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Allstate’s Strategy Drives Growth and Attractive Returns
NORTHBROOK, Ill.–(BUSINESS WIRE)–The Allstate Corporation (NYSE: ALL) today reported financial results
for the first quarter of 2019.
The Allstate Corporation Consolidated Highlights | |||||||||||
Three months ended March 31, | |||||||||||
($ in millions, except per share data and ratios) | % / pts | ||||||||||
2019 | 2018 | Change | |||||||||
Consolidated revenues | $ | 10,990 | $ | 9,770 | 12.5 | ||||||
Net income applicable to common shareholders | 1,261 | 977 | 29.1 | ||||||||
per diluted common share | 3.74 | 2.71 | 38.0 | ||||||||
Adjusted net income* | 776 | 1,108 | (30.0 | ) | |||||||
per diluted common share* | 2.30 | 3.08 | (25.3 | ) | |||||||
Return on common shareholders’ equity (trailing twelve months) | |||||||||||
Net income applicable to common shareholders | 10.8 | % | 17.9 | % | (7.1 | ) | |||||
Adjusted net income* | 13.5 | % | 16.2 | % | (2.7 | ) | |||||
Book value per common share | 63.59 | 58.62 | 8.5 | ||||||||
Property-Liability combined ratio | |||||||||||
Recorded | 91.8 | 87.5 | 4.3 | ||||||||
Underlying combined ratio* (excludes catastrophes, prior year reserve reestimates and amortization of purchased intangibles) |
84.2 | 83.6 | 0.6 | ||||||||
Property and casualty insurance premiums written | 8,695 | 8,131 | 6.9 | ||||||||
Catastrophe losses | 680 | 361 | 88.4 | ||||||||
Total policies in force (in thousands) | 123,516 | 85,581 | 44.3 |
* Measures used in this release that are not based on accounting
principles generally accepted in the United States of America
(“non-GAAP”) are denoted with an asterisk and defined and reconciled to
the most directly comparable GAAP measure in the “Definitions of
Non-GAAP Measures” section of this document.
“Allstate’s strategy to profitably grow market share in protection
products continues to gain momentum,” said Tom Wilson, Chair, President
and Chief Executive Officer of The Allstate Corporation. “Using an
innovative approach to better serve customers enabled us to grow while
maintaining attractive returns. The Allstate and Esurance brands grew
personal insurance policies in force 2.3% and 10.9% over the prior year
quarter. SquareTrade protection contracts increased 86.3% over the prior
year quarter to 77.9 million, reflecting the expansion of retail
distribution. Revenues increased to $11 billion for the quarter, and net
income rose to $1.26 billion, reflecting growth, progress on all five
Operating Priorities and gains on equity investments.
“Adjusted net income* was $776 million, $2.30 per share, as the
Property-Liability underlying combined ratio was better than expected,
reflecting a decrease in the frequency of auto claims. Higher
catastrophe losses and lower income from performance-based investments
reduced income from the prior year quarter. Income from the Service
Businesses, Life and Benefits all increased. Our proactive investment
approach resulted in a total return of 4.7% over the latest 12 months,
although reported investment income was down in the quarter due to lower
limited partnership valuations. We remain highly focused on adjusted net
income return on common shareholders’ equity*, which was 13.5% for the
latest 12 months. Allstate’s broader success is discussed in the
recently released Prosperity
Report,” concluded Wilson.
First Quarter 2019 Results
-
Total revenue of $10.99 billion in the first quarter of 2019 increased
12.5% compared to the prior year quarter.
- Property-Liability insurance premiums earned increased 6.1%.
- Service Businesses revenue increased 25.2%.
- Life premiums and contract charges increased 1.9%.
- Net investment income decreased 17.6%.
- Realized capital gains increased revenues by $662 million.
-
Net income applicable to common shareholders was $1.26 billion, or
$3.74 per diluted share, in the first quarter of 2019, compared to net
income of $977 million, or $2.71 per diluted share, in the first
quarter of 2018. Adjusted net income* of $776 million for the first
quarter was below the prior year quarter due to higher catastrophe
losses and lower net investment income.
