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Dentsu Inc. Q1 FY2019 Consolidated Financial Results
(The first quarter ended March 31, 2019 – reported on an IFRS basis)
TOKYO–(BUSINESS WIRE)–Dentsu Inc. (TOKYO:4324)(ISIN:JP3551520004):
Executive Summary
-
In Q1 FY2019, the Dentsu Group delivered total growth of revenue less
cost of sales of 2.3% (constant currency basis) and organic growth of
-1.6%. -
The Japan business delivered -0.8% and -2.7% respectively, mainly due
to a decrease in traditional media in the Japanese market, partially
offset by digital-related services and favorable results in
subsidiaries. -
The international business, Dentsu Aegis Network, delivered 4.8%
growth of revenue less cost of sales (constant currency basis) and
-0.7% organic growth, impacted by negative growth in APAC mainly due
to weakness in the Australian market. -
Despite a soft start to the year, revenue is expected to build as the
year progresses. -
There is no change to the full-year guidance announced in February
2019.
Financial Results for Q1 FY2019 |
||||||||
Consolidated Group (million yen) |
Q1
FY2019 |
Q1
FY2018 |
YoY
change, % |
Constant |
||||
Revenue | 250,578 | 242,107 | 3.5 | – | ||||
Revenue less cost of sales* | 227,974 | 226,665 | 0.6 | 2.3 | ||||
Statutory results | ||||||||
• operating profit |
9,294 | 22,393 | (58.5) | – | ||||
• net profit (attributable to owners of the parent) |
(2,583) | 10,788 | – | – | ||||
• basic EPS |
(9.16) yen | 38.27 yen | – | – | ||||
Underlying results** | ||||||||
• operating profit |
24,472 | 32,744 | (25.3) | (25.2) | ||||
• operating margin |
10.7% | 14.4% | (370) bps | (390) bps | ||||
• net profit (attributable to owners of the parent) |
12,551 | 17,972 | (30.2) | – | ||||
• basic EPS |
44.53 yen | 63.76 yen | (30.2) | – | ||||
EBITDA*** | 32,201 | 37,022 | (13.0) | – | ||||
Average JPY/USD rate | 110.2 yen | 108.3 yen | 1.8 | – | ||||
Average JPY/GBP rate | 143.7 yen | 150.9 yen | (4.8) | – |
*Revenue less cost of sales is the metric by which the Group’s
organic growth is measured. Organic growth represents the constant
currency year-on-year growth after adjusting for the effect of
businesses acquired or disposed of since the beginning of the previous
year.
** See below for definition of “underlying.”
***
See below for definition of “EBITDA.”
Highlights of Q1 FY2019 results
-
The Dentsu Group delivered growth of revenue less cost of sales of
2.3% (constant currency basis) :-
-0.8% in Japan, and 4.8% at Dentsu Aegis Network driven by
acquisitions. -
The breakdown in contribution is: +8.8 billion yen from M&As, -3.7
billion yen by organic growth, and -3.7 billion yen from foreign
exchange rates.
-
-0.8% in Japan, and 4.8% at Dentsu Aegis Network driven by
-
The Group produced organic growth of -1.6% :
-
-2.7% in Japan, and -0.7% at Dentsu Aegis Network. The Japan
business declined due to a decrease in traditional media in the
Japanese market, partially offset by digital-related services and
favorable results in subsidiaries. The international business was
impacted by negative growth in APAC, due to weakness in the
Australian market, softer client spend and cycling out of account
lost in FY2018. -
Digital business contribution to total revenue less cost of
sales reached 47.0% (Q1 FY2018: 43.7%), including 27.7% in
Japan (Q1 FY2018: 23.0%), and 62.5% at Dentsu Aegis Network (Q1
FY2018: 60.8%). -
International business contribution to total revenue less cost
of sales reached 55.5% (Q1 FY2018: 54.9%).
-
-2.7% in Japan, and -0.7% at Dentsu Aegis Network. The Japan
-
Group underlying operating profit was 24.4 billion yen (Q1
FY2018: 32.7 billion yen).-
24.6 billion yen in Japan (Q1 FY2018: 30.4 billion yen), and -0.1
billion yen at Dentsu Aegis Network (Q1 FY2018: 2.3 billion yen). -
Difference between the underlying operating profit and statutory
operating profit was mainly due to amortization of M&A related
intangible assets.
-
24.6 billion yen in Japan (Q1 FY2018: 30.4 billion yen), and -0.1
-
Group underlying operating margin was 10.7% (Q1 FY2018: 14.4%).
-
24.3% in Japan (Q1 FY2018: 29.7%), and -0.1% at Dentsu Aegis
Network (Q1 FY2018: 1.9%). -
The decline in Japan was mainly due to planned SG&A costs related
to investments to drive future growth. At Dentsu Aegis Network, a
softer-than-expected start to the year impacted on the operating
margin which was seasonally low in the first quarter and was
within budget.
