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Q2 Holdings, Inc. Announces First Quarter 2019 Financial Results
Reading Time: 11 minutes
Total first quarter revenue of $71.3 million, up 30 percent
year-over-year, and up 6 percent from the previous quarter
AUSTIN, Texas–(BUSINESS WIRE)–Q2
Holdings, Inc. (NYSE:QTWO), a leading provider of digital
transformation solutions for banking and lending, today announced
results for its first quarter ending March 31, 2019.
First Quarter 2019 Results
-
Revenue for the first quarter of $71.3 million, up 30 percent
year-over-year and up 6 percent from the previous quarter. -
GAAP gross margin for the first quarter of 47.8 percent, down from
50.8 percent one year ago. Non-GAAP gross margin for the first quarter
of 52.3 percent, down from 54.3 percent one year ago. The
year-over-year decline is primarily attributable to the investment in
the Cloud Lending and Gro acquisitions closed in the fourth quarter of
2018.
-
GAAP net loss for the first quarter of $19.3 million, which compares
to $6.0 million for the first quarter of 2018, and $11.9 million for
the fourth quarter of 2018. Adjusted EBITDA for the first quarter of
$0.3 million, down from $5.0 million one year ago and down from $3.1
million for the fourth quarter of 2018 primarily as a result of the
investment in the Cloud Lending and Gro acquisitions and the timing
and volume of payroll taxes related to equity awards.
“We had a strong start to the year in the first quarter, particularly on
the sales side of the business,” said Matt Flake, CEO of Q2. “We
achieved record bookings for a first quarter, powered by a broad mix of
deals that included our newly acquired Gro and Cloud Lending products in
multiple combinations. We also continued our sales execution on the
digital banking side, with a balanced performance across bank and credit
union markets. With our current pipeline and newly expanded product
portfolio, I’m as optimistic as ever about the opportunity ahead of us
through 2019 and beyond.”
First Quarter Highlights
-
Signed a digital banking contract for our small business and corporate
solutions with a $10 billion bank in the Northeast. -
Signed a Q2 Open contract including the Q2 digital banking platform as
the front end of a direct bank initiative at a $5 billion financial
institution. -
Signed a digital lending contract utilizing the Cloud Lending platform
with a current Q2 platform client, a $1 billion bank in Texas.
-
Signed a digital onboarding contract utilizing the Gro solution with a
new $8 billion bank in the Northeast, representing the single largest
deal in Gro’s history.
-
Exited the first quarter with approximately 13.1 million registered
users on the Q2 platform, representing 2% sequential and 19%
year-over-year growth.
Financial Outlook
“We are pleased to have delivered first quarter revenue which exceeded
the high end of our guidance,” said Jennifer Harris, CFO of Q2. “Given
our strong bookings performance, we have accelerated the investment in
the continued integration of our newly acquired businesses in order to
capitalize on the opportunity they represent. This accelerated
investment, along with the timing of payroll taxes and our annual client
conference in the second quarter, will result in margins being
relatively muted in the first half of the year with approximately 80
percent of the adjusted EBITDA coming in the back half of the year.”
Q2 Holdings is providing guidance for its second quarter 2019 as follows:
-
Total revenue of $75.5 million to $76.5 million, which would represent
year-over-year growth of 29 percent to 31 percent. -
Adjusted EBITDA of $2.7 million to $3.3 million. GAAP net loss is the
most comparable GAAP measure to adjusted EBITDA. Adjusted EBITDA
differs from GAAP net loss in that it excludes things such as
depreciation and amortization, stock-based compensation,
acquisition-related costs, interest, income taxes and unoccupied lease
charges. Q2 Holdings is unable to predict with reasonable certainty
the ultimate outcome of these exclusions without unreasonable effort.
Therefore, Q2 Holdings has not provided guidance for GAAP net loss or
a reconciliation of the foregoing forward-looking adjusted EBITDA
guidance to GAAP net loss.