-
The company changed its accounting for pension and other
postretirement plans to a fair value basis. Under the new principle,
remeasurement of plan assets and projected liabilities are immediately
recognized through earnings. This change has been applied to all prior
periods. Note 1 of our March 31, 2019, Form 10-Q provides more detail.
Property-Liability Results | |||||||||
Three months ended March 31, | |||||||||
(% to earned premiums) | pts | ||||||||
2019 | 2018 | Change | |||||||
Recorded Combined Ratio | 91.8 | 87.5 | 4.3 | ||||||
Allstate Brand Auto | 90.4 | 87.9 | 2.5 | ||||||
Allstate Brand Homeowners | 92.2 | 80.5 | 11.7 | ||||||
Esurance Brand | 99.4 | 99.3 | 0.1 | ||||||
Encompass Brand | 100.8 | 97.7 | 3.1 | ||||||
Underlying Combined Ratio* | 84.2 | 83.6 | 0.6 | ||||||
Allstate Brand Auto | 90.2 | 89.4 | 0.8 | ||||||
Allstate Brand Homeowners | 63.7 | 63.1 | 0.6 | ||||||
Esurance Brand | 97.4 | 98.4 | (1.0 | ) | |||||
Encompass Brand | 88.5 | 87.2 | 1.3 |
-
Property-Liability underwriting income of $700 million in the
first quarter of 2019 was $305 million below the prior year quarter,
primarily due to higher catastrophe losses. The underlying combined
ratio* was 84.2 for the first quarter of 2019.
-
Allstate brand auto insurance net written premium grew 4.7% in
the first quarter of 2019 compared to the prior year quarter,
reflecting a 2.7% increase in policies in force and higher average
premium. The recorded combined ratio of 90.4 in the first quarter of
2019 was 2.5 points higher than the prior year quarter. The underlying
combined ratio* of 90.2 in the quarter was 0.8 points higher than the
first quarter of 2018 due to higher physical damage claim severity,
partially offset by higher premiums earned and lower accident
frequency. -
Allstate brand homeowners insurance net written premium grew
6.8% in the first quarter of 2019 compared to the prior year quarter
and generated attractive returns. The recorded combined ratio of 92.2
in the first quarter was 11.7 points higher than the first quarter of
2018, primarily driven by elevated catastrophe losses. The underlying
combined ratio* of 63.7 was 0.6 points higher than the prior year
quarter. -
Esurance brand policies in force increased 10.9% in the first
quarter of 2019 compared to the prior year quarter, resulting in net
written premium growth of 13.4%. The recorded combined ratio of 99.4
in the first quarter of 2019 was in line with the prior year quarter,
and the underlying combined ratio* of 97.4 was 1.0 point lower than
the first quarter of 2018, driven by higher earned premium. -
Encompass brand net written premium in the first quarter of
2019 was in line with the prior year quarter. The recorded combined
ratio of 100.8 in the first quarter of 2019 was 3.1 points higher than
the prior year quarter, as increased losses were partially offset by
lower operating expenses. The underlying combined ratio* of 88.5 in
the first quarter was 1.3 points higher than the first quarter of 2018.
Service Businesses Results | ||||||||||||
Three months ended March 31, | ||||||||||||
($ in millions) | % / $ | |||||||||||
2019 | 2018 | Change | ||||||||||
Total Revenues | $ | 392 | $ | 313 | 25.2 | % | ||||||
SquareTrade | 164 | 122 | 34.4 | |||||||||
Allstate Roadside Services | 73 | 74 | (1.4 | ) | ||||||||
Allstate Dealer Services | 107 | 96 | 11.5 | |||||||||
Arity | 24 | 21 | 14.3 | |||||||||
InfoArmor | 24 | — | NA | |||||||||
Adjusted Net Income (Loss) | $ | 11 | $ | (3 | ) | $ | 14 | |||||
SquareTrade | 14 | 2 | 12 | |||||||||
Allstate Roadside Services | (6 | ) | (5 | ) | (1 | ) | ||||||
Allstate Dealer Services | 6 | 3 | 3 | |||||||||
Arity | (2 | ) | (3 | ) | 1 | |||||||
InfoArmor | (1 | ) | — | NA |
NA = not applicable
-
Service Businesses policies in force grew to 83.6 million, and
revenues increased 25.2% compared to the first quarter of 2018.
