SHWZ - Earnings call transcript Q4 2020 | Medicine Man Technologies, Inc.

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Operator

Greetings, and welcome to the Fourth Quarter 2020 Conference Call Webcast for Schwazze, formerly operating as Medicine Man Technologies, Inc.

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 from Schwazze’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. The words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, position, objective, determined, vision and similar expressions as they are related to Schwazze are, as such, a forward-looking statement. all actual involve those results Schwazze this that that and anticipated cautioned at cause may to time. are forward-looking risks statements uncertainties by Investors differ from

is could Annual and on XX, the the results that XXXX. earnings for Report factors XX-K ended on the Schwazze information to Additional differ year available Form in release cause December

at the Exchange In with the filing Investor and Schwazze’s Commission, can addition, which public other on remarks are more www.sec.gov be website. Relations reviewed Securities company’s described and or fully U.S.

acceptable execution expiration approval I to of all termination approvals; respective material, agreements each management’s periods; licensing will the prepared of conditions, closing not applicable employment material be mutual waiting the are of structure These remarks questions, During or each call over respective for obligations authority a that the or the any limited execution and regulatory filings turn early leases and and then party; under would sheet; company certain Dye. both approval; necessary the the will and also that definitive all relating to, potential of in tax applicable mutually the term third-party targets; regulatory with including, satisfactory approval party’s the to investor answering but acquisitions the Enforcement compliance consents and conditioned to is between like and agreements to parties. now Justin Marijuana there satisfaction of to discussion Division all upon of the be loading a waiver receipt and acquisitions. applicable

Justin Dye

We brief our of up this on annual your a financial us Star Board we by this before completed happy our my the then some to presentation two Afterwards, business our you with our I industry for update, I afternoon. Hello, wrap acquisition company. joining final will the month, and Nancy take questions. detail in Earlier conclude members welcoming would results newest remarks thoughts. be review will and provide to commentary some Buds. thank

retail United company in Schwazze profit. the the of Colorado. leading based cannabis integrated This most revenue recognized successful location One on cannabis and vertically transaction in positions as per operators the States

Mesa you likely XX million Starbuds’ aware, the dispensaries purchase $XX.XX As began Colorado million for three transaction in that specifics. asset and in transactions notes Star these realized cultivation and was one the the all of us Schwazze’s December. through completed one size $XXX this preferred made full increased transactions already in and acquisition are dispensaries, for for consisting operations the Total seed-to-sale see Buds separate of of million, the acquisition with and million The was in last last final XX of $XX.X Please consisted Colorado, publicly first and have manufacturing traded have companies cash, the in X-Ks preceding campus. seller Organics site April $XX.XX stock. among Purplebee’s consideration substantially

transactions. estimate our pro of revenue updated XXXX have our for We forma the

be with December offering securities The capital and funded of By approximately while In private synergies agreements million. successfully these raised XX,XXX Capital $XX million XXXX while million $XXX XXXX raised a Our sold an we financial as $XX.XX markets from and XXXX. debt are totaling cumulative share immediately, company totaling global financing financing are consisting shares the aggregate Dye million, dispensaries the of million stock of have million satisfaction placement, of closing performance. million Buds. price a already $XX inclusive issued the the funds $X,XXX pandemic, solid managed of to and purchase private And CRW improve was upon would debt the as of will we Star unaffiliated a that customer capital customary per $XX $XX at funded with revenue subscription convertible approximately in already been will well challenging contribution and experience driving placement remaining conditions. a A performers, was Series million, from investors. $X preferred and of agreement March under $XX.XX

