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spk01: Good afternoon. My name is JP and I will be your conference operator today. At this time, I would like to welcome everyone to the Schwa's fourth quarter conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a live question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star then the number two. Thank you. Ms. Joanne Jobin, you may begin your conference.
spk04: Greetings and welcome to the 2022 fourth quarter and year-end conference call and webcast for Schwoz. We are being hosted by Justin Dye, Chairman and Chief Executive Officer, Nirup Krishnamurthy, President, and Forrest Hoffmaster, 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 Schwartz. Investors are cautioned that not all forward-looking statements involve risk 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, 2022. In addition, other information is more fully described in Schwoz's public filing with the U.S. Security and Exchange Commission, which can be reviewed at www.sec.gov, on www.fedar.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.
spk03: Hello and thank you for joining us this afternoon. I will provide a brief overall business review and our president, Nirup Krishnamurthy, will provide operational details before turning the call over to our newly appointed CFO, Forrest Hoffmaster, who will review our quarterly and year-end financial results in detail. I will then conclude our presentation with some final thoughts and afterwards we would then be happy to take your questions. I am pleased to report that for 2022, Schwoz once again outperformed the Colorado market. We successfully entered the New Mexico medical and recreational market and increased our total revenues by 47% year over year, with retail sales growing 92% over prior year. We also generated $11.4 million of after-tax cash flow from operations in 2022. Through hard work, diligence, our dedicated attention to detail, we continue to outperform our markets despite an ongoing challenging environment. I am extremely proud of the Schwoz team, which I believe is one of the best and strongest in the industry today. We've worked hard to continue to grow our market share. outperforming our markets in Colorado by 11%, increasing our profitability rate with ongoing improvement, and we continue to generate free cash flow from operations after paying taxes and meeting our capital spending and debt obligations. Our team continues to deliver on our vision to become the most admired cannabis company in the industry, providing trusted products, brands, and exceptional customer experiences. Schwoz continues to execute its strategy to go deep in our operating states and build customer loyalty and market share. Our long-term plans of building a regional powerhouse, delivering a wide assortment of high-quality products with exceptional customer service backed by our operating playbook is a winning combination for our customers, our employees, and our shareholders. And now I would like to turn the call over to our president, Naroop Krishnamurthy to take us through some of our accomplishments for 2022.
spk02: Thank you, Justin. Let's review the highlights of the fourth quarter of 2022, followed by the highlights of our annual performance. Like the rest of our industry partners, we continue to navigate broader economic conditions in our country, impacts of the failure of the Safe Banking Bill, as well as dynamics in our core markets. in Colorado and New Mexico. Despite these challenges, our team delivered another record year and quarter in terms of revenue and adjusted EBITDA growth. We have an experienced and dedicated team, and I would like to thank all of our team members for their hard work, enthusiasm, operational excellence, and most of all, their commitment to our customers. In 2022, the company completed seven acquisitions and opened six new stores, not related to acquisitions, which increased the company's retail presence from 18 dispensaries in 2021 to 41 dispensaries as of December 31, 2022, 16 in New Mexico and 25 in Colorado. The company now has five operating cultivation and two manufacturing facilities in Colorado and New Mexico. All these accomplishments are too numerous to go through one by one on this call, but they are listed in our financials and, of course, in our press release. The first quarter of 2023, we continued to roll out our plans. We rolled out the enhanced custom e-commerce platform in New Mexico for our green leaf customers. We opened two new all green locations in New Mexico, one located in Albuquerque and the other in the southern town of Carlsbad. And in Colorado, we signed a definitive agreement to acquire retail locations in Fort Collins and Garden City, two attractive markets whose customers we currently do not serve. We had previously