WM Technology, the parent company of the popular cannabis marketplace Weedmaps, has demonstrated resilience in the face of market challenges, reporting a 3% sequential increase in sales to $45.9 million for the second quarter of 2024. This comes despite a 5% year-over-year decline in revenue.
The company’s software offerings for cannabis businesses, known as SaaS solutions, experienced a notable 19% surge, contributing to 29% of the total revenue mix. This growth highlights the increasing demand for technology solutions within the cannabis industry. However, listing revenues, which account for 62% of the mix and primarily come from featured listings and deals on the Weedmaps platform, fell 14% year-over-year. This decline may be attributed to the evolving landscape of the cannabis market and increased competition.
Despite the mixed revenue performance, WM Technology maintains its stability in profitability and cash flow. The company’s adjusted EBITDA margins remained steady at 22%, while average monthly paying clients increased by 2% to 5,045. This suggests that the company is effectively managing its expenses and attracting new customers.
WM Technology has been actively reinvesting cost savings into advertising and product development, with ad spending reaching 8.3% of revenue in the second quarter, up from 5.6% in the first quarter. This strategic move demonstrates the company’s commitment to expanding its market reach and enhancing its platform offerings. Simultaneously, cash General and Administrative (G&A) expenses fell 3% sequentially, indicating efficient cost management.
While WM Technology has shown strong performance in its home state of California, analyst Pablo Zuanic expressed concerns about the company’s ability to compete in other markets. While Michigan has emerged as a notable bright spot, it remains an exception rather than the rule. Zuanic highlighted opportunities for WM Technology to monetize additional touchpoints on the Weedmaps platform. This could involve expanding into adjacent cannabis categories, depending on how regulations evolve.
Looking ahead, WM Technology expects sales of $44 million for the third quarter, with EBITDA margins projected to decline to 16%. However, the company aims to return to 20% EBITDA margins in the medium term. Despite currently lagging behind peers in the tech sector in terms of valuation, Zuanic emphasized the company’s focus on cost control and its pursuit of growth in emerging markets, positioning it for future opportunities.
