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SBA Communications Corporation Reports First Quarter 2019 Results; Updates Full Year 2019 Outlook
BOCA RATON, Fla.–(BUSINESS WIRE)–SBA Communications Corporation (Nasdaq: SBAC) (“SBA” or the “Company”)
today reported results for the quarter ended March 31, 2019.
Highlights of the first quarter include:
- Strong leasing and services results
- Net income of $26.0 million or $0.23 per share
-
AFFO per share growth of 14.6% over the year earlier period on a
constant currency basis - Increased 2019 Outlook for Revenue, Adjusted EBITDA and AFFO
“We had a great start to 2019,” commented Jeffrey A. Stoops, President
and CEO. “Our customers rolled into the new year with the continued
strong levels of activity we saw in the second half of 2018, and that
level of activity continues. In the U.S., both our leasing and our
services results in the first quarter were ahead of expectations,
contributing to the increase in our full year Outlook. Internationally,
leasing activity remains strong as well, with changes in the
International Outlook driven entirely by foreign currency movements.
Against this favorable demand environment, we executed very well and
produced material growth in AFFO per share. We believe 2019 is shaping
up to be another strong year for SBA.”
Operating Results
The table below details select financial results for the three months
ended March 31, 2019 and comparisons to the prior year period.
% Change | |||||||||||||||
excluding |
|||||||||||||||
Q1 2019 | Q1 2018 | $ Change | % Change | FX (1) | |||||||||||
Consolidated | ($ in millions, except per share amounts) | ||||||||||||||
Site leasing revenue | $ | 452.1 | $ | 430.5 | $ | 21.6 | 5.0% | 7.2% | |||||||
Site development revenue | 41.1 | 27.8 | 13.3 | 48.1% | 48.1% | ||||||||||
Tower cash flow (1) | 362.9 | 339.0 | 23.9 | 7.0% | 8.8% | ||||||||||
Net income | 26.0 | 31.5 | (5.5) | (17.5%) | (5.1%) | ||||||||||
Earnings per share – diluted | 0.23 | 0.27 | (0.04) | (14.8%) | 0.0% | ||||||||||
Adjusted EBITDA (1) | 345.6 | 318.8 | 26.8 | 8.4% | 10.3% | ||||||||||
AFFO (1) | 236.1 | 218.4 | 17.7 | 8.1% | 10.9% | ||||||||||
AFFO per share (1) | 2.07 | 1.85 | 0.22 | 11.9% | 14.6% |
(1) |
See the reconciliations and other disclosures under “Non-GAAP Financial Measures” later in this press release. |
Total revenues in the first quarter of 2019 were $493.3 million compared
to $458.3 million in the year earlier period, an increase of 7.6%. Site
leasing revenue in the quarter of $452.1 million was comprised of
domestic site leasing revenue of $362.8 million and international site
leasing revenue of $89.3 million. Domestic cash site leasing revenue was
$361.2 million in the first quarter of 2019 compared to $338.7 million
in the year earlier period, an increase of 6.7%. International cash site
leasing revenue was $88.3 million in the first quarter of 2019 compared
to $86.4 million in the year earlier period, an increase of 2.2%, or
13.0% excluding the impact of changes in foreign currency exchange rates.
Site leasing operating profit was $359.5 million, an increase of 6.4%
over the year earlier period. Site leasing contributed 97.3% of the
Company’s total operating profit in the first quarter of 2019. Domestic
site leasing segment operating profit was $297.7 million, an increase of
7.6% over the year earlier period. International site leasing segment
operating profit was $61.7 million, an increase of 1.2% over the year
earlier period.
Tower Cash Flow for the first quarter of 2019 of $362.9 million was
comprised of Domestic Tower Cash Flow of $301.8 million and
International Tower Cash Flow of $61.1 million. Domestic Tower Cash Flow
for the quarter increased 7.8% over the prior year period and
International Tower Cash Flow increased 3.4% over the prior year period.
Tower Cash Flow Margin was 80.7% for the first quarter of 2019, as
compared to 79.8% for the year earlier period.
