Editor’s note: This story was updated with information from Leafly’s fourth quarter earnings report and an internal email sent from the company’s CEO.
Leafly is laying off 40 employees, about 21% of its workforce, as it looks to conserve cash and reach profitability amid various headwinds affecting the cannabis company’s business.
The company revealed the news as part of its fourth quarter earnings report.
GeekWire reported the cuts earlier Thursday, citing posts from several employees — including a creative lead and vice president of retail sales — who said they were laid off.
Leafly previously cut 56 positions, or 21% of its workforce at the time, in October.
In an email to employees obtained by GeekWire, Leafly CEO Yoko Miyashita cited reduced advertising spend and “a slower start to 2023 than anticipated.”
“Our customers are in belt-tightening mode and that necessarily impacts their spend on Leafly,” she wrote in the memo, which you can read in full below.
The company went public last year in a SPAC deal and its stock has lost nearly all of its value since then.
Leafly received a letter Oct. 28 from the Nasdaq notifying the company that it did not comply with the $50 million market value minimum required to be listed on the exchange.
Nasdaq said Leafly’s market value must be $50 million or more for a minimum of 10 consecutive business days at any time before April 26. The company has a market capitalization of around $20 million and is among Nasdaq’s list of noncompliant companies.
“Rationalizing our cost structure, preserving cash, and ensuring sustainability of Leafly as a public company by focusing on improving our path to profitability,” Miyashita wrote in the memo, as part of the company’s current priorities.
Leafly’s revenue in Q4 stayed flat year-over-year at $12.1 million, and losses grew slightly to $5.8 million. It ended the quarter with about $25 million in cash.
The company’s average monthly users; ending retail accounts; and retailer average revenue per account all fell year-over-year in 2022. Average monthly users came in at 7.96 million for 2022, down 22% from the year prior.
Founded in 2010, Leafly’s online marketplace lets customers shop and select cannabis products from licensed retailers. The startup also serves as an educational resource. Its revenue primarily comes from a monthly subscription fee paid by cannabis retailers to be listed on the platform and to access e-commerce tools.
Leafly is facing headwinds in the form of decelerating digital ad spend, part of a broader shift by companies to cut costs amid higher interest rates and the tech downturn.
Cannabis sales in some regions are declining following a pandemic-driven boost. Sales in Washington state slowed year-over-year in 2022 for the first time since cannabis was legalized. Retail and wholesale prices are also down.
Leafly’s average revenue per account in Q4 was $566, down $70 from the year-ago period.
The company is reorganizing its sales and content/creative teams to focus on “high-value customers” and create content that drives shopping behavior.
Read Miyashita’s full memo below.
Dear Team Leafly,
We are experiencing times of significant change and uncertainty in the cannabis industry. Over the past several months, we’ve seen our revenue come under additional pressure with a weaker holiday season and a slower start to 2023 than anticipated, as clients reduced their advertising spend. Our customers are in belt-tightening mode and that necessarily impacts their spend on Leafly. This is the broad context under which I share the difficult news that we have decided to make additional headcount reductions that will impact 41 positions – or roughly 21 percent of our current workforce.
Those impacted have already received meeting invites to speak with leadership and HR later today – if you have not received a meeting invite by 10:30am PT/1:30pm ET today, your role is not impacted. Transitions like this are very difficult as the impact is felt by our teammates, colleagues, and friends. People we have come to know and partnered with through the ups and downs at Leafly. I fully acknowledge that and I am deeply sorry for the circumstances that have led to this outcome.
Leafly is, and will remain, a prominent player in the cannabis space, but to navigate current realities, we must operate differently and become intently grounded in three priorities:
Aligning our resources around one common theme: building a stronger marketplace – one that delivers against the need to help consumers identify what to try and buy, then delivers them to the virtual and physical doorsteps of our retail and brand partners;
Focusing on the areas of our business that deliver the most near-term revenue; and
Rationalizing our cost structure, preserving cash, and ensuring sustainability of Leafly as a public company by focusing on improving our path to profitability.
These priorities mean significant changes to certain areas of our business, including to sales and to our content and creative teams. On the sales side, we need to get closer to our most high-value customers, requiring a shift from a broad-based, high-touch model to most clients, to a model that is hyper-focused on deepening relationships and growing spend from our emerging and highest-value clients. As part of this shift, we must align our customer account management, services, and support to be more cost-efficient and in-line with a client’s revenue contribution.
These priorities also mean changes to our content and creative teams. Over the past 10+ years, we built from scratch one of the most recognized news and learn sections in the industry, and we now have a rich catalog of thousands of pieces of useful and sought-after cannabis information. At the same time, we are now competing against some of the biggest names in journalism. Under this new reality, we are making an explicit shift to anchor our content strategy directly to the revenue generating aspects of our cannabis marketplace to include more content that drives shopping behavior and creates value for our retailers and brands in the form of more bottom-of-the-funnel sessions and orders.
To those who are leaving us: Thank you. Thank you for working so hard to bring the magic of cannabis to countless people and for your contributions to Leafly. We are grateful for you.
For those who are continuing forward, we are competing in a tough environment. By making the necessary changes to how we operate, and sustaining this business and one another through a difficult period, I am confident about the opportunity for Leafly ahead. Our partners tell us there is tremendous value in working with Leafly and we should all be proud of the work we have accomplished together and our commitment to serving those partners for many years to come.