Adjusted net income was $11 million, an increase of $14 million
compared to the prior year quarter.
-
SquareTrade revenue was $164 million in the first quarter of
2019, reflecting policy growth of 36.1 million compared to the first
quarter of 2018. Adjusted net income was $14 million in the first
quarter of 2019, due to higher premiums and improved loss experience. -
Allstate Roadside Services revenue was $73 million in the first
quarter of 2019. The adjusted net loss of $6 million in the first
quarter was comparable to the prior year quarter, primarily due to
adverse loss experience. -
Allstate Dealer Services revenue grew 11.5% compared to the
first quarter of 2018, and adjusted net income was $6 million,
reflecting higher premiums and improved loss experience. -
Arity revenue was $24 million in the first quarter of 2019,
primarily from contracts with affiliates. The adjusted net loss of $2
million in the quarter includes investments in research and
development. -
InfoArmor, acquired in October 2018, had revenues of $24
million and an adjusted net loss of $1 million in the first quarter of
2019 due to costs associated with scaling its platform and integration
into Allstate.
Allstate Life, Benefits and Annuities Results | |||||||||||
Three months ended March 31, | |||||||||||
($ in millions) | 2019 | 2018 | % Change | ||||||||
Premiums and Contract Charges | |||||||||||
Allstate Life | $ | 337 | $ | 327 | 3.1 | % | |||||
Allstate Benefits | 288 | 286 | 0.7 | ||||||||
Allstate Annuities | 3 | 3 | — | ||||||||
Adjusted Net Income (Loss) | |||||||||||
Allstate Life | $ | 73 | $ | 71 | 2.8 | % | |||||
Allstate Benefits | 31 | 29 | 6.9 | ||||||||
Allstate Annuities | (25 | ) | 35 | NM |
NM = not meaningful
-
Allstate Life adjusted net income was $73 million in the first
quarter of 2019, $2 million higher than the prior year quarter, as
increased premiums, contract charges and net investment income were
partially offset by higher contract benefits and expenses. -
Allstate Benefits adjusted net income was $31 million in the
first quarter of 2019, $2 million higher than the prior year quarter,
primarily due to lower contract benefits. -
Allstate Annuities had an adjusted net loss of $25 million in
the first quarter of 2019, due to lower performance-based investment
income. The utilization of performance-based equity investments
improves longer-term economic returns but increases income volatility.
Allstate Investment Results | |||||||||||
Three months ended March 31, | |||||||||||
($ in millions, except ratios) | % / pts | ||||||||||
2019 | 2018 | Change | |||||||||
Net investment income | $ | 648 | $ | 786 | (17.6 | ) | |||||
Market-based investment income(1) | 693 | 652 | 6.3 | ||||||||
Performance-based investment income(1) | 6 | 181 | (96.7 | ) | |||||||
Realized capital gains and losses | 662 | (134 | ) | NM | |||||||
Change in unrealized net capital gains, pre-tax | 1,335 | (1,002 | ) | NM | |||||||
Total return on investment portfolio | 3.3 | % | (0.5 | )% | 3.8 | ||||||
Total return on investment portfolio (trailing twelve months) | 4.7 | % | 3.8 | % | 0.9 |
(1) Investment expenses are not allocated between
market-based and performance-based portfolios with the exception of
investee level expenses.
NM = not meaningful
-
Allstate Investments $84 billion portfolio generated a strong
total return of 3.3% in the first quarter of 2019, and net investment
income was $648 million, a decline of $138 million from the prior year
quarter due to lower performance-based income.