During the first quarter of 2019, the Company received a partial
recovery of pre-petition obligations owed to the Company from Oi, S.A.
(“Oi”) in accordance with the reorganization plan approved by the
Brazilian courts. Net of costs incurred in connection with the Oi
bankruptcy process, the Company recovered $2.3 million in the quarter
(the “Oi recovery”). The Oi recovery resulted in a partial reversal of
the Company’s allowance for doubtful accounts which was recorded as an
offset to bad debt expense within Selling, general and administrative
expenses. Any future recoveries will be recorded in a similar manner in
the period in which payment is received.
Adjusted EBITDA for the quarter was $345.6 million, which includes the
$2.3 million Oi recovery, an 8.4% increase over the prior year period.
Adjusted EBITDA Margin was 70.4% in the first quarter of 2019 compared
to 70.4% in the first quarter of 2018.
Net Cash Interest Expense was $96.9 million in the first quarter of 2019
compared to $87.6 million in the first quarter of 2018, an increase of
10.6%.
Net income for the first quarter of 2019 was $26.0 million, or $0.23 per
share, and included a $2.1 million loss, net of taxes, on the currency
related remeasurement of U.S. dollar denominated intercompany loans with
a Brazilian subsidiary, while net income for the first quarter of 2018
was $31.5 million, or $0.27 per share, and included a $1.6 million gain
on the currency related remeasurement of U.S. dollar denominated
intercompany loans with a Brazilian subsidiary.
AFFO for the quarter was $236.1 million, which includes the $2.3 million
Oi recovery, an 8.1% increase over the prior year period. AFFO per share
for the first quarter of 2019 was $2.07, an 11.9% increase over the
prior year period.
Investing Activities
During the first quarter of 2019, SBA purchased 54 communication sites
for total cash consideration of $36.1 million. SBA also built 72 towers
during the first quarter of 2019. As of March 31, 2019, SBA owned or
operated 29,687 communication sites, 16,289 of which are located in the
United States and its territories, and 13,398 of which are located
internationally. In addition, the Company spent $15.4 million to
purchase land and easements and to extend lease terms. Total cash
capital expenditures for the first quarter of 2019 were $91.7 million,
consisting of $7.2 million of non-discretionary cash capital
expenditures (tower maintenance and general corporate) and $84.5 million
of discretionary cash capital expenditures (new tower builds, tower
augmentations, acquisitions, and purchasing land and easements).
The Company has agreed to purchase and anticipates closing on 256
additional communication sites for an aggregate amount of $123.9
million. The Company anticipates that the majority of these acquisitions
will be consummated by the end of the third quarter of 2019.
Financing Activities and Liquidity
SBA ended the first quarter of 2019 with $9.8 billion of total debt,
$7.2 billion of total secured debt, $142.0 million of cash and cash
equivalents, short-term restricted cash, and short-term investments, and
$9.7 billion of Net Debt. SBA’s Net Debt and Net Secured Debt to
Annualized Adjusted EBITDA Leverage Ratios were 7.0x and 5.1x,
respectively.
As of the date of this press release, the Company had $50.0 million
outstanding under the $1.25 billion Revolving Credit Facility.
The Company did not repurchase any shares of its Class A common stock
during the first quarter. As of the date of this press release, the
Company has $204.5 million of authorization remaining under the stock
repurchase plan authorized on February 16, 2018.
Outlook
The Company is updating its full year 2019 Outlook for anticipated
results. The Outlook provided is based on a number of assumptions that
the Company believes are reasonable at the time of this press release.
Information regarding potential risks that could cause the actual
results to differ from these forward-looking statements is set forth
below and in the Company’s filings with the Securities and Exchange
Commission.
The Company’s full year 2019 Outlook assumes the acquisitions of only
those communication sites under contract and anticipated to close at the
time of this press release. The Company may spend additional capital in
2019 on acquiring revenue producing assets not yet identified or under
contract, the impact of which is not reflected in the 2019 guidance. The
Outlook also does not contemplate any repurchases of the Company’s stock
during 2019. The Outlook contemplates one new financing during the third
quarter of 2019 to refinance the Company’s 2014-1C Tower Securities. The
assumed interest rate of this new financing is 4.25%. There are no
additional new financings contemplated in our 2019 Outlook.
