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Ares Capital Corporation Announces March 31, 2019 Financial Results and Declares Second Quarter 2019 Dividend of $0.40 Per Share
DIVIDEND DECLARATIONS
NEW YORK–(BUSINESS WIRE)–Ares Capital Corporation (“Ares Capital”) (NASDAQ:ARCC) announced that
its Board of Directors has declared a second quarter dividend of $0.40
per share. The second quarter dividend is payable on June 28, 2019 to
stockholders of record as of June 14, 2019. Ares Capital previously
declared on February 12, 2019 an additional dividend of $0.02 per share,
payable, subject to the satisfaction of certain Maryland law
requirements, on June 28, 2019 to stockholders of record as of June 14,
2019.
MARCH 31, 2019 FINANCIAL RESULTS
Ares Capital also announced financial results for its first quarter
ended March 31, 2019.
HIGHLIGHTS
Financial
Q1-19 | Q1-18 | |||||||||||||||||||||||
(dollar amounts in millions, except per share data) |
Total |
Per |
Total |
Per |
||||||||||||||||||||
Core EPS(2) | $ | 0.48 | $ | 0.38 | ||||||||||||||||||||
GAAP EPS | $ | 0.50 | $ | 0.57 | ||||||||||||||||||||
Net investment income | $ | 201 | $ | 0.47 | $ | 144 | $ | 0.34 | ||||||||||||||||
Net realized gains (losses) | $ | 56 | $ | 0.13 | $ | (12 | ) | $ | (0.03 | ) | ||||||||||||||
Net unrealized gains (losses) | $ | (43 | ) | $ | (0.10 | ) | $ | 110 | $ | 0.26 | ||||||||||||||
GAAP net income | $ | 214 | $ | 0.50 | $ | 242 | $ | 0.57 | ||||||||||||||||
Dividends declared and payable | $ | 0.42 | (3) | $ | 0.38 | |||||||||||||||||||
As of | |||||||||||||||||||
(dollar amounts in millions, except per share data) | March 31, 2019 | December 31, 2018 | March 31, 2018 | ||||||||||||||||
Portfolio investments at fair value | $ | 13,064 | $ | 12,417 | $ | 12,199 | |||||||||||||
Total assets | $ | 13,962 | $ | 12,895 | $ | 12,693 | |||||||||||||
Stockholders’ equity | $ | 7,339 | $ | 7,300 | $ | 7,178 | |||||||||||||
Net assets per share | $ | 17.21 | $ | 17.12 | $ | 16.84 | |||||||||||||
__________________________________________________
(1) All per share amounts are basic and diluted.
(2) Basic and diluted Core EPS is a non-GAAP financial measure. Core EPS
is the net per share increase (decrease) in stockholders’ equity
resulting from operations less net realized and unrealized gains and
losses, any capital gains incentive fees attributable to such net
realized and unrealized gains and losses and any income taxes related to
such net realized gains and losses. Basic and diluted GAAP EPS is the
most directly comparable GAAP financial measure. Ares Capital believes
that Core EPS provides useful information to investors regarding
financial performance because it is one method Ares Capital uses to
measure its financial condition and results of operations. The
presentation of this additional information is not meant to be
considered in isolation or as a substitute for financial results
prepared in accordance with GAAP. Reconciliations of basic and diluted
Core EPS to the most directly comparable GAAP financial measure are set
forth in Schedule 1 hereto.
(3) Includes an additional dividend of $0.02 per share paid in the first
quarter ended March 31, 2019.
Portfolio Activity
(dollar amounts in millions) | Q1-19 | Q4-18 | Q1-18 | |||||||||||||||
Portfolio Activity During the Period: | ||||||||||||||||||
Gross commitments | $ | 1,953 | $ | 2,709 | $ | 1,792 | ||||||||||||
Exits of commitments | $ | 1,353 | $ | 1,021 | $ | 1,342 | ||||||||||||
Portfolio as of the End of the Period: | ||||||||||||||||||
Number of portfolio company investments | 345 | 344 | 360 | |||||||||||||||
Weighted average yield of debt and other income producing securities(4): |
||||||||||||||||||
At amortized cost | 10.4 | % | 10.2 | % | 10.1 | % | ||||||||||||
At fair value | 10.5 | % | 10.3 | % | 10.1 | % | ||||||||||||
Weighted average yield on total investments(5): | ||||||||||||||||||
At amortized cost | 9.3 | % | 9.0 | % | 8.9 | % | ||||||||||||
At fair value | 9.5 | % | 9.3 | % | 8.8 | % | ||||||||||||
__________________________________________________
(4) Weighted average yield of debt and other income producing securities
is computed as (a) the annual stated interest rate or yield earned plus
the net annual amortization of original issue discount and market
discount or premium earned on accruing debt and other income producing
securities divided by (b) the total accruing debt and other income
producing securities at amortized cost or at fair value as applicable.
(5) Weighted average yield on total investments is calculated as (a) the
annual stated interest rate or yield earned plus the net annual
amortization of original issue discount and market discount or premium
earned on accruing debt and other income producing securities divided by
(b) the total investments at amortized cost or at fair value as
applicable.
FIRST QUARTER 2019 OPERATING RESULTS
For the first quarter of 2019, Ares Capital reported GAAP net income of
$214 million or $0.50 per share (basic and diluted), Core EPS(2) of
$0.48 per share (basic and diluted), net investment income of $201
million or $0.47 per share (basic and diluted), and net realized and
unrealized gains of $13 million or $0.03 per share (basic and diluted).
