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2022 aEBIDTA to tax-adjusted OCF conversion:
— CannaVestments (@CannaVestments) May 8, 2023
GTI: 52.6%
GRUSF: 39.2%
VEXT: 39.1%
MRMD: 37.9%
SHWZ: 11.7%
CURA: 11.7%
CNTMF: 6.0%
TRUL: 0.8%
VRNO: -0.5%
4Front: -13.9%
CL: -16.2%
AWH: -39.6%
AYR: -59.1%
TER: -93.8%
ACRG: -144.8%
CC: -176.4%
Been hard to stay positive in the sector lately. Just feels like nothing will ever happen at the federal level. Good to see that they backed research recently, since the old "research" was sponsored by NIDA (National Institute on Drug Abuse)...so obviously their efforts were in proving the "drug abuse" side...but it also seems like a delay tactic to give the pharmaceutical industry a chance to get out ahead in isolating, patenting and generating single molecule based drugs. If the industry has to wait for medical proof on the botanical side...i.e. compound molecules...then that will never happen because the FDA doesnt even have an established pathway for this type development. Also hard to see the analytical firms back off coverage. My frustration is that the industry, while potentially baby-stepping forward continues to shoot itself in the foot by bad actors; whether that be the side that used the farm bill loophole to put psychoactive substances on gas station shelves, and into the hands of kids...or just watching the MSOs in space that continue to prioritize the profit side of the industry (which I get because these are corporations) over best business practices to further the industry. The money spend for constant failure and/or the continue to focus on establishing siloed markets for their own benefit...while constantly complaining about (but shielding their eyes from) the external factors driving cost compression. Between work recently...and the (perceived) never-ending cycle cannabis bullshit...I am just finding it hard to want to pay attention anymore, but I continue to convince myself that if I am feeling this way we must be at the bottom, right? When in reality, I don't think we are...just trying to remain hopeful, while sadly wishing I could fast-forward the consolidation timeline so we could get rid of most of the garbage companies that exist out there today.
Personally, I don think that the playbook is broken. We have seen efficiencies in the business and we have see margins maintained while the industry faces increased cost compression and competition...and while adding acquisitions. I think the 'corporate' industry is broken. I think the issue continues to be that cannabis still remains the wild-wild west. I mean, the annual sales of the industry continue to grow. People enjoy cannabis more than chocolate! There is obviously a market. What there isn't is consistent regulation, national regulation, good legal operators, consistent product and national pricing. The legal hurdles and state-by-state markets cause a level of dissociation. Regardless of the 280E tax burden, the lack of national cannabis reform, in my opinion, is the culprit. If the nation would open to the industry then the industry, as a whole, would right size (over time). Cannabis would commoditize and the price would settle around pricing that is competitive with the (already existing) national illicit market. However, until then, corporate cannabis will continue to see ebbs and flows between cost compression and re-stabilization as new entrepreneurs try their hand at the green rush...and as operators in low (expense) grow locations illegally fuel markets where the pricing is favorable. But then again, maybe that is all a pipedream because one could argue that may never happen due to the way that each state has had to establish/regulate its own market...the capital deployment...the tax revenue...etc. The problem is, there is a national (illegal) market and the corporate cannabis model will always struggle until it can compete...and re-establish itself...on a level playing field.
First Quarter Earnings -- May 10, 2023, at 5:00 pm ET --
https://www.prnewswire.com/news-releases/schwazze-announces-first-quarter-earnings-call-301814233.html
Reposting. Someone posted this on StockTwits: https://www.reddit.com/r/SHWZ/comments/135uans/schwazze_updated_share_holdings_waterfall/
Not disappointed that they are not increasing the share count...actually ecstatic that they arent (shareholder value). Really just going off of conversations made across the industry, and from JD as well. Most of the consolidation/acquisitions want a combination of cash and shares. They recognize that they are undervalued, combining forces, and wanting a bird in both hands; cash in their pocket while also a stake in the future. My surprise was more so in accepting this while knowing how deep JD wanted to go in each market...and also seeing that the company was nearing the 250M (when looking at fully diluted). Just assumed it was inevitable in preparation of upcoming market conditions...and taking advantage. Apparently I was wrong...and excitedly accepting of that.
