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Humana Reports First Quarter 2019 Financial Results; Raises Full Year 2019 Financial Guidance
-
1Q19 earnings per diluted common share (EPS) of $4.16 on a GAAP basis,
$4.48 on an Adjusted basis -
2019 EPS guidance raised to approximately $16.63 to $16.88 on a GAAP
basis, $17.25 to $17.50 on an Adjusted basis, meaningfully exceeding
long-term growth targets -
Strong start to 2019 driven by better than expected utilization in the
individual Medicare Advantage business -
Increased full year expected individual Medicare Advantage membership
growth to 415,000 to 440,000 members, representing approximately 14
percent growth in 2019
LOUISVILLE, Ky.–(BUSINESS WIRE)–Humana Inc. (NYSE: HUM) today reported consolidated pretax income and
diluted earnings per common share (EPS) for the quarter ended March 31,
2019 (1Q19) versus the quarter ended March 31, 2018 (1Q18) as follows:
Consolidated pretax income In millions |
1Q19 (a) | 1Q18 (b) | ||||||||
Generally Accepted Accounting Principles (GAAP) | $ | 746 | $ | 707 | ||||||
Amortization associated with identifiable intangibles | 18 | 30 | ||||||||
Put/call valuation adjustments associated with 40% minority |
39 | – | ||||||||
Segment earnings associated with the Individual Commercial Segment | – | (53 | ) | |||||||
Adjusted (non-GAAP) | $ | 803 | $ | 684 |
Diluted earnings per common share (EPS) | 1Q19 (a) | 1Q18 (b) | ||||||||
GAAP | $ | 4.16 | $ | 3.53 | ||||||
Amortization associated with identifiable intangibles | 0.10 | 0.17 | ||||||||
Put/call valuation adjustments associated with 40% minority interest in Kindred at Home |
0.22 | – | ||||||||
Segment earnings associated with the Individual Commercial segment | – | (0.29 | ) | |||||||
Adjustments to provisional estimates for the income tax effects related to the tax reform law enacted on December 22, 2017 (Tax Reform Law) |
– | (0.05 | ) | |||||||
Adjusted (non-GAAP) | $ | 4.48 | $ | 3.36 | ||||||
The company has included financial measures throughout this earnings
release that are not in accordance with GAAP. Management believes that
these measures, when presented in conjunction with the comparable GAAP
measures, are useful to both management and its investors in analyzing
the company’s ongoing business and operating performance. Consequently,
management uses these non-GAAP (Adjusted) financial measures as
indicators of the company’s business performance, as well as for
operational planning and decision making purposes. Non-GAAP (Adjusted)
financial measures should be considered in addition to, but not as a
substitute for, or superior to, financial measures prepared in
accordance with GAAP. All financial measures in this press release are
in accordance with GAAP unless otherwise indicated. Please refer to the
footnotes for a detailed description of each item adjusted out of GAAP
financial measures to arrive at a non-GAAP (Adjusted) financial measure.
“In a year of strong Medicare Advantage membership growth for the
industry, driven in no small part by the health insurance industry fee
suspension and the resulting increased benefits offered to seniors
nationwide, we are pleased to be able to deliver industry leading
individual Medicare Advantage membership growth of 415,000 to 440,000
members together with above target earnings growth for 2019.” said Bruce
D. Broussard, Humana’s President and Chief Executive Officer. “Each day,
more and more seniors are choosing Medicare Advantage, a program that
today has over 22 million members, demonstrating the compelling value of
a program that delivers affordable, quality care for seniors and
improved clinical outcomes as payers and providers work together to
understand each member’s whole health and help them navigate the complex
healthcare system.”
Summary of 1Q19 Results
GAAP and Adjusted pretax income and EPS results for 1Q19 exceeded
management expectations, primarily driven by lower than anticipated
utilization in the individual Medicare Advantage business.
The company’s year-over-year consolidated GAAP and Adjusted pretax
results in 1Q19 were favorably impacted by the solid performance of the
company’s Medicare Advantage business and significant operating cost
efficiencies driven by productivity initiatives previously implemented.
As expected, the company’s higher-than-anticipated individual Medicare
Advantage membership growth during the recently completed Annual
Election Period (AEP) had a muted impact on the consolidated earnings in
1Q19. While new Medicare Advantage members increase revenues, on
average, they have a breakeven impact on pretax earnings in the first
year as they were not previously engaged in clinical programs or
appropriately documented under the Centers for Medicare and Medicaid
Services (CMS) risk-adjustment model.
The year-over-year changes in GAAP and Adjusted EPS for 1Q19 reflected
the same factors impacting GAAP and Adjusted consolidated pretax income
comparisons as well as the beneficial impact of the temporary suspension
of the health insurance industry fee (HIF) in 2019. In addition,
year-over-year comparisons of both GAAP and Adjusted EPS are favorably
impacted by a lower number of shares used to compute EPS, primarily
reflecting share repurchases.
Please refer to the consolidated and segment highlight sections that
follow for additional discussion of the factors impacting the
year-over-year results. In addition, below is a summary of key
consolidated and segment statistics comparing 1Q19 to 1Q18.
