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Genesee & Wyoming Reports Results for the First Quarter of 2019
DARIEN, Conn.–(BUSINESS WIRE)–Genesee & Wyoming Inc. (G&W) (NYSE:GWR)
First Quarter 2019 Consolidated Highlights Compared with First
Quarter 2018
-
Operating revenues decreased 2.9% to $558.1 million from $574.7
million. -
Reported operating income decreased 8.3% to $79.7 million; Adjusted
operating income increased 0.5% to $87.8 million despite negative
effects from severe winter weather and flooding in North America.(1) -
Reported diluted earnings per common share (EPS) decreased 42.9% to
$0.68 with 57.1 million weighted average shares outstanding, compared
with reported diluted EPS in the first quarter of 2018 of $1.19 with
62.9 million weighted average shares outstanding; Adjusted diluted EPS
increased 11.4% to $0.78.(1) -
Reported net income and diluted EPS for the first quarter of 2019
included $5.4 million, or $0.10 per share, of restructuring and
related costs. Reported net income and diluted EPS for the first
quarter of 2018 included a $31.6 million, or $0.50 per share, income
tax benefit associated with the U.S. Short Line Tax Credit for fiscal
year 2017 that was enacted retroactively in February 2018.
Company Comments
Jack Hellmann, Chairman and Chief Executive Officer of G&W, commented,
“In the first quarter of 2019, our adjusted diluted EPS increased over
11%, despite severe winter weather and flooding in North America that
impeded shipments from connecting Class I railroads to our Midwest and
Canada regions. These weather impacts resulted in a $0.09, or 10%,
reduction in diluted EPS compared with our first quarter guidance. We
expect to recover a portion of the winter-affected traffic in the coming
months, our outlook for North American rail shipments remains positive
and our 2019 annual guidance remains unchanged.”
“In the first quarter of 2019, we implemented cost reduction initiatives
in each of our three geographic segments. In North America, we
consolidated our Central Region into our Midwest and Southern regions.
In the U.K./Europe, we continued to make reductions in our overhead cost
structure and to invest in technology, and in Australia, we streamlined
rail operations concurrent with the termination of grain operations on
the Eyre Peninsula narrow gauge network.”
“Finally, in the first quarter of 2019, we evaluated several potential
acquisitions and investments. And in March, we signed two long-term
leases of short line railroads in Indiana that create a contiguous
400-mile, four-railroad footprint (CERA-TPW-TZPR-IMRR) within our
Midwest Region, spanning from Eastern Indiana to Western Illinois with
connections to six Class I railroads.”
First Quarter Segment Highlights
-
North America: Operating revenues from G&W’s North American Operations
increased 2.1% to $332.4 million from $325.6 million. Revenue for the
first quarter of 2018 included $5.5 million of revenues from leased
railroads in Canada, for which the leases expired at the end of 2018.
Reported operating income from G&W’s North American Operations, which
was negatively impacted by severe winter weather in the United States
and Canada and flooding in the Midwestern United States, decreased
5.3% to $69.3 million; Adjusted operating income from G&W’s North
American Operations decreased 4.2% to $70.3 million.(1) -
Australia: Operating revenues from G&W’s 51.1% owned Australian
Operations decreased 13.0% to $65.1 million from $74.8 million.
Reported operating income from G&W’s Australian Operations decreased
21.7% to $12.5 million; Adjusted operating income from G&W’s
Australian Operations decreased 11.9% to $14.1 million. Operating
income from G&W’s Australian Operations were negatively impacted by
$1.5 million from foreign currency depreciation and $1.5 million from
drought conditions in South Australia and New South Wales, which were
partially offset by a decrease in expenses.(1) -
U.K./Europe: Operating revenues from G&W’s U.K./European Operations
decreased 7.8% to $160.5 million from $174.2 million. Revenues for the
first quarter of 2018 included $14.7 million of revenues from G&W’s
former Continental Europe intermodal business, ERS Railways B.V.
(ERS), which was sold in June 2018. Reported operating loss from G&W’s
U.K./European Operations remained relatively flat at $2.1 million.
Adjusted operating income from G&W’s U.K./European Operations
increased to $3.4 million from an adjusted operating loss of $2.0
million in 2018.(1)
Financial Results
G&W’s operating revenues decreased $16.6 million, or 2.9%, to $558.1
million in the first quarter of 2019, compared with $574.7 million in
the first quarter of 2018. G&W’s operating income in the first quarter
of 2019 was $79.7 million, compared with $86.9 million in the first
quarter of 2018. Excluding certain items affecting comparability between
periods discussed below, G&W’s adjusted operating income in the first
quarter of 2019 was $87.8 million, compared with $87.4 million in the
first quarter of 2018.(1)
G&W’s provision for income taxes in the first quarter of 2019 was $14.3
million, while the benefit from income taxes for the first quarter of
2018 was $15.9 million. G&W’s effective tax rate for the first quarter
of 2019 was 26.9%, compared with 26.2% in the first quarter of 2018,
excluding the $31.6 million income tax benefit from the retroactive
extension of the of the U.S. Short Line Tax Credit for fiscal year 2017
that was enacted in February 2018.