-
24.3% in Japan (Q1 FY2018: 29.7%), and -0.1% at Dentsu Aegis
-
Underlying net profit (attributable to owners of the parent) and
underlying basic EPS decreased by 30.2% and 30.2% respectively,
mainly due to the decline of underlying operating income and an
increase of finance costs.-
Difference between the underlying net profit and statutory net
profit was mainly due to operating profit adjustments and a loss
on M&A related put-option liabilities.
-
Difference between the underlying net profit and statutory net
Toshihiro Yamamoto, President and CEO, Dentsu Inc., said:
“In Q1 FY2019, Dentsu Group recorded a decline in organic growth of
-1.6%, with -2.7% in Japan and -0.7% at Dentsu Aegis Network.
It
has been a soft start to the year and challenging market conditions
remain, however, we expect to see revenues build through the remainder
of the year. In Japan, a number of world-class, one-off events will
positively impact our results particularly in H2 FY2019. At Dentsu Aegis
Network, the cycling out of accounts lost in FY2018 and the on-boarding
of new business wins will begin to impact results in H2 FY2019.
In Japan, investment has continued to drive sustainable future growth
with key investments in our IT infrastructure and our digital business.
At Dentsu Aegis Network, operational excellence remains a key priority,
with the next stage focusing on client and media operation processes.
At the end of March 2019, our shareholders endorsed our plans to
reorganize the corporate structure of Dentsu Inc. effective January 1,
2020. The holding company ‘Dentsu Group Inc.’ will support all Dentsu
Group companies and our combined 62,000 talented people. The new
structure will allow for greater corporate governance and improved
integration between Dentsu in Japan and Dentsu Aegis Network.
Workstreams are already underway across many of our corporate functions
and business lines to ensure a smooth and seamless transition.
There is much to do in the remainder of the year, but through
maintaining our continued focus on driving innovation and pursuing
excellence in everything we do, I am confident we can continue to
deliver even greater value for our clients.”
Q1 FY2019 Consolidated Financial Results
1. Q1 FY2019 Performance Review
Japan:
The Group’s operations in Japan delivered organic growth of -2.7% in Q1
FY2019. This was mainly due to a decrease in traditional media in the
Japanese market, partially offset by digital-related services and
favorable results in subsidiaries.
Underlying operating margin in Japan declined by 540 bps to 24.3%. This
was mainly due to planned SG&A costs related to investments to drive
future growth.
International:
Dentsu Aegis Network delivered organic growth of -0.7% in Q1 FY2019. The
Americas reported positive organic growth, EMEA was negative but with a
mixed performance across the region and APAC (excluding Japan) was
negative, impacted by weakness in Australia.
The Q1 2019 margin is impacted by the usual seasonality expected in the
first quarter. We continue to control our costs responsibly and still
expect to deliver margin improvement in FY2019 as guided in February
2019.
Total net new business year-to-date for media is significantly ahead of
this stage last year with no major account losses. The pitch pipeline is
healthy with the current opportunities over 80% offensive. The win rate
for digital, creative & experiential is also significantly ahead of last
year’s run rate with a good spread of accounts won across all regions.
International – Regions:
In EMEA, Dentsu Aegis Network reported -0.4% organic growth in Q1
FY2019. There was a mixed performance across the region. Germany, Spain
and Italy posted double-digit growth, while Russia, Switzerland and the
Netherlands performed well. The Nordics experienced some slowdown,
facing tougher comparables after a very strong 2018, while the UK and
France were in negative territory.
In the Americas, Dentsu Aegis Network reported 0.1% organic growth in Q1
FY2019. In the U.S. the slowdown was due to timing of client spend and
the cycling out of several client accounts. Growth in the U.S. is
expected to improve in H2 FY2019 as new business wins impact our
revenues. Canada performed well while challenging macro-economic
conditions in Brazil impacted growth.
In the APAC region (excluding Japan), Dentsu Aegis Network reported
-3.0% organic growth in Q1 FY2019. Australia remains a difficult market.
A combination of macro factors and account losses cycling out will
continue to add pressure until H2 FY2019. New management has recently
joined in Australia and will continue to manage the business to reflect
the challenging operating environment we face. China returned to
positive growth in the quarter, new management has recently been
installed. There has been good growth across other markets within APAC,
including India and Thailand.
Acquisitions:
Acquisitions continue to accelerate the Group strategy by providing
innovation, scale, geographic and capability infill as well as bringing
new entrepreneurial talent into the organization. In Q1 FY2019, a total
of five new acquisitions were signed. Two acquisitions were made in
EMEA, one in the Americas and two in APAC.
In February 2019, we welcomed Happy Marketer, Southeast Asia’s leading
data-driven digital marketing agency. Joining Merkle as Happy Marketer,
a Merkle Company, this acquisition will provide a strategic foundation
for Merkle’s data, analytics and CRM solutions, enabling the delivery of
people-based marketing at scale across the region.
