Schwazze (SHWZ) - Cannabis Operator Expands & Increases Revenue

Schwazze is the parent company of a portfolio of vertically integrated cannabis brands spanning from seed to sale. The company aims to be the leader in any market it enters, through its high-performance and customer-centric culture. The company name is derived from a pruning technique to promote the growth of a cannabis plant.

Company Overview

The company has recently raised USD$ 59 million and coupled with the company’s cash position of USD$ 21 million will enable the company to fund its acquisitions and internal growth. The funds will be deployed in the coming year, with two-thirds of the raised capital to be implemented to close out all of its current acquisitions.

The company has a clear strategy to be number one in Colorado and shortly New Mexican retail markets, while also aiming to have an efficient supply chain partnered with third parties. Schwazze enjoys the support of large institutional investors due to its recent successes and its ability to add value to shareholders through its returns.

The coming year will see Schwazze continuing to focus on its capital expenditure, acquisitions, and client-oriented service.  The company will implement any excess capital into the acquisition of more retail stores, investing in new brands and expanding its cultivation portfolio.

The company will continue focusing on its operations in both Colorado and New Mexico with the aim being to get its operations as efficient as possible and able to compete with other businesses in the states. Schwazze does not plan to move into any new states soon.

Schwazze is optimistic regarding the future of the cannabis industry in the US and believes that it is correctly positioned for the shift in public perception currently underway.

Management

Justin Dye serves as the Chief Executive Officer and Chairman of the company’s board. Dye has been involved in high-level strategic management, mergers and acquisitions, operations, private equity and corporate finance for more than 25 years. He played a key role in the acquisition of the national grocery chain, Albertsons Inc., through a private equity consortium. Dye led the acquired Albertsons Inc. through more than USD$ 40 billion in acquisitions, divestitures and real estate transactions.  Dye has also held various senior management roles in companies including Cerberus Capital Management, General Electric and Arthur Andersen LLP.

Nancy Bush Huber is the Chief Financial Officer (CFO) of Schwazze and has over 25 years of experience in the financial oversight of publicly traded companies. She holds a Chemical Engineering degree from Purdue University and her MBA from the Kellogg School of Management. Busher has been involved in various mergers and acquisitions as well as multifunctional management, strategic planning, IPOs, SEC reporting, investor relations, intellectual property and systems implementation. Huber was able to grow the revenue of Western Multiplex Corporation by 100% in the timeframe of two years after successfully executing the company’s IPO ahead of schedule.

Nirup Krishnamurthy is the Chief Operating Officer of the company and has been involved in leadership positions of fortune 500 companies for more than 25 years. Krishnamurthy was involved in the oversight of the turnaround initiatives at United Airlines and led various cost-saving and revenue-enhancing initiatives. He has also held positions at companies such as Northern Trust Bank and the Great Atlantic and Pacific Tea Company.

Dan Pabon is the General Counsel and Chief Government Affairs Officer for Schwazze. He served as a state representative for Colorado between 2011 and 2019 and has a vast amount of experience in the navigation of governance and regulations. Pabon was previously Vice President at Sewald Hanfling Public Affairs, where he assisted various clientele with lobbying, government affairs, business development and community engagement.

Jim Parco is the President of Schwazze Biosciences Ltd., the cultivation and production leg of Schwazze. Parco received his bachelor’s degree in economics from the United States Air Force Academy, his MBA from the College of William and Mary and his doctorate from the University of Arizona. Parco founded Mesa Organics in 2014 and grew the operation to four dispensaries as well as the creation of Purplebee's, a leading cannabis extraction company based in Colorado.

Ryan Schuelke is the director of cultivation of the company and has been involved in the cultivation of cannabis for more than 12 years. Schuelke was involved in the development of the “Three A Light” cultivation methodology, which enables the cultivation of larger crops through a strategic pruning regime.  

The company’s strategic endeavours are led by Todd Williams, who has been involved in strategic growth initiatives for more than 25 years. Williams was Vice President of Corporate Development at Albertsons Inc. and in his tenure managed the acquisition of more than 1,600 operating grocery stores with more than USD$ 40 billion in sales and USD$ 10 billion in transaction value.

Collin Lodge, Julie Suntrup, David Kaufman and Jeremy Bullock serve as Vice Presidents of the company. Lodge is Vice President of Retail and in his time at Albertsons Inc. was responsible for obtaining over USD$ 30 billion in revenue. Suntrup is the Vice President of Marketing and Merchandising. Suntrup has been involved in the marketing of companies in various sectors, including cannabis, alcohol, functional beverage, food, retail, QSR, personal care and pharmaceutical. David Kaufman is the Vice President of Manufacturing for the company and is an expert in the implementation of LEAN manufacturing strategies enabling multimillion-dollar improvements and cost reductions. Jeremy Bullock rounds out the team as the Vice President of commercial sales for Schwazze. Bullock has been involved in the Colorado cannabis industry for more than a decade and was able to double the revenue of Craft, a cannabis consumer packaged goods (CPG) company in two years. He was also responsible for the launching of 19 new products into the cannabis market during his time at Craft.