-
Total return on the investment portfolio of 4.7% for the latest
12 months included a stable contribution from market-based investment
income and increased fixed income valuations. -
Market-based investments contributed $693 million of income in
the first quarter of 2019, an increase of 6.3% compared to the prior
year quarter. The market-based portfolio benefited from investment at
higher market yields, which included a modest duration extension of
the fixed income portfolio. -
Performance-based investments generated income of $6 million
and capital gains of $57 million in the first quarter of 2019, a
decrease in income of $175 million and an increase in capital gains of
$65 million compared to the prior year quarter. Performance-based
income in the first quarter of 2019 reflects lower asset appreciation
related to private equity investments. The trailing 12-month
performance-based return is 8.4%. -
Net realized capital gains were $662 million in the first
quarter of 2019, compared to losses of $134 million in the prior year
quarter. Net realized gains for the quarter were primarily related to
higher valuation of equity investments and gains related to the sale
of performance-based investments. -
Unrealized net capital gains increased $1.3 billion from the
fourth quarter of 2018, as lower market yields resulted in higher
fixed income valuations.
Proactive Capital Management
“In addition to producing excellent operating results, Allstate
continues to proactively manage shareholders’ capital,” said Mario
Rizzo, Chief Financial Officer. “We returned $158 million to common
shareholders during the first quarter through common stock dividends.
Common shares are being purchased through a $1 billion accelerated share
repurchase (ASR) program, which began in December 2018. Upon completion
of the ASR in the second quarter, about $1.9 billion will remain on the
$3 billion common share repurchase program. Book value per diluted
common share of $63.59 was 8.5% higher than March 31, 2018, reflecting
strong income generation and appreciation of the investment portfolio.”
Visit www.allstateinvestors.com
to view additional information about Allstate’s results, including a
webcast of its quarterly conference call and the call presentation. The
conference call will be held at 9:00 a.m. ET on Thursday, May 2.
Forward-Looking Statements
This news release contains “forward-looking statements” that anticipate
results based on our estimates, assumptions and plans that are subject
to uncertainty. These statements are made subject to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements do not relate strictly to historical or
current facts and may be identified by their use of words like “plans,”
“seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,”
“intends,” “believes,” “likely,” “targets” and other words with similar
meanings. We believe these statements are based on reasonable estimates,
assumptions and plans. However, if the estimates, assumptions or plans
underlying the forward-looking statements prove inaccurate or if other
risks or uncertainties arise, actual results could differ materially
from those communicated in these forward-looking statements. Factors
that could cause actual results to differ materially from those
expressed in, or implied by, the forward-looking statements may be found
in our filings with the U.S. Securities and Exchange Commission,
including the “Risk Factors” section in our most recent annual report on
Form 10-K. Forward-looking statements are as of the date on which they
are made, and we assume no obligation to update or revise any
forward-looking statement.
THE ALLSTATE CORPORATION AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) |
||||||||
($ in millions, except par value data) | March 31, 2019 | December 31, 2018 | ||||||
Assets | ||||||||
Investments: | ||||||||
Fixed income securities, at fair value (amortized cost $56,831 and $57,134) |
$ | 58,202 | $ | 57,170 | ||||
Equity securities, at fair value (cost $4,767 and $4,489) | 5,802 | 5,036 | ||||||
Mortgage loans | 4,681 | 4,670 | ||||||
Limited partnership interests | 7,493 | 7,505 | ||||||
Short-term, at fair value (amortized cost $4,157 and $3,027) | 4,157 | 3,027 | ||||||
Other | 3,786 | 3,852 | ||||||
Total investments | 84,121 | 81,260 | ||||||
Cash | 551 | 499 | ||||||
Premium installment receivables, net | 6,201 | 6,154 | ||||||
Deferred policy acquisition costs | 4,670 | 4,784 | ||||||
Reinsurance and indemnification recoverables, net | 9,374 | 9,565 | ||||||
Accrued investment income | 614 | 600 | ||||||
Property and equipment, net | 1,047 | 1,045 | ||||||
