Leafly Holdings, Inc. (NASDAQ:LFLY) Q3 2022 Earnings Conference Call November 10, 2022 4:30 PM ET
Company Participants
Keenan Zopf – Investor Relations, The Blueshirt Group
Yoko Miyashita – Chief Executive Officer
Suresh Krishnaswamy – Chief Financial Officer
Conference Call Participants
Harrison Vivas – Cowen
Jason Helfstein – Oppenheimer
Eric Des Lauriers – Craig-Hallum
Operator
Hello, and welcome to today’s Leafly Third Quarter 2022 Earnings Call. My name is Jordan, and I’ll be coordinating your call today. [Operator Instructions]
I’m now going to hand over to Keenan Zopf, Investor Relations with The Blueshirt Group to begin. Keenan, please go ahead.
Keenan Zopf
Good afternoon, and welcome to Leafly’s third quarter 2022 earnings call. Joining me on the call today are CEO, Yoko Miyashita; and CFO, Suresh Krishnaswamy. Today’s prepared remarks have been recorded after which Yoko and Suresh will host live Q&A. A copy of our press release, along with an accompanying earnings presentation can be found on our website at investor.leafly.com.
Today’s call will contain forward-looking statements, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding the services offered by Leafly, the markets in which Leafly operates; business strategies; performance metrics, industry environment; potential growth opportunities; and Leafly’s projected future results and financial outlook; and can be identified by words such as expect, anticipate, intend, plan, believe, seek, or will.
These statements reflect our views as of today only, should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements by their nature address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations.
For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks discussed in today’s press release, our Annual Report Form 10-K filed with the SEC on March 31, 2022 and our other periodic filings with the SEC.
During the call we will also discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP and non-GAAP results is included in our earnings press release, which has been filed with the SEC and is also available on our website at investor.leafly.com.
With that, let me turn the call over to Yoko.
Yoko Miyashita
Thank you, Keenan, and thank you to everyone for joining us. Revenue for the quarter was $11.8 million, up 8.1% year-over-year as we continue to expand our advertising products, partnerships and the Leafly brand. Revenue from retail was up 5.1% year-over-year, and revenue from brands was up 19.6% year-over-year.
On a sequential basis, revenue reflected the ongoing, challenging environment facing the retailers and brands we serve. The cannabis industry in particular saw anemic sequential growth with Q3 retail sales estimates coming in at flat to 1% growth compared to Q2. The volume of product sold has grown, but retail price points have declined.
Those declines have put pressure on our retailers and brands to reduce their ad spend as their margins compress. This tells us that the macro environment is difficult but consumer demand for cannabis has not softened and they continue to purchase, which we see reflected in our own platform activity.
Although Average Order Value has softened, the number of items ordered with each purchase has remained consistent and retailers are placing deals on our platform at a record number. This is a strong indication that value has become extremely important as consumers are looking for the best prices and deals when they purchase.
With our investments this year to build our subscriber base and increase deals functionality on our platform, we’re poised to deliver choice and value to consumers when they need it most. We’re also helping brands and retailers reach more customers when building their business is critically important.
With the market pace of growth declining, and the subsequent impact to ad spend from retailers and brands, we announced a 21% headcount reduction in October, which is in addition to the significant OpEx savings initiatives we announced on our last earnings call. Suresh will give more details about these in a moment.
Both of these actions have realigned our cost structure, enabling us to preserve capital and manage for the long-term health of the company. These measures also give us greater flexibility in this dynamic market, better positioning us to take advantage of opportunities as they arise. Although, this was a difficult decision, we are focused on creating shareholder value, and it was the right decision given the current macro environment.
Investments made over the past two years allowed us to reorganize our sales team and bring on much needed talent in our PDE and G&A teams. This early work provided insight and data to know which investments yield the greatest benefit and information on what we can do to be more efficient and what we can prioritize to drive the greatest returns.