announced our licensing agreement with Lowell Farms and have now successfully launched their premium line of pre-rolled joints to dispensaries in Colorado and New Mexico. In addition, we are introducing a Schwarz brand called EDW, which stands for Everyday Weed. The first product being launched in the second quarter under this brand in both our markets will be a half-ounce, full-flower, roll-your-own joint for our core customers. We are excited about our multi-year house of brands strategy designed to meet the needs and growing demand of of customers in our markets. On April 1st, 2022, Schwoz commenced selling both recreational and medical cannabis in New Mexico. We opened six new stores in New Mexico last year and two more in the first quarter of 2023. These stores increased our presence in key markets, including Albuquerque and southern New Mexico cities such as Sunland Park, Rio Doce, Alamogordo, and Carlsbad. We have incorporated our operating playbook here as well and are now reaping the rewards. Plans to open additional stores throughout the state will be focused on adding coverage to areas where we currently do not serve customers. We're also focused on our internal operations to ensure we are being as efficient as we can to drive lower cost of goods from our production facilities by applying lean practices. and lower operating costs at our dispensaries through efficient scheduling and inventory management. We expect that these efforts, along with our retail playbook, will further improve our margins and our positive cash flow from operations this year after meeting our tax and debt obligation along with CapEx spending. Now I would like to briefly give you our view on our two markets. Colorado in particular saw a material decline in wholesale pricing in 2022, which affected retail pricing, which in turn led to pressure on top-line revenues. We as a company have been focused to ensure that our volumes in terms of units sold remain steady in these conditions and have been rewarded with our results. We expect pricing pressure to continue in 2023, but we are now well-positioned to drive results in these conditions. In New Mexico, the overall market has been steady since the launch of their adult use program. However, the number of retail licenses has more than doubled since April, putting pressure on store-level sales. But again, our operating playbook combined with our high-quality product assortment has meant that our green leaf dispensaries are first choice for customers in the state. Our combined revenue for the quarter totaled $40.1 million compared to $26.5 million in the same quarter last year, representing a 51% increase. Here are some key quarterly retail statistics for our Colorado and New Mexico operations. Two-year stacked IDs for Colorado were down 6%, and one-year IDs were down by 9% year-over-year. was $60.86, up 1.5%. Customer visits were 416,717, and that was down 10.5%. Two-year stacked IDs for New Mexico were up 57%, and one-year IDs were up by 43% year-over-year. Average basket size was $52.54, down 11.8%. and customer visits were 219,665, up 61.7%. Here are the comparable year-over-year retail statistics for our Colorado and New Mexico operations. Retail statistics 2022 compared to 2021 for Colorado and New Mexico included the following. In Colorado, one-year sales ID went down 10.5%, and two-year sales IDs were up 0.1%. Average basket size was 60.32 or down 1.9%. Customer visits were 1.685 million or down 8.8%. In New Mexico, one-year sales ID were up 33.8%, and two-year sales ID were up 48.2%. Average basket size was 54.04, or down 11.2%, and customer visits were 734,000, or up 50.7%. We are pleased to report, as previously noted, that we once again outpaced the state of Colorado by 11%, a remarkable achievement when you consider the challenges faced by the industry, and in particular Colorado, at this time. We will continue to evaluate additional opportunities across the cannabis industry with a primary focus on retail expansion with adequate cultivation and manufacturing assets supporting the expansion. Our criteria for potential acquisitions include dispensaries that complement our footprint and have a loyal customer base, well-branded products that complement ours, and accretive to the bottom line with material synergies. Any announcements regarding expansion intentions will be made once we have signed definitive agreements. Lastly, we have been openly discussing the overall shift away from our consulting business, and late this year, we made the decision to completely move away from this business to concentrate our resources on our core business. This is reflected as a loss on disposition at year end. And now I'd like to turn the discussion over to our newly appointed CFO, Forrest Hoffmaster, to continue our financial review.
