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Radian Announces First Quarter 2019 Financial Results
— GAAP net income increases to $171 million; diluted net income per
share grows 50% year-over-year to $0.78 —
— Adjusted diluted net operating income per share increases 24%
year-over-year to $0.73 —
— MI in force increases 10% year-over-year to $224 billion —
— Book value per share grows 24% year-over-year to $17.49 —
— Company purchases shares of its common stock under most recent
share repurchase program —
— In April, company enhances risk profile and improves capital
position with closing of $562 million ILN transaction; improves
financial flexibility with additional $375 million return of capital
from Radian Guaranty to Radian Group —
PHILADELPHIA–(BUSINESS WIRE)–Radian Group Inc. (NYSE: RDN) today reported net income for the quarter
ended March 31, 2019, of $171.0 million, or $0.78 per diluted share.
This compares to net income for the quarter ended March 31, 2018, of
$114.5 million, or $0.52 per diluted share.
Key Financial Highlights (dollars in millions, except |
|||||||||
Quarter Ended March 31, |
Quarter Ended March 31, |
Percent |
|||||||
Net income (1) | $171.0 | $114.5 | 49% | ||||||
Diluted net income per share | $0.78 | $0.52 | 50% | ||||||
Consolidated pretax income | $216.1 | $142.4 | 52% | ||||||
Adjusted pretax operating income (2) | $202.1 | $164.1 | 23% | ||||||
Adjusted diluted net operating |
$0.73 | $0.59 | 24% | ||||||
Net premiums earned – mortgage insurance | $261.8 | $242.6 | 8% | ||||||
MI New Insurance Written (NIW) | $10,900 | $11,664 | (7)% | ||||||
MI primary insurance in force | $223,734 | $204,025 | 10% | ||||||
Book value per share | $17.49 | $14.16 | 24% | ||||||
Return on Equity (1)(3) | 19.0% | 15.1% | 26% | ||||||
Adjusted Net Operating Return on Equity (2) | 17.7% | 17.1% | 4% | ||||||
(1) |
Net income for the first quarter of 2019 includes a $21.9 |
|
(2) |
Adjusted results, including adjusted pretax operating income, |
|
(3) |
Calculated by dividing annualized net income by average |
|
Adjusted pretax operating income for the quarter ended March 31, 2019,
was $202.1 million, compared to $164.1 million for the quarter ended
March 31, 2018. Adjusted diluted net operating income per share for the
quarter ended March 31, 2019, was $0.73, an increase of 24 percent
compared to $0.59 for the quarter ended March 31, 2018.
Book value per share at March 31, 2019, was $17.49, an increase of 7
percent compared to $16.34 at December 31, 2018, and an increase of 24
percent compared to $14.16 at March 31, 2018. A $78.4 million after-tax
change in accumulated other comprehensive income, due to net unrealized
gains on investment securities, increased book value per share by $0.37
during the first quarter of 2019.
“I am pleased to report on another excellent first quarter for Radian,
with net income of $171 million, return on equity of 19%, and the fifth
consecutive quarter of 10% year-over-year growth in our mortgage
insurance in-force portfolio, which grew to $224 billion. These results
are driven by the fundamental strength of our business model,” said
Radian’s Chief Executive Officer Rick Thornberry. “We continue to
enhance our risk profile and improve our financial flexibility, and are
pleased that our strong financial position has afforded us the
opportunity to return value more quickly to our stockholders through our
share repurchases.”
FIRST QUARTER HIGHLIGHTS
-
Mortgage insurance NIW was $10.9 billion for the quarter, representing
a decrease of 14 percent compared to $12.7 billion in the fourth
quarter of 2018 and a decrease of 7 percent compared to $11.7 billion
in the prior-year quarter.-
Of the $10.9 billion in NIW in the first quarter of 2019, 83
percent was written with monthly and other recurring premiums
compared to 83 percent in the fourth quarter of 2018, and 79
percent a year ago. -
Borrower-paid originations accounted for 95 percent of total NIW
in the first quarter of 2019, compared to 94 percent in the fourth
quarter of 2018, and 83 percent a year ago. -
Purchase originations accounted for 92 percent of total NIW in the
first quarter of 2019, compared to 95 percent in the fourth
quarter of 2018, and 89 percent a year ago.
-
Of the $10.9 billion in NIW in the first quarter of 2019, 83
-
Total primary mortgage insurance in force as of March 31, 2019, grew
to $223.7 billion, an increase of 1 percent compared to $221.4 billion
as of December 31, 2018, and an increase of 10 percent compared to
$204.0 billion as of March 31, 2018.-
Radian’s mortgage insurance portfolio consists of 94 percent of
new business written after 2008, including those loans that
successfully completed the Home Affordable Refinance Program
(HARP). -
Persistency, which is the percentage of mortgage insurance that
remains in force after a 12-month period, was 83.4 percent as of
March 31, 2019, compared to 83.1 percent as of December 31, 2018,
and 81.0 percent as of March 31, 2018. -
Annualized persistency for the three months ended March 31, 2019,
was 85.4 percent, compared to 85.5 percent for the three months
ended December 31, 2018, and 84.3 percent for the three months
ended March 31, 2018.
-
Radian’s mortgage insurance portfolio consists of 94 percent of
-
Net mortgage insurance premiums earned were $261.8 million for the
quarter ended March 31, 2019, compared to $259.7 million for the
quarter ended December 31, 2018, and $242.6 million for the quarter
ended March 31, 2018.-
Mortgage insurance in force premium yield was 48.6 basis points in
the first quarter of 2019, compared to 49.0 basis points in the
fourth quarter of 2018 and 48.7 basis points in the first quarter
of 2018. -
Total net mortgage insurance premium yield, which includes the
impact of ceded premiums and accrued profit commission, was 47.0
basis points in the first quarter of 2019, compared to 47.4 basis
points in the fourth quarter of 2018, and 47.9 basis points in the
first quarter of 2018. -
Additional details regarding notable variable items impacting
premiums earned may be found in Exhibit D.
