/home/grassnews/public_html/wp-content/themes/zox-news/parts/post-single.php on line 153
">
Warning: Undefined array key 0 in /home/grassnews/public_html/wp-content/themes/zox-news/parts/post-single.php on line 153
Warning: Attempt to read property "cat_name" on null in /home/grassnews/public_html/wp-content/themes/zox-news/parts/post-single.php on line 153
APX Group Holdings, Inc. Reports First Quarter 2019 Results
1st Quarter 2019 Highlights
- Total revenues increased 12.0% year over year, to $276.2 million
-
Net loss of $89.2 million compared to net loss of $84.7 million in the
prior year -
$149.7 million in Adjusted EBITDAa compared to $122.9
million in Adjusted EBITDAa in the prior year - 47,536 New Subscribers
PROVO, Utah–(BUSINESS WIRE)–APX Group Holdings, Inc. (“APX Group”, “Vivint” or the “Company”)
today reported financial and operational results for the first quarter
ended March 31, 2019.
“One of our primary focus areas in the first quarter is preparation for
our summer selling season,” said Todd Pedersen, chief executive officer
of APX Group. “We believe we’ve made good progress in expanding our
direct-to-home sales force and expect to have more sales representatives
in the field this year. We’ve also spent quite a bit of time integrating
our second look financing partner and expect this addition will reduce
retail installment contracts as we move through the year. Our innovation
team will release a number of new products in 2019, including a new 4K
outdoor camera and an upgraded doorbell camera, along with a regular
cadence of enhancements to our smart home cloud platform. With all of
this momentum, I believe we’re well positioned for another strong
performance this calendar year.”
Revenue and Subscriber Data
The Company reported total revenues of $276.2 million for the
three-month period ended March 31, 2019, an increase of $29.6 million,
or 12.0%, as compared to the same period in 2018. Total Subscribers
increased by approximately 10% during the three-month period ended March
31, 2019, which accounted for approximately $26.5 million of the
increase in total revenues, while approximately $4.1 million of the
increase was due to an increase of $0.81 in the Average Monthly Revenue
per User. When compared to the three months ended March 31, 2018,
foreign currency translation negatively affected total revenues by $0.9
million, as computed on a constant foreign currency basis.
The Company added 47,536 New Subscribers during the first quarter of
2019, a decrease of 14.4% compared to 55,502 New Subscribers during the
same period in 2018. Excluding the New Subscribers originated from the
retail channel in the first quarter of 2018, New Subscriber growth is
flat on a year-over-year comparison basis.
Summary of Quarterly Key Financial and Portfolio Metrics |
($ in millions, except for subscriber data)
|
a: This earnings release includes Adjusted EBITDA, a metric |
March 31,
2018 |
June 30,
2018 |
September 30,
2018 |
December 31,
2018 |
March 31,
2019 |
|||||||||||||||||
Total Revenues | $ | 246.6 | $ | 255.0 | $ | 272.3 | $ | 276.5 | $ | 276.2 | |||||||||||
Net Loss | $ | (84.7 | ) | $ | (144.4 | ) | $ | (120.2 | ) | $ | (118.6 | ) | $ | (89.2 | ) | ||||||
Adjusted EBITDA(a) | $ | 122.9 | $ | 137.2 | $ | 139.3 | $ | 138.3 | $ | 149.7 | |||||||||||
Adj EBITDA Margin | 49.8 | % | 53.8 | % | 51.2 | % | 50.0 | % | 54.2 | % | |||||||||||
New Subscribers(1) | 55,502 | 117,875 | 104,249 | 44,948 | 47,536 | ||||||||||||||||
Total Subscribers(1) | 1,313,742 | 1,393,635 | 1,450,185 | 1,444,822 | 1,445,353 | ||||||||||||||||
Total Monthly Service Revenue(1) | $ | 71.0 | $ | 73.3 | $ | 75.5 | $ | 76.1 | $ | 77.0 | |||||||||||
Average Monthly Service Revenue per User(1) | $ | 54.00 | $ | 52.61 | $ | 52.05 | $ | 52.67 | $ | 53.26 | |||||||||||
Total Monthly Revenue(1) | $ | 82.2 | $ | 85.0 | $ | 90.8 | $ | 92.2 | $ | 92.1 | |||||||||||
Average Monthly Revenue per User(1) | $ | 62.97 | $ | 62.49 | $ | 63.12 | $ | 63.80 | 63.78 | ||||||||||||
Attrition Rate(2) | 10.7 | % | 11.1 | % | 11.8 | % | 12.3 | % | 12.9 | % | |||||||||||
(1) New Subscribers from sales pilots are not included |
(2) Attrition Rate is reported on an LTM basis for each period |
“As Vivint grows and increases capabilities, we’ve continually
emphasized operational and financial scaling across the business, and we
are seeing meaningful results in this area,” said Mark Davies, chief
financial officer of APX Group. “In terms of sales efficiency, our last
12-month Net Subscriber Acquisition Costs decreased year over year from
$1,488 to $1,142. Our G&A productivity has improved year over year, as
we’ve reduced G&A as a percent of revenue from 20.6% to 16.8%. And most
importantly, the benefits of our fully integrated technology and service
platform has yielded significant improvements in our service cost per
subscriber, which decreased from $17.04 in the first quarter of 2018 to
$13.83 this quarter. While these improvements are significant, we’ll
remain focused on balancing growth with cash flow and margin creation.”
