WM Technology, Inc. (MAPS) Earnings Call Transcript & Summary

Welcome, everyone, and thanks for joining us at the 24th Annual Needham Growth Conference. I'm Matt McGinley, and I'm the equity research analyst at Needham that covers the Cannabis Industry. In this session, we're pleased to have WM Technology join us. WM technology is 1 of the leading technology in software providers, in the Cannabis Industry. It has a B2C marketplace called weedmaps.com and a B2B suite software known as WM Business. Weedmaps has more than 14 million monthly active users and more than 18,000 business listings. They have a true end-to-end operating system on the WM Business side for cannabis retailers to grow their businesses and they have all the compliance tools integrated into it, which is critical for those operators in this space, given how complex the regulatory state is for the industry. So overall, the company has 1 of the most comprehensive cloud-based software solutions available in the cannabis market. And with 4,500 monthly paying clients, they'll do about $190 million in revenue this year and about -- or I should say, in 2021 and about $32 million in EBITDA. They're listed on the NASDAQ under the ticker MAPS or M-A-P-S. And with that, I -- we have with us Chris Beals, who is the CEO of the company and a member of the Board of Directors. We also have Arden Lee, who's the CFO. We'll give them some time to tell us about the company here, and we'll save a few minutes at the end to answer any questions from the audience. So for the people in the audience, you're all in listen-only mode. If you have a question, please submit them via ask-a-question button on your browser or shoot me an e-mail and we can ask questions at the end. So with that, Chris and Lee, please move forward.

Thanks for having us. So I'm Chris Beals, I'm the CEO of WM Technology. So just to orient you on the business. There's 2 parts to WM technology that are deeply interconnected. So the first is our marketplace side of the business, Weedmaps. It's what we were founded on over 14 years ago. And then the other half of it is our business in a box, WM Business, which is an interconnected suite of SaaS and software solutions that work seamlessly with the marketplace and with each other. So starting on the marketplace side, Weedmaps is the leading commerce-driven marketplace for cannabis goods in all jurisdictions where cannabis is legal. To put that another way, we take the highest volume of frequent cannabis consumers, something I'll get into a little bit further, and we drive them through the process of discovery, learning about cannabis and transacting. Our -- when you think about who consumes cannabis, with the frequency of once a month or more, what we consider the actual core demographic that drives the industry. It's about 12% to 13% of the U.S. population, and it's over 94% of our monthly active users. And our business clients know this. They know that this is where they can catch those users where they are at the point in the journey of looking for shopping, comparing, trying to find them by cannabis, and that makes us an incredibly attractive value proposition for them in terms of both driving transactions, but also driving awareness. Related to that, on the other side is WM Business, and that's the industry's first and broadest software suite that truly is sort of business-in-a-box functionality, where a retailer can go from opening on its first day of business and sort of have its full suite of needs, including doing e-commerce, accessing the Weedmaps marketplace, CRM, that sort of thing, all handled. And so what we -- the way that we built that out and it symbiotically relates to the marketplace is we leveraged when we got the started, the desire of retailers and brands to access the marketplace, but to do so in the most cost-effective fashion possible, to integrate their POSs with us, and we use those desires to interconnect to effectively take a land and expand strategy, launching an expanding suite of software that meets all of these critical pain points that these brands and retailers have. And so today, we have half of our U.S. licensees paying clients, spending on average about $3,800 per month on a combination of SaaS subscription fees and then upsell offerings within the marketplace. So if you think of the marketplace is sort of a virtual shopping mall, featured listings, things that make their storefront appear more prominently or then things like promoted deals that can be applied on checkout for consumers and that sort of thing. And so this solution, and I'll get into this in a little more detail, covers everything from acquiring users, receiving transactions, transaction fulfillment and then retargeting, reactivating those users to get them to come back and purchase again. The common denominator between the 2, well, there are several, but the big 1 is data. Our marketplace and SaaS offerings both feed off of each other and sort of augment the data that each of them has. So for instance, we get transactional data and we get real-time inventory data, which is critical for reasons that I'll get into from our POS integrations as well as we have our own point-of-sale systems. And then what's truly unique about that is once we ingest that data, we can then augment it with brand data, consumer-generated review data on clinical effect, things like that. And so we have the broadest database of data on these actual products, which is critical in an industry where there's no normalized SKU data, brand data and the main things consumers are searching for change real-time, pricing, the lab testing for that particular batch of cannabis, that sort of thing. And so it's really this proprietary set of data, this custom tailored marketplace and then the suite of software that goes with it that makes all of this interaction painless and compliant for the brands and retailers that sort of glues all