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Schwazze Announces First Quarter 2024 Financial Results

15 May 2024

Schwazze Management to Host Conference Call Today at 5:00 p.m. Eastern Time

DENVER, May 15, 2024 /CNW/ - Medicine Man Technologies, Inc., operating as Schwazze, (OTCQX: SHWZ) (Cboe CA: SHWZ) ("Schwazze" or the "Company"), today announced financial and operational results for the first quarter ended March 31, 2024.

"We delivered another period of revenue growth in Q1 as we further refined our retail strategy while contending with the prolonged competitive challenges in Colorado and New Mexico," said Forrest Hoffmaster, Interim CEO of Schwazze. "Throughout the quarter, we continued to sharpen our pricing and promotional efforts while enhancing the in-store experience, widening assortment, improving in-stock position, and advancing our loyalty program to attract and retain new customers. We also strengthened our wholesale business with quarter-over-quarter growth, while surpassing 30% total door penetration across both states."

"The Colorado market remains highly competitive with more than 680 active recreational licenses, underscoring the importance of delivering an exceptional customer experience and fully integrated retail support program. Although retail pricing has recently stabilized, Colorado sales in Q1 were down 10% year-over-year due to lower volumes. Nonetheless, we significantly outpaced the market as our sales were up 9%, demonstrating the effectiveness of our operating playbook to compete in challenging environments. We expect to continue driving improvements in customer acquisition, retention, and loyalty as we further increase market share in the state."

"In New Mexico, the proliferation of new licenses continued to outpace state cannabis sales as store count in Q1 increased 31% year-over-year while the market grew only 13%. In addition to pricing and promotional efforts, we've focused on driving traffic into our stores by expanding assortment with high quality flower and delivering an elevated customer experience. The New Mexico regulatory body has also increased its license enforcement efforts in recent months, contributing to more than 70 store closures and a 33% sequential decrease in net new store openings in the first quarter. We will continue to support the New Mexico Cannabis Control Division as it develops its regulatory framework."

"Over the past four years we have rapidly scaled our footprint through 13 acquisitions, building a leading retail presence in both Colorado and New Mexico. We are beginning to see positive momentum from our pricing and promotional strategy and will remain focused on driving operating efficiencies while further optimizing our assets as we consolidate cultivation facilities and eliminate underperforming stores that do not meet our high-margin thresholds. We believe these initiatives, coupled with our operating playbook and strict cost controls, will enable us to return to stronger levels of profitability moving forward."

First Quarter 2024 Financial Summary

$ in Thousands USD

Q1 2024

Q4 2023

Q1 2023

Total Revenue

$41,601

$43,325

$40,001

Gross Profit

$17,934

$7,034[1]

$21,849

Operating Expenses

$20,643

$23,276

$16,199

Income (Loss) from Operations

$(2,709)

$(16,242)

$5,650

Adjusted EBITDA[2]

$7,341

$10,953

$14,525

Operating Cash Flow

$(3,700)

$3,452

$(880)

Recent Highlights

  • Announced the grand opening of a medical and recreational dispensary in March under the Everest Apothecary banner in Las Cruces, New Mexico, increasing the Company's retail footprint to 34 stores across the state.
  • Increased wholesale penetration in the first quarter to more than 30% of total doors in Colorado and New Mexico.
  • Lowell Herb Co. pre-roll sales increased more than 3x quarter-over-quarter in Colorado, where it continues to be the #1 pre-roll in the state.
  • Wana gummy sales up more than 2x quarter-over-quarter in New Mexico.

First Quarter 2024 Financial Results

Total revenue in the first quarter of 2024 increased 4% to $41.6 million compared to $40.0 million for the same quarter last year. The increase was primarily due to growth from new stores compared to the prior year period, partially offset by continued pricing pressure and the proliferation of new licenses in New Mexico.

Gross profit for the first quarter of 2024 was $17.9 million or 43.1% of total revenue, compared to $21.8 million or 54.6% of total revenue for the same quarter last year. The decrease in gross margin was primarily driven by the aforementioned pricing pressure in New Mexico, as well as higher medical sales mix in Colorado.

____________________________

1 Q4 2023 Gross Profit includes one-time, non-cash inventory adjustments of approximately $13.1 million comprised of $3.1 million of product consolidation, obsolescence, and shrinkage expenses, $4.3 million of net realizable value adjustments, and $5.8 million of fair value adjustments on acquired inventory in New Mexico in 2023. 
2  Adjusted EBITDA is a non-GAAP measure as defined by the SEC, and represents earnings before interest, taxes, depreciation, and amortization, adjusted for other income, non-cash share-based compensation, one-time transaction related expenses, or other non-operating costs. The Company uses Adjusted EBITDA as it believes it better explains the results of its core business. See "ADJUSTED EBITDA RECONCILIATION (NON-GAAP)" section herein for an explanation and reconciliations of non-GAAP measure used throughout this release.