Costs and Expenses
Operating expenses for the first quarter of 2019 decreased by $0.7
million to $83.1 million as compared to $83.8 million for the first
quarter of 2018. The primary drivers of the decrease were a $2.6 million
decrease in costs associated with our retail channel and other sales
pilots and lower equipment costs of $2.2 million. These cost decreases
were partially offset by increases in personnel and related support
costs of $1.9 million, customer payment processing costs of $0.6
million, and information technology software costs of $0.4 million.
Net Service Cost per Subscriber was $13.83 for the first quarter of
2019, which contributed to a Net Service Margin of 74.0%, as compared to
$17.04 and a Net Service Margin of 68.6% for the same period in 2018.
Selling expenses, net of capitalized contract costs, for the first
quarter of 2019 decreased by $15.7 million to $43.6 million as compared
to $59.2 million for first quarter of 2018. The primary drivers of the
decrease were $11.2 million in lower costs associated with our retail
channel and other sales pilots, a decrease in personnel and related
support costs of $3.0 million and lower marketing-related costs of $1.1
million.
The Company’s Net Subscriber Acquisition Costs per New Subscriber was
$1,142 for the last twelve months ended March 31, 2019 as compared to
$1,488 for the same period in 2018. The average proceeds collected at
point of sale during the last twelve months was approximately $1,031 per
New Subscriber.
General and administrative (“G&A”) expenses, net of allocations, for the
first quarter of 2019 decreased by $4.7 million to $46.3 million as
compared to $51.0 million for the first quarter of 2018. The primary
drivers of the decrease were a reduction in professional and legal
contracted services costs of $2.8 million, lower marketing-related costs
of $1.4 million, a decrease in personnel and related support costs of
$1.3 million and lower information technology costs of $0.5 million. The
decreases were partially offset by a $1.9 million increase in bad debt.
Adjusted EBITDA and Net Loss
Net loss was $89.2 million and Adjusted EBITDA was $149.7 million for
the first quarter of 2019, as compared to net loss of $84.7 million and
Adjusted EBITDA of $122.9 million for the same period in 2018.
Liquidity
As of March 31, 2019, the Company’s liquidity position on a consolidated
basis, defined as cash on hand, short-term marketable securities and
available borrowing capacity under the Company’s revolving credit
facility, was approximately $253 million.
Certain Credit Statistics
The Company’s net leverage ratio, defined as the ratio of net debt to
LTM Adjusted EBITDA, was 5.5x as of March 31, 2019.
Conference Call
Vivint will host a conference call and webcast to discuss the quarterly
results at 5:00 p.m. ET today, May 7, 2019. To join the live webcast and
conference call, please visit the Investor Relations section of the
Vivint website, www.investors.vivint.com/events-presentations/events,
or dial (833) 235-7641 for domestic participants or (647) 689-4162 for
international participants with the conference code of 1698518.
A financial results presentation and online access to join the webcast
will be available immediately before the call on the Investor Relations
section of the Company’s website at http://www.investors.vivint.com/events-presentations/events.
A replay of the webcast will be available for 30 days on the Investor
Relations section of the Company’s website at www.investors.vivint.com
following the completion of the webcast and conference call.
About Vivint Smart Home
Vivint Smart Home is a leading smart home company in North America.
Vivint delivers an integrated smart home system with in-home
consultation, professional installation and support delivered by its
Smart Home Pros, as well as 24-7 customer care and monitoring. Dedicated
to redefining the home experience with intelligent products and
services, Vivint serves more than 1.4 million customers. For more
information, visit www.vivint.com.