The company’s esteemed management team is responsible for navigating the new and unfamiliar waters of the US cannabis Industry.

Cannabis Market and company strategy

The cannabis market in the United States is well-positioned to experience remarkable growth rates, with the market regularly referred to as a hypergrowth market. The use of cannabis is legal in 18 states of the United States, with 45 % of the country’s population living in these states. The Centre for Disease Control and Prevention (CDC), found that 48.2 million people or 18 % of the US population use Marijuana on an annual basis, with 11% of the country’s population using cannabis and cannabis-related products every month. The shifting public perception of cannabis use has led to the industry experiencing vast amounts of growth.

Schwazze implements a four-pronged approach to establish itself as the most admired cannabis company globally. The company’s strategy involves a focused approach on its retail operations, with Schwazze aiming to grow its asset portfolio of operations in Colorado and Mexico. The company aims to run a lean operation as well as to create and consolidate its Schwazze house of premium brands, with it focused on the marketing of the brands. The final of the four prongs is the collection and analysis of operational data to ensure maximum efficiency throughout the company’s operations.

Brands and Services

Schwazze is the parent company of Star Buds, Emerald Fields, R. Greenleaf, Success Nutrients, The big Tomato, Medicine Man Technologies, Three A Light, and PurpleBee’s. The companies of Schwazze can be split into three categories namely its chain of dispensaries, its production-focused wing and its consulting wing.

The company’s dispensaries are comprised of Starr Buds, Emerald Fields and R Greenleaf. Starr Buds is a chain of 17 dispensaries located throughout the United States as well as Jamaica, whilst Emerald Fields provides a boutique cannabis shopping experience within Colorado. R Greenleaf consists of ten medical dispensaries located in Albuquerque, Santa Fe, Roswell, Las Cruces, Grants and Las Vegas, New Mexico.

The production-focused aspects of the company consist of PurpleBee’s, Success Nutrients and The big Tomato. PurpleBee’s is a Colorado-based leading cannabis extraction and concentrate manufacturer that provides cannabis products to various leading edible companies throughout the state as well as also providing high-quality vape cartridges and syringes. Success Nutrients supplies a nine-part formulation line of essential micro and macronutrients, which enhances plant growth throughout each stage of the life cycle and delivers top results in both soil and hydroponic gardens. The big Tomato is an indoor and hydroponics equipment and product supplier.

The last leg of the company’s brands and services is its consulting wing, which consists of Medicine Man Technologies and “Three A Light”. Medical Man Technologies is a provider of consulting services as well as operational support for cannabis companies, with “Three A Light” serving as a guide for cannabis growers.

Q1 2022 activities

The approach of Schwazze thus far has proven to be successful with the company recently publishing its results for Q1 2022. The Q1 2022 results include highlights as a 64% increase in revenue from USD$ 19.3 million in Q1 2021 to USD$ 31.8 million and the addition of 14 dispensaries during Q1 2022.

The retail sales of the company grew by 124% to USD$ 26.5 million in Q1 2022, this compared to Q1 2021, with the company’s gross margin increasing by 34.4% to USD$ 10.9 million from USD$ 7.3 million in Q1 2021. The company’s earnings before interest, taxes, depreciation and amortisation (EBITDA) were USD$ 7.9 million compared to USD$ 5.8 million for the same period in 2021.

Apart from the company’s financial success it was also recently listed on the NEO Stock Exchange, as well as signed a definitive agreement to acquire assets of Urban Health and Wellness. Schwazze also recently closed the acquisition of Brow 2 LLC assets and acquired Emerald Fields.

The activities of Schwazze in Q1 2022, further include the addition of a president for the company’s New Mexican operations, the acquisition of various assets, leading the company to be a multi-store outlet (MSO) and closing the acquisition of two cannabis dispensaries in Colorado from BG3 Investments, LLC dba Drift.

Future

Schwazze will continue its strategy of acquiring high-value cannabis assets in the coming year. The company has recently raised USD$ 59 million and coupled with the company’s cash position of USD$ 21 million will enable it to further its expansion initiatives.

The expansion initiatives of the company include the addition of various retail locations in both Colorado as well as New Mexico, with its primary focus being on the expansion of its New Mexican operations. The envisioned growth in New Mexico will be organic, according to the company, with the aim being the opening of new stores instead of acquisition.

Schwazze is optimistic regarding the future of the cannabis industry in the US and believes to be correctly positioned for the shift in public perception regarding the use of cannabis currently underway.

To find out more, go to the Schwazze website