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GrafTech Reports First Quarter 2019 Results
BROOKLYN HEIGHTS, Ohio–(BUSINESS WIRE)–GrafTech International Ltd. (NYSE: EAF) (GrafTech or the Company) today
announced financial results for the quarter ended March 31, 2019,
including net income of $197 million, or $0.68 per share, and Adjusted
EBITDA from continuing operations of $284 million.
“GrafTech reported another successful quarter including net sales of
$475 million and net income of $197 million,” said David Rintoul,
President and Chief Executive Officer. “With these solid results, during
the year we plan to continue to return cash to shareholders and repay
debt.”
Key Financial Measures |
|||||||
For the Three Months | |||||||
Ended March 31, | |||||||
(dollars in thousands, except per share amounts) |
|
2019 | 2018 | ||||
Net sales | $ | 474,994 | $ | 451,899 | |||
Net income | $ | 197,436 | $ | 223,673 | |||
Earnings per share (1) | $ | 0.68 | $ | 0.74 | |||
Adjusted EBITDA from continuing operations (2) | $ | 283,815 | $ | 310,339 |
(1) |
Earnings per share represents diluted earnings per share after giving effect to the stock split effected on April 12, 2018 for both periods and the share repurchase effected on August 13, 2018, resulting in weighted average shares outstanding of 290,566,163 and 302,225,923 for the three months ended March 31, 2019 and 2018, respectively. |
|
(2) |
A non-GAAP financial measure, see below for more information and a reconciliation of EBITDA from continuing operations and Adjusted EBITDA from continuing operations to Net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP. |
|
Net sales for the quarter ended March 31, 2019 increased to $475 million
compared to $452 million in the first quarter of 2018. The improvement
was primarily due to higher sales volumes of GrafTech manufactured
graphite electrodes. These sales volumes increased to 45 thousand metric
tons (MT) from 42 thousand metric tons in the prior year period. The
weighted average realized price of these graphite electrodes was $9,954
per metric ton, in line with the prior year period.
Net income for the first quarter of 2019 decreased to $197 million, or
$0.68 per share, compared to $224 million, or $0.74 per share in the
first quarter of 2018. Adjusted EBITDA from continuing operations also
decreased to $284 million in the first quarter of 2019 compared to $310
million in the first quarter of 2018. Higher graphite electrode sales
volumes were offset by higher cost of sales due to higher prices for
third party needle coke.
Cash flow from operating activities increased to $157 million in the
first quarter of 2019 from $141 million in the comparable period of
2018. First quarter 2018 cash flow from operating activities was
impacted primarily by a significant one-time change in accounts
receivable due to higher pricing for graphite electrodes. First quarter
cash flow typically includes the majority of our annual cash tax
payments. Cash tax payments totaled approximately $61 million in the
first quarter of 2019, but were negligible in the prior year period.
Key operating metrics(1) |
||||||||
For the Three Months | ||||||||
Ended March 31, | ||||||||
(in thousands, except price data) | 2019 | 2018 | ||||||
Sales volume (MT) (2) | 45 | 42 | ||||||
Weighted average realized price (3) | $ | 9,954 | $ | 9,989 | ||||
Production volume (MT) (4) | 48 | 43 | ||||||
Production capacity excluding St. Marys during idle period (MT) (5)(6) | 51 | 44 | ||||||
Capacity utilization excluding St. Marys during idle period (5)(7) | 94 | % | 98 | % | ||||
Total production capacity (MT) (6)(8) | 58 | 51 | ||||||
Total capacity utilization (7)(8) | 83 | % | 84 | % |
(1) |
Effective the first quarter of 2019, we have recast the key metrics of sales volume and weighted average price above to include only graphite electrodes manufactured by GrafTech. This better reflects management’s assessment of our profitability and excludes resales of low grade graphite electrodes manufactured by third party suppliers. For comparability purposes, the prior period has been recast to conform to this presentation. |
|
(2) |
Sales volume has been recast to reflect the total sales volume of GrafTech manufactured electrodes for which revenue has been recognized during the period. |
|
(3) |
Weighted average realized price has been recast to reflect the total revenues from sales of GrafTech manufactured electrodes for the period divided by the GrafTech manufactured sales volume for that period. |
|
(4) |
Production volume reflects graphite electrodes produced during the period. |
|
(5) |
The St. Marys, Pennsylvania facility was temporarily idled effective the second quarter of 2016 except for the machining of semi-finished products sourced from other plants. In the first quarter of 2018, our St. Marys facility began graphitizing a limited amount of electrodes sourced from our Monterrey, Mexico facility. |
|
(6) |
Production capacity reflects expected maximum production volume during the period under normal operating conditions, standard product mix and expected maintenance outage. Actual production may vary. |
|
(7) |
Capacity utilization reflects production volume as a percentage of production capacity. |
|
(8) |
Includes graphite electrode facilities in Calais, France; Monterrey, Mexico; Pamplona, Spain and St. Marys, Pennsylvania. |
|
Operational Update
Production of 48 thousand MT in the first quarter of 2019 increased from
43 thousand MT in the first quarter of 2018 due to the completion of
debottlenecking projects.