Net income can vary substantially from period to period due to various
factors, including the level of new investment commitments, the
recognition of realized gains and losses and unrealized appreciation and
depreciation. As a result, quarterly comparisons of net income may not
be meaningful.
As of March 31, 2019, total assets were $14.0 billion, stockholders’
equity was $7.3 billion and net asset value per share was $17.21.
In the first quarter of 2019, Ares Capital made $2.0 billion in new
investment commitments, including commitments to 13 new portfolio
companies and 24 existing portfolio companies. Of the new commitments,
36 were sponsored transactions. As of March 31, 2019, 167 separate
private equity sponsors were represented in Ares Capital’s portfolio. Of
the $2.0 billion in new commitments made during the first quarter of
2019, 42% were in first lien senior secured loans, 39% were in second
lien senior secured loans, 8% were in the subordinated certificates of
the Senior Direct Lending Program, LLC (the “SDLP”), 7% were in
preferred equity and 4% were in other equity securities. Of these
commitments, 94% were in floating rate debt securities, of which 91%
contained interest rate floors and 9% were in the subordinated
certificates of the SDLP to make co-investments with Varagon Capital
Partners (“Varagon”) and its clients in floating rate first lien senior
secured loans through the SDLP, all of which contained interest rate
floors. Ares Capital may seek to sell all or a portion of these new
investment commitments, although there can be no assurance that Ares
Capital will be able to do so.
In the first quarter of 2019, significant new commitments included:
-
$467 million in first lien senior secured revolving and term loans, a
second lien senior secured term loan and preferred and other equity in
a revenue cycle management provider to physician practices and
hospitals; -
$180 million in a second lien senior secured term loan in a collision
repair company; -
$157 million in first lien senior secured revolving, delayed draw and
term loans, second lien senior secured delayed draw and term loans and
preferred and other equity in an enterprise management software
provider for the convenience retail and petroleum wholesale market; -
$156 million in the subordinated certificates of the SDLP to make
co-investments with Varagon and its clients in first lien senior
secured loans to two portfolio companies in a variety of industries; -
$93 million in a first lien senior secured term loan in an outsourced
data collection provider to the market research industry; -
$91 million in a second lien senior secured term loan in a
manufacturer of biologic, metal and synthetic implants and devices; -
$89 million in first lien senior secured revolving and term loans in a
manufacturer of packaging solutions and plastic injection molded
products; -
$58 million in a first lien senior secured delayed draw term loan and
second lien senior secured delayed draw and term loans in an insurance
service provider; -
$56 million in first lien senior secured revolving and term loans and
equity in a health food company; -
$55 million in first lien senior secured revolving and term loans in a
cloud-based business management solutions provider; -
$54 million in a second lien senior secured term loan in a diversified
food products manufacturer; -
$52 million in a first lien senior secured term loan in a supply chain
risk management platform provider; -
$51 million in first lien senior secured revolving, delayed draw and
term loans in an electronic payment processing solutions provider; and -
$49 million in first lien senior secured revolving and term loans in a
software provider for application development.
Also in the first quarter of 2019, Ares Capital exited approximately
$1.4 billion of investment commitments. Of the total investment
commitments exited, 70% were first lien senior secured loans, 29% were
second lien senior secured loans and 1% were other equity securities. Of
the approximately $1.4 billion of exited investment commitments, 98%
were floating rate, 1% were on non-accrual status and 1% were
non-interest bearing.
The fair value of Ares Capital’s portfolio investments at March 31, 2019
was $13.1 billion, including $11.8 billion in accruing debt and other
income producing securities. The total portfolio investments at fair
value were comprised of approximately 44% of first lien senior secured
loans, 30% of second lien senior secured loans, 6% of subordinated
certificates of the SDLP (the proceeds of which were applied to
co-investments with Varagon and its clients to fund first lien senior
secured loans through the SDLP), 6% of senior subordinated loans, 5% of
preferred equity securities and 9% of other equity securities. As of
March 31, 2019, the weighted average yield of debt and other income
producing securities in the portfolio at amortized cost and fair value
was 10.4% and 10.5%, respectively, the weighted average yield on total
investments in the portfolio at amortized cost and fair value was 9.3%
and 9.5%, respectively, and 85% of the total investments at fair value
were in floating rate securities.
“ARCC reported strong first quarter earnings driven by net portfolio
growth, increased fee income and stable credit and investment
performance,” said Kipp deVeer, Chief Executive Officer of Ares Capital.
“While we have remained highly selective, we have also continued to find
attractive investment opportunities with $2 billion in new commitments
to well positioned middle market companies.”
“On the balance sheet front, we have extended debt maturities, increased
available capital and further diversified our sources of financing in
support of our strategy of making compelling risk adjusted return
investments in franchise companies,” said Penni Roll, Chief Financial
Officer of Ares Capital.