Note:
– IFRS 16 “Leases” is applied from January 1, 2019. Past
results are not restated under IFRS 16.
Further information
Further details of these results, including all related financial
statements, can be found in the Investor Relations section of the Dentsu
Inc. website: http://www.dentsu.com/ir.
Definitions of “underlying” and “EBITDA”
-
Underlying operating profit: KPI to measure recurring business
performance which is calculated as operating profit added with
amortization of M&A related intangible assets, acquisition costs,
share-based compensation expenses related to acquired companies and
one-off items such as gain/loss on sales and retirement of non-current
assets and impairment loss. -
Operating margin: Underlying operating profit divided by
Revenue less cost of sales. -
Underlying net profit (attributable to owners of the parent):
KPI to measure recurring net profit attributable to owners of the
parent which is calculated as net profit added with adjustment items
related to operating profit, gain/loss on sales of shares of
associates, revaluation of earnout liabilities / M&A related
put-option liabilities, tax-related, NCI profit-related and other
one-off items. -
Underlying basic EPS: EPS based on underlying net profit
(attributable to owners of the parent). -
EBITDA: Operating profit before depreciation, amortization and
impairment losses.
Reconciliation from Underlying to Statutory Operating |
||||||
Consolidated Group (million yen) | Q1 FY2019 | Q1 FY2018 | Change, % | |||
Underlying operating profit | 24,472 | 32,744 | (25.3) | |||
Adjustment items: | (15,177) | (10,350) | ||||
Amortization of M&A related intangible assets | (9,004) | (8,792) | ||||
Acquisition costs | (421) | (320) | ||||
Share-based compensation expenses related to acquired companies | (1,985) | (1,099) | ||||
One-off items | (3,767) | (140) | ||||
Statutory operating profit | 9,294 | 22,393 | (58.5) |
Reconciliation from Underlying to Statutory Net |
||||||
Consolidated Group (million yen) | Q1 FY2019 | Q1 FY2018 | Change, % | |||
Underlying net profit | 12,551 | 17,972 | (30.2) | |||
Adjustment items: | (15,135) | (7,184) | ||||
Operating profit adjustments | (15,177) | (10,350) | ||||
Gain (loss) on revaluation of earnout liabilities and M&A related put-option liabilities |
(7,216) | (1,918) | ||||
Related income tax expense | 6,292 | 4,373 | ||||
Adjustments attributable to non-controlling interests | 967 | 710 | ||||
Net profit (loss) | (2,583) | 10,788 | – |
P/L from Statutory Operating Profit to Statutory Net Profit |
||||||
Consolidated Group (million yen) | Q1 FY2019 | Q1 FY2018 | Change, % | |||
Operating profit | 9,294 | 22,393 | (58.5) | |||
Share of results of associates | 160 | 916 | (82.5) | |||
Profit before interest and tax | 9,454 | 23,310 | (59.4) | |||
Net finance income (costs) | (10,939) | (4,286) | – | |||
Finance income | 1,302 | 1,502 | (13.3) | |||
Finance costs | 12,241 | 5,789 | 111.4 | |||
Profit (loss) before tax | (1,484) | 19,023 | – | |||
Income tax expense | (553) | 6,781 | – | |||
Net profit (loss) | (930) | 12,241 | – | |||
Attributable to owners of the parent | (2,583) | 10,788 | – | |||
Attributable to non-controlling interests | 1,652 | 1,453 | 13.6 |
Quarterly Organic Growth for the Dentsu Group, Dentsu in |
||||||||||||||||||
Dentsu Group Total | Dentsu in Japan | Dentsu Aegis Network Total | ||||||||||||||||
2019 | 2018 | 2017* | 2019 | 2018 | 2017* | 2019 | 2018 | 2017* | ||||||||||
Q1 (Jan – Mar) | (1.6%) | 2.1% | 3.7% | (2.7%) | 1.9% | 4.3% | (0.7%) | 2.2% | 3.1% | |||||||||
Q2 (Apr – June) | – | 5.9% | (4.6%) | – | 8.4% | (7.6%) | – | 4.5% | (2.7%) | |||||||||
Q3 (Jul – Sept) | – |
5.4% |
(2.1%) | – |
2.7% |
(4.8%) | – |
7.0% |
(0.2%) | |||||||||
Q4 (Oct – Dec) | – | 0.9% | 2.8% | – | (3.0%) | 5.5% | – | 3.4% | 1.2% | |||||||||
Fiscal Year | – | 3.4% | 0.1% | – | 2.1% | (0.3%) | – | 4.3% | 0.4% |
* IFRS 15 “Revenue from Contracts with Customers” is applied on the
FY2017 results and their figures are adjusted.
