10-Q: WM Technology Q3 2025 Revenue Dips Amid Market Headwinds

WM Technology, Inc. reported a 9% decrease in Q3 2025 revenues to $42.2 million and a 31.5% drop in net income, attributing declines to ongoing industry challenges despite an increase in paying clients.

Summary

• Revenues for the three months ended September 30, 2025, decreased by 9% to $42.2 million, compared to $46.6 million in the same period of 2024.
• Net income for the three months ended September 30, 2025, was $3.6 million, a decrease from $5.3 million in Q3 2024.
• Adjusted EBITDA for Q3 2025 decreased by 33.2% to $7.6 million, down from $11.3 million in Q3 2024.
• Average monthly paying clients increased by 2% to 5,221 in Q3 2025, from 5,100 in Q3 2024.
• Average monthly revenues per paying client decreased by 11.5% to $2,693 in Q3 2025, from $3,043 in Q3 2024.
• For the nine months ended September 30, 2025, revenues decreased by 4% to $131.6 million, and net income was $8.3 million, a slight decrease from $8.5 million in the prior year.
• The company recorded a $2.3 million loss contingency in the second quarter of 2025 related to a probable shortfall in its AWS minimum purchase obligation.
• The 'One Big Beautiful Bill Act' (OBBBA), signed on July 4, 2025, is expected to accelerate deductions of previously capitalized research and development costs, leading to no significant income taxes for the company for the year ending December 31, 2025.
• Cash balance increased to $62.6 million as of September 30, 2025, from $52.0 million at December 31, 2024.

Sentiment

Score: 3

Explanation: The company experienced significant declines in revenue, net income, and Adjusted EBITDA, alongside a notable drop in average revenue per paying client. While client numbers increased slightly and cash position improved, the overall financial performance for the quarter and year-to-date is negative, compounded by ongoing material weaknesses in internal controls and a loss contingency related to AWS. The cannabis industry's regulatory uncertainty and competitive pressures remain significant headwinds.

Positives

• Average monthly paying clients increased by 2% to 5,221 in Q3 2025 and by 3.7% to 5,214 for the nine months ended September 30, 2025, indicating client acquisition.
• Cash balance increased to $62.6 million as of September 30, 2025, from $52.0 million at December 31, 2024, improving liquidity.
• Total liabilities decreased to $57.553 million as of September 30, 2025, from $61.799 million at December 31, 2024.
• The 'One Big Beautiful Bill Act' (OBBBA) is expected to result in no significant income taxes for the year ending December 31, 2025, due to accelerated deductions of R&D costs.
• Net cash provided by operating activities was $23.1 million for the nine months ended September 30, 2025.

Negatives

• Revenues decreased by 9% to $42.2 million in Q3 2025 and by 4% to $131.6 million for the nine months ended September 30, 2025, primarily due to declines in Featured Listing and WM Deal products.
• Net income decreased by 31.5% to $3.6 million in Q3 2025 and by 2.1% to $8.3 million for the nine months ended September 30, 2025.
• Adjusted EBITDA decreased by 33.2% to $7.6 million in Q3 2025 and by 5.1% to $29.4 million for the nine months ended September 30, 2025.
• Average monthly revenues per paying client decreased by 11.5% to $2,693 in Q3 2025, attributed to spend declines in established markets and lower average spend from new clients.
• General and administrative expenses increased by 8% in Q3 2025 and by 12% for the nine months ended September 30, 2025, partly due to a $2.3 million loss contingency.
• The company recorded a $2.3 million loss contingency in Q2 2025 for a probable shortfall in its AWS minimum purchase obligation.
• Net cash provided by operating activities decreased to $23.1 million for the nine months ended September 30, 2025, from $27.3 million in the prior year.

Risks

• The company operates in a relatively new industry where laws and regulations vary significantly by jurisdiction, and federal law still prohibits cannabis (other than hemp).
• Changes in state or federal cannabis laws, or active federal enforcement, could adversely affect the business.
• The company's ability to grow depends on continued widespread legalization and regulation of cannabis, which is not assured.
• Geographic concentration of clients, particularly in California (56% of Q3 2025 revenues), makes the company vulnerable to downturns in local markets.
• Increasing prices of commodity products and inflation may impact clients' ability to maintain or increase spend, potentially affecting revenue and collections.
• Competition is expected to intensify as the cannabis regulatory regime becomes more settled, potentially attracting new participants with greater resources.
• Negative publicity, whether justified or not, could tarnish the company's reputation and reduce demand for its platform.
• Ongoing material weaknesses in internal control over financial reporting, including IT general controls and process-level controls, could lead to material misstatements.
• The company is subject to ongoing shareholder class action and derivative litigation related to historical reporting of Monthly Active Users (MAUs).
• The company's liquidity assumptions may prove incorrect, potentially exhausting financial resources sooner than expected.
• Future capital requirements and adequacy of funds depend on many factors, and additional financing may not be secured on acceptable terms or at all.

Future Outlook

The company plans to continue making focused organic and inorganic investments to grow revenue and scale operations, including accelerating marketing spend, expanding business listings, and enhancing the Weedmaps for Business offering. Significant near-term investments are expected for data assets and evolving listings/software for brand clients. General and administrative expenses are expected to decline as a percentage of revenue as the business scales.