Q2 Holdings is providing guidance for the full-year 2019 as follows:
-
Total revenue of $308.8 million to $311.8 million, which would
represent year-over-year growth of 28 percent to 29 percent. -
Adjusted EBITDA of $20 million to $22 million. Adjusted EBITDA differs
from GAAP net loss in that it excludes things such as depreciation and
amortization, stock-based compensation, acquisition-related costs,
interest, income taxes and unoccupied lease charges. Q2 Holdings is
unable to predict with reasonable certainty the ultimate outcome of
these exclusions without unreasonable effort. Therefore, Q2 Holdings
has not provided guidance for GAAP net loss or a reconciliation of the
foregoing forward-looking adjusted EBITDA guidance to GAAP net loss.
|
Conference Call Details |
||
|
Date: |
May 8, 2019 | |
|
Time: |
8:30 a.m. EDT | |
|
Hosts: |
Matt Flake, CEO / Jennifer Harris, CFO | |
|
Dial in: |
US toll free: 1-833-241-4254 | |
| International: 1-647-689-4205 | ||
|
Conference ID: |
6699674 | |
Please join the conference call at least 10 minutes early to ensure the
line is connected. A live webcast of the conference call and financial
results will be accessible from the investor relations section of the Q2
website at http://investors.q2ebanking.com/.
An archived replay of the webcast will be available at this website on a
temporary basis shortly after the call.
About Q2 Holdings, Inc.
Q2, a financial experience company headquartered in Austin, Texas,
builds stronger communities by strengthening the financial institutions
that serve them. We empower banks, credit unions and other financial
services providers to be the ever-present companion on an account
holder’s financial journey—helping our customers unlock new
opportunities, grow their businesses and improve efficiencies. To learn
more about Q2, visit www.q2ebanking.com.
Use of Non-GAAP Measures
Q2 uses the following non-GAAP financial measures: adjusted EBITDA;
non-GAAP gross margin; non-GAAP gross profit; non-GAAP sales and
marketing expense; non-GAAP research and development expense; non-GAAP
general and administrative expense; non-GAAP operating loss; and,
non-GAAP net loss. Management believes that these non-GAAP financial
measures are useful measures of operating performance because they
exclude items that Q2 does not consider indicative of its core
performance.
In the case of adjusted EBITDA, Q2 adjusts net loss for such things as
interest, taxes, depreciation and amortization, stock-based
compensation, acquisition-related costs, amortization of technology and
intangibles, and unoccupied lease charges. In the case of non-GAAP gross
margin and non-GAAP gross profit, Q2 adjusts gross profit and gross
margin for stock-based compensation and amortization of acquired
technology. In the case of non-GAAP sales and marketing expense,
non-GAAP research and development expense, and non-GAAP general and
administrative expense, Q2 adjusts the corresponding GAAP expense to
exclude stock-based compensation. In the case of non-GAAP operating loss
and non-GAAP net loss, Q2 adjusts operating loss and net loss,
respectively, for stock-based compensation, acquisition related-costs,
amortization of acquired technology, amortization of acquired
intangibles, and unoccupied lease charges.
These non-GAAP measures should be considered in addition to, not as a
substitute for or superior to, the closest GAAP measures, or other
financial measures prepared in accordance with GAAP. A reconciliation to
the closest GAAP measures of these non-GAAP measures is contained in
tabular form on the attached unaudited condensed consolidated financial
statements.
Q2’s management uses these non-GAAP measures as measures of operating
performance; to prepare Q2’s annual operating budget; to allocate
resources to enhance the financial performance of Q2’s business; to
evaluate the effectiveness of Q2’s business strategies; to provide
consistency and comparability with past financial performance; to
facilitate a comparison of Q2’s results with those of other companies,
many of which use similar non-GAAP financial measures to supplement
their GAAP results; and in communication with our board of directors
concerning Q2’s financial performance.