Quarterly Organic Growth for Dentsu Aegis Network by region |
||||||||||||||||||
Dentsu Aegis Network |
Dentsu Aegis Network |
Dentsu Aegis Network |
||||||||||||||||
2019 | 2018 | 2017* | 2019 | 2018 | 2017* | 2019 | 2018 | 2017* | ||||||||||
Q1 (Jan – Mar) | (0.4%) | 2.7% | 5.8% | 0.1% | 4.6% | 0.6% | (3.0%) | (2.9%) | 4.5% | |||||||||
Q2 (Apr – June) | – | 4.8% | (0.3%) | – | 6.5% | (4.1%) | – | 0.8% | (3.8%) | |||||||||
Q3 (Jul – Sept) | – |
8.2% |
5.9% | – |
5.3% |
(2.0%) | – |
8.2% |
(5.5%) | |||||||||
Q4 (Oct – Dec) | – | 12.0% | 1.3% | – | 3.5% | (0.0%) | – | (9.6%) | 2.6% | |||||||||
Fiscal Year | – | 7.4% | 3.1% | – | 4.9% | (1.5%) | – | (1.7%) | (0.6%) |
* IFRS 15 “Revenue from Contracts with Customers” is applied on the
FY2017 results and their figures are adjusted.
FY2019 Forecasts (No change from the announcement in February |
||||||||
Consolidated Group |
FY2019 |
FY2018 |
YoY |
Constant |
||||
Revenue | 1,097,900 | 1,018,512 | 7.8 | – | ||||
Revenue less cost of sales | 986,400 | 932,680 | 5.8 | 7.9 | ||||
Japan | 400,800 | 369,258 | 8.5 | 8.5 | ||||
International total | 585,600 | 563,852 | 3.9 | 7.4 | ||||
Underlying operating profit | 157,400 | 153,229 | 2.7 | 4.3 | ||||
Japan | 81,300 | 80,268 | 1.3 | 1.3 | ||||
International total | 76,100 | 72,963 | 4.3 | 7.5 | ||||
Operating margin | 16.0% | 16.4% | (40) bps | (50) bps | ||||
Japan | 20.3% | 21.7% | (140) bps | (140) bps | ||||
International total | 13.0% | 12.9% | 10 bps | 10 bps | ||||
Underlying net profit | 95,400 | 97,419 | (2.1) | – | ||||
Underlying basic EPS | 338.42 yen | 345.59 yen | (2.1) | – | ||||
Operating profit | 122,500 | 111,638 | 9.7 | – | ||||
Net profit | 61,400 | 90,316 | (32.0) | – | ||||
JPY/USD rate* | 109.0 yen | 110.4 yen | (1.3) | – | ||||
JPY/GBP rate* | 140.7 yen | 147.5 yen | (4.6) | – |
* FY2019 forecasts are based on average exchange rates in January
2019. Actual exchange rates in FY2018 actual results are annual average
exchange rates in 2018.
Note: Underlying net profit,
Underlying basic EPS and Net profit: Excluding attribution to
non-controlling interests.
About the Dentsu Group
Dentsu is the world’s largest advertising agency brand. Led by Dentsu
Inc. (Tokyo: 4324; ISIN: JP3551520004), a company with a history of 117
years of innovation, the Dentsu Group provides a comprehensive range of
client-centric brand, integrated communications, media and digital
services through its ten global network brands—Carat, Dentsu, dentsu X,
iProspect, Isobar, mcgarrybowen, Merkle, MKTG, Posterscope and Vizeum—as
well as through its specialist/multi-market brands. The Dentsu Group has
a strong presence in over 145 countries and regions across five
continents, and employs more than 62,000 dedicated professionals. Dentsu
Aegis Network Ltd., its international business headquarters in London,
oversees Dentsu’s agency operations outside of Japan. The Group is also
active in the production and marketing of sports and entertainment
content on a global scale. http://www.dentsu.com/
Contacts
For additional enquiries
Media –
Please contact Corporate Communications:
Tokyo
Dentsu
Inc.
Shusaku Kannan:
+81 3 6216 8042
[email protected]
London
Dentsu
Aegis Network
Dani Jordan:
+44 744 7828
[email protected]
Investors & analysts –
Please contact Investor
Relations:
Tokyo
Dentsu Inc.
Yuji Ito:
+81
3 6216 8015
[email protected]
London
Dentsu
Aegis Network
Kate Stewart:
+44 (0)203 535 8237
[email protected]
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Cannabis
Medical Cannabis Market Report 2024-2030: Asia-Pacific Set to Witness Robust Growth, Driven by R&D Discovery Initiatives
Cannabis
Rubicon Organics Reports Q1 2024 Financial Results
SCHWAZZE
Schwazze Announces First Quarter 2024 Financial Results
Schwazze Management to Host Conference Call Today at 5:00 p.m. Eastern Time
DENVER, May 15, 2024 /PRNewswire/ — Medicine Man Technologies, Inc., operating as Schwazze, (OTCQX: SHWZ) (Cboe CA: SHWZ) (“Schwazze” or the “Company”), today announced financial and operational results for the first quarter ended March 31, 2024.