In addition, we have delivered significant product and partnership launches that we expect will present further monetization opportunities as they scale. As we look to the short to medium-term, we’re focused on optimizing what we have already accomplished, with plenty of opportunity to generate incremental revenue across the Leafly platform.
Our teams expect to move as quickly as possible in the areas of the business that we are able to control, and will be ready to capitalize when the industry returns to robust growth, as we all expect. As a long-time supporter of a fair and equitable cannabis industry, we are encouraged by the industry momentum seen across the country.
In October, we witnessed history when President Biden reinvigorated federal legalization discussions, by announcing pardons and kicking off the process to examine de-scheduling. It’s an historic moment and recognition from the highest level of the executive branch of what the public overwhelmingly already supports.
With the U.S. elections this week, we’ll be welcoming two more states to legal recreational cannabis Maryland and Missouri whose residents comprise almost 4% of the U.S. population 18 and over. The Leafly platform is firmly established in these current medical markets, with over 80% of medical dispensaries in Maryland and Missouri already engaged on Leafly as of the end of Q3. We look forward to serving the millions of recreational consumers who will now have access to licensed, tested cannabis and onboarding new retail locations once those rec markets open.
In addition, delivery continues to gain momentum in local markets as well. We are very excited about the partnership with Uber Eats we announced in October. This partnership brings a seamless shopping experience to life within the Uber Eats app. The partnership is currently limited to Toronto.
Its important for a number of reasons. One, it normalizes cannabis and is a recognition of the great potential of this industry and the value of the cannabis shopper. Two, we deliver tremendous value to retailers on our platform, giving them access to Uber’s wide customer base. Uber’s penetration across consumers in Toronto is significantly larger than ours and the ability to connect those consumers with retailers is critical in a competitive environment and it’s a powerful lever to help retailers grow their business.
Three, this partnership lends itself to our strategy of strengthening and building more commercial partnerships through technology integrations as we find more avenues to help our retailers reach a broader audience. Specifically for us, we see this partnership as a way to drive new retailer acquisition and order volume growth in Ontario.
New retail leads from the province increased by more than 260% in the week after the announcement. We also see this as an opportunity to drive ARPA higher in this market. We are a
valuable connector for consumers and retailers, and our partnership with Uber is helping to connect even more consumers with licensed, tested cannabis products in Toronto.
Delivering against our mission to help more people discover cannabis on such a large platform would not have been possible without the growth and momentum from the investments we’ve made and our focus on technology integrations over the past two years.
Moving on to other quarterly highlights, we saw an increase in ending retail accounts of 7.4% quarter-over-quarter or 18.2% year-over-year. We saw continued growth in monthly active users with a 4% increase over last quarter. This was driven by top of funnel improvements, which have continued to bring high quality users to the site.
We are disciplined in our marketing approach to drive traffic through meaningful content while establishing Leafly as the trusted, go-to source for cannabis. It is not our strategy to utilize low-quality, paid traffic. Instead, we have focused on improving SEO by publishing content that consumers find valuable, which has been fruitful and is a key component of our mission to help consumers discover cannabis.
As you know, one of our four key areas of focus this year has been making improvements to our ad platform to drive lower funnel performance for retailers and brands. We launched some of the largest improvements to our ad platform, including the launch of marquee ad units, the first new ad unit for retailers released in nearly two years across the most valued real-estate on Leafly: our homepage, strains, and strains list pages.
We launched these products on web in October, with expansion into native coming as a fast-follow. We are seeing great interest and strong selling momentum which adds to our durable subscription revenue and reinforces that retailers are still eager to find ways to connect with engaged Leafly consumers.
We’ve also improved our attribution on our menu merchandising product, making it easier for brands to easily understand how Leafly drives lower funnel performance through these ad units. We continue to strengthen the role Leafly plays in the success of our retail and brand clients by reducing friction for our B2B partners in key areas.
