Schwazze Q2 Revenue Up 2% YoY, Net Loss Rises And Debt Remains High

Medicine Man Technologies, Inc., operating as Schwazze, SHWZ (Cboe CA:SHWZ) disclosed its financial and operational results Tuesday for the second quarter that ended June 30, 2024. The Denver, Colorado-based cannabis company reported quarterly revenue of $43.24 million, which compares to $42.38 million in the same period last year.

"We made solid progress on our growth and optimization initiatives in Q2 and generated sequential quarterly growth across all key financial metrics while advancing our retail strategy," stated Forrest Hoffmaster, interim CEO of Schwazze. "During the quarter, we continued to deepen our customer understanding, sharpen our pricing and promotional strategy, enhance the in-store experience, and improve our assortment and in-stock positions. These efforts drove increased store traffic and market share expansion in both Colorado and New Mexico. In our wholesale business, we generated our second consecutive period of quarter-over-quarter growth in both states with penetration growth and catalog expansion while improving wholesale margins."

Q2 Financial Highlights

Gross profit was $19.04 million, compared to $23.04 million in the same period a year ago.
Loss from operations amounted to ($2.71 million), compared to the income of $4.96 million in the second quarter of 2023.
Net loss was $13.9 million for the second quarter of 2024 compared to $6.6 million for the same quarter last year.
Adjusted EBITDA was a gain of $9.03 million, compared to $13.81 million in the corresponding period of 2023. The decrease in Adjusted EBITDA was primarily driven by a lower gross margin and higher operating expenses.
Operating expenses for the quarter amounted to $21.79 million, compared to $18.98 million in the same quarter a year ago.
As of June 30, 2024, cash and cash equivalents were $12.3 million compared to $19.2 million on December 31, 2023. Total debt as of June 30, 2024, was $163.4 million compared to $156.8 million on December 31, 2023.

Recent Operational Milestones

In July 2024, Schwazze extended the maturities of its original $15.0 million Altmore, LLC Loan Agreement and its $17.0 million Reynold Greenleaf & Associates LLC Promissory Note to November 2025 (both previously due in February 2025) as a step toward addressing future debt obligations.
Announced the grand opening of a medical and recreational dispensary in June under the R. Greenleaf banner in Bernalillo, New Mexico, increasing the company's retail footprint to 35 stores across the state.
Closed the company's Colorado distribution center and shuttered its non-plant touching wholesale operations, The Big Tomato, in Colorado to concentrate on core business operations.
Closed three underperforming Colorado dispensaries and streamlined the company's corporate office support structure to strengthen its retail forward strategy.
Increased wholesale penetration during the quarter to approximately 34% and 35% of total doors in Colorado and New Mexico, respectively.
Expanded wholesale catalog in New Mexico with the launch of Lowell Farms pre-rolls.
Generated 28% sequential wholesale unit growth in New Mexico with Wana gummies.

"Looking ahead, we will continue to refine our retail strategy while further driving operating efficiencies across our retail, cultivation, and manufacturing assets. Our recent debt restructuring provides us with the financial flexibility to execute our strategic growth initiatives in Colorado and New Mexico. Over the past year, our consistent efforts to optimize operations have established a solid foundation, positioning us for continued growth and stronger levels of profitability in the second half of 2024," Hoffmaster concluded.