spk05: Thank you, Nirup. I will review our financial results for the fourth quarter and year end of 2022. As mentioned earlier, fourth quarter revenues of $40.1 million increased $13.6 million compared to $26.5 million for the same quarter last year. While seasonally lower than third quarter revenues of $43.2 million, the year over year quarterly increase was 51% as compared to the year over year third quarter increase of 36%. Adjusted EBITDA for Q4 2022 was $13.3 million and 33% of revenue compared to $7.5 million and 28% of revenue for the same period last year. Once again, we generated positive cash flow from operations of 5.4 million after our tax and debt related obligations. For the year ended December 31st, 2022, we achieved 159.4 million in revenue, an increase of 47% compared to $108.4 million in revenue in 2021. Much of our year-over-year revenue growth was driven by our retail segment with the New Mexico entry, acquisitions in Colorado, and six new store openings in New Mexico. Wholesale revenues continued to be affected by market oversupply and price compression. Total cost of goods and services was $74.3 million compared to $59.1 million for the year into 2021. representing an increase of $15.3 million or approximately 26%. This increase is primarily due to volume from the New Mexico acquisition and subsequent opening of six new stores in 2022. The rate improvement is the result of the company's vertical integration efficiencies, buying power, and retail playbook. As a result, gross profit increased to $85 million or 53% of total revenue compared to $49.4 million, or 46% of total revenue during the same period in 2021. Operating expenses totaled $72.2 million for the year ended 2022, compared to $38.9 million for 2021, representing an increase of $33.2 million. This increase was largely due to increased selling, general, and administrative expenses, predominantly attributable to expenses related to acquisition activity and increased overhead associated with the entry into the New Mexico market, and certain one-time impairment charges of $8 million of goodwill associated with our non-plant touching wholesale businesses serving the broader cultivation markets. Other expenses for 2022 were $16.4 million, compared to $8.5 million of other income in 2021. This was largely driven by cash and non-cash debt-related interest obligations and a $4.7 million one-time disposition of assets, mostly associated with the discontinuation of our consulting business as part of our strategic move to shift our full-time attention to our core segment. As a result, Schwoz generated a net loss of $18.5 million compared to net income of $14.5 million for the year ended 2021. largely related to the impairment charge, interest expense, and disposition of assets. Adjusted EBITDA was $52 million, representing 33% of revenue, compared to $32.2 million and 30% 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, non-cash-related compensation costs, and depreciation amortization. Please see the financial table in our press release for adjusted EBITDA details. As already mentioned, for the year ended 2022, we generated $11.4 million in positive cash flow from operations compared to $8.4 million for 2021 after meeting our tax and debt obligations and capex spending. We ended the year with cash and cash equivalents of $38.9 million. Given our recent performance and current cash position, we remain optimistic that we can successfully integrate acquired companies and continue our expansion and M&A plans. Thank you for your time today. I'd now like to turn it back to Justin, who will open the call to questions and answers.
spk03: Thank you, Forrest and Niru. Before we open the call to Q&A, I would like to thank you and all your continued support, encouragement, and interest in Schwoz. 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. Thank you.
spk04: Thank you, Justin. Good afternoon, everyone. My name is Joanne Jobin, and I am the IRO for Schwoz, and I'll be moderating the Q&A portion of the call today. The first question is, How is the New Mexico acquisition performing? That seems to be a big question on everyone's mind.
spk03: Justin? Yeah, thanks, Joanne. Nirup, will you please take that one?
spk02: Sure, Justin. Well, as you all know, we closed on the acquisition in New Mexico with 10 dispensaries closed. three farms and a MIP on February 7th of last year. And on April 1st, the state went recreational, meaning adult use program. And I will tell you that we have been very happy with what has happened in New Mexico. It has been a fantastic acquisition for us. In addition to the 10 stores since we acquired, we have added six more stores in key areas of the state, especially around the southern part of New Mexico. And we are seeing a really good performance in all of our stores in New Mexico. We have maintained our market share, and we are seeing that our stores are very quickly becoming the first choice for customers over in New Mexico. We have a new president we appointed in the first part of this year. His name is Ken Deal. He's done a terrific job in implementing our operating playbook and driving customer traffic and promotional effectiveness across the state. We are really happy. In addition to the six stores we added last year, in the first quarter of this year, we added two more locations, bringing the total to 18. We expect to continue to grow the estate. and expect to fill in other areas where we currently do not serve customers. So overall, it's going as well as we can expect it to. Thank you.
spk04: Thank you, Nimroop. Keeping on with the New Mexico acquisition, we're getting a lot of questions regarding some of the states surrounding Colorado and New Mexico, and that those states are considering some form of legalization. Do you anticipate any impact on revenues on your border areas in your dispensaries?
spk02: Yeah, I don't know which states we're considering here, but if you look at surrounding states, we have Arizona, Nevada, which are already legal, and we have Texas, where the medical program is legal. And so, at least in the short term, I do not expect any material impact to our sales in both these states.
spk04: Thank you, Nirav. Thank you. The next question is, you mentioned the launch of EDW and your partnership with Lowell Farms. Can you tell us more about that and any other brand activity? And can you update us on how Autograph has been going?
