- Earnings call transcript Q3 2022

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Operator

Good afternoon, ladies and gentlemen. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Schwazze Third Quarter conference Call. Please note all lines have been placed on mute to prevent any background noise. I would now like to turn the call over to Ms. Jobin. Joanne ahead. go Please

Joanne Jobin

to Schwazze. Third welcome and Conference Webcast for the and Quarter XXXX Call Greetings,

being by Huber, are Nirup We hosted Krishnamurthy, Executive and President Officer; Chief and Nancy Chief Officer. Justin Financial Dye, Chairman

and answers presentation, remind found Schwazze's earnings you for be statements at uncertainties. continue, prepared link achievements Examples press poised, to that state statements questions and their future subject contain the in would to I may and others, website on from management they performance statements, operations. submitted financial similar business Management's among expect, Investor forward-looking legislation cautioned or build, potential anticipated position, Such risks to or preceded are and will, questions Following may, Schwazze's relate and are via to actual forward-looking the take objectives time. your may words future operations anticipate, also web which results, cause plan, Schwazze become, approximate, could of release. by believe, and Relations the involve Investors expressions those develop, statements as will results like remarks Schwazze's. strategy events, submitted and all may uncertainties project, and regulation federal this differ that include, statements of risks regarding and by forward-looking forward-looking and that to plans

performance differ Form Relations year or Additional Investor and information is for to in on call results, available in that XXXX. December and XX, Schwazze's achievements release available events, factors website made Schwazze's this ended the before concerning cause could available materially XX-K earnings Schwazze's

company's directly which on and US most Exchange now turn made and of can more public found with Investor Dye. the website. discussed call the in between would financial is Relations be Relations Schwazze's the press Schwazze's measure Investor during at financial differences discuss the comparable non-GAAP today's in over Also, available www.sedar.com GAAP filings non-GAAP described A measures Schwazze's Schwazze's call Commission, with viewed Justin Securities to the the may Chairman, call. call this In be on on during to CEO reconciliation www.sec.gov the addition, release before website. or other like information I and can earnings measure fully available

Justin Dye

this then Hello, and with joining appointed happy our thank our some newly afterwards, in review provide will CFO, presentation a final reviews Huber, your Nirup then results will you our business conclude Krishnamurthy, for brief take our I would us to overall questions. quarterly provide afternoon. details financial I thoughts. will President, And before Nancy detail. be operational and we

within dedication continuing third and XXXX, our for by markets outperform Schwazze worked of their of taxes hard us the environment, club the commitment the to Colorado operations, past I'm after economic from cannabis and Despite We've generate we rate cash market year. Despite that's proud market. and and flow XX%. share, grow the an challenging quarter a challenging continued in Colorado increase in profitability team For to Schwazze our the paying a placing backdrop, our CapEx, extremely over free sector. to exclusive continue outperformed

difference condition. and cannabis to experiences most making providing become on by that products, company, communities journey and vision continues team improve the brands a and human Our our admired our trusted in the

beginning customer-first officially would a approach, house the this despite industry in Krishnamurthy entire drive curating plans some conviction maintain to growth with a decisions. of brands us passion analytics that newly-appointed a data since Developing regional now, remain our of And long-term plan on our the challenges efficiency are track and to distinguished accomplishments powerhouse. like year. through take scale of for craftsmanship, the we and Nirup Our for innovation, of leveraging welcome to and driven I teamwork our President, and quarter building technology by and

retailer has Under a growing XXX to revenue I of innovation, joined in in has employees from execution. rate companies. role the XX to run the our works C-level that strategic Mechanical of experience held to grocery roles growth leadership, Bank at and in over joining national markets Nirup say and XXXX, in for less $XXX Industrial than a continue, operations from earned Schwazze executive of grown and Buffalo. core A&P. State former and Trust like and initiatives bachelor's innovation, with than from years bringing University in $X XX New he and an Prior more Company, in our Before with of we his He a would to United Company Fortune leadership million. run million Nirup performance. integral Engineering the to directly XXX EBITDA President, in $XX M&A million Engineering is retail building a operational technology, growth Nirup oversight Schwazze with team He played rate York, accelerate Northern doctorate Airlines, planning, assumed today. responsibility

Nirup Krishnamurthy

Thank you, Justin.