Humana Inc. Summary of Quarter Results |
1Q19 (a) | 1Q18 (b) | |||||||||
Consolidated results: | |||||||||||
Revenues – GAAP | $ | 16,107 | $ | 14,279 | |||||||
Revenues – Adjusted | $ | 16,107 | $ | 14,284 | |||||||
Pretax income – GAAP | $ | 746 | $ | 707 | |||||||
Pretax income – Adjusted | $ | 803 | $ | 684 | |||||||
EPS – GAAP | $ | 4.16 | $ | 3.53 | |||||||
EPS – Adjusted | $ | 4.48 | $ | 3.36 | |||||||
Benefits expense ratio – GAAP | 86.2 | % | 84.5 | % | |||||||
Benefits expense ratio – Adjusted | 86.2 | % | 84.9 | % | |||||||
Operating cost ratio – GAAP | 10.4 | % | 12.4 | % | |||||||
Operating cash flows– GAAP | $ | 896 | $ | 3,686 | |||||||
Operating cash flows– Adjusted | $ | 896 | $ | 351 | |||||||
Parent company cash and short term investments | $ | 721 | $ | 567 | |||||||
Debt-to-total capitalization | 36.0 | % | 33.9 | % | |||||||
Retail segment results: | |||||||||||
Revenues – GAAP | $ | 14,013 | $ | 12,107 | |||||||
Benefits expense ratio – GAAP | 88.3 | % | 87.4 | % | |||||||
Operating cost ratio – GAAP | 8.2 | % | 10.1 | % | |||||||
Segment earnings – GAAP | $ | 465 | $ | 267 | |||||||
Segment earnings – Adjusted | $ | 469 | $ | 273 | |||||||
Group and Specialty segment results: | |||||||||||
Revenues – GAAP | $ | 1,887 | $ | 1,970 | |||||||
Benefits expense ratio – GAAP | 76.4 | % | 73.2 | % | |||||||
Operating cost ratio – GAAP | 21.9 | % | 23.6 | % | |||||||
Segment earnings – GAAP | $ | 165 | $ | 211 | |||||||
Segment earnings – Adjusted | $ | 166 | $ | 212 | |||||||
Healthcare Services segment results: | |||||||||||
Revenues – GAAP | $ | 6,098 | $ | 5,663 | |||||||
Operating cost ratio – GAAP | 96.6 | % | 96.2 | % | |||||||
Segment earnings – GAAP | $ | 175 | $ | 173 | |||||||
Adjusted earnings before interest, taxes, depreciation and |
$ | 238 | $ | 222 | |||||||
2019 Earnings Guidance
Humana has raised its GAAP and Adjusted EPS guidance for the year ended
December 31, 2019 (FY19). The company now expects FY19 GAAP EPS guidance
to be in a range of approximately $16.63 to $16.88, while Adjusted EPS
is expected to be in a range of approximately $17.25 to $17.50.
A reconciliation of GAAP to Adjusted EPS for the company’s FY19
projections as well as comparable numbers for the year ended December
31, 2018 (FY 2018) is shown below for comparison.
Diluted earnings per common share | FY 2019 Guidance (d) |
FY 2018 (e) |
|||||||
GAAP | ~$16.63 to $16.88 | $ | 12.16 | ||||||
Amortization of identifiable intangibles | 0.40 | 0.49 | |||||||
Put/call valuation adjustments associated with 40% minority interest in Kindred at Home |
0.22 | 0.18 | |||||||
Loss on sale of KMG America Corporation (KMG), a wholly-owned subsidiary |
– | 2.41 | |||||||
Segment earnings associated with the Individual Commercial segment | – | (0.41 | ) | ||||||
Adjustments to provisional estimates for the income tax effects related to the Tax Reform Law |
– | (0.28 | ) | ||||||
Adjusted (non-GAAP) – FY 2019 projected | ~$17.25 to $17.50 | $ | 14.55 | ||||||
“Early indicators in 2019 are positive, with utilization trending better
than our initial expectations for the Retail segment,” said Brian A.
Kane, Chief Financial Officer. “This strong performance has allowed us
to raise our full year Adjusted EPS guidance to a range of $17.25 to
$17.50, reflecting expected Adjusted EPS growth of 19 to 20 percent,
while delivering compelling individual Medicare Advantage membership
growth significantly in excess of the industry.”
2020 Rate Notice
On April 1, 2019, CMS published its 2020 Medicare Advantage Capitation
Rates and Medicare Advantage and Part D Payment Policies and Final Call
Letter (the Final Rate Notice). The company expects the Final Rate
Notice to result in a 2.20 percent(f) rate increase for
Humana’s individual Medicare Advantage business versus CMS’ estimate for
the sector of 2.53 percent, excluding the impact of Employer Group
Waiver Plan (EGWP) funding changes, on a comparable basis. The
difference between the Humana projection and the CMS projection results
from small differences in various components of the rate.
Detailed Press Release
Humana’s full earnings press release including the statistical pages has
been posted to the company’s Investor Relations site and may be accessed
at https://humana.gcs-web.com/
or via a current report on Form 8-K filed by the company with the
Securities and Exchange Commission this morning (available at www.sec.gov
or on the company’s website).
