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Vector Group Reports First Quarter 2019 Financial Results

Published

5 years ago

on

Reading Time: 13 minutes

MIAMI–(BUSINESS WIRE)–Vector Group Ltd. (NYSE:VGR) today announced financial results for the
three months ended March 31, 2019.

GAAP Financial Results

First quarter of 2019 revenues were $420.9 million, compared to revenues
of $429.0 million for the first quarter of 2018. The Company recorded
operating income of $42.6 million for the first quarter of 2019,
compared to operating income of $48.1 million for the first quarter of
2018. Net income attributed to Vector Group Ltd. for the first quarter
of 2019 was $15.0 million, or $0.08 per diluted common share, compared
to a net income of $7.2 million, or $0.04 per diluted common share, for
the first quarter of 2018.

Non-GAAP Financial Measures

Non-GAAP financial measures also include adjustments for purchase
accounting associated with the Company’s 2013 acquisition of an
additional 20.59% interest in Douglas Elliman Realty, LLC, the impact of
non-controlling interest associated with the 29.41% of Douglas Elliman
Realty, LLC that was purchased by the Company on December 31, 2018,
litigation settlements and judgments, settlements of long-standing
disputes related to the Master Settlement Agreement in the Tobacco
segment, net interest expense capitalized to real estate ventures,
stock-based compensation expense (for purposes of Adjusted EBITDA only)
and non-cash interest expense associated with the Company’s convertible
debt. Reconciliations of non-GAAP financial measures to the comparable
GAAP financial results for the three months ended March 31, 2019 and
2018 are included in Tables 2 through 7.

Three months ended March 31, 2019 compared to the three months ended
March 31, 2018

Adjusted EBITDA attributed to Vector Group Ltd. (as described in Table 2
attached hereto) were $49.7 million for the first quarter of 2019
compared to $50.4 million for the first quarter of 2018.

Adjusted Net Income (as described in Table 3 attached hereto) was $13.0
million, or $0.08 per diluted share, for the first quarter of 2019, and
$5.6 million, or $0.03 per diluted share for the first quarter of 2018.

Adjusted Operating Income (as described in Table 4 attached hereto) was
$42.6 million for the first quarter of 2019 compared to $42.5 million
for the first quarter of 2018.

Tobacco Segment Financial Results

For the first quarter of 2019, the Tobacco segment had revenues of
$256.8 million, compared to $267.1 million for the first quarter of
2018. The decline in revenues was primarily due to a 7.1% decline in
unit sales volume.

Operating Income from the Tobacco segment was $60.1 million for the
three months ended March 31, 2019, compared to $63.4 million for the
three months ended March 31, 2018.

Non-GAAP Financial Measures

Tobacco Adjusted Operating Income for the first quarter of 2019 and 2018
was $60.1 million and $59.9 million, respectively.

For the first quarter of 2019, the Tobacco segment had conventional
cigarette (wholesale) shipments of approximately 2.08 billion units
compared to 2.24 billion units for the first quarter of 2018.

Liggett’s retail market share increased to 4.2% for the first quarter of
2019 from 4.0% for the first quarter of 2018. Compared to the first
quarter of 2018, Liggett’s retail shipments declined by 2.1% while the
overall industry’s retail shipments declined by 5.6%, according to data
from Management Science Associates, Inc.

Real Estate Segment Financial Results

For the first quarter of 2019, the Real Estate segment had revenues of
$164.2 million, compared to $161.9 million for the first quarter of
2018. First quarter of 2019, the Real Estate segment reported a net loss
of $9.1 million, compared to net loss of $8.5 million for the first
quarter of 2018.

Douglas Elliman’s results are included in Vector Group Ltd.’s Real
Estate segment. For the first quarter of 2019, Douglas Elliman had
revenues of $161.9 million, compared to $159.4 million for the first
quarter of 2018. For the first quarter of 2019, Douglas Elliman reported
net loss of $10.4 million, compared to net loss of $8.1 million for the
first quarter of 2018.

Non-GAAP Financial Measures

For the first quarter of 2019, Real Estate Adjusted EBITDA attributed to
the Company were loss of $7.9 million, compared to a loss of $7.6
million for the first quarter of 2018.