to New past to Virginia Glendale, across have included and with we successes, few. to of of Boulevard a of that Washington rest Boulevard. On with grand XXX Mexico, our the on Lightshade I'm as our strategy to and the vibrant announced unique to-date. we we neighborhood. accomplishments the Avenue is we September new at R. the now Denver's in the documents September the of partners, is of New five October adult-use to in look We, like and located XX, would enter. in Clovis, ongoing the dispensary Colorado there another all in quarter navigate at located dispensaries dispensaries, five Avenue this located Mexico year, This we XXXX Mexico our brings effects at a conditions are been opened enough, September let's New two opening local challenges which and Greenleaf Drive. XXX excellence. Mexico. cannabis markets in in like success Colorado; and of that of customers Street this has stress has dispensaries as members at responsiveness in customers, manufacturing the delivered adult-use hard certain develop for importantly, to our XXX country quite Despite decentralized XXXX our New and in work, XX at one XX commitment one adult dispensary and these industry management of like total LLC. and almost our would our assembled key Park operational communities. Mexico. corner be announced challenges, Ross oversight, dispensary As New This cornerstone terms East in I team On the enthusiasm I Mississippi team dispensary Starbuds two our definite skill do I our that economic Clovis. acquire our fosters EBITDA the local in markets. continue the to Colorado in New in system I Schwazze company a of X, of thank we discuss Green opening December our Leaf New on proud opening heart continuing announced have team and leader and and mentioned, This a cannot few this their four pandemic, built Sudderth markets our and of efficiency both facilities, have Mexico. we highlight And And the also agility, adult-use in On and There we team our Mexico Ruidoso, the quarter been Most strategy, operating quarter. what Havana and XXXX, to in accomplished count XX, we XX X, our and Colorado set Since Street in Labs asset very Lightshade you broader and the navigate our of Colorado to that our still assets we continue much to wherein since announced at in record South the inception, added of in more signed cultivation as adjusted Colorado and growth. Aurora well located revenue

Starbuds Greenleaf it by out the our banners. build premium next Purplebee’s portfolio introducing cannabis adding to to Mexico our retail continue Fields vape expanding We roll terpene-infused We in a expanded of brand, R. early expect our brands, Autograph house Emerald and and vape dispensaries, New Colorado in year.

both We premier to to Smokes, also announced Farms manufacture and dispensaries pre-rolled Colorado with New joints Lowell in and a agreement Mexico. Farms licensing statewide line Lowell distribute of a

We expect XXXX. QX to in Colorado begin in sales

the to We center, city Colorado delayed in in of has approvals. our construction stretch internal due been distribution are which our final

chain supply suppliers pay company in of QX, which expect and customers, We whole. our driving role waste benefit a begin a key and the will out our to in center will the as distribution our distribution

XXXX, commenced driving We internal our QX techniques goods. fully initiative implement manufacturing throughout have down year's New cost We sales. that manufacturing this over be steadily our for Mexico XXXX. benefits April sales XX.X% of medical report realized continue will On same-store can Schwazze in New both The recreational of to selling X, lean and cannabis in prior Mexico. margin increased the cultivation and areas

these with growth We and see are results to month-over-month. continue pleased sales

not to four XXXX, currently more to stores areas will focus state where open in throughout year, this We we customers. have serve we additional coverage openings adding with do following plans the on where

down to compared one-year compared $XX.X XX% Colorado challenges customer by Recorded the the XXXX X.X% XXXX to XXXX third state XX% for by and identicals million faced once visits the QX report when $XX.XX, we XXXX the Despite revenue a achievement QX lower time. by totaled negative representing to quarter, are compared Colorado to were and visits, XXXX. XXXX Our again a for pleased QX industry Average XXXX compared QX QX XXXX. to outpaced customer same for size in stacked you of compared slightly for to totaled increase. QX X.X% XX.X% remarkable XX.X% that at up $XX.X this million XXXX, two-year the consider and QX basket XXXX. in same-store QX we sales were by $XXX,XXX, QX negative identicals quarter was QX

to years identicals comparing due recreational QX primarily down customer two XX.X% and totaled XXXX identicals QX basket QX QX by size visits Mexico, QX Recorded for year $XX.XX, QX to QX XXXX XXXX were New XXXX. XXXX to XX% sales baskets. was for QX QX compared use and for by compared Average stacked $XXX,XXX, lower one XXXX. up same-store compared XX.X% to to XXXX, up were XXXX and XX.X% for XXXX