Forward-looking Statements
This press release contains forward-looking statements, including
statements about positive sales and bookings momentum, optimism about
Q2’s performance in 2019, the opportunities presented by the Cloud
Lending and Gro acquisitions and Q2’s ability to capitalize on them,
including through accelerated investment, anticipated margins for the
remainder of 2019 and Q2’s quarterly and annual financial guidance. The
forward-looking statements contained in this press release are based
upon Q2’s historical performance and its current plans, estimates and
expectations and are not a representation that such plans, estimates or
expectations will be achieved. Factors that could cause actual results
to differ materially from those described herein include risks related
to: (a) the risk of increased competition in its existing markets and as
it enters new sections of the market with Tier 1 customers, new markets
with Alt-FIs and FinTechs and new products and services; (b) the risk
that the market for Q2’s solutions does not grow as anticipated, in
particular with respect to Tier 1 customers and Alt-FI and FinTech
customers; (c) the risk that Q2’s increased focus on selling to larger
Tier 1 customers may result in greater uncertainty and variability in
Q2’s business and sales results; (d) the risk that changes in Q2’s
market, business or sales organization negatively impacts its ability to
sell its products and services; (e) the challenges and costs associated
with selling, implementing and supporting Q2’s solutions, particularly
for larger customers with more complex requirements and longer
implementation processes; (f) the risk that errors, interruptions or
delays in Q2’s products or services or Web hosting negatively impacts
Q2’s business and sales; (g) risks associated with data breaches and
breaches of security measures within Q2’s products, systems and
infrastructure and the resultant harm to Q2’s business and its ability
to sell its products and services; (h) the impact that a slowdown in the
economy, financial markets, and credit markets has on Q2’s customers and
Q2’s business sales cycles, prospects and customers’ spending decisions
and timing of implementation decisions, particularly in regions where a
significant number of Q2’s customers are concentrated; (i) the
difficulties and risks associated with developing and selling complex
new solutions and enhancements with the technical and regulatory
specifications and functionality required by customers and governmental
authorities; (j) the risks inherent in technology and implementation
partnerships that could cause harm to Q2’s business; (k) the
difficulties and costs Q2 may encounter with complex implementations of
its solutions and the resulting impact on reputation and the timing of
its revenue from any delayed implementations; (l) the risk that Q2 will
not be able to maintain historical contract terms such as pricing and
duration; (m) the risks associated with managing growth and the
challenges associated with improving operations and hiring, retaining
and motivating employees to support such growth; (n) the risk that
modifications or negotiations of contractual arrangements will be
necessary during Q2’s implementations of its solutions or the general
risks associated with the complexity of Q2’s customer arrangements; (o)
the risks associated with integrating acquired companies and
successfully selling and maintaining their solutions; (p) the risks
associated with anticipated higher operating expenses in 2019 and
beyond; (q) litigation related to intellectual property and other
matters and any related claims, negotiations and settlements; (r) the
risks associated with further consolidation in the financial services
industry; and (s) risks associated with selling our solutions
internationally.
Additional information relating to the uncertainty affecting the Q2
business are contained in Q2’s filings with the Securities and Exchange
Commission. These documents are available on the SEC Filings section of
the Investor Relations section of Q2’s website at http://investors.q2ebanking.com/.
These forward-looking statements represent Q2’s expectations as of the
date of this press release. Subsequent events may cause these
expectations to change, and Q2 disclaims any obligations to update or
alter these forward-looking statements in the future, whether as a
result of new information, future events or otherwise.