PORTFOLIO QUALITY
Ares Capital Management LLC (“Ares Capital Management” or Ares Capital’s
“investment adviser”) employs an investment rating system to categorize
Ares Capital’s investments. In addition to various risk management and
monitoring tools, Ares Capital’s investment adviser grades the credit
risk of all investments on a scale of 1 to 4 no less frequently than
quarterly. This system is intended primarily to reflect the underlying
risk of a portfolio investment relative to Ares Capital’s initial cost
basis in respect of such portfolio investment (i.e., at the time of
origination or acquisition), although it may also take into account
under certain circumstances the performance of the portfolio company’s
business, the collateral coverage of the investment and other relevant
factors. Under this system, investments with a grade of 4 involve the
least amount of risk to Ares Capital’s initial cost basis. The trends
and risk factors for this investment since origination or acquisition
are generally favorable, which may include the performance of the
portfolio company or a potential exit. Investments graded 3 involve a
level of risk to Ares Capital’s initial cost basis that is similar to
the risk to Ares Capital’s initial cost basis at the time of origination
or acquisition. This portfolio company is generally performing as
expected and the risk factors to Ares Capital’s ability to ultimately
recoup the cost of Ares Capital’s investment are neutral to favorable.
All investments or acquired investments in new portfolio companies are
initially assessed a grade of 3. Investments graded 2 indicate that the
risk to Ares Capital’s ability to recoup the initial cost basis of such
investment has increased materially since origination or acquisition,
including as a result of factors such as declining performance and
non-compliance with debt covenants; however, payments are generally not
more than 120 days past due. An investment grade of 1 indicates that the
risk to Ares Capital’s ability to recoup the initial cost basis of such
investment has substantially increased since origination or acquisition,
and the portfolio company likely has materially declining performance.
For debt investments with an investment grade of 1, most or all of the
debt covenants are out of compliance and payments are substantially
delinquent. For investments graded 1, it is anticipated that Ares
Capital will not recoup Ares Capital’s initial cost basis and may
realize a substantial loss of Ares Capital’s initial cost basis upon
exit. For investments graded 1 or 2, Ares Capital’s investment adviser
enhances its level of scrutiny over the monitoring of such portfolio
company. The grade of a portfolio investment may be reduced or increased
over time.
As of March 31, 2019 and December 31, 2018, the weighted average grade
of the investments in Ares Capital’s portfolio at fair value was 3.1 and
3.0, respectively, and loans on non-accrual status represented 2.3% and
2.5%, respectively, of total investments at amortized cost (or 0.4% and
0.6%, respectively, at fair value).
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2019, Ares Capital had $572 million in cash and cash
equivalents and $6.3 billion in total aggregate principal amount of debt
outstanding ($6.2 billion at carrying value). Subject to leverage,
borrowing base and other restrictions, Ares Capital had approximately
$0.8 billion available for additional borrowings under its existing
credit facilities as of March 31, 2019.
In March 2019, Ares Capital issued $402.5 million aggregate principal
amount of unsecured convertible notes, that mature on March 1, 2024 (the
“2024 Convertible Notes”), unless previously converted or repurchased in
accordance with their terms. Ares Capital does not have the right to
redeem the 2024 Convertible Notes prior to maturity. The 2024
Convertible Notes bear interest at a rate of 4.625% per year, payable
semi-annually. The initial conversion price of $19.88 was approximately
15% above the $17.29 per share closing price of Ares Capital’s common
stock on March 5, 2019.
FIRST QUARTER 2019 DIVIDEND PAID AND 2019 DECLARED ADDITIONAL
DIVIDENDS
On February 12, 2019, Ares Capital declared a first quarter 2019
dividend of $0.40 per share and an additional first quarter 2019
dividend of $0.02 per share for a total of approximately $179 million.
The record date for these dividends was March 15, 2019 and the dividends
were paid on March 29, 2019.
On February 12, 2019, Ares Capital also declared additional dividends of
$0.02 per share to be distributed in the second, third and fourth
quarter of 2019. The second quarter 2019 additional dividend of $0.02
per share will be payable on June 28, 2019 to stockholders of record as
of June 14, 2019. The third quarter 2019 additional dividend of $0.02
per share will be payable on September 30, 2019 to stockholders of
record as of September 16, 2019. The fourth quarter 2019 additional
dividend of $0.02 per share will be payable on December 27, 2019 to
stockholders of record as of December 16, 2019. Payment of the
additional June 28, 2019, September 30, 2019 and December 27, 2019
dividends are subject to the satisfaction of certain Maryland law
requirements.
RECENT DEVELOPMENTS
In April 2019, Ares Capital amended and restated its senior secured
credit facility (as amended, the “Revolving Credit Facility”) to, among
other things, (a) increase the total size under the Revolving Credit
Facility from approximately $2.1 billion to approximately $3.4 billion,
(b) increase the size of the letter of credit sub-facility from $150
million to $200 million, with the ability of Ares Capital to increase
incrementally by $75 million on an uncommitted basis, (c) extend the
expiration of the revolving period with respect to all commitments of
the lenders under the credit facility to March 30, 2023, during which
period Ares Capital, subject to certain conditions, may make borrowings
under the credit facility, and (d) extend the stated maturity date with
respect to all commitments of the lenders under the credit facility to
March 30, 2024.
From April 1, 2019 through April 24, 2019, Ares Capital made new
investment commitments of approximately $183 million, of which $130
million were funded. Of these new commitments, 51% were in first lien
senior secured loans, 48% were in second lien senior secured loans and
1% were in the subordinated certificates of the SDLP. Of the
approximately $183 million of new investment commitments, 100% were
floating rate. The weighted average yield of debt and other income
producing securities funded during the period at amortized cost was
9.8%. Ares Capital may seek to sell all or a portion of these new
investment commitments, although there can be no assurance that it will
be able to do so.