As Colorado to products. cannabis wholesale our state, last continue this due in market to resulting we in quarter, capacity oversupply to increased anticipate report be of year the in cultivation challenging an the growth stated in

we however, especially state, Mexico, grow add along continues the to the in borders. New markets and southern as new eastern

retail. from revenue our of XX% approximately generated we quarter, This

and contribution to retail our continue the in add we to to to with and implementation our distribution model. in assortment count locations. our the at continue optimize continue the retail categories, expect to across supply segment to central additional dispensaries, from as We aligning dispensary our Through efficiencies partner products playbook, sales as product our New effectively to growth our to Mexico. see we of we growth contribute At retail, grow, a chain production we and review the product recreational vendors operating promote and move the

e-commerce starbudscolorado.com. activities. can on that gift Fields flagship now revenue Of on We remodeled three gun and remodeling acquisitions universal We're purchased our one surveys. Fields. our has which the to or and very and in smoking The Emerald Buds was we introduced retail store increased other launch based location, as experiencing be a in demographics. is working dispensaries, completely And second Emerald Buds Star at our Colorado attribute to two that the been are have Buds Star time Colorado drift a We dispensaries by into the Boulevard on Buds dispensary. customized have rebannered we All Emerald customers used traffic for holiday either evidenced all The season. location in Star Fields received these cards our launched by quarter. well Highlands Star actively banners site

We the expansion. adequate and with cannabis retail a on to additional opportunities across expansion primary focus evaluate industry will continue assets supporting with manufacturing cultivation the

like regarding customer potential intentions synergy And we base, criteria the loyal includes discussion have ours. Any bottom a announcements dispensaries to I'd that reached be material Our for complement definitive that once review. line agreements with complement with financial our footprint made turn acquisitions, to Nancy our to well-branded prospective accretive products opportunities, expansion over will now, partners. continue and have to

Nancy Huber

the of Thank XXXX. now financial you, like review quarter Nirup. I to our results would for third

million, Emerald that XX% record nine-month as Fields, compared XX, report pleased and also an retail the New to $X.X revenues Total XX% very a other increase increase $XX.X reported for of well reported included quarter Schwazze a million of $XX.X of earlier, compared QX. revenue to of I of September quarter third late to million. to million, revenue year-over-year ended and revenue, revenue mentioned million, operating and Nirup to As we of comparing XXXX. sales we added $XX.X as When $XXX.X am million assets $XX,XXX. wholesale of in year Drift, in $XX.X Mexico wellness Brow this X January urban remember, sales mid-February in

revaluation of of Wholesale is wholesale in Total goods Operating In totaled and for services focus growth of compensation. these prior of to in sales addition, million the on representing acquisitions, XXXX, expenses, other Operating general from retail reflects our again X%. to our for is an administrative $X.X or vertical rationalization. quarter, overall driven quarter due fees, XX.X% is balances, last compared same $XX.X increase pricing this a to sales, once million to and totaled recreational New representing increase salaries, year, the expenses percentage This an to increase related higher service in notes expenses of the year professional was XX, three and Other Gross employment of million for investor during payments third-party ended cost the Mexico. $XX.X partially profit expenses XXXX, in gain in the percentage $X.X for driven XX%. Much increase expenses increase the QX XX.X% costs, the million due due of quarter however, million playbook, from offset quarter of to continue the debt increase quarter negotiations. to million The to liability in positive rate. we experienced the the quarter revenues revenue approach, for market. $X.X of obligations XXXX. the sales decreased increased over $XX.X $XX.X or stock-based implementation due this a integration selling, $X.X in consolidated derivative to XXXX. Mexico as cost added costs quarter December of operating same an expenses million months decreased change cannabis of oversupply the acquisitions in or of of to in XXXX quarter margin due company's of to purchasing is as the same driven regulation. the XXX%. by revenue, The This result by benefits retail and revenue driving million the growth at from to an higher decrease million company New of recognized revenue increase a totaled as on our unrealized of debt issued Colorado product quarter other compared in interest increased was and expense of by same in by reduction a expense XX.X% services the and offset cost In the XX.X%. which percentage the that an and September down related representing an price as compared $X.X goods not higher in by vertical in

$X.X is compared of factors, the period QX revenue the diluted share acquisition year. to quarter XX.X% EBITDA for costs the to for same After for generated same basic million of EBITDA the versus $X.XX amortization. and related operating $X.XX and net Schwazze income period preferred was million these details. non-cash See prior the Adjusted and of costs, XX.X% As the merger from XXXX. year. result representing $X table $X.X and for the quarter million, stock for million compensation XXXX This earnings revenue depreciation adjusted for the of derived adjusting expenses, $XX.X in was for compared a for raising last per dividends quarter and onetime net of financial and capital of and accumulated income income