Operating expenses for the first quarter of 2024 were $20.6 million compared to $16.2 million for the same quarter last year. The year-ago period benefitted from a payroll tax credit of $3.9M. The remaining increase was primarily driven by personnel expenses and four-wall SG&A costs associated with 21 additional stores in Colorado and New Mexico that are still ramping.

Loss from operations for the first quarter of 2024 was $2.7 million compared to income from operations of $5.6 million in the same quarter last year. Net loss was $16.1 million for the first quarter of 2024 compared to net income of $1.7 million for the same quarter last year.

Adjusted EBITDA for the first quarter of 2024 was $7.3 million compared to $14.5 million for the same quarter last year. The decrease in Adjusted EBITDA was primarily driven by lower gross margin and higher operating expenses associated with the 21 additional stores that are still ramping.

As of March 31, 2024, cash and cash equivalents were $13.2 million compared to $19.2 million on December 31, 2023. Total debt as of March 31, 2024, was $159.7 million compared to $156.8 million on December 31, 2023.

Conference Call

The Company will conduct a conference call today, May 15, 2024, at 5:00 p.m. Eastern time to discuss its results for the first quarter ended March 31, 2024.

Schwazze management will host the conference call, followed by a question-and-answer period. Interested parties may submit questions to the Company prior to the call by emailing This email address is being protected from spambots. You need JavaScript enabled to view it..

Date: Wednesday, May 15, 2024
Time: 5:00 p.m. Eastern time
Toll-free dial-in: (888) 664-6383
International dial-in: (416) 764-8650
Conference ID: 84167910
Webcast: SHWZ Q1 2024 Earnings Call

The conference call will also be broadcast live and available for replay on the investor relations section of the Company's website at https://ir.schwazze.com.

Toll-free replay number: (888) 390-0541
International replay number: (416) 764-8677
Replay ID: 167910

If you have any difficulty registering or connecting with the conference call, please contact Elevate IR at (720) 330-2829.

About Schwazze

Schwazze (OTCQX: SHWZ) (Cboe CA: SHWZ) is building a premier vertically integrated regional cannabis company with assets in Colorado and New Mexico and will continue to explore taking its operating system to other states where it can develop a differentiated regional leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale.

Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company's leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector.

Medicine Man Technologies, Inc. was Schwazze's former operating trade name. The corporate entity continues to be named Medicine Man Technologies, Inc. Schwazze derives its name from the pruning technique of a cannabis plant to enhance plant structure and promote healthy growth. To learn more about Schwazze, visit https://schwazze.com/.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include financial outlooks; any projections of net sales, earnings, or other financial items; any statements of the strategies, plans and objectives of our management team for future operations; expectations in connection with the Company's previously announced business plans; any statements regarding future economic conditions or performance; and statements regarding the intent, belief or current expectations of our management team. Such statements may be preceded by the words "may," "will," "could," "would," "should," "expect," "intends," "plans," "strategy," "prospects," "anticipate," "believe," "approximately," "estimate," "predict," "project," "potential," "continue," "ongoing," or the negative of these terms or other words of similar meaning in connection with a discussion of future events or future operating or financial performance, although the absence of these words does not necessarily mean that a statement is not forward-looking. We have based our forward-looking statements on management's current expectations and assumptions about future events and trends affecting our business and industry. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Therefore, forward-looking statements are not guarantees of future events or performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company's control and cannot be predicted or quantified. Consequently, actual events and results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) regulatory limitations on our products and services and the uncertainty in the application of federal, state, and local laws to our business, and any changes in such laws; (ii) our ability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (iii) our ability to identify, consummate, and integrate anticipated acquisitions; (iv) general industry and economic conditions; (v) our ability to access adequate capital upon terms and conditions that are acceptable to us; (vi) our ability to pay interest and principal on outstanding debt when due; (vii) volatility in credit and market conditions; (viii) the loss of one or more key executives or other key employees; and (ix) other risks and uncertainties related to the cannabis market and our business strategy. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission (SEC), including the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC's website at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise except as required by law.

Investor Relations Contact
Sean Mansouri, CFA or Aaron D'Souza
Elevate IR
(720) 330-2829
This email address is being protected from spambots. You need JavaScript enabled to view it.

MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
For the Periods Ended March 31, 2024 and December 31, 2023
Expressed in U.S. Dollars

 

 March 31,

 

December 31,

 

2024

 

2023

 

ASSETS

 
     

Current Assets

     

Cash & Cash Equivalents

$

13,151,317

 

$

19,248,932

Accounts Receivable, net of Allowance for Doubtful Accounts

 

3,356,032

  

4,261,159

Inventory

 

26,382,184

  

25,787,793

Marketable Securities, net of Unrealized Loss of $347,516 and Loss of $1,816, respectively

 

108,583

  

456,099

Prepaid Expenses & Other Current Assets

 

3,502,310

  

3,914,064

Total Current Assets

 

46,500,426

  

53,668,047

Non-Current Assets

     

Fixed Assets, net Accumulated Depreciation of $10,061,700 and $8,741,782, respectively

 

31,326,000

  

31,113,630

Investments

 

2,000,000

  

2,000,000

Investments Held for Sale

 

-

  

202,111

Goodwill

 

67,492,705

  

67,499,199

Intangible Assets, net Accumulated Amortization of $36,483,160 and $32,706,765, respectively

 

162,391,482

  

166,167,877

Other Non-Current Assets

 

1,328,187

  

1,263,837

Operating Lease Right of Use Assets

 

34,575,832

  

34,233,142

Deferred Tax Assets, net

 

992,144

  

1,996,489

Total Non-Current Assets

 

300,106,350

  

304,476,285

Total Assets

$

346,606,776

 

$

358,144,332

      
 

LIABILITIES & STOCKHOLDERS' EQUITY

 
     

Current Liabilities

     

Accounts Payable

$

9,443,233

 

$

13,341,561

Accrued Expenses

 

8,106,618

  

7,774,691

Derivative Liabilities

 

1,319,845

  

638,020

Lease Liabilities - Current

 

5,186,316

  

4,922,724

Current Portion of Long Term Debt

 

29,579,713

  

3,547,011

Income Taxes Payable

 

28,235,039

  

25,232,782

Total Current Liabilities

 

81,870,764

  

55,456,789

Non-Current Liabilities

     

Long Term Debt, net of Debt Discount & Issuance Costs

 

130,120,753

  

153,262,203

Lease Liabilities - Non-Current

 

30,735,072

  

30,133,452

Total Non-Current Liabilities

 

160,855,825

  

183,395,655

Total Liabilities

$

242,726,589

 

$

238,852,444

      

Stockholders' Equity

     

Preferred Stock, $0.001 Par Value. 10,000,000 Shares Authorized; 82,185 Shares Issued and

     

82,185 Outstanding as of March 31, 2024 and 85,534 Shares Issued and 85,534 Outstanding as of

     

December 31, 2023.

 

82

  

86

Common Stock, $0.001 Par Value. 250,000,000 Shares Authorized; 79,168,539 Shares Issued

     

and 78,248,389 Shares Outstanding as of March 31, 2024 and 74,888,392 Shares Issued

     

and 73,968,242 Shares Outstanding as of December 31, 2023.

 

79,169

  

74,888

Additional Paid-In Capital

 

202,677,665

  

202,040,968

Accumulated Deficit

 

(96,843,602)

  

(80,790,927)

Common Stock Held in Treasury, at Cost, 920,150 Shares Held as of March 31, 2024 and

     

920,150 Shares Held as of December 31, 2023.

 

(2,033,127)

  

(2,033,127)

Total Stockholders' Equity

 

103,880,187

  

119,291,888

Total Liabilities & Stockholders' Equity

$

346,606,776

 

$

358,144,332

MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND (LOSS)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars

 

For the Three Months Ended

 

March 31,

 

2024

 

2023

 

(Unaudited)

 

(Unaudited)

Operating Revenues

     

Retail

$

37,633,252

 

$

35,820,111

Wholesale

 

3,898,320

  

4,058,925

Other

 

69,421

  

121,900

Total Revenue

 

41,600,993

  

40,000,936

Total Cost of Goods & Services

 

23,667,319

  

18,152,163

Gross Profit

 

17,933,674

  

21,848,773

Operating Expenses

     

Selling, General and Administrative Expenses

 

11,835,818

  

10,100,934

Professional Services

 

1,671,881

  

1,187,364

Salaries

 

6,880,988

  

4,695,971

Stock Based Compensation

 

253,916

  

214,544

Total Operating Expenses

 

20,642,603

  

16,198,813

Income from Operations

 

(2,708,929)

  

5,649,960

Other Income (Expense)

     

Interest Expense, net

 

(8,307,369)

  

(7,745,854)

Unrealized Gain (Loss) on Derivative Liabilities

 

(681,825)

  

8,501,685

Other Loss

 

10,500

  

-

Loss on Investment

 

(33,382)

  

-

Unrealized Gain on Investment

 

(347,516)

  

1,816

Total Other Income (Expense)

 

(9,359,592)

  

757,647

Pre-Tax Net Income (Loss)

 

(12,068,521)

  

6,407,607

Provision for Income Taxes

 

3,984,154

  

4,662,178

Net Income (Loss)

$

(16,052,675)

 

$

1,745,429

      