Commercial Strategy
As previously announced, GrafTech has successfully sold approximately
two-thirds of its cumulative long-term production capacity through
three- to five-year, fixed-volume, fixed-price, take or pay contracts.
These contracts provide reliability of long-term graphite electrode
supply for customers and stability of future operating results for
shareholders.
Capital Structure
As of March 31, 2019, GrafTech had cash and equivalents of $42 million
and total debt of $2.0 billion. During the first quarter of 2019, the
Company returned cash to shareholders in the form of a quarterly
dividend of $0.085 per share and repaid $125 million of debt.
Distribution
As previously announced, the Board of Directors has declared a dividend
of $0.085 per share to stockholders of record as of the close of
business on May 31, 2019, to be paid on June 28, 2019.
Conference Call
In conjunction with this earnings release, you are invited to listen to
our earnings call being held on May 1, 2019 at 10:00 a.m. Eastern
Daylight Time. The webcast and accompanying slide presentation will be
available at www.GrafTech.com,
in the Investors section. The earnings call dial-in number is +1 (866)
521-4909 toll-free in the U.S. and Canada or +1 (647) 427-2311 for
overseas calls, conference ID: 4597627. A replay of the Conference Call
will be available until August 1, 2019 by dialing +1 (800) 585-8367
toll-free in the U.S. and Canada or +1 (416) 621-4642 for overseas
calls, conference ID: 4597627. A replay of the webcast will also be
available on our website until August 1, 2019, at www.GrafTech.com,
in the Investors section. GrafTech also makes its complete financial
reports that have been filed with the Securities and Exchange Commission
(SEC) and other information available at www.GrafTech.com.
The information in our website is not part of this release or any report
we file or furnish to the SEC.
About GrafTech
GrafTech International Ltd. is a leading manufacturer of high quality
graphite electrode products essential to the production of electric arc
furnace steel and other ferrous and non-ferrous metals. The Company has
a competitive portfolio of low-cost graphite electrode manufacturing
facilities, including three of the highest capacity facilities in the
world. GrafTech is also the only large scale graphite electrode producer
that is substantially vertically integrated into petroleum needle coke,
the primary raw material for graphite electrode manufacturing, which is
currently in limited supply. This unique position provides competitive
advantages in product quality and cost.
Special note regarding forward–looking statements
This news release and related discussions may contain forward–looking
statements that reflect our current views with respect to, among other
things, future events and financial performance. You can identify these
forward–looking statements by the use of forward–looking
words such as “will,” “may,” “plan,” “estimate,” “project,” “believe,”
“anticipate,” “expect,” “intend,” “should,” “would,” “could,” “target,”
“goal,” “continue to,” “positioned to,” “are confident”, “remain solid”,
“remain positive”, “remain optimistic” or the negative version of those
words or other comparable words. Any forward–looking statements
contained in this news release are based upon our historical performance
and on our current plans, estimates and expectations in light of
information currently available to us. The inclusion of this forward–looking
information should not be regarded as a representation by us that the
future plans, estimates or expectations contemplated by us will be
achieved. Our expectations and targets are not predictions of
actual performance and historically our performance has deviated, often
significantly, from our expectations and targets. These forward–looking
statements are subject to various risks and uncertainties and
assumptions relating to our operations, financial results, financial
condition, business, prospects, growth strategy and liquidity.