“We delivered another period of revenue growth in Q1 as we further refined our retail strategy while contending with the prolonged competitive challenges in Colorado and New Mexico,” said Forrest Hoffmaster, Interim CEO of Schwazze. “Throughout the quarter, we continued to sharpen our pricing and promotional efforts while enhancing the in-store experience, widening assortment, improving in-stock position, and advancing our loyalty program to attract and retain new customers. We also strengthened our wholesale business with quarter-over-quarter growth, while surpassing 30% total door penetration across both states.”
“The Colorado market remains highly competitive with more than 680 active recreational licenses, underscoring the importance of delivering an exceptional customer experience and fully integrated retail support program. Although retail pricing has recently stabilized, Colorado sales in Q1 were down 10% year-over-year due to lower volumes. Nonetheless, we significantly outpaced the market as our sales were up 9%, demonstrating the effectiveness of our operating playbook to compete in challenging environments. We expect to continue driving improvements in customer acquisition, retention, and loyalty as we further increase market share in the state.”
“In New Mexico, the proliferation of new licenses continued to outpace state cannabis sales as store count in Q1 increased 31% year-over-year while the market grew only 13%. In addition to pricing and promotional efforts, we’ve focused on driving traffic into our stores by expanding assortment with high quality flower and delivering an elevated customer experience. The New Mexico regulatory body has also increased its license enforcement efforts in recent months, contributing to more than 70 store closures and a 33% sequential decrease in net new store openings in the first quarter. We will continue to support the New Mexico Cannabis Control Division as it develops its regulatory framework.”
“Over the past four years we have rapidly scaled our footprint through 13 acquisitions, building a leading retail presence in both Colorado and New Mexico. We are beginning to see positive momentum from our pricing and promotional strategy and will remain focused on driving operating efficiencies while further optimizing our assets as we consolidate cultivation facilities and eliminate underperforming stores that do not meet our high-margin thresholds. We believe these initiatives, coupled with our operating playbook and strict cost controls, will enable us to return to stronger levels of profitability moving forward.”
First Quarter 2024 Financial Summary
$ in Thousands USD |
Q1 2024 |
Q4 2023 |
Q1 2023 |
Total Revenue |
$41,601 |
$43,325 |
$40,001 |
Gross Profit |
$17,934 |
$7,034[1] |
$21,849 |
Operating Expenses |
$20,643 |
$23,276 |
$16,199 |
Income (Loss) from Operations |
$(2,709) |
$(16,242) |
$5,650 |
Adjusted EBITDA[2] |
$7,341 |
$10,953 |
$14,525 |
Operating Cash Flow |
$(3,700) |
$3,452 |
$(880) |
Recent Highlights
- Announced the grand opening of a medical and recreational dispensary in March under the Everest Apothecary banner in Las Cruces, New Mexico, increasing the Company’s retail footprint to 34 stores across the state.
- Increased wholesale penetration in the first quarter to more than 30% of total doors in Colorado and New Mexico.
- Lowell Herb Co. pre-roll sales increased more than 3x quarter-over-quarter in Colorado, where it continues to be the #1 pre-roll in the state.
- Wana gummy sales up more than 2x quarter-over-quarter in New Mexico.
First Quarter 2024 Financial Results
Total revenue in the first quarter of 2024 increased 4% to $41.6 million compared to $40.0 million for the same quarter last year. The increase was primarily due to growth from new stores compared to the prior year period, partially offset by continued pricing pressure and the proliferation of new licenses in New Mexico.
Gross profit for the first quarter of 2024 was $17.9 million or 43.1% of total revenue, compared to $21.8 million or 54.6% of total revenue for the same quarter last year. The decrease in gross margin was primarily driven by the aforementioned pricing pressure in New Mexico, as well as higher medical sales mix in Colorado.
____________________________ |
1 Q4 2023 Gross Profit includes one-time, non-cash inventory adjustments of approximately $13.1 million comprised of $3.1 million of product consolidation, obsolescence, and shrinkage expenses, $4.3 million of net realizable value adjustments, and $5.8 million of fair value adjustments on acquired inventory in New Mexico in 2023. |
Operating expenses for the first quarter of 2024 were $20.6 million compared to $16.2 million for the same quarter last year. The year-ago period benefitted from a payroll tax credit of $3.9M. The remaining increase was primarily driven by personnel expenses and four-wall SG&A costs associated with 21 additional stores in Colorado and New Mexico that are still ramping.
Loss from operations for the first quarter of 2024 was $2.7 million compared to income from operations of $5.6 million in the same quarter last year. Net loss was $16.1 million for the first quarter of 2024 compared to net income of $1.7 million for the same quarter last year.