Reported net income attributable to G&W in the first quarter of 2019 was
$38.7 million, compared with reported net income attributable to G&W of
$75.1 million in the first quarter of 2018. Excluding the net impact of
certain items affecting comparability between periods discussed below,
G&W’s adjusted net income attributable to G&W in the first quarter of
2019 was $44.4 million, compared with $43.8 million in the first quarter
of 2018.(1)
G&W’s reported diluted EPS in the first quarter of 2019 were $0.68 with
57.1 million weighted average shares outstanding, compared with reported
diluted EPS in the first quarter of 2018 of $1.19 with 62.9 million
weighted average shares outstanding. G&W’s adjusted diluted EPS in the
first quarter of 2019 were $0.78 with 57.1 million weighted average
shares outstanding, compared with adjusted diluted EPS in the first
quarter of 2018 of $0.70 with 62.9 million weighted average shares
outstanding.(1)
Items Affecting Comparability
In the first quarter of 2019 and 2018, G&W’s results included certain
items affecting comparability between the periods that are set forth in
the following table (in millions, except per share amounts):
Income/(Loss) |
After-Tax Net |
Diluted EPS |
|||||||||||||||
Three Months Ended March 31, 2019 |
|||||||||||||||||
Corporate development and related costs | $ | (0.4 | ) | $ | (0.3 | ) | $ | (0.01 | ) | ||||||||
Restructuring and related costs | $ | (7.6 | ) | $ | (5.4 | ) | $ | (0.10 | ) | ||||||||
Three Months Ended March 31, 2018 |
|||||||||||||||||
Corporate development and related costs | $ | (0.2 | ) | $ | (0.1 | ) | $ | — | |||||||||
Restructuring and related costs | $ | (0.3 | ) | $ | (0.2 | ) | $ | — | |||||||||
2017 Short Line Tax Credit | $ | — | $ | 31.6 | $ | 0.50 | |||||||||||
In the first quarter of 2019, G&W’s results included restructuring and
related costs of $7.6 million, primarily driven by our optimization
activities in the U.K., and corporate development and related costs of
$0.4 million.
In the first quarter of 2018, G&W’s results included a $31.6 million
income tax benefit associated with the U.S. Short Line Tax Credit for
fiscal year 2017 that was enacted in February 2018.
First Quarter Results by Segment
Operating revenues from G&W’s North American Operations increased $6.8
million, or 2.1%, to $332.4 million in the first quarter of 2019,
compared with $325.6 million in the first quarter of 2018. Excluding
$5.5 million of revenues from lease expirations in Canada for the first
quarter of 2018 and a $1.1 million decrease due to the impact of foreign
currency depreciation, North American Operations same railroad revenues
increased $13.3 million, or 4.2%, primarily due to increases in freight
and freight-related revenues.
G&W’s North American Operations were negatively impacted by extreme
winter weather in the United States and Canada and flooding in the
Midwestern United States. Operating income from G&W’s North American
Operations was $69.3 million in the first quarter of 2019, compared with
$73.2 million in the first quarter of 2018. The operating ratio for
North American Operations was 79.1% in the first quarter of 2019,
compared with 77.5% in the first quarter of 2018. Adjusted operating
income from G&W’s North American Operations in the first quarter of 2019
was $70.3 million, compared with $73.4 million in the first quarter of
2018. The adjusted operating ratio for North American Operations was
78.9% in the first quarter of 2019, compared with an adjusted operating
ratio of 77.5% in the first quarter of 2018.(1)
Operating revenues from G&W’s Australian Operations decreased $9.7
million, or 13.0%, to $65.1 million in the first quarter of 2019,
compared with $74.8 million in the first quarter of 2018. Excluding a
$7.0 million decrease due to the impact of foreign currency
depreciation, Australian Operations revenues decreased $2.7 million, or
4.0%, primarily due to decreases in drought impacted agricultural
products freight revenues and freight-related revenues.(2)
G&W’s Australian Operations had operating income of $12.5 million in the
first quarter of 2019, compared with $16.0 million in the first quarter
of 2018. The operating ratio for Australian Operations was 80.8% in the
first quarter of 2019, compared with 78.7% in the first quarter of 2018.