Most companies used the down market of 2022 to clean up their books, probably because it was an easy excuse, but also because it would make future earnings look less bad. I was trying to think of a way to display this information, so I thought why not display both revenue and the change in the companies accumulated deficit (difference from 2021 to 2022). In the below graph the 2022 revenue is blue and the orange is the deficit. If a company added to their deficit the orange is under the blue, and vice versa, if they reduced their deficit, the orange is above the blue.
Wow! I haven't had any time to pull the numbers, but I went out to NM CROP site and it is updated. I cannot believe that NM has 988 dispensaries!!! That is 355 new dispensaries in 1 month!!!
March - 633
April - 988
Well I was 100% wrong. I figured for sure that they would vote to raise the share count to be able to mix/match when making deals. I wonder why they moved the proxy vote up? This proxy looks uneventful. What am I missing here?
Someone on Twitter posted (like a month or 2 ago) that they heard/rumored Pablo was let go. I was watching from that point forward to see if he (Pablo) made any comments or showed up on any annual earnings calls...and he did not. Late last month, Merida Capital Holdings posted Pablo as a guest speaker at one of their upcoming events. He was listed as the Managing Director of his own company. At that point, I figured it was just a matter of time.
Thanks for the breakout on dispensary count per location. I did notice that the locations were (for the most part) closer to the Texas border, which I found exciting (for the time being), but I intentionally didnt factor that into my napkin math.
@IPS, is this what you saw coming?
I looked at it similarly. [Napkin Math] If they take these 14 retail locations and pull the average per location that they are seeing with their existing 18 locations....approx $3.7M per month, total, across the 18....that is $205,555 per location. For 14 locations, that is an extra $2.88M per month; annualized that is $34.5M...so 1.1x estimated annual sales? I guess we will find out. If it closes on the last day of June, I am guessing it will add about $17M in total revenue by the end of the year...making New Mexico 2023 total revenue $62M; approx $80M run-rate had all 32 retail been producing for 12 months (and that is just retail).
SCHWAZZE SIGNS DEFINITIVE DOCUMENTS TO ACQUIRE ASSETS OF SUCELLUS, MANAGE ASSETS OF EVEREST, A PROMINENT NEW MEXICO CANNABIS OPERATOR
Consists of:
14 Dispensaries -- located in Albuquerque, Santa Fe, Las Cruces, Los Lunas, Sunland Park, Belen, and Texico.
1 Cultivation Facility -- 16,000 square feet of cultivation
1 Manufacturing Plant -- 8,500 square foot manufacturing facility are located in Albuquerque.
https://stockhouse.com/news/press-releases/2023/04/25/schwazze-signs-definitive-documents-to-acquire-assets-of-sucellus-manage-assets
I know SHWZ sponsored an ultimate frisbee team. I wonder if they would be interested in getting involved in the below event...since it is in Denver this year?
I was an active player up to the pandemic and can personally attest to not only the number of players that this event draws but also the benefits of cannabis aiding in recovery:
Gaelic games in the United States are governed by the USGAA, with over 130 active adult clubs, over 180 teams, and 4500+ members across the country. These clubs will compete to attend the USGAA Playoffs in Denver on the 18th – 20th of August 2023, for the title of National Champions in their respective grades.
It is expected that up to 1500 players along with over 1000 spectators from across North America will travel to Denver and the surrounding Colorado area for the event.
LOCATION OF THE 2023 FINALS
Sandstone Ranch Sports Field Complex
Someone started a Reddit board regarding Standing Akimbo news:
https://www.reddit.com/r/COents/comments/12qmj3f/standing_akimbo_enters_into_agreement_to_be/
I keep going back to what I read in a WestWord article:
"Per capita, there are twice as many residents per store in the Springs as there are in Denver," says Aaron Bluse, co-owner of Colorado dispensary chain Altitude Organic. "This could lead to the doubling or tripling of sales if you're in the right location."
Price tag seems a little hefty. Obviously this is a play at the Colorado Springs medical market/license:
"The consideration for the proposed acquisition is US$10,540,000 and will be paid as US$1,000,000 in cash and US$5,540,000 in Company common stock at closing, and US$4,000,000 in deferred cash payments."