Forward-Looking Statements
This earnings release and accompanying conference call include certain
forward-looking statements as defined by the Private Securities
Litigation Reform Act of 1995, including statements regarding, among
other things, the Company’s plans, strategies and prospects, both
business and financial. Forward-looking statements convey the Company’s
current expectations or forecasts of future events. Although we believe
that the Company’s plans, intentions and expectations reflected in or
suggested by these forward-looking statements are reasonable, we cannot
assure you that the Company will achieve or realize these plans,
intentions or expectations. Forward-looking statements are inherently
subject to risks, uncertainties and assumptions. Generally, statements
that are not historical facts, including statements concerning our
possible or assumed future actions, business strategies, events or
results of operations, are forward-looking statements. These statements
may be preceded by, followed by or include the words “believes,”
“estimates,” “expects,” “projects,” “forecasts,” “may,” “will,”
“should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” or
similar expressions.
Forward-looking statements are not guarantees of performance. You should
not put undue reliance on these statements which speak only as of the
date hereof. You should understand that the following important factors,
in addition to those discussed in “Risk Factors” and elsewhere in the
Company’s most recent Annual Report on Form 10-K/A, for the fiscal year
ended December 31, 2018 and the Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2019, which is expected to be filed on or
about the date of this earnings release, could affect our future results
and could cause those results or other outcomes to differ materially
from those expressed or implied in our forward-looking statements:
-
risks of the smart home and security industry, including risks of and
publicity surrounding the sales, subscriber origination and retention
process; -
the highly competitive nature of the smart home and security industry
and product introductions and promotional activity by Vivint’s
competitors; -
litigation, complaints, product liability claims and/or adverse
publicity; -
the impact of changes in consumer spending patterns, consumer
preferences, local, regional, and national economic conditions, crime,
weather, demographic trends and employee availability; -
increases and/or decreases in utility and other energy costs,
increased costs related to utility or governmental requirements; -
cost increases or shortages in smart home and security technology
products or components; - the introduction of unsuccessful new Smart Home Services;
-
privacy and data protection laws, privacy or data breaches, or the
loss of data; and -
the impact to the Company’s business, results of operations, financial
condition, regulatory compliance and customer experience of the Vivint
Flex Pay plan and our ability to successfully compete in the retail
sales channels.
In addition, the origination and retention of new subscribers will
depend on various factors, including, but not limited to, market
availability, subscriber interest, the availability of suitable
components, the negotiation of acceptable contract terms with
subscribers, local permitting, licensing and regulatory compliance, and
our ability to manage anticipated expansion and to hire, train and
retain personnel, the financial viability of subscribers and general
economic conditions.
These and other factors that could cause actual results to differ from
those implied by the forward-looking statements in this press release
are more fully described in the “Risk Factors” section in the Company’s
most recent annual report on Form 10-K/A for the fiscal year ended
December 31, 2018 and the Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2019, which is expected to be filed on or about
the date of this earnings release, and other reports as such factors may
be updated from time to time in the Company’s periodic filings with the
SEC. These risk factors should not be construed as exhaustive. We
undertake no obligations to update or revise publicly any
forward-looking statements, whether a result of new information, future
events, or otherwise, except as required by law.
Certain Definitions
Total Subscribers – is the aggregate number of active smart home
and security subscribers at the end of a given period.
Total Monthly Revenue – or Total MR, is the average monthly total
revenue recognized during the period.
Average Monthly Revenue per User – or AMRU, is Total MR divided
by average monthly Total Subscribers during a given period.
Total Monthly Service Revenue – or MSR, is the contracted
recurring monthly service billings to our smart home and security
subscribers, based on the Total Subscribers number as of the end of a
given period.
Average Monthly Service Revenue per User – or AMSRU, is Total MSR
divided by Total Subscribers at the end of a given period.
Attrition Rate – is the aggregate number of canceled smart home
and security subscribers during the prior 12 month period divided by the
monthly weighted average number of Total Subscribers based on the Total
Subscribers at the beginning and end of each month of a given period.
Subscribers are considered canceled when they terminate in accordance
with the terms of their contract, are terminated by us or if payment
from such subscribers is deemed uncollectible (when at least four
monthly billings become past due). If a sale of a service contract to
third parties occurs, or a subscriber relocates but continues their
service, we do not consider this as a cancellation. If a subscriber
transfers their service contract to a new subscriber, we do not consider
this a cancellation.
