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Insperity Announces Record First Quarter Results

Published

5 years ago

on

Reading Time: 12 minutes

HOUSTON–(BUSINESS WIRE)–Insperity,
Inc. (NYSE: NSP), a leading provider of human
resources and business performance solutions for America’s best
businesses, today reported results for the first quarter ended Mar. 31,
2019:

  • Q1 WSEE growth of 15% on strong sales and client retention
  • Q1 net income and EPS up 53% and 57%, to $76 million and $1.85,
    respectively
  • Q1 adjusted EPS up 40% to $1.98
  • Q1 adjusted EBITDA up 21% to $101 million

First Quarter Results

First quarter 2019 net income and diluted earnings per share of $76.3
million and $1.85 represented increases of 53% and 57%, respectively,
compared to the first quarter of 2018. Adjusted EPS was $1.98, a 40%
increase over the first quarter of 2018. Adjusted EBITDA increased 21%
over the first quarter of 2018 to $101.4 million.

“Our record first quarter results reflect the strength of our business
model and continued excellent execution of our strategic plan,” said
Paul J. Sarvadi, Insperity chairman and chief executive officer. “These
results further demonstrate the sustainability of our rapid growth and
profitability experienced over the last several years into 2019.”

Revenues increased 14% over the first quarter of 2018 to $1,153.0
million on a 15% increase in the average number of worksite employees
(“WSEEs”) paid per month. The continued double-digit worksite employee
growth was the result of the enrollment of new clients coming off a
successful 2018 fall sales campaign and a high level of client retention
during our heavy first quarter client renewal period. Additionally, we
experienced net hiring in our client base during the first quarter of
2019, although at lower levels than experienced during the first quarter
of 2018.

Gross profit increased 14% over the first quarter of 2018 to $226.7
million, and included favorable workers’ compensation and benefit cost
trends and stronger pricing. Operating expenses increased 5% over the
first quarter of 2018, while adjusted operating expenses increased 12%
to $141.3 million, and included continued investments in our growth,
technology and product and service offerings.

“Worksite employee growth in the mid-teens, combined with effective
management of pricing, direct cost programs and operating costs,
produced adjusted EBITDA and cash flow at record levels,” said Douglas
S. Sharp, senior vice president of finance, chief financial officer and
treasurer. “We ended the first quarter with $141 million of adjusted
cash, up from $129 million at December 31, 2018, after the repurchase of
230,000 shares at a cost of $29 million and the payment of our regular
cash dividend totaling $12 million.”

2019 Guidance

The company also announced its updated guidance for 2019, including the
second quarter of 2019. Please refer to the accompanying financial
tables at the end of this press release for the reconciliation of
non-GAAP financial measures to the comparable GAAP financial measures.

         
      Q2 2019       Full Year 2019
       
Average WSEEs paid 232,500 — 234,500 238,400 — 242,600
Year-over-year increase 14.0% — 15.0% 14.0% — 16.0%
 
Adjusted EPS $0.81 — $0.86 $4.55 — $4.80
Year-over-year increase 19% — 26% 21% — 28%
 
Adjusted EBITDA (in millions) $55 — $58 $276 — $289
Year-over-year increase 18% — 24% 15% — 21%
 

Definition of Key Metrics

Average WSEEs paid – Determined by calculating the company’s cumulative
worksite employees paid during the period divided by the number of
months in the period.

Adjusted EPS – Represents diluted net income per share computed in
accordance with GAAP, excluding the impact of non-cash stock-based
compensation and costs associated with a one-time tax reform bonus paid
to corporate employees.

Adjusted EBITDA – Represents net income computed in accordance with
GAAP, plus interest expense, income taxes, depreciation and amortization
expense, non-cash stock-based compensation and costs associated with a
one-time tax reform bonus paid to corporate employees.