-
Mortgage insurance in force premium yield was 48.6 basis points in
-
The mortgage insurance provision for losses was $20.8 million in the
first quarter of 2019, compared to $27.1 million in the fourth quarter
of 2018, and $37.4 million in the prior-year quarter.-
The number of primary delinquent loans was 20,122 as of March 31,
2019, a decrease of 5 percent compared to 21,093 as of
December 31, 2018 and a decrease of 18 percent compared to 24,597
as of March 31, 2018. -
The primary mortgage insurance delinquency rate decreased to 2.0
percent in the first quarter of 2019, compared to 2.1 percent in
the fourth quarter of 2018, and 2.5 percent in the first quarter
of 2018. -
The loss ratio in the first quarter of 2019 was 8.0 percent,
compared to 10.4 percent in the fourth quarter of 2018, and 15.4
percent in the first quarter of 2018. -
Mortgage insurance loss reserves were $385.4 million as of
March 31, 2019, compared to $397.9 million as of December 31,
2018, and $485.2 million as of March 31, 2018.
-
The number of primary delinquent loans was 20,122 as of March 31,
-
Total mortgage insurance claims paid were $34.6 million in the first
quarter of 2019, compared to $39.7 million in the fourth quarter of
2018, and $59.9 million in the first quarter of 2018. In addition, the
company’s pending claim inventory declined 3 percent from March 31,
2018. -
Total Mortgage and Real Estate Services Segment revenues for the first
quarter of 2019 were $36.0 million, compared to $41.5 million for the
fourth quarter of 2018, and $34.2 million for the first quarter of
2018. Segment results for the first quarter of 2019 include revenues
of approximately $5.1 million and incremental expenses (comprised of
approximately $3.6 million of operating expenses and approximately
$2.2 million of cost of services), both related to businesses acquired
in 2018. Adjusted earnings before interest, income taxes, depreciation
and amortization (Services adjusted EBITDA) for the quarter ended
March 31, 2019 was a loss of $0.9 million, compared to income of $3.2
million for the quarter ended December 31, 2018, and income of $0.5
million for the quarter ended March 31, 2018. Additional details
regarding the non-GAAP measure Services adjusted EBITDA may be found
in Exhibits F and G. -
Other operating expenses were $78.8 million in the first quarter of
2019, compared to $77.3 million in the fourth quarter of 2018, and
$63.2 million in the first quarter of 2018. The change in expenses
year-over-year is primarily driven by $5.7 million of non-operating
items, $3.6 million related to businesses acquired in 2018 as
previously mentioned, and an increase in legal and other professional
services of $1.6 million.
CAPITAL AND LIQUIDITY UPDATE
The company remains focused on optimizing its capital position,
enhancing its return on capital, and increasing its financial
flexibility.
Radian Group
-
As of March 31, 2019, Radian Group maintained $718 million of
available liquidity. Total liquidity, which includes the company’s
$268 million unsecured revolving credit facility entered into in
October 2017, was $986 million as of March 31, 2019. -
In March 2019, the company announced the Board’s authorization to
increase its existing share repurchase program from $100 million to
$250 million and extend the term to July 31, 2020. This program
provides Radian the flexibility to repurchase shares opportunistically
from time to time and to spend up to $250 million, excluding
commissions, based on market and business conditions, stock price and
other factors. During the first quarter, Radian repurchased and
settled 1,546,674 shares of its common stock. In addition, as of April
26, 2019, the company repurchased an additional 4,131,329 shares. As
of April 26, 2019, total shares repurchased in 2019 were 5,678,003,
representing a total approximate value of $122.4 million or $21.56 per
share inclusive of commissions. At April 26, 2019, purchase authority
of up to approximately $128 million remained available under this
program, which expires on July 31, 2020. -
After consideration of the shares repurchased after quarter end and
the $375 million return of capital described below, Radian Group’s
available liquidity would have increased by approximately $284 million
relative to the amount as of March 31, 2019.
Radian Guaranty
-
At March 31, 2019, Radian Guaranty’s Available Assets under the
Private Mortgage Insurer Eligibility Requirements (PMIERs) totaled
approximately $3.5 billion, resulting in an excess or “cushion” of
approximately $488 million, or 16 percent over its Minimum Required
Assets of approximately $3.0 billion. -
In April 2019, Radian Guaranty announced the closing of its second
mortgage insurance-linked note (ILN) transaction, where the company
obtained $562 million of credit risk protection from Eagle Re 2019-1
Ltd. (Eagle Re) through the issuance by Eagle Re of ILNs to eligible
third-party capital markets investors in an unregistered private
offering. Eagle Re is a special purpose insurer domiciled in Bermuda
and is not a subsidiary or affiliate of Radian Guaranty. Eagle Re has
funded its reinsurance obligations by issuing four classes of ILNs
which have a 10-year maturity with a 7-year call option. The ILNs are
non-recourse to Radian Group or its subsidiaries and affiliates. -
The Pennsylvania Insurance Department approved a $375 million return
of capital from Radian Guaranty to Radian Group during the second
quarter of 2019, which was paid on April 30, 2019 from Radian
Guaranty’s gross paid in and contributed statutory surplus. As
previously reported, the Pennsylvania Insurance Department approved a
$450 million return of capital in the fourth quarter of 2018. These
strategic capital actions improve Radian Group’s financial flexibility. -
After consideration of the ILN transaction and the $375 million return
of capital described above, Radian Guaranty’s excess of Available
Assets over its Minimum Required Assets under PMIERs would have
increased by approximately $187 million.