Conference Call
Humana will host a conference call at 9:00 a.m. eastern time today to
discuss its financial results for the quarter and the company’s
expectations for future earnings.
All parties interested in the company’s 1Q19 earnings conference call
are invited to dial 888-625-7430. No password is required. The
audio-only webcast of the 1Q19 earnings call may also be accessed via
Humana’s Investor Relations page at humana.com.
The company suggests participants for both the conference call and those
listening via the web dial in or sign on at least 15 minutes in advance
of the call.
For those unable to participate in the live event, the archive will be
available in the Historical Webcasts and Presentations section of the
Investor Relations page at humana.com,
approximately two hours following the live webcast. Telephone replays
will also be available from approximately 2:00 p.m. eastern time on May
1, 2019 until 11:00 p.m. eastern time on June 26, 2019 and can be
accessed by dialing 855-859-2056 and providing the conference ID
#3292269.
Footnotes
(a) 1Q19 Adjusted
results exclude the following:
-
Amortization expense for identifiable intangibles of approximately $18
million pretax, or $0.10 per diluted common share; GAAP measures
affected in this release include consolidated pretax, EPS, and segment
earnings (for respective amortization expense for the Retail and Group
and Specialty segments). -
Put/call valuation adjustments of approximately $39 million, or $0.22
per diluted common share, associated with Humana’s 40% minority
interest in Kindred at Home. GAAP measures affected in this release
include consolidated pretax and EPS.
(b) 1Q18 Adjusted results exclude the following:
-
Amortization expense for identifiable intangibles of approximately $30
million pretax, or $0.17 per diluted common share; GAAP measures
affected in this release include consolidated pretax, EPS, and segment
earnings (for respective amortization expense for the Retail and Group
and Specialty segments). -
Segment earnings of $53 million, or $0.29 per diluted common share,
for the company’s Individual Commercial segment given the company’s
exit on January 1, 2018, as previously disclosed. GAAP measures
affected in this release include consolidated pretax income, EPS,
consolidated revenues, consolidated benefit ratio, and consolidated
operating cost ratio. -
Adjustment of $0.05 per diluted common share related to provisional
estimates for the income tax effects related to the Tax Reform Law.
The only GAAP measure affected in this release is EPS.
(c) The Healthcare Services segment Adjusted EBITDA includes GAAP
segment earnings with adjustments to add back depreciation and
amortization expense, interest expense, and income taxes. The Adjusted
EBITDA includes results from the all lines of business within the
segment and the impact of Humana’s 40% minority interest in Kindred at
Home.
(d) FY 2019 Adjusted EPS projections exclude the
following:
-
Amortization expense for identifiable intangibles of approximately
$0.40 per diluted common share. -
Put/call valuation adjustments of approximately $0.22 per diluted
common share, associated with Humana’s 40% minority interest in
Kindred at Home. FY 2019 GAAP EPS guidance excludes the impact of
future value changes of the Kindred at Home put/call option, which
cannot be estimated.
(e) FY 2018 Adjusted results exclude the following:
-
Amortization expense for identifiable intangibles of approximately $90
million pretax, or $0.49 per diluted common share. -
Put/call valuation adjustments of approximately $33 million, or $0.18
per diluted common share, associated with Humana’s 40% minority
interest in Kindred at Home. -
Loss of approximately $786 million pretax, or $2.41 per diluted common
share, associated with the company’s sale of its wholly-owned
subsidiary, KMG. -
Segment earnings of approximately $74 million, or $0.41 per diluted
common share, for the company’s Individual Commercial segment given
the company’s exit on January 1, 2018, as previously disclosed. -
Adjustment of $0.28 per diluted common share related to provisional
estimates for the income tax effects related to the Tax Reform Law.
(f) Excludes estimates of changes in revenues associated with increased
accuracy of risk coding.
Cautionary Statement
This news release includes forward-looking statements regarding Humana
within the meaning of the Private Securities Litigation Reform Act of
1995. When used in investor presentations, press releases, Securities
and Exchange Commission (SEC) filings, and in oral statements made by or
with the approval of one of Humana’s executive officers, the words or
phrases like “expects,” “believes,” “anticipates,” “intends,” “likely
will result,” “estimates,” “projects” or variations of such words and
similar expressions are intended to identify such forward-looking
statements.