Adjusted operating income from G&W’s Australian Operations was $14.1
million in the first quarter of 2019, compared with $16.0 million in the
first quarter of 2018. The adjusted operating ratio for Australian
Operations was 78.4% in the first quarter of 2019, compared with 78.6%
in the first quarter of 2018. Operating income from G&W’s Australian
Operations was negatively impacted by $1.5 million from foreign currency
depreciation and $1.5 million from drought conditions in South Australia
and New South Wales, which were partially offset by a decrease in
expenses.(1)
Operating revenues from G&W’s U.K./European Operations decreased $13.7
million, or 7.8%, to $160.5 million in the first quarter of 2019,
compared with $174.2 million in the first quarter of 2018. Excluding
$14.7 million of revenues from G&W’s divested ERS operations for the
first quarter of 2018 and an $11.0 million decrease due to the impact of
foreign currency depreciation, U.K./European Operations same railroad
revenues increased $12.1 million, or 8.1%, primarily due to increases in
U.K. intermodal freight-related and freight revenues.(2)
G&W’s U.K./European Operations had an operating loss of $2.1 million in
the first quarter of 2019, compared with and operating loss of $2.2
million in the first quarter of 2018, which included operating income of
$0.5 million from ERS. The operating ratio for G&W’s U.K./European
Operations of 101.3% in the first quarter of 2019 remained unchanged
compared with the first quarter of 2018. Adjusted operating income from
G&W’s U.K./European Operations was $3.4 million in the first quarter of
2019, compared with an adjusted operating loss of $2.0 million in the
first quarter of 2018, which included operating income of $0.5 million
from ERS. The adjusted operating ratio for U.K./European Operations was
97.9% in the first quarter of 2019, compared with 101.2% in the first
quarter of 2018.(1)
Adjusted Free Cash Flow Measures (1)
Adjusted free cash flow measures for the three months ended March 31,
2019 and 2018 were as follows (in millions):
Three Months Ended | |||||||||||
March 31, | |||||||||||
2019 | 2018 | ||||||||||
Net cash provided by operating activities | $ | 103.4 | $ | 101.4 | |||||||
Allocation of adjusted cash flow to noncontrolling interest(a) | (7.1 | ) | (9.0 | ) | |||||||
Adjusted net cash provided by operating activities attributable to G&W |
$ | 96.3 | $ | 92.4 | |||||||
Core capital expenditures(b) | (59.5 | ) | (41.4 | ) | |||||||
Adjusted free cash flow attributable to G&W before new business investments and grant funded projects |
$ | 36.8 | $ | 51.0 | |||||||
New business investments | (1.6 | ) | (7.5 | ) | |||||||
Grant funded projects, net of proceeds received from outside parties(c) | 2.4 | (0.4 | ) | ||||||||
Adjusted free cash flow attributable to G&W | $ | 37.6 | $ | 43.1 | |||||||
(a) |
Allocation of adjusted cash flow to noncontrolling interest (Macquarie Infrastructure and Real Assets’ (MIRA’s) 48.9% equity ownership of G&W Australia Holdings LP (GWA) since December 1, 2016) is calculated as 48.9% of the total of (i) cash flow provided by operating activities of G&W’s Australian Operations, less (ii) net purchases of property and equipment of G&W’s Australian Operations. The timing and amount of actual distributions, if any, from GWA to G&W and MIRA made in any given period will vary and could differ materially from the amounts presented. No such distributions were made for the three months ended March 31, 2019 and 2018. G&W expressly disclaims any direct correlation between the allocation of adjusted cash flow to noncontrolling interest and actual distributions made in any given period. |
|
(b) |
Core capital expenditures represent purchases of property and equipment as presented on the Statement of Cash Flows less grant proceeds from outside parties, insurance proceeds for the replacement of assets and proceeds from disposition of property and equipment, each of which as presented on the Statement of Cash Flows, less new business investments and grant funded projects. |
|
(c) |
Grant funded projects represent purchases of property and equipment for projects partially or entirely funded by outside parties, net of grant proceeds from outside parties as presented on the Statement of Cash Flows. |
|
Share Repurchase Program
During the first quarter of 2019, G&W repurchased 64,860 shares of Class
A Common Stock for $4.8 million, which resulted in a reduction of 59,095
shares in our weighted average diluted shares outstanding for the first
quarter of 2019. During the first quarter of 2018, G&W repurchased
792,921 shares of Class A Common Stock for $57.4 million, which resulted
in a reduction of 51,106 shares in our weighted average diluted shares
outstanding for the first quarter of 2018.
Conference Call and Webcast Details
As previously announced, G&W’s conference call to discuss financial
results for the first quarter of 2019 will be held on Tuesday, April 30,
2019, at 11 a.m. EDT. The dial-in number for the teleconference in the
U.S. is (800) 230-1085; outside the U.S., the dial-in number is (612)
288-0329, or the call may be accessed live over the Internet (listen
only) at www.gwrr.com/investors.
Management will be referring to a slide presentation that will also be
available at gwrr.com/investors. The webcast will be archived at www.gwrr.com/investors
until the following quarter’s earnings press release. Telephone replay
is available for 30 days beginning at 1 p.m. EDT on April 30, 2019, by
dialing (800) 475-6701 (or outside the U.S., dialing 320-365-3844). The
access code is 458667.
About G&W
G&W owns or leases 120 freight railroads organized in eight locally
managed operating regions with 8,000 employees serving 3,000 customers.
-
G&W’s six North American regions serve 41 U.S. states and four
Canadian provinces and include 114 short line and regional freight
railroads with more than 13,000 track-miles. -
G&W’s Australia Region serves New South Wales, the Northern Territory
and South Australia and operates the 1,400-mile Tarcoola-to-Darwin
rail line. The Australia Region is 51.1% owned by G&W and 48.9% owned
by a consortium of funds and clients managed by Macquarie
Infrastructure and Real Assets. -
G&W’s U.K./Europe Region includes the U.K.’s largest rail maritime
intermodal operator and second-largest freight rail provider, as well
as regional services in Continental Europe.
G&W subsidiaries and joint ventures also provide rail service at more
than 40 major ports, rail-ferry service between the U.S. Southeast and
Mexico, transload services, contract coal loading, and industrial
railcar switching and repair.
From time to time, we may use our website as a channel of distribution
of material company information. Financial and other material
information regarding G&W is routinely posted on and accessible at www.gwrr.com/investors.
In addition, you may automatically receive email alerts and other
information about us by enrolling your email address in the “Email
Alerts” section of www.gwrr.com/investors.
The information contained on or connected to our Internet website is not
deemed to be incorporated by reference in this press release or filed
with the United States Securities and Exchange Commission.