XXXX, months positive generate expecting feel positive costs as one focus million class cash puts the positive before we For ending to select this we to in the us a few very flow from generated cash operations acquisitions. for $X acquisition in We and cannabis generate of the cash XX, expect September flow before three year. companies

For the Schwazze cash The nine for period months, cash compared third of to for the in of equivalents million has currently same of quarter. of cash and the the company operations has $X.X used $X XXXX. end million the cash at million $XX.X generating

revised industry adjusted to million. Turning million be XXXX $XX for to projected and now $XXX $XX current reflect be for projected EBITDA was and EBITDA fiscal adjusted the million projected revenue year the year revenue XXXX. for is the fiscal guidance million entire XXXX Projected to to Guidance is to outlook challenges. $XXX the from to

are of million rate We fourth the million. lower target which on annualized the $XX range to quarter for and $XX adjusted to a was of end run EBITDA deliver

to today, acquisitions you store for projected below in revenue. We $XXX and optimistic pressures, we be continue year our XXXX quarter rate expect be and open and This lower-than-expected call integrate questions-and-answers. to million to continue to pivotal another wholesale will plans. the will delays the we synergize your Justin, construction of sales M&A back slightly to to million that industry like remain to due I'd now who lower-than-expected as Despite expansion revenue our in and in and time new Thank turn is quarter $XXX openings New the Mexico. the annualized for fourth run fourth

Justin Dye

Thank and Nirup. you, Nancy,

thank support, now to be take question, all ask like again, of website on in Q&A, Schwazze. submit. you click please to open continued we the to To Thank the questions. happy and portion interest link a you. your on would would your Investor Relations encouragement Before and our the call We once I for

Joanne Jobin

you, Thank this and Q&A third the participating moderating the Jobin. be will quarter team I you, afternoon. webcast Justin, I everyone, Schwazze’s of My thank in Nirup am and behalf Nancy, for is the IRO Joanne on Schwazze for and name today.

So with you everyone are has a generating do topic. have question cash? the it's cash? to enough first as big Nancy, submitted we probably position. And Do cash guess can

Nancy Huber

expect the operations to for Joanne. the That's flow Yeah, cash cash generated question. And positive great we the a in year. from $X third generate million year, Thanks, acquisitions before in the for company quarter.

call, I cannabis exceptional companies. this in for As said is most the

one are our flow. generating that very of through are We doing maintaining we're few in cash positive that And costs. controlling efforts

hear SG&A you'll a like lot talk us making improve using to things implementing our as as and we sure about So margins cost effectively internal an can. DC we're

We have putting understand that playbook their stores, cetera. how labor a stores helps et should be they in our

So and SG&A on to operating we're those expenses expenses, single continuing every focus day.

starting The doing you'll technique that using more operations, in been cannabis the use thing to We've some other they're we recently since plant-touching of green from hear activities. is their et companies cetera. started

see And quarter every improvement, so, been we've implementing will because revenue. on that. a although along, percent targeted not that improvement continued as of going all a you huge see to you're very We're

this example, for SG&A our So are and of a they percent the quarter before. revenue margins were than our gross quarter, lower

of as given opportunity major questions M&A market with other every debt one to itself the make focuses. that year. probably can look cash as about growth And acquisitions. at We financing. well as of today smart do presents will priced do was inflation. I the to asked, as activity. good we continue flow saw organic was an today, that drive positive cash We'll our our is that we're using That But the delivering one is in for as looking

Joanne Jobin

Nancy. Thank you,

in the of any and in for a products, tell mentioned about up quarter? call? past brand that's about on you Nirup. talk that can And can we the question new launch Autograph bit little Maybe the Next activity us you other been going the that,

Nirup Krishnamurthy

Product versus is which our a This is X made big the the botanical cannabis-derived extension botanically is our quarter. Signature is tokens Series well-recognized a had before. all Thanks, in across Autograph value-priced, Joanne. this from derived now premium we available one brand our X.X in brand, Autograph of Colorado. brand. Purplebees and introduced We new gram gram a Wakelin, stores

hold sustainable it this from five child-resistant we very are of manner fact product. utilized that the years. recyclable that they're a proud for sourced is the in ocean-bound over conscious This XXX% that tubes introduced makes packaging includes products plastic, biodegradable the We and which

marketing The second, the fully is outer layer repackaging, also recyclable.

