Medicine Man Tech Inc

ladies and gentlemen thank you for standing by my name is michelle and i will be your conference operator today at this time i would like to welcome everyone to the schwa's second quarter conference call all lines have been placed on mute to prevent any background noise at this time i would like to turn the conference over to joanne jobin please go ahead thank you operator greetings and welcome to the 2022

second quarter 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 web 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 positions. business strategy and plans, and objectives for future operations. Such forward-looking statements may be preceded by the words plan, will, may, continue, anticipate, become, build, develop, expect, believe, poised, project, approximate, could, potential, or similar expressions as they relate to Schwantz. 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 Schwoz's 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, on www.cdar.com, 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 discussed during the call with the most directly comparable GAAP measure can be found in Schwoz's earnings press release made available before this call and available on Schwoz's investor relations website. I would now like to turn the call over to CEO and Chairman Justin Dye.

Thank you, Joe. Hello and thank you for joining us this afternoon. I will provide a business update and our CFO, Nancy Huber, will review our quarterly financial results in detail before I conclude our presentation with some final thoughts. We will then be happy to take your questions. For the second quarter of 2022, Schwoz continued to outperform the market despite a challenging environment in Colorado. Our team has continued to nurture a vision of becoming the most admired key into this company by making a difference in our communities and providing trusted products, brands, and experiences that improve the human condition. Our growth plans remain on track and despite challenges for the entire industry, we maintain our conviction in our long-term plan of building a regional powerhouse, developing scale with a customer first approach, curating a distinguished house of brands that are driven by passion for innovation, craftsmanship, efficiency, and teamwork, and leveraging data analytics and technology to drive decisions. As we continue to navigate the lingering effects of the pandemic and now broader economic inflation, as well as a challenging environment in the Colorado market, our team members delivered a record quarter in terms of revenue growth, and adjusted EBITDA growth. And for that, I'm very proud. I would like to thank all of our team members for their commitment to our customers, hard work, enthusiasm, and their commitment to driving operational efficiencies. Since December of 2021, Schwoz has added 15 cannabis dispensaries to its retail network, 10 in New Mexico and five in Colorado, as well as five cultivation facilities. including four in new mexico and one in colorado one manufacturing asset in new mexico our accomplishments since december 2021 include on june 1st we announced the closing of the announced the acquisition of all assets of urban health and wellness which included an adult use urban dispensary located in Denver's Vibert Highlands neighborhood and 7,200 square foot of indoor cultivation capabilities. On March the 23rd, the company's common stock commenced trading under the symbol SHWZ on the NEO exchange, a tier one Canadian stock exchange based in Toronto, Canada. On February the 16th, we announced the acquisition of the assets of Brow2 LLC, a Denver-based cultivation asset which includes a 37,000 square foot building for indoor cultivation and equipment. In February, we also acquired the Emerald Fields brand. We own and operate our two retail cannabis dispensaries located in Manitou Springs in Glendale, Colorado. We officially became a regional MSO when we acquired the New Mexico operating assets of Reynolds Greenleaf and Associates, LLC, and the Equity of Elemental Kitchen and Laboratories, LLC. And we also strengthened our New Mexico management team. This transaction included 10 Greenleaf licensed medical cannabis dispensaries, the R. Greenleaf brand, four cultivation facilities, three operating, one in development, and one manufacturing location. In late January, we announced the acquisition of the assets of Drift, which consists of two cannabis dispensaries located in Boulder, Colorado. We continue to develop our decentralized operating system that fosters local management oversight, agility, efficiency, and responsiveness to our customers and local communities. Most importantly, we continue to build out our house of retail brands, adding them on fields, in our green leaf dispensaries and expanding the purple bees date brand in both Colorado and New Mexico. Last quarter, we also announced a license agreement with Low Farms to manufacture and distribute Low Smokes, a premium line of pre-rolled joints, to dispensaries statewide in