CONFERENCE CALL
Radian will discuss first quarter financial results in a conference call
tomorrow, Wednesday, May 1, 2019, at 9:00 a.m. Eastern time. The
conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts
or at www.radian.biz.
The call may also be accessed by dialing 800.230.1074 inside the U.S.,
or 612.288.0340 for international callers, using passcode 466411 or by
referencing Radian.
A replay of the webcast will be available on the Radian website
approximately two hours after the live broadcast ends for a period of
one year. A replay of the conference call will be available
approximately two and a half hours after the call ends for a period of
two weeks, using the following dial-in numbers and passcode:
800.475.6701 inside the U.S., or 320.365.3844 for international callers,
passcode 466411.
In addition to the information provided in the company’s earnings news
release, other statistical and financial information, which is expected
to be referred to during the conference call, will be available on
Radian’s website under Investors>Quarterly Results, or by clicking on http://www.radian.biz/page?name=QuarterlyResults.
2019 INVESTOR DAY
Radian will host an Investor Day on Tuesday, May 7, 2019, from 9:30 a.m.
to 3:30 p.m. Eastern time in Philadelphia. The company’s senior leaders
will provide details on Radian’s business strategy and priorities, key
business and product initiatives, and financial objectives. The event
will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts.
The slide presentation will also be available on Radian’s website one
hour prior to the event and can be accessed by visiting http://www.radian.biz/page?name=Presentations.
A replay of the webcast will be available at http://www.radian.biz/page?name=Webcasts
following the live broadcast, for a period of one year.
NON-GAAP FINANCIAL MEASURES
Radian believes that adjusted pretax operating income, adjusted diluted
net operating income per share and adjusted net operating return on
equity (non-GAAP measures) facilitate evaluation of the company’s
fundamental financial performance and provide relevant and meaningful
information to investors about the ongoing operating results of the
company. On a consolidated basis, these measures are not recognized in
accordance with accounting principles generally accepted in the United
States of America (GAAP) and should not be considered in isolation or
viewed as substitutes for GAAP measures of performance. The measures
described below have been established in order to increase transparency
for the purpose of evaluating the company’s operating trends and
enabling more meaningful comparisons with Radian’s competitors.
Adjusted pretax operating income is defined as earnings excluding the
impact of certain items that are not viewed as part of the operating
performance of the company’s primary activities, or not expected to
result in an economic impact equal to the amount reflected in pretax
income. Adjusted pretax operating income adjusts GAAP pretax income to
remove the effects of: (i) net gains (losses) on investments and other
financial instruments; (ii) loss on induced conversion and debt
extinguishment; (iii) acquisition-related expenses; (iv) amortization or
impairment of goodwill and other acquired intangible assets; and (v) net
impairment losses recognized in earnings and infrequent or unusual
non-operating items. Adjusted diluted net operating income per share
represents a diluted net income per share calculation using as its basis
adjusted pretax operating income, net of taxes at the company’s
statutory tax rate for the period. Adjusted net operating return on
equity is calculated by dividing annualized adjusted pretax operating
income, net of taxes computed using the company’s statutory tax rate, by
average stockholders’ equity, based on the average of the beginning and
ending balances for each period presented.
In addition to the above non-GAAP measures for the consolidated company,
the company also presents as supplemental information a non-GAAP measure
for the Services segment, representing earnings before interest, income
tax provision (benefit), depreciation and amortization (EBITDA).
Services adjusted EBITDA is calculated by using the Services segment’s
adjusted pretax operating income as described above, further adjusted to
remove the impact of depreciation and corporate allocations for interest
and operating expenses. In addition, the company also has presented a
related non-GAAP measure, Services adjusted EBITDA margin, which is
calculated by dividing Services adjusted EBITDA by GAAP total revenue
for the Services segment. Services adjusted EBITDA and Services adjusted
EBITDA margin are presented to facilitate comparisons with other
services companies, since they are widely accepted measures of
performance in the services industry and are used internally as
supplemental measures to evaluate the performance of our Services
segment.
See Exhibit F or Radian’s website for a description of these items, as
well as Exhibit G for reconciliations to the most comparable
consolidated GAAP measures.
ABOUT RADIAN
Radian is ensuring the American dream of homeownership responsibly and
sustainably through products and services that include industry-leading
mortgage insurance and a comprehensive suite of mortgage, risk, real
estate, and title services. We are powered by technology, informed by
data and driven to deliver new and better ways to transact and manage
risk. Learn more about Radian’s financial strength and flexibility at www.radian.biz
and visit www.radian.com
to see how Radian is shaping the future of mortgage and real estate
services.
FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS |
||
For historical trend information, refer to Radian’s quarterly |
||
Exhibit A: | Condensed Consolidated Statements of Operations Trend Schedule | |
Exhibit B: | Net Income Per Share Trend Schedule | |
Exhibit C: | Condensed Consolidated Balance Sheets | |
Exhibit D: | Net Premiums Earned – Insurance | |
Exhibit E: | Segment Information | |
Exhibit F: | Definition of Consolidated Non-GAAP Financial Measures | |
Exhibit G: | Consolidated Non-GAAP Financial Measure Reconciliations | |
Exhibit H: |
Mortgage Insurance Supplemental Information New Insurance Written |
|
Exhibit I: |
Mortgage Insurance Supplemental Information Primary Insurance in Force and Risk in Force |
|
Exhibit J: |
Mortgage Insurance Supplemental Information Claims and Reserves |
|
Exhibit K: |
Mortgage Insurance Supplemental Information Default Statistics |
|
Exhibit L: |
Mortgage Insurance Supplemental Information Reinsurance Programs |
|
Radian Group Inc. and Subsidiaries | |||||||||||||||||||||||||
Condensed Consolidated Statements of Operations Trend Schedule | |||||||||||||||||||||||||
Exhibit A | |||||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||
(In thousands, except per-share amounts) |
Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | Qtr 1 | ||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||
Net premiums earned – insurance | $ | 263,512 | $ | 261,682 | $ | 258,431 | $ | 251,344 | $ | 242,550 | |||||||||||||||
Services revenue | 32,753 | 38,414 | 36,566 | 36,828 | 33,164 | ||||||||||||||||||||
Net investment income | 43,847 | 42,051 | 38,995 | 37,473 | 33,956 | ||||||||||||||||||||
Net gains (losses) on investments and other financial instruments | 21,913 | (11,705 | ) | (4,480 | ) | (7,404 | ) | (18,887 | ) | ||||||||||||||||
Other income | 1,604 | 1,031 | 1,174 | 1,016 | 807 | ||||||||||||||||||||
Total revenues | 363,629 | 331,473 | 330,686 | 319,257 | 291,590 | ||||||||||||||||||||
Expenses: | |||||||||||||||||||||||||
Provision for losses | 20,754 | 27,140 | 20,881 | 19,337 | 37,283 | ||||||||||||||||||||
Policy acquisition costs | 5,893 | 6,485 | 5,667 | 5,996 | 7,117 | ||||||||||||||||||||
Cost of services | 24,157 | 24,939 | 25,854 | 24,205 | 23,126 | ||||||||||||||||||||
Other operating expenses | 78,805 | 77,266 | 70,125 | 70,184 | 63,243 | ||||||||||||||||||||
Restructuring and other exit costs | — | 113 | 4,464 | 925 | 551 | ||||||||||||||||||||
Interest expense | 15,697 | 15,584 | 15,535 | 15,291 | 15,080 | ||||||||||||||||||||
Amortization and impairment of other acquired intangible assets | 2,187 | 3,461 | 3,472 | 2,748 | 2,748 | ||||||||||||||||||||
Total expenses | 147,493 | 154,988 | 145,998 | 138,686 | 149,148 | ||||||||||||||||||||
Pretax income | 216,136 | 176,485 | 184,688 | 180,571 | 142,442 | ||||||||||||||||||||
Income tax provision (benefit) | 45,179 | 36,706 | 41,891 | (28,378 | ) | 27,956 | |||||||||||||||||||
Net income | $ | 170,957 | $ | 139,779 | $ | 142,797 | $ | 208,949 | $ | 114,486 | |||||||||||||||
Diluted net income per share | $ | 0.78 | $ | 0.64 | $ | 0.66 | $ | 0.96 | $ | 0.52 | |||||||||||||||
Radian Group Inc. and Subsidiaries | ||||||||||||||||||||
Net Income Per Share Trend Schedule | ||||||||||||||||||||
Exhibit B | ||||||||||||||||||||
The calculation of basic and diluted net income per share was |
||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||
(In thousands, except per-share amounts) |
Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | Qtr 1 | |||||||||||||||
Net income —basic and diluted | $ | 170,957 | $ | 139,779 | $ | 142,797 | $ | 208,949 | $ | 114,486 | ||||||||||
Average common shares outstanding—basic | 213,537 | 213,435 | 213,309 | 213,976 | 215,967 | |||||||||||||||
Dilutive effect of stock-based compensation arrangements (1) | 4,806 | 4,448 | 4,593 | 3,854 | 3,916 | |||||||||||||||
Adjusted average common shares outstanding—diluted | 218,343 | 217,883 | 217,902 | 217,830 | 219,883 | |||||||||||||||
Basic net income per share | $ | 0.80 | $ | 0.65 | $ | 0.67 | $ | 0.98 | $ | 0.53 | ||||||||||
Diluted net income per share | $ | 0.78 | $ | 0.64 | $ | 0.66 | $ | 0.96 | $ | 0.52 | ||||||||||
(1) |
The following number of shares of our common stock equivalents |
|
2019 | 2018 | |||||||||||||||||
(In thousands) |
Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | Qtr 1 | |||||||||||||
Shares of common stock equivalents | 169 | 337 | 338 | 484 | 170 | |||||||||||||
Radian Group Inc. and Subsidiaries | |||||||||||||||||||||||||
Condensed Consolidated Balance Sheets | |||||||||||||||||||||||||
Exhibit C | |||||||||||||||||||||||||
(In thousands, except per-share amounts) |
March 31, |
December 31, 2018 |
September 30, 2018 |
June 30, 2018 |
March 31, 2018 |
||||||||||||||||||||
Assets: | |||||||||||||||||||||||||
Investments | $ | 5,475,770 | $ | 5,153,029 | $ | 5,028,235 | $ | 4,873,919 | $ | 4,668,217 | |||||||||||||||
Cash | 118,668 | 95,393 | 104,413 | 95,573 | 122,481 | ||||||||||||||||||||
Restricted cash | 9,086 | 11,609 | 9,925 | 9,152 | 7,623 | ||||||||||||||||||||
Accounts and notes receivable | 89,237 | 78,652 | 108,003 | 94,848 | 80,068 | ||||||||||||||||||||
Deferred income taxes, net | 67,697 | 131,643 | 134,201 | 171,293 | 253,381 | ||||||||||||||||||||
Goodwill and other acquired intangible assets, net | 56,811 | 58,998 | 55,707 | 59,179 | 61,465 | ||||||||||||||||||||
