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We focused on driving more value to retailers in 2022, contributing to growth in the year were the launch of new products, including our new delivery first shopping experience, prominent marque ad units, and improved functionality of our retailer platform and services. We also rolled out our enhanced bidding capabilities more broadly and our recent partnership with Uber-Eats in Ontario has been successful with delivering an increase in orders to Toronto retailers by 254%. Most notably, the actions we took to control costs in 2022, delivered an improvement in our adjusted EBITDA loss. We delivered negative $23 million adjusted EBITDA for 2022 above our expectations; much of this was done through a right-sizing of the business in October, meaningful cost cutting initiatives and tight spending controls across the company.

We continue to prudently manage expenses and protect cash and are implementing additional headcount reductions of approximately 40 positions expected to yield annual savings of $8 million beginning in Q2 as we continue to rationalize our cost base and be nimble in a difficult cannabis environment. Most notably, we are adjusting our go-to-market strategy to ensure we are allocating resources to our highest value clients, while maintaining our local approach, improving track record of bringing new retailers onto the platform. As market consolidation continues to accelerate, we are focused on building deeper relationships and increasing customer spend across Leafly's full suite of products and services. As has been the case for the past many months, our focus will continue to be on prioritizing projects and product enhancements that will result in the highest returns and maximizing cost efficiencies across the business.

Our operational plan for 2023 builds on these priorities and we expect considerable improvement to adjusted EBITDA on an annual basis going forward. This plan also allows us to preserve capital as we seek an improved path to profitability. Despite headwinds, I want to highlight the continued success we've seen from our local market strategy, to enter less penetrated markets at lower price points with the focus on up-sell. Both New Mexico and Montana are great examples of this. These two recreational markets open last year, new stores opened and our sales team focused on getting them subscribed to the platform and up-selling them with our existing and new advertising products. This led our market penetration to reach 75% in both of these markets by the end of '22, from just over 50% at the start of the year, as well as achieve increase in ARPA of greater than 50% in both markets.

This playbook is one that we've replicated multiple times. As new markets come online, we will continue to increase penetration in markets where we see the greatest growth opportunities, both in landing new retailers and through up-sell, which we believe will drive ARPA up in the long-term. In the short to medium-term with many markets still under penetrated, ARPA will vary market-by-market. As we look ahead to 2023, we continue to operate in a weak macroeconomic environment and a challenging cannabis vertical. We expect the environment to be similar to what we saw exiting 2022 with growth muted and high variability from market to market. Cannabis prices are down, economics are difficult. With some markets like Massachusetts, Oregon, and Arizona seeing significant reductions in the wholesale price flower, these dynamics certainly have an impact on the retailers and brands, who use our services.

With this in line, we continue to take a cautious and focused approach by managing the inputs we control, including cashflow and expenses and driving significant improvements towards profitability. Our approach for the new year is rooted in the successes we made in 2022, knowing that the product innovations we have brought to market over the last 18 months, along with the focus and discipline on our cost base, have set us up to sustain ourselves through this turbulence and thrive once it subsides. Despite some of these industry and economic challenges, consumer interest in cannabis is persistent and remains high with volumes of product order holding steady, but consumers are looking for deals in value, as we see them trading down to lower price point products.

What does this mean for us? Targeted solutions for the cost conscious consumer like price comparison and deal in discount discovery, to connect them with the same quality products they seek for less; we have a tremendously diverse set of products, more than 160,000 available on the platform today. This also provides us with an immense amount of data that we can share with our retail and brands customers to further establish trust and reinforce the value of our platform. Part of servicing the consumer means continuing to improve the consumer experience and increased retention, which is critical to our success. We're focused on a couple of different things in 2023. First consumer enhancements. We're building off our proprietary data to drive better personalization, creation, and effects based shopping, which allows consumers to shop based on how they want to feel.

We'll also focus on getting more deals to consumers to deliver what they're looking for in today's market, and that is value In mobile apps, we've seen significant growth and we continue to emphasize native more than 1 million downloads of the Leafly app occurred in 2022 and 18 and a half percent increase year-over-year. Mobile is where our most engaged customers are. They search more, they shop more, and we have an easier path to retention and engagement. Our app creates a sticky closed-loop experience, where we can more freely interact through notifications, offers, and relevant content. Orders on mobile saw tremendous growth, 384% year-over-year, partially fueled by our Uber-Eat partnership announced in October. This relationship is an extension of our strong belief that mobile is a critical component to our strategy.

We are encouraged by early successes and continue to ramp-up in Ontario. While still in its , we think the Uber-Eats partnership and our belief in a delivery first shopping experience has tremendous opportunity as local markets embrace e-commerce and delivery. We also believe that reducing friction for our retail and brand customers will continue to demonstrate our commitment to making working with Leafly as easy and beneficial as possible, creating efficiency and value for our partners. We're hearing from our customers more and more, that they want to understand how they can best leverage the Leafly platform to grow their business. We have a lot of information and data, and 2023 is about bringing that to life and making that data actionable for our customers and combining it with our expertise in know-how.

Third party integrations which are critical for reducing friction for our retailers will benefit from a new and more robust ordering API. We'll improve ordering features with scheduled pickup windows, giving retailers greater control to manage their order flow and to deliver for shoppers. We'll make it easier for retailers to create deals on Leafly and offer new deal types. We will continue to innovate, improve on our ad products, including the extension of our marquee ad units into our mobile ads, providing an increase in impressions on our most engaged platform. We will streamline the ad creation process through an improved ad builder giving retailers and brands greater control. Looking at 2023, we are seeking an improved path to profitability through sustainable revenue growth and cash conservation.