Cautionary Statement Concerning Forward-Looking Statements
This press release contains forward-looking statements regarding future
events and the future performance of Genesee & Wyoming Inc. that are
based on current expectations, estimates and projections about our
industry, management’s beliefs and assumptions made by management. Words
such as “anticipates,” “intends,” “plans,” “believes,” “could,”
“should,” “seeks,” “expects,” “will,” “estimates,” “trends,” “outlook,”
variations of these words and similar expressions are intended to
identify these forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks,
uncertainties and assumptions that are difficult to forecast, including
the following: risks related to the operation of our railroads; severe
weather conditions and other natural occurrences, which could result in
shutdowns, derailments, railroad network and port congestion or other
substantial disruption of operations; customer demand and changes in our
operations or loss of important customers; exposure to the credit risk
of customers and counterparties; changes in commodity prices;
consummation and integration of acquisitions; economic, political and
industry conditions, including employee strikes or work stoppages;
retention and contract continuation; legislative and regulatory
developments, including changes in environmental and other laws and
regulations to which we or our customers are subject; increased
competition in relevant markets; funding needs and financing sources,
including our ability to obtain government funding for capital projects;
international complexities of operations, currency fluctuations,
finance, tax and decentralized management; challenges of managing rapid
growth, including retention and development of senior leadership;
unpredictability of fuel costs; susceptibility to and outcome of various
legal claims, lawsuits and arbitrations; increase in, or volatility
associated with, expenses related to estimated claims, self-insured
retention amounts and insurance coverage limits; consummation of new
business opportunities; decrease in revenues and/or increase in costs
and expenses; susceptibility to the risks of doing business in foreign
countries; uncertainties arising from a referendum in which voters in
the United Kingdom (U.K.) approved an exit from the European Union
(E.U.), commonly referred to as Brexit; our ability to integrate
acquired businesses successfully or to realize the expected synergies
associated with acquisitions; risks associated with our substantial
indebtedness; failure to maintain satisfactory working relationships
with partners in Australia; failure to maintain an effective system of
internal control over financial reporting as well as disclosure controls
and procedures and other risks including, but not limited to, those
noted in our 2018 Annual Report on Form 10-K and our Quarterly Reports
on Form 10-Q under “Risk Factors.” Therefore, actual results may differ
materially from those expressed or forecasted in any such
forward-looking statements. Forward-looking statements speak only as of
the date of this press release or as of the date they were made. G&W
does not undertake, and expressly disclaims, any duty to publicly update
any forward-looking statement, whether as a result of new information,
future events, or otherwise, except as required by law.
1. |
Adjusted operating income, adjusted operating ratio, adjusted net income attributable to G&W, adjusted diluted earnings per common share (EPS), and the adjusted free cash flow measures of adjusted net cash provided by operating activities attributable to G&W, adjusted free cash flow attributable to G&W and adjusted free cash flow attributable to G&W before new business investments and grant funded projects are non-GAAP financial measures and are not intended to replace financial measures calculated in accordance with GAAP. The information required by Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934, including a reconciliation to their most directly comparable financial measures calculated in accordance with GAAP, is included in the tables attached to this press release. |
|
2. |
Foreign exchange impact is calculated by comparing the prior period results translated from local currency to U.S. dollars using current period exchange rates to the prior period results in U.S. dollars as reported. |
|
GENESEE & WYOMING INC. AND SUBSIDIARIES | |||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018 | |||||||||||
(in thousands, except per share amounts) | |||||||||||
(unaudited) | |||||||||||
Three Months Ended | |||||||||||
March 31, | |||||||||||
2019 | 2018 | ||||||||||
OPERATING REVENUES | $ | 558,089 | $ | 574,661 | |||||||
OPERATING EXPENSES | 478,379 | 487,748 | |||||||||
OPERATING INCOME | 79,710 | 86,913 | |||||||||
INTEREST INCOME | 547 | 498 | |||||||||
INTEREST EXPENSE | (27,610 | ) | (25,236 | ) | |||||||
OTHER INCOME/(LOSS), NET | 419 | (2,040 | ) | ||||||||
INCOME BEFORE INCOME TAXES | 53,066 | 60,135 | |||||||||
(PROVISION FOR)/BENEFIT FROM INCOME TAXES | (14,260 | ) | 15,890 | ||||||||
NET INCOME | $ | 38,806 | $ | 76,025 | |||||||
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST | 100 | 927 | |||||||||
NET INCOME ATTRIBUTABLE TO GENESEE & WYOMING INC. | $ | 38,706 | $ | 75,098 | |||||||
BASIC EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC. COMMON STOCKHOLDERS: |
$ | 0.69 | $ | 1.21 | |||||||
WEIGHTED AVERAGE SHARES – BASIC | 56,368 | 61,918 | |||||||||
DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC. COMMON STOCKHOLDERS: |
$ | 0.68 | $ | 1.19 | |||||||
WEIGHTED AVERAGE SHARES – DILUTED | 57,132 | 62,887 | |||||||||
GENESEE & WYOMING INC. AND SUBSIDIARIES | ||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||
AS OF MARCH 31, 2019 AND DECEMBER 31, 2018 | ||||||||||