of this together. So moving on to the next slide. We'll touch on all these more as we go through the discussions, but the thing to understand is our unique combination of marketplace plus software and both of them leveraging a proprietary data layer that includes the broadest set of first-party transactional data out there, drives a high growth, strong profitability, strongly profitable business that you see here. And what you'll find about WM Technology is we have multiple built-in leverage and growth, both now with our existing markets and then with new states opening up, and then in the not-too-distant future, federal legalization, which unlocks a huge amount of additional monetization to us. The thing to keep in mind is when you revenue numbers, our growth rate, that sort of thing. We drive billions of dollars in GMV through our marketplace, and we do to federal and legality, cannot charge any take rates, put payment rails in. And so you're effectively looking at a huge block of revenue that sits on the other side of federal legalization. And I think the thing that's really interesting, too, is when you look at the macro TAM opportunity, cannabis one is the only industries where the steady state of what we expect consumption or what an analyst project consumption is over 5x what the current state is. And actually with that, let's move on to the next slide. So I think what you see here, there's a couple of factors that are going on. So just to orient you a little bit on this slide, it's estimated right now that licensed market U.S. retail sales are about $21 billion. And the thing that's interesting is if you look across all states that have legalized right now and not many people realize this and you look at what percentage of total cannabis demand is captured by the legal market in legalized states, it's only about 20% to 30% of demand. So about 70% to 80% of total cannabis demand is still met on the illicit side of the market. And the single biggest factor that solves for that, and you've done a bunch of research into this, and we've seen it demonstrated a number of states is retail density. States are continuing to issue new licenses. They're continuing to add to the retailers. But right now, the biggest thing driving that outside solicit market rate is there's just not enough retailers. And so that's something that we see changing as new cities open and as time progresses. But the thing that's interesting is we then have the other growth factor that you have a number of jurisdictions, which haven't opened up for cannabis legalization or they have, it's been in a very stunted fashion. So for instance, if you look at a state like New York, although it's been medically legal for some time, it's a very small market. Almost nobody utilizes the medicinal channels there. The number of patients is just over 100,000, there's only -- there's less than 30 retailers in the entire state. When you look at medically or adult-use legalization, which is going to be coming there later this year, you expect to see hundreds if not thousands of retailers and sort of anyone who's 21 and over be able to access that market. And so I think cannabis is really interesting in that, it mirrors what you see in certain other industries in some ways, which is converting existing demands into legal market demand. And this is similar to what we see in cloud hosting, where you're shifting pre-existing on-prem demand to off-prem demand. I mean electric vehicle growth where you're shifting from fuel power to battery power, here, we're getting a large number of cannabis consumers who have been buying in the listed or traditional market to switch over to a legal market, and then you have these broader macro levers of growth, which is new jurisdictions opening up. And then one of the biggest of all, which is, as I mentioned earlier, about 12% of users consume monthly. We know it's a factor of time. And if we look to places like Canada, that, that number grows significantly as sort of legalization continues on. And if you look at something like alcohol consumption, over 50% of U.S. population consumes beer on a monthly basis. And so all that to say is -- they're both endemic and non-endemic levers of growth to this industry, and that is sort of the sandbox in which we provide this marketplace in this suite of software. So moving on to the next slide. This is a bit of an eye chart, so I'm not going to go too deep into the individual pieces. But what I would say is that there is no consumer good that is more highly regulated and has a more complex supply chain and various set of products in the cannabis space. That is the world in which we operate. And within that, cannabis retailers have to comply with this dizzying array of cannabis laws. The difference from state to state and how jurisdictions regulate cannabis is much greater in terms of a difference than what we'd see from country to country with things like even pharmaceutical goods. And the other thing that's really important to know is when we survey consumers twice as many people report shopping by clinical effect is by brand. And so what we do is through consumer reviews, through data from the brands, through using the lab testing data that many states require. We then attempt to recommend or sort of guide consumers to find things regardless of how they choose to shop for cannabis. So whether they're shopping by clinical effect, by brand, by strain, there are discovery pathways for that throughout the marketplace, and we make it easier for brands and retailers to have their products appear in those different discovery paths. To simplify it, I think the easiest way to put it is this is an incredibly complex specialty marketplace, and so much of what we do is reliant on taking data, our software to make it seem seamless and simple for the consumers on the front end and for the brands and retailers trying to use that marketplace. Just