Leafly Q2 Revenue Increases 6% Sequentially to $12.1 Million

Leafly Holdings, Inc. Reports Second Quarter 2022 Financial Results

• Delivered 13.8% revenue growth and 19% ending retail account growth over Q2 2021
• 100% of all legal dispensaries in New Jersey on the Leafly platform in Q2

SEATTLE, August 11, 2022–(BUSINESS WIRE)–Leafly Holdings, Inc. (“Leafly” or “the Company”) (NASDAQ: LFLY), a leading online cannabis discovery marketplace and resource for cannabis consumers, today announced financial results for its second quarter ended June 30, 2022.

“Revenue in the quarter was $12.1 million, up 13.8% over Q2 last year, and up 5.5% over Q1 as we continue to build on the investments we’ve made in the first half of this year,” said Yoko Miyashita, CEO of Leafly.

We released several new enhancements that drive consumer engagement and differentiation. In addition, we’re also bringing more tools, greater flexibility and reduced friction to retailers and brands, creating a seamless experience between consumers and our supply partners.

Yoko Miyashita, CEO of Leafly

Our investments to-date have positioned us for long-term growth as the industry continues to evolve at a rapid pace, leaving significant opportunity in our path. Despite the uncertainties of the current macro-economic environment we remain committed to maximizing efficiencies and prioritizing projects that will result in the highest returns.

Second Quarter 2022 Financial Results

• Total revenue was $12.1 million, up 13.8% over Q2 2021 driven by growth in retailer and brand revenues
• Gross margin was 88.0%, compared to 88.5% in Q2 2021
• Total operating expense was $19.5 million, up 83.9% over $10.6 million in Q2 2021, and included investments in platform, product development and sales and marketing to position the business for long-term growth
• Net Income was $14.8 million, and included $24.4 million of gains on derivative liabilities, compared to net loss of $1.3 million in Q2 2021
• Adjusted EBITDA loss was $8.4 million, compared to adjusted EBITDA loss of $0.8 million in Q2 2021
• Ended the quarter with $35.4 million of cash and $31.9 million of restricted cash. Effective August 1, 2022, holders of the forward share purchase agreements exercised their options to have the Company repurchase all of their remaining shares underlying the agreements, for a total purchase price of approximately $31.7 million.

Reconciliations of GAAP to non-GAAP financial measures have been provided in the tables included in this release.

“We made progress in the quarter on our long-term objectives. Concurrently, we have encountered challenges in our less mature markets and seen signs that customers are more cautious with their ad budgets,” said Suresh Krishnaswamy, CFO of Leafly. “We remain focused on our execution and managing our expenses carefully.”

Key Performance Metrics

• Year over year, ending retail accounts grew, and ARPA declined, as a result of Leafly’s strategy to lower entry point subscription fees in order to rapidly expand in lower penetrated markets.
• Quarter over quarter, ending retail accounts was impacted by higher than historical average churn levels in markets where the competitive marketplace dynamics have yet to fully develop.
• MAUs increased quarter over quarter, highlighting the strength of news and learn content, technical improvements to SEO and the Company’s expertise in the cannabis category. In Q2 2021, MAUs reflected an increase in user traffic primarily as a result of the pandemic.

Business Highlights

• Q2 2022 revenue from retail accounts was $9.1 million, up 11.3% over Q2 2021, reflecting increased advertising spend from retailers.
• In Q2, all licensed dispensaries in New Jersey subscribed to the Leafly platform and published their menus, giving residents a single platform to shop the menus of every legal dispensary in the state. In many cases, residents can place an online order for in-store pickup.
• Released improvements and enhancements to Leafly’s retailer dashboard, giving retailers robust features to help them make informed decisions and have greater visibility and transparency in their ad spend on Leafly, which is even more critical in today’s environment. Additionally, we rolled out tools that allow clients instant access to ROI metrics and valuable insights.
• Q2 2022 revenue from brands was $3.0 million, up 22.2% over Q2 2021, primarily due to channel marketing, data licensing and Leafly’s new subscription product offerings that drove a 134.4% year over year increase in the number of brand advertisers on the platform and increased sales of display advertising for products and brands.
• Continued to add enhancements to the delivery ordering experience, including better filtering options to help users find the right dispensary and products they want. These enhancements help drive conversion and create a stickier customer experience to keep them coming back to the platform.
• Launched, “Leafly PLUS University,” which allows accredited cannabis researchers to supplement their work with Leafly’s large cannabis dataset that would otherwise not be available.

