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Leafly Holdings, Inc. Reports First Quarter 2022

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Delivered 21% revenue growth over Q1 2021

Ending retail accounts grew 37% year over year

Reiterates full year guidance for revenue and adjusted EBITDA

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 first quarter ended March 31, 2022.

“The first quarter was marked by our continued focus on creating an unmatched consumer shopping experience and a marketplace that delivers outstanding value to our retail and brand customers. Year over year, we grew revenue by 21%, increased ending retail accounts by 37%, and grew the number of brand advertisers on our platform by 135%,” said Yoko Miyashita, CEO of Leafly. “We will harness the momentum of this quarter to drive further investment in products and programs that create a meaningful impact for our customers and the industry.”

First Quarter 2022 Financial Results

  • Total revenue was $11.4 million in line with Company expectations and up 21% over Q1 2021 driven by growth in new subscriptions and increased monetization from advertising products
  • Gross margin was 87%, compared to 88% in Q1 2021
  • Total operating expense was $17.4 million, up 84% over $9.5 million in Q1 2021, and included investments in platform, product development and sales and marketing to position the business for growth
  • Net loss was $19.4 million, and included $10.4 million of losses on derivative liabilities, compared to net loss of $1.1 million in Q1 2021
  • Adjusted EBITDA loss was $5.4 million, compared to adjusted EBITDA loss of $0.8 million in Q1 2021

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

“Our first quarter results were in line with expectations and set the foundation for accelerated revenue growth we expect to see throughout the year,” said Suresh Krishnaswamy, CFO of Leafly. “The industry continues to evolve, bringing long-term opportunity for growth across new and existing markets. We continue to invest in product, sales and marketing in order to create and deliver a best-in-class experience for our consumers, retailers and brands.”

Business Highlights

  • The Company continued to bolster its executive leadership team with the hiring of Deidre Boulware as Leafly’s Chief People Officer.
  • Significantly increased headcount across the sales organization and the engineering team as the Company continued to invest in key areas for growth.
  • In April 2022, New Jersey and New Mexico opened their legalized, recreational cannabis market. Both states, previously only open to the medical market, now join to comprise 18 states, Guam and D.C. where adult use is legal, contributing to the large and growing cannabis ecosystem that supports local businesses and brings legal access to consumers.
  • On May 3, 2022, Leafly and applicable holders amended the previously disclosed Forward Share Purchase Agreements, and extended them to August 1, 2022. Through May 3, 2022, approximately $7.3 million of cash in escrow has been or will be released to the Company. Please refer to our 8-K filed with the SEC on May 4, 2022 for additional details.

Growth from Retailers

  • Leafly ended the quarter with 5,422 retail accounts, a 37% increase over Q1 2021, driven by continued adoption of Leafly by retailers in existing markets across North America.
  • Retailer average revenue per account (“ARPA”) was $576, a 16% decline from Q1 2021, as Leafly strategically lowered entry subscription fees to accelerate retailer concentration in certain markets. This growing base of new retailers provides opportunity for greater monetization in the future as retailers adopt Leafly’s advertising products and online ordering capabilities. ARPA increased in Leafly’s most established and healthiest markets.
  • Revenue from retail accounts in Q1 2022 was $9.2 million, up 17% over Q1 2021, reflecting the increase of retailer subscriptions on the platform as well as increased advertising spend from retailers in its most-competitive markets.
  • Launched new business dashboard which allows customers instant access to ROI metrics and best-in-class insights, as well as a collection of best-practices that retailers can use to improve their performance on our platform.

Growth from Brands

  • Revenue from brands in Q1 2022 was $2.2 million, up 35% over Q1 2021, primarily due to Leafly’s new subscription product offerings that drove a 135% year over year increase in the number of brand advertisers on the platform and increased sales of display advertising.
  • Top brands are using the Leafly platform to drive sales and increase brand awareness. The Company continues to expand the brands and categories on its platform like THC-infused, other cannabinoid providers and ancillary products.

Consumer relevance and reach expands

  • Average monthly active users (“MAUs”) in Q1 2022 were 7.7 million, compared to 11.0 million average MAUs in Q1 2021, which was elevated due to the effects of the pandemic when shoppers turned to e-commerce solutions instead of in-store shopping.
  • Introduced a new, consumer-facing delivery feature that significantly improves the consumer shopping experience. This augments Leafly’s existing, successful pick-up offering, giving consumers an additional way to shop for cannabis in the way that they want.

Financial Outlook

Leafly is reiterating 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 $53.0 million to $58.0 million, representing 29% growth over 2021 at the midpoint. We expect Adjusted EBITDA loss to be in the range of $31.0 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, May 12, 2022 at 2:00 p.m. Pacific Time (5:00 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: #353774. An archived version of the webcast will be available from the same website after the call.

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