These forward-looking statements are not guarantees of future
performance and are subject to risks, uncertainties, and assumptions,
including, among other things, information set forth in the “Risk
Factors” section of the company’s SEC filings, a summary of which
includes but is not limited to the following:
-
If Humana does not design and price its products properly and
competitively, if the premiums Humana receives are insufficient to
cover the cost of healthcare services delivered to its members, if the
company is unable to implement clinical initiatives to provide a
better healthcare experience for its members, lower costs and
appropriately document the risk profile of its members, or if its
estimates of benefits expense are inadequate, Humana’s profitability
could be materially adversely affected. Humana estimates the costs of
its benefit expense payments, and designs and prices its products
accordingly, using actuarial methods and assumptions based upon, among
other relevant factors, claim payment patterns, medical cost
inflation, and historical developments such as claim inventory levels
and claim receipt patterns. The company continually reviews estimates
of future payments relating to benefit expenses for services incurred
in the current and prior periods and makes necessary adjustments to
its reserves, including premium deficiency reserves, where
appropriate. These estimates, however, involve extensive judgment, and
have considerable inherent variability because they are extremely
sensitive to changes in claim payment patterns and medical cost
trends, so any reserves the company may establish, including premium
deficiency reserves, may be insufficient. -
If Humana fails to effectively implement its operational and strategic
initiatives, particularly its Medicare initiatives and state-based
contract strategy, the company’s business may be materially adversely
affected, which is of particular importance given the concentration of
the company’s revenues in these products. In addition, there can be no
assurances that the company will be successful in maintaining or
improving its Star ratings in future years. -
If Humana fails to properly maintain the integrity of its data, to
strategically implement new information systems, to protect Humana’s
proprietary rights to its systems, or to defend against cyber-security
attacks, the company’s business may be materially adversely affected. -
Humana is involved in various legal actions, or disputes that could
lead to legal actions (such as, among other things, provider contract
disputes and qui tam litigation brought by individuals on behalf of
the government), governmental and internal investigations, and routine
internal review of business processes any of which, if resolved
unfavorably to the company, could result in substantial monetary
damages or changes in its business practices. Increased litigation and
negative publicity could also increase the company’s cost of doing
business. -
As a government contractor, Humana is exposed to risks that may
materially adversely affect its business or its willingness or ability
to participate in government healthcare programs including, among
other things, loss of material government contracts, governmental
audits and investigations, potential inadequacy of government
determined payment rates, potential restrictions on profitability,
including by comparison of profitability of the company’s Medicare
Advantage business to non-Medicare Advantage business, or other
changes in the governmental programs in which Humana participates.
Changes to the risk-adjustment model utilized by CMS to adjust
premiums paid to Medicare Advantage, or MA, plans according to the
health status of covered members, including proposed changes to the
methodology used by CMS for risk adjustment data validation audits
that fail to address adequately the statutory requirement of actuarial
equivalence, if implemented, could have a material adverse effect on
our operating results, financial position and cash flows. -
The Healthcare Reform Law, including The Patient Protection and
Affordable Care Act and The Healthcare and Education Reconciliation
Act of 2010, could have a material adverse effect on Humana’s results
of operations, including restricting revenue, enrollment and premium
growth in certain products and market segments, restricting the
company’s ability to expand into new markets, increasing the company’s
medical and operating costs by, among other things, requiring a
minimum benefit ratio on insured products, lowering the company’s
Medicare payment rates and increasing the company’s expenses
associated with a non-deductible health insurance industry fee and
other assessments; the company’s financial position, including the
company’s ability to maintain the value of its goodwill; and the
company’s cash flows. Additionally, potential legislative or judicial
changes, including activities to invalidate, repeal or replace, in
whole or in part, the Health Care Reform Law, creates uncertainty for
Humana’s business, and when, or in what form, such legislative or
judicial changes may occur cannot be predicted with certainty. -
Humana’s business activities are subject to substantial government
regulation. New laws or regulations, or changes in existing laws or
regulations or their manner of application could increase the
company’s cost of doing business and may adversely affect the
company’s business, profitability and cash flows. -
Humana’s failure to manage acquisitions, divestitures and other
significant transactions successfully may have a material adverse
effect on the company’s results of operations, financial position, and
cash flows. -
If Humana fails to develop and maintain satisfactory relationships
with the providers of care to its members, the company’s business may
be adversely affected. -
Humana’s pharmacy business is highly competitive and subjects it to
regulations in addition to those the company faces with its core
health benefits businesses. -
Changes in the prescription drug industry pricing benchmarks may
adversely affect Humana’s financial performance. -
If Humana does not continue to earn and retain purchase discounts and
volume rebates from pharmaceutical manufacturers at current levels,
Humana’s gross margins may decline. -
Humana’s ability to obtain funds from certain of its licensed
subsidiaries is restricted by state insurance regulations. -
Downgrades in Humana’s debt ratings, should they occur, may adversely
affect its business, results of operations, and financial condition. -
The securities and credit markets may experience volatility and
disruption, which may adversely affect Humana’s business.
In making forward-looking statements, Humana is not undertaking to
address or update them in future filings or communications regarding its
business or results. In light of these risks, uncertainties, and
assumptions, the forward-looking events discussed herein may or may not
occur. There also may be other risks that the company is unable to
predict at this time. Any of these risks and uncertainties may cause
actual results to differ materially from the results discussed in the
forward-looking statements.
Humana advises investors to read the following documents as filed by the
company with the SEC for further discussion both of the risks it faces
and its historical performance:
- Form 10‐K for the year ended December 31, 2018; and
- Form 8‐Ks filed during 2019.
About Humana
Humana Inc. (NYSE: HUM) is committed to helping our millions of medical
and specialty members achieve their best health. Our successful history
in care delivery and health plan administration is helping us create a
new kind of integrated care with the power to improve health and
well-being and lower costs. Our efforts are leading to a better quality
of life for people with Medicare, families, individuals, military
service personnel, and communities at large.