Prepaid reinsurance premium | 408,622 | 417,628 | 413,728 | 405,447 | 390,241 | ||||||||||||||||||||
Other assets | 373,678 | 367,700 | 415,272 | 430,077 | 426,773 | ||||||||||||||||||||
Total assets | $ | 6,599,569 | $ | 6,314,652 | $ | 6,269,484 | $ | 6,139,488 | $ | 6,010,249 | |||||||||||||||
Liabilities and stockholders’ equity: | |||||||||||||||||||||||||
Unearned premiums | $ | 720,159 | $ | 739,357 | $ | 747,921 | $ | 741,296 | $ | 723,100 | |||||||||||||||
Reserve for losses and loss adjustment expense | 388,784 | 401,361 | 412,460 | 451,542 | 488,656 | ||||||||||||||||||||
Senior notes | 1,031,197 | 1,030,348 | 1,029,511 | 1,028,687 | 1,027,875 | ||||||||||||||||||||
Reinsurance funds withheld | 329,868 | 321,212 | 352,952 | 331,776 | 305,409 | ||||||||||||||||||||
Other liabilities | 419,470 | 333,659 | 379,362 | 385,051 | 412,793 | ||||||||||||||||||||
Total liabilities | 2,889,478 | 2,825,937 | 2,922,206 | 2,938,352 | 2,957,833 | ||||||||||||||||||||
Common stock | 230 | 231 | 231 | 231 | 233 | ||||||||||||||||||||
Treasury stock | (895,321 | ) | (894,870 | ) | (894,635 | ) | (894,610 | ) | (894,191 | ) | |||||||||||||||
Additional paid-in capital | 2,697,724 | 2,724,733 | 2,720,626 | 2,715,426 | 2,748,233 | ||||||||||||||||||||
Retained earnings | 1,889,964 | 1,719,541 | 1,580,296 | 1,438,032 | 1,229,616 | ||||||||||||||||||||
Accumulated other comprehensive income (loss) | 17,494 | (60,920 | ) | (59,240 | ) | (57,943 | ) | (31,475 | ) | ||||||||||||||||
Total stockholders’ equity | 3,710,091 | 3,488,715 | 3,347,278 | 3,201,136 | 3,052,416 | ||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 6,599,569 | $ | 6,314,652 | $ | 6,269,484 | $ | 6,139,488 | $ | 6,010,249 | |||||||||||||||
Shares outstanding | 212,136 | 213,473 | 213,333 | 213,232 | 215,543 | ||||||||||||||||||||
Book value per share | $ | 17.49 | $ | 16.34 | $ | 15.69 | $ | 15.01 | $ | 14.16 | |||||||||||||||
Tangible book value per share (See Exhibit G) | $ | 17.22 | $ | 16.06 | $ | 15.43 | $ | 14.73 | $ | 13.88 | |||||||||||||||
Statutory Capital Ratios | |||||||||||||||||||||||||
Risk to capital ratio-Radian Guaranty only | 13.4 | :1 | (1) | 13.9 | :1 | 12.4 | :1 | 12.5 | :1 | 12.6 | :1 | ||||||||||||||
Risk to capital ratio-Mortgage Insurance combined | 12.4 | :1 | (1) | 12.8 | :1 | 11.7 | :1 | 11.8 | :1 | 11.9 | :1 | ||||||||||||||
(1) Preliminary. |
|||||||||||||||||||||||||
Contacts
Emily Riley – Phone: 215.231.1035
Email: [email protected]
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Schwazze Announces First Quarter 2024 Financial Results
Schwazze Management to Host Conference Call Today at 5:00 p.m. Eastern Time
DENVER, May 15, 2024 /PRNewswire/ — Medicine Man Technologies, Inc., operating as Schwazze, (OTCQX: SHWZ) (Cboe CA: SHWZ) (“Schwazze” or the “Company”), today announced financial and operational results for the first quarter ended March 31, 2024.
“We delivered another period of revenue growth in Q1 as we further refined our retail strategy while contending with the prolonged competitive challenges in Colorado and New Mexico,” said Forrest Hoffmaster, Interim CEO of Schwazze. “Throughout the quarter, we continued to sharpen our pricing and promotional efforts while enhancing the in-store experience, widening assortment, improving in-stock position, and advancing our loyalty program to attract and retain new customers. We also strengthened our wholesale business with quarter-over-quarter growth, while surpassing 30% total door penetration across both states.”
“The Colorado market remains highly competitive with more than 680 active recreational licenses, underscoring the importance of delivering an exceptional customer experience and fully integrated retail support program. Although retail pricing has recently stabilized, Colorado sales in Q1 were down 10% year-over-year due to lower volumes. Nonetheless, we significantly outpaced the market as our sales were up 9%, demonstrating the effectiveness of our operating playbook to compete in challenging environments. We expect to continue driving improvements in customer acquisition, retention, and loyalty as we further increase market share in the state.”
“In New Mexico, the proliferation of new licenses continued to outpace state cannabis sales as store count in Q1 increased 31% year-over-year while the market grew only 13%. In addition to pricing and promotional efforts, we’ve focused on driving traffic into our stores by expanding assortment with high quality flower and delivering an elevated customer experience. The New Mexico regulatory body has also increased its license enforcement efforts in recent months, contributing to more than 70 store closures and a 33% sequential decrease in net new store openings in the first quarter. We will continue to support the New Mexico Cannabis Control Division as it develops its regulatory framework.”
“Over the past four years we have rapidly scaled our footprint through 13 acquisitions, building a leading retail presence in both Colorado and New Mexico. We are beginning to see positive momentum from our pricing and promotional strategy and will remain focused on driving operating efficiencies while further optimizing our assets as we consolidate cultivation facilities and eliminate underperforming stores that do not meet our high-margin thresholds. We believe these initiatives, coupled with our operating playbook and strict cost controls, will enable us to return to stronger levels of profitability moving forward.”
