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