Goodwill | 2,547 | 2,530 | ||||||
Other assets | 3,659 | 3,007 | ||||||
Separate Accounts | 3,050 | 2,805 | ||||||
Total assets | $ | 115,834 | $ | 112,249 | ||||
Liabilities | ||||||||
Reserve for property and casualty insurance claims and claims expense | $ | 27,544 | $ | 27,423 | ||||
Reserve for life-contingent contract benefits | 12,200 | 12,208 | ||||||
Contractholder funds | 18,161 | 18,371 | ||||||
Unearned premiums | 14,323 | 14,510 | ||||||
Claim payments outstanding | 891 | 1,007 | ||||||
Deferred income taxes | 817 | 425 | ||||||
Other liabilities and accrued expenses | 8,977 | 7,737 | ||||||
Long-term debt | 6,453 | 6,451 | ||||||
Separate Accounts | 3,050 | 2,805 | ||||||
Total liabilities | 92,416 | 90,937 | ||||||
Shareholders’ equity | ||||||||
Preferred stock and additional capital paid-in, $1 par value, 79.8 thousand shares issued and outstanding, $1,995 aggregate liquidation preference |
1,930 | 1,930 | ||||||
Common stock, $.01 par value, 900 million issued, 333 million and 332 million shares outstanding |
9 | 9 | ||||||
Additional capital paid-in | 3,291 | 3,310 | ||||||
Retained income | 45,148 | 44,033 | ||||||
Deferred Employee Stock Ownership Plan expense | (3 | ) | (3 | ) | ||||
Treasury stock, at cost (567 million and 568 million shares) | (28,042 | ) | (28,085 | ) | ||||
Accumulated other comprehensive income: | ||||||||
Unrealized net capital gains and losses: | ||||||||
Unrealized net capital gains and losses on fixed income securities with OTTI |
73 | 75 | ||||||
Other unrealized net capital gains and losses | 1,003 | (51 | ) | |||||
Unrealized adjustment to DAC, DSI and insurance reserves | (104 | ) | (26 | ) | ||||
Unrealized net capital gains and losses | 972 | (2 | ) | |||||
Unrealized foreign currency translation adjustments | (44 | ) | (49 | ) | ||||
Unamortized pension and other postretirement prior service credit | 157 | 169 | ||||||
Total accumulated other comprehensive income | 1,085 | 118 | ||||||
Total shareholders’ equity | 23,418 | 21,312 | ||||||
Total liabilities and shareholders’ equity | $ | 115,834 | $ | 112,249 |
THE ALLSTATE CORPORATION AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||||||
($ in millions, except per share data) | Three months ended March 31, | |||||||
2019 | 2018 | |||||||
Revenues | ||||||||
Property and casualty insurance premiums | $ | 8,802 | $ | 8,286 | ||||
Life premiums and contract charges | 628 | 616 | ||||||
Other revenue | 250 | 216 | ||||||
Net investment income | 648 | 786 | ||||||
Realized capital gains and losses: | ||||||||
Total other-than-temporary impairment (“OTTI”) losses | (16 | ) | — | |||||
OTTI losses reclassified to (from) other comprehensive income | 2 | (1 | ) | |||||
Net OTTI losses recognized in earnings | (14 | ) | (1 | ) | ||||
Sales and valuation changes on equity investments and derivatives | 676 | (133 | ) | |||||
Total realized capital gains and losses | 662 | (134 | ) | |||||
Total revenues | 10,990 | 9,770 | ||||||
Costs and expenses | ||||||||
Property and casualty insurance claims and claims expense | 5,820 | 5,129 | ||||||
Life contract benefits | 497 | 504 | ||||||
Interest credited to contractholder funds | 162 | 161 | ||||||
Amortization of deferred policy acquisition costs | 1,364 | 1,273 | ||||||
Operating costs and expenses | 1,380 | 1,303 | ||||||
Pension and other postretirement remeasurement gains and losses | 15 | 14 | ||||||
Amortization of purchased intangible assets | 32 | 22 | ||||||
Restructuring and related charges | 18 | 19 | ||||||
Interest expense | 83 | 83 | ||||||
Total costs and expenses | 9,371 | 8,508 | ||||||
Gain on disposition of operations | 1 | 1 | ||||||
Income from operations before income tax expense | 1,620 | 1,263 | ||||||
Income tax expense | 328 | 257 | ||||||
Net income | 1,292 | 1,006 | ||||||
Preferred stock dividends | 31 | 29 | ||||||
Net income applicable to common shareholders | $ | 1,261 | $ | 977 | ||||
Earnings per common share: | ||||||||
Net income applicable to common shareholders per common share – Basic |
$ | 3.79 | $ | 2.76 | ||||
Weighted average common shares – Basic | 332.6 | 354.1 | ||||||
Net income applicable to common shareholders per common share – Diluted |
$ | 3.74 | $ | 2.71 | ||||
Weighted average common shares – Diluted | 337.5 | 359.9 | ||||||
Definitions of Non-GAAP Measures
We believe that investors’ understanding of Allstate’s performance is
enhanced by our disclosure of the following non-GAAP measures. Our
methods for calculating these measures may differ from those used by
other companies and therefore comparability may be limited.
