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spk04: Good afternoon. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Schwa's fourth quarter conference call. Note that all lines have been placed on mute to prevent any background noise. And if at any time during this call you require immediate assistance, please press star zero for the operator. And I would like to turn the conference over to Joanne Jobin, Investor Relations Officer. Please go ahead.
spk06: Greetings and welcome to the year-end 2021 conference call and webcast for Schwoz. We are being hosted by Justin Dye, Chairman and Chief Executive Officer, and Nancy Huber, Chief Financial Officer. Following their presentation, management will take questions submitted via the link found on Schwoz's Investor Relations website and in the earnings press release. I would also like to remind you that management's prepared remarks and answers to your submitted questions may contain forward-looking statements, which are subject to risks and uncertainties. Examples of forward-looking statements include, among others, statements regarding federal and state legislation and regulation, and Schwoz's future results of operations and financial position, business strategy and plans. and objectives for future operations. The words expect, anticipate, could, enable, estimate, intend, accept, believe, potential, will, should, project, position, objective, determine, vision, and similar expressions, as they're related to Schwarz, are, as such, a forward-looking statement. Investors are cautioned. that all forward-looking statements involve risks and uncertainties that may cause actual events, results, performance, or achievements to differ from those anticipated by Schwoz at this time. Additional information concerning factors that could cause events, results, performance, or achievements to differ materially is available in Schwoz's earnings release made available before this call and available on Schwoz's investor relations website and in the form 10-K for the year ended December 31st, 2021. In addition, other information is more fully described in Schwoz's public filing with the U.S. Security and Exchange Commission. which can be viewed at www.sec.gov or on the company's investor relations website. Also, Schwoz may discuss non-GAAP financial measures during today's call. A reconciliation of the differences between the non-GAAP financial measure disclosed during the call with the most directly comparable GAAP measure can be found in the Schwoz Earnings Press Release made available before this call and available on Schwoz's Investor Relations website and in the form 10-K for the year ended December 31st, 2021. I would now like to turn the call over to CEO and Chairman Justin Dye.
spk00: Hello and thank you for joining us this afternoon. I will provide a business update and our CFO, Nancy Huber, We'll review our year-end financial results in detail before I conclude our presentation with some final thoughts. We would then be happy to take your questions. In a truly transformational year, which continued into the first quarter of this year, 2022, our business continued to deliver strong operating results, and our team continued to execute our operating playbook. Our growth plans remain on schedule. We remain enthusiastic about our expanding future, these factors give us confidence that we are building a unique, differentiated business that is poised for profitable growth. In 2021, and including the first quarter of 2022, we announced or completed the following transactions. On March 23 this year, the company's common trading shares commenced trading under the symbol SHWZ onto the NEO. a tier one Canadian stock exchange based in Toronto, Ontario. In March, we also signed definitive documents to acquire all the assets of Urban Health and Wellness Inc. The proposed transaction includes the adult use urban dispensary, as well as 7,200 square feet indoor cultivation facility, both located in Denver, Colorado. On February 16th, we announced the acquisition of the assets of Brow 2 LLC, a Denver based cultivation asset, which includes a 37,000 square foot building for indoor cultivation and equipment. In February, we also acquired Emerald Fields, the owner and operator of two retail cannabis dispensaries located in Manitou Springs in Glendale, Colorado. We officially became a regional multi-state operator. when we announced closing of the New Mexico operating assets of Reynolds Greenleaf and Associates LLC and the equity of Elemental Kitchen and Laboratories LLC. This transaction included 10 Greenleaf licensed medical cannabis dispensaries, four cultivation facilities, three operating, one in development, and one manufacturing location. The state of New Mexico currently allows medical cannabis and has approved adult use recreational cannabis sales expected to commence tomorrow, April 1st, 2022. Along with our newly formed MSO status, we formed a strong Schwoz New Mexico leadership team under the leadership of Steve Pair as our New Mexico division president, along with Alex Walter-Hahn and Jacob White, both from our Greenleaf & Associates team. We also announced we are adding additional key roles at Schwoz to support our significant expansion within manufacturing, cultivation, and information technologies. Key members included Dave Kaufman as VP of Manufacturing and Supply Chain, Robert Pisali as VP of Cultivation. In late January, we announced the acquisition of the assets of Drift, which consists of two cannabis dispensaries located in Boulder, Colorado. In December of 2021, we announced the acquisition of the assets of the Smoking Gun, a dispensary located on a prime retail corner in the greater Denver metro area. Our most important announcement of the year occurred in early December when we announced a transformative $95 million raise of convertible debt for Schwoz M&A initiatives and expansion plans. This raise also introduced new institutional investors to the company, At that time, we made the announcement agreeing to purchase the New Mexico assets, transitioning Schwoz into a regional operator status. In August, we commenced our product home delivery service to residences in the city of Aurora, Colorado, and