it we new market launched we and wholesale QX, in then expand XXXX. brand So, to in would the to continue

have an with Farms. We also Lowe agreement

now So, Farms. extensive original portfolio in artisan New licensing, the distribution is is our licensed and craft to a brand we we licensed offers also note Products statewide. as quarter retailers dispensaries. that premium exclusive I'm sales California-based that all Lowe for award-winning brand are Farms Colorado for this Mexico manufacturing Schwazze Lowe of first and available of happy our have wholesale an week. in partner -- And and this made cannabis

taking are Farms, partner is And Mexico it be and think we the with that of New happy So of I we'll quarter to legs to a Lowe fourth XXXX. there very lot product. to

Joanne Jobin

Thank Nirup. you,

question. on. you And the how at market state still and what fits you’re Next Nirup, the market the discuss market? Schwazze into point? of that this Colorado is Can

Nirup Krishnamurthy

tough of know, in is year. having as market Colorado us of a the retail The terms most

economic XX% Colorado and as to XX% was And also So, in a down cycling a COVID market tough year-to-date. invested whole in it environment.

I'm very that, in said we this happy by quarter. state having again outpacing Schwazze to -- as note the So, once that XX%

outpaced retail continue playbook, and state we to that. We operation. our which seven retail have the quarters do We had in our to apply we run

possible service have our main in best we products, one, three be are the to want we quality to we assortment to stores. the we our focus and So, the highest customers. have areas, best

you our worked customers products have with very the a through period. have year, and collaborative provide been suppliers loyal customers our -- has to which this price, supplier us great good tell have and community a very I'll at volume, closely remained good very, and So this and driven

$X market, nearly be cultivate a and will to expect in to continue this market to market large we cannabis continue to So the billion, admired and in that grow company most Colorado is Colorado. still we

Joanne Jobin

Nirup. here. it, at Thank we're while to And you another ask you, question we're going

there's people wholesale, in Regarding asking dramatically, down are wholesale a numbers Colorado. -- about lot that of particularly

some have exiting they're And the announced market. that companies wholesale even

is what So Schwazze strategy?

Nirup Krishnamurthy

in Colorado was in market primarily to wholesale driven XXXX. flower due of down The overproduction

in lot COVID. a lot year, rates, Again, alteration the slow, happened There's the glute marketplace. excess lower et a which of cycling number; essentially are excess We the one, it that distillate market gaming. Number we last down. in is like but CPG wholesale cetera, that of in two, affected resulted a used across directs,

And have number year pricing so of last year. But saw Colorado we of kilograms on distillate almost of in Distillate our our have over in year. significant we terms last per XX% the distillate marketplace. of we tonnage maintained spite pressure this in versus sold volumes, down maintained month in was that, pricing

believe So, we the don't market is anywhere. going

that run all distillate flower in has have value across we online, is it's in are the and believe over to that run. we continue and potential -- we relationships, be with the expand adopt also the provide to last we that in side, goal not plans portfolio And farms time. period coming to healthy think we going brands, come. $XXX, year. relationships the But I to our great other we expanded brands our develop CPG the long and expand of many new on good And manufacturers -- side a CPG on our the it we across to too come to this market long will categories. portfolio the to dollars medium over wholesale and have back we or our year, on continue low years

in are happy with point this But we the we believe of is market. a So temporary this depression we where kind at are wholesale

Joanne Jobin

Thank you, Nirup.

question is sales a continue the for impact to to here's quarter? sales or speak to Justin, how impacting expected you. next inflation for that you Can and

Justin Dye

wages pressure. look When around at roughly what's going clip, We concerned is under obviously still are inflation consumer, X%, are about a at you on the with it. healthy running

having are a tougher people dollar having their So time further. go

really product to provide it's provide value for important So deals. consumer and companies

that. watch to continue we So

certainly in insulated, I think We're category. we're perhaps this but is a terms completely not category an we're cannabis. that emerging as seeing of resilient

certainly that's encouraging. think I So

what consumers maybe they're how one, to how are watching we're dispensaries. deals, they're behaving, in buying, they're certainly buy participating in purchasing, our So free seeing, deals get or tree looking flower one

So we're more making those available.

becoming And So particularly you're certainly, and concern. more it's debt looking more homeowners. more for at debt, expensive is a mortgage

in a the state low concerning rate. -- got but where we've So it's we're yet, unemployment

we're So and to happening customer our have going our to see pulse. watch keep continue and the to on with finger what's

So decisive decisive think we interesting Senate House vote see the from the don't night. have I with times. Obviously, what of last rest happens and of count. the a really we'll happened view what with the

well. we're the concerned So and we'll watching see about But what happens we're economy. there as certainly,

Joanne Jobin

impact your and forward? Thank you you, expect Justin. now to fully can sales are Mexico, New discuss how going products operations you Nirup that we this grow vertical with in Colorado and