Adjusted EBITDA for the first quarter of 2024 was $7.3 million compared to $14.5 million for the same quarter last year. The decrease in Adjusted EBITDA was primarily driven by lower gross margin and higher operating expenses associated with the 21 additional stores that are still ramping.
As of March 31, 2024, cash and cash equivalents were $13.2 million compared to $19.2 million on December 31, 2023. Total debt as of March 31, 2024, was $159.7 million compared to $156.8 million on December 31, 2023.
Conference Call
The Company will conduct a conference call today, May 15, 2024, at 5:00 p.m. Eastern time to discuss its results for the first quarter ended March 31, 2024.
Schwazze management will host the conference call, followed by a question-and-answer period. Interested parties may submit questions to the Company prior to the call by emailing [email protected].
Date: Wednesday, May 15, 2024
Time: 5:00 p.m. Eastern time
Toll-free dial-in: (888) 664-6383
International dial-in: (416) 764-8650
Conference ID: 84167910
Webcast: SHWZ Q1 2024 Earnings Call
The conference call will also be broadcast live and available for replay on the investor relations section of the Company’s website at https://ir.schwazze.com.
Toll-free replay number: (888) 390-0541
International replay number: (416) 764-8677
Replay ID: 167910
If you have any difficulty registering or connecting with the conference call, please contact Elevate IR at (720) 330-2829.
About Schwazze
Schwazze (OTCQX: SHWZ) (Cboe CA: SHWZ) is building a premier vertically integrated regional cannabis company with assets in Colorado and New Mexico and will continue to explore taking its operating system to other states where it can develop a differentiated regional leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale.
Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company’s leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector.
Medicine Man Technologies, Inc. was Schwazze’s former operating trade name. The corporate entity continues to be named Medicine Man Technologies, Inc. Schwazze derives its name from the pruning technique of a cannabis plant to enhance plant structure and promote healthy growth. To learn more about Schwazze, visit https://schwazze.com/.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include financial outlooks; any projections of net sales, earnings, or other financial items; any statements of the strategies, plans and objectives of our management team for future operations; expectations in connection with the Company’s previously announced business plans; any statements regarding future economic conditions or performance; and statements regarding the intent, belief or current expectations of our management team. Such statements may be preceded by the words “may,” “will,” “could,” “would,” “should,” “expect,” “intends,” “plans,” “strategy,” “prospects,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other words of similar meaning in connection with a discussion of future events or future operating or financial performance, although the absence of these words does not necessarily mean that a statement is not forward-looking. We have based our forward-looking statements on management’s current expectations and assumptions about future events and trends affecting our business and industry. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Therefore, forward-looking statements are not guarantees of future events or performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control and cannot be predicted or quantified. Consequently, actual events and results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) regulatory limitations on our products and services and the uncertainty in the application of federal, state, and local laws to our business, and any changes in such laws; (ii) our ability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (iii) our ability to identify, consummate, and integrate anticipated acquisitions; (iv) general industry and economic conditions; (v) our ability to access adequate capital upon terms and conditions that are acceptable to us; (vi) our ability to pay interest and principal on outstanding debt when due; (vii) volatility in credit and market conditions; (viii) the loss of one or more key executives or other key employees; and (ix) other risks and uncertainties related to the cannabis market and our business strategy. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s website at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise except as required by law.