Adjusted net income is net income applicable to common
shareholders, excluding:
-
realized capital gains and losses, after-tax, except for periodic
settlements and accruals on non-hedge derivative instruments, which
are reported with realized capital gains and losses but included in
adjusted net income, -
Pension and other postretirement remeasurement gains and losses,
after-tax, - valuation changes on embedded derivatives not hedged, after-tax,
-
amortization of deferred policy acquisition costs (“DAC”) and deferred
sales inducements (“DSI”), to the extent they resulted from the
recognition of certain realized capital gains and losses or valuation
changes on embedded derivatives not hedged, after-tax, -
business combination expenses and the amortization of purchased
intangible assets, after-tax, - gain (loss) on disposition of operations, after-tax, and
-
adjustments for other significant non-recurring, infrequent or unusual
items, when (a) the nature of the charge or gain is such that it is
reasonably unlikely to recur within two years, or (b) there has been
no similar charge or gain within the prior two years.
Net income applicable to common shareholders is the GAAP measure that is
most directly comparable to adjusted net income.
We use adjusted net income as an important measure to evaluate our
results of operations. We believe that the measure provides investors
with a valuable measure of the company’s ongoing performance because it
reveals trends in our insurance and financial services business that may
be obscured by the net effect of realized capital gains and losses,
pension and other postretirement remeasurement gains and losses,
valuation changes on embedded derivatives not hedged, business
combination expenses and the amortization of purchased intangible
assets, gain (loss) on disposition of operations and adjustments for
other significant non-recurring, infrequent or unusual items. Realized
capital gains and losses, pension and other postretirement remeasurement
gains and losses, valuation changes on embedded derivatives not hedged
and gain (loss) on disposition of operations may vary significantly
between periods and are generally driven by business decisions and
external economic developments such as capital market conditions, the
timing of which is unrelated to the insurance underwriting process.
Consistent with our intent to protect results or earn additional income,
adjusted net income includes periodic settlements and accruals on
certain derivative instruments that are reported in realized capital
gains and losses because they do not qualify for hedge accounting or are
not designated as hedges for accounting purposes. These instruments are
used for economic hedges and to replicate fixed income securities, and
by including them in adjusted net income, we are appropriately
reflecting their trends in our performance and in a manner consistent
with the economically hedged investments, product attributes (e.g. net
investment income and interest credited to contractholder funds) or
replicated investments. Business combination expenses are excluded
because they are non-recurring in nature and the amortization of
purchased intangible assets is excluded because it relates to the
acquisition purchase price and is not indicative of our underlying
business results or trends. Non-recurring items are excluded because, by
their nature, they are not indicative of our business or economic
trends. Accordingly, adjusted net income excludes the effect of items
that tend to be highly variable from period to period and highlights the
results from ongoing operations and the underlying profitability of our
business. A byproduct of excluding these items to determine adjusted net
income is the transparency and understanding of their significance to
net income variability and profitability while recognizing these or
similar items may recur in subsequent periods.
Contacts
Greg Burns
Media Relations
(847) 402-5600
John Griek
Investor
Relations
(847) 402-2800
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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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