We see opportunities to rationalize our sales and support cost base by off-shoring some operational support tasks while focusing our talent on higher value activities, such as in-market activations and building stronger relationships with our highest value customers. We'll continue to manage this year through a conservative approach as we seek a path to profitability, preserving cash, and targeting our resources against the key opportunities ahead. That's in places like Missouri, which just recently opened their rec market. They have approximately 200 stores in market, that drove a hundred million in sales of cannabis in its first month. We are in that market in front of licensees, bringing them onto our platform and activating, ordering at full penetration across Missouri.

That's a sizable revenue opportunity just by using our current ARPA rates. Cannabis with all of its regulatory hurdles and starts and pauses is a long game. We're going to see for the first time how cannabis performs in a down economy and what we see gives us reasons for optimism. We're adjusting to give consumers what they're looking for - Value and providing retailer and brand clients with clearer and simpler paths to reach shoppers. We've positioned ourselves in the market to benefit as opportunities start to take hold, and we believe we're positioned well for the year ahead and set up for success when the market re-accelerates. Now I'll turn it over to Suresh.

Photo by CRYSTALWEED cannabis on Unsplash

Suresh Krishnaswamy: Thank you Yoko, and welcome everyone. As Yoko discussed, we're operating in a difficult environment. We started to see a shift in our business in the second half of 2022, without budgets coming under increased scrutiny. This shift in the market impacted results in our sales growth slogan. Revenue in the fourth quarter was $12.1 million, essentially flagged year-over-year. Raising that down, revenue from retail was $9.5 million up to 4% year-over-year. Revenue from brands was $2.7 million down 12% year-over-year, reflecting the softening we started to see in the second half of last year. I'll speak to our retail results first. During the fourth quarter, we continue to focus on growing our market share in both new and more established markets.

Our success in this area led to ending retail accounts growth of 10% year-over-year. We had bright spots with healthy account growth in Montana, New Mexico, and California. We continued to see softness in the same markets. We have called out previously, like Oklahoma and parts of Canada. Our retail ARPA in the fourth quarter was $554, a decline of 7% year-over-year in flat quarter-over-quarter. We expect to see continued pressure on ARPA this year. We're prioritizing growth of accounts in newer markets, and these come on at lower average ARPA. We also continue to see industry and market dynamics put pressure on how customers approach ad spend. Turning to brands, on a sequential basis, revenue declined 3% compared to Q3. We started to see brands pulling back on advertising spend in the third quarter.

Given the importance of the holiday and the historical seasonality and brand spend, we had anticipated an uptake for December. However, the typical boost in ag spend in the period after Thanksgiving did not materialize. Looking at Q1 activity, brand spend continues to be soft, given the macro environment as brands are not activating at the same levels they were in 2022. Now turning to gross margin; total gross margin in the fourth quarter was 88% in line with levels reported in the year ago quarter. Our team is focusing on cost management measures and optimizing resources, and as a result, we expect gross margin to remain at similar levels in 2023. Moving on to operating expenses, our Q4 total operating expenses were $16.3 million, which was relatively flat compared to Q3.

Today we announced additional cost cutting measures in a reduction in force. The measures we are taking will align our cost structure to reflect the current industry and macroeconomic environment, while also focusing on our largest opportunities. We are reducing headcount by approximately 40 positions or 21% of the company's workforce and expect a one-time cash restructuring charge for the layoffs of approximately $700,000 in Q1 of this year. We expect total annual cash savings of approximately $8 million with about half of that realized this year. Moving forward, we'll be intently focused on three priorities, one, aligning all of our resources around one common theme, building a stronger marketplace, two, supporting the areas of the business that will provide the greatest return from a near term revenue perspective.

And three, continuing to improve operating efficiency and preserving cash. Our team is laser focused on managing costs in order to extend our cash runway and stay on chorus to achieve profitability as we have outlined previously. Now turning to the balance sheet, we enter the quarter with $24.6 million in cash. Our team has been diligent in managing our cash resources. We remain committed to prudently managing our capital and our cost reductions starting last October are a testament to this. We will continue to operate with this disciplined approach and focus on improving efficiency. In light of recent events, we wanted to inform investors that we do not have a banking relationship with SVB, Signature Bank or First Republic. We diversify our cash balances across several banking relationships to mitigate risk, and we're actively evaluating options to increase cash protection.

Now to our guidance, given the challenging environment and the lack of visibility for the year, we have decided not to provide full year guidance at this time, and instead only provide quarterly guidance for the near-term. For Q1 '23, we expect revenue of $11 million to $11.3 million and an adjusted EBITDA loss of negative $4.3 million to negative $4 million. We continue to focus on our path to profitability and are executing against our plans to achieve this in the next 24 months. Over 2023, we expect our annual cash burn rate to be approximately $10 million and our targeting a meaningful improvement over 2022 in full year adjusted EBITDA loss. While external factors are impacting our growth rates, we're focusing on the things we can control and taking the opportunity to realign the business for greater efficiency.

The changes that we announced today are designed to better serve our customers, deepen our relationships, and help them navigate this challenging environment. We'll now open up the call for questions. Operator?

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