Insperity will be hosting a conference call today at 10 a.m. ET to
discuss these results, provide guidance for the second quarter and an
update to the full year guidance, and answer questions from investment
analysts. To listen in, call 877-651-0053 and use conference i.d. number
2122429. The call will also be webcast at http://ir.insperity.com.
The conference call script will be available at the same website later
today. A replay of the conference call will be available at
855-859-2056, conference i.d. 2122429. The webcast will be archived for
one year.

About Insperity

Insperity, a trusted advisor to America’s best businesses for more than
33 years, provides an array of human resources and business solutions
designed to help improve business performance. Insperity® Business
Performance Advisors offer the most comprehensive suite of products and
services available in the marketplace. Insperity delivers administrative
relief, better benefits, reduced liabilities and a systematic way to
improve productivity through its premier Workforce Optimization®
solution. Additional company offerings include Traditional Payroll and
Human Capital Management, Time and Attendance, Performance Management,
Organizational Planning, Recruiting Services, Employment Screening,
Expense Management, Retirement Services and Insurance Services.
Insperity business performance solutions support more than 100,000
businesses with over 2 million employees. With 2018 revenues of $3.8
billion, Insperity operates in 74 offices throughout the United States.
For more information, visit http://www.insperity.com.

Forward-Looking Statements

The statements contained herein that are not historical facts are
forward-looking statements within the meaning of the federal securities
laws (Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934). You can identify such forward-looking
statements by the words “expects,” “intends,” “plans,” “projects,”
“believes,” “estimates,” “likely,” “possibly,” “probably,” “goal,”
“opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,”
“predicts,” “appears,” “indicator” and similar expressions.
Forward-looking statements involve a number of risks and uncertainties.
In the normal course of business, Insperity, Inc., in an effort to help
keep our stockholders and the public informed about our operations, may
from time to time issue such forward-looking statements, either orally
or in writing. Generally, these statements relate to business plans or
strategies, projected or anticipated benefits or other consequences of
such plans or strategies, or projections involving anticipated revenues,
earnings, unit growth, profit per worksite employee, pricing, operating
expenses or other aspects of operating results. We base the
forward-looking statements on our expectations, estimates and
projections at the time such statements are made. These statements are
not guarantees of future performance and involve risks and uncertainties
that we cannot predict. In addition, we have based many of these
forward-looking statements on assumptions about future events that may
prove to be inaccurate. Therefore, the actual results of the future
events described in such forward-looking statements could differ
materially from those stated in such forward-looking statements. Among
the factors that could cause actual results to differ materially are:

  • adverse economic conditions;
  • regulatory and tax developments and possible adverse application of
    various federal, state and local regulations;
  • the ability to secure competitive replacement contracts for health
    insurance and workers’ compensation insurance at expiration of current
    contracts;
  • cancellation of client contracts on short notice, or the inability to
    renew client contracts or attract new clients;
  • vulnerability to regional economic factors because of our geographic
    market concentration;
  • increases in health insurance costs and workers’ compensation rates
    and underlying claims trends, health care reform, financial solvency
    of workers’ compensation carriers, other insurers or financial
    institutions, state unemployment tax rates, liabilities for employee
    and client actions or payroll-related claims;
  • failure to manage growth of our operations and the effectiveness of
    our sales and marketing efforts;
  • the impact of the competitive environment and other developments in
    the human resources services industry, including the PEO industry, on
    our growth and/or profitability;
  • our liability for worksite employee payroll, payroll taxes and
    benefits costs;
  • our liability for disclosure of sensitive or private information;
  • our ability to integrate or realize expected returns on our
    acquisitions;
  • failure of our information technology systems;
  • an adverse final judgment or settlement of claims against Insperity;
    and
  • disruptions to our business resulting from the actions of certain
    stockholders.

These factors are discussed in further detail in Insperity’s filings
with the U.S. Securities and Exchange Commission. Any of these factors,
or a combination of such factors, could materially affect the results of
our operations and whether forward-looking statements we make ultimately
prove to be accurate.

Except to the extent otherwise required by federal securities law, we do
not undertake any obligation to update our forward-looking statements to
reflect events or circumstances after the date they are made or to
reflect the occurrence of unanticipated events.