are continuing to look into ways to expand the service into other jurisdictions as delivery is approved. In July, we closed the acquisition of Southern Colorado Growers, which includes 34 acres of land with outdoor cultivation capacity, as well as indoor greenhouse and hoop house cultivation facilities and equipment. This purchase was the company's first major move into cultivation, which provides high-end premium cannabis directly to our Starbuds dispensaries and also provides significant production of biomass for our Purple Bees extraction and manufacturing facility. We launched our wholly-owned research and development subsidiary, Schwoz Biosciences LLC in May of 2021. And during 2021, Schwoz completed the acquisition of the remaining seven Starbuds dispensaries and the rebannering of four Mesa Organics retail dispensaries to Starbuds. As you can see by this report, our leadership team, our board of directors placed a premium on execution. To summarize, since April 2020, Schwartz has acquired or announced the planned acquisition of 33 cannabis dispensaries, as well as seven cultivation facilities and two manufacturing assets in Colorado and New Mexico. Most importantly, we continue to build our house of retail brands with Emerald Fields and our Greenleaf dispensaries, and we also continue to successfully expand the Purple Bees vape brand in all our dispensaries and across the state of Colorado. Now that we have the retail square footage and the grow capability, we expect to commence additional flower branding in our dispensaries in 2022. Year over year, our revenue increased to $108.4 million compared to $24 million during the same period last year, representing a 352% increase. The company's adjusted EBITDA for the year was $32.2 million, representing 29.7% of revenue. Proforma identicals for 2021, which includes performance before acquisition in 2020 and 21, show an average basket size that increased to 59.70, up 9.5%. Recorded customer visits totaled 1,375,589, up 3.8% compared to year-end 2020. Year-over-year identical sales were 13.3%. Since completing our acquisitions, we continue to generate approximately 68% of our revenue from retail, 32% from wholesale. We expect the contribution from the retail segment to continue to grow as we add to our dispensary count and add recreational sales in New Mexico. Through the implementation of our operating playbook, we've been able to effectively contribute to growth and efficiencies in our manufacturing and retail locations. At our Purple Bees Manufacturing Division, we implemented our MRP system, improving our ability for production planning and making cost decisions with real-time information. We held our first vendor summit in September, attended by approximately 83 suppliers from across Colorado, reviewing our product plans and discussing partnering opportunities and how to grow our vendors' business as well as ours. In retail, we're reviewing our product categories, aligning product assortment across our dispensaries. Along with strong revenue growth and adjusted EBITDA results, we continue to be encouraged with our retail results with our two-year stacked IDs at 47.3%, which we believe better represent market growth due to COVID-19 impact and stimulus packages. and demonstrates that we continue to outpace the Colorado market as reported by the PDS analytics by 19.8%. In 2022, we will continue to cycle COVID-19 retail numbers for the first half of the year. So we anticipate growth in Colorado market to be challenging this year. We anticipate the opening of the adult use market in New Mexico will offset some of that slower growth in Colorado. As mentioned earlier, we continue to strengthen our Colorado and New Mexico management teams. All come with great experience in their respective fields and will add necessary horsepower to critical areas to drive growth, execution, and support acquisitions in Colorado and New Mexico. We also plan to add a distribution center in Colorado as part of our retail wholesale playbook expansion. As for the federal and state government laws regarding cannabis legislation, there continues to be a lot of discussion but no significant movement or changes on any of the federal acts. Although it looks like the House may pass the Moore Act again this week or next, we remain skeptical it will pass the Senate. We expect that all parties will continue to look at financial and legal reform and cannabis laws and perhaps pass either the Moore Act or the Safe Banking Act or something similar as we continue to invest and reinvest in our customers and communities. On a positive note, more states continue to legalize both medical and adult use cannabis. As always, we will closely monitor any federal and state changes that would impact our industry and are poised to make any changes that are necessary. We have recently started home delivery products to Aurora, a suburb of Denver, Colorado, and we are looking to expand this service into other jurisdictions as delivery is approved. Turning to the future, As we are now a regional operator, we will continue to evaluate additional opportunities across the cannabis industry in the areas of cultivation, manufacturing, and retail dispensaries in other states. Our current criteria for potential acquisitions includes revenue growth or growth potential, EBITDA profitability with synergy opportunities, attractive acquisition prices that are accretive to our shareholders, provides additional brands and products, and attractive retail locations with good real estate. Any announcements regarding expansion intentions will be made once we've reached definitive agreements with prospective partners. Let me also reiterate that we believe our home state of Colorado continues to represent attractive geographies to build out our platform as it provides us with the opportunity to acquire targets that are sophisticated and profitable and have already weathered the early boom and bust cycle of the industry. Our entry into New Mexico will provide exciting additional opportunities as the state turns from medical only to medical and recreational adult use by April the 1st. And now I'd like to turn the discussion over to Nancy to continue our financial review.