"As part of the Standing Akimbo acquisition, Schwazze plans to open a Colorado Springs medical dispensary acquired in 2022 under the Standing Akimbo banner."
As previously mentioned by someone...could also be Texas.
AUSTIN — More Texans could access the state’s medical marijuana program under a bill that passed in the Texas House on Wednesday.
The proposal by Fort Worth GOP Rep. Stephanie Klick adds more medical conditions that fall under the state’s Compassionate Use Program to include patients who suffer from chronic pain. It also increases the amount of THC — the substance in marijuana that produces a high — allowed.
The House approved the bill on a 127-19 vote. The bill now heads to the Senate.
Aside from adding more medical conditions to the program, the bill increases the amount of THC to 10 milligrams per dosage unit. The limit is currently 1% by weight.
The application window runs until April 28. The agency, however, will not make a decision to approve any application until after the session concludes, in case the Legislature passes bills that expand the program.
https://www.dallasnews.com/news/texas/2023/04/11/more-texans-could-qualify-for-medical-marijuana-under-bill-advanced-in-texas-house/
This was right in tune with the primary focus of how the state of New Jersey expects cannabis license holders to direct/prove their (financial) investment/support. I turned into just the MSO license renewal portion of the recording and that was how each MSO was to justify their renewal.
Certainly wouldn't have hurt since they've had the best return over the past 6 mos., maybe due to being one of very few to start reporting +FCF.
— Sammy J (@sammyj_19) April 3, 2023
And since the one w 14 straight Qs of +FCF is 2nd on the 6mo. list 👇(Stoic), maybe FCF is starting to matter no matter size/liquidity: pic.twitter.com/pxHxYyNHCk
March 2023 Numbers: UP 15%, from February, to $4.1M
I was pulling the dispensary count based on the Annual Report. The count didnt match the numbers on the NM Cannabis CROP site (Dec 502 and Jan 585).
I didnt realize that NM updated their site already until you released that 633 count. So here are the numbers:
Dispensary Count: 633 (March) - 606 (February) = 27 Additional Dispensaries
Overall March sales looked awesome compared to February, even though the month had 3 more days.
February Total Sales: $3,498,752.81 / 28 days = $124,955.46 per day
March Total Sales: $4,108,358.60 / 31 days = $132,527.70 per day
Difference: +$7572.24 per day
From 550 to 633 in dispensaries in NM in 3 months! Closing in on Colorado dispensary counts, per the annual report, even though the NM population (2.11M) is 36% of the size of the population in Colorado (5.84M). I know out of state sales are strong, but the state has to be close to reaching a breaking point.
"As of December 31, 2022, there were 669 recreational cannabis licenses issued in Colorado, up from 651 recreational cannabis licenses issued as of December 31, 2021.
In New Mexico, there were 200 cannabis licenses as of December 31, 2021, which increased to 550 cannabis licenses as of December 31, 2022."
The babysteps are happening...I just think that the main issue is that there is no way to easily measure under the influence of marijuana, like there is with alcohol. I think one there is a device that law enforcement can carry around, as easy to use as a breathalyzer, the steps forward will be larger.
Some on Twitter seemed excited, I guess because it is 'official'...but I thought this was old (public) news. The NBA stopped testing for marijuana back in 2020 when the league returned to play during COVID. For the industry, I think it is a another babystep toward (societal) normalization...but I don't expect it to amount to much, if anything, in stock movement.
Now, according to Charania, “NBA players will no longer be prohibited for marijuana under the new seven-year Collective Bargaining Agreement.”
“It’s been removed from the anti-drug testing program, a process that began during 2019-20 season,” he reported.
It is definitely an interesting thought...and I hope hardcorehodler doesnt think I minimized his post. I guess I didnt realize that MN would end up putting the company in the #1 position in the state...I do like the idea of going head-to-head with GTI though. Obviously consolidating NM makes sense. Maryland, going AU July 1st, could see a good ROI selling the assets...potential capital market constraints. IMO NY "assets" are essentially dead....everyone wants to stay away...and I am expecting/waiting for P.Diddy to squash his deal with CL/CC. I also dont know the 5th state that the company claims to be in (per one of their last PRs). Obviously MN and NM are the best possibilities...I didnt think that Goodness Growth would want to divest pieces of the company and, honestly, I am still stuck on the Verano and Goodness litigation component.