Douglas Elliman’s results are included in Vector Group Ltd.’s Real
Estate segment. For the first quarter of 2019, Douglas Elliman’s
Adjusted EBITDA (as described in Table 7 attached hereto) were negative
$9.0 million, compared to negative $8.6 million for the first quarter of
2018.

For the three months ended March 31, 2019, Douglas Elliman achieved
closed sales of approximately $5.8 billion, compared to $6.1 billion for
the three months ended March 31, 2018.

Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted Net Income, Adjusted Operating Income, Tobacco
Adjusted Operating Income, Tobacco Adjusted EBITDA, New Valley LLC
Adjusted EBITDA and Douglas Elliman Realty, LLC Adjusted EBITDA (“the
Non-GAAP Financial Measures”) are financial measures not prepared in
accordance with generally accepted accounting principles (“GAAP”). The
Company believes that the Non-GAAP Financial Measures are important
measures that supplement discussions and analysis of its results of
operations and enhances an understanding of its operating performance.
The Company believes the Non-GAAP Financial Measures provide investors
and analysts with a useful measure of operating results unaffected by
differences in capital structures and ages of related assets among
otherwise comparable companies.

On December 31, 2018, New Valley LLC, the real estate subsidiary of
Vector Group Ltd, acquired the 29.41% interest in Douglas Elliman
Realty, LLC it did not previously own. Vector Group Ltd. has adjusted
its presentation of Non-GAAP Financial Measures in Tables 2, 3, 6 and 7
to assume the transaction occurred on January 1, 2018 and to improve
comparability between the three months ended March 31, 2019 and 2018,
respectively, as well as the twelve months ended March 31, 2019. Please
refer to Vector Group Ltd.’s Form 8-K, which is dated May 3, 2019, for
additional information.

Management uses the Non-GAAP Financial Measures as measures to review
and assess operating performance of the Company’s business, and
management and investors should review both the overall performance
(GAAP net income) and the operating performance (the Non-GAAP Financial
Measures) of the Company’s business. While management considers the
Non-GAAP Financial Measures to be important, they should be considered
in addition to, but not as substitutes for or superior to, other
measures of financial performance prepared in accordance with GAAP, such
as operating income, net income and cash flows from operations. In
addition, the Non-GAAP Financial Measures are susceptible to varying
calculations and the Company’s measurement of the Non-GAAP Financial
Measures may not be comparable to those of other companies. Attached
hereto as Tables 2 through 7 is information relating to the Company’s
Non-GAAP Financial Measures for the three months ended March 31, 2019
and 2018.

Conference Call to Discuss First Quarter 2019 Results

As previously announced, the Company will host a conference call and
webcast on Tuesday, May 7, 2019 at 8:30 AM (ET) to discuss first quarter
2019 results. Investors can access the call by dialing 800-859-8150 and
entering 70986911 as the conference ID number. The call will also be
available via live webcast at https://www.investornetwork.com/event/presentation/48438.
Webcast participants should allot extra time to register before the
webcast begins.

A replay of the call will be available shortly after the call ends
on May 7, 2019 through May 21, 2019. To access the replay, dial
877-656-8905 and enter 70986911 as the conference ID number. The
archived webcast will also be available at https://www.investornetwork.com/event/presentation/48438
for one year.

Vector Group is a holding company for Liggett Group LLC, Vector Tobacco
Inc., New Valley LLC, and Douglas Elliman Realty, LLC. Additional
information concerning the company is available on the Company’s
website, www.VectorGroupLtd.com.