Nirup Krishnamurthy

We year, have in two Colorado. bills this acquired

we that, wholesale we new out rolling products, are now are with on So side. the and now flower selling

as product We are you launched in also Farms. and we're know, that also And products fourth we autographs quite about quarter can't I like have new new said, Lowell developing we yet. launching a talk the

own New was Mexico, Schwazze vertically year, which essentially produced. a or operation, -- I third-party sold products manufactured down to little over integrated was a was shift Colorado two. supplier So bought a a the happens essentially essentially internally And is and XXX% what our next vertically retail was In we products. you're think products of to in from that year chain see based was Schwazze our almost third-party products last going XXX%

and up products. starting in the for New in we Now [ph] example, as New Mexico their to Clear carry lot market, Mexico, market to suppliers expands, a of we The has launched expect are now show

to our going suppliers enter over time products stores New more you're see as come in market. the So Mexico third-party into

our is available day, ours both have to products So give stores. shopping our to product experience our end in and at to of they it's best the suppliers' set focus of customers the the sure the best the make

a month to going going that’s forward. So be

Joanne Jobin

has Year you how Can Nirup. Colorado? undertaken the New and you, us New been both many in tell Thank since by Mexico Schwazze acquisitions

Nirup Krishnamurthy

Sorry, you again? question just that Joanne, repeat could

Joanne Jobin

talk have many Colorado Mexico? New you in since the about made New acquisitions Can in been Year how and

Nirup Krishnamurthy

and XXXX, dispensaries, Colorado. XX New added Mexico in Since we in of five XX December have cannabis

We Mexico. also added asset and five added cultivation we Colorado; facilities, four in one and in New one Mexico New manufacturing in

two also New open more and by year. Mexico, in we stores four We of also Mexico we opened the to stores in end in had New expect the organic Clovis,

have takes past future a can case, they good also In the you closed obviously, pipeline all our this time. year, of we as whoever, -- the also by So within literally we closing reviewing, quarter. see same acquisitions and have targets, year, announcing

So we continue. and to in comes thing expect this that waves,

Joanne Jobin

Thank Nirup. Nancy, to I'm seen over think Okay. impressive, can do to that continue continues Nancy. improvements going the this and in that margins you to you've we trend? you, revenues be product move

Nancy Huber

at adjusted quarter, Thanks, revenue of highest this And was look Joanne. good question. That's when Yes. percent it the number been. as a it you our EBITDA had a

of kind to EBITDA. is XXs mid high target Our adjusted for

So that’s kind of and between the SG&A. gross margin

we adding as XXXX add single-digit will We be third-party internal positively we distribution by And then think offset Nirup said, low Our margin gross move as have into kind effect. the will in could New center. Mexico. be that as impacted products of this

offset potentially of kind they each So other.

to to revenues usually between is we as start thing the eight organically, It XX out understand us months don't to The run stores at expect full get to our them somewhere grow obviously they be. rate. to other we takes

the costs store percentage. amortized higher like that be are being revenue at and a some things of over rent will So

growth. more pipeline Colorado, -- SG&A that. – as New growth the have as it's well percent the full that the add through which in will as will rate we our in pay we but look harder couple for Mexico. of do a Mexico hits as up things little much those And that. Colorado being in costs, ends organic of be continue for rate so to we because bit it that SG&A to for although you of it, But at a a Many In little which has obviously, of run M&A, revenue positively our organically, New P&L and more stores add of impact

operations we'll take return continue to XX% And that EBITDA continue what the to to work see cash as and think shareholders. we'll in range. our as the SG&A mid- cost on to I is So that is, much that out to expectation to possible high

Joanne Jobin

Okay. any this Do that? you, downwards And color which you on additional guidance, was revised the have on you Nancy. can year? Thank comment

Nancy Huber

Yes.

we So we which open are. talked we EBITDA we to to have so side the see on the million that. – We we range year that we October, full of think there's $XX run fiscal harvest, we significantly. low that guidance you'll guidance take million have still we guidance. slightly not the the for run product We'd see hit rate hit the down Mexico, about, a adjusted continues that think like market adjusted a like as New on hopefully, was adjusted little wholesale be not have seeing we bit Revenue pressure. you stores a earlier to are at than be to could could if stores hit four Nirup low end then those target under from and anticipate that anticipated, do go The that would guidance, was we year of And be as or end first in out little midpoint rate. in would we gave more but expect $XX low to but quarters, QX know, And hoping lower it end. And looks open we're numbers we'll as wholesale significant three EBITDA. better, going the for the that were in you QX bit is guidance

We delays, of in municipalities inspections approvals stuff. of because and construction mostly are from terms experiencing

exactly I I line And closer mid So open before like. opened four looks expect QX but to rather said, that be on hoped of we stores to time the the we as a handle end had beginning be of we the better to what have they'd of think than end year, QX.