spk02: Sure, Joanne. In terms of our retail footprint, we have 43 locations that are currently operating in both these states. This kind of serves as a platform for us to embark on a multi-year product strategy or a product brand strategy that allows us to develop unique products within our own brand portfolio. And we're starting to do that. Today, In Colorado, we sell flour, we sell pre-rolls, we sell a vape line using purple bees, and we're starting to introduce other products. So as announced in the last call, we entered into a partnership with Lowell Farms, and I'm happy to announce that we have launched it in both states in different fashion. In Colorado, we decided to go outside of our network to begin with, to generate more revenues, and we are happy with the demand. We are actually ramping up our production in Colorado to meet our demand, so the demand has been solid. April next month, we'll be launching it internally in our own footprint with a big promotion for 420. Overall, the Lowell Farms operations in Colorado has gone really well and really we're ramping up production to meet demand. In New Mexico, we went the other way. We launched it in our stores in New Mexico, and now we're starting to expand outside our footprint. So the margin profile, the price point is a little higher because Lowell Farms is a premium product, and we are seeing very good demand for the product at this point in time. In addition, we are launching EDW, Everyday Weed, in Colorado this month, or end of this month, early next month. And essentially, that is a product where you can roll your own pre-rolls on ground flour. And it's a very unique product that is not available in the marketplace today in our two states. And we're anxious to see how it performs. We expect it to go really well. And this is all part of a multi-year program, as I mentioned before. And so we are pretty happy with the progress to date.
spk04: Okay. Thank you, Nirav. Okay. We are going to swing over to finance now. Forrest, this is a question very much for you regarding cash flow and EBITDA. Okay.
spk05: Yeah, EBITDA, thank you, Joanne. EBITDA certainly had a strong year, finished the year with $52 million in EBITDA and 33% on the bottom line, so much improved year over year and adding more efficient acquisitions through the year. In terms of cash, we ended the year with $38 million, so ended strong. We're generating or generated $11.4 million in operating cash flow at the end of the year, which is $3 million over last year after considerable spending on acquisitions and CapEx and also satisfying existing debt and tax obligations. Our balance sheet remains strong. This is obviously a big topic for the industry. It's a big topic for us. We're Looking at it daily, we have ample liquidity, good working capital to pursue the strategy, and are also aggressively improving ways we can operate and support scale through cost takeout measures and some of the synergies that we have, as well as accelerating the integrations of future acquisitions. So right now, we're focused on delivering positive cash flow, net of the acquisition costs for the year while driving organic growth. yeah, continuing to reinvest that back into the business.
spk04: Thank you, Forrest. Can you continue on and talk a little bit about cost controls and what you're doing to tease out a little bit more in your cost control systems?
spk05: Sure, thank you. I think I should just start with the strength of the team that we have here in the organization, just deeply experienced in retail, manufacturing, cannabis, They know where the levers are and they know how to operate in challenging environments. So just really top to bottom focused on retail efficiencies, all the retail playbook aspects of operating a solid retail business unit from labor and product cost management, making sure that we're creating an excellent customer experience. And then focused on passing through cost efficiencies and the improvements in our cultivation, and manufacturing facilities. So a lot of expertise there working on making sure that we're continuously improving costs and passing that through. And then making sure that we're improving the SG&A in the business. So constantly looking at how we're supporting both states, where our sale or where our G&A is going and how we're using it and where we can find more efficiencies. And then lastly, just working on How we're accelerating, I think I mentioned this earlier, the integration of future acquisitions, making sure we're getting them to profitability faster and creating the synergies that we need to make them successful.
spk04: Thank you. And Forrest, how about a comment on your debt position right now?
spk05: Yeah, strong balance sheet. Debt to equity ratios, 1.4. Debt to EBITDA is 1.7. Again, mentioned liquidity, we're strong on liquidity and working capital, generating operating cash from operations. We're very aware of our interest and principal obligations in the out year, and our intention is to improve the cash position, deploy it wisely to continue to meet those debt obligations.
spk00: Thank you.
spk04: Just one more question here regarding refinancing possibilities for your debt. Will you be using positive cash flow generation to be paying off some of the debt to lower the large payments due in 2025?
spk05: Yes, that's our plan. Right now it's as we all know, not necessarily the environment to go to the market and look for financing. So our whole focus right now is generating free cash flow from operations and making sure we're satisfying our obligations.
spk04: Okay. And one more question, Forrest, regarding guidance for the year and why you did not provide guidance for 2023.
spk05: Yeah, it's a good question. I know we're seeing... mixed approaches to this. I think for us, we've had a successful quarter, we've had a successful year. That's where our focus is, is on growing the strength of the business, managing what is within our control, certainly hitting the performance side of things, but also creating long-term value. So that's where our attention is right now, core business, generating free cash flow, successful execution of our M&A plan, And we'll revisit whether or not we're going to provide forward-looking guidance in second quarter earnings.
