Schwazze Slides Back into the Red with $6.6 Million Loss in Q2

Operating expenses were up in the quarter due to the company's ongoing expansion.

Colorado-based Medicine Man Technologies (OTCQX: SHWZ) (Cboe: SHW), which does business as Schwazze in its home state and in New Mexico, posted a $6.6 million loss against $42.3 million in revenue for the second quarter of 2023, after putting up a meager $1.7 million profit in the first quarter.

The numbers were a steep drop from a year prior, when Schwazze posted a $33.8 million profit for the same period. The company blamed the quarterly losses on “a $35.2 million change in the non-cash accounting revaluation of the derivative liability related to the company’s convertible note.”

“The cannabis market environment in Colorado and New Mexico remains a challenge due to pricing pressure and license proliferation,” CEO Nirup Krishnamurthy said in a statement. “However, we are beginning to see early signs of wholesale pricing stabilization in Colorado and are hyperfocused on customer acquisition.”

Revenue was up by $2 million sequentially, to $42.3 million from $40 million, but down compared with the same quarter a year prior when revenue was $44.2 million. Schwazze chalked up the year-over-year drop to a 25% decline in its wholesale pricing and added competition in New Mexico, where Schwazze now runs 32 dispensaries.

Operating cash flow was where the quarter really popped for Schwazze. A year ago, the company had negative $13.4 million, but this past quarter that number was in the black, at $2.6 million.

Operating expenses, however, also went up, from $16.1 million in Q1 to $19.6 million in Q2, due to Schwazze’s ongoing expansion.

Among quarterly highlights for Schwazze were:

  • The acquisitions of Everest Apothecary in New Mexico
  • The purchase of two Smokey’s Cannabis Company dispensaries and Standing Akimbo in Colorado
  • The opening of a new Standing Akimbo dispensary in Colorado Springs
  • The appointment of Krishnamurthy as CEO

At the end of the quarter, Schwazze had $19.8 million in the bank and $220 million in liabilities, including $155.4 million in debt, which was up from $127.8 million at the end of 2022.

“We will continue to run a lean operation while implementing the Schwazze retail playbook across our markets to expand our customer base, increase labor and price optimization, and improve customer loyalty and brand penetration,” Krishnamurthy said. “We are well positioned to continue driving strong … consistent cash flow generation in 2023.”

John Schroyer

John Schroyer has been a reporter since 2006, initially with a focus on politics, and covered the 2012 Colorado campaign to legalize marijuana. He has written about the cannabis industry specifically since 2014, after being on hand for the first-ever legal cannabis sales on New Year’s Day that year in Denver. John has covered subsequent marijuana market launches in California and Illinois, has written about every aspect of the marijuana trade, and was part of the team that built the cannabis industry’s first-ever trade show, MJBizCon. He joined Green Market Report in 2022.

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