spk05: Thank you, Justin. I would now like to review our financial results for the year ended 2021. As Justin mentioned at the top of the presentation, Total revenue for the year was $108.4 million compared to $24 million for the same period in 2020 and represents an increase of approximately 352%. Also, just a reminder that in the first quarter of 2021, we changed our segment reporting to align with how we now manage and evaluate business performance. We are now reporting by retail, which includes dispensaries, and wholesale, which includes MIPS, cultivation, big tomato, and success nutrients, and other, which includes revenue from consulting and other small revenue areas. Also, remember we added two Starbuds dispensaries in February of this year and five in March, as well as Southern Colorado growers in July and Smoking Gun in December, so results include their contributions since those dates. I am also pleased to report that we generated positive operating cash flow for the year of $57.3 million, of which $34.9 million were due to our derivative liability related to our convertible debt financing. We ended the year with $106.4 million in cash and cash equivalents. Retail sales were $73.7 million for 2021, up from $3.9 million the previous year, representing a 1,811% increase driven primarily by acquisitions of dispensaries in Colorado. Wholesale operations revenue increased to $34.4 million from $18.6 million compared to the previous year, representing an 85% increase, primarily driven by the acquisition of cultivation facilities and increase in sales of distillate products to the market. Other sales were $0.3 million from $1.5 million the previous year, primarily driven by the focus away from consulting to retail and wholesale. Total cost of goods and services for the year totaled $15.9 million compared to $17.2 million during the same period in 2020, representing an increase of 243% due to increased sales of products and growth through acquisition. Gross profit increased to $49.4 million for the year compared to $6.8 million during the same period in 2020. Gross profit margin increased as a percentage of revenue from 28.2% to 45.5%, continued to be driven by the strength of Starbucks acquisition, our consolidated purchasing approach, and continued implementation of our retail playbook. Total operating expenses were $38.9 million for the year, compared to $29.7 million during the same period in 2020, The higher expenses were due to increased selling, general and administrative expenses, and salaries, benefits, and related employment costs. Net income attributed to common shareholders for the year was $7.2 million, or approximately 17 cents basic earnings per share, compared to a net loss of $19.4 million, or a loss of 47 cents for the basic loss per share for the same period last year. Adjusted EBITDA for the year was $32.2 million, representing 29.7% of revenue, compared to a loss of $7.6 million for the same period last year. This is derived from operating income and adjusted for one-time expenses, merger and acquisition and capital raising costs, and non-cash-related compensation costs and depreciation and amortization. Turning now to the outlook for 2022, The company is providing guidance which excludes transactions that are announced but not closed. Our Q4 2022 run rate projected revenue guidance is approximately $220 million to $260 million, and we are projecting Q4 2022 annualized adjusted EBITDA from $70 million to $82 million. The company is optimistic 2022 will be another pivotal year as we integrate and synergize our recent acquisitions and continue our expansion and M&A plans. Thank you for your time today, and I'd now like to turn back to Justin, who will open the call to questions and answers.
spk00: On behalf of the entire Schwoz team, I'd like to thank all of you for your continued support, encouragement, and interest in Schwoz. I'd like to thank our entire team, but specifically the frontline team members at Big Tomato, Success Nutrients, Purple Bees, our cultivation team at Growth Forth Gardens, Starbuds, Emerald Fields, and our Greenleaf. As always, we're grateful for our customers for their loyalty and support. We would now be happy to take your questions. To ask a question, please click on the link on the investor relations portion of our website and submit.