[Financial Tables Follow]

 
TABLE 1
VECTOR GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share
Amounts)

 

 
Three Months Ended
March 31,
2019   2018
(Unaudited)
Revenues:
Tobacco* $ 256,756 $ 267,116
Real estate 164,168   161,850  
Total revenues 420,924 428,966
 
Expenses:
Cost of sales:
Tobacco* 177,303 184,962
Real estate 108,717   109,313  
Total cost of sales 286,020 294,275
 
Operating, selling, administrative and general expenses 92,314 89,076
Litigation settlement and judgment income

–

  (2,469 )
Operating income 42,590 48,084
 
Other income (expenses):
Interest expense (37,520 ) (45,947 )
Change in fair value of derivatives embedded within convertible debt 10,349 10,567
Equity in losses from real estate ventures (2,439 ) (6,560 )
Equity in earnings from investments 1,362 1,162
Net gains (losses) recognized on investment securities 4,773 (3,340 )
Other, net 2,667   1,646  
Income before provision for income taxes 21,782 5,612
Income tax expense 6,749   1,948  
 
Net income 15,033 3,664
 
Net (income) loss attributed to non-controlling interest (80 ) 3,547  
 
Net income attributed to Vector Group Ltd. $ 14,953   $ 7,211  
 
Per basic common share:
 
Net income applicable to common share attributed to Vector Group Ltd. $ 0.09   $ 0.04  
 
Per diluted common share:
 
Net income applicable to common share attributed to Vector Group Ltd. $ 0.08   $ 0.04  
 

* Revenues and cost of sales include federal excise taxes of $104,633
and $112,801, respectively.

 

TABLE 2
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION
OF ADJUSTED EBITDA
(Unaudited)
(Dollars
in Thousands)

 
    LTM   Three Months Ended
March 31, March 31,
2019 2019   2018
 
Net income attributed to Vector Group Ltd. $ 65,847 $ 14,953 $ 7,211
Interest expense 195,353 37,520 45,947
Income tax expense 26,353 6,749 1,948
Net income (loss) attributed to non-controlling interest 3,529 80 (3,547 )
Depreciation and amortization 18,928   4,708   4,587  
EBITDA $ 310,010 $ 64,010 $ 56,146
Change in fair value of derivatives embedded within convertible debt
(a) 		(44,771 ) (10,349 ) (10,567 )
Equity in earnings from investments (b) (3,358 ) (1,362 ) (1,162 )
Net gains (losses) recognized on investment securities 2,052 (4,773 ) 3,340
Equity in (earnings) losses from real estate ventures (c) (18,567 ) 2,439 6,560
Loss on extinguishment of debt 4,066 — —
Stock-based compensation expense (d) 10,003 2,436 2,384
Litigation settlement and judgment expense (income) (e) 685 — (2,469 )
Impact of MSA settlement (f) (2,808 ) — (3,490 )
Purchase accounting adjustments (g) 426 — 182
Other, net (11,949 ) (2,667 ) (1,646 )
Adjusted EBITDA $ 245,789 $ 49,734 $ 49,278
Adjusted EBITDA attributed to non-controlling interest (7,015 ) — 3,696
Adjustment to reflect additional 29.41% of Adjusted EBITDA from
Douglas Elliman Realty, LLC (h) 		5,849   —   (2,530 )
Adjusted EBITDA attributed to Vector Group Ltd. $ 244,623   $ 49,734   $ 50,444  
 
Adjusted EBITDA by Segment
Tobacco $ 249,352 $ 62,122 $ 61,979
Real Estate (i) 12,004 (7,908 ) (8,758 )
Corporate and Other (15,567 ) (4,480 ) (3,943 )
Total $ 245,789   $ 49,734   $ 49,278  
 
Adjusted EBITDA Attributed to Vector Group Ltd. by Segment
Tobacco $ 249,352 $ 62,122 $ 61,979
Real Estate (i) 10,838 (7,908 ) (7,592 )
Corporate and Other (15,567 ) (4,480 ) (3,943 )
Total $ 244,623   $ 49,734   $ 50,444  
 