In addition to the Uber partnership, which will expand in Toronto, we completed integrations with Blaze and OnFleet, making it easier for delivery partners to scale on Leafly and improving the customer shopping experience. We believe delivery is a critical growth driver for us in existing and forthcoming markets and with our growth in integrations and new partnerships in this area, we intend to lead in this category. Our success in California is a compelling proof point. Our delivery product is driving growth in revenue and performance in California, with a 24% year-over-year increase in California revenue and nearly 2.5 times increase in orders, almost one-third of those orders coming from our iOS app.
Building and maintaining trust remains a focus, as we continue to create an incredible consumer shopping experience. We have refocused our editorial and content efforts to make sure we are bringing the most valuable and sought-after content to consumers through our news and learn channels and premium editorial content. We also introduced FX-based filters in our shopping experience, as consumers consistently tell us that it’s how they want to shop for cannabis. It’s how we’re leveraging our unique IP to help consumers in their cannabis discovery journey.
We’ve strengthened our thought leadership with the release of our second annual harvest report, the only annual holistic assessment of cannabis as a crop, a crop that is the sixth largest crop in the United States. We also released our inaugural opt out report which highlights the inadvertent ways local municipalities are supporting the illicit market when they opt out of legal cannabis sales. These are important topics not covered extensively by anyone else.
We’re also excited by the anticipated opening of New York rec stores before the end of the year. Our brand resonance across consumers in the Northeast is significant, and our penetration across existing medical retailers is strong in those markets, including 100% penetration across retailers in New Jersey and over 90% of existing dispensaries in New York on our platform at the end of Q3.
On the operations front, we are focused on optimizing our teams, existing products and offerings. We’re working to create better alignment across teams, drive increased productivity in our sales organization and improve our go-to-market strategy. We welcomed Carlos Pinto to Leafly in October to oversee the sales, marketing and content team. His expertise in developing strong cross-functional team comes just at the right time.
We’ve done the heavy lifting, consumers recognize the Leafly brand as a source for trusted expertise and premium content. We’ve built a robust platform for retailers and brands with some amazing products and key technological integrations, and now we’re focused on penetrating local markets, adding retailers on platform and connecting them with high-value traffic.
Today, the legal cannabis market is in its infancy. Despite the current macro environment, the industry is forecasted to grow to $42 billion over the next four years. Legalization momentum only serves to further normalize cannabis, and over time, this will be a valuable CPG industry in need of technology and support services that Leafly will be here to deliver. I am optimistic about the long-term prospects of the industry, and of Leafly, as we build a healthy and vibrant marketplace for the future of cannabis.
And now I’ll turn it over to Suresh.
Suresh Krishnaswamy
Thank you, Yoko, and welcome, everyone. We are operating in a difficult environment and Q3 was a tough quarter. We saw a continued softening in ad spend from Q2, and we responded quickly to adjust the business by implementing cost-cutting measures, including a headcount reduction. As we look ahead to Q4 and beyond, we will manage the business to take advantage of the opportunities ahead of us, while staying focused on controlling costs. Q4 is typically our best quarter of the year due to higher holiday-related ad spend. Our early read for the quarter is one of caution. In October, we’ve seen healthy interest from advertisers in our new marquee ads and Strain feature ads, and a pickup in retail revenue. However, we’re still seeing brands pull back on their spending.
Now to the results in Q3. Revenue in the third quarter was $11.8 million, up 8% year-over-year. Breaking that down, revenue from retail was $9 million, up 5% year-over-year. Revenue from brands was $2.7 million, up 20% year-over-year. Ending retail accounts grew 18% year-over-year as the sales team worked to grow our market share in both newer and more established markets. We saw continued churn in retail accounts in Oklahoma, a market that has been struggling to strike a balance between supply and demand. This churn was offset by strong account additions in Florida, California and newer markets like New Mexico. Our retail ARPA in the third quarter was $556, a decline of 10% year-over-year and 4% quarter-over-quarter.