The Company’s Outlook assumes an average foreign currency exchange rate
of 3.90 Brazilian Reais to 1.0 U.S. Dollar and 1.33 Canadian Dollars to
1.0 U.S. Dollar throughout the last three quarters of 2019. When
compared to the Company’s initial full year 2019 Outlook provided
February 21, 2019, the variances in the actual first quarter foreign
currency exchange rates versus the Company’s assumptions, and the
changes in the Company’s foreign currency rate assumptions for the
remainder of the year negatively impacted the full year 2019 Outlook by
approximately $4.5 million for Site Lease Revenue, $3.0 million for
Tower Cash Flow, and $2.7 million for Adjusted EBITDA and AFFO.
(in millions, except per share amounts) | Full Year 2019 | |||||||
Site leasing revenue (1) | $ | 1,823.0 | to | $ | 1,843.0 | |||
Site development revenue | $ | 120.0 | to | $ | 140.0 | |||
Total revenues | $ | 1,943.0 | to | $ | 1,983.0 | |||
Tower Cash Flow (2) | $ | 1,467.0 | to | $ | 1,487.0 | |||
Adjusted EBITDA (2) | $ | 1,379.0 | to | $ | 1,399.0 | |||
Net cash interest expense (3) | $ | 381.0 | to | $ | 391.0 | |||
Non-discretionary cash capital expenditures (4) | $ | 31.0 | to | $ | 41.0 | |||
AFFO (2) | $ | 922.0 | to | $ | 973.0 | |||
AFFO per share (2) (5) | $ | 8.02 | to | $ | 8.47 | |||
Discretionary cash capital expenditures (6) | $ | 325.0 | to | $ | 345.0 |
(1) |
The Company’s Outlook for site leasing revenue includes revenue associated with pass through reimbursable expenses. |
|
(2) |
See the reconciliation of this non-GAAP financial measure presented below under “Non-GAAP Financial Measures.” |
|
(3) |
Net cash interest expense is defined as interest expense less interest income. Net cash interest expense does not include amortization of deferred financing fees or non-cash interest expense. |
|
(4) |
Consists of tower maintenance and general corporate capital expenditures. |
|
(5) |
Outlook for AFFO per share is calculated by dividing the Company’s outlook for AFFO by an assumed weighted average number of diluted common shares of 114.9 million. Our Outlook does not include the impact of any potential future repurchases of the Company’s stock during 2019. |
|
(6) |
Consists of new tower builds, tower augmentations, communication site acquisitions and ground lease purchases. Does not include expenditures for acquisitions of revenue producing assets not under contract at the date of this press release. |
Conference Call Information
SBA Communications Corporation will host a conference call on Monday,
April 29, 2019 at 5:00 PM (EST) to discuss the quarterly results. The
call may be accessed as follows:
When: Monday, |
April 29, 2019 at 5:00 PM (EDT) |
|
Dial-in Number: | (800) 230-1085 | |
Conference Name: | SBA first quarter results | |
Replay Available: | April 29, 2019 at 8:00 PM to May 13, 2019 at 11:59 PM (TZ: Eastern) | |
Replay Number: | (800) 475-6701 | |
Access Code: | 465875 | |
Internet Access: |
Information Concerning Forward-Looking Statements
This press release and our earnings call include forward-looking
statements, including statements regarding the Company’s expectations or
beliefs regarding (i) customer demand and its ability to capture demand,
(ii) the Company’s portfolio growth goals, its strategy with respect to
portfolio growth and opportunities throughout its domestic and
international markets, (iii) capital allocation and the Company’s target
net debt leverage range, (iv) the Company’s financial and operational
guidance for the full year 2019, the assumptions it made and the drivers
contributing to the increase in its full year guidance, (v) the timing
of closing for currently pending acquisitions, (vi) additional capital
spending in 2019 and the Company’s capital allocation mix, including
allocating capital to both share repurchases and portfolio growth, (vii)
its belief that 2019 will be a strong year for the Company, (viii)
financing of indebtedness in 2019, and (ix) foreign exchange rates and
their impact on the Company’s financial and operational guidance.