spk04: Thank you, Forrest. Let's bring Justin back in the mix here. Justin, can you talk about your M&A activity and what are the plans in 2023 and going forward?
spk03: Yeah, thank you, Joe. I appreciate you asking me a question. These guys have all the answers. They're all hogging the airwaves. No, the team had a great year, great quarter, so congratulations to Naroop and Forrest and Nancy and the whole team. But, you know, I think we've talked a lot about this with our investors, and nothing has changed. We are going to continue to focus on core markets. We're operating in Colorado. We continue to see a very fertile landscape here to continue to grow within the cities and the counties where we serve as customers today, as well as extending that coverage into new counties and new cities. And to remind you, there's still well over 650 businesses recreational dispensaries in the state and we occupy just a few. So we still see a tremendous opportunity of really good real estate out there that we can acquire and frankly there's some opportunities to develop some new locations and we're going to continue to work there. And then New Mexico, we're very, very pleased with New Mexico and what we're really proud of is the team down there is is leveraging our size and scale and our expertise around retailing and merchandising to drive our new stores and to become the retailer of choice with really great products and driving efficiencies to create products on the shelf that are valuable, that have a really good value for our customers with rapid and great service. We're opening stores, and very quickly we're winning, and the customers are coming to visit with us. And that's important. So you're going to continue to see us on the M&A activity to fill in those states. We still see lots and lots of runway within those two states, and as we've discussed with all of you, our goal is to be number one in those states from a retail perspective with great product brands that Naroop highlighted that we're bringing in new products in the different product categories. that solve a need for customers, and we're excited about that. So building product brands behind our retail powerhouses is a winning formula, and you're going to continue to see us do that and continue to work with wholesale customers, getting to leverage that size and scale when making products accessible for those other retailers out there to offer them to their customers as well. So we're going to keep working there. We'll keep our eyes up on the landscape for other states and sort of in our region here as we continue to focus on being a regional operator. But we like having that determination focus and focusing our capital there. We're finding lots of really interesting opportunities on retail, wholesale, and on the product side from an acquisition standpoint. I can tell you we're busier than we've ever been on the M&A front. And we're being very discerning in how we're using our cash and capital. And there's some really great brands and retailers out there. So we're going to continue to look at that. So I think we're very bullish about our opportunities in both of these states and looking at other states down the road as well. And once again, we won't dip our toe in the water. We'll look for a platform where we can be number one in the next state down the road. And we're sticking to our strategy and executing the plan. And I think you're seeing that in terms of the margin. The gross margin is up almost 7.5% from last year. And I think you'll continue to see efficiencies that we can wrench out and continue to drive volume. you're going to see more and more of those types of opportunities.
spk04: Thank you, Justin. And keeping on with the M&A activity, looking at the bigger picture, looking on the horizon, which is the question we always get, where do you expect to be in the next three to five years, and is there a buyout in the works, or could there be a buyout in the works?
spk03: Well, I think since we've been in this business, we invested in this business in June of 2019. And many of the executives and management team have been here. And we set out to really win and take care of customers in Colorado. And then that branched out into New Mexico. We have put ourselves in a position that we wanted to. So we're generating free cash flow. which allows us to put more cash on the balance sheet, allows us to have the ability to pay down debt if and when we want to be able to do that, allows us to have a war chest to use some cash in acquisitions when and where we need to do that, and creates unbelievable flexibility for us. So we have the opportunity to continue to do what we're doing, which is grow within our states, perhaps get into another state or two down the road, or to acquire something much larger or wait for safe banking or capital markets provision where we could perhaps even be listed in a couple of different exchanges, whether it be the NASDAQ or something along those lines that would allow us to have a larger population of retail shareholders and allow us to tap into that and be able to tap into the institutional investor base. So we've got optionality, which is good for our shareholders. Certainly, Actually markets are challenged right now with cannabis, with the cannabis investors running for the sidelines after safe banking didn't pass in December. So we're in great shape. We're in great shape. We have right now, we control our destiny and there's a lot of companies that don't. And I think that, uh, I think as we, through this, we'll come out of this, uh, this capital, uh, you know, kind of the capital vacuum, so to speak on the debt and the equity side, and we're going to come out very, very strong. And I think these things happen quickly, and I think we'll be more appreciated in terms of share price. And the good thing is we've got lots of choices, and what we're doing is resonating with our customers. And the big thing is we have to win with our customers, our retail customers, our medical patients, and our wholesale customers. And as long as we're winning with them and we're generating free cash flow and we're growing, we really have a lot of flexibility. So we're setting very, very well. Really proud of the team. Naroop's done a heck of a job leading operations, leading the business. We're excited to have Forrest on board. Ken Beal that's running New Mexico. Kyle Lodge that's running Colorado. The team's running wholesale. And on the M&A side, I think the team's done a really good job. So I think we're set up really well.
