. And so, as we look at the go forward, obviously, I think there’s the ability to sort of think about monetization more on the business in a box, that SAS suite, but separately, over 40% of our headcount is engineering, product, and design. We have a zesty roadmap of new products, new features that we expect to bring on and be able to monetize. So, I would say that if you look at that go forward growth if you’re just looking at the steady-state of where the markets are right now, I guess the easiest way to analogize it is there’s a lot of room for growth within existing markets, just on that base level.

Green Market Report:   NASDAQ recently announced its desire to have the companies that list on their marketplace to have diversity in the board and looking at Silver Spike and Weedmaps, it’s just a bunch of white men. Are there any plans for the board to have any females?

Chris Beals:                         Absolutely. Diversity is really a core part of Weedmaps and what we strive to do. Look, I think it’s always an area that companies can improve in and I would say we’re no exception. It’s something that we’ve actually made a focus internally. Separately, in terms of board composition, we absolutely care about having a diverse board. And that was something we would do regardless of the changes or whenever the NASDAQ comes out.

Green Market Report:   Well, that could have maybe happened before. Any acquisition plans?

Chris Beals:                         Keep in mind, just one note on that actually, it’s a closely held LLC. Part of this transition will be forming a new board.

Green Market Report:   Got it.

Chris Beals:                         And that’s part of the merger process.

Green Market Report:   Are there acquisitions planned? It looked like most of the proceeds were planned for just like more tech and an expansion of the tech that’s existing. I didn’t really see that there were any plans for acquisition, so I was just curious if that was part of the mix?

Chris Beals:                         Yeah. We always want to ensure that we have dry powder for acquisitions. I think we are a company that’s looking sort of out further, but I would say one thing that sometimes weighs against that is sort of the continued efficiencies we’ve been able to drive on sort of our internal development efforts and separately as a company ethos, we’re very sort of ROI focused on our investments, whether that be internal initiatives or potential M and A. But that’s something we keep track of, but nothing sort of specific planned.

Green Market Report:   Along the line of the board member question, what Weedmaps has done with regards to any kind of social equity or social justice types of movement. Is that something that you guys are engaging in?

Chris Beals:                         Actually, it’s a pretty core mission. Weedmaps’ mission is to power a diverse and inclusive cannabis industry. We actually launched something called the WM Teal (Together for Equity Access and Legislation) and that was basically a social equity support program that we launched late last year, which was basically intended to give free software, support, consulting services and to help these businesses participate. Separately through our policy team, we actually wrote a lot of the initial draft language on social equity programs and have been big advocates for actually having social equity programs within jurisdictions that are opening up. We’ve worked closely, for instance, with the NAACP and other groups in New Jersey in advocating for that.

I think, yeah, there is a lot we’re doing in this space. I think part of it is the support of folks who get licenses and unfortunately, a lot of these social equity programs have been too slow to roll out, but the other part is advocating. And this is something we’ve been doing for some time and writing white papers and this mock language on, sort of a model legislative language on, which is trying to get more jurisdictions to implement social equity programs or to actually have that opportunity as well as encouraging jurisdictions to realize that starting up a cannabis business is incredibly expensive between the fees, the licensing, but then the sort of sheer rigor of these compliance regulations where we’re really regulating cannabis like it’s a radioactive substance. And so, encouraging state and local governments to think about things like grants or sort of loan forgiveness programs or things like that because you can have the programs, we can give the software, we can give all these enablement tools, but ultimately, raw capital is, unfortunately, sometimes feels like a must in this industry just because of sort of how we’re regulated for this.

Green Market Report:   So, looking at your revenue numbers, they were pretty solid. You consistently, as you noted, grew your revenues. Why go public? Because going public is certainly not, as I’m sure you’re finding out, the end all and be all. You got special accountants, you’ve got to have so many things that you’re doing with regards to the compliance and then, of course, reporting every quarter to your shareholders. Why go that route? Why not just stay private?

Chris Beals:                         We have a pretty seasoned executive team and we have folks who are fairly familiar with the rigors of the process and yeah, we would not disagree with you that there’s a lot of increased work and rigor. Look, I was a former life scientist and tech transactions attorney, I’m, yes, very familiar with it. I think for us, it’s a couple of things. I think one, being the first sort of tech company at this valuation you got at NASDAQ, in and of itself I think has a frankly, sort of these positive externalities in terms of raising the profile of the company and also enabling us to do successive transactions more easily, to have a public currency that we can utilize if we’re going to go about and do M and A, but then the other part of it is, is that this was frankly, a very effective way for us to raise capital, but also bring, given the fact that we’ve essentially been a bootstrap company for our entire history, to bring bellwether investor groups in and to support the story and grow.