       

Insperity, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
(in thousands)     March 31, 2019     December 31, 2018
 
Assets
Cash and cash equivalents $ 398,936 $ 326,773
Restricted cash 44,705 42,227
Marketable securities 53,599 60,781
Accounts receivable, net 421,297 400,623
Prepaid insurance 24,928 8,411
Other current assets     36,616       27,721  
Total current assets 980,081 866,536
Property and equipment, net 116,131 117,213
Right of use leased assets 50,259 —
Prepaid health insurance 9,000 9,000
Deposits 177,105 172,674
Goodwill and other intangible assets, net 12,723 12,726
Deferred income taxes, net 145 8,816
Other assets     5,534       4,851  
Total assets     $ 1,350,978       $ 1,191,816  
 
Liabilities and stockholders’ equity
Accounts payable $ 7,854 $ 10,622
Payroll taxes and other payroll deductions payable 308,062 261,166
Accrued worksite employee payroll cost 363,862 329,979
Accrued health insurance costs 45,832 35,153
Accrued workers’ compensation costs 47,973 45,818
Accrued corporate payroll and commissions 27,562 60,704
Other accrued liabilities     49,244       28,890  
Total current liabilities 850,389 772,332
Accrued workers’ compensation cost, net of current 186,624 187,412
Long-term debt 144,400 144,400
Operating lease liabilities, net of current 50,371 —
Other accrued liabilities, net of current     —       9,996  
Total noncurrent liabilities 381,395 341,808
Stockholders’ equity:
Common stock 555 555
Additional paid-in capital 33,833 36,752
Treasury stock, at cost (376,097 ) (357,569 )
Retained earnings     460,903       397,938  
Total stockholders’ equity     119,194       77,676  
Total liabilities and stockholders’ equity     $ 1,350,978       $ 1,191,816  
   

Insperity, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 
Three Months Ended
March 31,
(in thousands, except per share amounts)     2019   2018   Change
Operating results:    
Revenues(1) $ 1,153,010 $ 1,014,372 13.7 %
Payroll taxes, benefits and workers’ compensation costs     926,293     814,652     13.7 %
Gross profit 226,717 199,720 13.5 %
Salaries, wages and payroll taxes 83,380 87,186 (4.4 )%
Stock-based compensation 6,040 3,135 92.7 %
Commissions 6,952 6,066 14.6 %
Advertising 5,031 3,565 41.1 %
General and administrative expenses 33,162 29,852 11.1 %
Depreciation and amortization     6,691     5,213     28.4 %
Total operating expenses     141,256     135,017     4.6 %
Operating income 85,461 64,703 32.1 %
Other income (expense):
Interest income 3,245 1,456 122.9 %
Interest expense     (1,681 )   (1,070 )   57.1 %
Income before income tax expense 87,025 65,089 33.7 %
Income tax expense     10,736     15,098     (28.9 )%
Net income     $ 76,289     $ 49,991     52.6 %
Less distributed and undistributed earnings allocated to
participating securities 		    (1,031 )   (585 )   76.2 %
Net income allocated to common shares     $ 75,258     $ 49,406     52.3 %
 
Net income per share of common stock
Basic $ 1.86 $ 1.20 55.0 %
Diluted $ 1.85 $ 1.18 56.8 %
____________________________________
(1)   Revenues are comprised of gross billings less WSEE payroll costs as
follows:
         
Three Months Ended March 31,
(in thousands)           2019     2018
   
Gross billings $ 6,871,670 $ 5,923,356
Less: WSEE payroll cost           5,718,660       4,908,984
Revenues           $ 1,153,010       $ 1,014,372
   

Insperity, Inc.