Joanne Jobin

you, Thank Nancy.

that like? execution our us our take can look Perhaps Justin M&A listeners asking One of update pipeline. what is does on provide that. to And an

Justin Dye

Well, that years We with want. secrets, what to and said set one broadest wanted products give develop to out retail lot think they good ago, products, out focused, the that have the customers we of be we I develop number without of three some find a a when thing our assortment of brands when sharing broad assortment those of in this be our we customer wanted and within stores, choice we we relationships suppliers Colorado. create listen to

Purple and autograft think create making work good manufacturing, really I that, Bs data-driven really creating processes. are examples wing good of hard on decisions, processes,

and can and take that's we're we very efficient doing. what business, level, we So at operate out of a cost the

there's little going the to growth, stores I'll stores new for finding to organic we're continue of stores. adult-use Colorado. state everybody remind XXX a So over in so look

there We a we today. have to And seen growth. -- going see of to XX be be there's of will continue We've those consolidation. lot

we've a then New got to And to to year. be a Mexico, and work we're obviously, that. continue slate and with opening will four coming in on going opened another two. this partner we're good We've we're brands And to We've of stores. got going that. continue We consolidator, do good

drive leverage We that, revenue locations, acquisitions going and retail the a synergies, real clean, cost New good great we're them there's we so stores. meet brands, do we the needs we will look cash stewards. synergies, in see great watch our bring local stores, don't And more to capital obviously stores. local we deal continue flow. towns We're be bring then closely. find they're and capabilities, counties to on to but Mexico, operating -- spend and done our we're bringing and that in locations. to Our the want job you'll of adding to. to synergies nice fixed working and estate every and of a they're us, generate Colorado store good costs those to expect both money us And and SG&A. stint great And products teamshave

our to we're to promote to like it, the So playbook, retail on And a distribution, and really to going supply merchandising et side. it. we're from what price delivery, how manufacturing product what standpoint operating the do a chain we're stores good carry, from going how going looks in going it cetera, or bring then what we're

on. to is on we're what of a good states on balance our good do. I We've Could are continue going shape. other We'll to New work strategy. We've one cash, we're work to sheet. regional mean Mexico. goal fit And Colorado We've evaluate there work we're continue cash. number continue So But and continue that's got strategy. in and got that be to got our those -- to opportunities. that's regional those to our that's what types really going

where what to. we're headed up So that's Thanks. and we're really

Joanne Jobin

and why Justin. question you, regarding a in Thank We've in Mexico doing we here. We've thing same got setting aren't had actually few a the Colorado. quite organically the New between Colorado and of difference them Nirup? up

Nirup Krishnamurthy

Yeah.

And have they the a – we So is new in have recreational counties by limited XXX Colorado, dispensaries constrained dispensaries. adding in over the is state. license on where local

are so opened up And of up And there dispensaries. licenses. areas, jurisdictions have that areas really, a opened that those new apply couple will new for for have for we

in time. most pretty are much the comedies However, point at this of restricted

our can get acquisitions the way accounts in in is through and time. at grow we footprint And really, point so in this those

terms as Justin launch real And Greenleaf some open newer Mexico is And get in mentioned. locations, our to of locations. going we very those environment secured a have in licenses. more is good trying and New to it estate new little stores we're a

last – there's don't So forever. think I and that's going to

want use have couple the best across years footprint We recreational so make of comes to And the state. sure of the we first while online.

Joanne Jobin

shortages great maybe Thank labor or Do personnel any comment on Budtenders, could question the challenges to fulfill cetera? you, et marketplace. a as that. Nirup. we got positions managers, here see you about experiences Nirup such in We've

Nirup Krishnamurthy

challenge the to last years, is it's Labor of couple this in always the Yeah. recruit. -- environment over in country been a

head said our program Dan pipeline steady -- function, our we HR of having put that, have but good Bonach, a HR. He's where of prospects. really a place so in And

benefits In have addition, good implemented of in employees. we programs terms some for our

a We program XXX(k) matching. with have introduced

Our our are for have benefits in become working – ensure the are -- our are terms customers are a health, that dental. we part – that family. we on very good to And training Budtenders, of program they very good example, of

they want come And way they've try and stay we while. with a so us to hire us to the employees for to is

is And so going creating for allows what hiring an days. But yes, not we these are is environment easy that after. that