From April 1, 2019 through April 24, 2019, Ares Capital exited
approximately $747 million of investment commitments. Of the total
investment commitments, 88% were first lien senior secured loans, 11%
were senior subordinated loans and 1% were other equity securities. Of
the approximately $747 million of exited investment commitments, 99%
were floating rate and 1% were non-interest bearing. The weighted
average yield of debt and other income producing securities exited or
repaid during the period at amortized cost was 9.3% and the weighted
average yield on total investments exited or repaid during the period at
amortized cost was 9.3%. On the approximately $747 million of investment
commitments exited from April 1, 2019 through April 24, 2019, Ares
Capital recognized total net realized gains of approximately $14 million.
In addition, as of April 24, 2019, Ares Capital had an investment
backlog and pipeline of approximately $1,055 million and $195 million,
respectively. Investment backlog includes transactions approved by Ares
Capital’s investment adviser’s investment committee and/or for which a
formal mandate, letter of intent or a signed commitment have been
issued, and therefore Ares Capital believes are likely to close.
Investment pipeline includes transactions where due diligence and
analysis are in process, but no formal mandate, letter of intent or
signed commitment have been issued. The consummation of any of the
investments in this backlog and pipeline depends upon, among other
things, one or more of the following: satisfactory completion of our due
diligence investigation of the prospective portfolio company, Ares
Capital’s acceptance of the terms and structure of such investment and
the execution and delivery of satisfactory transaction documentation. In
addition, Ares Capital may sell all or a portion of these investments
and certain of these investments may result in the repayment of existing
investments. Ares Capital cannot assure you that it will make any of
these investments or that Ares Capital will sell all or any portion of
these investments.
On April 24, 2019, at an in-person meeting, the Board of Directors of
Ares Capital approved the form of Second Amended and Restated Advisory
and Management Agreement to be entered into by Ares Capital and its
investment adviser, effective as of June 6, 2019. The Second Amended and
Restated Advisory and Management Agreement will reduce the rate used in
calculating the base management fee calculated thereunder from 1.50% to
1.00% per annum with respect to assets financed using leverage over 1.0x
debt to equity.
On April 24, 2019, the Board of Directors of Ares Capital appointed (i)
Lisa Morgan as Chief Compliance Officer of Ares Capital, replacing
Miriam Krieger who had served in such capacity since July 2011, and (ii)
Miriam Krieger as Vice President of Ares Capital.
WEBCAST / CONFERENCE CALL
Ares Capital will host a webcast/conference call on Tuesday, April 30,
2019 at 12:00 p.m. (Eastern Time) to discuss its quarter ended March 31,
2019 financial results. PLEASE VISIT ARES CAPITAL’S WEBCAST LINK LOCATED
ON THE HOME PAGE OF THE INVESTOR RESOURCES SECTION OF ARES CAPITAL’S
WEBSITE FOR A SLIDE PRESENTATION THAT COMPLEMENTS THE EARNINGS
CONFERENCE CALL.
All interested parties are invited to participate via telephone or the
live webcast, which will be hosted on a webcast link located on the Home
page of the Investor Resources section of Ares Capital’s website at www.arescapitalcorp.com.
Please visit the website to test your connection before the webcast.
Domestic callers can access the conference call by dialing (888)
317-6003. International callers can access the conference call by
dialing +1 (412) 317-6061. All callers will need to enter the
Participant Elite Entry Number 0181728 followed by the # sign and
reference “Ares Capital Corporation” once connected with the operator.
All callers are asked to dial in 10-15 minutes prior to the call so that
name and company information can be collected. For interested parties,
an archived replay of the call will be available approximately one hour
after the end of the call through May 14, 2019 at 5:00 p.m. (Eastern
Time) to domestic callers by dialing (877) 344-7529 and to international
callers by dialing +1 (412) 317-0088. For all replays, please reference
conference number 10129711. An archived replay will also be available
through May 14, 2019 on a webcast link located on the Home page of the
Investor Resources section of Ares Capital’s website.
ABOUT ARES CAPITAL CORPORATION
Ares Capital is a leading specialty finance company that provides
one-stop debt and equity financing solutions to U.S. middle market
companies and power generation projects. Ares Capital originates and
invests in senior secured loans, mezzanine debt and, to a lesser extent,
equity investments through its national direct origination platform.
Ares Capital’s investment objective is to generate both current income
and capital appreciation through debt and equity investments primarily
in private companies. Ares Capital has elected to be regulated as a
business development company (“BDC”) and is the largest BDC by both
market capitalization and total assets. Ares Capital is externally
managed by a subsidiary of Ares Management Corporation (NYSE: ARES), a
publicly traded, leading global alternative asset manager. For more
information about Ares Capital Corporation, visit www.arescapitalcorp.com.
However, the contents of such website are not and should not be deemed
to be incorporated by reference herein.
FORWARD-LOOKING STATEMENTS
Statements included herein or on the webcast/conference call may
constitute “forward-looking statements,” which relate to future events
or Ares Capital’s future performance or financial condition. These
statements are not guarantees of future performance, condition or
results and involve a number of risks and uncertainties. Actual results
and conditions may differ materially from those in the forward-looking
statements as a result of a number of factors, including those described
from time to time in Ares Capital’s filings with the Securities and
Exchange Commission. Ares Capital undertakes no duty to update any
forward-looking statements made herein or on the webcast/conference call.
ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
(in millions, except per share data)
As of | |||||||||||
March 31, 2019 | December 31, 2018 | ||||||||||
(unaudited) | |||||||||||
ASSETS | |||||||||||
Total investments at fair value (amortized cost of $13,440 and $12,754, respectively) |
$ | 13,064 | $ | 12,417 | |||||||
Cash and cash equivalents | 572 | 296 | |||||||||
Interest receivable | 114 | 91 | |||||||||
Receivable for open trades | 28 | 12 | |||||||||
Operating lease right-of-use asset | 105 | — | |||||||||
Other assets | 79 | 79 | |||||||||
Total assets | $ | 13,962 | $ | 12,895 | |||||||
LIABILITIES | |||||||||||
Debt | $ | 6,197 | $ | 5,214 | |||||||
Base management fees payable | 49 | 45 | |||||||||
Income based fees payable | 38 | 36 | |||||||||
Capital gains incentive fees payable | 64 | 112 | |||||||||
Interest and facility fees payable | 25 | 64 | |||||||||
Payable for open trades | 35 | 25 | |||||||||
Operating lease liabilities | 137 | — | |||||||||
Accounts payable and other liabilities | 78 | 99 | |||||||||
Total liabilities | 6,623 | 5,595 | |||||||||
STOCKHOLDERS’ EQUITY | |||||||||||
Common stock, par value $0.001 per share, 600 common shares |
— | — | |||||||||
Capital in excess of par value | 7,177 | 7,173 | |||||||||
Accumulated undistributed earnings | 162 | 127 | |||||||||
Total stockholders’ equity | 7,339 | 7,300 | |||||||||
Total liabilities and stockholders’ equity | $ | 13,962 | $ | 12,895 | |||||||
NET ASSETS PER SHARE | $ | 17.21 | $ | 17.12 | |||||||
Contacts
INVESTOR RELATIONS
Ares Capital Corporation
Carl G. Drake or John Stilmar
(888)
818-5298
[email protected]
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Cannabis
Medical Cannabis Market Report 2024-2030: Asia-Pacific Set to Witness Robust Growth, Driven by R&D Discovery Initiatives
Cannabis
Rubicon Organics Reports Q1 2024 Financial Results
SCHWAZZE
Schwazze Announces First Quarter 2024 Financial Results
Schwazze Management to Host Conference Call Today at 5:00 p.m. Eastern Time
DENVER, May 15, 2024 /PRNewswire/ — Medicine Man Technologies, Inc., operating as Schwazze, (OTCQX: SHWZ) (Cboe CA: SHWZ) (“Schwazze” or the “Company”), today announced financial and operational results for the first quarter ended March 31, 2024.
“We delivered another period of revenue growth in Q1 as we further refined our retail strategy while contending with the prolonged competitive challenges in Colorado and New Mexico,” said Forrest Hoffmaster, Interim CEO of Schwazze. “Throughout the quarter, we continued to sharpen our pricing and promotional efforts while enhancing the in-store experience, widening assortment, improving in-stock position, and advancing our loyalty program to attract and retain new customers. We also strengthened our wholesale business with quarter-over-quarter growth, while surpassing 30% total door penetration across both states.”
“The Colorado market remains highly competitive with more than 680 active recreational licenses, underscoring the importance of delivering an exceptional customer experience and fully integrated retail support program. Although retail pricing has recently stabilized, Colorado sales in Q1 were down 10% year-over-year due to lower volumes. Nonetheless, we significantly outpaced the market as our sales were up 9%, demonstrating the effectiveness of our operating playbook to compete in challenging environments. We expect to continue driving improvements in customer acquisition, retention, and loyalty as we further increase market share in the state.”
“In New Mexico, the proliferation of new licenses continued to outpace state cannabis sales as store count in Q1 increased 31% year-over-year while the market grew only 13%. In addition to pricing and promotional efforts, we’ve focused on driving traffic into our stores by expanding assortment with high quality flower and delivering an elevated customer experience. The New Mexico regulatory body has also increased its license enforcement efforts in recent months, contributing to more than 70 store closures and a 33% sequential decrease in net new store openings in the first quarter. We will continue to support the New Mexico Cannabis Control Division as it develops its regulatory framework.”
“Over the past four years we have rapidly scaled our footprint through 13 acquisitions, building a leading retail presence in both Colorado and New Mexico. We are beginning to see positive momentum from our pricing and promotional strategy and will remain focused on driving operating efficiencies while further optimizing our assets as we consolidate cultivation facilities and eliminate underperforming stores that do not meet our high-margin thresholds. We believe these initiatives, coupled with our operating playbook and strict cost controls, will enable us to return to stronger levels of profitability moving forward.”
First Quarter 2024 Financial Summary
$ in Thousands USD |
Q1 2024 |
Q4 2023 |
Q1 2023 |
Total Revenue |
$41,601 |
$43,325 |
$40,001 |
Gross Profit |
$17,934 |
$7,034[1] |
$21,849 |
Operating Expenses |
$20,643 |
$23,276 |
$16,199 |
Income (Loss) from Operations |
$(2,709) |
$(16,242) |
$5,650 |
Adjusted EBITDA[2] |
$7,341 |
$10,953 |
$14,525 |
Operating Cash Flow |
$(3,700) |
$3,452 |
$(880) |
Recent Highlights
- Announced the grand opening of a medical and recreational dispensary in March under the Everest Apothecary banner in Las Cruces, New Mexico, increasing the Company’s retail footprint to 34 stores across the state.
