Executive Summary

Q2 2023 delivered $42.375M revenue, 57.9% gross margin, and $13.814M adjusted EBITDA (32.6% margin); diluted EPS was $(0.15) as non-cash derivative revaluation and higher SG&A from newly added stores weighed on GAAP profitability .
Sequentially, revenue rose 5.9% vs Q1, with adjusted EBITDA down modestly on ramping acquisitions; YoY, revenue declined 4.3% on wholesale price compression and NM license proliferation, partly offset by retail expansion .
Management highlighted early signs of wholesale price stabilization in Colorado and continued market-share gains; integration synergies from Everest, Standing Akimbo, and Smokey’s are expected over 6–12 months, supporting margins and cash generation .
Bold positives: Operating cash flow turned positive to $2.683M vs $(13.486)M in Q2 2022, and adjusted EBITDA remained >30% despite pricing headwinds .

What Went Well and What Went Wrong

What Went Well
- “Go deep” retail strategy scaled footprint; acquisitions added strategic depth in NM (Everest) and first major entry into CO medical (Standing Akimbo), with synergy capture beginning in July .
- Colorado wholesale pricing showed early stabilization (AMR rose QoQ), and Schwazze outpaced the CO market by 4% in Q2; loyalty members grew 17% sequentially, supporting traffic resilience .
- Cost optimization, supply-chain efficiencies, and lean practices drove margin preservation; management expects further savings as initiatives mature .
What Went Wrong
- Wholesale price compression (≈25% YoY) reduced wholesale revenue and pressured margins; NM license proliferation added retail price pressure and diluted transactions .
- SG&A rose with 27 additional stores still ramping, compressing adjusted EBITDA margin to 32.6% vs 33.9% last year .
- GAAP net swung to a $(6.608)M loss vs $33.841M profit YoY, largely due to a $35.2M non-cash change in derivative liability revaluation on the convertible note .

Financial Results

Metric	Q2 2022	Q1 2023	Q2 2023
Revenue ($USD Millions)	$44.263	$40.001	$42.375
Diluted EPS ($USD)	$0.24	$(0.06)	$(0.15)
Gross Margin (%)	56.8%	58.0%	57.9%
Adjusted EBITDA ($USD Millions)	$15.021	$14.525	$13.814
Adjusted EBITDA Margin (%)	33.9%	36.3%	32.6%
Income from Operations ($USD Millions)	$9.036	$5.650	$4.957
Operating Cash Flow ($USD Millions)	$(13.486)	$(0.880)	$2.683

Segment Revenue Breakdown

Segment	Q2 2022 ($USD Millions)	Q1 2023 ($USD Millions)	Q2 2023 ($USD Millions)
Retail	$38.139	$35.820	$38.099
Wholesale	$6.081	$4.059	$4.274
Other	$0.044	$0.122	$0.002

KPIs and Balance Metrics

KPI	Q1 2023	Q2 2023
Store Count (NM dispensaries)	18 (end of Q1)	32 (end of Q2)
Store Count (CO dispensaries)	28 (pro forma announced)	30 (current run-rate)
Loyalty Members Growth (seq)	—	+17%
E-commerce Penetration Growth (seq)	NM: +45%; CO: +15%	NM: +45%; CO: +15%
Cash & Equivalents ($MM)	$35.167	$19.872
Total Debt ($MM)	$131.184 (LT + current, end Q1)	$155.444 (total)
Operating Working Capital (non-GAAP) ($MM)	$7.987	$10.011

Notes: Adjusted EBITDA excludes non-cash stock comp, deal/capital raise expenses, severance/retention, inventory FMV purchase accounting, and other non-recurring items per reconciliation .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA Margin (qualitative)	FY 2023	Company would revisit forward guidance in Q2; focus on core execution and free cash flow	“Well positioned to continue driving strong adjusted EBITDA margins … in 2023”	Maintained qualitative outlook
Operating Cash Flow (qualitative)	FY 2023	Focus on delivering positive operating cash flow net of acquisition costs	“Consistent cash flow generation in 2023”	Maintained qualitative outlook
Cost Optimization	FY 2023	SG&A/retail efficiency focus; supply chain synergies	Initiated retail opex optimization, supply-chain efficiency, corporate overhead reduction programs	Expanded programs

No formal numerical revenue/EPS/margin guidance was provided; management emphasized lean operations, margin discipline, and cash generation .