As we have mentioned on previous calls, this number has been trending lower as we grow aggressively in newer markets and work to gain market share in more established markets. The decline in ARPA from Q2 to Q3 was primarily related to pricing promotions and discounts in British Columbia and Oklahoma, and general pricing pressure in Illinois. Strategically, we believe this approach to add retail accounts will benefit our business in the long-term. It’s part of our land and expand strategy. We will focus on growing accounts and deepening our market penetration.
At the same time, we’re also working to reduce churn and keep customers on our site. We know that customers come to Leafly looking for information and product access. The more retailers we have on our site, the more Leafly helps create a healthy, vibrant marketplace that benefits consumers and retailers alike. Due to the subscription nature of our business, the introduction of our new marquee ad units, and the important holiday ad period, we expect continued growth in retail revenue in Q4 on a sequential basis in the mid to high single-digits.
Turning to brands. On a sequential basis, revenue declined 8% compared to Q2 as brand accounts pulled back on digital advertising. Part of this decline is due to the fact that Q2 includes the 4/20 holiday, which typically leads to a boost in brand advertising. Our expectation for the near-term is for brand revenue to face continued headwinds as these customers have trimmed their budgets even in light of the upcoming holidays, which are traditionally higher spend periods for brands. We expect brand revenue in Q4 will be roughly flat compared to Q3 2022.
Now turning to gross margin. Total gross margin in the third quarter was 87.1%, a 130 basis point decrease from 88.4% in Q3 2021, driven primarily by increased business platform and web infrastructure expenses and headcount costs. We expect gross margin to remain at similar levels going forward.
Moving on to operating expenses. Our Q3 total operating expenses were $16.3 million, which represents a 16% sequential decrease in OpEx from Q2 as a result of a pullback in marketing and travel and entertainment spending and reduced headcount.
I want to take some time now to speak to the restructuring and cost-cutting measures that we announced on the 18 of October. The items that we have taken will have a meaningful impact on our operating expenses going forward. These efforts are intended to position us with the appropriate operating structure and resources to deliver sustainable value to our customers and shareholders.
An additional goal of this restructure is to conserve cash and strengthen our balance sheet. As we announced on the 18, we expect to pay approximately $0.5 million in Q4 related to salary and benefits costs for eliminated positions. The majority of the headcount reduction occurred in the sales and marketing and product development teams.
As we disclosed in our press release, we expect annualized cash cost savings of approximately $16 million starting in 2023. While we’re not prepared to offer guidance for the full-year 2023, I did want to provide some commentary to help investors understand how we’re thinking about cost structure next year and the impact of our realignment of the business.
As I’ve said, we do expect cash cost savings of approximately $16 million in 2023 compared to 2022. We currently anticipate that our operating expense structure, excluding stock-based compensation, will be roughly split across our three categories, with sales and marketing at 40% of total OpEx, TDE at 20% of total OpEx, and G&A at 40% of OpEx.
Given the current environment, we are proceeding with a cautious posture. As Yoko mentioned, there are dramatic changes happening in the industry with respect to legalization, that get us excited about the future. We have positioned our business to capture this future opportunity while being mindful of the macroeconomic headwinds.
Now turning to the balance sheet. We ended the quarter with $27.8 million in cash. We continue to be prudent in managing our cash. The cost reduction and business realignment are designed to preserve our ability to respond to opportunities in the market, while also effectively managing capital. I also want to point out our Q3 ending basic share count of 40 million shares. This was after we repurchased 3.1 million shares during the quarter using restricted cash on our balance sheet.
Now to our guidance. For the full year 2022, we are refining our revenue guidance and now expect revenue to be between $47 million and $48 million. While our retail revenue is holding up, we see increased risk in brand spending in Q4. For adjusted EBITDA guidance, we expect a loss of approximately negative $26 million for the year, which is at the top end of our previous range. Lastly, we’re planning to give full-year 2023 financial guidance on our fourth quarter earnings call in March 2023.