a.   Represents income recognized from changes in the fair value of the
derivatives embedded in the Company’s convertible debt.
b. Represents equity in earnings recognized from investments that the
Company accounts for under the equity method.
c. Represents equity in (earnings) losses recognized from the Company’s
investment in certain real estate businesses that are not
consolidated in its financial results.
d. Represents amortization of stock-based compensation.
e. Represents accruals for settlements of judgment expenses in the
Engle progeny tobacco litigation and proceeds received from a
litigation award at Douglas Elliman Realty, LLC.
f. Represents the Company’s tobacco segment’s settlement of a
long-standing dispute related to the Master Settlement Agreement.
g. Represents purchase accounting adjustments recorded in the periods
presented in connection with the increase of the Company’s ownership
of Douglas Elliman Realty, LLC, which occurred in 2013.
h. Represents 29.41% of Douglas Elliman Realty LLC’s Adjusted EBITDA in
the respective periods. On December 31, 2018, the Company increased
its ownership of Douglas Elliman Realty, LLC from 70.59% to 100%.
i. Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $10,896
for the last twelve months ended March 31, 2019 and negative $8,991
and negative $8,603 for the three months ended March 31, 2019 and
2018, respectively. Amounts reported in this footnote reflect 100%
of Douglas Elliman Realty, LLC’s entire Adjusted EBITDA.
 
 

TABLE 3
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION
OF ADJUSTED NET INCOME
(Unaudited)
(Dollars
in Thousands, Except Per Share Amounts)

 
    Three Months Ended
March 31,
2019   2018
 
Net income attributed to Vector Group Ltd. $ 14,953 $ 7,211
 
Change in fair value of derivatives embedded within convertible debt (10,349 ) (10,567 )
Non-cash amortization of debt discount on convertible debt 8,525 18,193
Litigation settlement and judgment income (a) — (2,469 )
Impact of MSA settlement (b) — (3,490 )
Impact of net interest expense capitalized to real estate ventures (930 ) (1,953 )
Douglas Elliman Realty, LLC purchase accounting adjustments (c) — 375
Adjustment to reflect additional 29.41% of net income from Douglas
Elliman Realty, LLC (d) 		—   (2,381 )
Total adjustments (2,754 ) (2,292 )
 
Tax benefit related to adjustments 763 655
   
Adjusted Net Income attributed to Vector Group Ltd. $ 12,962   $ 5,574  
 
Per diluted common share:
 
Adjusted Net Income applicable to common shares attributed to Vector
Group Ltd. 		$ 0.08   $ 0.03  
 
a.   Represents accruals for settlements of judgment expenses in the
Engle progeny tobacco litigation and proceeds received from a
litigation award at Douglas Elliman Realty, LLC, net of
non-controlling interest.
b. Represents the Company’s tobacco segment’s settlement of a
long-standing dispute related to the Master Settlement Agreement.
c. Represents 100% of purchase accounting adjustments in the periods
presented for assets acquired in connection with the Company’s
acquisition of the 20.59% of Douglas Elliman Realty, LLC on December
31, 2013.
d. Represents 29.41% of Douglas Elliman Realty LLC’s net income in the
respective 2018 period. On December 31, 2018, the Company increased
its ownership of Douglas Elliman Realty, LLC from 70.59% to 100%.
 
 

TABLE 4
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION
OF ADJUSTED OPERATING INCOME
(Unaudited)
(Dollars
in Thousands)

 
    LTM   Three Months Ended
March 31, March 31,
2019 2019   2018
 
Operating income $ 218,555 $ 42,590 $ 48,084
 
Litigation settlement and judgment expense (income) (a) 685 — (2,469 )
Impact of MSA settlement (b) (2,808 ) — (3,490 )
Douglas Elliman Realty, LLC purchase accounting adjustments (c) 1,031   —   375  
Total adjustments (1,092 ) — (5,584 )
 
Adjusted Operating Income (d) $ 217,463   $ 42,590   $ 42,500  
 
a.   Represents accruals for settlements of judgment expenses in the
Engle progeny tobacco litigation and proceeds received from a
litigation award at Douglas Elliman Realty, LLC.
b. Represents the Company’s tobacco segment’s settlement of a
long-standing dispute related to the Master Settlement Agreement.
c. Amounts represent purchase accounting adjustments recorded in the
periods presented in connection with the increase of the Company’s
ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
d. Does not include a reduction for 29.41% non-controlling interest in
Douglas Elliman Realty, LLC. for the last twelve months ended March
31, 2019 and three months ended March 31, 2018.
 