To accomplish that, we support physicians and other health care
professionals as they work to deliver the right care in the right place
for their patients, our members. Our range of clinical capabilities,
resources and tools – such as in-home care, behavioral health, pharmacy
services, data analytics and wellness solutions – combine to produce a
simplified experience that makes health care easier to navigate and more
effective.
More information regarding Humana is available to investors via the
Investor Relations page of the company’s website at humana.com,
including copies of:
- Annual reports to stockholders
- Securities and Exchange Commission filings
- Most recent investor conference presentations
- Quarterly earnings news releases and conference calls
- Calendar of events
- Corporate Governance information
Contacts
Amy Smith
Humana Investor Relations
(502) 580-2811
e-mail:
[email protected]
Alex
Kepnes
Humana Corporate Communications
(502) 580-2990
e-mail:
[email protected]
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Cannabis
Medical Cannabis Market Report 2024-2030: Asia-Pacific Set to Witness Robust Growth, Driven by R&D Discovery Initiatives
Cannabis
Rubicon Organics Reports Q1 2024 Financial Results
SCHWAZZE
Schwazze Announces First Quarter 2024 Financial Results
Schwazze Management to Host Conference Call Today at 5:00 p.m. Eastern Time
DENVER, May 15, 2024 /PRNewswire/ — Medicine Man Technologies, Inc., operating as Schwazze, (OTCQX: SHWZ) (Cboe CA: SHWZ) (“Schwazze” or the “Company”), today announced financial and operational results for the first quarter ended March 31, 2024.
“We delivered another period of revenue growth in Q1 as we further refined our retail strategy while contending with the prolonged competitive challenges in Colorado and New Mexico,” said Forrest Hoffmaster, Interim CEO of Schwazze. “Throughout the quarter, we continued to sharpen our pricing and promotional efforts while enhancing the in-store experience, widening assortment, improving in-stock position, and advancing our loyalty program to attract and retain new customers. We also strengthened our wholesale business with quarter-over-quarter growth, while surpassing 30% total door penetration across both states.”
“The Colorado market remains highly competitive with more than 680 active recreational licenses, underscoring the importance of delivering an exceptional customer experience and fully integrated retail support program. Although retail pricing has recently stabilized, Colorado sales in Q1 were down 10% year-over-year due to lower volumes. Nonetheless, we significantly outpaced the market as our sales were up 9%, demonstrating the effectiveness of our operating playbook to compete in challenging environments. We expect to continue driving improvements in customer acquisition, retention, and loyalty as we further increase market share in the state.”
“In New Mexico, the proliferation of new licenses continued to outpace state cannabis sales as store count in Q1 increased 31% year-over-year while the market grew only 13%. In addition to pricing and promotional efforts, we’ve focused on driving traffic into our stores by expanding assortment with high quality flower and delivering an elevated customer experience. The New Mexico regulatory body has also increased its license enforcement efforts in recent months, contributing to more than 70 store closures and a 33% sequential decrease in net new store openings in the first quarter. We will continue to support the New Mexico Cannabis Control Division as it develops its regulatory framework.”
“Over the past four years we have rapidly scaled our footprint through 13 acquisitions, building a leading retail presence in both Colorado and New Mexico. We are beginning to see positive momentum from our pricing and promotional strategy and will remain focused on driving operating efficiencies while further optimizing our assets as we consolidate cultivation facilities and eliminate underperforming stores that do not meet our high-margin thresholds. We believe these initiatives, coupled with our operating playbook and strict cost controls, will enable us to return to stronger levels of profitability moving forward.”
First Quarter 2024 Financial Summary
$ in Thousands USD |
Q1 2024 |
Q4 2023 |
Q1 2023 |
Total Revenue |
$41,601 |
$43,325 |
$40,001 |
Gross Profit |
$17,934 |
$7,034[1] |
$21,849 |
Operating Expenses |
$20,643 |
$23,276 |
$16,199 |
Income (Loss) from Operations |
$(2,709) |
$(16,242) |
$5,650 |
Adjusted EBITDA[2] |
$7,341 |
$10,953 |
$14,525 |
Operating Cash Flow |
$(3,700) |
$3,452 |
$(880) |
Recent Highlights
- Announced the grand opening of a medical and recreational dispensary in March under the Everest Apothecary banner in Las Cruces, New Mexico, increasing the Company’s retail footprint to 34 stores across the state.
- Increased wholesale penetration in the first quarter to more than 30% of total doors in Colorado and New Mexico.
- Lowell Herb Co. pre-roll sales increased more than 3x quarter-over-quarter in Colorado, where it continues to be the #1 pre-roll in the state.
- Wana gummy sales up more than 2x quarter-over-quarter in New Mexico.
First Quarter 2024 Financial Results
Total revenue in the first quarter of 2024 increased 4% to $41.6 million compared to $40.0 million for the same quarter last year. The increase was primarily due to growth from new stores compared to the prior year period, partially offset by continued pricing pressure and the proliferation of new licenses in New Mexico.