Average Subscriber Lifetime – in number of months, is 100%
divided by our expected long-term annualized attrition rate (which is
currently estimated at 13%) multiplied by 12 months.
Net Service Cost per Subscriber – is the average monthly service
costs incurred during the period (both period and capitalized service
costs), including monitoring, customer service, field service and other
service support costs, less total non-recurring smart home services
billings for the period divided by average monthly Total Subscribers for
the same period.
Net Service Margin – is the monthly average MSR for the period,
less total average net service costs for the period divided by the
monthly average MSR for the period.
New Subscribers – is the aggregate number of net new smart home
and security subscribers originated during a given period. This metric
excludes new subscribers acquired by the transfer of a service contract
from one subscriber to another.
Net Subscriber Acquisition Costs per New Subscriber – is the net
cash cost to create new smart home and security subscribers during a
given 12 month period divided by New Subscribers for that period. These
costs include commissions, Products, installation, marketing, sales
support and other allocations (general and administrative and overhead)
less upfront payment received from the sale of Products associated with
the initial installation, and installation fees. These costs exclude
capitalized contract costs and upfront proceeds associated with contract
modifications.
Total Bookings – is total monthly service revenue for New
Subscribers multiplied by Average Subscriber Lifetime, plus total
Product revenue to be recognized over the contract term from New
Subscribers.
Total Monthly Service Revenue for New Subscribers – is the
contracted recurring monthly service billings to our New Subscribers
during a given period.
Average Monthly Service Revenue per New Subscriber – is the Total
Monthly Service Revenue for New Subscribers divided by New Subscribers
during a given period.
Lifetime Service Revenue per New Subscriber – is the Total
Monthly Service Revenue for New Subscribers divided by New Subscribers,
multiplied by Average Subscriber Lifetime.
Lifetime Service Revenue Multiple – is the Lifetime Service
Revenue per New Subscriber divided by Net Subscriber Acquisition Costs
per New Subscriber.
Total Subscriber Lifetime Backlog – is total unrecognized Product
revenue plus total service revenue expected to be recognized over the
remaining subscriber lifetime for Total Subscribers.
APX GROUP HOLDINGS, INC. and SUBSIDIARIES | |||||||||
Condensed Consolidated Statements of Operations |
|||||||||
(In thousands) |
|||||||||
(Unaudited) |
|||||||||
Three Months Ended March 31, | |||||||||
2019 | 2018 | ||||||||
Revenues: | |||||||||
Recurring and other revenue | $ | 276,249 | $ | 246,597 | |||||
Total revenues | 276,249 | 246,597 | |||||||
Costs and expenses: | |||||||||
Operating expenses | 83,076 | 83,760 | |||||||
Selling expenses | 43,591 | 59,243 | |||||||
General and administrative expenses | 46,339 | 50,967 | |||||||
Depreciation and amortization | 131,221 | 124,258 | |||||||
Total costs and expenses | 304,227 | 318,228 | |||||||
Loss from operations | (27,978 | ) | (71,631 | ) | |||||
Other expenses (income): | |||||||||
Interest expense | 63,748 | 58,790 | |||||||
Interest income | (23 | ) | (31 | ) | |||||
Other income, net | (2,246 | ) | (45,240 | ) | |||||
Total other expenses | 61,479 | 13,519 | |||||||
Loss before income taxes | (89,457 | ) | (85,150 | ) | |||||
Income tax benefit | (301 | ) | (433 | ) | |||||
Net loss | $ | (89,156 | ) | $ | (84,717 | ) | |||
APX GROUP HOLDINGS, INC. and SUBSIDIARIES | |||||||||||
Condensed Consolidated Balance Sheets |
|||||||||||
(In thousands) |
|||||||||||
(Unaudited) |
|||||||||||
March 31, 2019 | December 31, 2018 | ||||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 3,691 |
|
$ | 12,773 | ||||||
Accounts and notes receivable, net | 55,348 | 48,724 | |||||||||
Inventories | 94,275 | 50,552 | |||||||||
Prepaid expenses and other current assets | 15,128 | 11,449 | |||||||||
Total current assets | 168,442 | 123,498 | |||||||||
Property, plant and equipment, net | 64,614 | 73,401 | |||||||||