(in thousands) | ||||||||||
(unaudited) | ||||||||||
March 31, | December 31, | |||||||||
2019 | 2018 | |||||||||
ASSETS | ||||||||||
CURRENT ASSETS: | ||||||||||
Cash and cash equivalents | $ | 70,108 | $ | 90,387 | ||||||
Accounts receivable, net | 439,527 | 426,305 | ||||||||
Materials and supplies | 59,368 | 56,716 | ||||||||
Prepaid expenses and other | 66,125 | 54,185 | ||||||||
Total current assets | 635,128 | 627,593 | ||||||||
PROPERTY AND EQUIPMENT, net | 4,643,936 | 4,613,014 | ||||||||
GOODWILL | 1,120,212 | 1,115,849 | ||||||||
INTANGIBLE ASSETS, net | 1,429,602 | 1,430,197 | ||||||||
DEFERRED INCOME TAX ASSETS, net | 5,261 | 4,616 | ||||||||
OTHER ASSETS, net(a) | 547,669 | 77,192 | ||||||||
Total assets | $ | 8,381,808 | $ | 7,868,461 | ||||||
LIABILITIES AND EQUITY | ||||||||||
CURRENT LIABILITIES: | ||||||||||
Current portion of long-term debt | $ | 26,522 | $ | 28,303 | ||||||
Accounts payable | 282,917 | 288,070 | ||||||||
Accrued expenses(a) | 232,731 | 165,280 | ||||||||
Total current liabilities | 542,170 | 481,653 | ||||||||
LONG-TERM DEBT, less current portion | 2,391,695 | 2,425,235 | ||||||||
DEFERRED INCOME TAX LIABILITIES, net | 886,183 | 877,721 | ||||||||
DEFERRED ITEMS – grants from outside parties | 328,347 | 326,520 | ||||||||
OTHER LONG-TERM LIABILITIES(a) | 576,133 | 127,280 | ||||||||
TOTAL EQUITY | 3,657,280 | 3,630,052 | ||||||||
Total liabilities and equity | $ | 8,381,808 | $ | 7,868,461 |
(a) |
On January 1, 2019, G&W adopted Accounting Standards Update (ASU) 2016-02, Leases. The new standard requires lessees to recognize operating leases on their balance sheet as a right-of-use asset with a corresponding lease liability. This resulted in approximately $495 million of assets and a corresponding amount of liabilities being recognized on G&W’s balance sheet as of March 31, 2019. Capital leases will continue to be recognized on the balance sheet but are now referred to as “finance” leases, as required by the new standard. |
|
Contacts
Michael Williams of G&W Corporate Communications
1-203-202-8900
[email protected]
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Cannabis
Rubicon Organics Reports Q1 2024 Financial Results
SCHWAZZE
Schwazze Announces First Quarter 2024 Financial Results
Schwazze Management to Host Conference Call Today at 5:00 p.m. Eastern Time
DENVER, May 15, 2024 /PRNewswire/ — Medicine Man Technologies, Inc., operating as Schwazze, (OTCQX: SHWZ) (Cboe CA: SHWZ) (“Schwazze” or the “Company”), today announced financial and operational results for the first quarter ended March 31, 2024.
“We delivered another period of revenue growth in Q1 as we further refined our retail strategy while contending with the prolonged competitive challenges in Colorado and New Mexico,” said Forrest Hoffmaster, Interim CEO of Schwazze. “Throughout the quarter, we continued to sharpen our pricing and promotional efforts while enhancing the in-store experience, widening assortment, improving in-stock position, and advancing our loyalty program to attract and retain new customers. We also strengthened our wholesale business with quarter-over-quarter growth, while surpassing 30% total door penetration across both states.”
“The Colorado market remains highly competitive with more than 680 active recreational licenses, underscoring the importance of delivering an exceptional customer experience and fully integrated retail support program. Although retail pricing has recently stabilized, Colorado sales in Q1 were down 10% year-over-year due to lower volumes. Nonetheless, we significantly outpaced the market as our sales were up 9%, demonstrating the effectiveness of our operating playbook to compete in challenging environments. We expect to continue driving improvements in customer acquisition, retention, and loyalty as we further increase market share in the state.”
“In New Mexico, the proliferation of new licenses continued to outpace state cannabis sales as store count in Q1 increased 31% year-over-year while the market grew only 13%. In addition to pricing and promotional efforts, we’ve focused on driving traffic into our stores by expanding assortment with high quality flower and delivering an elevated customer experience. The New Mexico regulatory body has also increased its license enforcement efforts in recent months, contributing to more than 70 store closures and a 33% sequential decrease in net new store openings in the first quarter. We will continue to support the New Mexico Cannabis Control Division as it develops its regulatory framework.”
“Over the past four years we have rapidly scaled our footprint through 13 acquisitions, building a leading retail presence in both Colorado and New Mexico. We are beginning to see positive momentum from our pricing and promotional strategy and will remain focused on driving operating efficiencies while further optimizing our assets as we consolidate cultivation facilities and eliminate underperforming stores that do not meet our high-margin thresholds. We believe these initiatives, coupled with our operating playbook and strict cost controls, will enable us to return to stronger levels of profitability moving forward.”
First Quarter 2024 Financial Summary
$ in Thousands USD |
Q1 2024 |
Q4 2023 |
Q1 2023 |
Total Revenue |
$41,601 |
$43,325 |
$40,001 |
Gross Profit |
$17,934 |
$7,034[1] |
$21,849 |
Operating Expenses |
$20,643 |
$23,276 |
$16,199 |
Income (Loss) from Operations |
$(2,709) |
$(16,242) |
$5,650 |
Adjusted EBITDA[2] |
$7,341 |
$10,953 |
$14,525 |
Operating Cash Flow |
$(3,700) |
$3,452 |
$(880) |
Recent Highlights
- Announced the grand opening of a medical and recreational dispensary in March under the Everest Apothecary banner in Las Cruces, New Mexico, increasing the Company’s retail footprint to 34 stores across the state.