Gross profit for the first quarter of 2024 was $17.9 million or 43.1% of total revenue, compared to $21.8 million or 54.6% of total revenue for the same quarter last year. The decrease in gross margin was primarily driven by the aforementioned pricing pressure in New Mexico, as well as higher medical sales mix in Colorado.
____________________________ |
1 Q4 2023 Gross Profit includes one-time, non-cash inventory adjustments of approximately $13.1 million comprised of $3.1 million of product consolidation, obsolescence, and shrinkage expenses, $4.3 million of net realizable value adjustments, and $5.8 million of fair value adjustments on acquired inventory in New Mexico in 2023. |
Operating expenses for the first quarter of 2024 were $20.6 million compared to $16.2 million for the same quarter last year. The year-ago period benefitted from a payroll tax credit of $3.9M. The remaining increase was primarily driven by personnel expenses and four-wall SG&A costs associated with 21 additional stores in Colorado and New Mexico that are still ramping.
Loss from operations for the first quarter of 2024 was $2.7 million compared to income from operations of $5.6 million in the same quarter last year. Net loss was $16.1 million for the first quarter of 2024 compared to net income of $1.7 million for the same quarter last year.
Adjusted EBITDA for the first quarter of 2024 was $7.3 million compared to $14.5 million for the same quarter last year. The decrease in Adjusted EBITDA was primarily driven by lower gross margin and higher operating expenses associated with the 21 additional stores that are still ramping.
As of March 31, 2024, cash and cash equivalents were $13.2 million compared to $19.2 million on December 31, 2023. Total debt as of March 31, 2024, was $159.7 million compared to $156.8 million on December 31, 2023.
Conference Call
The Company will conduct a conference call today, May 15, 2024, at 5:00 p.m. Eastern time to discuss its results for the first quarter ended March 31, 2024.
Schwazze management will host the conference call, followed by a question-and-answer period. Interested parties may submit questions to the Company prior to the call by emailing [email protected].
Date: Wednesday, May 15, 2024
Time: 5:00 p.m. Eastern time
Toll-free dial-in: (888) 664-6383
International dial-in: (416) 764-8650
Conference ID: 84167910
Webcast: SHWZ Q1 2024 Earnings Call
The conference call will also be broadcast live and available for replay on the investor relations section of the Company’s website at https://ir.schwazze.com.
Toll-free replay number: (888) 390-0541
International replay number: (416) 764-8677
Replay ID: 167910
If you have any difficulty registering or connecting with the conference call, please contact Elevate IR at (720) 330-2829.
About Schwazze
Schwazze (OTCQX: SHWZ) (Cboe CA: SHWZ) is building a premier vertically integrated regional cannabis company with assets in Colorado and New Mexico and will continue to explore taking its operating system to other states where it can develop a differentiated regional leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale.
Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company’s leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector.
Medicine Man Technologies, Inc. was Schwazze’s former operating trade name. The corporate entity continues to be named Medicine Man Technologies, Inc. Schwazze derives its name from the pruning technique of a cannabis plant to enhance plant structure and promote healthy growth. To learn more about Schwazze, visit https://schwazze.com/.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include financial outlooks; any projections of net sales, earnings, or other financial items; any statements of the strategies, plans and objectives of our management team for future operations; expectations in connection with the Company’s previously announced business plans; any statements regarding future economic conditions or performance; and statements regarding the intent, belief or current expectations of our management team. Such statements may be preceded by the words “may,” “will,” “could,” “would,” “should,” “expect,” “intends,” “plans,” “strategy,” “prospects,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other words of similar meaning in connection with a discussion of future events or future operating or financial performance, although the absence of these words does not necessarily mean that a statement is not forward-looking. We have based our forward-looking statements on management’s current expectations and assumptions about future events and trends affecting our business and industry. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Therefore, forward-looking statements are not guarantees of future events or performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control and cannot be predicted or quantified. Consequently, actual events and results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) regulatory limitations on our products and services and the uncertainty in the application of federal, state, and local laws to our business, and any changes in such laws; (ii) our ability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (iii) our ability to identify, consummate, and integrate anticipated acquisitions; (iv) general industry and economic conditions; (v) our ability to access adequate capital upon terms and conditions that are acceptable to us; (vi) our ability to pay interest and principal on outstanding debt when due; (vii) volatility in credit and market conditions; (viii) the loss of one or more key executives or other key employees; and (ix) other risks and uncertainties related to the cannabis market and our business strategy. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s website at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise except as required by law.
