Cannabis advertising giant WM Technology (Nasdaq: MAPS), the parent company of dispensary finder website Weedmaps.com, is pivoting back to its roots, leadership said during an earnings call Thursday.
Weedmaps lost more than $82 million in 2022, but sizable chunk of that loss was a one-off hit. Company leadership points out that the “bulk” of a $61 million fourth-quarter loss was made up of one-time expenses related to a round of layoffs.
“It’s always darkest before the dawn,” Executive Chairman Doug Francis said after revealing that the company is pausing a search for a new CEO to replace Chris Beals – who stepped down suddenly in November – so as to focus completely on “driving profitable growth.”
“The cannabis industry is facing additional headwinds as we deal with over-regulation, the slow rollout of new licenses across the country, a lack of government support combined with high taxes from all levels of government, commoditization of cannabis products, frozen capital markets, limited access to banking, and a thriving black market,” Francis said, summarizing trends that have affected Weedmaps’ bottom line.
Francis and CFO Arden Lee emphasized that Weedmaps’ number of paying clients increased by 19% in 2022, so the takeaway for them was to cut costs and return to basics. That, they said, should lead to positive cash flow this year.
The main problem identified by Francis and Lee is broad economic pressure that has squeezed the wallets of cannabis companies that have traditionally paid top dollar to advertise on Weedmaps. As those clients slashed their spending, Weedmaps has seen a consistent decrease in revenue per client, even as the company broadened its footprint into new U.S. state markets.
“The issue that we’re having in this environment, as we talked about for the last few quarters, is that across our scaled markets, specifically California, Colorado, Oklahoma … (retail cannabis sales) continue to decline on a quarter-over-quarter basis,” Lee said. “If you look at the data year-to-date in 2023, so far, it’s been sequentially down for the better part of the Q1 to date.”
But, Lee added, “Outside of those three states, we’re seeing very healthy demand trends” among cannabis brands and shops that want Weedmaps’ services.
That, to him, means that all Weedmaps needs to do is put its head down and grind out its longstanding business approach to get its balance sheet back into the black.
“We’ve got our eyes focused specifically on those three states to just to get a read around client tone and health of our clients, because it’s still touch (and) go obviously in those three states, but outside of that it’s business as usual,” Lee said.
Lee also noted that Weedmaps is not planning any major investments in infrastructure or new services this year, but it will primarily focus on executing its existing model.
“(We) don’t anticipate significant investments to achieve our growth priorities,” Lee said, despite acknowledging that the company also expects that its clients will continue to perhaps pay less per month, as the overall economy continues to tighten.
Francis added that he wants to bolster Weedmaps’ traditional approach to useful content and industry intel for businesses, which he said has long been a core focus.
“We’re really developing our content, which we think will help in all markets. Weedmaps really used to really be the source of truth for the industry. And through our data integrations and bringing kind of the pros back around, that’s really our goal is to be the thought leader,” Francis said.
“The main takeaway that I’ve gotten from most (cannabis industry) folks is that, it’s tough.”