John SchroyerColorado-based Medicine Man Technologies, which does business as Schwazze (OTCQX: SHWZ) (Cboe CA: SHWZ), posted a $16 million net loss for the first three months of 2024, deepening its financial hole since last year’s $34.5 million loss.
Revenues were down slightly sequentially to $41.6 million from $43.3 million, but up slightly year-over-year from $40 million. But the net loss – a huge swing from the $1.7 million in net income a year ago – must really sting.
The company attributed the stale revenue growth to “pricing pressure in New Mexico, as well as higher medical sales mix in Colorado.”
Perhaps a telling sign of internal turbulence at the financially troubled firm, former CEO Nirup Krishnamurthy abruptly resigned in February “due to personal reasons,” according to a press release from Schwazze. He was replaced by interim CEO Forrest Hoffmaster, who had previously been the company’s chief financial officer.
Hoffmaster hailed the quarter as “another period of revenue growth” for Schwazze – referring to the 4% year-over-year uptick – and said the company is bolstering its wholesale division to supplement retail cannabis sales in Colorado and New Mexico.
Hoffmaster also indicated that both markets are still struggling to stabilize, with New Mexico’s still growing as Colorado has grappled with contraction in recent years.
“The Colorado market remains highly competitive with more than 680 active recreational licenses,” Hoffmaster said. “Although retail pricing has recently stabilized, Colorado sales in Q1 were down 10% year-over-year due to lower volumes. Nonetheless, we significantly outpaced the market as our sales were up 9%.”
“In New Mexico, the proliferation of new licenses continued to outpace state cannabis sales as store count in Q1 increased 31% year-over-year while the market grew only 13%,” Hoffmaster continued. “The New Mexico regulatory body has also increased its license enforcement efforts in recent months, contributing to more than 70 store closures and a 33% sequential decrease in net new store openings in the first quarter.”
But Schwazze is still ramping up and building out many of its assets in its two Western state markets, Hoffmaster emphasized, and after an acquisition spree, Schwazze is now focused on monetizing its operations and building brand loyalty.
“Over the past four years we have rapidly scaled our footprint through 13 acquisitions, building a leading retail presence in both Colorado and New Mexico. We are beginning to see positive momentum from our pricing and promotional strategy,” Hoffmaster said. “We believe these initiatives … will enable us to return to stronger levels of profitability moving forward.”
As of March 31, Schwazze had $346.6 million in total assets, including $13.1 million in cash, against $242.7 million in total liabilities.