- Increased wholesale penetration in the first quarter to more than 30% of total doors in Colorado and New Mexico.
- Lowell Herb Co. pre-roll sales increased more than 3x quarter-over-quarter in Colorado, where it continues to be the #1 pre-roll in the state.
- Wana gummy sales up more than 2x quarter-over-quarter in New Mexico.
First Quarter 2024 Financial Results
Total revenue in the first quarter of 2024 increased 4% to $41.6 million compared to $40.0 million for the same quarter last year. The increase was primarily due to growth from new stores compared to the prior year period, partially offset by continued pricing pressure and the proliferation of new licenses in New Mexico.
Gross profit for the first quarter of 2024 was $17.9 million or 43.1% of total revenue, compared to $21.8 million or 54.6% of total revenue for the same quarter last year. The decrease in gross margin was primarily driven by the aforementioned pricing pressure in New Mexico, as well as higher medical sales mix in Colorado.
____________________________ |
1 Q4 2023 Gross Profit includes one-time, non-cash inventory adjustments of approximately $13.1 million comprised of $3.1 million of product consolidation, obsolescence, and shrinkage expenses, $4.3 million of net realizable value adjustments, and $5.8 million of fair value adjustments on acquired inventory in New Mexico in 2023. |
Operating expenses for the first quarter of 2024 were $20.6 million compared to $16.2 million for the same quarter last year. The year-ago period benefitted from a payroll tax credit of $3.9M. The remaining increase was primarily driven by personnel expenses and four-wall SG&A costs associated with 21 additional stores in Colorado and New Mexico that are still ramping.
Loss from operations for the first quarter of 2024 was $2.7 million compared to income from operations of $5.6 million in the same quarter last year. Net loss was $16.1 million for the first quarter of 2024 compared to net income of $1.7 million for the same quarter last year.
Adjusted EBITDA for the first quarter of 2024 was $7.3 million compared to $14.5 million for the same quarter last year. The decrease in Adjusted EBITDA was primarily driven by lower gross margin and higher operating expenses associated with the 21 additional stores that are still ramping.
As of March 31, 2024, cash and cash equivalents were $13.2 million compared to $19.2 million on December 31, 2023. Total debt as of March 31, 2024, was $159.7 million compared to $156.8 million on December 31, 2023.
Conference Call
The Company will conduct a conference call today, May 15, 2024, at 5:00 p.m. Eastern time to discuss its results for the first quarter ended March 31, 2024.
Schwazze management will host the conference call, followed by a question-and-answer period. Interested parties may submit questions to the Company prior to the call by emailing [email protected].
Date: Wednesday, May 15, 2024
Time: 5:00 p.m. Eastern time
Toll-free dial-in: (888) 664-6383
International dial-in: (416) 764-8650
Conference ID: 84167910
Webcast: SHWZ Q1 2024 Earnings Call
The conference call will also be broadcast live and available for replay on the investor relations section of the Company’s website at https://ir.schwazze.com.
Toll-free replay number: (888) 390-0541
International replay number: (416) 764-8677
Replay ID: 167910
If you have any difficulty registering or connecting with the conference call, please contact Elevate IR at (720) 330-2829.
About Schwazze
Schwazze (OTCQX: SHWZ) (Cboe CA: SHWZ) is building a premier vertically integrated regional cannabis company with assets in Colorado and New Mexico and will continue to explore taking its operating system to other states where it can develop a differentiated regional leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale.
Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company’s leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector.
Medicine Man Technologies, Inc. was Schwazze’s former operating trade name. The corporate entity continues to be named Medicine Man Technologies, Inc. Schwazze derives its name from the pruning technique of a cannabis plant to enhance plant structure and promote healthy growth. To learn more about Schwazze, visit https://schwazze.com/.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include financial outlooks; any projections of net sales, earnings, or other financial items; any statements of the strategies, plans and objectives of our management team for future operations; expectations in connection with the Company’s previously announced business plans; any statements regarding future economic conditions or performance; and statements regarding the intent, belief or current expectations of our management team. Such statements may be preceded by the words “may,” “will,” “could,” “would,” “should,” “expect,” “intends,” “plans,” “strategy,” “prospects,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other words of similar meaning in connection with a discussion of future events or future operating or financial performance, although the absence of these words does not necessarily mean that a statement is not forward-looking. We have based our forward-looking statements on management’s current expectations and assumptions about future events and trends affecting our business and industry. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Therefore, forward-looking statements are not guarantees of future events or performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control and cannot be predicted or quantified. Consequently, actual events and results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) regulatory limitations on our products and services and the uncertainty in the application of federal, state, and local laws to our business, and any changes in such laws; (ii) our ability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (iii) our ability to identify, consummate, and integrate anticipated acquisitions; (iv) general industry and economic conditions; (v) our ability to access adequate capital upon terms and conditions that are acceptable to us; (vi) our ability to pay interest and principal on outstanding debt when due; (vii) volatility in credit and market conditions; (viii) the loss of one or more key executives or other key employees; and (ix) other risks and uncertainties related to the cannabis market and our business strategy. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s website at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise except as required by law.