KEY FINANCIAL AND STATISTICAL DATA

(Unaudited)

 
Three Months Ended March 31,
      2019     2018     Change
       
Average WSEEs paid 225,525 195,683 15.3 %
Statistical data (per WSEE per month):
Revenues(1) $ 1,704 $ 1,728 (1.4 )%
Gross profit 335 340 (1.5 )%
Operating expenses 209 230 (9.1 )%
Operating income 126 110 14.5 %
Net income 113 85 32.9 %
____________________________________
(1)   Revenues per WSEE per month are comprised of gross billings per WSEE
per month less WSEE payroll costs per WSEE per month follows:
         
Three Months Ended March 31,
(per WSEE per month)           2019     2018
Gross billings $ 10,157     $ 10,090
Less: WSEE payroll cost           8,453       8,362
Revenues           $ 1,704       $ 1,728
 

Insperity, Inc.

Non-GAAP Financial Measures

(Unaudited)

 
Non-GAAP financial measures are not prepared in accordance with GAAP
and may be different from non-GAAP financial measures used by other
companies. Non-GAAP financial measures should not be considered as a
substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP. Investors are encouraged to review
the reconciliation of the non-GAAP financial measures used to their
most directly comparable GAAP financial measures as provided in the
tables below.
       
Non-GAAP Measure     Definition     Benefit of Non-GAAP Measure
Non-bonus payroll cost     Non-bonus payroll cost is a non-GAAP financial measure that excludes
the impact of bonus payrolls paid to our WSEEs.

 

Bonus payroll cost varies from period to period, but has no direct
impact to our ultimate workers’ compensation costs under the
current program.

    Our management refers to non-bonus payroll cost in analyzing,
reporting and forecasting our workers’ compensation costs.

 

We include these non-GAAP financial measures because we believe
they are useful to investors in allowing for greater transparency
related to the costs incurred under our current workers’
compensation program.

Adjusted cash, cash equivalents and marketable securities Excludes funds associated with:

• federal and state income tax withholdings,

• employment taxes,

• other payroll deductions, and

• client prepayments.

We believe that the exclusion of the identified items helps us
reflect the fundamentals of our underlying business model and
analyze results against our expectations, against prior period, and
to plan for future periods by focusing on our underlying operations.
We believe that the adjusted results provide relevant and useful
information for investors because they allow investors to view
performance in a manner similar to the method used by management and
improves their ability to understand and assess our operating
performance.
Adjusted operating expense Represents operating expenses excluding the impact of the following:

• costs associated with a one-time tax reform bonus paid to
corporate employees.

EBITDA Represents net income computed in accordance with GAAP, plus:

• interest expense,

• income tax expense, and

• depreciation and amortization expense.

Adjusted EBITDA Represents EBITDA plus:

• non-cash stock based compensation, and

• costs associated with a one-time tax reform bonus paid to
corporate employees.

Adjusted Net Income Represents net income computed in accordance with GAAP, excluding:

• non-cash stock based compensation, and

• costs associated with a one-time tax reform bonus paid to
corporate employees.

Adjusted EPS     Represents diluted net income per share computed in accordance with
GAAP, excluding:

• non-cash stock based compensation, and

• costs associated with a one-time tax reform bonus paid to
corporate employees.

   
 

Following is a reconciliation of payroll cost (GAAP) to non-bonus
payroll costs (non-GAAP):

   
Three Months Ended March 31,
(in thousands, except per WSEE per month) 2019     2018
    $   WSEE     $   WSEE
   
Payroll cost $ 5,718,660 $ 8,453 $ 4,908,984 $ 8,362
Less: Bonus payroll cost     990,578     1,465       830,861     1,415  
Non-bonus payroll cost     $ 4,728,082     $ 6,988       $ 4,078,123     $ 6,947  
% Change period over period 15.9 % 0.6 % 15.9 % 3.3 %
 

Following is a reconciliation of cash, cash equivalents and marketable
securities (GAAP) to adjusted cash, cash equivalents and marketable
securities (non-GAAP):

       
(in thousands)     March 31, 2019     December 31, 2018
 
Cash, cash equivalents and marketable securities $ 452,535 $ 387,554
Less:
Amounts payable for withheld federal and state income taxes,
employment taxes and other payroll deductions 279,641 224,487
Client prepayments     32,388       34,177
Adjusted cash, cash equivalents and marketable securities     $ 140,506       $ 128,890
 