spk03: Thank you. Thank you, Justin and Nancy.
spk06: Also joining us here today is Nirup Krishnamurthy, our Chief Operating Officer, who will also be available to take questions from the audience. My name is Joanne Jobin. I am the IRO for Schwoz, and I will be moderating Q&A on behalf of the team today. And the first submitted question is, given your capital raises and other financings in 2021, Could you please give us a rundown on your total cash position, total outstanding debt, fully diluted shares outstanding by voting class, total outstanding warrants, and any other employee stock auctions outstanding at year end? This would help us without having to navigate through your filed 10-K. Thank you.
spk05: As of today, we have about 52.4 million shares of common stock outstanding. That includes the shares that we've issued subsequent to year end per the subsequent event comment in the 10-K. The preferred converted as of year end was 78.3 million shares. Remember, there's an 8% interest on that. Every quarter that number goes up by a little bit. There's 17 million warrants outstanding. And then the convertible shares at 95 million would convert to 42.4 million. The conversion rate on those is 2.24. But those are counted in our debt position as of now. In terms of options, we have about 9.8 million options outstanding to our employees. of which about 5.4 million of them are vested. And they range in stock price from about 1.17 to just a little over $2. And at year end, we had $106.4 million of cash. We've used approximately 52 million of that cash positive, although we are using cash for capital projects as well. Also remember the convertible debt, which is $95 million, has a 4% PIC interest and a 9% pay, so there's 4% being added to that interest as we go. The other debt that we have is $44.5 The Altmore note is $15 million, and we have a seller note with RGA for $17 million. I think that gives you all the information you need to look at our capital structure.
spk06: Thank you. The next question. How many acquisitions since StarBuds?
spk00: I think maybe a better positioning would be how many dispensaries do we have now, just to give everybody kind of a view. If you look at it, we've acquired or announced 33 cannabis dispensaries, seven cultivation facilities, and two manufacturing campuses in Colorado and New Mexico. I would comment and say we have a very good pipeline of new store opportunities, both new real estate as well as acquisitions of existing operators, both in Colorado and in New Mexico. So we continue to look at that and stay disciplined and look for really nice businesses to acquire and partner with. We certainly look forward to expanding in New Mexico as well. We can continue to look at other states in the region, but our main focus right now is certainly Colorado and New Mexico. Thank you.
spk06: Thank you, Justin. How do you keep outpacing the state? That's four quarters in a row now. That's quite impressive considering the state is down once again.
spk00: Yeah, great. Appreciate the comment. You know, we actually outpaced the state by 11.3% for the year when you compare our identical sales versus BDS reported growth for the cannabis industry, which we're proud of. We're going to keep working towards that. You know, we're applying our execution playbook to what we do. That's being excellent at retail, standing for great quality products, terrific, friendly, knowledgeable service, and then making sure we have the highest quality and the best assortment in the stores is really what we want to stand for in our stores. We've executed the operating playbook to drive efficiencies and drive productivity and best practices in cultivation, in our supply chain manufacturing. We are opening a distribution center later this year that we think will continue to drive efficiencies and will make the business better and better, you know, more prepared to satisfy the needs of our customers and our vendors who are looking for supply chain solutions. So we're excited about that. You know, we've implemented our MRP system, which allows us to do better production planning and costing at Purple Bees, our manufacturing campus. You know, we held our first vendor top-to-top summit in September. We had 83 Colorado suppliers there where we discussed products. We discussed how we could work closer together and really grow the industry and be partners in doing that. In retail, we're continuing to review categories and products, brands, and aligning that assortment to what our customers are telling us that they want, and at good values with great quality. If you look at our two-year stacked ID comps for same-store sales, we're 47.3%. So the last two years, if you combine our one-year identicals, it's 47.3%, which is, we think, very healthy growth. for a, you know, a sophisticated market such as Colorado. And as we said, our IDs were 13.3%, which we believe represent the, you know, really the market over the last couple of years. And certainly there's been lots of displacement, labor shortages. uh you know we've had employees out with covet we've seen customers in certain parts of the state really uh drop off with some of the covet issues so i think the team has uh i think the industry's done a nice job of really managing through this in an unprecedented sort of set of circumstances with the pandemic so we're proud of what we're doing we continue to work on growing sales taking care of our customers If you look at our wholesale business, we continue to win customers. We delivered 85% revenue growth. We continued our upward trend with an increase in basket size and customer visits on the retail side. And we continue to generate approximately 68-70% of our revenue from retail and 32% from wholesale. And we continue to expect to see growth with REC in New Mexico. In fact, we're calling from New Mexico today. We're excited about being here. At midnight tonight, we will be in the REC business here in New Mexico, and we've got almost the entire team here. We'll be checking customers out of the store. So if you're in the area of Las Cruces or Santa Fe or Albuquerque, come see us.