- Increased wholesale penetration in the first quarter to more than 30% of total doors in Colorado and New Mexico.
- Lowell Herb Co. pre-roll sales increased more than 3x quarter-over-quarter in Colorado, where it continues to be the #1 pre-roll in the state.
- Wana gummy sales up more than 2x quarter-over-quarter in New Mexico.
First Quarter 2024 Financial Results
Total revenue in the first quarter of 2024 increased 4% to $41.6 million compared to $40.0 million for the same quarter last year. The increase was primarily due to growth from new stores compared to the prior year period, partially offset by continued pricing pressure and the proliferation of new licenses in New Mexico.
Gross profit for the first quarter of 2024 was $17.9 million or 43.1% of total revenue, compared to $21.8 million or 54.6% of total revenue for the same quarter last year. The decrease in gross margin was primarily driven by the aforementioned pricing pressure in New Mexico, as well as higher medical sales mix in Colorado.
____________________________ |
1 Q4 2023 Gross Profit includes one-time, non-cash inventory adjustments of approximately $13.1 million comprised of $3.1 million of product consolidation, obsolescence, and shrinkage expenses, $4.3 million of net realizable value adjustments, and $5.8 million of fair value adjustments on acquired inventory in New Mexico in 2023. |
Operating expenses for the first quarter of 2024 were $20.6 million compared to $16.2 million for the same quarter last year. The year-ago period benefitted from a payroll tax credit of $3.9M. The remaining increase was primarily driven by personnel expenses and four-wall SG&A costs associated with 21 additional stores in Colorado and New Mexico that are still ramping.
Loss from operations for the first quarter of 2024 was $2.7 million compared to income from operations of $5.6 million in the same quarter last year. Net loss was $16.1 million for the first quarter of 2024 compared to net income of $1.7 million for the same quarter last year.
Adjusted EBITDA for the first quarter of 2024 was $7.3 million compared to $14.5 million for the same quarter last year. The decrease in Adjusted EBITDA was primarily driven by lower gross margin and higher operating expenses associated with the 21 additional stores that are still ramping.
As of March 31, 2024, cash and cash equivalents were $13.2 million compared to $19.2 million on December 31, 2023. Total debt as of March 31, 2024, was $159.7 million compared to $156.8 million on December 31, 2023.
Conference Call
The Company will conduct a conference call today, May 15, 2024, at 5:00 p.m. Eastern time to discuss its results for the first quarter ended March 31, 2024.
Schwazze management will host the conference call, followed by a question-and-answer period. Interested parties may submit questions to the Company prior to the call by emailing [email protected].
Date: Wednesday, May 15, 2024
Time: 5:00 p.m. Eastern time
Toll-free dial-in: (888) 664-6383
International dial-in: (416) 764-8650
Conference ID: 84167910
Webcast: SHWZ Q1 2024 Earnings Call
The conference call will also be broadcast live and available for replay on the investor relations section of the Company’s website at https://ir.schwazze.com.
Toll-free replay number: (888) 390-0541
International replay number: (416) 764-8677
Replay ID: 167910
If you have any difficulty registering or connecting with the conference call, please contact Elevate IR at (720) 330-2829.
About Schwazze
Schwazze (OTCQX: SHWZ) (Cboe CA: SHWZ) is building a premier vertically integrated regional cannabis company with assets in Colorado and New Mexico and will continue to explore taking its operating system to other states where it can develop a differentiated regional leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale.
Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company’s leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector.
Medicine Man Technologies, Inc. was Schwazze’s former operating trade name. The corporate entity continues to be named Medicine Man Technologies, Inc. Schwazze derives its name from the pruning technique of a cannabis plant to enhance plant structure and promote healthy growth. To learn more about Schwazze, visit https://schwazze.com/.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include financial outlooks; any projections of net sales, earnings, or other financial items; any statements of the strategies, plans and objectives of our management team for future operations; expectations in connection with the Company’s previously announced business plans; any statements regarding future economic conditions or performance; and statements regarding the intent, belief or current expectations of our management team. Such statements may be preceded by the words “may,” “will,” “could,” “would,” “should,” “expect,” “intends,” “plans,” “strategy,” “prospects,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other words of similar meaning in connection with a discussion of future events or future operating or financial performance, although the absence of these words does not necessarily mean that a statement is not forward-looking. We have based our forward-looking statements on management’s current expectations and assumptions about future events and trends affecting our business and industry. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Therefore, forward-looking statements are not guarantees of future events or performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control and cannot be predicted or quantified. Consequently, actual events and results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) regulatory limitations on our products and services and the uncertainty in the application of federal, state, and local laws to our business, and any changes in such laws; (ii) our ability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (iii) our ability to identify, consummate, and integrate anticipated acquisitions; (iv) general industry and economic conditions; (v) our ability to access adequate capital upon terms and conditions that are acceptable to us; (vi) our ability to pay interest and principal on outstanding debt when due; (vii) volatility in credit and market conditions; (viii) the loss of one or more key executives or other key employees; and (ix) other risks and uncertainties related to the cannabis market and our business strategy. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s website at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise except as required by law.