spk04: Thank you. Alright, we're almost at the top of the hour. We're going to be wrapping it up very soon. One more question. This is for Narup or Forrest. Can you comment further on the impairment of goodwill and the impact on your P&L?
spk00: OK, John, I'll take that and Forrest, you can chime in if needed.
spk02: As we looked at all our operations, one of the decisions we made was to, I guess, focus more on our core business and less on the non-core businesses, which is basically the consulting business, our success nutrients business, and our big tomato business, which is essentially a supply kind of system for cultivation. And as part of that, we decided to take write-downs on our goodwill on our balance sheet to really focus going forward on our core businesses. So that essentially is the main reason for the impairments you'll see in our results. So it did not have a material impact on our P&L. Our EBITDA was just fine. I think it was more of a a net income exercise, and a balance sheet adjustment.
spk04: Forrest, do you have anything to add?
spk05: I think it was just that when you look at the retail segment of overall operations, I think retail sales were at about 89 percent in total, and so this was just the opportunity to look at where we were with some of the other areas of the business that that needed to be looked at a little harder. And so we're turning all the attention to the retail cultivation manufacturing side of the business. And I think Big Tomato and Success Nutrients is just reflective of what's happening in the overall cultivation market. It's our non-cannabis wholesale area. And so, yeah, just what Nerug said, took the area to look at that right off the practice and move ahead with a clear balance sheet that reflects our future operations.
spk04: Thank you, Forrest. And I'm just going to quickly take a few online questions here before we wrap it up. We're getting a lot of questions about the Colorado cannabis market and the pressure it's been under. And, you know, perhaps the gentleman can give some color on your current view of the cannabis market in Colorado and where it's going.
spk02: Okay, I'll take that. In a Colorado market, as I mentioned in the prepared remarks, you're seeing pricing pressure both on the wholesale side, which obviously has affected retail pricing in other competitors. So you had to match that, and you will see that a bulk of our year-over-year shortfall in revenue last year was due to pricing and not due to volume. So, you know, we are selling – our sell-through rates have been very strong in terms of units sold. And so it has primarily come down to oversupply of flour in the market. And so what we are seeing recently, though, is that a bunch of cultivation farms are starting to shut down. The number of licenses has come down 9% in the last few months. And we expect the market to bounce back in a period of time, but I just think it's going to take some time for the market to come back as the inventory kind of flushes out through the system. And I think it's going to take most of this year to flush that out. But I do believe long-term, Colorado is a pretty healthy market. We've got high volumes, and once we go through this cycle and we get out of this oversupply, I think the market is going to come back steady and strong over the next several years. So that's the way we look at it. And having said that, I also believe we are seeing the – market rates on flowers starting to steady out a little bit. These are rates published by the state. And so while I see pressure continuing this year, I see long-term the market coming back.
spk04: Thank you. All right. So that's about all the questions we have for today, or we have time to answer today. We are at the top of the hour. Justin, do you have any final remarks before we do end the call?
spk03: Yes, I do. I want to thank all of our customers and shareholders as well as our team members. You know, this is a tough business. It requires, you know, retailing in the cannabis industry. It's a seven-day venture where it's only taking care of customer patients is is top of mind today. And I'm really proud of the team. I think we had a great year last year in really tough conditions in Colorado. New Mexico is really the system there is being built as we go. And our team has done a good job of navigating that and really making sure we stay compliant and really advancing safety and compliance for the entire industry in both of our states, which is very, very important for the industry. And we'll remain optimistic for future regulation and perhaps some federal help. But in the meantime, we're in great shape to continue to thrive until we get that. And I just appreciate everybody hanging in there. It's a tough time from a capital market standpoint. and shareholders and appreciate our shareholders hanging in there with us. And I think there'll be good times ahead of us. So thank you. And thanks, Joe, for facilitating. And we'll look forward to talking with all of you soon. Thanks a lot.
spk04: Thank you, Justin. And thank you, Nirup and Forrest. I would like to remind everyone that this webcast is available on the SHWA's website. And once again, thank you, everyone, for joining us this afternoon for the SHWA's quarterly
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