spk06: Thank you, Justin. The next question is, it's multi-part, so I'll go through it sequentially. Do you have any comment on why your revenue declined sequentially? What impact has higher fuel prices had on the home delivery business? Can you provide any detail as to the number of daily transactions, average basket size, growth rates for the home delivery business?
spk00: Yeah, let me – this is really the difference between new markets and limited license markets that are still ramping or still in the gold rush kind of process. So to measure sequentially and to look at it sequentially, frankly, is not a very sophisticated view in a mature market such as ours. When you look at what we have done, you look at quarter three this year, our identical was 1.1% at retail, and the two-year stack comp was 37.7%. When you compare that to quarter Q4, our identical was 4.9%, so improving 3.8% store-to-store on an identical basis, which is good sequential growth. And on the two-year basis, it was 40.4%. So we grew about another 3% versus Q3. And Colorado is its own unique market. And when you look at it, certainly you have cyclicality. So the best two quarters are Q2 and Q3. In the Colorado market, with tourism, which is how the market behaves, it's been like that since... REC came online, so you can see there's certainly cyclicality in the business. So that's probably the right way to look at it. I would also say in the fourth quarter, retail held in there very strong, and we saw softening on the wholesale side, particularly on the distillate side. Back half of November, we saw CPG customers not taking product as they had seen really slowing CPG sales and had excess inventory on the raw material side with the distillate. And then we saw that to continue in December. We're seeing some recovery. I think that's a temporary sort of lag, and we're seeing it start to pick up. But that's really how to think about the growth side of things and how to think about them.
spk06: Thank you, Justin. How is the company addressing cultivation license caps in New Mexico as you seek to grow vertical operations?
spk00: Yeah, that's another great question. So, you know, New Mexico is its own company. market, and here you do have a number of licensees that are getting retail licenses as well as growing licenses as well. There's a shortage of product in the state. So one of the key issues that's going to hold back really the demand side of things is going to be lack of product, so it's really supply-generated. So we're going to see a number of operators open in New Mexico, and they won't have a lot of product to sell is sort of the way we're thinking about things. We've addressed that, so we have plenty of product to meet the growing needs of the REC market. We'll tip off tonight at midnight, and we're really looking forward to seeing how REC evolves here in New Mexico. You know, the licensing, certainly you've got to get licenses, et cetera, but, you know, there's a fundamental supply issue with product here in New Mexico. So those are the things that we think about for our customers and patients here with our Greenleaf.
spk06: Thank you, Justin. Next question. Can you comment on the proposed Starbud site on Colorado Boulevard slated for a 2023 opening? It looks like a very large retail dispensary.
spk00: Yeah, we're very optimistic about that. That was a single operator that we acquired on a hard corner on one of the busiest areas. one of the busiest streets in Denver, and we're really excited about the opportunity. Hard Corner, great ingress and egress. We will convert that into a Starbucks, bring our merchandising, our service, our quality to that, and we're in the process of remodeling, and we'll start remodeling and drawing the store up that will be a Starbucks quality and We're excited about that. So more to come on that, and we look forward to seeing that store grow.
spk06: Thank you, Justin. And sticking with the same topic, what is the strategy with using Emerald Fields versus Starbucks as banners for dispensaries?
spk00: Yeah, I think when you look at customers, they have a slightly different customer mix when you look at who is shopping within those stores. So we think really having Starbucks in Colorado as well as Emerald Fields will allow us to appeal to a broader set of consumers. And we're going to test and measure different retail tactics and merchandising sets and service, staffing models, technology, et cetera. So we always do some A-B testing and looking to see what's driving the best benefit for our customers. in terms of getting them out quickly, efficiently, give them the best service, and then obviously give them the right products at the right value on the right promotions. So it really gives us a way to appeal to a broader audience here in Colorado, and we will run both of those. So as we continue to grow our store count, In Colorado, we'll decide whether, you know, is it best to be at Emerald Fields or Starbucks or keep the existing name. If they have brand loyalty and those shoppers have an affinity towards that, we are not going to be overly prescriptive. We're going to do what's best for the customer and do no harm. So we may keep that banner for a while or into perpetuity if we think it's good.