Capitalized contract costs, net | 1,092,865 | 1,115,775 | |||||||||
Deferred financing costs, net | 1,797 | 2,058 | |||||||||
Intangible assets, net | 235,583 | 255,085 | |||||||||
Goodwill | 835,404 | 834,855 | |||||||||
Operating lease right-of-use assets | 72,891 | – | |||||||||
Long-term notes receivables and other assets, net | 121,796 | 119,819 | |||||||||
Total assets | $ | 2,593,392 | $ | 2,524,491 | |||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||||||
Current Liabilities: | |||||||||||
Accounts payable | $ | 115,242 |
|
$ | 66,646 | ||||||
Accrued payroll and commissions | 37,281 |
|
65,479 | ||||||||
Accrued expenses and other current liabilities | 158,997 |
|
136,715 | ||||||||
Deferred revenue | 194,326 |
|
186,953 | ||||||||
Current portion of operating lease liabilities | 11,749 | – | |||||||||
Current portion of finance lease obligations | 7,114 | 7,743 | |||||||||
Total current liabilities | 524,709 | 463,536 | |||||||||
Notes payable, net | 3,035,990 | 3,037,095 | |||||||||
Revolving line of credit | 40,000 | – | |||||||||
Finance lease liabilities, net of current portion | 3,952 | 5,571 | |||||||||
Operating lease liabilities, net of current portion | 71,964 | – | |||||||||
Deferred revenue, net of current portion | 326,631 | 323,585 | |||||||||
Other long-term obligations | 73,390 | 90,209 | |||||||||
Deferred income tax liabilities | 1,120 | 1,096 | |||||||||
Total liabilities | 4,077,756 | 3,921,092 | |||||||||
Total stockholders’ deficit | (1,484,364 | ) |
|
(1,396,601 | ) | ||||||
Total liabilities and stockholders’ deficit | $ | 2,593,392 | $ | 2,524,491 | |||||||
APX GROUP HOLDINGS, INC. and SUBSIDIARIES | ||||||||
Summary Cash Flow Data |
||||||||
(In thousands) |
||||||||
(Unaudited) |
||||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net cash used in operating activities | $ | (43,017 | ) | $ | (59,582 | ) | ||
Net cash (used in) provided by investing activities | (1,811 | ) | 46,586 | |||||
Net cash provided by financing activities |
35,721 | 12,616 | ||||||
Effect of exchange rate changes on cash | 25 | (19 | ) | |||||
Net decrease in cash and cash equivalents |
$ | (9,082 | ) | $ | (399 | ) | ||
Cash and cash equivalents: | ||||||||
Beginning of period | 12,773 | 3,872 | ||||||
End of period | $ | 3,691 | $ | 3,473 | ||||
Statement Regarding Non-GAAP Financial Measures
This earnings release includes Adjusted EBITDA, which is a supplemental
measure that is not required by, or presented in accordance with,
accounting principles generally accepted in the United States (“GAAP”).
“Adjusted EBITDA” is defined as net income (loss) before interest
expense (net of interest income), income and franchise taxes and
depreciation and amortization (including amortization of capitalized
subscriber acquisition costs), further adjusted to exclude the effects
of certain contract sales to third parties, non-capitalized subscriber
acquisition costs, stock based compensation and certain unusual,
non-cash, non-recurring and other items permitted in certain covenant
calculations under the agreements governing our notes, the credit
agreement governing our term loan and the credit agreement governing our
revolving credit facility.
We believe that the presentation of Adjusted EBITDA is appropriate to
provide additional information to investors about the calculation of,
and compliance with, certain financial covenants contained in the
agreements governing the notes, and the credit agreements governing the
revolving credit facility and the term loan. We caution investors that
amounts presented in accordance with our definition of Adjusted EBITDA
may not be comparable to similar measures disclosed by other issuers,
because not all issuers and analysts calculate Adjusted EBITDA in the
same manner.
Adjusted EBITDA is not a measurement of our financial performance under
GAAP and should not be considered as an alternative to net loss or any
other performance measures derived in accordance with GAAP or as an
alternative to cash flows from operating activities as a measure of our
liquidity.
See the following table for a quantitative reconciliation of Adjusted
EBITDA to Net Loss, which we believe is the most comparable financial
measure calculated in accordance with GAAP.