Investor Relations Contact
Sean Mansouri, CFA or Aaron D’Souza
Elevate IR
(720) 330-2829
[email protected]
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
For the Periods Ended March 31, 2024 and December 31, 2023
Expressed in U.S. Dollars
March 31, |
December 31, |
||||
2024 |
2023 |
||||
ASSETS
|
|||||
Current Assets |
|||||
Cash & Cash Equivalents |
$ |
13,151,317 |
$ |
19,248,932 |
|
Accounts Receivable, net of Allowance for Doubtful Accounts |
3,356,032 |
4,261,159 |
|||
Inventory |
26,382,184 |
25,787,793 |
|||
Marketable Securities, net of Unrealized Loss of $347,516 and Loss of $1,816, respectively |
108,583 |
456,099 |
|||
Prepaid Expenses & Other Current Assets |
3,502,310 |
3,914,064 |
|||
Total Current Assets |
46,500,426 |
53,668,047 |
|||
Non-Current Assets |
|||||
Fixed Assets, net Accumulated Depreciation of $10,061,700 and $8,741,782, respectively |
31,326,000 |
31,113,630 |
|||
Investments |
2,000,000 |
2,000,000 |
|||
Investments Held for Sale |
– |
202,111 |
|||
Goodwill |
67,492,705 |
67,499,199 |
|||
Intangible Assets, net Accumulated Amortization of $36,483,160 and $32,706,765, respectively |
162,391,482 |
166,167,877 |
|||
Other Non-Current Assets |
1,328,187 |
1,263,837 |
|||
Operating Lease Right of Use Assets |
34,575,832 |
34,233,142 |
|||
Deferred Tax Assets, net |
992,144 |
1,996,489 |
|||
Total Non-Current Assets |
300,106,350 |
304,476,285 |
|||
Total Assets |
$ |
346,606,776 |
$ |
358,144,332 |
|
LIABILITIES & STOCKHOLDERS’ EQUITY
|
|||||
Current Liabilities |
|||||
Accounts Payable |
$ |
9,443,233 |
$ |
13,341,561 |
|
Accrued Expenses |
8,106,618 |
7,774,691 |
|||
Derivative Liabilities |
1,319,845 |
638,020 |
|||
Lease Liabilities – Current |
5,186,316 |
4,922,724 |
|||
Current Portion of Long Term Debt |
29,579,713 |
3,547,011 |
|||
Income Taxes Payable |
28,235,039 |
25,232,782 |
|||
Total Current Liabilities |
81,870,764 |
55,456,789 |
|||
Non-Current Liabilities |
|||||
Long Term Debt, net of Debt Discount & Issuance Costs |
130,120,753 |
153,262,203 |
|||
Lease Liabilities – Non-Current |
30,735,072 |
30,133,452 |
|||
Total Non-Current Liabilities |
160,855,825 |
183,395,655 |
|||
Total Liabilities |
$ |
242,726,589 |
$ |
238,852,444 |
|
Stockholders’ Equity |
|||||
Preferred Stock, $0.001 Par Value. 10,000,000 Shares Authorized; 82,185 Shares Issued and |
|||||
82,185 Outstanding as of March 31, 2024 and 85,534 Shares Issued and 85,534 Outstanding as of |
|||||
December 31, 2023. |
82 |
86 |
|||
Common Stock, $0.001 Par Value. 250,000,000 Shares Authorized; 79,168,539 Shares Issued |
|||||
and 78,248,389 Shares Outstanding as of March 31, 2024 and 74,888,392 Shares Issued |
|||||
and 73,968,242 Shares Outstanding as of December 31, 2023. |
79,169 |
74,888 |
|||
Additional Paid-In Capital |
202,677,665 |
202,040,968 |
|||
Accumulated Deficit |
(96,843,602) |
(80,790,927) |
|||
Common Stock Held in Treasury, at Cost, 920,150 Shares Held as of March 31, 2024 and |
|||||
920,150 Shares Held as of December 31, 2023. |
(2,033,127) |
(2,033,127) |
|||
Total Stockholders’ Equity |
103,880,187 |
119,291,888 |
|||
Total Liabilities & Stockholders’ Equity |
$ |
346,606,776 |
$ |
358,144,332 |
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND (LOSS)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
(Unaudited) |
(Unaudited) |
||||
Operating Revenues |
|||||
Retail |
$ |
37,633,252 |
$ |
35,820,111 |
|
Wholesale |
3,898,320 |
4,058,925 |
|||
Other |
69,421 |
121,900 |
|||
Total Revenue |
41,600,993 |
40,000,936 |
|||
Total Cost of Goods & Services |
23,667,319 |
18,152,163 |
|||
Gross Profit |
17,933,674 |
21,848,773 |
|||
Operating Expenses |
|||||
Selling, General and Administrative Expenses |
11,835,818 |
10,100,934 |
|||
Professional Services |
1,671,881 |
1,187,364 |
|||
Salaries |
6,880,988 |
4,695,971 |
|||
Stock Based Compensation |
253,916 |
214,544 |
|||
Total Operating Expenses |
20,642,603 |
16,198,813 |
|||
Income from Operations |
(2,708,929) |
5,649,960 |
|||
Other Income (Expense) |
|||||
Interest Expense, net |
(8,307,369) |
(7,745,854) |
|||
Unrealized Gain (Loss) on Derivative Liabilities |
(681,825) |
8,501,685 |
|||
Other Loss |
10,500 |
– |
|||
Loss on Investment |
(33,382) |
– |
|||
