Schwazze Reports Q2 2023: Revenue $42.4M Despite Challenges, Adjusted EBITDA $13.8M

Medicine Man Technologies, Inc., operating as Schwazze, SHWZ SHWZ reported its financial and operating results Wednesday afternoon for the second quarter that ended June 30, 2023.

Q2 Highlights

• In Q2 2023, Schwazze's Q2 2023 financials reveal a total revenue of $42.4 million, down from $44.3 million last year. The dip is attributed to lower wholesale revenue, a 25% YoY drop in pricing, and new licenses in key New Mexico markets.
• Gross profit stands at $24.5 million (57.9% of revenue), boosted by efficiency gains despite wholesale pricing pressure.
• Operating expenses rose to $19.6 million, due to 27 new stores in Colorado and New Mexico. Income from operations was $5.0 million, with a net loss of $6.6 million, influenced by a $35.2 million non-cash accounting revaluation of derivative liability.
• Adjusted EBITDA for Q2 2023 is $13.8 million (32.6% of revenue), a decrease from last year.
• Cash and cash equivalents as of June 30, 2023, were $19.9 million, with total debt at $155.4 million.

CEO Nirup Krishnamurthy highlighted Schwazze's commitment to its 'go deep' retail strategy, demonstrated through acquisitions like Everest Apothecary in New Mexico and Standing Akimbo in Colorado. Despite being in early integration stages, synergies from bulk purchasing and cultivation practices are emerging, promising future benefits.

Market challenges persist due to pricing pressure and license proliferation in Colorado and New Mexico. However, Krishnamurthy pointed out positive signs of wholesale pricing stabilization in Colorado, emphasizing a focus on customer acquisition and experience while maintaining brand standards and margins.

Recent highlights underscore Schwazze's growth:

• Acquisition of Everest Apothecary, expanding operations significantly in New Mexico.
• Leadership change with Nirup Krishnamurthy as CEO.
• Acquisitions of Colorado retail dispensaries and the launch of Standing Akimbo.
• E-commerce penetration growth in New Mexico and Colorado.
• A substantial 17% sequential increase in new customer loyalty members during Q2 2023.

"In addition to our focus on top-line growth, supply chain efficiencies, and cash generation, we are capitalizing on our hyper-regional retail strategy with a series of cost optimization programs that are improving our cash position and margins," said Forrest Hoffmaster, Schwazze CFO.

"Looking ahead, we will continue to run a lean operation while implementing the Schwazze retail playbook... We are well positioned to continue driving strong adjusted EBITDA margins and consistent cash flow generation in 2023," concluded Krishnamurthy sharing the company's outlook.

Price Action: Shares of Schwazze were up 0.45% at $0.8493 per share after the bell on Wednesday afternoon.

Benzinga Cannabis Capital Conference

The Benzinga Cannabis Capital Conference, the place where deals get done, is returning to Chicago this Sept 27-28 for its 17th edition. Get your tickets today before prices increase and secure a spot at the epicenter of cannabis investment and branding.

Image by El Planteo