WM Technology Q1 2026 Earnings Call - Strategic Delisting and Cannabis Rescheduling Unlocks Next Phase

Conference Call Operator, WM Technology: Good afternoon, everyone, welcome to WM Technology’s first quarter 2026 earnings conference call. All participants will be in a listen-only mode for the duration of the call. I would now like to turn the call over to your host, Simon Yao, Director of Investor Relations. Please go ahead.

Simon Yao, Director of Investor Relations, WM Technology: Good afternoon. Thank you for joining us to discuss our first quarter 2026 results. Today, we are joined by our CEO, Douglas 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 risk and other important factors that could affect our actual results, please refer to our SEC filings available on the 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 May 11th, 2026. Since then, we may have made announcements related to the topics discussed, so please refer to the company’s most recent press releases or 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 release and presentation. Finally, today’s call is being webcast on our investor relations website, and the audio replay will be available shortly. With that, I will now turn it over to Doug.

Douglas Francis, Chief Executive Officer (CEO), WM Technology: Good afternoon, everyone, and thank you for joining us today. I want to start by acknowledging the recent federal action to reschedule medical cannabis to Schedule III. In April, the DOJ, through Acting Attorney General Todd Blanche, issued a final order moving FDA-approved marijuana products subject to state medical cannabis licenses from Schedule I to Schedule III under the Controlled Substances Act. This represents an important milestone for the cannabis industry and a meaningful recognition of the role medical cannabis plays for patients across the country. Beyond this medical cannabis action, the broader federal rescheduling process remains ongoing, with the DEA expected to begin a new administrative hearing on June 29, 2026. At the same time, the full impact of these developments will take time to unfold.

There are still important questions around implementation, how the benefits may flow through to operators, and what this could mean for the broader cannabis industry, including adult use markets. We view any progress at the federal level as constructive and are encouraged to see continued movement toward a more rational regulatory framework for cannabis in the U.S. At this time, we do not expect the rescheduling to materially affect our operations. Even with that progress, the operating environment for cannabis businesses remain difficult. Operators continue to navigate price compression driven by oversupply and competition, pressure on consumer discretionary spending, elevated tax burdens, limited access to capital, and regulatory uncertainty across both federal and state markets. These pressures continue to impact client budgets, business stability, and the pace at which operators can invest for growth.

In response, we remain focused on the fundamentals of our business, disciplined execution, product innovation, marketplace strength, and maintaining the flexibility to support the industry as it evolves. Against that backdrop, we are pleased with our first quarter results, which came in in line with our revenue expectations and reflected another quarter of disciplined execution in a constrained environment. We continued to improve our platform, supported the clients and customers who rely on Weedmaps, and reinforced the role our marketplace plays within the cannabis ecosystem. I also wanted to address our recent voluntary delisting from Nasdaq. As we have shared, this was a strategic decision intended to provide Weedmaps with greater flexibility to pursue opportunities across the cannabis ecosystem. We serve a highly regulated industry, and major U.S. exchange policies have continued to limit the scope of opportunities available to companies operating in and around cannabis.

We believe this decision better aligns our company profile with the realities of the industry we serve and provides greater flexibility to execute against our long-term strategy. We are now free to put our balance sheet to work in two key ways. First, we may invest in strategic clients and partner companies across the cannabis supply chain to empower groups who have high conviction in the value of the Weedmaps ecosystem. Second, we plan to begin development and expansion of our technology platform and services into areas previously prohibited by Nasdaq. We are incredibly excited about this strategic unlock and are focused on growth. As we think about the next phase of Weedmaps, our focus remains on building a platform that can better serve the full cannabis ecosystem, including retailers, brands, MSOs, and consumers.

That means continuing to improve the core marketplace while investing in new products and capabilities that align with where the industry is headed. I would like to thank the team for their resilience in navigating the cannabis headwinds, largely with our arms tied behind our back. It has been a very long time coming, but with tailwinds from the rescheduling process and our strategic unlocks from our delisting, we are free to make the obvious bets that are long overdue. Our priorities remain clear. Allow our balance sheet and expanded capabilities to better serve our most engaged clients. Continue to expand our marketplace and ecosystem. Continue operating with discipline while positioning the company for the next phase of the industry’s evolution. With that, I will now turn it over to Susan.

Susan Echard, Chief Financial Officer (CFO), WM Technology: Thanks, Doug. Now turning to our financial performance. Revenue for the first quarter was $43.6 million, down 2% year-over-year and up 1% sequentially, in line with expectations. Sequential growth was driven by increased client spend in March ahead of the 4/20 holiday. While we were pleased with our revenue performance relative to expectations, many of our clients continue to operate in a challenging environment. Price compression, elevated tax burdens, and broader financial stress continues to be more pronounced in the industry’s largest, most mature markets, including California, Michigan, and Colorado. These dynamics continued to weigh on client retention during the quarter. Average monthly paying clients were approximately 4,983, down 4% year-over-year and 3% sequentially.

The decline was primarily driven by churn in mature markets, where operator financial pressure has contributed to business closures and account removals from the platform related to non-payment. This churn was partially offset by continued new client acquisitions and growth in newer markets, including New York and Mississippi. Average revenue per paying client for the first quarter was $2,914, a marginal increase compared to the first quarter of last year. While overall client spend remains under pressure, the metric benefited from the churn among lower spend clients, which had a favorable mixed impact on the average. Turning to expenses, operating expenses for the quarter were $43.4 million, compared to $42 million in the first quarter of last year.

The year-over-year increase was primarily driven by a higher provision for credit losses, including a $3.9 million allowance for doubtful accounts, as ongoing operator financial pressure continued to impact collections from certain delinquent accounts. We have continued to take a disciplined approach to accounts receivable management, including increased focus on payment plans and collection efforts. While we continue to support clients through a difficult operating environment, we are also taking appropriate action where payment behavior no longer supports continued service. This increase was partially offset by lower costs in other areas as we continue to manage headcount, vendor spend, and discretionary expenses. We remain focused on maintaining flexibility in the business by controlling costs where appropriate and investing selectively in key areas of our business. This resulted in first quarter net income of $1.7 million.

During the quarter, we incurred certain non-recurring costs, including restructuring expenses, which were partially offset by a million-dollar gain from the sale of a domain name. Excluding these items and other adjustments, adjusted EBITDA for the first quarter was $5.9 million. Turning to cash flow, net cash used in operating activities was $1.3 million in the first quarter, primarily reflecting slower collections to start the year and the timing of working capital. We ended the quarter with $57 million in cash and investments, consisting primarily of cash, short-term treasuries, and bonds. Our share count across Class A and Class V common stock was 159 million as of March 31, 2026. Looking ahead, we expect second quarter revenue to decline sequentially by low single digits from the first quarter.

This outlook reflects continued client churn and account removals in mature markets as well as a more normalized level of client spend following the seasonal increase ahead of the 4/20 holiday. We remain focused on managing the business with discipline while continuing to support clients and invest selectively against our long-term priorities. With that, I’ll turn the call back to the operator.

Conference Call Operator, WM Technology: This concludes today’s conference call. Thank you for participating, and you may now disconnect.