spk06: Thank you, Justin. Next question. In the M&A pipeline, what size of acquisitions will be your sweet spot, and will that still follow the same acquisition criteria and structure, or has that changed with today's marked environment?
spk00: Yeah, that's... You know, these will solve a strategic imperative for us. So on the retail side, we're going to continue to drive our store footprint to cover more and more of the state of Colorado. Same thing in New Mexico. We will buy businesses that generate EBITDA and, you know, hopefully are generating free cash flow after taxes. That's important to us. We'll pay an appropriate price for those that make sense for our shareholders, and that's the way we'll think about that. So we're going to continue to look at retail will be our principal focus. There may be some brand and product opportunities down the road as well, but principally on the retail side. And then as we really try to get into more growing our biomass to fuel our distillate manufacturing business, you'll see us investing there as well.
spk06: Thank you, Justin. It sounds like the Aurora delivery model may be still evolving. Can you discuss the challenges and opportunities that you are seeing, and do you expect to bring that to New Mexico?
spk02: Yeah, I'll take that. So we implemented delivery in Aurora last year, and we are seeing decent traffic for online ordering and delivery. And our basket size on delivery is significantly higher than an in-store kind of basket from a consumer standpoint. So in that regard, it is proving beneficial in terms of both top line and margins. And good customer service. So we have a process that is established and in place. And as the questioner, as the person who asked the question said, it is evolving and we are actively looking at figuring out how to expand that capability across other counties, including Denver.
spk06: Thank you. Next question. Are the retail prices in New Mexico the same, better, or less than Colorado prices?
spk02: Well, retail pricing in New Mexico is will be higher than Colorado simply because of scarcity of supply to begin with. As we go REC starting tomorrow, we expect demand to far outstrip supply, and that will drive pricing in the marketplace. Colorado being a very, very mature market with a large number of suppliers, both on the growth side as well as on the CPG side, The pricing is more market-based, and so while we expect New Mexico to get there over many years, it's not going to happen right away.
spk06: Thank you, Nirup. And one more on New Mexico. How well prepared are you for REC while still serving the medical market? Do you expect a large influx of visitors from other states?
spk02: Yes. closed on our acquisition in New Mexico on February 7th. And since then, the team here, Steve and his team, have worked very, very diligently to get the 10 stores ready for recreational sales starting tomorrow. We have remodeled four of the stores and have made adjustments to the remaining six to ensure that medical patients are not inconvenienced at the same time enable some significant traffic from a recreational site. So yes, we love to see customers. Our job is, as Justin mentioned, to have the best set of products with the highest quality and great customer service. And we're going to bring the same playbook that we are operating in Colorado into New Mexico. And we're really and eagerly looking forward to serving our recreational customers in addition to our medical customers here.
spk06: Thank you, Nirup. Congratulations on quite an eventful year. It appears that Q4 came in roughly 5 to 6 mil below the guidance you gave with Q3 results. Can you please tell us what do you attribute this shortfall to?
spk03: Yeah, Joe, I'll take that one.
spk05: So retail did see a slight decrease in our performance compared to what we anticipated. Things were a little bit soft in November and December. We have seen that bounce back. But I think cycling COVID in those times was a little bit more difficult than we anticipated. And because we saw a decrease in retail, we also saw a decrease in our wholesale business as the consumer products people who had built up inventory in anticipation of the high sales in November and December figured out they had a lot of inventory on their shelves. So those numbers decreased as well. It has taken a little bit longer for those numbers to bounce back, but we are seeing those come back now in Q1 and anticipate moving forward there. As Justin said, we do believe that cycling COVID But we anticipate with the launch of FRAC in New Mexico, we'll offset some of that stuff.
spk06: Thank you, Nancy. As you continue to target becoming a super regional, will you be focusing on adjacent states or nationwide? And what states should we be thinking about for possible expansion?