We will now open up the call for questions. Operator?
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from Harrison Vivas of Cowen. Harrison, please go ahead.
Harrison Vivas
Great. Thanks so much for taking my questions. First one for me. Nice pickup in ending retail accounts here. So just given we’re halfway into 4Q, curious if you can give us any line of sight into what you’re seeing in terms of cancellations and/or new adds of the platform?
Suresh Krishnaswamy
Yes. Hi, Harrison. We had a strong quarter in retail account growth, 18% year-over-year. We’re really focused on growing retail accounts following the churn it’s on in Q2. We are pleased with what we achieved in Q3. To give you a little sense, California has a large number of account adds due to introductory promotions and our focus on our new delivery product and experience. And overall, we saw growth in over 70% of our markets quarter-over-quarter, including some of our newer markets, New Mexico, Missouri, and within our MSO client base in Florida. So we’re looking for some of those trends to continue.
So we’re expecting modest account growth going forward. I mean, we’re not giving guidance on any retail accounts, but year-over-year, it’s probably in the high single-digits. We know retailers see the value of being on the Leafly platform, and we’re conscious at the same time of customers tightening their budget in the current environment. At the same time, we’re optimistic about the new licenses coming online as well, in a number of places.
Harrison Vivas
For sure. That’s helpful. I know it’s still early days, but are you seeing a pickup in new retail accounts as a direct result of the partnerships that you’ve done recently, specifically with BLAZE and Onfleet in the U.S?
Yoko Miyashita
Yes. Let me speak to that one, Harrison. BLAZE and Onfleet, critical partners for our delivery experience in terms of reducing friction for our retailers in building the right consumer experience. So we think that’s one of the key drivers of our growth in California, and I give chairs and staff on the call in terms of the year-over-year performance increases we’re seeing there. Very excited about that. We think we’re in early days. We talked about our redelivery product that we launched in H1 of this year. We have layered on delivery platinum placements, which are specific ad units that are really catered to that delivery audience. So we’ll continue to work on scaling that. We’re excited about what that — what lies ahead from that work.
I’ll also say in terms of delivery, the Uber Eats announcement, not only did we see the increase of retailer needs in the market, but that’s had a general payload effect. And really that ability to connect consumers, really strong top of funnel traffic with retailers that’s highly attractive in this highly competitive space where retailers can try and pay in cash.
Harrison Vivas
Great. That’s helpful. So just, I guess, following up on that, can you maybe offer more color on the economics of those partnerships and how we should think about the impact to the model, especially because you’re offering these partnerships with some customers free of charge? And then I guess curious to see like how do we think about the ramp and ARPAs over time, given you’re turning them on for free initially?
Yoko Miyashita
Yes, great question. And while I can’t go into the specific of our deal with Uber, what I can say is, this deal has allowed us to essentially raise the entry price points for all new retailers coming on platform in Ontario. It’s made our platform that much more valuable and that does give us a great opportunity to increase ARPA in market. So it’s certainly as well as existing as we go through many more cycles.
Operator
Our next question comes from Jason Helfstein of Oppenheimer. Jason, please go ahead.
Jason Helfstein
Thanks. Two questions. So the guidance for revenue is minus 4% to plus 5% year-over-year. Obviously, everyone is going to kind of try to read forward from that. So without giving formal guidance, I mean, how are you thinking about next year? I mean, in some cases, we’ve thought about a weak first half and a stronger second half. Just how did you come up with the minus 3% to plus 5% range? And just how do we think about that? And then the second, was there a catalyst that caused customer growth quarter-to-quarter? Thanks.
Suresh Krishnaswamy
So Jason, just to dive in on that question, could you just clarify the minus 3% to plus 5% that you’re talking about for next year?
Jason Helfstein
I think that’s the implied if you take the range of your full-year. You gave full-year revenue 47 to 48, right?
Suresh Krishnaswamy
For this year?
