WM Technology (NASDAQ:MAPS) has maintained stability in its profitability and cash flow, showcasing a 3% sequential sales increase to $45.9 million for 2Q24, despite a 5% year-over-year decline.

In a Monday afternoon report, senior analyst Pablo Zuanic noted that SaaS solution revenues, representing WM Technology's software offerings for cannabis businesses, surged 19%, contributing to 29% of the total revenue mix. Meanwhile, listing revenues, which account for 62% of the mix and primarily come from featured listings and deals on the Weedmaps platform, fell 14% year-over-year. Zuanic & Associates reiterated a "Neutral" rating for WM Technology, but "are becoming more constructive."

The company's adjusted EBITDA margins remained stable at 22%, with average monthly paying clients increasing by 2% to 5,045.

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Cost Controls And Reinvestment Drive Growth

MAPS has been reinvesting cost savings into advertising and product development, with ad spending reaching 8.3% of revenue in 2Q24, up from 5.6% in 1Q24. Meanwhile, cash General and Administrative (G&A) expenses fell 3% sequentially. Zuanic noted that cash reserves increased by $5.5 million to $41.2 million, with receivables reduced to 14 days from 28 days in 2Q23.

Competitive Position Outside California

While MAPS has shown strong performance in its home state of California, Zuanic raised concerns about the company's ability to compete in other markets. Michigan has been a notable bright spot, but it remains an exception rather than the rule.

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Opportunities To Monetize Additional Platform Features

Zuanic highlighted potential opportunities for MAPS to monetize additional touchpoints on the Weedmaps platform. This could include expanding into adjacent cannabis categories, depending on how regulations evolve.

According to Zuanic, there may be opportunities to "monetize other touchpoints in the Weedmaps platform or enter adjacent MJ categories," which could present further growth avenues for the company as regulations change.

Outlook And Valuation

For 3Q24, MAPS expects sales of $44 million, with EBITDA margins projected to decline to 16%. According to Zuanic, in the medium term, the company targets a return to 20% EBITDA margins.

Valued at 1.2x sales and 12.8x EBITDA, MAPS currently lags behind peers in the tech sector, with non-cannabis marketplace stocks trading at 2.6x sales, e-commerce enablement platforms at 3.6x and vertical SaaS stocks at over 7x. However, Zuanic emphasized the company's focus on cost control and its pursuit of growth in emerging markets, positioning it for future opportunities.