Financial Outlook

During the second quarter, we began to see some macro-economic impacts on the business, with signals from retailers and multi state operators that their advertising budgets are under scrutiny. In light of the current macroeconomic environment, we are taking a more conservative view of the second half of the year and are taking steps to manage the business accordingly. We are implementing plans to reduce operating expenses and have implemented a hiring freeze.

Leafly is updating its annual guidance. The Company does not provide quarterly guidance. Based on current business trends and conditions, the financial outlook is expected to be as follows:

• For the full year 2022, Leafly expects revenue to be in the range of $48.0 million to $51.0 million, representing 15% growth over 2021 at the midpoint. We expect Adjusted EBITDA loss to be in the range of $28.5 million – $26.0 million.

Leafly has not provided a quantitative reconciliation of forecasted GAAP net income (loss) to forecasted total Adjusted EBITDA within this communication because the Company is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. These items include, but are not limited to: depreciation and amortization expense from new assets; impairments of assets; changes in the valuation of any derivatives; the valuation of, and changes in, grants of equity-based compensation; gains or losses on modification or extinguishment of debt. These items, which could materially affect the computation of forward-looking GAAP net income (loss), are inherently uncertain and depend on various factors, many of which are outside of Leafly’s control. For more information regarding the non-GAAP financial measures discussed in this communication, please see “Non-GAAP Financial Measures” below.

Webcast and Conference Call Information

Leafly will host a conference call and webcast to discuss the results today, Thursday, August 11, 2022 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). A live webcast of the call can be accessed from Leafly’s Investor Relations website at https://investor.leafly.com.

The live call may also be accessed via telephone at (844) 200-6205 toll-free domestically and at (929) 526-1599 internationally. Please reference conference ID: #970556. An archived version of the webcast will be available from the same website after the call.

About Leafly

Leafly helps millions of people discover cannabis each year. Our powerful tools help shoppers make informed purchasing decisions and empower cannabis businesses to attract and retain loyal customers through advertising and technology services. Learn more at Leafly.com or download the Leafly mobile app through Apple’s App Store or Google Play.

Definitions of Key Performance Metrics

Monthly active users

Monthly active users (“MAUs”) represents the total unique visitors to Leafly websites and native apps each month, which in turn represents the maximum potential unique visitors that could become a customer of a dispensary or brand listed on Leafly’s platform, within a given month.

Users (visitors) are considered active by initiating a session on at least one webpage or app. Each month’s MAUs is the total of unique visitors to Leafly during the specified month and includes both new visitors as well as those returning from the previous month. We count a unique user the first time an individual accesses one of our websites or native apps during a calendar month. If an individual accesses our websites using different web browsers within a given month, the first access by each such web browser is counted as a separate unique user. If an individual accesses more than one of our websites or native apps in a single month, the first access to each website or app is counted as a separate unique user since unique users are tracked separately for each domain and native app. The unique visitors are measured using Google Analytics for our web applications and Firebase for our native applications.

Ending retail accounts

Ending retail accounts is the number of paying retailer accounts with Leafly as of the last month of the respective period. Retail accounts can include more than one retailer.

Retailer average revenue per account

Retailer ARPA is calculated as monthly retail revenue, on an account basis, divided by the number of retail accounts that were active during that same month. An active account is one that had an active paying subscription with Leafly in the month. Leafly does not provide retailers with an ongoing free subscription offering but may offer a free introductory period with certain subscriptions.

LEAFLY HOLDINGS, INC
NON-GAAP FINANCIAL MEASURES – UNAUDITED
(in thousands)

Earnings Before Interest, Taxes and Depreciation and Amortization (EBITDA) and Adjusted EBITDA

To provide investors with additional information regarding our financial results, we have disclosed EBITDA and Adjusted EBITDA, both of which are non-GAAP financial measures that we calculate as net loss before interest, taxes and depreciation and amortization expense in the case of EBITDA and further adjusted to exclude non-cash, unusual and/or infrequent costs in the case of Adjusted EBITDA. Below we have provided a reconciliation of net loss (the most directly comparable GAAP financial measure) to EBITDA and from EBITDA to Adjusted EBITDA.

We present EBITDA and Adjusted EBITDA because these metrics are a key measure used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of investment capacity. Accordingly, we believe that EBITDA and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

EBITDA and Adjusted EBITDA have limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and both EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and
• EBITDA and Adjusted EBITDA do not reflect interest or tax payments that may represent a reduction in cash available to us.

Because of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.

A reconciliation of net loss to non-GAAP EBITDA and Adjusted EBITDA is as follows:

Original press release

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