Jason Helfstein
Yes, I’m saying this year. So if you back into the implied fourth quarter revenue change of your guide, I think that’s the range, if I’m math is correct. And so I guess I’m like, how did you come up with the low end versus the high end? And just broadly, how are you thinking about next year from maybe a cadence standpoint because obviously, we’re all going to come up with models and people are seeing on this call, we’re going to come with our own estimates, but just if you can talk about maybe how you’re thinking about the arc of next year, perhaps a bit?
Suresh Krishnaswamy
Yes, sure. So thanks for clarifying that. So for this year, as we look at Q4, large components of our revenue are pretty much well baked at this point. I mean, especially in retail, which is largely a subscription-like revenue, And that’s the larger portion of our business as well. So we have a bit more potential variability in brands revenue. We feel our guidance of 47% to 48% fully reflects that. So at the midpoint, that range represents 10% year-over-year growth at the mid-point, which is above-market growth for the cannabis industry, right? So we’re doing everything in our power to execute on our plan and make sure that we finish the year strong. So we’re pretty confident in the guidance range that we’ve put out.
In addition, especially talking about the EBITDA guidance for this year, in this environment, we’ve made the hard decisions on the headcount reductions and the OpEx cuts that were right for the business. We feel we’ve got ahead of that, and we really refocused the teams to prioritize on the most important initiatives, and we position ourselves for next year, certainly, for a situation where the current challenging macro environment continues, but at the same time, are positioned to capitalize when opportunities do come our way and growth return. So as far as 2023 is concerned, I mean, we expect to provide full-year 2023 guidance on our Q4 call in March. But what I can say is, it’s been a tough market in the second half of this year, and you’re quite right, and backing into the implied growth in Q4. And so you can see that even in this tough environment, we continue to grow.
So I think that’s the best read for next year, given we haven’t yet provided guidance. So we’ve positioned ourselves with the cost reduction and the reprioritization for continuing to navigate through this current challenging macro environment. So we expect that to continue into next year.
So at the same time, I can say, we’ve been monitoring industry and local market trends, and we’re seeing momentum in new products. I mean, Yoko mentioned the marquee ad, thereafter a very strong start. This quarter, we expect to build on that. We’re also anticipating additional licenses, places like LA, New York, newly legalized market. So we just continue to communicate the value that we bring to our retail partners.
We know that they want to be on the platform, we’re making it easier for them to understand the ROI. So we’re — we remain optimistic about the opportunity for next year. We’re going to continue to manage the cost side of the business to conservative estimates. I hope that helps.
Jason Helfstein
Thank you.
Yoko Miyashita
There was a second part to your question in terms of our retail account ARPA growth, whether that was, don’t want me to put words in your mouth, but essentially it has to go about doing that. And I would say, we’re on spot because when we talked about our sales reorg earlier this year, really organizing into local market structure has been critical for us to go after and understand the dynamics of each market, driving adds.
And can we talk about delivery growth? That’s been a critical driver for bringing new California. I will say it’s structural first and foremost in terms of internal, on how we can go after the opportunity, and it’s been execution on the tails of that.
Jason Helfstein
Thank you.
Operator
Our next comes from Eric Des Lauriers of Craig-Hallum. Eric, the line is yours.
Eric Des Lauriers
Great. Thank you for taking my questions. First one for me is just a follow-up on the Uber Eats partnership, congrats there. Can you help us understand the ability for that partnership to expand beyond Toronto? Is there something specific with the Ontario province? I’m assuming that this is obviously limited to Canada for now, but just talk about the ability to potentially expand beyond Toronto after a trial phase?
Yoko Miyashita
Yes. As hopefully my commentary to suggests, we’ve been super excited about how that launch has gone up in terms of partnerships that we’ve been able to develop with Uber. There are obvious reasons as to why we started to begin of the Canada first for both of us. And we’ll focus on the expansion in Toronto through the rest of the year.