| Q2 Holdings, Inc. | |||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||
| (in thousands) | |||||||||||
| March 31, | December, 31 | ||||||||||
| 2019 | 2018 | ||||||||||
| (unaudited) | (unaudited) | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 110,542 | $ | 108,341 | |||||||
| Restricted cash | 1,815 | 1,815 | |||||||||
| Investments | 53,971 | 68,979 | |||||||||
| Accounts receivable, net | 19,549 | 19,668 | |||||||||
| Contract assets, current portion | 654 | 598 | |||||||||
| Prepaid expenses and other current assets | 6,464 | 3,983 | |||||||||
| Deferred solution and other costs, current portion | 11,169 | 10,501 | |||||||||
| Deferred implementation costs, current portion | 5,011 | 4,427 | |||||||||
| Total current assets | 209,175 | 218,312 | |||||||||
| Property and equipment, net | 40,715 | 34,994 | |||||||||
| Right of use asset | 25,410 | – | |||||||||
| Deferred solution and other costs, net of current portion | 22,004 | 16,761 | |||||||||
| Deferred implementation costs, net of current portion | 11,055 | 9,948 | |||||||||
| Intangible assets, net | 60,254 | 63,296 | |||||||||
| Goodwill | 107,857 | 107,907 | |||||||||
| Contract assets, net of current portion | 11,228 | 10,272 | |||||||||
| Other long-term assets | 2,709 | 2,230 | |||||||||
| Total assets | $ | 490,407 | $ | 463,720 | |||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 10,254 | $ | 9,169 | |||||||
| Accrued liabilities | 11,425 | 9,329 | |||||||||
| Accrued compensation | 26,602 | 12,652 | |||||||||
| Deferred revenues, current portion | 45,246 | 42,531 | |||||||||
| Lease liabilities, current portion | 6,898 | – | |||||||||
| Total current liabilities | 100,425 | 73,681 | |||||||||
| Convertible notes, net of current portion | 185,266 | 182,723 | |||||||||
| Deferred revenues, net of current portion | 24,202 | 23,063 | |||||||||
| Deferred rent, net of current portion | – | 8,151 | |||||||||
| Lease liabilities, net of current portion | 27,644 | – | |||||||||
| Other long-term liabilities | 477 | 17,202 | |||||||||
| Total liabilities | 338,014 | 304,820 | |||||||||
| Stockholders’ equity: | |||||||||||
| Common stock | 4 | 4 | |||||||||
| Additional paid-in capital | 344,033 | 331,355 | |||||||||
| Accumulated other comprehensive income/(loss) | 89 | (37 | ) | ||||||||
| Accumulated deficit | (191,733 | ) | (172,422 | ) | |||||||
| Total stockholders’ equity | 152,393 | 158,900 | |||||||||
| Total liabilities and stockholders’ equity | $ | 490,407 | $ | 463,720 | |||||||
| Q2 Holdings, Inc. | |||||||||||
| Condensed Consolidated Statements of Comprehensive Loss | |||||||||||
| (in thousands, except per share data) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2019 | 2018 | ||||||||||
| (unaudited) | (unaudited) | ||||||||||
| Revenues | $ | 71,296 | $ | 54,808 | |||||||
| Cost of revenues (1) (2) | 37,184 | 26,977 | |||||||||
| Gross profit | 34,112 | 27,831 | |||||||||
| Operating expenses: | |||||||||||
| Sales and marketing (1) | 15,805 | 10,966 | |||||||||
| Research and development (1) | 17,657 | 11,157 | |||||||||
| General and administrative (1) | 13,860 | 10,296 | |||||||||
| Acquisition related costs | 2,718 | 256 | |||||||||
| Amortization of acquired intangibles | 1,215 | 368 | |||||||||
| Total operating expenses | 51,255 | 33,043 | |||||||||
| Loss from operations | (17,143 | ) | (5,212 | ) | |||||||
| Other income (expense), net | (2,207 | ) | (1,023 | ) | |||||||
| Loss before income taxes | (19,350 | ) | (6,235 | ) | |||||||