to give you 1 example, we have our own point-of-sale system, but we integrate with almost 100-point of sales systems to get live real-time data on that marketplace. On the brand side, the challenges are no less. We are about to see an explosion in the number of brands, the number of form factors, what means of consumption of cannabis and whether consumers are old or new, they generally have no idea what these different types of products are and brands have struggled to date getting any sort of true brand affinity or sort of brand identity that they can scalably provide to consumers, where the main means by which they can do that, and it's why we're investing so heavily in our brand ecosystem on the marketplace, then also software solutions to help brands curate and market more effectively to consumers. With that, I should mention, if you look at something like the New York market, and it's just an interesting thing to think about with the opportunity that we provide, but structurally with the way that social equity licenses are set up in other parts of the New York market are structured legislatively when New York opens later this year, more than 50% of the cannabis businesses in the state where there will be retailers, delivery services, brands, will be run by people who have never run a cannabis business in their entire life. They will generate new brands, new store fronts, new means of -- or sort of new form factors of cannabis, and these will all be new to consumers. And that's exactly where we come in. So flipping over to the next slide. This really gets to the point of how we help consumers go through the discovery path because ultimately, as a marketplace in the measure of how efficacious we are is how many people transact, how many people buy cannabis. And when we look at how consumers shop for cannabis, it's incredibly varied. As many people shop by strain to shop by price consciousness. As I mentioned earlier, twice as many people shop by clinical effect, they shop by brands current. And that's where we come in, normalizing and providing discovery pathways for consumers to shop, look around and figure out what they want to buy. So we have over 18,000 businesses with over 5 million products. I believe that's the biggest catalog of branded products anywhere out there, and we use a mix of machine learning and fuzzy match to try and make sure that we can match a known brand or product SKU to what the different retailers are selling regardless of which of those 100 point-of-sale systems they're using. And when you get all the way down to the bottom of the funnel and throughout this, I think it's important to know how this interplays with the business in a box, the WM Business suite, the WM Technology offers. So -- when you look at something like a consumer completing an order, well, at that point, if the business is using CANNVEYA, which is our delivery and logistics solution, they need to rely on that to update the state track and trace system if something is out for delivery to a consumer. They need to record and hold the driver's license and signature information from the consumer. Most jurisdictions require delivery be done with real-time GPS tracking that the person driving the vehicle be an employee of the dispensary and they limit how much product can be in the trunk and require they be able to show a digital manifest to the police officer. So when you think about a successful consumer journey, there's the part that consumer sees, but then there's the part that happens on the other side, which is the retailer effectively in a timely manner delivering that product compliantly to that consumer and then the journey goes on. And so that's just 1 example of how this sort of discovery pathway in locking in the consumer with the product they want, then seamlessly flows into some of these business in the box solutions that I mentioned earlier. Let's move on to the next slide. I think if it hasn't become clear yet, what we deal with in terms of the breadth and complexity of product, how difficult it is for a consumer to understand what type of products they want to purchase and then the number of data sources we have to aggregate and make -- look like it comes from a single source is far beyond what you see in almost any other digital online marketplace. So -- and here are just some examples drawing out that looking at sort of non-cannabis focused marketplaces. For instance, when you think about restaurants and that sort of thing, generally relatively static menus. There is sort of the DOORDASH example. The average cannabis retailer has over 400 SKUs that they have in stock and the number of SKUs for reasons that I won't go into at this point, that shift in and out of stock on a daily basis, it usually doesn't. And the #1 biggest complaint from consumers is that if they order something and it's not in stock or given the low retail density that they've just driven an hour for an order pickup and what they ordered wasn't in stock. And so real-time data integration, real-time inventory, real-time product match is really critical. When you think about something like the description of the products, there's no normalized SKU or accent numbers. There's no normalized pharmacy tearsheets. And so what we're generally doing is pulling in THC and CBD levels that can vary from batch to batch. As I mentioned earlier, consumers really care about clinical effect. We use normalized consumer reviews from verified purchasers to try and lock in to how will this affects people. And I'll get into this a little later, we're then starting to take that enormous amount of first-party data we have to do personalized recommendations, to help people get over the hump of, I don't know what any of these products are, great. The Weedmaps marketplace can recommend products for you. And then last but not least, I think when you think about after they've made that purchase with our