First Quarter 2024 Financial Summary
$ in Thousands USD |
Q1 2024 |
Q4 2023 |
Q1 2023 |
Total Revenue |
$41,601 |
$43,325 |
$40,001 |
Gross Profit |
$17,934 |
$7,034[1] |
$21,849 |
Operating Expenses |
$20,643 |
$23,276 |
$16,199 |
Income (Loss) from Operations |
$(2,709) |
$(16,242) |
$5,650 |
Adjusted EBITDA[2] |
$7,341 |
$10,953 |
$14,525 |
Operating Cash Flow |
$(3,700) |
$3,452 |
$(880) |
Recent Highlights
- Announced the grand opening of a medical and recreational dispensary in March under the Everest Apothecary banner in Las Cruces, New Mexico, increasing the Company’s retail footprint to 34 stores across the state.
- Increased wholesale penetration in the first quarter to more than 30% of total doors in Colorado and New Mexico.
- Lowell Herb Co. pre-roll sales increased more than 3x quarter-over-quarter in Colorado, where it continues to be the #1 pre-roll in the state.
- Wana gummy sales up more than 2x quarter-over-quarter in New Mexico.
First Quarter 2024 Financial Results
Total revenue in the first quarter of 2024 increased 4% to $41.6 million compared to $40.0 million for the same quarter last year. The increase was primarily due to growth from new stores compared to the prior year period, partially offset by continued pricing pressure and the proliferation of new licenses in New Mexico.
Gross profit for the first quarter of 2024 was $17.9 million or 43.1% of total revenue, compared to $21.8 million or 54.6% of total revenue for the same quarter last year. The decrease in gross margin was primarily driven by the aforementioned pricing pressure in New Mexico, as well as higher medical sales mix in Colorado.
____________________________ |
1 Q4 2023 Gross Profit includes one-time, non-cash inventory adjustments of approximately $13.1 million comprised of $3.1 million of product consolidation, obsolescence, and shrinkage expenses, $4.3 million of net realizable value adjustments, and $5.8 million of fair value adjustments on acquired inventory in New Mexico in 2023. |
Operating expenses for the first quarter of 2024 were $20.6 million compared to $16.2 million for the same quarter last year. The year-ago period benefitted from a payroll tax credit of $3.9M. The remaining increase was primarily driven by personnel expenses and four-wall SG&A costs associated with 21 additional stores in Colorado and New Mexico that are still ramping.
Loss from operations for the first quarter of 2024 was $2.7 million compared to income from operations of $5.6 million in the same quarter last year. Net loss was $16.1 million for the first quarter of 2024 compared to net income of $1.7 million for the same quarter last year.
Adjusted EBITDA for the first quarter of 2024 was $7.3 million compared to $14.5 million for the same quarter last year. The decrease in Adjusted EBITDA was primarily driven by lower gross margin and higher operating expenses associated with the 21 additional stores that are still ramping.
As of March 31, 2024, cash and cash equivalents were $13.2 million compared to $19.2 million on December 31, 2023. Total debt as of March 31, 2024, was $159.7 million compared to $156.8 million on December 31, 2023.
Conference Call
The Company will conduct a conference call today, May 15, 2024, at 5:00 p.m. Eastern time to discuss its results for the first quarter ended March 31, 2024.
Schwazze management will host the conference call, followed by a question-and-answer period. Interested parties may submit questions to the Company prior to the call by emailing [email protected].
Date: Wednesday, May 15, 2024
Time: 5:00 p.m. Eastern time
Toll-free dial-in: (888) 664-6383
International dial-in: (416) 764-8650
Conference ID: 84167910
Webcast: SHWZ Q1 2024 Earnings Call
The conference call will also be broadcast live and available for replay on the investor relations section of the Company’s website at https://ir.schwazze.com.
Toll-free replay number: (888) 390-0541
International replay number: (416) 764-8677
Replay ID: 167910
If you have any difficulty registering or connecting with the conference call, please contact Elevate IR at (720) 330-2829.
About Schwazze
Schwazze (OTCQX: SHWZ) (Cboe CA: SHWZ) is building a premier vertically integrated regional cannabis company with assets in Colorado and New Mexico and will continue to explore taking its operating system to other states where it can develop a differentiated regional leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale.
Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company’s leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector.
Medicine Man Technologies, Inc. was Schwazze’s former operating trade name. The corporate entity continues to be named Medicine Man Technologies, Inc. Schwazze derives its name from the pruning technique of a cannabis plant to enhance plant structure and promote healthy growth. To learn more about Schwazze, visit https://schwazze.com/.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include financial outlooks; any projections of net sales, earnings, or other financial items; any statements of the strategies, plans and objectives of our management team for future operations; expectations in connection with the Company’s previously announced business plans; any statements regarding future economic conditions or performance; and statements regarding the intent, belief or current expectations of our management team. Such statements may be preceded by the words “may,” “will,” “could,” “would,” “should,” “expect,” “intends,” “plans,” “strategy,” “prospects,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other words of similar meaning in connection with a discussion of future events or future operating or financial performance, although the absence of these words does not necessarily mean that a statement is not forward-looking. We have based our forward-looking statements on management’s current expectations and assumptions about future events and trends affecting our business and industry. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Therefore, forward-looking statements are not guarantees of future events or performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control and cannot be predicted or quantified. Consequently, actual events and results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) regulatory limitations on our products and services and the uncertainty in the application of federal, state, and local laws to our business, and any changes in such laws; (ii) our ability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (iii) our ability to identify, consummate, and integrate anticipated acquisitions; (iv) general industry and economic conditions; (v) our ability to access adequate capital upon terms and conditions that are acceptable to us; (vi) our ability to pay interest and principal on outstanding debt when due; (vii) volatility in credit and market conditions; (viii) the loss of one or more key executives or other key employees; and (ix) other risks and uncertainties related to the cannabis market and our business strategy. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s website at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise except as required by law.