I know it sounds a bit cliche, but I think one of the toughest things about doing what we do, doing this very regulatorily intensive software stack, working on this marketplace, which frankly, wouldn’t have transactability without us doing a bunch of machine learning and data normalization and building the wrong product catalogs that actually underpin these listings so that when you click on an individual menu listing, there’s information that enables a consumer to transact. These are really complex things where we’re doing things like machine learning and that sort of thing. And I think by bringing these investors around the table, I think it highlights and it is a sign of recognition of, I think, just how tough what we’re doing is and sort of, I think, how future says, we’ve been in our approach.

Green Market Report:   Have you had any pushback from NASDAQ? Because I know that NASDAQ folks are not very friendly towards the cannabis companies. They’ve certainly not shown a desire to really work with them very much. And while Greenlane and Akerna and a couple more have managed to get in the door, have you felt any pressure from them with regards to any of the marketplace transactions that you would be engaged in selling cannabis?

Chris Beals:                         A couple of things to note there. We’ve had a very cordial and open dialogue because as you can imagine, they want to understand that this is a compliant company and then how we operate. I think the thing here that’s really important to note is we provide SAAS software on a licensing fee basis and then we provide the sort of broader consumer reach things. We don’t do anything that is involved in a cannabis transaction. We don’t enable payments for cannabis transactions, we don’t take Visa on cannabis transactions, anything like that. And so, I think part of what underpins, and look, we take a fairly conservative approach from a compliance view, so it’s one of the ancillary benefits of having a large compliance and policy team for building the software we build, is they also give you advice on sort of everything else.

We as a company, keep a very conservative path from a compliance view and I think that’s something that NASDAQ understood and took comfort in, but there’s a lot of intentionality there. And look, undoubtedly, there are definitely opportunities for us. In fact, I think frankly, very large opportunities exist when federal legalization or something like federal banking, like when the Safe Banking Act passes and we simply don’t or won’t, or can’t do now because of that compliance first mindset.

 


Debra BorchardtDecember 10, 2020
Weedmap.jpg?fit=1024%2C576&ssl=1

4min1460

WM Holding Company, LLC, better known as Weedmaps, and Silver Spike Acquisition Corp. (Nasdaq: SSPK), a publicly-traded special purpose acquisition company, announced today a definitive agreement for a business combination that would result in WMH becoming a public company that would remain on the NASDAQ marketplace. The estimated post-transaction equity value of the combined company is approximately $1.5 billion and provides up to $575 million of gross proceeds through the approximately $250 million of cash held-in-trust by Silver Spike Acquisition Corp. and a fully-committed common stock PIPE of $325 million

The combined company will be led by Chris Beals, Chief Executive Officer of WMH. Weedmaps was founded in 2008 as an online listings marketplace for cannabis consumers and businesses. The company solely provides software and other technology solutions and is non-plant touching, which makes it NASDAQ friendly. WMH has grown revenue at a CAGR of 40% over the last five years and is on track to deliver $160 million in revenue and $35 million in EBITDA for 2020.

The company said in a statement that as a result of outsized demand, the PIPE offering was significantly oversubscribed and upsized, including investment from funds managed by AFV Partners, the Federated Hermes Kaufmann Funds and Senvest Management LLC along with a $35 million commitment from Silver Spike Capital. WM Holding’s executive officers will retain 100% of their equity in the combined company, which will have approximately $100 million of cash on hand after closing

SaaS Business

Many cannabis consumers are familiar with the business location tool the company is mostly known for. There are over 10 million monthly active users and 18,000 business listings across the U.S.. The maps give customers information about retailers and product availability. In addition to the consumer facing product, Weedmaps also has a cloud-based WM Business SaaS subscription offering that provides cannabis retailers with an end-to-end operating system to access valuable users, grow sales and scale their businesses at a compelling return-on-spend.

Th company describes this “business-in-a-box” functionality that ranges from integrations supporting product menus that have online order-ahead, delivery order fulfillment software, data & analytics, a point-of-sale solution and a wholesale marketplace. “WMH has been investing in and optimizing its WM Business software solution to also facilitate compliance for businesses amidst the complex, disparate and constantly evolving regulations governing the cannabis industry. Underlying this compliance functionality is a proprietary and sophisticated rules engine that is a core underpinning of the WM Business SaaS platform.”

Illegal Operator Issue

Weedmaps came under fire in 2019 for listing unlicensed dispensaries and began 2020 in an effort to remove those listings. That was after California regulators sent a cease and desist order to the company to stop advertising illegal operations. At the time, Weedmaps President Christopher Beals defended the company’s decision to run the ads,  saying that Weedmaps was  “showing the same information that Google and Yelp and Craigslist and 30 other websites are showing.” Then Weedmaps’ main competitor Leafly decided to no longer support illegal dispensary ads putting pressure on Weedmaps to comply.

 


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