CRM and loyalty solutions, we're then providing ways for the brand, for the retailer to retarget, to reengage that consumer to get them to come back again. So with that, let's move on to the next slide. I want to flip over and just talk for one second on the business in a box solution set. And so just as we look at the marketplace and there's sort of a funnel of conversion from somebody coming in the top and moving through, there's a natural parallelism or sort of similarity with the business in a box, the WM Business suite and that it has elements that sort of follow the entire life cycle of how a retailer brand wants to engage with the consumer. So for reaching users, they can use the Weedmaps marketplace platform. Then we have our ads, our deals platform. We're working on a number of integrations to bidirectionally syndicate deal and deal claim with point-of-sale systems. For converting users, there's our ordering system, which built in compliance features such as in jurisdictions where ID has to be gathered ahead of time. Or there have to be disclaimers that are displayed or a common 1 is medical users can't purchase certain products and recreational users can't purchase certain other products and the tax differs, handling that in our order system. WM Store once we've normalized and taking all this data and augmented it for the retailer, WM Stores is an e-com that lets them embed that on their website and power transactability, compliantly on their own web surfaces. Can I give a little bit of this example earlier, CANNVEYA, which is delivery and fulfillment, handling all of those requirements to upstate, those different state track and trace driver, tracking, digital manifests, all the other sort of biz-and-team compliance requirements that are laid on cannabis retailers, retargeting users. I'll get into the dashboard a little bit later, but we're starting to take that sort of immense data wealth that we have and turn it out into insights and coaching points for businesses to help them better engage either on the platform or through things like the CRM, Sprout, our CRM solution. And then WM Retail, which is our point-of-sale solution and then CANNCURRENT, which is a very complicated SaaS solution set that is incredibly powerful, it's basically an integrations and connector solution that lets businesses do custom workflows, including updating those state track and trace systems when, say, an item is rejected by a consumer. How do they bring it back, check it into the POS and have the state track and trace system know that the quantity has increased. And moving on to the next slide. We're really in a universe of one when it comes to what we offer. So you have the leading marketplace that's out there. But then on top of that, we offer the industry's only Business-in-a-Box solution so the pairing between these 2, so often the value to the business or where compliance sort of fails and dies is not so much sometimes within these individual solutions, but on them working seamlessly together, and that's such a huge value of what we offer. The other thing is we're the only NASDAQ-listed company, and we have the financial scale, the scale of engineering, over 40% of our headcount is engineering, product and design and we're over 700 employees now. So just our breadth and speed of bringing new solutions or new feature sets to our existing solutions market is far greater. Moving on to the next slide. I alluded to this a little bit earlier, but let me put a finer point on it. We've been around for over 14 years, operating and operating profitably. During that time, we built what I could maybe the largest data set of first-party transactional and behavioral data anywhere out there on cannabis. And we're just starting to scratch the surface of the potential with things like recommendation engines built on it, insights, tools. And one of the things we're targeting as we look forward is trying to turn that into subscription data and insights packages to help brands and retailers, who generally are guessing for most of their key business decisions, help them make better decisions to increase profit margin, increase shelf velocity of lagging SKUs in their in stock and that sort of thing. Just flipping on. I'll give you an example of that. So this is something we did at the end of this last year, which is we started digging into that first-party data and looking at user behavioral data and comparing that to the behavior of similar users. And we started with many surfaces and basically reshifting what was presented, the order in which it was presented playing with sort of filtration to put in front of that user products that were -- they were either more likely to purchase or that we believe they were likely to have an affinity for based on their purchasing behavior or that of similar users. And what we saw from that was almost a 5% uplift in conversion. And as we look towards the go forward and look towards the more top-level surfaces throughout the marketplace, we can start to do more with personalization recommendation, is new states open and we think about new users coming in who have never -- either never consumed cannabis or they've been long-time cannabis consumers, but none of these legal market brands or form factors mean anything to them, taking all the guesswork and the hard work out and giving them the recommendations they need separately with our [ Nexus ] with physical in-store operations through our Business-in-a-Box piece, we can start giving those recommendations to store clerks, to bud tenders, helping them give accurate recommendations to consumers so that they can increase basket sizes, that sort of thing. Then moving on, as you might expect with a specialized marketplace like ours. We drive outsized return for the customers that are -- for the brands and retailers that are using this marketplace. So the most important thing to keep in mind is this is