We will be excited to share more information about that. And I think what we’re really looking at is the engagement activity that this drives. So I can’t really speak to expansion beyond Toronto at this stage, but we’ll be certainly happy to share more as the partnership develops.
Eric Des Lauriers
Okay. Great. And then just on to the strategy of using promotional pricing to help drive ARPA gains. Certainly seems to make sense in this macro environment. I’m wondering — I guess, just kind of maybe two questions here. Do you have any early insight into the ROI of that strategy?
And can you just help us understand maybe some of the risks or opportunities of really accelerating that strategy? I mean, sort of what’s stopping you from lowering prices further to continue capturing greater share and presumably, it would still be incremental to revenue and gross profit dollars? So just wondering how you think about that strategy? Thank you.
Suresh Krishnaswamy
Yes. Thanks, Eric. So I mean, our strategy overall is to build a robust platform and marketplace, right, that deliver value to consumers and retailers. So we’ve really been focusing on account growth over ARPA at this stage and on the value to customers, right, to improving the consumer experience, adding more deals on the site, expanding on successful start of our delivery gateway experience.
So all of those things have contributed to the success we’ve had and really focusing on adding retailers to our platform. On the ARPA side, what we report is an average of what’s playing out at the local market level. So that’s also — I’ll draw attention to that. We’re in growth mode and we’re building the business in newer markets, at the same time we’re deepening our penetration in more established markets.
So this is our land-and-expand strategy. So the ARPA number has been trending lower as we grow in newer markets, and we work to gain more market share, and that’s something that we’re going to continue at the local market level. So Yoko just mentioned that we reorganized the sales team last quarter. And so I think we’re seeing these dynamics really play out very differently across markets.
And our view is, as we add retail to the platform, we start to understand the value, and you’ve seen that there’s willingness to pay for that value increases. So specifically talking about some of the decline in ARPA in Q3, that was related to pricing promotions and discounts. And we saw that in British Columbia, Oklahoma, some pricing pressure in Illinois, but at the same time, we’re also seeing ARPA growth in some of the newer markets like New Mexico and Missouri. So we’ll see the early…
Eric Des Lauriers
Yes. That’s helpful. I think I misspoke by focusing on ARPA. I did mean a promotional pricing helping to drive retail account gains. And I guess my question is ultimately sort of how much room you have to continue leaning into that strategy and how much we should expect that to accelerate versus you’re sort of comfortable with the current level of promotional pricing that you’re offering?
Suresh Krishnaswamy
Yes. I think we’re – I mean, we’re really tailoring our strategy through each market, right. So we’re not giving guidance on ARPA because we’re really looking at it at a local market level. But in the near-term, I mean, we’re certainly focused on adding retailers and that means that ARPA will continue to trend lower rate, we’re going to continue to focus on retail cost growth.
We feel like that’s the right strategy, and from what we’ve seen as we continue to add retailers onto the platform at prices that make sense for them, and allow them to really understand the value that we’re bringing. We’re seeing them participate in newer products. We talked about the marquee ad. So we feel that once we’re on the platform, there’s healthy demand, and we expect some of the newer products to contribute to ARPA growth in some of these markets, so.
Yoko Miyashita
And let me give you example there. Ontario was actually a market, which we used introductory pricing earlier this year. We’ve been able to bring sufficient numbers of retailers on the platform. We obviously have this new offering in the form of Uber Eats, and that’s allowed us to drive ARPA higher in that market. We’re no longer offering some more pricing in Ontario. So it’s that level of granularity in which we’re looking at the market dynamics to adjust these and how we approach a specific market and the right strategy for us.
Eric Des Lauriers
Yes, definitely makes sense. Yes. It seems like a great strategy at this point. Thanks for the color.
Yoko Miyashita
Thanks, Eric.
Suresh Krishnaswamy
Thanks, Eric.
Operator
We have no further questions on the phone lines. With that, we’ll conclude today’s call. Thank you for joining. You may now disconnect your lines.
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