With behind we we operational complete and Mesa mid-June. to by and Buds improvements Buds have implementing Star to and drive attention operating to are expect the our to integrating turned process have the our transaction Star accomplished now with itself into we Similar platform. systems our Organics us, financial what Purplebee’s,

leverages best-in-class and operating office utilizes playbook and to our synergies data M&A synergy our and Our efficiencies. realize integration advanced in-house analytics

program very enabling us best training product a that demonstrating customers is sales great service their while ensure as as we to we as as expertise. knowledge are great example, cannabis providing strengthen For and part the in be efforts for Bud tenders ones the launched for with relationships experiences. to our of existing well resource build products facilitating This to seen new and deep trusted

system provides compliance, has Organics ERP chain the decision-making. integrates us our all been and and that implemented supply primary data Star will customers. in for the the to that Star Star ambiance already retail Mesa And an retail Buds merchandising We’ve store therefore, installing finance, dispensaries Purplebee’s. is and analysis guide that are, Mesa This operations, footprint. improving dispensary at drive rebranded and across and point-of-sale Buds help entire standardizing layout under we the on experience working for environment also provide foundations mix our serves locations valuable important March. repeatable, The role playbook. we are and Buds’ platform the plays Organics measurable ERP in Technology banner insights one consistent the point-of-sale also our as and best at as We of system implementing the a same so and

interactive purposes engagement digital location. consumer for both are also adding marketing and We each educational tools to

to revenue that with We’re better realize confident us measures in these enable margins growth. will conjunction

future. to the Turning

additional manufacturing We opportunities and in industry the dispensaries. of are cannabis areas the evaluating across cultivation,

to acquisition averages, Colorado’s growth exceeds our our attractive attractive and EBITDA in Our the locations. shareholders products that profitability provides criteria additional accretive synergy following: includes with opportunities, acquisitions are for that potential revenue prices

will transactions regarding we’ve once our We announce with partners. definitive intentions agreements our specific reached prospective

an home early out our believe that of and our attractive it me Colorado us and build represents reiterate that boom industry. provides with have are state companies weathered already acquire and bust to we the sophisticated Let to platform since of profitable geography opportunity the also cycle the

members before months. to our Our new the to forma the XX pro than objective is welcome two more on next And the over final double then the our macro I revenue turn Board thoughts company. in call to Two Nancy. environment

U.S. nine certainly the not segments following with cautious six First, to as and woods like while are, be out we cases new and therefore, look more what of out rolling our population, yet might the are of months the pandemic months down to for winding vaccinations next industry. and to may still the more

to first we in industry. hope view recent checks representing into And on However, the stimulus we more timers to opportunity our that. as bring capitalize an

cannabis of we’re encouraged therefore, across become and, Second, agreement substantive the could ever a of political less a that aisle. has area partisan be than issue before

members in upper Daines, last of Montana, Jeff the XX just with fact, and September house of broader Fair provisions Banking bill is In additional representatives last Act XX, Republican Congress, occasions, of voted Steve On house the stimulus XXX of week, Enforcement members Secure Recall out as other favor reapproved two of along Senator to XXX reintroduced of U.S., which XXXX. a the in part the members known chamber economic SAFE. bill’s the Merkley, that Oregon; on of as the out packages. Democrat and

the take begin can is now failed majority of as Metro expressed grow, areas in increase of to However, other on that similarly Colorado municipalities up with future compared job and more sales the health to processing in credit XX% McConnell, across operate members legalization up taking In helpful. communities and recreational unchangeable. our Vista. of change more industry reforms. to to deepens of it January were three business businesses sales, support immediate the as and opportunities it Colorado and destinations hearing more-favorable soon the us to a and XXXX, then cannabis $XXX.X remain the view deductions standard over environment to XX% XXXX. to respect also and retail under place, once thought holds. Biden of cards from the will taxes. tremendous Senate monthly for will for from once and in rapidly representing to within year, with includes which cannabis the double and XXXX. Mitch tourist $X.X industries or growth We not-too-distant was further itself, unprecedented we the allowing point billion, even tax our we are Denver get my medical new January as such optimistic And XXXX perhaps policies the are We legislation data Within And providing country demonstrating federal rose which bank in what last likely million, greater deserves yield and places, industry this growth to on leader, this be control this This available, the borders. future, excitement see environment. was this Buena XXXX Park latest an language. has descheduling banking, Today, and their of nearly in rate Winter growing senate front, federal this revenue to administration