Investor Relations Contact
Sean Mansouri, CFA or Aaron D’Souza
Elevate IR
(720) 330-2829
[email protected]
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
For the Periods Ended March 31, 2024 and December 31, 2023
Expressed in U.S. Dollars
March 31, |
December 31, |
||||
2024 |
2023 |
||||
ASSETS
|
|||||
Current Assets |
|||||
Cash & Cash Equivalents |
$ |
13,151,317 |
$ |
19,248,932 |
|
Accounts Receivable, net of Allowance for Doubtful Accounts |
3,356,032 |
4,261,159 |
|||
Inventory |
26,382,184 |
25,787,793 |
|||
Marketable Securities, net of Unrealized Loss of $347,516 and Loss of $1,816, respectively |
108,583 |
456,099 |
|||
Prepaid Expenses & Other Current Assets |
3,502,310 |
3,914,064 |
|||
Total Current Assets |
46,500,426 |
53,668,047 |
|||
Non-Current Assets |
|||||
Fixed Assets, net Accumulated Depreciation of $10,061,700 and $8,741,782, respectively |
31,326,000 |
31,113,630 |
|||
Investments |
2,000,000 |
2,000,000 |
|||
Investments Held for Sale |
– |
202,111 |
|||
Goodwill |
67,492,705 |
67,499,199 |
|||
Intangible Assets, net Accumulated Amortization of $36,483,160 and $32,706,765, respectively |
162,391,482 |
166,167,877 |
|||
Other Non-Current Assets |
1,328,187 |
1,263,837 |
|||
Operating Lease Right of Use Assets |
34,575,832 |
34,233,142 |
|||
Deferred Tax Assets, net |
992,144 |
1,996,489 |
|||
Total Non-Current Assets |
300,106,350 |
304,476,285 |
|||
Total Assets |
$ |
346,606,776 |
$ |
358,144,332 |
|
LIABILITIES & STOCKHOLDERS’ EQUITY
|
|||||
Current Liabilities |
|||||
Accounts Payable |
$ |
9,443,233 |
$ |
13,341,561 |
|
Accrued Expenses |
8,106,618 |
7,774,691 |
|||
Derivative Liabilities |
1,319,845 |
638,020 |
|||
Lease Liabilities – Current |
5,186,316 |
4,922,724 |
|||
Current Portion of Long Term Debt |
29,579,713 |
3,547,011 |
|||
Income Taxes Payable |
28,235,039 |
25,232,782 |
|||
Total Current Liabilities |
81,870,764 |
55,456,789 |
|||
Non-Current Liabilities |
|||||
Long Term Debt, net of Debt Discount & Issuance Costs |
130,120,753 |
153,262,203 |
|||
Lease Liabilities – Non-Current |
30,735,072 |
30,133,452 |
|||
Total Non-Current Liabilities |
160,855,825 |
183,395,655 |
|||
Total Liabilities |
$ |
242,726,589 |
$ |
238,852,444 |
|
Stockholders’ Equity |
|||||
Preferred Stock, $0.001 Par Value. 10,000,000 Shares Authorized; 82,185 Shares Issued and |
|||||
82,185 Outstanding as of March 31, 2024 and 85,534 Shares Issued and 85,534 Outstanding as of |
|||||
December 31, 2023. |
82 |
86 |
|||
Common Stock, $0.001 Par Value. 250,000,000 Shares Authorized; 79,168,539 Shares Issued |
|||||
and 78,248,389 Shares Outstanding as of March 31, 2024 and 74,888,392 Shares Issued |
|||||
and 73,968,242 Shares Outstanding as of December 31, 2023. |
79,169 |
74,888 |
|||
Additional Paid-In Capital |
202,677,665 |
202,040,968 |
|||
Accumulated Deficit |
(96,843,602) |
(80,790,927) |
|||
Common Stock Held in Treasury, at Cost, 920,150 Shares Held as of March 31, 2024 and |
|||||
920,150 Shares Held as of December 31, 2023. |
(2,033,127) |
(2,033,127) |
|||
Total Stockholders’ Equity |
103,880,187 |
119,291,888 |
|||
Total Liabilities & Stockholders’ Equity |
$ |
346,606,776 |
$ |
358,144,332 |
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND (LOSS)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
(Unaudited) |
(Unaudited) |
||||
Operating Revenues |
|||||
Retail |
$ |
37,633,252 |
$ |
35,820,111 |
|
Wholesale |
3,898,320 |
4,058,925 |
|||
Other |
69,421 |
121,900 |
|||
Total Revenue |
41,600,993 |
40,000,936 |
|||
Total Cost of Goods & Services |
23,667,319 |
18,152,163 |
|||
Gross Profit |
17,933,674 |
21,848,773 |
|||
Operating Expenses |
|||||
Selling, General and Administrative Expenses |
11,835,818 |
10,100,934 |
|||
Professional Services |
1,671,881 |
1,187,364 |
|||
Salaries |
6,880,988 |
4,695,971 |
|||
Stock Based Compensation |
253,916 |
214,544 |
|||
Total Operating Expenses |
20,642,603 |
16,198,813 |
|||
Income from Operations |
(2,708,929) |
5,649,960 |
|||
Other Income (Expense) |
|||||
Interest Expense, net |
(8,307,369) |
(7,745,854) |
|||
Unrealized Gain (Loss) on Derivative Liabilities |
(681,825) |
8,501,685 |
|||
Other Loss |
10,500 |
– |
|||
Loss on Investment |
(33,382) |
– |
|||
Unrealized Gain on Investment |
(347,516) |