Earnings Call Themes & Trends

Topic	Q4 2022 (Q-2)	Q1 2023 (Q-1)	Q2 2023 (Current)	Trend
Pricing/Supply in CO	Oversupply drove price pressure; licenses down ~9% recently; margin resilience via retail playbook	Wholesale flower pricing showed signs of stability; CO market down, Schwazze outpaced by ~8%	AMR for flower rose QoQ ($649 → >$702); active licenses fell (812→701); Schwazze outpaced market by 4%	Stabilizing, slow normalization
NM License Proliferation	Doubling of licenses since Apr’22; store-level pressure	NM licenses at 633 (Mar); growing presence; 8.6% share pre-Everest	+29% YTD store count; aggressive pricing ($4/gram); footprint expanded to 32 dispensaries	Intensifying competition; scale offsets
M&A & Integration	Active pipeline; disciplined capital allocation	Announced Smokey’s, Standing Akimbo (CO), Everest (NM)	Closed Everest, Smokey’s, Standing Akimbo; synergy capture from bulk buying, cultivation best practices; 6–12 month integration timeline	Accretive scale; synergies ramping
Supply Chain/ERP	Lean manufacturing; retail efficiencies; cost controls	Off-premise distribution launched; ERP rollout in cultivation for seed-to-sale visibility	Supplier migration largely complete; price negotiation savings; working capital improvement	Efficiency gains compounding
Regulatory (SAFE/Rescheduling)	Optimistic long-term; operate without federal assistance	SAFE Banking progress; remain focused on execution	USCC chair; monitoring SAFE markup and rescheduling; “long-term proposition”	Constructive advocacy; timing uncertain
Medical Market (CO)	—	Standing Akimbo deal signed (largest medical dispensary)	Entry into CO medical channel; store-within-store concept planned	New channel expansion
E-commerce/Loyalty	—	Enhanced e-commerce; strong 4/20; data-driven promotions	NM +45% / CO +15% e-comm penetration growth; +17% loyalty members seq	Digital adoption rising

Management Commentary

“In Q2, we continued to execute on our commitment to going deep in each of our markets… adding 17 new stores to our footprint. Everest … positions us as a top operator in [NM]. Standing Akimbo… marks our first significant foray into the Colorado medical market” .
“Despite the market conditions in the quarter, we outperformed the market by 4% in Colorado… [and] experienced a modest revenue increase on a sequential basis [in wholesale]… while contending with a 25% year-over-year price reduction” .
CFO: “Adjusted EBITDA… was $13.8 million or 32.6% of revenue… The decrease… was primarily driven by lower revenue and higher SG&A associated with the new stores that are still ramping” .
CEO: “We are well positioned to continue driving strong adjusted EBITDA margins and consistent cash flow generation in 2023” .

Q&A Highlights

Integration Synergies and Timing: Management targets 6–12 months to fully integrate acquisitions and realize synergies; early gross margin lift of +15 percentage points at Smokey’s within 20 days post-close .
Market Dynamics: CO wholesale pricing showed first QoQ uptick in ~10 quarters (AMR to >$702 from $649); active licenses declined materially; in NM, 133 new stores YTD increased saturation and pressured pricing .
Medical Strategy: Standing Akimbo leverages medical expertise; “store within a store” medical banner to expand channel across CO footprint .
Working Capital and Liquidity: Comfortable liquidity with ~$19.9M cash at 6/30; focus on inventory efficiency, ERP visibility, supplier migration to off-premise facility; generating positive operating cash flow .
Expansion Goals: Target ~100 CO stores and ~50 NM stores over time, with deep, #1 market positions; regional M&A focus continues .

Estimates Context

S&P Global/Capital IQ consensus estimates for SHWZ were unavailable at the time of this analysis due to missing CIQ mapping for the ticker (tool error). As a result, no Wall Street consensus comparisons are included for revenue, EPS, or EBITDA for Q2 2023. Where estimates are needed for future work, we recommend re-querying once the CIQ mapping is updated.
Implication: Absent consensus, investors should anchor on company-reported sequential/YoY trajectories and margin/cash flow commentary .

Key Takeaways for Investors

Margin resilience and cash generation: Adjusted EBITDA remained robust at 32.6% and operating cash flow turned positive to $2.683M, indicating effective cost control and integration discipline despite pricing headwinds .
Pricing stabilization in CO: Initial signs of wholesale stabilization (AMR uptick, license reductions) could be a near-term sentiment tailwind; Schwazze’s 4% outperformance suggests share gains even in a tough tape .
Scale and synergy runway: Recent acquisitions expand footprint and medical exposure; synergy capture (bulk buying, cultivation best practices) should support margins over the next 6–12 months .
NM competition manageable with depth: License proliferation and aggressive pricing are pressuring the state, but Schwazze’s expanded presence (32 dispensaries) and loyalty/e-commerce momentum offset some demand dilution .
Balance sheet watchpoints: Cash of $19.872M and total debt of $155.4M warrant continued focus on OCF and working capital optimization; management is paying down principal and prioritizing capex discipline .
Non-GAAP lens matters: Adjusted EBITDA excludes non-cash items and one-time costs; tracking margin trajectory alongside SG&A from ramping stores is key to assessing sustained profitability .
Trading setup: Near-term catalysts include continued stabilization in CO pricing, synergy updates, and evidence of medical channel scaling; risks center on NM saturation and wholesale price volatility .

Medicine Man Technologies, Inc. (SHWZ)·Q2 2023 Earnings Summary