Investor Relations Contact
Sean Mansouri, CFA or Aaron D’Souza
Elevate IR
(720) 330-2829
[email protected]
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
For the Periods Ended March 31, 2024 and December 31, 2023
Expressed in U.S. Dollars
March 31, |
December 31, |
||||
2024 |
2023 |
||||
ASSETS
|
|||||
Current Assets |
|||||
Cash & Cash Equivalents |
$ |
13,151,317 |
$ |
19,248,932 |
|
Accounts Receivable, net of Allowance for Doubtful Accounts |
3,356,032 |
4,261,159 |
|||
Inventory |
26,382,184 |
25,787,793 |
|||
Marketable Securities, net of Unrealized Loss of $347,516 and Loss of $1,816, respectively |
108,583 |
456,099 |
|||
Prepaid Expenses & Other Current Assets |
3,502,310 |
3,914,064 |
|||
Total Current Assets |
46,500,426 |
53,668,047 |
|||
Non-Current Assets |
|||||
Fixed Assets, net Accumulated Depreciation of $10,061,700 and $8,741,782, respectively |
31,326,000 |
31,113,630 |
|||
Investments |
2,000,000 |
2,000,000 |
|||
Investments Held for Sale |
– |
202,111 |
|||
Goodwill |
67,492,705 |
67,499,199 |
|||
Intangible Assets, net Accumulated Amortization of $36,483,160 and $32,706,765, respectively |
162,391,482 |
166,167,877 |
|||
Other Non-Current Assets |
1,328,187 |
1,263,837 |
|||
Operating Lease Right of Use Assets |
34,575,832 |
34,233,142 |
|||
Deferred Tax Assets, net |
992,144 |
1,996,489 |
|||
Total Non-Current Assets |
300,106,350 |
304,476,285 |
|||
Total Assets |
$ |
346,606,776 |
$ |
358,144,332 |
|
LIABILITIES & STOCKHOLDERS’ EQUITY
|
|||||
Current Liabilities |
|||||
Accounts Payable |
$ |
9,443,233 |
$ |
13,341,561 |
|
Accrued Expenses |
8,106,618 |
7,774,691 |
|||
Derivative Liabilities |
1,319,845 |
638,020 |
|||
Lease Liabilities – Current |
5,186,316 |
4,922,724 |
|||
Current Portion of Long Term Debt |
29,579,713 |
3,547,011 |
|||
Income Taxes Payable |
28,235,039 |
25,232,782 |
|||
Total Current Liabilities |
81,870,764 |
55,456,789 |
|||
Non-Current Liabilities |
|||||
Long Term Debt, net of Debt Discount & Issuance Costs |
130,120,753 |
153,262,203 |
|||
Lease Liabilities – Non-Current |
30,735,072 |
30,133,452 |
|||
Total Non-Current Liabilities |
160,855,825 |
183,395,655 |
|||
Total Liabilities |
$ |
242,726,589 |
$ |
238,852,444 |
|
Stockholders’ Equity |
|||||
Preferred Stock, $0.001 Par Value. 10,000,000 Shares Authorized; 82,185 Shares Issued and |
|||||
82,185 Outstanding as of March 31, 2024 and 85,534 Shares Issued and 85,534 Outstanding as of |
|||||
December 31, 2023. |
82 |
86 |
|||
Common Stock, $0.001 Par Value. 250,000,000 Shares Authorized; 79,168,539 Shares Issued |
|||||
and 78,248,389 Shares Outstanding as of March 31, 2024 and 74,888,392 Shares Issued |
|||||
and 73,968,242 Shares Outstanding as of December 31, 2023. |
79,169 |
74,888 |
|||
Additional Paid-In Capital |
202,677,665 |
202,040,968 |
|||
Accumulated Deficit |
(96,843,602) |
(80,790,927) |
|||
Common Stock Held in Treasury, at Cost, 920,150 Shares Held as of March 31, 2024 and |
|||||
920,150 Shares Held as of December 31, 2023. |
(2,033,127) |
(2,033,127) |
|||
Total Stockholders’ Equity |
103,880,187 |
119,291,888 |
|||
Total Liabilities & Stockholders’ Equity |
$ |
346,606,776 |
$ |
358,144,332 |
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND (LOSS)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
(Unaudited) |
(Unaudited) |
||||
Operating Revenues |
|||||
Retail |
$ |
37,633,252 |
$ |
35,820,111 |
|
Wholesale |
3,898,320 |
4,058,925 |
|||
Other |
69,421 |
121,900 |
|||
Total Revenue |
41,600,993 |
40,000,936 |
|||
Total Cost of Goods & Services |
23,667,319 |
18,152,163 |
|||
Gross Profit |
17,933,674 |
21,848,773 |
|||
Operating Expenses |
|||||
Selling, General and Administrative Expenses |
11,835,818 |
10,100,934 |
|||
Professional Services |
1,671,881 |
1,187,364 |
|||
Salaries |
6,880,988 |
4,695,971 |
|||
Stock Based Compensation |
253,916 |
214,544 |
|||
Total Operating Expenses |
20,642,603 |
16,198,813 |
|||
Income from Operations |
(2,708,929) |
5,649,960 |
|||
Other Income (Expense) |
|||||
Interest Expense, net |
(8,307,369) |
(7,745,854) |
|||
Unrealized Gain (Loss) on Derivative Liabilities |
(681,825) |
8,501,685 |
|||
Other Loss |
10,500 |
– |
|||
Loss on Investment |
(33,382) |
– |
|||
Unrealized Gain on Investment |
(347,516) |