 

TABLE 5
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION
OF TOBACCO ADJUSTED OPERATING INCOME
AND TOBACCO
ADJUSTED EBITDA
(Unaudited)
(Dollars
in Thousands)

 
    LTM   Three Months Ended
March 31, March 31,
2019 2019   2018
 
Tobacco Adjusted Operating Income:
Operating income from tobacco segment $ 243,260 $ 60,144 $ 63,411
 
Litigation settlement and judgment expense (a) 685 — —
Impact of MSA settlement (b) (2,808 ) —   (3,490 )
Total adjustments (2,123 ) — (3,490 )
 
Tobacco Adjusted Operating Income $ 241,137   $ 60,144   $ 59,921  
 
 

LTM

Three Months Ended

March 31, March 31,
2019 2019 2018
 
Tobacco Adjusted EBITDA:
Operating income from tobacco segment $ 243,260 $ 60,144 $ 63,411
 
Litigation settlement and judgment expense (a) 685 — —
Impact of MSA settlement (b) (2,808 ) —   (3,490 )
Total adjustments (2,123 ) — (3,490 )
 
Tobacco Adjusted Operating Income 241,137 60,144 59,921
 
Depreciation and amortization 8,130 1,957 2,037
Stock-based compensation expense 85   21   21  
Total adjustments 8,215 1,978 2,058
 
Tobacco Adjusted EBITDA $ 249,352   $ 62,122   $ 61,979  
 
a.   Represents accruals for settlements of judgment expenses in the
Engle progeny tobacco litigation.
b. Represents the Company’s tobacco segment’s settlement of a
long-standing dispute related to the Master Settlement Agreement.
 
 

TABLE 6
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION
OF REAL ESTATE SEGMENT (NEW VALLEY LLC) ADJUSTED EBITDA
(Unaudited)
(Dollars
in Thousands)

 
    LTM   Three Months Ended
March 31, March 31,
2019 2019   2018
 
Net income (loss) attributed to Vector Group Ltd. from subsidiary
non-guarantors (a) 		$ 14,238 $ (9,085 )   $ (8,544 )
Interest expense (a) 247 229 49
Income tax expense (benefit) (a) 3,524 (3,419 ) (2,994 )
Net income (loss) attributed to non-controlling interest (a) 3,529 80 (3,547 )
Depreciation and amortization 9,792   2,501   2,289  
EBITDA $ 31,330 $ (9,694 ) $ (12,747 )
Loss from non-guarantors other than New Valley LLC 80 28 34
Equity in (earnings) losses from real estate ventures (b) (18,567 ) 2,439 6,560
Purchase accounting adjustments (c) 426 — 182
Litigation settlement and judgment income (d) — — (2,469 )
Other, net (2,087 ) (704 ) (342 )
Adjusted EBITDA $ 11,182 $ (7,931 ) $ (8,782 )
Adjusted EBITDA attributed to non-controlling interest (7,015 ) — 3,696
Adjustment to reflect additional 29.41% of Adjusted EBITDA from
Douglas Elliman Realty, LLC (e) 		5,849   —   (2,530 )
Adjusted EBITDA attributed to New Valley LLC $ 10,016   $ (7,931 ) $ (7,616 )
 
Adjusted EBITDA by Segment
Real Estate (f) $ 12,004 $ (7,908 ) $ (8,758 )
Corporate and Other (822 ) (23 ) (24 )
Total (g) $ 11,182   $ (7,931 ) $ (8,782 )
 
Adjusted EBITDA Attributed to New Valley LLC by Segment
Real Estate (f) $ 10,838 $ (7,908 ) $ (7,592 )
Corporate and Other (822 ) (23 ) (24 )
Total (g) $ 10,016   $ (7,931 ) $ (7,616 )
 