Accordingly, there are or will be important factors that could cause our
actual results to differ materially from those indicated in these
statements. We believe that these factors include, but are not limited
to: the cyclical nature of our business and the selling prices of our
products may lead to periods of reduced profitability and net losses in
the future; the possibility that we may be unable to implement our
business strategies, including our initiative to secure and maintain
longer-term customer contracts, in an effective manner; the possibility
that tax legislation could adversely affect us or our stockholders;
pricing for graphite electrodes has historically been cyclical and
current prices are relatively high, however, the price of graphite
electrodes may decline in the future; the sensitivity of our business
and operating results to economic conditions; our dependence on the
global steel industry generally and the electric arc furnace (“EAF”)
steel industry in particular; the possibility that global graphite
electrode overcapacity may adversely affect graphite electrode prices;
the competitiveness of the graphite electrode industry; our dependence
on the supply of petroleum needle coke; our dependence on supplies of
raw materials (in addition to petroleum needle coke) and energy; the
possibility that our manufacturing operations are subject to hazards;
changes in, or more stringent enforcement of, health, safety and
environmental regulations applicable to our manufacturing operations and
facilities; the legal, economic, social and political risks associated
with our substantial operations in multiple countries; the possibility
that fluctuation of foreign currency exchange rates could materially
harm our financial results; the possibility that our results of
operations could deteriorate if our manufacturing operations were
substantially disrupted for an extended period, including as a result of
equipment failure, climate change, regulatory issues, natural disasters,
public health crises, political crises or other catastrophic events; our
dependence on third parties for certain construction, maintenance,
engineering, transportation, warehousing and logistics services; the
possibility that we are unable to recruit or retain key management and
plant operating personnel or successfully negotiate with the
representatives of our employees, including labor unions; the
possibility that we may divest or acquire businesses, which could
require significant management attention or disrupt our business; the
sensitivity of goodwill on our balance sheet to changes in the market;
the possibility that we are subject to information technology systems
failures, cybersecurity attacks, network disruptions and breaches of
data security; our dependence on protecting our intellectual property;
the possibility that third parties may claim that our products or
processes infringe their intellectual property rights; the possibility
that significant changes in our jurisdictional earnings mix or in the
tax laws of those jurisdictions could adversely affect our business; the
possibility that our indebtedness could limit our financial and
operating activities or that our cash flows may not be sufficient to
service our indebtedness; the possibility that restrictive covenants in
our financing agreements could restrict or limit our operations; the
fact that borrowings under certain of our existing financing agreements
subjects us to interest rate risk; the possibility of a lowering or
withdrawal of the ratings assigned to our debt; the possibility that
disruptions in the capital and credit markets could adversely affect our
results of operations, cash flows and financial condition, or those of
our customers and suppliers; the possibility that highly concentrated
ownership of our common stock may prevent minority stockholders from
influencing significant corporate decisions; the possibility that we may
not pay cash dividends on our common stock in the future; the fact that
certain of our stockholders have the right to engage or invest in the
same or similar businesses as us; the fact that certain provisions of
our Amended and Restated Certificate of Incorporation and our Amended
and Restated By-Laws could hinder, delay or prevent a change of control;
the fact that the Court of Chancery of the State of Delaware will be the
exclusive forum for substantially all disputes between us and our
stockholders; and our status as a “controlled company” within the
meaning of the New York Stock Exchange (“NYSE”) corporate governance
standards, which allows us to qualify for exemptions from certain
corporate governance requirements.
These factors should not be construed as exhaustive and should be
read in conjunction with the other cautionary statements, including the
Risk Factors section included in our Annual Report on Form 10-K and
other filings with the SEC. The forward–looking statements made
in this press release relate only to events as of the date on which the
statements are made. We do not undertake any obligation to publicly
update or review any forward–looking statement, except as
required by law, whether as a result of new information, future
developments or otherwise.
Non–GAAP financial measures
In addition to providing results that are determined in accordance with
GAAP, we have provided certain financial measures that are not in
accordance with GAAP. EBITDA from continuing operations and Adjusted
EBITDA from continuing operations are non-GAAP financial measures. We
define EBITDA from continuing operations, a non-GAAP financial measure,
as net income or loss plus interest expense, minus interest income, plus
income taxes, discontinued operations and depreciation and amortization
from continuing operations. We define adjusted EBITDA from continuing
operations as EBITDA from continuing operations plus any pension and
other post-employment benefit (“OPEB”) plan expenses,
rationalization-related charges, initial and follow-on public offering
expenses, non-cash gains or losses from foreign currency remeasurement
of non-operating liabilities in our foreign subsidiaries where the
functional currency is the U.S. dollar, related party Tax Receivable
Agreement expense, stock-based compensation and non-cash fixed asset
write-offs. Adjusted EBITDA from continuing operations is the primary
metric used by our management and our board of directors to establish
budgets and operational goals for managing our business and evaluating
our performance.
We monitor adjusted EBITDA from continuing operations as a supplement to
our GAAP measures, and believe it is useful to present to investors,
because we believe that it facilitates evaluation of our
period-to-period operating performance by eliminating items that are not
operational in nature, allowing comparison of our recurring core
business operating results over multiple periods unaffected by
differences in capital structure, capital investment cycles and fixed
asset base. In addition, we believe adjusted EBITDA from continuing
operations and similar measures are widely used by investors, securities
analysts, ratings agencies, and other parties in evaluating companies in
our industry as a measure of financial performance and debt-service
capabilities. We also monitor, and present to investors, the ratio of
total debt to adjusted EBITDA from continuing operations, because we
believe it is a useful and widely used way to assess our leverage.