a marketplace surface. And so when you think about how we perform the ROI we drive on ads, it's much higher because you have consumers who are there to shop and you're giving them the pathways to complete that shopping experience. So if you look at something like a Google Adwords, you're generally looking at a cost per click for just a nonspecialized audience, a general audience that's approaching $4. And you're looking at a conversion rate that's measured in basis points, not percentage points. When you look at what we offer, we offer right now roughly $0.90 cost per click, and we're offering, as you might expect from a marketplace, an outsized conversion rate. For promoted surfaces, we're offering -- we drive almost a 20% conversion rate. Just by way of comparison, Amazon generally drives around the 10% conversion rate on promoted engageable elements. And then you flip over, what does that mean for when businesses choose to spend money with us. Well, we drive a 5 to 8x return on ad spend or ROAS. That is a huge opportunity for us to grow our revenue. If you look at other industries, generally, you'd expect a 1 to 2x ROAS. And so another way of putting that in very rough layman's terms is if somebody puts $1 and sort of promotional or ad budget into that marketplace, they're getting $5 to $8 out the other side. And then related to that, the question is, well, how do we sort of drive that ROAS down, how do we more effectively monetize. If you look at the next slide, this is something we actually have in beta right now, which is a more augmented admin. And directionally, this touches on a couple of things. One, it makes it easier for businesses to understand the ROAS, the ROI, they're getting, but also we put gamification elements in this. In some ways, the spiritually harkens to some of the things like -- the sites like LinkedIn do where we're encouraging and coaching businesses, hey, if you do this. If you link real-time data from your POS, if you add a yield here, that sort of thing, you can increase conversion, you can increase consumer reach in your region. Here are SKUs that are trending, you should think about stocking them. But then as we drive towards increased economies of scale, we can do things like put self-service flows for signing up for different parts of the Business-in-a-Box suite. In fact, right now, you can instantiate and create your own WM Store, that e-com embed right from this admin. And so this will be rolling out in the general release later this quarter. And with that, let me flip it over to Arden to dive a little bit into the financials.

Great. Thanks, Chris. So a couple of things. Wanted to get into a bit of the unit economics and how to think about just spend dynamics and monetization dynamics for clients on our platform. So the data that you're seeing on the left-hand side maps out different classes of client cohorts, starting with our 2016 clients up through our 2021 clients, and this data is as of the end of Q3, their spend on Weedmaps in month 1 versus where they are today. And what you can see here, which is evidence of the ROI that we're delivering to our clients, as Chris referenced, is that our clients generally spend more with us the longer they're on the platform. So for example, on the left side of this chart, you can see our 2016 cohort, came onto the platform in month 1, spending about $500 to $1,000 per month, which is in line with our base bundle of subscription services. Today, spending just over $5,500 per month. What you can also see is with each progressive cohort of clients, they're entering onto the system at higher levels of spend. And the level of monetization that we're being -- we've been able to drive is steeper up and to the right. With our 2020 and 2021 cohorts, you can see that they're entering into system month 1 at, let's call it, $1,500 to $2,000 of spend. What's driving that? It's a recognition that the spend is worthy. It's a recognition that we are delivering transactions in terms of user engagements that are converting into actual growth for our clients. And what's aided the kind of ramp instead month 1 and the steeper slope of our more recent client cohorts is everything that we've introduced by way of WM Business. Our data would show that when you have clients that are engaging across multiple solution sets that we're offering as part of WM Business, they're more highly engaged and more ripe for upsell opportunities across other solutions that we offer. And the proof is also in the relative comparison. So you can see on the right side here, as of our latest reported quarter, our average monthly revenue per client was running at just about $3,800 per month. And that compares with a couple of other data points of other cannabis tech solutions providers, whether it be springbig at just under $900 per month or Leafly at just over $600 per month. Next slide, please. And we've consistently grown, not only the level of monetization of our clients, but are paying client base in and of itself. So what you see here is our average monthly revenue per paying client on the left, our average monthly paying clients, and we've shown it both U.S. as well as total reported on the bottom. I'll focus on the top half of this slide. As folks who have followed our story know, we reset our Canadian marketplace in 2020. And so the top half looks at the U.S. only, which are kind of more like-for-like comparisons. And you can see that our year-to-date growth through the end of Q3, in terms of revenue per paying clients as well as paying clients was very healthy. What you can see here is our paying client growth was -- for Q3 was in the mid-20s, and it was -- grew quarter-over-quarter in the mid-single digits, and our growth in average monthly paying client was in the high teens in Q3 on a year-over-year basis and in the low single digits on a quarter-over-quarter. We have a lot of opportunity in terms of continuing