a.   Amounts are derived from Vector Group Ltd.’s Condensed Consolidated
Financial Statements. See Note entitled “Condensed Consolidating
Financial Information” contained in Vector Group Ltd.’s Form 10-Q
for the three months ended March 31, 2019.
b. Represents equity in (earnings) losses recognized from the Company’s
investment in certain real estate businesses that are not
consolidated in its financial results.
c. Represents purchase accounting adjustments recorded in the periods
presented in connection with the increase of the Company’s ownership
of Douglas Elliman Realty, LLC, which occurred in 2013.
d. Represents proceeds received from a litigation award at Douglas
Elliman Realty, LLC.
e. Represents 29.41% of Douglas Elliman Realty LLC’s Adjusted EBITDA in
the respective periods. On December 31, 2018, the Company increased
its ownership of Douglas Elliman Realty, LLC from 70.59% to 100%.
f. Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $10,896
for the last twelve months ended March 31, 2019 and negative $8,991
and negative $8,603 for the three months ended March 31, 2019 and
2018, respectively. Amounts reported in this footnote reflect 100%
of Douglas Elliman Realty, LLC’s entire Adjusted EBITDA.
g. New Valley’s Adjusted EBITDA does not include an allocation of
Vector Group Ltd.’s “Corporate and Other” segment expenses (for
purposes of computing Adjusted EBITDA contained in Table 2 of this
press release) of $15,567 for the last twelve months ended March 31,
2019 and $4,480 and $3,943 for the three months ended March 31, 2019
and 2018, respectively.
 
 

TABLE 7
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION
OF DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA
AND
DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA ATTRIBUTED TO REAL
ESTATE SEGMENT
(Unaudited)
(Dollars
in Thousands)

 
    LTM   Three Months Ended
March 31, March 31,
2019 2019   2018
 
Net income (loss) attributed to Douglas Elliman Realty, LLC $ 2,880 $ (10,414 )   $ (8,097 )
Interest expense 11 3 45
Income tax expense (benefit) 180 — 220
Depreciation and amortization 9,384   2,400   2,187  
Douglas Elliman Realty, LLC EBITDA $ 12,455 $ (8,011 ) $ (5,645 )
Equity in earnings from real estate ventures (a) (1,267 ) (649 ) (625 )
Purchase accounting adjustments (b) 426 — 182
Litigation settlement and judgment income (c) — — (2,469 )
Other, net (718 ) (331 ) (46 )
Douglas Elliman Realty, LLC Adjusted EBITDA $ 10,896 $ (8,991 ) $ (8,603 )
Douglas Elliman Realty, LLC Adjusted EBITDA attributed to
non-controlling interest 		(5,849 ) — 2,530

Adjustment to reflect additional 29.41% of Adjusted EBITDA from
Douglas Elliman Realty, LLC,
which represents the additional
interest acquired on December 31, 2018 (d)

5,849   —   (2,530 )
Douglas Elliman Realty, LLC Adjusted EBITDA attributed to Real
Estate Segment 		$ 10,896   $ (8,991 ) $ (8,603 )
 
a.   Represents equity in earnings recognized from the Company’s
investment in certain real estate businesses that are not
consolidated in its financial results.
b. Represents purchase accounting adjustments recorded in the periods
presented in connection with the increase of the Company’s ownership
of Douglas Elliman Realty, LLC, which occurred in 2013.
c. Represents proceeds received from a litigation award at Douglas
Elliman Realty, LLC.
d. Represents 29.41% of Douglas Elliman Realty LLC’s Adjusted EBITDA in
the respective periods. On December 31, 2018, the Company increased
its ownership of Douglas Elliman Realty, LLC from 70.59% to 100%.
 

Contacts

Emily Claffey/Benjamin Spicehandler/Columbia Clancy
Sard Verbinnen
& Co
212-687-8080
Conrad Harrington
Sard Verbinnen &
Co – Europe
+44 (0)20 3178 8914
J. Bryant Kirkland III, Vector
Group Ltd.
305-579-8000

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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. 
2  Adjusted EBITDA is a non-GAAP measure as defined by the SEC, and represents earnings before interest, taxes, depreciation, and amortization, adjusted for other income, non-cash share-based compensation, one-time transaction related expenses, or other non-operating costs. The Company uses Adjusted EBITDA as it believes it better explains the results of its core business. See “ADJUSTED EBITDA RECONCILIATION (NON-GAAP)” section herein for an explanation and reconciliations of non-GAAP measure used throughout this release.

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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