The Company wishes to caution readers that these forward-looking
statements may be affected by the risks and uncertainties in the
Company’s business as well as other important factors may have affected
and could in the future affect the Company’s actual results and could
cause the Company’s actual results for subsequent periods to differ
materially from those expressed in any forward-looking statement made by
or on behalf of the Company. With respect to the Company’s expectations
regarding all of these statements, including its financial and
operational guidance, such risk factors include, but are not limited to:
(1) the ability and willingness of wireless service providers to
maintain or increase their capital expenditures; (2) the Company’s
ability to identify and acquire sites at prices and upon terms that will
provide accretive portfolio growth; (3) the Company’s ability to
accurately identify and manage any risks associated with its acquired
sites, to effectively integrate such sites into its business and to
achieve the anticipated financial results; (4) the Company’s ability to
secure and retain as many site leasing tenants as planned at anticipated
lease rates; (5) the impact of continued consolidation among wireless
service providers, including the impact of the potential T-Mobile and
Sprint merger, on the Company’s leasing revenue; (6) the Company’s
ability to successfully manage the risks associated with international
operations, including risks associated with foreign currency exchange
rates; (7) the Company’s ability to secure and deliver anticipated
services business at contemplated margins; (8) the Company’s ability to
maintain expenses and cash capital expenditures at appropriate levels
for its business while seeking to attain its investment goals; (9) the
Company’s ability to acquire land underneath towers on terms that are
accretive; (10) the economic climate for the wireless communications
industry in general and the wireless communications infrastructure
providers in particular in the United States, Brazil, and
internationally; (11) the Company’s ability to obtain future financing
at commercially reasonable rates or at all; (12) the ability of the
Company to achieve its long-term stock repurchases strategy, which will
depend, among other things, on the trading price of the Company’s common
stock, which may be positively or negatively impacted by the repurchase
program, market and business conditions; (13) the Company’s ability to
achieve the new builds targets included in its anticipated annual
portfolio growth goals, which will depend, among other things, on
obtaining zoning and regulatory approvals, weather, availability of
labor and supplies and other factors beyond the Company’s control that
could affect the Company’s ability to build additional towers in 2019;
and (14) the Company’s ability to meet its total portfolio growth, which
will depend, in addition to the new build risks, on the availability of
sufficient towers for sale to meet our targets, competition from third
parties for such acquisitions and our ability to negotiate the terms of,
and acquire, these potential tower portfolios on terms that meet our
internal return criteria. With respect to its expectations regarding the
ability to close pending acquisitions, these factors also include
satisfactorily completing due diligence, the amount and quality of due
diligence that the Company is able to complete prior to closing of any
acquisition and its ability to accurately anticipate the future
performance of the acquired towers, the ability to receive required
regulatory approval, the ability and willingness of each party to
fulfill their respective closing conditions and their contractual
obligations and the availability of cash on hand or borrowing capacity
under the Revolving Credit Facility to fund the consideration. With
respect to the repurchases under the Company’s stock repurchase program,
the amount of shares repurchased, if any, and the timing of such
repurchases will depend on, among other things, the trading price of the
Company’s common stock, which may be positively or negatively impacted
by the repurchase program, market and business conditions, the
availability of stock, the Company’s financial performance or
determinations following the date of this announcement in order to use
the Company’s funds for other purposes. Furthermore, the Company’s
forward-looking statements and its 2019 outlook assumes that the Company
continues to qualify for treatment as a REIT for U.S. federal income tax
purposes and that the Company’s business is currently operated in a
manner that complies with the REIT rules and that it will be able to
continue to comply with and conduct its business in accordance with such
rules. In addition, these forward-looking statements and the information
in this press release is qualified in its entirety by cautionary
statements and risk factor disclosures contained in the Company’s
Securities and Exchange Commission filings, including the Company’s
Annual Report on Form 10-K filed with the Commission on February 28,
2019.