Investor Relations Contact
Sean Mansouri, CFA or Aaron D’Souza
Elevate IR
(720) 330-2829
[email protected]
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
For the Periods Ended March 31, 2024 and December 31, 2023
Expressed in U.S. Dollars
March 31, |
December 31, |
||||
2024 |
2023 |
||||
ASSETS
|
|||||
Current Assets |
|||||
Cash & Cash Equivalents |
$ |
13,151,317 |
$ |
19,248,932 |
|
Accounts Receivable, net of Allowance for Doubtful Accounts |
3,356,032 |
4,261,159 |
|||
Inventory |
26,382,184 |
25,787,793 |
|||
Marketable Securities, net of Unrealized Loss of $347,516 and Loss of $1,816, respectively |
108,583 |
456,099 |
|||
Prepaid Expenses & Other Current Assets |
3,502,310 |
3,914,064 |
|||
Total Current Assets |
46,500,426 |
53,668,047 |
|||
Non-Current Assets |
|||||
Fixed Assets, net Accumulated Depreciation of $10,061,700 and $8,741,782, respectively |
31,326,000 |
31,113,630 |
|||
Investments |
2,000,000 |
2,000,000 |
|||
Investments Held for Sale |
– |
202,111 |
|||
Goodwill |
67,492,705 |
67,499,199 |
|||
Intangible Assets, net Accumulated Amortization of $36,483,160 and $32,706,765, respectively |
162,391,482 |
166,167,877 |
|||
Other Non-Current Assets |
1,328,187 |
1,263,837 |
|||
Operating Lease Right of Use Assets |
34,575,832 |
34,233,142 |
|||
Deferred Tax Assets, net |
992,144 |
1,996,489 |
|||
Total Non-Current Assets |
300,106,350 |
304,476,285 |
|||
Total Assets |
$ |
346,606,776 |
$ |
358,144,332 |
|
LIABILITIES & STOCKHOLDERS’ EQUITY
|
|||||
Current Liabilities |
|||||
Accounts Payable |
$ |
9,443,233 |
$ |
13,341,561 |
|
Accrued Expenses |
8,106,618 |
7,774,691 |
|||
Derivative Liabilities |
1,319,845 |
638,020 |
|||
Lease Liabilities – Current |
5,186,316 |
4,922,724 |
|||
Current Portion of Long Term Debt |
29,579,713 |
3,547,011 |
|||
Income Taxes Payable |
28,235,039 |
25,232,782 |
|||
Total Current Liabilities |
81,870,764 |
55,456,789 |
|||
Non-Current Liabilities |
|||||
Long Term Debt, net of Debt Discount & Issuance Costs |
130,120,753 |
153,262,203 |
|||
Lease Liabilities – Non-Current |
30,735,072 |
30,133,452 |
|||
Total Non-Current Liabilities |
160,855,825 |
183,395,655 |
|||
Total Liabilities |
$ |
242,726,589 |
$ |
238,852,444 |
|
Stockholders’ Equity |
|||||
Preferred Stock, $0.001 Par Value. 10,000,000 Shares Authorized; 82,185 Shares Issued and |
|||||
82,185 Outstanding as of March 31, 2024 and 85,534 Shares Issued and 85,534 Outstanding as of |
|||||
December 31, 2023. |
82 |
86 |
|||
Common Stock, $0.001 Par Value. 250,000,000 Shares Authorized; 79,168,539 Shares Issued |
|||||
and 78,248,389 Shares Outstanding as of March 31, 2024 and 74,888,392 Shares Issued |
|||||
and 73,968,242 Shares Outstanding as of December 31, 2023. |
79,169 |
74,888 |
|||
Additional Paid-In Capital |
202,677,665 |
202,040,968 |
|||
Accumulated Deficit |
(96,843,602) |
(80,790,927) |
|||
Common Stock Held in Treasury, at Cost, 920,150 Shares Held as of March 31, 2024 and |
|||||
920,150 Shares Held as of December 31, 2023. |
(2,033,127) |
(2,033,127) |
|||
Total Stockholders’ Equity |
103,880,187 |
119,291,888 |
|||
Total Liabilities & Stockholders’ Equity |
$ |
346,606,776 |
$ |
358,144,332 |
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND (LOSS)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
(Unaudited) |
(Unaudited) |
||||
Operating Revenues |
|||||
Retail |
$ |
37,633,252 |
$ |
35,820,111 |
|
Wholesale |
3,898,320 |
4,058,925 |
|||
Other |
69,421 |
121,900 |
|||
Total Revenue |
41,600,993 |
40,000,936 |
|||
Total Cost of Goods & Services |
23,667,319 |
18,152,163 |
|||
Gross Profit |
17,933,674 |
21,848,773 |
|||
Operating Expenses |
|||||
Selling, General and Administrative Expenses |
11,835,818 |
10,100,934 |
|||
Professional Services |
1,671,881 |
1,187,364 |
|||
Salaries |
6,880,988 |
4,695,971 |
|||
Stock Based Compensation |
253,916 |
214,544 |
|||
Total Operating Expenses |
20,642,603 |
16,198,813 |
|||
Income from Operations |
(2,708,929) |
5,649,960 |
|||
Other Income (Expense) |
|||||
Interest Expense, net |
(8,307,369) |
(7,745,854) |
|||
Unrealized Gain (Loss) on Derivative Liabilities |
(681,825) |
8,501,685 |
|||
Other Loss |
10,500 |
– |
|||
Loss on Investment |
(33,382) |
– |
|||
Unrealized Gain on Investment |
(347,516) |