Investor Relations Contact
Sean Mansouri, CFA or Aaron D’Souza
Elevate IR
(720) 330-2829
[email protected]
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
For the Periods Ended March 31, 2024 and December 31, 2023
Expressed in U.S. Dollars
March 31, |
December 31, |
||||
2024 |
2023 |
||||
ASSETS
|
|||||
Current Assets |
|||||
Cash & Cash Equivalents |
$ |
13,151,317 |
$ |
19,248,932 |
|
Accounts Receivable, net of Allowance for Doubtful Accounts |
3,356,032 |
4,261,159 |
|||
Inventory |
26,382,184 |
25,787,793 |
|||
Marketable Securities, net of Unrealized Loss of $347,516 and Loss of $1,816, respectively |
108,583 |
456,099 |
|||
Prepaid Expenses & Other Current Assets |
3,502,310 |
3,914,064 |
|||
Total Current Assets |
46,500,426 |
53,668,047 |
|||
Non-Current Assets |
|||||
Fixed Assets, net Accumulated Depreciation of $10,061,700 and $8,741,782, respectively |
31,326,000 |
31,113,630 |
|||
Investments |
2,000,000 |
2,000,000 |
|||
Investments Held for Sale |
– |
202,111 |
|||
Goodwill |
67,492,705 |
67,499,199 |
|||
Intangible Assets, net Accumulated Amortization of $36,483,160 and $32,706,765, respectively |
162,391,482 |
166,167,877 |
|||
Other Non-Current Assets |
1,328,187 |
1,263,837 |
|||
Operating Lease Right of Use Assets |
34,575,832 |
34,233,142 |
|||
Deferred Tax Assets, net |
992,144 |
1,996,489 |
|||
Total Non-Current Assets |
300,106,350 |
304,476,285 |
|||
Total Assets |
$ |
346,606,776 |
$ |
358,144,332 |
|
LIABILITIES & STOCKHOLDERS’ EQUITY
|
|||||
Current Liabilities |
|||||
Accounts Payable |
$ |
9,443,233 |
$ |
13,341,561 |
|
Accrued Expenses |
8,106,618 |
7,774,691 |
|||
Derivative Liabilities |
1,319,845 |
638,020 |
|||
Lease Liabilities – Current |
5,186,316 |
4,922,724 |
|||
Current Portion of Long Term Debt |
29,579,713 |
3,547,011 |
|||
Income Taxes Payable |
28,235,039 |
25,232,782 |
|||
Total Current Liabilities |
81,870,764 |
55,456,789 |
|||
Non-Current Liabilities |
|||||
Long Term Debt, net of Debt Discount & Issuance Costs |
130,120,753 |
153,262,203 |
|||
Lease Liabilities – Non-Current |
30,735,072 |
30,133,452 |
|||
Total Non-Current Liabilities |
160,855,825 |
183,395,655 |
|||
Total Liabilities |
$ |
242,726,589 |
$ |
238,852,444 |
|
Stockholders’ Equity |
|||||
Preferred Stock, $0.001 Par Value. 10,000,000 Shares Authorized; 82,185 Shares Issued and |
|||||
82,185 Outstanding as of March 31, 2024 and 85,534 Shares Issued and 85,534 Outstanding as of |
|||||
December 31, 2023. |
82 |
86 |
|||
Common Stock, $0.001 Par Value. 250,000,000 Shares Authorized; 79,168,539 Shares Issued |
|||||
and 78,248,389 Shares Outstanding as of March 31, 2024 and 74,888,392 Shares Issued |
|||||
and 73,968,242 Shares Outstanding as of December 31, 2023. |
79,169 |
74,888 |
|||
Additional Paid-In Capital |
202,677,665 |
202,040,968 |
|||
Accumulated Deficit |
(96,843,602) |
(80,790,927) |
|||
Common Stock Held in Treasury, at Cost, 920,150 Shares Held as of March 31, 2024 and |
|||||
920,150 Shares Held as of December 31, 2023. |
(2,033,127) |
(2,033,127) |
|||
Total Stockholders’ Equity |
103,880,187 |
119,291,888 |
|||
Total Liabilities & Stockholders’ Equity |
$ |
346,606,776 |
$ |
358,144,332 |
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND (LOSS)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
(Unaudited) |
(Unaudited) |
||||
Operating Revenues |
|||||
Retail |
$ |
37,633,252 |
$ |
35,820,111 |
|
Wholesale |
3,898,320 |
4,058,925 |
|||
Other |
69,421 |
121,900 |
|||
Total Revenue |
41,600,993 |
40,000,936 |
|||
Total Cost of Goods & Services |
23,667,319 |
18,152,163 |
|||
Gross Profit |
17,933,674 |
21,848,773 |
|||
Operating Expenses |
|||||
Selling, General and Administrative Expenses |
11,835,818 |
10,100,934 |
|||
Professional Services |
1,671,881 |
1,187,364 |
|||
Salaries |
6,880,988 |
4,695,971 |
|||
Stock Based Compensation |
253,916 |
214,544 |
|||
Total Operating Expenses |
20,642,603 |
16,198,813 |
|||
Income from Operations |
(2,708,929) |
5,649,960 |
|||
Other Income (Expense) |
|||||
Interest Expense, net |
(8,307,369) |
(7,745,854) |
|||
Unrealized Gain (Loss) on Derivative Liabilities |
(681,825) |
8,501,685 |
|||
Other Loss |
10,500 |
– |
|||
Loss on Investment |
(33,382) |
– |
|||
Unrealized Gain on Investment |
(347,516) |