spk00: Well, thank you for the question. It's one that we keep very close to the vest. We certainly have gone on record to say we're going to continue to drive market share in Colorado, and obviously we're focused on that here in New Mexico, so we've got a lot of work to do in these two states. Certainly, we like this region. There are other states that may be attractive down the road, but For the next period of time, we're really focused on building the best business we can here and being a market leader. We're number one in Colorado today after our most recent acquisitions by revenue, which we're very proud of. We said we were going to do that, and we've done it. We've got good competitors in Colorado, so we've got to stay focused on continuing to drive the business there. taking care of customers and you know we have similar similar plans here in New Mexico but we like we like the we like the West with their synergies between being able to move people around share best practices it's easier to travel etc so I think you're going to continue to see that and you know we're going to remain disciplined buying cash flowing good profitable businesses that we can make better and and add synergies too. I think there was a question around synergies. I would say the synergies are reflected in the guidance that we have provided, those deals that we've announced already. We believe we will have more acquisitions and certainly going to continue to work on unit growth and more stores that will create more and more opportunities for best practices, which is operating better, more efficiently, using our size and scale. as well as synergies on the supply chain side. So, you know, I think we're focused on Colorado, New Mexico, and that's sort of the punchline.
spk06: Thank you, Justin. We're getting a lot of questions on potential biotes or takeovers, so maybe you can just comment on that.
spk00: Well, my general counsel has advised me to not comment on any potential deals in the market, et cetera, or where we are. That's a fair question. Obviously, there was a big transaction announced between Cresco and ColumbiaCare. We continue to watch and monitor the MSO landscape and how that works. But I'll come back to what we've said really from the beginning. We are focused on building a really great company here that innovates, that takes care of customers, that continues to drive sales and grow margin and become very, very efficient in the supply chain, launching products and having really superior brands. And we're going to do those in the states that we're at. And if we do that, we're going to create a really great company that's going to be valuable and it's going to treat investors very, very well, and that's what we're focused on. Our job here is to build a great company and make sure that we reward our shareholders and investors and drive the highest returns for them. That's what we're in the business for doing. So we'll continue to build this business, and if there's opportunities down the road, we certainly would keep our eyes open to make sure that we're taking care of our shareholders.
spk06: Thank you, Justin. For clarification, it sounds like the 2022 guidance does not include any additional acquisitions that have not been closed and acquisitions that have not been announced. Is this correct?
spk05: Yes, that is correct. It's just based on acquisitions that we have closed. So if you would include those things we've closed this year. For example, Drift, Atmo Field, New Mexico, and the Brow just grow. It doesn't include, for example, Urban, which we announced we had a definitive agreement with, but we haven't closed. So that's kind of the way to look at that.
spk00: So to the extent that we have, do we To the extent we have more acquisitions that are accretive and grow revenue and cash flow, those would be additive to what we've put out there, which means upside.
spk06: Thank you, Justin. How should we think about translating the $70 million to $82 million EBITDA guidance to recurring operating free cash flow after maintenance capex, or can you provide a range for that?
spk05: I can't really give you the operating cash flow because we haven't provided any guidance on that, but I do say that we'll be doing about $15 million worth of capital improvements over the year, and that kind of breaks out across the board. We'll be doing store refreshes probably earlier in the year and new store openings, which will take a little longer, as well as we are investing in grow capabilities in New Mexico, and a little bit in Colorado as well, and some manufacturing improvements. And we have a new distribution center opening that we've talked about in Colorado as well.
spk03: And they'll be kind of sprinkled throughout the year.
spk06: Thank you, Nancy. Justin, we're getting quite a few questions on the share price and what the rationale is as to why the markets is not paying better attention to Schwoz. Would you like to comment, please?