Our use of adjusted EBITDA from continuing operations has limitations as
an analytical tool, and you should not consider it in isolation or as a
substitute for analysis of our results as reported under GAAP. Some of
these limitations are:
-
adjusted EBITDA from continuing operations does not reflect changes
in, or cash requirements for, our working capital needs; -
adjusted EBITDA from continuing operations does not reflect our cash
expenditures for capital equipment or other contractual commitments,
including any capital expenditure requirements to augment or replace
our capital assets; -
adjusted EBITDA from continuing operations does not reflect the
interest expense or the cash requirements necessary to service
interest or principal payments on our indebtedness; -
adjusted EBITDA from continuing operations does not reflect tax
payments that may represent a reduction in cash available to us; -
adjusted EBITDA from continuing operations does not reflect expenses
relating to our pension and OPEB plans; -
adjusted EBITDA from continuing operations does not reflect the
non-cash gains or losses from foreign currency remeasurement of
non-operating liabilities in our foreign subsidiaries where the
functional currency is the U.S. dollar; -
adjusted EBITDA from continuing operations does not reflect initial
and follow-on public offering expenses; -
adjusted EBITDA from continuing operations does not reflect related
party Tax Receivable Agreement expense; -
adjusted EBITDA from continuing operations does not reflect
rationalization-related charges, stock-based compensation or the
non-cash write-off of fixed assets; and -
other companies, including companies in our industry, may calculate
EBITDA from continuing operations and adjusted EBITDA from continuing
operations differently, which reduces its usefulness as a comparative
measure.
In evaluating EBITDA from continuing operations and adjusted EBITDA from
continuing operations, you should be aware that in the future, we will
incur expenses similar to the adjustments in the reconciliation
presented below. Our presentations of EBITDA from continuing operations
and adjusted EBITDA from continuing operations should not be construed
as suggesting that our future results will be unaffected by these
expenses or any unusual or non-recurring items. When evaluating our
performance, you should consider EBITDA from continuing operations and
adjusted EBITDA from continuing operations alongside other financial
performance measures, including our net income (loss) and other GAAP
measures.
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Dollars in thousands) |
||||||||
Unaudited |
||||||||
As of | As of | |||||||
March 31, | December 31, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 42,289 | $ | 49,880 | ||||
Accounts and notes receivable, net of allowance for doubtful |
278,410 | 248,286 | ||||||
Inventories | 299,794 | 293,717 | ||||||
Prepaid expenses and other current assets | 50,594 | 46,168 | ||||||
Total current assets | 671,087 | 638,051 | ||||||
Property, plant and equipment | 692,186 | 688,842 | ||||||
Less: accumulated depreciation | 185,121 | 175,137 | ||||||
Net property, plant and equipment | 507,065 | 513,705 | ||||||
Deferred income taxes | 58,760 | 71,707 | ||||||
Goodwill | 171,117 | 171,117 | ||||||
Other assets | 121,670 | 110,911 | ||||||
Total assets | $ | 1,529,699 | $ | 1,505,491 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 85,219 | $ | 88,097 | ||||
Short-term debt | 15,492 | 106,323 | ||||||
Accrued income and other taxes | 47,700 | 82,255 | ||||||
Other accrued liabilities | 42,827 | 50,452 | ||||||
Related party payable – tax receivable agreement | 23,852 | — | ||||||
Total current liabilities | 215,090 | 327,127 | ||||||
Long-term debt | 2,017,716 | 2,050,311 | ||||||
Other long-term obligations | 69,471 | 72,519 | ||||||
Deferred income taxes | 46,415 | 45,825 | ||||||
Related party payable – tax receivable agreement | 62,625 | 86,478 | ||||||
Long-term liabilities of discontinued operations | — | — | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, par value $0.01, 300,000,000 shares authorized, none issued |
— | — | ||||||
Common stock, par value $0.01, 3,000,000,000 shares authorized, |
2,905 | 2,905 | ||||||
Additional paid-in capital | 819,915 | 819,622 | ||||||
Accumulated other comprehensive income (loss) | 16,318 | (5,800 | ) | |||||
Accumulated deficit | (1,720,756 | ) | (1,893,496 | ) | ||||