My initial thought: I dont think that it in the cards. SHWZ has always adhered to the idea of going deep in the states that they are in with a focus of being the top operator in that state. Adding Goodness Growth would add 18 more dispensaries scattered across 5 different states. It replicates the issues that most of the MSOs have, where they have a state footprint but not a state foothold. Plus, I am not sure SHWZ would want to insert themselves into the legal drama that is going on between Goodness and Verano.
Been hoping that as well but Texas medical cannabis laws are 'a lot' strange. There are three license holders in the state but only one is operational. Aside from a low-THC requirement, the challenge is...at least from my understanding...is a medical company needs to service the entire state, and I think it is required to be a same day service. So the economics just don't make sense right now. Could you imagine someone from the opposite side of the state ordering something and planning the logistics/delivery?
You have a point...and who knows, maybe AW will buy his stuff back for pennies on the dollar (like the Blue Camo/AYR deal...where the Blue Camo owners changed their name to AZ GOAT --hilarious rename-- and bought their stores back at a fraction of what they were paid for them). I get the concept of stretching our dollars further. Why pay up for 4 stores if you can get way more than that for less...plus build out across the state and not centralized in Denver. Was really just thinking about previous comments made about those stores; well established and high volume.
Anybody else have this thought:
Seeing Columbia Cares results, known debt issues and possible post-merge right sizing (if it even happens)...what if, in the end, SHWZ ends up buying the four original MMDenver stores for a fraction of the previous term sheet price?
I know Columbia Care paid $42M for those four stores and a small grow. I think at one point I remember hearing that those four locations have an annual combined revenue of $25M.
DENVER, Sept. 5, 2019 /PRNewswire/ -- MDCL announced today that it has entered into a binding term sheet to acquire four additional dispensaries in Colorado. Under the terms of the transaction, Medicine Man Technologies will purchase the group of four dispensaries for $36,898,499.
Thank you for posting. You bring up valid concerns...and yes, I think all the companies in the space are taking advantage of the down market to add the write offs now, because investors will blame the market conditions and sweep it under the rug. The company gets to move forward less that dead weight and expecting to look better in the quarters to come. I need to go back and look to see what the total is for the top US operators. We have to be around $1B in goodwill/impairment, and that is without Curaleaf, who will probably report about half of that amount on their own. I am glad you shed light on the preferred stock, and dividends. It is on my radar but I (personally) tend to give it a pass because I see how the company is operating, where it is going, and believe it will work itself out in the end (which is probably an investor flaw). As for saturation, I dont ignore it...and, quite frankly I like the lack of license controls. Obviously it is challenging to any business operating under the conditions...but it is also trial by fire. The strong will survive and consumers benefit from the competition...both in quality and price. I like how the operators arent all controlled by big money...and there isnt any 'social equity' license flip. Just sick of these alleged top-operators using their access to capital to get regulators to implement license limits, lock down the licenses, squashing home grow and forcing their moldy garbage down consumers throats for a premium. That's my investment strategy in in a nutshell...and the reason I will continue buying SHWZ (but not reaching...waiting). I prefer a company that is proving their worth while operating in the foxhole as opposed to one making a name for themselves by continuously seeking asylum.
Exactly!...Continued disdain for the company but then 'advises' cannabis investors to look into CEA Industries, Hydrofarm and Greenlane.
Can you help me track the impairment charges?
On the call they me brushed off impairment as non-plant touching assets pertaining to consulting services, Success Nutrients and Big Tomato....maybe all three they consider 'consulting services'? Looking into the 10K the numbers are a little hard to follow.
One-time Loss on Impairment of $8,011,405
Other Expenses - Loss on Business Disposition of $4,684,366
How are they getting $8,011,405? The total impairment was $11.7M and if you deduct out the $4,684,366...you get $7.02M. Why cant I get the sum of these two areas to be $11.7M? And maybe more importantly, what does the other $7M account for...I assume Big Tomato and Success Nutrients?
"During 2022, the Company discontinued operations related to its consulting business, one cultivation facility in New Mexico acquired in the R. Greenleaf acquisition, and one cultivation facility in Colorado acquired in the Star Buds acquisitions."