spk00: You know, I'll frame it as probably a more optimistic one in the fact that, you know, now that, you know, if you look at the business, our business grew from roughly 20 million to, you know, 108 million within one year. In 19, we had about $12 million in revenues, so the business has ramped very, very quickly. We've grown from 100 employees to 700 employees in one year, and we're generating positive EBITDA. We're generating positive net income. We're generating free cash flow after taxes, after CapEx. So the fact of the matter is we're a unique company, I believe. I think we've got really great fundamentals. We've got a good strategy of building market share, taking care of customers, working with partners on the supply chain side to make everyone more efficient, and that model works. And we're seeing that. I think that's why we're outpacing Colorado. I think that's why we're optimistic about New Mexico. And it's about focus and execution. And from my perspective and our board's perspective, we want to be known as an execution company and delivering the results that we set. So having said all of that, we have to take that and share that with more people. We have not since COVID, we've not been on the road in person. For roadshows, we've done a lot of virtual roadshows, and we're starting to – we'll be traveling here over the next – really over the next nine months and sharing with more institutional investors, retail investors. We've got a handful of conferences coming up here next month that we'll be at, three different conferences. So I think doing that, I think that's important. I think being listed and going public in Canada – It does a couple things for us. I think it gets more institutions and more retail investors attuned to our story. It also sets us up to be – it's easier to trade in the stock. So there are trading platforms that can't get into or can't really trade in OTC stocks, but they can on the stock. on the NEO exchange. So I think those things are, they're all incremental and I think they'll all continue to pay dividends for us. And you know, it's a, we're not, you know, we trade at a pretty steep discount to where other operators trade. And I think, you know, our goal is to continue to operate the numbers and what we're doing. We'll speak for themselves and we're going to get out and make sure that that message is delivered. and to capital markets as we think about our future and lowering our cost of capital and making sure we've got a really good balance sheet. So I think we're going to see a lot of good positive things. I think we've got really great operating momentum. And I think you have to look hard and fast at companies that look like us with the free cash flow profile, EBITDA growth, revenue growth, and really taking market share from companies sophisticated markets. So I like where we're positioned. We've got a lot more things to do and a lot more things to work on, but I love our team and I think everyone's really focused on making this a great company.
spk06: Thank you, Justin. Are you able to detail whose idea it was to create a Starbuzz cell phone app? It appears the Starbuzz app was the first major cannabis operator app available to the public.
spk00: I cannot. That's a great question that I don't have an answer for. My guess is it would be the founders of Starbucks.
spk06: Okay, thank you. So we're going to wrap up. We have one more question, and I think it's a great one to wrap up on. What concerns you the most for executing on 2022 guidance?
spk00: I think you always have risk on the demand side. We watch the customer base very closely. We watch visits. We watch basket. Our goal is to continue to sell great products to solve problems and make people's lives better. We've got to do that. We've got to do that at the store level on the wholesale side. We've got to continue to work with our customers in solving problems and whether it be giving them really high-quality, consistent distillate and other products and really working closely with them. So I think really on the demand side, we're going to watch how Colorado evolves going forward. We certainly mentioned the wholesale softness back part of Q4, and certainly pricing for wholesale distillate has certainly come down. So we're watching that, but I feel like the team feels pretty confident we can meet the guidance for the fourth quarter. We've done that because there's some timing things that we don't control from a licensing and build-out standpoint. That's why we went to a fourth-quarter view. I think it's a cleaner view than a full annual view. It really gives you a sense of the size and the company that we're building. So I worry about that. I think in New Mexico, we're going to have to really work hard to stay on top of taking care of customers. The volume, we believe, is going to expand dramatically, and making sure that we're in stock, making sure we've got great products on the shelves, making sure we're taking care of patients and customers with really great front-end services. associates and team members to do that. So staying staffed up, making sure we've got good contingency plans on the supply chain side. Those are going to be the things that we need to work on, but I see a lot of synergies, a lot of best practices that we can share between Colorado and New Mexico, and that gives me a lot of optimism.
spk06: Thank you, Justin. We're going to wrap up now, and I'd like to ask you if you have any final remarks before we end the call today.
spk00: Yeah, I just want to thank our investors. I want to thank all the team members at Schwoz. I want to thank our board. I want to thank our vendors, partners who have really stepped up and have been terrific working with us on the flower side, on the package goods side. You know, certainly want to thank customers for shopping with us and, you know, all the team members. But, you know, I think I would leave the parting, you know, Shot is basically the following. I think we've created a really good company with good operating momentum. We're seeing that from a revenue perspective. We're seeing that from an EBITDA perspective. We're generating free cash flow. We've got positive earnings per share. And from a financial perspective, that's important. But more importantly, we really like the innovation that's going on in the company, and we're building new products. We're working on new solutions with our vendors, and you're going to continue to see us innovate. So I think you're going to see a lot of good stuff out of us and, you know, more to come, and we'll look forward to our next conference call.
spk06: Thank you, Justin. And thank you, Nancy and Narope. I would like to remind everyone that this webcast is available on the Schwoz website. Once again, thank you for joining the Schwoz fourth quarter and year-end webcast. This ends our call for today.
spk03: Thank you.
spk04: Ladies and gentlemen, you may now disconnect your lines.
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