This press release contains non-GAAP financial measures. Reconciliation
of each of these non-GAAP financial measures and the other Regulation G
information is presented below under “Non-GAAP Financial Measures.”
This press release will be available on our website at www.sbasite.com.
About SBA Communications Corporation
SBA Communications Corporation is a first choice provider and leading
owner and operator of wireless communications infrastructure in North,
Central, and South America. By “Building Better Wireless,” SBA generates
revenue from two primary businesses – site leasing and site development
services. The primary focus of the Company is the leasing of antenna
space on its multi-tenant communication sites to a variety of wireless
service providers under long-term lease contracts. For more information
please visit: www.sbasite.com.
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||
(in thousands, except per share amounts) | ||||||
For the three months | ||||||
ended March 31, | ||||||
2019 | 2018 | |||||
Revenues: | (unaudited) | (unaudited) | ||||
Site leasing | $ | 452,183 | $ | 430,542 | ||
Site development | 41,110 | 27,760 | ||||
Total revenues | 493,293 | 458,302 | ||||
Operating expenses: | ||||||
Cost of revenues (exclusive of depreciation, accretion, | ||||||
and amortization shown below): | ||||||
Cost of site leasing | 92,714 | 92,817 | ||||
Cost of site development | 31,101 | 22,520 | ||||
Selling, general, and administrative (1)(2) | 50,959 | 36,049 | ||||
Acquisition and new business initiatives related adjustments and expenses |
2,437 | 3,044 | ||||
Asset impairment and decommission costs | 5,771 | 8,506 | ||||
Depreciation, accretion, and amortization | 171,038 | 165,398 | ||||
Total operating expenses | 354,020 | 328,334 | ||||
Operating income | 139,273 | 129,968 | ||||
Other income (expense): | ||||||
Interest income | 1,800 | 1,295 | ||||
Interest expense | (98,667) | (88,923) | ||||
Non-cash interest expense | (641) | (733) | ||||
Amortization of deferred financing fees | (5,061) | (5,388) | ||||
Loss from extinguishment of debt, net | — | (645) | ||||
Other income (expense), net | (508) | 4,553 | ||||
Total other expense, net | (103,077) | (89,841) | ||||
Income before income taxes | 36,196 | 40,127 | ||||
Provision for income taxes | (10,207) | (8,582) | ||||
Net income | $ | 25,989 | $ | 31,545 | ||
Net income per common share | ||||||
Basic | $ | 0.23 | $ | 0.27 | ||
Diluted | $ | 0.23 | $ | 0.27 | ||
Weighted average number of common shares | ||||||
Basic | 112,708 | 116,494 | ||||
Diluted | 114,344 | 118,293 |
(1) |
Includes non-cash compensation of $22,605 and $9,893 for the three months ended March 31, 2019 and 2018, respectively. |
|
(2) |
Includes the impact of the recovery of the $2.3 million Oi reserve for the three months ended March 31, 2019. |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(in thousands, except par values) | ||||||
March 31, | December 31, | |||||
2019 | 2018 | |||||
ASSETS | (unaudited) | |||||
Current assets: | ||||||
Cash and cash equivalents | $ | 117,613 | $ | 143,444 | ||
Restricted cash | 23,883 | 32,464 | ||||
Accounts receivable, net | 113,017 | 111,035 | ||||
Costs and estimated earnings in excess of billings on uncompleted contracts |
23,482 | 23,785 | ||||
Prepaid expenses and other current assets (1) | 22,574 | 63,126 | ||||
Total current assets | 300,569 | 373,854 | ||||
Property and equipment, net (1) | 2,761,325 | 2,786,355 | ||||
Intangible assets, net | 3,258,952 | 3,331,465 | ||||
Right-of-use assets, net (1) | 2,552,304 | — | ||||
Other assets (1) | 439,609 | 722,033 | ||||
Total assets | $ | 9,312,759 | $ | 7,213,707 | ||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||
Current Liabilities: | ||||||
Accounts payable | $ | 34,545 | $ | 34,308 | ||
Accrued expenses | 53,534 | 63,665 | ||||
Current maturities of long-term debt | 942,442 | 941,728 | ||||