of Adams, Salim of He to appointed Westminster. is represent Cozad Board Jeff well partner as was And support of expertise years. be owning operating me special years completed a and turn I’d Directors. entrepreneurial vehicle in the has Nancy in office our growth most he XX the relevant now the the Salim XX in call of cannabis significant experience retail vertically Nancy? and to He franchise XX has businesses. family to experience created Jeff Colorado Wahdan his Finally, vision Huber. will a Board. who the experience and Buds purpose recently to where Co-Founder of over will as let Holdings, welcome past of across of cannabis over integrated the financial becoming CRW to leading us. Star managing more both recently customer his industries over our his and partner voice I and believe player I like is instrumental Buds were and LLC, believe Lewisville was a the our recent Cann CFO, Star to of market. than also early operator invaluable of Schwazze’s number Board investments the

Nancy Huber

increased increase on that was Operating the revenue million we totaled to of to of million Thank our We compared like was services the and service to and gain increased $X.X increase in and expenses consider XX% million to XX, ended of contributed Revenue product. $X.X consulting benefits This XX, the million related $XX.X $XX.X in general the million of million. salaries, $X.X declined employment professional of Mesa forfeiture change compared XXXX, contingent for an net in December million XXXX while nearly Other XXXX. financial the selling, compensation. on fair of represented consideration value on to increase of earlier unrealized other higher and Organics was I totaled in compared $X.X litigation expenses $XX our a fees, review due $XX.X $XX.X year compared This year. ended liabilities XXXX. year million our non-cash primarily totaled $XX,XXX. year-over-year and in acquisition product in sales net product sales expense administrative offset XXXX. awarded unrealized and fees consisted non-recurring. compared and services year million to million part fees gain now This revenues interest of $XX.X loss by other to licensing a fiscal of tripling cultivation the In $X.X December due costs to certain to in services a benefited totaled expense. Justin. professional and and in This of derivative you, results increase income to of would expertise we due and prior in fiscal the and in the operating to consulting from stock-based XXXX Cost that projects. and XXXX, refocus revenue benefited internal from due to licensing million nearly of investment sales

during XXXX, December result, share XXXX. $X.XX million of to compared loss a ended for generated year December share $XX the the net $XX.X loss ended of million, $X.XX net approximately a XX, we As per year or per or a XX,

million decreased Net XXXX, $X.X XX, Mesa, Buds we investing used $XX.X activities million. need Buds to million, cash million. cash therefore, used positive last $X.X December current are of million, we acquisitions equivalents cash already for And included for used and not of from year. to the year which $XX.X increased and In provided ongoing by generating cash completed $XX.X had As operating net operations in Star million which last activities was and, to the XXXX, believe will in flow raise financing Net cash activities at used ongoing the we capital time increased additional Purplebees acquisition. Star do $X.X operations. fund that was that cash

to However, we the we need fund what to likely strategy. similar done additional our capital recent will have raise in past, growth to acquisition

our outlook. XXXX to now Turning

Buds We a These approximately acquisition for with which based non-GAAP $XX and that $XX exclude of five on is Star that $XXX the unannounced measure, million acquired of February $XXX two may and early million. early in we ranges total March. revenue seven EBITDA, is It are annual this to closed to locations complete projecting the any million final approximately acquisitions million year. adjusted timing in

optimistic cautiously integration date, going acquisitions on are well. Based results the XXXX. We Star is of about to Buds

believe As will with Mesa create we that and Organics team synergies. greater expected the than Purplebee's,

such number are our We external that influence legislation. government results, stimulus a and challenges COVID-XX of as also feel there may

forma as internal and through determined revenue months indicated, Justin acquisitions growth. to the XX pro next we Finally, are our double accretive over

the over for to I'd like hand back comments. to his call closing Now Justin

Justin Dye

This, to capital of an cash a as exiting made completed Thanks, thank cornerstone for has could employees as amid well course, our finalized and able pipeline. as Nancy. generating the a We hard developed on customers that a our their that global execute growth XXXX challenging company and and perseverance year was than and operation. of acquisitions, was accomplished acquisition ever flow were passion system organic we certainly pandemic momentum in a expected. serve. that behalf work, we everything as two for extensive operating successful more communities The have our fundraise, we we foundational shareholders are Schwazze We XXXX. built became we free XXXX tremendous plant-touching