| Benefit from income taxes | 39 | 187 | |||||||||
| Net loss | $ | (19,311 | ) | $ | (6,048 | ) | |||||
| Other comprehensive loss: | |||||||||||
| Unrealized gain (loss) on available-for-sale investments | 113 | (24 | ) | ||||||||
| Foreign currency translation adjustment | 12 | – | |||||||||
| Comprehensive loss | $ | (19,186 | ) | $ | (6,072 | ) | |||||
| Net loss per common share: | |||||||||||
| Net loss per common share, basic and diluted | $ | (0.44 | ) | $ | (0.14 | ) | |||||
| Weighted average common shares outstanding, basic and diluted | 43,773 | 42,170 | |||||||||
|
(1) Includes stock-based compensation expenses as |
|||||||||||
| Three Months Ended March 31, | |||||||||||
| 2019 | 2018 | ||||||||||
| Cost of revenues | $ | 1,548 | $ | 1,015 | |||||||
| Sales and marketing | 1,806 | 1,226 | |||||||||
| Research and development | 2,012 | 1,356 | |||||||||
| General and administrative | 3,530 | 2,498 | |||||||||
| Total stock-based compensation expenses | $ | 8,896 | $ | 6,095 | |||||||
| (2) |
Includes amortization of acquired technology of $1.6 million and $0.9 million for the three months ended March 31, 2019 and 2018, respectively |
|
| Q2 Holdings, Inc. | |||||||||||
| Condensed Consolidated Statements of Cash Flows | |||||||||||
| (in thousands) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2019 | 2018 | ||||||||||
| (unaudited) | (unaudited) | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (19,311 | ) | $ | (6,048 | ) | |||||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|||||||||||
| Amortization of deferred implementation, solution and other costs | 1,464 | 2,218 | |||||||||
| Depreciation and amortization | 5,821 | 3,878 | |||||||||
| Amortization of debt issuance costs | 250 | 123 | |||||||||
| Amortization of debt discount | 2,298 | 1,099 | |||||||||
| Amortization of premiums on investments | (84 | ) | 56 | ||||||||
| Stock-based compensation expenses | 9,154 | 6,095 | |||||||||
| Deferred income taxes | 133 | 36 | |||||||||
| Other non-cash charges | 76 | 22 | |||||||||
| Changes in operating assets and liabilities | (10,687 | ) | (14,582 | ) | |||||||
| Cash used in operating activities | (10,886 | ) | (7,103 | ) | |||||||
| Cash flows from investing activities: | |||||||||||
| Net redemptions of investments | 15,204 | 2,901 | |||||||||
| Purchases of property and equipment | (5,545 | ) | (5,396 | ) | |||||||
| Business combinations and asset acquisitions, net of cash acquired | – | (150 | ) | ||||||||
| Cash provided by (used in) investing activities | 9,659 | (2,645 | ) | ||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of convertible notes, net of issuance costs | – | 223,675 | |||||||||
| Purchase of convertible notes bond hedge | – | (41,699 | ) | ||||||||
| Proceeds from issuance of warrants | – | 22,379 | |||||||||
| Proceeds from exercise of stock options to purchase common stock | 3,428 | 2,843 | |||||||||
| Net cash provided by financing activities | 3,428 | 207,198 | |||||||||
| Net increase in cash, cash equivalents, and restricted cash | 2,201 | 197,450 | |||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | 110,156 | 60,276 | |||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 112,357 | $ | 257,726 | |||||||
| Q2 Holdings, Inc. | |||||||||||
| Reconciliation of GAAP to Non-GAAP Measures | |||||||||||
| (in thousands, except per share data) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2019 | 2018 | ||||||||||
| (unaudited) | (unaudited) | ||||||||||
