Yahoo Finance Medicine Man Technologies Inc (SHWZ) (Q1 2024) Earnings Call Transcript Highlights: Navigating ...
Total Revenue: Increased 4% to $41.6 million.
Gross Profit: $17.9 million, representing 43% of total revenue.
Operating Expenses: $20.6 million, up from $16.2 million in the previous year.
Loss from Operations: $2.7 million, compared to income from operations of $5.6 million last year.
Adjusted EBITDA: $7.3 million, or 18% of revenue.
Cash and Cash Equivalents: $13.2 million as of March 31, 2024.
Total Debt: $159.7 million as of March 31, 2024.
Store Count: Increased to 34 stores in New Mexico.
Wholesale Penetration: Reached 30% of total doors in Colorado; doubled sales in New Mexico year-over-year.
Release Date: May 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Medicine Man Technologies Inc (SHWZ) reported a 4% increase in total revenue to $41.6 million in Q1 2024, driven by growth from new stores.
The company's wholesale business showed quarter-over-quarter growth, achieving 30% total door penetration across Colorado and New Mexico.
Medicine Man Technologies Inc (SHWZ) is benefiting from regulatory actions in New Mexico, which are leading to a reduction in the number of competing stores, potentially strengthening the company's market position.
The DEA's proposal to reclassify cannabis from Schedule I to Schedule III is expected to reduce the tax burden on the company and the industry, potentially improving profitability.
The company is actively optimizing its asset base to drive operating efficiencies and maximize output, which includes plans to consolidate cultivation facilities and eliminate underperforming stores.
Negative Points
Despite revenue growth, Medicine Man Technologies Inc (SHWZ) experienced a decrease in gross margin to 43% in Q1 2024 from 55% the previous year, primarily due to pricing pressure in New Mexico and a higher medical sales mix in Colorado.
Operating expenses increased to $20.6 million in Q1 2024 from $16.2 million in the same period last year, largely due to personnel expenses and costs associated with additional stores.
The company reported a loss from operations of $2.7 million in Q1 2024, compared to an income from operations of $5.6 million last year.
Adjusted EBITDA significantly decreased to $7.3 million or 18% of revenue in Q1 2024, down from $14.5 million or 36% of revenue in the previous year.
Medicine Man Technologies Inc (SHWZ) is facing intense competition in both Colorado and New Mexico, which continues to put pressure on pricing and margins.
Q & A Highlights
Q: What are the plans for addressing underperforming stores, and is there potential for relocation rather than closures? A: Sean Mansouri, Elevate IR - Investor Relations, mentioned that three stores in Colorado are being considered for closure, with plans to reallocate the licenses rather than full closures.
Q: What is the focus for wholesale growth - adding more stores or increasing house brand presence on shelves? A: Sean Mansouri explained that the focus is on both expanding the number of stores and growing the portfolio of house brands. Efforts include expanding the sales team and introducing new products across all form factors.
Q: How long might it take for the store count in New Mexico to adjust to a healthy level? A: Sean Mansouri noted a significant reduction in store count growth and an increase in closures, suggesting a quick adjustment to a healthier level might be underway, with expectations to see a negative flip in store counts soon.
Q: Can you provide data on customer acquisition, retention, and loyalty improvements? A: Sean Mansouri acknowledged the need for improvement in these areas, highlighting efforts to stabilize the loyalty program platform and enhance promotional effectiveness.
Q: What is the impact of a higher medical sales mix on gross margins in Colorado? A: Forrest Hoffmaster, Interim CEO & CFO, explained that the medical sales mix, which stands at about 8% of total sales, has a lower margin compared to recreational sales, impacting overall gross margins.
Q: What are the expectations for cash flow and the company's financial position going forward? A: Sean Mansouri expressed confidence in the company's cash position and ongoing efforts to optimize cash flow through inventory management and operational efficiencies.
Q: What initiatives are in place to drive efficiencies in cultivation and manufacturing operations? A: Efforts include better alignment of production with consumer demand, LED light implementation for improved yields, and consolidation to enhance operational efficiency.
Q: How will the proposed DEA rescheduling of cannabis affect Schwazze's tax obligations? A: Justin Dye, Chairman of the Board, discussed the potential positive impact of rescheduling on tax obligations and the possibility of amending previous tax returns to reflect a more favorable tax position.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