to grow out our average monthly paying client base. Just to remind everyone, we are currently just over 50% of retail licensees within the U.S. in terms of having paying clients on the platform. And so in a world where there's no further license issuance or no new states opening up, we still have another 4,000-plus retailers to go target in terms of growth and nothing structural stands between us and that opportunity. That opportunity is a function of us getting after it, in terms of resourcing our teams in addition to getting after the growth that will naturally come as new licenses are being issued within our existing states that continue to densify and as new states continue to open up. Next slide, please. So here, we wanted to show some relative financial profile metrics for ourselves as well as some of the other publicly disclosed cannabis data points as well as how we think about different peer sets. So at the end of the day, we are a combination of marketplace vertical software specific to cannabis with a heavy focus on e-com enablement solutions, and that informs how we think about different peer sets out there. And what you can see here is that our year-to-date growth through the end of Q3, and I'll focus on the total stack of the bar on the top chart, which is U.S. only, just given the reset in Canada that we completed at the end of 2020. Our year-to-date growth at the end of Q3 is north of 50%. That compares very favorably versus all the data points that you see in terms of care comparisons. Our year-to-date gross margin is running in the mid-90s. It's the highest that you can see relative to our peer sets. And we have historically operated with positive adjusted EBITDA. That's been core to our operating philosophy. We have generally tended to invest out of our existing needs. And what I'd say also here is that we have a track record of generating this level of growth. In 2019 -- in our fiscal 2019, our year-over-year growth was 42% on top line. In fiscal '20, when you adjust for the reset of non-licensed operators in terms of the cutoff that we completed at the end of our 2019 fiscal year, our year-over-year growth adjusting for that reset was 41%. And you can see what we -- where we were 3 quarters through the year of 2021. We have a track record of delivering on outsized growth relative to our end market growth dynamics. And we also have a track record of investing out of our existing means with positive adjusted EBITDA throughout the course of our operating history. And we think this combination of growth and profitability is pretty unique when you think about different peer sets that you might comp WM Tech against. Flipping to the next slide. And going forward, we have multiple ways to win, a lot of ways to think about growth. And so let's talk about within our existing markets. There is only 1 licensed retailer for, let's call it, every 25,000 residents within all of our existing states. We are still miles away from achieving let alone optimum density, but even minimum density. Now don't get me wrong. Licenses continue to get issued. That 1 license per 25,000 stat that exists today has materially improved over the last several years, but there's still a lot of growth to go. So within our existing markets, we would estimate that if all of these states achieve a minimum level of density, which we define as 1 license for 10,000 residents, the current existing license universe would double. And you can think about the possibilities if there's more optimum levels of retail density similar to what you would see with alcohol retailers or pharma retailers. I mentioned before that we're only half of existing U.S. licensees today, and there is a lot of opportunity for us to continue broadening out our paying client base. And as those clients come on to platform, we've shown our consistent track record of getting them to higher levels of monetization by getting them engaged across our solutions set. Then there's new market expansion. We're very focused on the tri-state area with New Jersey, Connecticut and then subsequently New York. So some big states that will be coming online. In addition to other U.S. states that are either converting to adult use or opening up over the course of 2022. Canada monetization. So we haven't yet meaningfully started to reinitiate monetization in Canada, and that represents a big opportunity as well as international cannabis at the end of day is a global story in our marketplace should translate globally to some of these international markets that are starting to regulate cannabis usage. We've done a lot to inorganically pull forward growth. And so we recently completed a few acquisitions that brought forward several software capabilities that we can now cross-sell and scale over time. And then there's the opportunity that comes with federal regulation in and of itself. So today, only 13% of the population in the U.S. are active cannabis users. That number up in Canada where cannabis is federally regulated is closer to 1/3 of the population. So we fully expect with federal regulation that more retail density will occur, more of that consumer demand that currently sits outside of license channels was shipped into licensed channels that new users will continue to enter into the category and some of the kind of structural limitations by our clients to spend such as [ 280-e ] , where they can't deduct OpEx for federal tax purposes will go away, and we'll be able to access bigger budgets. And with that too, we will also be able to access new forms of monetization. At the end of the day, we are a marketplace business with a SaaS enablement layer focused on e-com, yet we do not monetize transaction activity or take payments, and that represents opportunities for us when federal regulation does occur. So with that, that wraps up the presentation today, I don't know, Matt, if we had time for questions or if we've run to time.