1,816 |
|||
Total Other Income (Expense) |
(9,359,592) |
757,647 |
|||
Pre-Tax Net Income (Loss) |
(12,068,521) |
6,407,607 |
|||
Provision for Income Taxes |
3,984,154 |
4,662,178 |
|||
Net Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Less: Accumulated Preferred Stock Dividends for the Period |
(2,155,259) |
(2,029,394) |
|||
Net Income (Loss) Attributable to Common Stockholders |
$ |
(18,207,934) |
$ |
(283,965) |
|
Earnings (Loss) per Share Attributable to Common Stockholders |
|||||
Basic Earnings (Loss) per Share |
$ |
(0.24) |
$ |
(0.01) |
|
Diluted Earnings (Loss) per Share |
$ |
(0.24) |
$ |
(0.06) |
|
Weighted Average Number of Shares Outstanding – Basic |
76,006,932 |
55,835,501 |
|||
Weighted Average Number of Shares Outstanding – Diluted |
76,006,932 |
101,608,278 |
|||
Comprehensive Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
(Unaudited) |
(Unaudited) |
||||
Cash Flows from Operating Activities: |
|||||
Net Income (Loss) for the Period |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Adjustments to Reconcile Net Income (Loss) to Cash for Operating Activities |
|||||
Depreciation & Amortization |
5,096,314 |
6,151,395 |
|||
Non-Cash Interest Expense |
1,031,431 |
991,184 |
|||
Non-Cash Lease Expense |
2,871,226 |
2,251,459 |
|||
Deferred Taxes |
1,004,345 |
(637,225) |
|||
Loss on Investment |
202,111 |
– |
|||
Change in Derivative Liabilities |
681,825 |
(8,501,685) |
|||
Amortization of Debt Issuance Costs |
421,512 |
421,513 |
|||
Amortization of Debt Discount |
2,303,246 |
1,999,933 |
|||
(Gain) Loss on Investments, net |
347,516 |
(1,816) |
|||
Stock Based Compensation |
640,974 |
214,544 |
|||
Changes in Operating Assets & Liabilities (net of Acquired Amounts): |
|||||
Accounts Receivable |
905,127 |
(118,181) |
|||
Inventory |
(587,900) |
(3,023,251) |
|||
Prepaid Expenses & Other Current Assets |
411,754 |
(3,036,801) |
|||
Other Assets |
(64,350) |
360,674 |
|||
Change in Operating Lease Liabilities |
(2,348,703) |
(1,531,765) |
|||
Accounts Payable & Other Liabilities |
(3,566,401) |
(3,464,671) |
|||
Income Taxes Payable |
3,002,257 |
5,299,403 |
|||
Net Cash Provided by (Used in) Operating Activities |
(3,700,390) |
(879,861) |
|||
Cash Flows from Investing Activities: |
|||||
Collection of Notes Receivable |
– |
10,631 |
|||
Purchase of Fixed Assets |
(1,532,287) |
(2,913,394) |
|||
Net Cash Provided by (Used in) Investing Activities |
(1,532,287) |
(2,902,763) |
|||
Cash Flows from Financing Activities: |
|||||
Payment on Notes Payable |
(864,938) |
– |
|||
Net Cash Provided by (Used in) Financing Activities |
(864,938) |
– |
|||
Net (Decrease) in Cash & Cash Equivalents |
(6,097,615) |
(3,782,624) |
|||
Cash & Cash Equivalents at Beginning of Period |
19,248,932 |
38,949,253 |
|||
Cash & Cash Equivalents at End of Period |
$ |
13,151,317 |
$ |
35,166,628 |
|
Supplemental Disclosure of Cash Flow Information: |
|||||
Cash Paid for Interest |
$ |
4,515,205 |
$ |
6,540,748 |
MEDICINE MAN TECHNOLOGIES, INC.
ADJUSTED EBITDA RECONCILIATION (NON-GAAP)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
Net Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Interest Expense, net |
8,307,369 |
7,745,854 |
|||
Provision for Income Taxes |
3,984,154 |
4,662,178 |
|||
Other (Income) Expense, net of Interest Expense |
1,052,223 |
(8,503,501) |
|||
Depreciation & Amortization |
5,618,834 |
6,612,814 |
|||
Earnings Before Interest, Taxes, Depreciation and |
|||||
Amortization (EBITDA) (non-GAAP) |
$ |
2,909,905 |
$ |
12,262,774 |
|
Non-Cash Stock Compensation |
253,916 |
214,544 |
|||
Deal Related Expenses |
637,761 |
1,195,802 |
|||
Capital Raise Related Expenses |
20,760 |
35,068 |
|||
Severance |
484,561 |
118,436 |
|||
Retention Program Expenses |
807,500 |
280,632 |
|||
Pre-Operating & Dark Carry Expenses |
1,053,837 |
391,917 |
|||
One-Time Legal Settlements |
417,653 |
– |
|||
Other Non-Recurring Items |
754,751 |
25,707 |
|||
Adjusted EBITDA (non-GAAP) |
$ |
7,340,644 |
$ |
14,524,880 |
|
Revenue |
41,600,993 |
40,000,936 |
|||
Adjusted EBITDA Percent |
17.6 % |
36.3 % |
View original content:https://www.prnewswire.co.uk/news-releases/schwazze-announces-first-quarter-2024-financial-results-302146858.html
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