APX GROUP HOLDINGS, INC. and SUBSIDIARIES | |||||||||||||||||||||||
Reconciliation of Non-GAAP Financial Measures |
|||||||||||||||||||||||
(In millions) |
|||||||||||||||||||||||
(Unaudited) |
|||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | March 31, | |||||||||||||||||||
2018 | 2018 | 2018 | 2018 | 2019 | |||||||||||||||||||
Net loss | $ | (84.7 | ) | $ | (144.4 | ) | $ | (120.2 | ) | $ | (118.6 | ) | $ | (89.2 | ) | ||||||||
Interest expense, net | 58.8 | 60.3 | 61.9 | 63.8 | 63.7 | ||||||||||||||||||
Other loss (income), net | 5.1 | 4.7 | 14.5 | 8.7 |
(2.2 |
) | |||||||||||||||||
Gain on sale of spectrum (i) |
(50.4 |
) | – | – | – | – | |||||||||||||||||
Income tax benefit |
(0.4 |
) |
(0.9 |
) |
(0.2 |
) | – |
(0.3 |
) | ||||||||||||||
Restructuring expenses (ii) |
– | 4.1 | 0.5 | – | – | ||||||||||||||||||
Depreciation and amortization (iii) | 28.9 | 28.9 | 29.1 | 28.9 | 26.2 | ||||||||||||||||||
Amortization of capitalized contract costs | 95.4 | 97.9 | 101.5 | 103.4 | 105.0 | ||||||||||||||||||
Non-capitalized contract costs (iv) | 70.9 | 83.1 | 59.6 | 63.0 | 57.7 | ||||||||||||||||||
Non-cash compensation (v) | 0.2 | 0.3 | 0.9 | 0.9 | 0.8 | ||||||||||||||||||
Other adjustments (vi) | 12.0 | 19.8 |
14.9 |
12.7 | 11.5 | ||||||||||||||||||
Adjustment for change in accounting principle (Topic 606) (vii) |
(12.9 |
) |
(16.6 |
) |
(23.2 |
) |
(24.5 |
) |
(23.5 |
) | |||||||||||||
Adjusted EBITDA | $ | 122.9 | $ | 137.2 | $ | 139.3 | $ | 138.3 | $ | 149.7 | |||||||||||||
(i) |
Gain on sale of spectrum intangible assets during the three months ended March 31, 2018. |
||
(ii) | Restructuring employee severance and termination benefits expenses. | ||
(iii) |
Excludes loan amortization costs that are included in interest expense. |
||
(iv) |
Reflects subscriber acquisition costs that are expensed as incurred because they are not directly related to the acquisition of specific subscribers. Certain other industry participants purchase subscribers through subscriber contract purchases, and as a result, may capitalize the full cost to purchase these subscriber contracts, as compared to our organic generation of new subscribers, which requires us to expense a portion of our subscriber acquisition costs under GAAP. |
||
(v) |
Reflects non-cash compensation costs related to employee and director stock option plans. Excludes non-cash compensation costs included in non-capitalized subscriber acquisition costs. |
||
(vi) |
Other Adjustments includes certain items such as product development costs, subcontracted monitoring fee savings, certain legal and professional fees, expenses associated with retention bonuses, relocation and severance payments, and certain other adjustments. |
||
(vii) |
Adjustments to eliminate the impact of the Company’s adoption of |
Contacts
Dale R. Gerard
Senior Vice President of Finance and Treasurer
801-705-8011
[email protected]
Warning: Undefined array key 0 in /home/grassnews/public_html/wp-content/themes/zox-news/parts/post-single.php on line 493
Warning: Attempt to read property "cat_ID" on null in /home/grassnews/public_html/wp-content/themes/zox-news/parts/post-single.php on line 493
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
-
Cannabis1 week ago
Mikra Announces Partnership with Virun NutraBiosciences Inc. and Releases CELLF 2.0
-
Cannabis1 week ago
IM Cannabis Reports First Quarter Financial Results
-
Innocan1 week ago
Innocan Pharma Reports Breakthrough in a Pre-Clinical Trial: Liposomal-CBD Injection Restores Mobility to an Amputee Female Donkey
-
Cannabis5 days ago
Global Legal Marijuana Strategic Business Report 2024: A $125+ Billion Market by 2030 Featuring Aphria, Aurora Cannabis, Beacon Medical, Canopy Growth, Cronos, OrganiGram, Tikun Olam, Tilray, Wayland
-
Cannabis5 days ago
Avicanna Announces Results of Study in Patients with Epidermolysis Bullosa
-
Cannabis4 days ago
North America Legal Cannabis Industry Report 2024: Market to Grow at a CAGR of 26.65% During 2023-2032, Bank Loans Boosting Business Growth
-
Cannabis3 days ago
Polyethylene Films Packaging Market Size to Worth USD 139.98 Bn by 2032
-
SCHWAZZE3 days ago
Schwazze Announces First Quarter 2024 Financial Results