We do. We have about 4 minutes left, and I have 1 or 2 from the audience here. So we start off with you. We have -- okay here's 1 regarding your client base. You have 4,500 paying clients in your platform, they're spending $3,800 per month. Can you talk a little bit more about the ROI you deliver to your clients? How are you able to achieve such tremendous ROI versus what we would see in a more traditional marketplace? And then what drives that higher cohort curve that you mentioned during the prepared remarks.

Yes. So I'll maybe start and then flip it over to Arden. Look, I think one of the things that drives that higher ROI is it is incredibly hard to educate and get consumers to shop online, to shop for cannabis online. It's just a very -- it can't be overstated how complex the good is, and we have 14 years of experience doing consumer surveys, doing fieldwork and building that into the marketplace to make it transactable. That's 1 thing that helps the ROI or the ROAS. And people don't buy, you're not going to deliver ROAS. But the other thing is, a part of it comes down to also an educational piece. One of other reasons for doing the admin and the dashboard is just making businesses be better aware of sort of the ROI that we drive. And we still see businesses need to be educated on that. I chuckle a little bit, but there's been a little bit of market turmoil and disruption. And there was a client as the CEO of a pretty large cannabis operator that reached out that they'd acquired a sort of small chain of cannabis dispensaries and the seller had terminated their Weedmaps contract right as things ended. And he fowarded the e-mail chain that went with it. And he said, "Hey, we really need to get turned back on Weedmaps." And the note further down with somebody who is sort of the operations manager across the store is basically saying, "Hey, on an average Tuesday, we do X and since we came down off the marketplace platform, we're doing about 30% to 35% of what we do on a normal Tuesday." I think that shows the value of the platform, but the thing that was interesting to me is that the CEO hadn't realized it till the operations manager pointed out to them. And so that's a continuing education process, but the value there is sort of undeniable. It's just we need to put it in front of them with things like the admin platform and that sort of thing. I think the other thing is -- and it's not just ROAS and ROI. It's also enabling them to get their data to respond to orders compliantly, that sort of thing. It's helping them improve their margins, which is a little bit harder to show them, but which they feel intrinsically. And on the compliance side, as we see regulators get more comfortable with the number of licenses that are there. If you're not compliant, the regulators, the inspectors, they're not there to coach you through it. They're going to come in. They're going to pull your license and they're going to leave. We see it happening in Colorado. We've seen it for some time. We're starting to see the same thing happen in Colorado and [indiscernible] California and other states that are maturing a bit. And so the compliance element of this, yes, improves margins, but it's not a nice to have. It's -- you need to protect the investment that you put into that business. But Arden, let me flip it over to you.

Yes. And Matt, specifically around that question around what's driven those client cohort spend curves up into the right. So a few things. Certainly, we benefited from some macro factors, meaning as markets continue to densify, right? States continue to densify, competition continues to brew, the level of sophistication continues to increase, that's driven the need for our clients to compete in that price more spend. But I'd say the large portion of what's driving those kind of higher levels of spend, is a few things. We've introduced more solutions for our clients to visibly, tangibly, close the loop on the type of returns that they're getting on spend. So introducing orders functionality so that they can receive orders directly off the marketplace, introducing performance analytics. So prior to May in 2020, we didn't provide any performance analytics to any of our clients. Now they have very robust performance analytics to be able to see what type of returns that they're getting, and we're also seeing higher levels cross product adoption, which in and of itself is driving the higher levels of engagement and spend that transient the spend on the platform on that analysis.

All right. Great. Well, Arden and Chris, with that, we're out of time. So I really appreciate your time and insights and for participating in the conference and best of luck on all these initiatives in '22.

Great. Thank you.

Great. Thanks.