Deferred revenue | 98,970 | 108,054 | ||||
Accrued interest | 35,059 | 48,722 | ||||
Current lease liabilities (1) | 228,776 | — | ||||
Other current liabilities (1) | 11,328 | 9,802 | ||||
Total current liabilities | 1,404,654 | 1,206,279 | ||||
Long-term liabilities: | ||||||
Long-term debt, net | 8,780,606 | 8,996,825 | ||||
Long-term lease liabilities (1) | 2,282,803 | — | ||||
Other long-term liabilities (1) | 147,477 | 387,426 | ||||
Total long-term liabilities | 11,210,886 | 9,384,251 | ||||
Shareholders’ deficit: | ||||||
Prefer. stock-par value $.01, 30,000 shares authorized, no shares issued or outst. |
— | — | ||||
Common stock – Class A, par value $.01, 400,000 shares authorized, 113,205 |
||||||
shares and 112,433 shares issued and outstanding at March 31, 2019 | ||||||
and December 31, 2018, respectively | 1,132 | 1,124 | ||||
Additional paid-in capital | 2,359,195 | 2,270,326 | ||||
Accumulated deficit | (5,131,347) | (5,136,368) | ||||
Accumulated other comprehensive loss | (531,761) | (511,905) | ||||
Total shareholders’ deficit | (3,302,781) | (3,376,823) | ||||
Total liabilities and shareholders’ deficit | $ | 9,312,759 | $ | 7,213,707 |
(1) |
On January 1, 2019, the Company adopted ASU 2016-02 which requires lessees to recognize a right-of-use asset and a lease liability. |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||
(unaudited) (in thousands) | ||||||
For the three months | ||||||
ended March 31, | ||||||
2019 | 2018 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income | $ | 25,989 | $ | 31,545 | ||
Adjustments to reconcile net income to net cash provided by operating | ||||||
activities: | ||||||
Depreciation, accretion, and amortization | 171,038 | 165,398 | ||||
Non-cash asset impairment and decommission costs | 5,451 | 8,446 | ||||
Non-cash compensation expense | 23,414 | 10,410 | ||||
Deferred income tax (benefit) expense | 3,470 | 2,277 | ||||
Other non-cash items reflected in the Statements of Operations | 4,647 | 2,784 | ||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||
AR and costs and est. earnings in excess of billings on uncompleted contracts, net |
1,931 | (5,198) | ||||
Prepaid expenses and other assets | (130) | (9,277) | ||||
Operating lease right-of-use assets, net | 24,116 | — | ||||
Accounts payable and accrued expenses | (5,050) | (14,336) | ||||
Accrued interest | (13,663) | (15,137) | ||||
Long-term lease liabilities | (19,652) | — | ||||
Other liabilities | 776 | 1,665 | ||||
Net cash provided by operating activities | 222,337 | 178,577 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Acquisitions | (55,287) | (117,622) | ||||
Capital expenditures | (36,374) | (31,096) | ||||
Other investing activities | 6,685 | (2,879) | ||||
Net cash used in investing activities | (84,976) | (151,597) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Net borrowings (repayments) under Revolving Credit Facility | (215,000) | 195,000 | ||||
Repayment of Tower Securities | — | (755,000) | ||||
Proceeds from issuance of Tower Securities, net of fees | — | 631,848 | ||||
Repurchase and retirement of common stock | — | (38,545) | ||||
Proceeds from employee stock purchase/stock option plans | 63,475 | 6,901 | ||||
Other financing activities | (6,522) | (6,155) | ||||
Net cash (used in) provided by financing activities | (158,047) | 34,049 | ||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
(13,743) | (504) | ||||
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (34,429) | 60,525 | ||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH: | ||||||
Beginning of period | 178,300 | 104,295 | ||||
End of period | $ | 143,871 | $ | 164,820 |
Contacts
Mark DeRussy, CFA
Capital Markets
561-226-9531
Lynne Hopkins
Media Relations
561-226-9431
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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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