both Colorado and New Mexico. We expect to begin sales to commence in Q4 of this year, 2022. We continue the construction of our Colorado distribution center as part of our retail wholesale playbook expansion, which is expected to be operational in Q4 2022. On April the 1st, 2022, Schwarz commenced selling both recreational and medical cannabis in New Mexico. We can report that New Mexico sales have increased 30% over prior years, quarter two, for the same store sales. We are pleased with these results and continue to see sales growth month over month. We have plans to open additional stores throughout the state this year and next, adding coverage to areas where we currently do not have dispensaries. Our revenue for Q2 totaled $44.3 million compared to $30.7 million in the same quarter 2021, representing an increase of 44%. We generated net income for the second quarter of $33.8 million compared to net income of $4.4 million for the comparable quarter in 2021. The company's adjusted EBITDA for the quarter was adjusted EBITDA for Q2 2022 was $15 million, representing 33.9% of revenue. We're also pleased to report that despite industry pressures, Retail sales were $38.1 million up 77% compared to the same period last year. Colorado two-year stacked IDs for Q2 2022 compared to Q3 2021 and 2021 sales were 1.8% and one-year IDs were down 0.7% compared to Q2 2022 to Q2 2021. The basket size for Q2 was 59.98, or down 4.1% compared to Q2 2021. Recorded customer visits for Q2 2022 totaled 444,771, down 8.9% compared to Q2 2021. New Mexico two-year stacked IDs for Q2 2022 compared to Q2 2021. of 2021 and quarter two of 2020 for same-store sales were up 41%, and one-year identicals were also up 30.4% when comparing quarter two 2022 to quarter two 2021. Average basket size for quarter two was $54.56, down 12.7% compared to quarter two 2021. Recorded customer visits for quarter two 2022 totaled 209,591, up 49.4% compared to quarter two 2021. While basket for both Colorado and New Mexico were down quarter over quarter, distributed really attributed to macro events in previous year's stimulus spending and inflation, we're pleased to report that we once again outpaced the state of Colorado for the quarter by 11%. I think this is a remarkable achievement when you consider the challenges faced by the industry at this time. As stated in our reported last quarter, we believe that we will continue to cycle COVID-19 retail numbers for the first half of this year, and we'll anticipate growth in Colorado market to continue to be challenging the rest of the year due to increased cultivation capacity in the state. which has resulted in oversupply of wholesale cannabis biomass. However, we are benefiting from the recreational market in New Mexico, which assisted in offsetting that slower growth. The quarter generated approximately 86% of our revenue from retail. We expect the contribution from the retail segment to continue to grow as we add to our dispensary count and see additional growth in recreational sales in New Mexico. Through the implementation of our operating playbook, we continue to effectively contribute to growth and efficiency at our manufacturing and retail locations. In retail, we continue to review our product categories, aligning product assortment across our dispensaries, and working with our vendors to promote products and work with our vendors to recognize savings as we move to a DC model in Colorado. We have re-bannered the drift and the smoking gun stores to Emerald Fields and Starbucks and completed remodels in the drift dispensaries. We expect the smoking gun location remodel now re-bannered at Starbucks will be completed this quarter. All three dispensaries are experiencing increased revenue and traffic that we attribute to these activities. As for the federal and state government laws regarding cannabis legislation, we can now report once again that there has been no significant movement or changes on the federal acts basis. We believe we're positioned to take advantage of any positive movement in federal legislation. And on a positive front, more states continue to legalize both medical and adult use cannabis. As always, we'll stay close to federal and state changes that would impact our industry, and we believe we're poised to succeed in that as things change. We will continue to evaluate additional opportunities across the cannabis industry in the areas of cultivation, manufacturing, and dispensaries in both our home states and others. Our current criteria for potential acquisitions includes Revenue growth or growth potential that exceeds the applicable state's averages. EBITDA profitability with synergy opportunities. Attractive acquisition prices that are accretive to our shareholders. Provides high quality branded products in attractive retail locations. Any announcements regarding expansion intentions will be made once we've reached definitive agreements with prospective partners. And now I'd like to turn the discussion over to Nancy Huber to continue our financial review. Nancy.