1,816 |
|||
Total Other Income (Expense) |
(9,359,592) |
757,647 |
|||
Pre-Tax Net Income (Loss) |
(12,068,521) |
6,407,607 |
|||
Provision for Income Taxes |
3,984,154 |
4,662,178 |
|||
Net Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Less: Accumulated Preferred Stock Dividends for the Period |
(2,155,259) |
(2,029,394) |
|||
Net Income (Loss) Attributable to Common Stockholders |
$ |
(18,207,934) |
$ |
(283,965) |
|
Earnings (Loss) per Share Attributable to Common Stockholders |
|||||
Basic Earnings (Loss) per Share |
$ |
(0.24) |
$ |
(0.01) |
|
Diluted Earnings (Loss) per Share |
$ |
(0.24) |
$ |
(0.06) |
|
Weighted Average Number of Shares Outstanding – Basic |
76,006,932 |
55,835,501 |
|||
Weighted Average Number of Shares Outstanding – Diluted |
76,006,932 |
101,608,278 |
|||
Comprehensive Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
(Unaudited) |
(Unaudited) |
||||
Cash Flows from Operating Activities: |
|||||
Net Income (Loss) for the Period |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Adjustments to Reconcile Net Income (Loss) to Cash for Operating Activities |
|||||
Depreciation & Amortization |
5,096,314 |
6,151,395 |
|||
Non-Cash Interest Expense |
1,031,431 |
991,184 |
|||
Non-Cash Lease Expense |
2,871,226 |
2,251,459 |
|||
Deferred Taxes |
1,004,345 |
(637,225) |
|||
Loss on Investment |
202,111 |
– |
|||
Change in Derivative Liabilities |
681,825 |
(8,501,685) |
|||
Amortization of Debt Issuance Costs |
421,512 |
421,513 |
|||
Amortization of Debt Discount |
2,303,246 |
1,999,933 |
|||
(Gain) Loss on Investments, net |
347,516 |
(1,816) |
|||
Stock Based Compensation |
640,974 |
214,544 |
|||
Changes in Operating Assets & Liabilities (net of Acquired Amounts): |
|||||
Accounts Receivable |
905,127 |
(118,181) |
|||
Inventory |
(587,900) |
(3,023,251) |
|||
Prepaid Expenses & Other Current Assets |
411,754 |
(3,036,801) |
|||
Other Assets |
(64,350) |
360,674 |
|||
Change in Operating Lease Liabilities |
(2,348,703) |
(1,531,765) |
|||
Accounts Payable & Other Liabilities |
(3,566,401) |
(3,464,671) |
|||
Income Taxes Payable |
3,002,257 |
5,299,403 |
|||
Net Cash Provided by (Used in) Operating Activities |
(3,700,390) |
(879,861) |
|||
Cash Flows from Investing Activities: |
|||||
Collection of Notes Receivable |
– |
10,631 |
|||
Purchase of Fixed Assets |
(1,532,287) |
(2,913,394) |
|||
Net Cash Provided by (Used in) Investing Activities |
(1,532,287) |
(2,902,763) |
|||
Cash Flows from Financing Activities: |
|||||
Payment on Notes Payable |
(864,938) |
– |
|||
Net Cash Provided by (Used in) Financing Activities |
(864,938) |
– |
|||
Net (Decrease) in Cash & Cash Equivalents |
(6,097,615) |
(3,782,624) |
|||
Cash & Cash Equivalents at Beginning of Period |
19,248,932 |
38,949,253 |
|||
Cash & Cash Equivalents at End of Period |
$ |
13,151,317 |
$ |
35,166,628 |
|
Supplemental Disclosure of Cash Flow Information: |
|||||
Cash Paid for Interest |
$ |
4,515,205 |
$ |
6,540,748 |
MEDICINE MAN TECHNOLOGIES, INC.
ADJUSTED EBITDA RECONCILIATION (NON-GAAP)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
Net Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Interest Expense, net |
8,307,369 |
7,745,854 |
|||
Provision for Income Taxes |
3,984,154 |
4,662,178 |
|||
Other (Income) Expense, net of Interest Expense |
1,052,223 |
(8,503,501) |
|||
Depreciation & Amortization |
5,618,834 |
6,612,814 |
|||
Earnings Before Interest, Taxes, Depreciation and |
|||||
Amortization (EBITDA) (non-GAAP) |
$ |
2,909,905 |
$ |
12,262,774 |
|
Non-Cash Stock Compensation |
253,916 |
214,544 |
|||
Deal Related Expenses |
637,761 |
1,195,802 |
|||
Capital Raise Related Expenses |
20,760 |
35,068 |
|||
Severance |
484,561 |
118,436 |
|||
Retention Program Expenses |
807,500 |
280,632 |
|||
Pre-Operating & Dark Carry Expenses |
1,053,837 |
391,917 |
|||
One-Time Legal Settlements |
417,653 |
– |
|||
Other Non-Recurring Items |
754,751 |
25,707 |
|||
Adjusted EBITDA (non-GAAP) |
$ |
7,340,644 |
$ |
14,524,880 |
|
Revenue |
41,600,993 |
40,000,936 |
|||
Adjusted EBITDA Percent |
17.6 % |
36.3 % |
View original content:https://www.prnewswire.co.uk/news-releases/schwazze-announces-first-quarter-2024-financial-results-302146858.html
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