Management Comments

• Our mission is to power a transparent and inclusive global cannabis economy.
• We believe that expansion of the number and types of cannabis businesses that choose to list on our platform will continue to make our platform more compelling for consumers and drive traffic and consumer engagement, which in turn will make our platform more valuable to cannabis businesses.
• We believe that continued investment in our platform is important for our growth and expect our product development expenses will increase in a manner consistent with revenue growth as our operations grow.
• We expect general and administrative expenses to decline as percentage of revenue as we scale our business and leverage investments in these areas.
• We believe that our existing cash and cash generated from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months.

Industry Context

The cannabis industry remains highly regulated and fragmented, with federal prohibition in the U.S. creating significant challenges despite widespread state-level legalization. WM Technology operates in a competitive landscape with both cannabis-focused and general two-sided marketplaces, search engines, and other software providers. The company's performance is directly impacted by market maturation, pricing pressures, and consolidation within the cannabis sector, particularly in established markets like California. The potential for federal regulatory changes could significantly alter market dynamics, enabling new monetization strategies and improving access to capital for industry participants.

Management Changes

Corporate Governance

Legal Proceedings

• A putative shareholder class action complaint (Seret Ishak v. WM Technology, Inc. et al.) was filed on October 17, 2024, alleging material misrepresentations/omissions related to historical MAU reporting, seeking unspecified monetary damages. An amended complaint was filed on May 12, 2025, and a motion to dismiss was filed on July 11, 2025, with a decision pending as of October 10, 2025.
• Two shareholder derivative actions (DeGennaro v. Francis, et. al and Pearson v. Francis, et. al) were filed in November 2024, alleging individual defendants authorized false statements/omissions regarding MAUs and corporate governance matters, seeking unspecified damages and corporate governance reforms. These actions were consolidated on December 10, 2024, and stayed on October 3, 2025, pending resolution of the class action.
• The SEC investigation, initiated in Q3 2022 following an internal complaint about MAUs, was resolved with an agreement in principle on July 22, 2024. The company consented to a cease-and-desist order and paid a civil money penalty of $1.5 million in October 2024.

Related Party Transactions

• A sublease agreement with an affiliate of the Chief Executive Officer commenced on June 1, 2022, with a monthly base rent of $69,000, and expired on October 31, 2024. No outstanding rent receivable as of September 30, 2025.
• A promissory note with Silver Spike Holdings, an affiliate of Silver Spike Sponsor (related to a board member), was entered into on March 16, 2023, for $1.1 million, bearing 5% annual interest, maturing on December 31, 2025. The remaining balance was $0.2 million as of September 30, 2025.

Stakeholder Impact

• Shareholders: Negative impact due to declining revenues, net income, and Adjusted EBITDA. Ongoing litigation and material weaknesses in internal controls pose risks to investor confidence and stock price. Potential for dilution if future capital raises involve equity.
• Employees: Reduction in force actions were taken to enhance operational efficiency, which could impact employee morale or job security. Stock-based compensation remains a component of employee remuneration.
• Customers (Cannabis Businesses): Continued industry challenges like price deflation and consolidation are compressing client operating margins and marketing budgets, leading to reduced spending on the company's platform. The company aims to provide value through its marketplace and SaaS solutions.
• Suppliers (e.g., AWS): The company recorded a $2.3 million loss contingency related to a shortfall in its AWS minimum purchase obligation, indicating potential underutilization or renegotiation of services.
• Regulatory Authorities: The company resolved an SEC investigation with a $1.5 million penalty, demonstrating compliance efforts but also highlighting past reporting issues.

Next Steps

• Continue focused organic and inorganic investments to grow revenue and scale operations.
• Accelerate investments in marketing to maintain and increase brand awareness through online and offline channels.
• Invest in expanding business listings and enhancing client/consumer experience.
• Improve depth and quality of information on the platform.
• Enhance data assets and evolve current listings and software offerings to brand clients.
• Continue remediation efforts for material weaknesses in internal control over financial reporting.
• Commence configuration of a new ERP system to replace the legacy system in fiscal year 2026.
• Monitor and address ongoing shareholder class action and derivative litigation.

Key Dates

Recommendation

The company faces significant headwinds with declining revenues, net income, and Adjusted EBITDA, coupled with a decrease in average revenue per paying client. While the increase in total paying clients and a stronger cash position offer some stability, the ongoing material weaknesses in internal controls and unresolved litigation create substantial uncertainty. The cannabis industry's regulatory environment and competitive pressures also present long-term challenges. Given the mixed signals and significant risks, a 'hold' recommendation is appropriate, advising investors to monitor remediation efforts, litigation outcomes, and market trends before making further investment decisions.

Keywords

Cannabis Marketplace, SaaS, Weedmaps, WM Technology, Cannabis Industry, SEC Filing, 10-Q, Financial Results, Quarterly Report, Cannabis Regulation, EBITDA, Adjusted EBITDA, Paying Clients, Revenue Decline, Internal Controls, Litigation, AWS, Software Development, Digital Advertising