Less: Accumulated Preferred Stock Dividends for the Period

 

(2,155,259)

  

(2,029,394)

Net Income (Loss) Attributable to Common Stockholders

$

(18,207,934)

 

$

(283,965)

      

Earnings (Loss) per Share Attributable to Common Stockholders

     

Basic Earnings (Loss) per Share

$

(0.24)

 

$

(0.01)

Diluted Earnings (Loss) per Share

$

(0.24)

 

$

(0.06)

      

Weighted Average Number of Shares Outstanding - Basic

 

76,006,932

  

55,835,501

Weighted Average Number of Shares Outstanding - Diluted

 

76,006,932

  

101,608,278

Comprehensive Income (Loss)

$

(16,052,675)

 

$

1,745,429

MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars

 

For the Three Months Ended

 

March 31,

 

2024

 

2023

 

(Unaudited)

 

(Unaudited)

Cash Flows from Operating Activities:

     

Net Income (Loss) for the Period

$

(16,052,675)

 

$

1,745,429

Adjustments to Reconcile Net Income (Loss) to Cash for Operating Activities

     

Depreciation & Amortization

 

5,096,314

  

6,151,395

Non-Cash Interest Expense

 

1,031,431

  

991,184

Non-Cash Lease Expense

 

2,871,226

  

2,251,459

Deferred Taxes

 

1,004,345

  

(637,225)

Loss on Investment

 

202,111

  

-

Change in Derivative Liabilities

 

681,825

  

(8,501,685)

Amortization of Debt Issuance Costs

 

421,512

  

421,513

Amortization of Debt Discount

 

2,303,246

  

1,999,933

(Gain) Loss on Investments, net

 

347,516

  

(1,816)

Stock Based Compensation

 

640,974

  

214,544

Changes in Operating Assets & Liabilities (net of Acquired Amounts):

     

Accounts Receivable

 

905,127

  

(118,181)

Inventory

 

(587,900)

  

(3,023,251)

Prepaid Expenses & Other Current Assets

 

411,754

  

(3,036,801)

Other Assets

 

(64,350)

  

360,674

Change in Operating Lease Liabilities

 

(2,348,703)

  

(1,531,765)

Accounts Payable & Other Liabilities

 

(3,566,401)

  

(3,464,671)

Income Taxes Payable

 

3,002,257

  

5,299,403

Net Cash Provided by (Used in) Operating Activities

 

(3,700,390)

  

(879,861)

      

Cash Flows from Investing Activities:

     

Collection of Notes Receivable

 

-

  

10,631

Purchase of Fixed Assets

 

(1,532,287)

  

(2,913,394)

Net Cash Provided by (Used in) Investing Activities

 

(1,532,287)

  

(2,902,763)

      

Cash Flows from Financing Activities:

     

Payment on Notes Payable

 

(864,938)

  

-

Net Cash Provided by (Used in) Financing Activities

 

(864,938)

  

-

      

Net (Decrease) in Cash & Cash Equivalents

 

(6,097,615)

  

(3,782,624)

Cash & Cash Equivalents at Beginning of Period

 

19,248,932

  

38,949,253

Cash & Cash Equivalents at End of Period

$

13,151,317

 

$

35,166,628

      

Supplemental Disclosure of Cash Flow Information:

     

Cash Paid for Interest

$

4,515,205

 

$

6,540,748

MEDICINE MAN TECHNOLOGIES, INC.
ADJUSTED EBITDA RECONCILIATION (NON-GAAP)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars

 

For the Three Months Ended

 

March 31,

 

2024

 

2023

Net Income (Loss)

$

(16,052,675)

 

$

1,745,429

Interest Expense, net

 

8,307,369

  

7,745,854

Provision for Income Taxes

 

3,984,154

  

4,662,178

Other (Income) Expense, net of Interest Expense

 

1,052,223

  

(8,503,501)

Depreciation & Amortization

 

5,618,834

  

6,612,814

Earnings Before Interest, Taxes, Depreciation and

     

Amortization (EBITDA) (non-GAAP)

$

2,909,905

 

$

12,262,774

Non-Cash Stock Compensation

 

253,916

  

214,544

Deal Related Expenses

 

637,761

  

1,195,802

Capital Raise Related Expenses

 

20,760

  

35,068

Severance

 

484,561

  

118,436

Retention Program Expenses

 

807,500

  

280,632

Pre-Operating & Dark Carry Expenses

 

1,053,837

  

391,917

One-Time Legal Settlements

 

417,653

  

-

Other Non-Recurring Items

 

754,751

  

25,707

Adjusted EBITDA (non-GAAP)

$

7,340,644

 

$

14,524,880

Revenue

 

41,600,993

  

40,000,936

Adjusted EBITDA Percent

 

17.6 %

  

36.3 %

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