Leafly gets losses under control, but faces possible Nasdaq delisting, debts coming due

Seattle-based Leafly Holdings Inc. (Nasdaq: LFLY) reported a net loss of just $1.1 million for the third quarter of the year, bringing its greatly reduced losses for the year to a mere $4.8 million.

Losses for the company fell about 50% year-over-year from $2.2 in the third quarter last year and were down from $9 million for the first three quarters of 2023.

At the same time, revenue has also taken a hit, dropping to $8.3 million in the most recent quarter from $10.5 million a year ago. Year-to-date revenue is also down, to $26.1 million from $32.5 million in 2023, Leafly reported, but with its losses under control things appear to be smoothing out for the online cannabis platform.

The revenue decreases were chalked up to “the decline in ending retail accounts coupled with reduced spend by our customers due to their budget constraints,” according to a press release from the company.

The number of retail accounts held by Leafly was down 20% year-over-year to 3,554, which is also down 1% sequentially. The decrease is mainly due to the removal of non-paying clients from the website over the last year, Leafly reported, and the average paying account increased 8% to $695.

CEO Yoko Miyashita expressed optimism that better days – and profitability – lay ahead for the business, and said in a press release that the retail aspect of Leafly’s operations has “largely reached a point of stabilization.”

“We believe the most significant challenges in the retail business are behind us,” Miyashita said, noting that retail revenues and retail accounts have basically flattened sequentially. “Diligent management of operating costs, as well as collections recovery efforts, continue to be a focus.”

CFO Suresh Krishnaswamy said Leafly’s top priority heading into next year is managing its $29.2 million debt load, given that it has several loans coming due in January. For that reason, Leafly declined to offer revenue guidance to investors and also canceled its usual earnings call.

“We are actively working on resolving this issue and remain focused on reducing cash burn and running the business efficiently,” Krishnawswamy said. “With the business on a firmer footing, we are targeting growth next year.”

“Until a resolution on its outstanding maturity can be reached, the company continues to disclose substantial doubt regarding its ability to continue as a going concern,” Leafly stated in the release. “We do not currently have the ability to repay our convertible notes due in January 2025.”

Leafly’s listing on the Nasdaq also remains in jeopardy, although the company is appealing a notice of delisting that was delivered last month.

“Any suspension or delisting action has been stayed pending a scheduled hearing in early December 2024 and a final written decision from Nasdaq,” Leafly reported this week.

As of Sept. 30, Leafly had $19.6 million in total assets, including $13.5 million in cash, against $34.1 million in total liabilities.