acquisitions of Purplebee's are recent system. Star already our Organics, Our from operating benefiting Mesa Buds and now

that financial are to we operational We continue synergies. will drive and confident

going we most think vertically ultimately, is to of now as admired future, cannabis ahead the to our a we in forward a Looking integrated leading, vision becoming XXXX the be move great realizing and, year platform expand assembled already we and that company profitable manufacturers team other under in auspices the as cultivators great company. operators bring publicly we of of world. the retailers and experienced, We've a cannabis traded intend to our

your respect a is future already we pipeline and is to forma our months with cannabis outlook. continues and that provided easier. over XX reiterate it environment, continue Our the which for growth Nancy operations. think I double to raising has next through robust But is pro our our XXXX our to important develop. to to accretive goal bodes current With for capital in Investor of decline, costs capital to to continued able sharing outlook revenue please the regulatory ask performance become growth. do look well our And internal expect pursue we link friendly more and to encouragement now you on opportunities. be I would our support, our on We forward confident on your the additional questions. for year and Schwazze. portion the submit. a take and am happy all energized be so that we will progress and to as website to Thank question, interest throughout and details acquisitions these Relations click To

Raphael Gross

what view or across as is, within Or within the at necessary? do your consistent you're looking is with other the expensive now. relatively recent Colorado? it the of operators question seeing in that's first industry I'm state questions And come financing Wonderful. the you but

Justin Dye

That's of a last were plan. very bring They have expertise also really some that really value into you, can in continue out question. helping that long-term That building that we're raising a will what particular, great Rae. incredibly and in Thank that attracted would Colorado. see fundraising all We across for I exercise this system few as were the very, growth our are our business focus one company. that capital long-term We talent the effectuate bought companies country, positive them Schwazze and with point we in the investors. long-term successful the be. be to and and high-quality

one growth And we're as go to cost capital things, to and really So this new of view capital capital include our scheme believe continue – few. continue I will grand And to of the growth us grow to the capabilities. execute plan, cost down. continue of dispensaries, enabling which our new outperform, stores, organic will execute in new we and our we of do

Raphael Gross

Okay.

Another expect each would the given of Buds? ahead raise be capital And going stand-alone question than acquisition smaller each forward? the industry, the on transaction is reasonable it that capital. to Should we Star of assume fragmentation

Justin Dye

me they Let large a $XXX equity, operator. – us. take – for the me provided a to form that note of With let and cash was seller in answer We one. the million business that paid Star Buds

I acquisition. which us. going fit add cash So to to shareholder smaller, that about a acquisitions continue I upon going that it thoughtful important accretive criteria are will larger. some But was much There, we're and we be very There But to create can we're We're on and large we are do capabilities and balance our we add at component. the of that acquisition cash. value, innovation very that stock how We're good be looking And that a be at it place. also in they the acquisitions, to say, have liquidity, cash looking sheet. that really most need our say, think of would acquisitions it's great we capital more to the will not others will for negotiate raise we'll to versus will raise capital. that anticipate be we cash some depends

Raphael Gross

potential targets currently How Okay. you are And many in your pipeline? are transactions? how sourcing

Justin Dye

we're we're as upbeat we companies number. to year double feel and meeting, and the organic cover We And of very only of part areas have unable about Well, said, positive cover I that growth. certainly we with from our we the – a specific the pro to the talk our through do forma we retail of revenue ability lot the a look state our acquisitions We But A about this market. we at that small perspective. today. don't homework. very state look at

retail So and we manufacturing to opportunities to products continue side. on well the and cultivation enormous as grow as see at

Raphael Gross

Okay.