The Company had approximately $11.7 million of goodwill impairment, of which $3,708,226 is related to discontinued of its consulting practice in 2022, which is reported under other income (expense) section of the accompanying consolidated statement of comprehensive (loss) income as a loss on business disposition.
Additionally, the Company recognized a loss on disposition of assets of $4,684,366 for the year ended December 31, 2022, which includes $3,708,226 of goodwill related to the discontinuation of the Company’s consulting business and $875,400 of intangible impairment also related to discontinued operations of a cultivation facility in Colorado. The remaining $100,740 of the loss recorded is related to other assets and liabilities written off for these discontinued operations.
FWIW, my estimate was on 1/5, after I had the New Mexico December retail numbers...and before I heard Dye's approximate. After hearing his approximate, I thought I was gonna be bang on figuring he intentinally rounded down.
Thanks. Still collecting my thoughts. I think subconsciously we all hoped for the best but expected a loss...but not the loss reported in Q4. It sucks because prior to the quarter we were chipping away at the deficit. I am really impressed though that margins were maintained. I mean we have seen other companies, including GTI, slip in this category in the last quarter...which I find absurd based on 'others' markets of operation. Slipping in limited licensed/competitive markets, sure tells me a story.
Focusing on the positives; and this is truly impressive given the markets of operation, and especially because other MSOs have been divesting from Colorado due to cost and margin compression, Gross Profit Margin (53%) and EBITDA Margin (33%) were maintained....and because of that, it really does interest me in what the company will report if/when the price of flower restores (similar to what other competitive markets, California and Michigan, are reporting). I think, on the call, Nirup mentioned this happening in Colorado and could take until the end of the year before it is reflected in the market.
I can see this happening, but probably won't be acknowledged until it shows up on (decreasing) Croptober supply. I also think, by summer of 2024 New Mexico hits a retail inflection point.
Making guess, based on these two events, within the next year I can see more growth coming in Colorado. Obviously there will be growth in New Mexico, I expect slower, strategic growth, picking up after the inflection point.
Onto the goodwill/impairment, I am not sure where I stand. I think the move obviously shows the company direction...and not being interesting in SHWZ acting like an 'all facets of the industry' holding company. I didn't care much about the 'consulting' aspect (I mean ask any company in the space...and they all grow "quality", right?) but I did like Success Nutrients and Big Tomato. I ultimately thought both would eventually have been sold off to GrowGen...but seeing the hydroponic/HomeDepot style company balance sheets, I guess it makes sense to divest. I am sure since COVID sourcing and shipping a water based nutrient line becomes more hassle than it is worth (speculation).
I am still holding to my initial gut feeling that the upcoming annual shareholder meeting includes a move to increase the total authorized share count.
Now onto my estimates:
I ended up being over on revenue and under on EBITDA. I didn't expect an 7% drop in revenue from Q3 to Q4. I anticipated a slight dip in Colorado, for Q4, but also expected it to be offset by new store openings in NM.
Annual Revenue Estimate: $162,241,947.81
Actual Annual Revenue: $159,379,219
COGs Estimate: $77,876,134.95
Actual COGs: $74,349,421
Gross Profit Estimate (52%) : $84,365,812.86
Actual Profit (53.4%): $85,029,798
EBITDA Estimate (32%): $51,917,423.30
Actual EBITDA (32.6%): $52,010,215
Moving to foot traffic and basket size:
Q4 foot traffic and basket size dipped in both states:
Q1-22-CO Visits: 415,308
Q1-22-CO Basket: $59.21
Q1-22-NM Visits: 122,913
Q1-22-NM Basket: $59.94
Q2-22-CO Visits: 444,771
Q2-22-CO Basket: $59.98
Q2-22-NM Visits: 209,591
Q2-22-NM Basket: $54.56
Q3-22-CO Visits: 452,220
Q3-22-CO Basket: $60.96
Q3-22-NM Visits: 231,137
Q3-22-NM Basket: $52.67
Q4-22-CO Visits: 416,717
Q4-22-CO Basket: $60.86
Q4-22-NM Visits: 219,665
Q4-22-NM Basket: $52.54