Unrealized Gain on Investment |
(347,516) |
1,816 |
|||
Total Other Income (Expense) |
(9,359,592) |
757,647 |
|||
Pre-Tax Net Income (Loss) |
(12,068,521) |
6,407,607 |
|||
Provision for Income Taxes |
3,984,154 |
4,662,178 |
|||
Net Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Less: Accumulated Preferred Stock Dividends for the Period |
(2,155,259) |
(2,029,394) |
|||
Net Income (Loss) Attributable to Common Stockholders |
$ |
(18,207,934) |
$ |
(283,965) |
|
Earnings (Loss) per Share Attributable to Common Stockholders |
|||||
Basic Earnings (Loss) per Share |
$ |
(0.24) |
$ |
(0.01) |
|
Diluted Earnings (Loss) per Share |
$ |
(0.24) |
$ |
(0.06) |
|
Weighted Average Number of Shares Outstanding – Basic |
76,006,932 |
55,835,501 |
|||
Weighted Average Number of Shares Outstanding – Diluted |
76,006,932 |
101,608,278 |
|||
Comprehensive Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
(Unaudited) |
(Unaudited) |
||||
Cash Flows from Operating Activities: |
|||||
Net Income (Loss) for the Period |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Adjustments to Reconcile Net Income (Loss) to Cash for Operating Activities |
|||||
Depreciation & Amortization |
5,096,314 |
6,151,395 |
|||
Non-Cash Interest Expense |
1,031,431 |
991,184 |
|||
Non-Cash Lease Expense |
2,871,226 |
2,251,459 |
|||
Deferred Taxes |
1,004,345 |
(637,225) |
|||
Loss on Investment |
202,111 |
– |
|||
Change in Derivative Liabilities |
681,825 |
(8,501,685) |
|||
Amortization of Debt Issuance Costs |
421,512 |
421,513 |
|||
Amortization of Debt Discount |
2,303,246 |
1,999,933 |
|||
(Gain) Loss on Investments, net |
347,516 |
(1,816) |
|||
Stock Based Compensation |
640,974 |
214,544 |
|||
Changes in Operating Assets & Liabilities (net of Acquired Amounts): |
|||||
Accounts Receivable |
905,127 |
(118,181) |
|||
Inventory |
(587,900) |
(3,023,251) |
|||
Prepaid Expenses & Other Current Assets |
411,754 |
(3,036,801) |
|||
Other Assets |
(64,350) |
360,674 |
|||
Change in Operating Lease Liabilities |
(2,348,703) |
(1,531,765) |
|||
Accounts Payable & Other Liabilities |
(3,566,401) |
(3,464,671) |
|||
Income Taxes Payable |
3,002,257 |
5,299,403 |
|||
Net Cash Provided by (Used in) Operating Activities |
(3,700,390) |
(879,861) |
|||
Cash Flows from Investing Activities: |
|||||
Collection of Notes Receivable |
– |
10,631 |
|||
Purchase of Fixed Assets |
(1,532,287) |
(2,913,394) |
|||
Net Cash Provided by (Used in) Investing Activities |
(1,532,287) |
(2,902,763) |
|||
Cash Flows from Financing Activities: |
|||||
Payment on Notes Payable |
(864,938) |
– |
|||
Net Cash Provided by (Used in) Financing Activities |
(864,938) |
– |
|||
Net (Decrease) in Cash & Cash Equivalents |
(6,097,615) |
(3,782,624) |
|||
Cash & Cash Equivalents at Beginning of Period |
19,248,932 |
38,949,253 |
|||
Cash & Cash Equivalents at End of Period |
$ |
13,151,317 |
$ |
35,166,628 |
|
Supplemental Disclosure of Cash Flow Information: |
|||||
Cash Paid for Interest |
$ |
4,515,205 |
$ |
6,540,748 |
MEDICINE MAN TECHNOLOGIES, INC.
ADJUSTED EBITDA RECONCILIATION (NON-GAAP)
For the Periods Ended March 31, 2024 and 2023
Expressed in U.S. Dollars
For the Three Months Ended |
|||||
March 31, |
|||||
2024 |
2023 |
||||
Net Income (Loss) |
$ |
(16,052,675) |
$ |
1,745,429 |
|
Interest Expense, net |
8,307,369 |
7,745,854 |
|||
Provision for Income Taxes |
3,984,154 |
4,662,178 |
|||
Other (Income) Expense, net of Interest Expense |
1,052,223 |
(8,503,501) |
|||
Depreciation & Amortization |
5,618,834 |
6,612,814 |
|||
Earnings Before Interest, Taxes, Depreciation and |
|||||
Amortization (EBITDA) (non-GAAP) |
$ |
2,909,905 |
$ |
12,262,774 |
|
Non-Cash Stock Compensation |
253,916 |
214,544 |
|||
Deal Related Expenses |
637,761 |
1,195,802 |
|||
Capital Raise Related Expenses |
20,760 |
35,068 |
|||
Severance |
484,561 |
118,436 |
|||
Retention Program Expenses |
807,500 |
280,632 |
|||
Pre-Operating & Dark Carry Expenses |
1,053,837 |
391,917 |
|||
One-Time Legal Settlements |
417,653 |
– |
|||
Other Non-Recurring Items |
754,751 |
25,707 |
|||
Adjusted EBITDA (non-GAAP) |
$ |
7,340,644 |
$ |
14,524,880 |
|
Revenue |
41,600,993 |
40,000,936 |
|||
Adjusted EBITDA Percent |
17.6 % |
36.3 % |
View original content:https://www.prnewswire.co.uk/news-releases/schwazze-announces-first-quarter-2024-financial-results-302146858.html
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