Joanne Jobin

Thank And reaching you, the we Nirup. the of top are hour.

few to up. a then more got wrap we've it questions we're going and here, So

everybody's what I results cannabis – election do might mean mind. you it comments have Justin for any and the on about the that's legislation? know

Justin Dye

evening adult went stage-up the with five into we Well, for use.

for Maryland states blue in also Arkansas reg a Dakota voted X not. You -- red did had and had for cannabis vote that Missouri in state cannabis. a you state the

to decisions. So their it own although grow continues still are they're -- states still making

think I that's positive.

be continuing think side. still see in the I congressional to Senate call to early and out momentum. to think going And we're on it's I too what's to figure happening the

So it's to I think be mixed. going

he governors had that he going encouraging we're the do, to to good arrest the I possession. D.C. federal checks what level which minor And in to have is, those was President think around for does I the do going the expansion cannabis and same think, and at said balances thing hopefully, the

thing banking the start some And there. do. good a and seeing it's for industry, We're thing that's discuss to we'll hopefully, right think hopeful. safe real I movement the some

than this the get for that's be lend money, likely at terrific able intelligence, cash you and industry, to more based able going have safety point, now issue, plus to safe, it's think between our with I would to of we're at to safe end January, the being have on banks a not of being deal more just being custody that able revolvers coverage, to XXX(k) because not have able -- just insurance bank stores, for vendors you've which got you. more insurance. have that liquidity, cover being set benefits and and asset-backed able and competition money and loans could hold actually having your being to but offer loan, term broader more able health to your And to with being FDIC better loans, a cheaper term

So all good industry. I that very be for will think the

So we're about optimistic that.

Joanne Jobin

well. getting we one end on that. Thank the What And the company? question you, session. questions liquidity more the any been do expect And before We've a plan of lot for events Justin. you is as

Justin Dye

Directors. of countless very We've question. very, Board a Great got Great.

and customers, signed innovative they company of on build for this a relative that We giving but taking business being great create is customers, them. creating care in a and a have operation basis, better. company leading our competitors market the towards a what takes company in proud investors them great to up want, all employees only care more of that not we're them value really is great of, than careers that of And then really great create there, and building building that

these a one hopefully, stock credit So we're we're building. for And what perspective. of from days, get that's that going to

and So a a as get And rewarded. to that like I philosopher from ever great takes takes has And been lot simple. it will got a quote build takes a it created Greek really great it do time, great you takes with to a There's suddenly, got and every day. work, that execution vision, you want we takes nothing It's stay it. we to hard company. plan,

build going what know develop. That's to and and going, Colorado, to do. you're got really, company have and region. in New team You where build we want Southwest work, strong this We're Mexico drive to in and the good really we continue a to

down been leads the going in that the New on us if or York and that Canada on, we've public Stock NASDAQ or where when else Exchange, working available something the becomes terms if grow We So deals of or this, a really, and -- strategic we if really continue acquisition organically, do continue be road. know. on we side. be company, But to don't and we growth know good to the in

operational and build the we're in drive don't that in XX And the think multiple something growth we're companies trading in I to market right build really, or really now, at profiles that continue or valuable. We going roughly EBITDA sectors times look that's advantage efficiencies to have the trading competitive trading us We're will And that like times happen. EBITDA other four EBITDA. and share.

We'll shareholder we'll at to our continue we'll day, and our value, have create be we're So of that create all work to patient. care it, we going of stakeholders. value make sure and take

Unidentified Company Representative

we Justin time all Thank is Nirup. today. and That have questions Nancy and the of for you,

the website have not please you my they're that do today, questions via to attention all e-mail and answered were investor If that answered. them ensure will

the end sign off, before have any we do today. remarks before Justin, call final you we

Justin Dye

for always, open and to follow goes our were start us. a sacrifices thank a us need first our As making to do customers to them thank to want us close for do. do investors the patients. seven you're all thank to thank with our we to to it. who leadership And our they want them. to thank this us what to to of all team a very difference. passion move I do. what the giving that the want capital work hard. week, thank I We days for They to want very, not but want and I those without day, their their that I and able passion I don't members and get to hours be and darn for industry, and XX team I for of want

Unidentified Company Representative

I'd the the is like Schwazze's for Schwazze available Once that to webcast. everyone on remind joining you again, thank Thank webcast website. the quarterly everyone you, Justin.

Medicine Man (SHWZ) 10 Nov 222022 Q3 Earnings call transcript