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SCHWAZZE ANNOUNCES FIRST QUARTER RESULTS
DENVER , May 16, 2022 /PRNewswire/ -- (OTCQX: SHWZ) (NEO: SHWZ) or the , today announced financial results for the first quarter ended March 31, 2022 ("Q1 2022").
Since December 2021 , Schwazze has closed acquisitions adding 14 cannabis dispensaries, 10 in New Mexico and four in Colorado as well as four cultivation facilities in New Mexico and one in Colorado and one manufacturing asset in New Mexico .
Justin Dye , Chairman and CEO of Schwazze stated
Justin continued,
Revenues for Q1 2022, totaled $31.8 million including (i) retail sales of $26.5 million (ii) wholesale sales of $5.2 million and (iii) other operating revenues of $0.04 million , compared to revenues of $19.3 million including (i) retail sales of $11.8 million (ii) wholesale of $7.4 million , and (iii) other operating revenues of $0.08 million during Q1 2021 and represented an increase of $12.4 million or 64%. Increased sales are due in large part to additional dispensary sales. In Q1 2022, we acquired fourteen new retail dispensaries. The decrease in wholesale revenue in 2022 was largely due to wholesale distillate pricing pressure and over-supply in the state of Colorado .
Cost of goods and services for Q1 2022, totaled $20.8 million compared to cost of goods and services of $12.1 million during Q1 2021, representing an increase of $8.7 million or 72%. This increase was due to increased sales and growth through acquisition. The cost of goods and services increased at a higher rate than revenue due to the impact of purchase accounting on retail acquisitions made in the each of the first quarters. Q1 2022 had $6.3 million in additional cost of goods and services due to purchase accounting while Q1 2021 had $2.2 million of additional cost of goods and services due to purchase accounting.
Gross profit increased to $10.9 million for Q 1 2022 compared to $7.3 million during the same period in 2021. Gross profit margin declined as a percentage of revenue from 37.5% to 34.4%, although net of purchase accounting, the gross margin increased from 48.7% to 54.1%. This positive result, net of purchase accounting continues to reflect our consolidated purchasing approach, the implementation of our retail playbook, and vertical product sales in New Mexico .
Operating expenses for Q1 2022, totaled $15.7 million , compared to operating expenses of $8.7 million during Q1 2021, representing an increase of $7 million or 80%. This increase was due to increased selling, general and administrative expenses including acquisition costs, professional service fees related to acquisitions, salaries, benefits and related employment costs mostly related to the increased number of dispensaries.
Other expense, net for Q1 2022, totaled $20.7 million , compared to $1.7 million during Q1 2021. The increase in other expense, net was due to an increase in interest payments due to various loans and by the non-cash loss on derivative liability related to our 13% senior secured convertible notes due 2026.
As a result of the factors discussed above, a net loss was generated for the Q1 2022 of $26.8 million , compared to net loss of $3.6 million during Q1 2021. This loss includes non-cash charges totaling $16.9 million ; this includes derivative liability of $13.4 million , depreciation and amortization of $2.5 million and non-cash compensations of $1.0 million as well as acquisition and capital raise costs associated with the closing of recent acquisitions of $9.1 million , including $6.3 million of purchase accounting costs and $2.8 million of additional related costs.
Adjusted EBITDA for Q1 2022 was $7.9 million representing 25% of revenue, compared to $5.8 million for the same period last year. This is derived from Operating Income and adjusting one-time expenses, merger and acquisition and capital raising costs, non-cash related compensation costs, and depreciation and amortization. See the financial table for Adjusted EBITDA below adjustment for details.
For Q1 2022, the Company generated net cash provided from operations of $5.8 million compared to $1.7 million for the same period in 2021. The Company has cash and cash equivalents of $47.1 million at the end of Q1 2022.
Nancy Huber , CFO for Schwazze commented,
The Company's guidance, issued for 2022 remains unchanged. Guidance has been issued for a fourth-quarter 2022 (Q4 2022) annualized run rate, which excludes transactions that are announced but not closed. Q4 2022 revenue annualized run rate is projected to be approximately $220 Million to $260 Million , and the projected Q4 2022 adjusted EBITDA annualized run rate is projected to be from $70 million to $82 million .
NOTES:
Investors and stakeholders may participate in the conference call by dialing 416-764-8650 or by dialing North American toll free 888-664-6383 or listen to the webcast from the Company's website at https://ir.schwazze.com . The webcast will be available on the Company's website and on replay until May 23, 2022 , and may be accessed by dialing 888-390-0541 / 117902#.
Following their prepared remarks, Chief Executive Officer, Justin Dye and Chief Financial Officer, Nancy Huber will answer investor questions. Investors may submit questions in advance or during the conference call itself through the weblink: https://produceredition.webcasts.com/starthere.jsp?ei=1548621&tp_key=88d9ed2417 This weblink has been posted to the Company's website and will be archived on the website. All Company SEC filings can also be accessed on the Company website at https://ir.schwazze.com/sec-filings and on SEDAR at www.sedar.com
Schwazze (OTCQX: SHWZ) is building a premier vertically integrated regional cannabis company with assets in Colorado and New Mexico and will continue to take 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. The Company is committed to unlocking the full potential of the cannabis plant to improve the human condition. 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. Schwazze is passionate about making a difference in our communities, promoting diversity and inclusion, and doing our part to incorporate climate-conscious practices. 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.
This press release contains "forward-looking statements." Such statements may be preceded by the words "plan," "will," "may," "continue," "predicts," "targeting" or similar words. Forward-looking statements include the guidance provided regarding the Company's Q4 2022 performance and annual capital spending. 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) our inability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (ii) difficulties in obtaining financing on commercially reasonable terms; (iii) changes in the size and nature of our competition; (iv) loss of one or more key executives or scientists; (v) difficulties in securing regulatory approval to market our products and product candidates; (vi) our ability to successfully execute our growth strategy in Colorado and New Mexico and outside the states, (vii) our ability to identify and consummate future acquisitions that meet our criteria, (viii) our ability to successfully integrate acquired businesses and realize synergies therefrom, (ix) the ongoing COVID-19 pandemic, (x) the timing and extent of governmental stimulus programs, (xi) the uncertainty in the application of federal, state and local laws to our business, and any changes in such laws, and (xii) our ability to achieve the target metrics, including our annualized revenue and EBIDTA run rates set out in our Q4 2022 guidance. 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.
Contact: Investors, Joanne Jobin, Investor Relations, Joanne.jobin@schwazze.com, 647 964 0292; Daniel Pabon , General Counsel, dan@schwazze.com, 303-371-0387 x1031; Media, Julie Suntrup, Schwazze, Vice President | Marketing & Merchandising, julie.suntrup@schwazze.com, 303 371 0387