Following is a reconciliation of operating expenses (GAAP) to adjusted
operating expenses (non-GAAP):

   
Three Months Ended March 31,
(in thousands, except per WSEE per month) 2019     2018
    $   WSEE     $   WSEE
   
Operating expenses $ 141,256 $ 209 $ 135,017 $ 230
Less:
One-time tax reform bonus     —     —       9,306     16  
Adjusted operating expenses     $ 141,256     $ 209       $ 125,711     $ 214  
% Change period over period 12.4 % (2.3 )% 18.8 % 5.9 %
 

Following is a reconciliation of net income (GAAP) to EBITDA (non-GAAP)
and adjusted EBITDA (non-GAAP):

   
Three Months Ended March 31,
(in thousands, except per WSEE per month) 2019     2018
    $   WSEE     $   WSEE
   
Net income $ 76,289 $ 113 $ 49,991 $ 85
Income tax expense 10,736 16 15,098 26
Interest expense 1,681 2 1,070 2
Depreciation and amortization     6,691     10       5,213     9  
EBITDA 95,397 141 71,372 122
Stock-based compensation 6,040 9 3,135 5
One-time tax reform bonus     —     —       9,306     16  
Adjusted EBITDA     $ 101,437     $ 150       $ 83,813     $ 143  
% Change period over period 21.0 % 4.9 % 33.6 % 19.2 %
 

Following reconciliation of net income (GAAP) to adjusted net income
(non-GAAP):

   
Three Months Ended March 31,
(in thousands)     2019     2018
   
Net income $ 76,289 $ 49,991
Non-GAAP adjustments:
Stock-based compensation 6,040 3,135
One-time tax reform bonus     —       9,306  
Total non-GAAP adjustments 6,040 12,441
Tax effect     (745 )     (2,886 )
Adjusted net income     $ 81,584       $ 59,546  
% Change period over period 37.0 % 54.1 %
 

Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP):

   
Three Months Ended March 31,
      2019     2018
   
Diluted EPS $ 1.85 $ 1.18
Non-GAAP adjustments:
Stock-based compensation 0.15 0.07
One-time tax reform bonus     —       0.22  
Total non-GAAP adjustments 0.15 0.29
Tax effect     (0.02 )     (0.06 )
Adjusted EPS     $ 1.98       $ 1.41  
% Change period over period 40.4 % 53.3 %
 

The following is a reconciliation of GAAP to non-GAAP financial measures
for second quarter and full year 2019 guidance:

         
(in millions, except per share amounts)       Q2 2019
Guidance 		    Full Year 2019
Guidance
 
Net income $28 – $30 $167 – $178
Income tax expense 11 – 12 48 – 50
Interest expense 2 7
Depreciation and amortization       7       28  
EBITDA 48 – 51 250 – 263
Stock-based compensation       7       26  
Adjusted EBITDA       $55 – $58       $276 – $289  
 
Diluted net income per share of common stock $0.68 – $0.73 $4.06 – $4.31
Non-GAAP adjustments:
Stock-based compensation       0.18       0.63  
Total non-GAAP adjustments 0.18 0.63
Tax effect       (0.05 )     (0.14 )
Adjusted EPS       $0.81 – $0.86       $4.55 – $4.80  

Contacts

Investor Relations Contact:
Douglas S. Sharp
Senior
Vice President of Finance,
Chief Financial Officer and Treasurer
(281)
348-3232
[email protected]

News Media Contact:
Suzanne Haugen
Public
Relations Manager
(281) 312-3543
[email protected]

Related Topics:
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Cannabis

Rubicon Organics Reports Q1 2024 Financial Results

Published

1 day ago

on

May 16, 2024

By

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SCHWAZZE

Schwazze Announces First Quarter 2024 Financial Results

Published

1 day ago

on

May 15, 2024

By

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. 
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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