| GAAP gross profit | $ | 34,112 | $ | 27,831 | |||||||
| Stock-based compensation | 1,548 | 1,015 | |||||||||
| Amortization of acquired technology | 1,631 | 912 | |||||||||
| Non-GAAP gross profit | $ | 37,291 | $ | 29,758 | |||||||
| Non-GAAP gross margin: | |||||||||||
| Non-GAAP gross profit | $ | 37,291 | $ | 29,758 | |||||||
| GAAP revenue | 71,296 | 54,808 | |||||||||
| Non-GAAP gross margin | 52.3 | % | 54.3 | % | |||||||
| GAAP sales and marketing expense | $ | 15,805 | $ | 10,966 | |||||||
| Stock-based compensation | (1,806 | ) | (1,226 | ) | |||||||
| Non-GAAP sales and marketing expense | $ | 13,999 | $ | 9,740 | |||||||
| GAAP research and development expense | $ | 17,657 | $ | 11,157 | |||||||
| Stock-based compensation | (2,012 | ) | (1,356 | ) | |||||||
| Non-GAAP research and development expense | $ | 15,645 | $ | 9,801 | |||||||
| GAAP general and administrative expense | $ | 13,860 | $ | 10,296 | |||||||
| Stock-based compensation | (3,530 | ) | (2,498 | ) | |||||||
| Non-GAAP general and administrative expense | $ | 10,330 | $ | 7,798 | |||||||
| GAAP operating loss | $ | (17,143 | ) | $ | (5,212 | ) | |||||
| Stock-based compensation | 8,896 | 6,095 | |||||||||
| Acquisition related costs | 2,718 | 256 | |||||||||
| Amortization of acquired technology | 1,631 | 912 | |||||||||
| Amortization of acquired intangibles | 1,215 | 368 | |||||||||
| Non-GAAP operating income (loss) | $ | (2,683 | ) | $ | 2,419 | ||||||
| GAAP net loss | $ | (19,311 | ) | $ | (6,048 | ) | |||||
| Stock-based compensation | 8,896 | 6,095 | |||||||||
| Acquisition related costs | 2,718 | 256 | |||||||||
| Amortization of acquired technology | 1,631 | 912 | |||||||||
| Amortization of acquired intangibles | 1,215 | 368 | |||||||||
| Amortization of debt discount and issuance costs | 2,548 | 1,222 | |||||||||
| Non-GAAP net income (loss) | $ | (2,303 | ) | $ | 2,805 | ||||||
| Reconciliation from diluted weighted-average number of common shares | |||||||||||
|
as reported to pro forma diluted weighted average number of common shares |
|||||||||||
| Diluted weighted-average number of common shares, as reported | 43,773 | 42,170 | |||||||||
| Weighted-average effect of potentially dilutive shares | – | 1,970 | |||||||||
| Pro forma diluted weighted-average number of common shares | 43,773 | 44,140 | |||||||||
| Calculation of non-GAAP income (loss) per share: | |||||||||||
| Non-GAAP net income (loss) | $ | (2,303 | ) | $ | 2,805 | ||||||
| Diluted weighted-average number of common shares (pro forma for | 43,773 | 44,140 | |||||||||
| three months ended March 31, 2018) | |||||||||||
| Non-GAAP net income (loss) per share | $ | (0.05 | ) | $ | 0.06 | ||||||
| Reconciliation of GAAP net loss to adjusted EBITDA: | |||||||||||
| GAAP net loss | $ | (19,311 | ) | $ | (6,048 | ) | |||||
| Depreciation and amortization | 5,821 | 3,878 | |||||||||
| Stock-based compensation | 8,896 | 6,095 | |||||||||
| Benefit from income taxes | (39 | ) | (187 | ) | |||||||
| Interest (income) expense, net | 2,178 | 1,023 | |||||||||
| Acquisition related costs | 2,718 | 256 | |||||||||
| Adjusted EBITDA | $ | 263 | $ | 5,017 | |||||||
Contacts
MEDIA CONTACT:
Emma Chase
Red Fan Communications
O:
(512) 551-9253 / C: (512) 917-4319
[email protected]
INVESTOR CONTACT:
Josh Yankovich
Q2 Holdings, Inc.
O:
(512) 682-4463
[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
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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