1,816 |
|||
Total Other Income (Expense) |
(9,359,592) |
757,647 |
|||
Pre-Tax Net Income (Loss) |
(12,068,521) |
6,407,607 |
|||
Provision for Income Taxes |
3,984,154 |
4,662,178 |
|||
Net Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Less: Accumulated Preferred Stock Dividends for the Period |
(2,155,259) |
(2,029,394) |
|||
Net Income (Loss) Attributable to Common Stockholders |
$ |
(18,207,934) |
$ |
(283,965) |
|
Earnings (Loss) per Share Attributable to Common Stockholders |
|||||
Basic Earnings (Loss) per Share |
$ |
(0.24) |
$ |
(0.01) |
|
Diluted Earnings (Loss) per Share |
$ |
(0.24) |
$ |
(0.06) |
|
Weighted Average Number of Shares Outstanding – Basic |
76,006,932 |
55,835,501 |
|||
Weighted Average Number of Shares Outstanding – Diluted |
76,006,932 |
101,608,278 |
|||
Comprehensive Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
(Unaudited) |
(Unaudited) |
||||
Cash Flows from Operating Activities: |
|||||
Net Income (Loss) for the Period |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Adjustments to Reconcile Net Income (Loss) to Cash for Operating Activities |
|||||
Depreciation & Amortization |
5,096,314 |
6,151,395 |
|||
Non-Cash Interest Expense |
1,031,431 |
991,184 |
|||
Non-Cash Lease Expense |
2,871,226 |
2,251,459 |
|||
Deferred Taxes |
1,004,345 |
(637,225) |
|||
Loss on Investment |
202,111 |
– |
|||
Change in Derivative Liabilities |
681,825 |
(8,501,685) |
|||
Amortization of Debt Issuance Costs |
421,512 |
421,513 |
|||
Amortization of Debt Discount |
2,303,246 |
1,999,933 |
|||
(Gain) Loss on Investments, net |
347,516 |
(1,816) |
|||
Stock Based Compensation |
640,974 |
214,544 |
|||
Changes in Operating Assets & Liabilities (net of Acquired Amounts): |
|||||
Accounts Receivable |
905,127 |
(118,181) |
|||
Inventory |
(587,900) |
(3,023,251) |
|||
Prepaid Expenses & Other Current Assets |
411,754 |
(3,036,801) |
|||
Other Assets |
(64,350) |
360,674 |
|||
Change in Operating Lease Liabilities |
(2,348,703) |
(1,531,765) |
|||
Accounts Payable & Other Liabilities |
(3,566,401) |
(3,464,671) |
|||
Income Taxes Payable |
3,002,257 |
5,299,403 |
|||
Net Cash Provided by (Used in) Operating Activities |
(3,700,390) |
(879,861) |
|||
Cash Flows from Investing Activities: |
|||||
Collection of Notes Receivable |
– |
10,631 |
|||
Purchase of Fixed Assets |
(1,532,287) |
(2,913,394) |
|||
Net Cash Provided by (Used in) Investing Activities |
(1,532,287) |
(2,902,763) |
|||
Cash Flows from Financing Activities: |
|||||
Payment on Notes Payable |
(864,938) |
– |
|||
Net Cash Provided by (Used in) Financing Activities |
(864,938) |
– |
|||
Net (Decrease) in Cash & Cash Equivalents |
(6,097,615) |
(3,782,624) |
|||
Cash & Cash Equivalents at Beginning of Period |
19,248,932 |
38,949,253 |
|||
Cash & Cash Equivalents at End of Period |
$ |
13,151,317 |
$ |
35,166,628 |
|
Supplemental Disclosure of Cash Flow Information: |
|||||
Cash Paid for Interest |
$ |
4,515,205 |
$ |
6,540,748 |
MEDICINE MAN TECHNOLOGIES, INC.
ADJUSTED EBITDA RECONCILIATION (NON-GAAP)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
Net Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Interest Expense, net |
8,307,369 |
7,745,854 |
|||
Provision for Income Taxes |
3,984,154 |
4,662,178 |
|||
Other (Income) Expense, net of Interest Expense |
1,052,223 |
(8,503,501) |
|||
Depreciation & Amortization |
5,618,834 |
6,612,814 |
|||
Earnings Before Interest, Taxes, Depreciation and |
|||||
Amortization (EBITDA) (non-GAAP) |
$ |
2,909,905 |
$ |
12,262,774 |
|
Non-Cash Stock Compensation |
253,916 |
214,544 |
|||
Deal Related Expenses |
637,761 |
1,195,802 |
|||
Capital Raise Related Expenses |
20,760 |
35,068 |
|||
Severance |
484,561 |
118,436 |
|||
Retention Program Expenses |
807,500 |
280,632 |
|||
Pre-Operating & Dark Carry Expenses |
1,053,837 |
391,917 |
|||
One-Time Legal Settlements |
417,653 |
– |
|||
Other Non-Recurring Items |
754,751 |
25,707 |
|||
Adjusted EBITDA (non-GAAP) |
$ |
7,340,644 |
$ |
14,524,880 |
|
Revenue |
41,600,993 |
40,000,936 |
|||
Adjusted EBITDA Percent |
17.6 % |
36.3 % |
View original content:https://www.prnewswire.co.uk/news-releases/schwazze-announces-first-quarter-2024-financial-results-302146858.html
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