1,816 |
|||
Total Other Income (Expense) |
(9,359,592) |
757,647 |
|||
Pre-Tax Net Income (Loss) |
(12,068,521) |
6,407,607 |
|||
Provision for Income Taxes |
3,984,154 |
4,662,178 |
|||
Net Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Less: Accumulated Preferred Stock Dividends for the Period |
(2,155,259) |
(2,029,394) |
|||
Net Income (Loss) Attributable to Common Stockholders |
$ |
(18,207,934) |
$ |
(283,965) |
|
Earnings (Loss) per Share Attributable to Common Stockholders |
|||||
Basic Earnings (Loss) per Share |
$ |
(0.24) |
$ |
(0.01) |
|
Diluted Earnings (Loss) per Share |
$ |
(0.24) |
$ |
(0.06) |
|
Weighted Average Number of Shares Outstanding – Basic |
76,006,932 |
55,835,501 |
|||
Weighted Average Number of Shares Outstanding – Diluted |
76,006,932 |
101,608,278 |
|||
Comprehensive Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
(Unaudited) |
(Unaudited) |
||||
Cash Flows from Operating Activities: |
|||||
Net Income (Loss) for the Period |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Adjustments to Reconcile Net Income (Loss) to Cash for Operating Activities |
|||||
Depreciation & Amortization |
5,096,314 |
6,151,395 |
|||
Non-Cash Interest Expense |
1,031,431 |
991,184 |
|||
Non-Cash Lease Expense |
2,871,226 |
2,251,459 |
|||
Deferred Taxes |
1,004,345 |
(637,225) |
|||
Loss on Investment |
202,111 |
– |
|||
Change in Derivative Liabilities |
681,825 |
(8,501,685) |
|||
Amortization of Debt Issuance Costs |
421,512 |
421,513 |
|||
Amortization of Debt Discount |
2,303,246 |
1,999,933 |
|||
(Gain) Loss on Investments, net |
347,516 |
(1,816) |
|||
Stock Based Compensation |
640,974 |
214,544 |
|||
Changes in Operating Assets & Liabilities (net of Acquired Amounts): |
|||||
Accounts Receivable |
905,127 |
(118,181) |
|||
Inventory |
(587,900) |
(3,023,251) |
|||
Prepaid Expenses & Other Current Assets |
411,754 |
(3,036,801) |
|||
Other Assets |
(64,350) |
360,674 |
|||
Change in Operating Lease Liabilities |
(2,348,703) |
(1,531,765) |
|||
Accounts Payable & Other Liabilities |
(3,566,401) |
(3,464,671) |
|||
Income Taxes Payable |
3,002,257 |
5,299,403 |
|||
Net Cash Provided by (Used in) Operating Activities |
(3,700,390) |
(879,861) |
|||
Cash Flows from Investing Activities: |
|||||
Collection of Notes Receivable |
– |
10,631 |
|||
Purchase of Fixed Assets |
(1,532,287) |
(2,913,394) |
|||
Net Cash Provided by (Used in) Investing Activities |
(1,532,287) |
(2,902,763) |
|||
Cash Flows from Financing Activities: |
|||||
Payment on Notes Payable |
(864,938) |
– |
|||
Net Cash Provided by (Used in) Financing Activities |
(864,938) |
– |
|||
Net (Decrease) in Cash & Cash Equivalents |
(6,097,615) |
(3,782,624) |
|||
Cash & Cash Equivalents at Beginning of Period |
19,248,932 |
38,949,253 |
|||
Cash & Cash Equivalents at End of Period |
$ |
13,151,317 |
$ |
35,166,628 |
|
Supplemental Disclosure of Cash Flow Information: |
|||||
Cash Paid for Interest |
$ |
4,515,205 |
$ |
6,540,748 |
MEDICINE MAN TECHNOLOGIES, INC.
ADJUSTED EBITDA RECONCILIATION (NON-GAAP)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
Net Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Interest Expense, net |
8,307,369 |
7,745,854 |
|||
Provision for Income Taxes |
3,984,154 |
4,662,178 |
|||
Other (Income) Expense, net of Interest Expense |
1,052,223 |
(8,503,501) |
|||
Depreciation & Amortization |
5,618,834 |
6,612,814 |
|||
Earnings Before Interest, Taxes, Depreciation and |
|||||
Amortization (EBITDA) (non-GAAP) |
$ |
2,909,905 |
$ |
12,262,774 |
|
Non-Cash Stock Compensation |
253,916 |
214,544 |
|||
Deal Related Expenses |
637,761 |
1,195,802 |
|||
Capital Raise Related Expenses |
20,760 |
35,068 |
|||
Severance |
484,561 |
118,436 |
|||
Retention Program Expenses |
807,500 |
280,632 |
|||
Pre-Operating & Dark Carry Expenses |
1,053,837 |
391,917 |
|||
One-Time Legal Settlements |
417,653 |
– |
|||
Other Non-Recurring Items |
754,751 |
25,707 |
|||
Adjusted EBITDA (non-GAAP) |
$ |
7,340,644 |
$ |
14,524,880 |
|
Revenue |
41,600,993 |
40,000,936 |
|||
Adjusted EBITDA Percent |
17.6 % |
36.3 % |
View original content:https://www.prnewswire.co.uk/news-releases/schwazze-announces-first-quarter-2024-financial-results-302146858.html
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