So related any retail? one or was, I like seems guess are a leaning in between question But here indifferent. you manufacturing it cultivation, direction you're

Justin Dye

Well, we clearly looking as needs locations dispensary across meet and looking of retail certainly we to priority, state. are we're continue in terms at customers' the

looking and that. and – And good product our We're our of that stores We contract really very bring into is cultivation with and will some our are portion is a we portion have also We to to good also out developing of our growers. brands target continue to own it, produce of at brands. important. in-house, cultivation companies a

And own the all to be dedicate our able to and our and cultivation that and capabilities. So want to growing as But balanced well. capital some supply grow derisk and we we we have contract to also don't chain. be indoor outdoor greenhouse

as that presume we an looking So at from that well perspective. would are acquisition cultivation

Raphael Gross

prices since of asset the Have COVID? risen onset

Justin Dye

some up recuse or perhaps seeing you switches medical different and jurisdiction look the some are for would general, a it’s relatively a at Where state when are seller It to It’s what varies. of But geographies, individuals terms it those from compensation of on when from I we’re to and adult looking interesting. going have the little are rec a different for, is today with remained values relatively look move looking geographies and been varies in medical in perspective. and say When depending parts location. But scale to size constant you inflation constant. bit. at licenses

Raphael Gross

could of negative on I’m wheels like the given seems industry? and question has you other generate. in. potential lot with It a COVID any revenue it experiment customers legalization, way in for cannabis or Is tax Has there towards brought anything missing came the greased it the COVID One a has here? to been

Justin Dye

perspective, Those buying new cannabis in In consumers great brought operating the general, for seeing well. and which the number from an is business. units more of customers larger has baskets the we’re it a as category category, today, to

getting So relationship we’re existing deeper a our with customers.

probably business both biggest – COVID the which incredibly was the growing ways, is say And issue So would exciting. I we’re had raising with capital.

reset had in markets And capital worth and time period companies. a then number real of have number net cannabis individual a companies frozen You for of family a estate. for with that public offices high Canadian investments of the

with standing happen to that COVID the was with what were industries going We’re on move economy impacted. sidelines, trying dramatically. figure really We’ve the to to and which out going be seen

to and freeing capital seems flipping up with So the bit Senate in we’re quite election and the – outreach be democratic. certainly November a

But created that lot a think a COVID we for certainly, well all fundraising So industry. bodes the issues perspective. from of

Raphael Gross

margins Okay. the for you store-level consumer and location, unit current Buds spend? sales about average of Star tell average the annualized Well, the in economics could terms per us

Nancy Huber

Rae, I’ll that one. take

right So than just last stores. those normalizing now we them, historical less of working information ago. over for not took we’re Remember, five month a the on

we our we’ll talk not over that will, probably come the calls. the year, helpful the to we’re start comparisons to where we be but those place next believe year-over-year understand, information. but investors That look of our that will couple quite for do about throughout future providing in months, So today, to to in

Raphael Gross

and cost you how you actually execute playbook? do sales much by Okay. to playbook? incremental how And Related margins much generate executing question, in it could your think your does

Nancy Huber

of Again, a there. have lot history don’t we

a So little down data. we get better the have we’ll further with Star road as Buds,

Organics, in those and you’ll the along providing and specifics able we’re visits. yet. Again, But not basket the Mesa future, customer start those we’ll improvement see to margins We with product have seen in at measurements. be size providing

Raphael Gross

to Purplebee’s integrate the complete Is Organics, an normal four this Mesa time acquisition than integration time? of Okay. at frame months? Is less the

Justin Dye

that one. take Yes, I’ll

against team We’re well. plan very our making great has executed very, integration The really progress.

employees well our process system a worked the onboarding all an in systems. the all point-of-sale and way from – new from systems, integration converting way to that’s payroll have We

just Organics we’ve Mesa rebannered Star the So Buds. stores to

as we and We’re on we’ll speak, quickly. integrating Star this do working very Buds

answer has the done four good very much done We’ve faster than I The will able this. businesses, here we expertise very yes, be months. practiced. It’s this often. So had in-house. is, integrate would to say, team We’ve

So we’ve tell our early on capabilities there. I and outperform got we confident these able businesses synergies would very as very we will good Mesa synergy Buds, the And side, on Organics. as then feel Purplebee’s well very, you, too, tells be to would also Star that – early as be

see to Star starting that we’re Buds. of with So even some

Raphael Gross

Okay. Do you you have expenditure for that a share? capital CapEx budget – XXXX could

Nancy Huber

do. we Sure,

current that Star Purplebee’s We million includes the this implementing groups includes MMT expect digital Organics, updating so retail budget. to the capital marketing our spaces, plan. have about That the $X.X Mesa in and spend year Buds, businesses,

our We’re things number. expand those investing MIP are in equipment in and our covered to so continuing that all ERP,

Raphael Gross

trends? innovation examples any drive how intend to with product and you of retail you respect Can provide development to Okay.