Total stockholders’ (deficit) equity | (881,618 | ) | (1,076,769 | ) | ||||
Total liabilities and stockholders’ equity | $ | 1,529,699 | $ | 1,505,491 | ||||
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(Dollars in thousands) |
||||||||
Unaudited |
||||||||
For the Three Months | ||||||||
Ended March 31, | ||||||||
2019 | 2018 | |||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||
Net sales | $ | 474,994 | $ | 451,899 | ||||
Cost of sales | 195,524 | 145,149 | ||||||
Gross profit | 279,470 | 306,750 | ||||||
Research and development | 637 | 429 | ||||||
Selling and administrative expenses | 15,226 | 15,876 | ||||||
Operating profit | 263,607 | 290,445 | ||||||
Other expense (income), net | 467 | 2,005 | ||||||
Interest expense | 33,700 | 37,865 | ||||||
Interest income | (414 | ) | (115 | ) | ||||
Income from continuing operations before provision for income taxes |
229,854 | 250,690 | ||||||
Provision (benefit) for income taxes | 32,418 | 28,643 | ||||||
Net income from continuing operations | 197,436 | 222,047 | ||||||
Income from discontinued operations, net of tax | — | 1,626 | ||||||
Net income | $ | 197,436 | $ | 223,673 | ||||
Basic income per common share*: | ||||||||
Net income per share | $ | 0.68 | $ | 0.74 | ||||
Net income from continuing operations per share | $ | 0.68 | $ | 0.73 | ||||
Weighted average common shares outstanding | 290,559,025 | 302,225,923 | ||||||
Diluted income per common share*: | ||||||||
Income per share | $ | 0.68 | $ | 0.74 | ||||
Diluted income from continuing operations per share | $ | 0.68 | $ | 0.73 | ||||
Weighted average common shares outstanding | 290,566,163 | 302,225,923 |
* March 31, 2018 shares outstanding gives effect to the stock split that became effective on April 12, 2018 |
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Dollars in thousands) |
||||||||
Unaudited |
||||||||
For the Three Months | ||||||||
Ended March 31, | ||||||||
2019 | 2018 | |||||||
Cash flow from operating activities: | ||||||||
Net income | $ | 197,436 | $ | 223,673 | ||||
Adjustments to reconcile net income to cash provided by operations: |
||||||||
Depreciation and amortization | 15,585 | 16,328 | ||||||
Deferred income tax provision | 6,427 | 19,791 | ||||||
Loss on extinguishment of debt | — | 23,827 | ||||||
Interest expense | 1,588 | 1,129 | ||||||
Other charges, net | 3,268 | 2,574 | ||||||
Net change in working capital* | (71,443 | ) | (150,527 | ) | ||||
Change in long-term assets and liabilities | 3,956 | 3,758 | ||||||
Net cash provided by operating activities | 156,817 | 140,553 | ||||||
Cash flow from investing activities: | ||||||||
Capital expenditures | (14,569 | ) | (14,025 | ) | ||||
Proceeds from the sale of assets | 74 | 736 | ||||||
Net cash (used in) provided by investing activities | (14,495 | ) | (13,289 | ) | ||||
Cash flow from financing activities: | ||||||||
Short-term debt, net | — | (12,536 | ) | |||||
Revolving Facility reductions | — | (45,692 | ) | |||||
Debt issuance costs | — | (20,090 | ) | |||||
Proceeds from the issuance of long-term debt, net of original |
— | 1,492,500 | ||||||
Repayment of Senior Notes | — | (304,782 | ) | |||||
Principal repayments on long-term debt | (125,000 | ) | — | |||||
Dividends paid to non-related-party | (5,194 | ) | — | |||||
Dividends paid to related-party | (19,502 | ) | (1,112,000 | ) | ||||
Net cash (used in) provided by financing activities | (149,696 | ) | (2,600 | ) | ||||
Net change in cash and cash equivalents | (7,374 | ) | 124,664 | |||||
Effect of exchange rate changes on cash and cash equivalents | (217 | ) | 344 | |||||
Cash and cash equivalents at beginning of period | 49,880 | 13,365 | ||||||
Cash and cash equivalents at end of period | $ | 42,289 | $ | 138,373 | ||||
* Net change in working capital due to changes in the following |
||||||||
Accounts and notes receivable, net | $ | (31,389 | ) | $ | (132,794 | ) | ||
Inventories | (4,705 | ) | (28,679 | ) | ||||
Prepaid expenses and other current assets | 7,425 | 10,754 | ||||||
Income taxes payable | (38,333 | ) | 6,533 | |||||
Accounts payable and accruals | (5,305 | ) | (8,227 | ) | ||||
Interest payable | 864 | 1,886 | ||||||
Net change in working capital | $ | (71,443 | ) | $ | (150,527 | ) | ||
Contacts
Meredith Bandy
Vice President, Investor Relations
216-676-2699
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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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