Schwazze Q1 Revenue Up 20% Sequentially To $31.8M, Retail Sales Increased 124% To $26.5M

 Schwazze, SHWZ HWZ announced financial results for the first quarter ended March 31, 2022.

Q1 2022 Financial Summary:

  • Revenues of $31.8 million grew 64% compared to $19.3 million in first quarter ended March 31, 2021 (Q1 2021)
  • Retail sales were $26.5 million up 124% when compared to Q1 2021
  • Gross Margin of $10.9 million was up 34.4% compared to $7.3 million in Q1 2021, both first quarters were affected by purchase accounting
  • Net Loss was ($26.8) million compared to a Net Loss of ($3.6) million for the same period last year
  • Adjusted EBITDA of $7.9 million was 25% of revenue, compared to $5.8 million for the same period last year

Justin Dye, chairman and CEO of Schwazze stated"as we continued our successful transformation into a Regional MSO in the first quarter of 2022, we met certain challenges, including the comparison cycling of an inflated Q1 2021, which was aided by stimulus checks and COVID lockdowns. Colorado's high COVID rates during Q1 2022 also impacted sales and internal staff. The devastating Marshall Fires in and around Boulder in January of this year, caused one store to temporarily close and the store has been further impacted due to a displaced population in and around Boulder County. Also, overall sales and a decrease in wholesale revenue was largely impacted by wholesale distillate pricing pressure and over-supply in the state of Colorado."

Q1 2022 Revenue
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.

 "Q1 2022 included four acquisitions in January and February expanding the company in all areas. We also found ourselves cycling large numbers from the previous year and were impacted by COVID as many businesses in Colorado were similarly affected in January. As we move forward in quarters not complicated by acquisitions costs, we are targeting to have positive operating income. We remain focused on continuing to drive our operating playbook through all our businesses and plan to outperform the market," Nancy Huber, CFO for Schwazze commented.

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