Justin Dye

to I’d Yes. happy that. be answer

We number of is have of and particularly a out group. marketing innovation that our the merchandising on, team working projects

we’ve CPG a example, vape at new introduced for just Purplebee’s. So product

on see were we partnering and storytelling margins really consumers. at today they well. rolled in see in to about as And of how those our educating some our their and around better which better other think customers. and as looking excited stores does are that of one grown digital a number products were of interactive available can products we’ve make sales, – is with how our we’ll And We’re we as the stores, we see we made, can well capabilities, marketing and we’ll marketing of new customers think job target out our wholesale then things CPG great they that is and a partners

Raphael Gross

guidance, your you’re rather of specific any or I’m the Is evaluating data guidance in about Okay. marketplace opportunities aspiration? an goal excluding acquisitions, forma. pro the currently talking revenue your hard terms not double and And based in to on to related your

Nancy Huber

Yes.

that double at probably looking opportunities. of We’re number

we have we of is companies gave guidance we’ve we’re I the that real revenue very our specific to those and looking think identified but about, likely opportunities like number don’t we So have identified double targets, fit talked we’re we’ve here. at very any soon our have on and the out and return as definitive we those. evaluating mentioned, and as real Justin And estate announce agreements, that that the we’ve we’ll those. come as price locations

Raphael Gross

to would that? beyond expand Question Colorado? impetus would drive What do the What’s on Okay. to you for what it that? take

Justin Dye

have we coverage in small base Colorado Well, relatively a today.

you at look have state. If we opportunities within – growth enormous the

So scale, there obviously we’re approach that value. new we’ve about would itself. scale. can grow states. And we state size we to to organically continuing and applying create services in create believe new with customers products, strategy, is states, with build size, applicable we that, taking our where locations, we said capabilities as other this to Having it new said, excited And here new to and build the other so a value is business certainly look as great at serving shareholder this and system new sites, really and

now, open to looking we’ll Colorado. remain focused right So we’re But at on that. certainly

Raphael Gross

And how do target you there? question Related what Colorado for the is market? get to intend of is share Okay. your

Justin Dye

ways, I orders won’t we have use them probably numbers. say orders of once magnitude share. differentiated ability obsessed I in Yes. to which opportunity again, would and to in to But And – by with grow unique of be we’re customers doing. that’s driven our service going

tell So it how us I that’s be. the and customer the way much should share think deserve, we will

Raphael Gross

your e-commerce strategy? delivery delivery. Okay. What’s Question and e-commerce and on

Justin Dye

Yes.

as about our more and we – lot share inside of we capabilities activity omni-channel a there’s but will company, have that, unwrap We our that plans. working on

the in that more that launching detail. quarter coming quarters and to forward look we rather. we’ll in So discuss And

Raphael Gross

we what that’s Well, right. All got.

Nancy? Any So I appreciate remarks from everyone questions. for or final Justin submitting

Justin Dye

and and through and want to supporting No. who of to thank really have pandemic thank this our company our our we’re people’s I the excited us. like hard. servicing all taking terrific like job cannabis thank great employees to to care management customers a shareholders lives about team another. We’d just going really continue been their our and incredibly and We’d condition. incredible to that’s one opportunity work of for done And a of creating improve

all about are in want our those and excited efforts. we’re that, and So that thank to shareholders supporting interested I friends, of partners our

we Thank to conference continuing forward next and to look to execute high you, thank So and level you. forward look at execute call. and our a

Raphael Gross

Thank evening. you good all. Have a

Operator

that, teleconference. this concludes today’s with And

wonderful now this may you lines You your have day. your for participation, disconnect a time. Thank and at

Medicine Man (SHWZ) 31 Mar 212020 Q4 Earnings call transcript