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Carter Validus Mission Critical REIT, Inc. First Quarter 2019 Results
TAMPA, Fla.–(BUSINESS WIRE)–Carter Validus Mission Critical REIT, Inc., or the Company, a public,
non-traded real estate investment trust focused on mission critical
healthcare properties, today announced operating results for the first
quarter ended March 31, 2019.
Quarter Ended March 31, 2019 and Subsequent
Highlights
- Net income attributable to common stockholders totaled $2.1 million.
-
Net operating income from continuing operations, or NOI, totaled $19.3
million. -
Funds from operations, or FFO, attributable to common stockholders
equaled $10.9 million. -
Modified funds from operations, or MFFO, attributable to common
stockholders equaled $6.6 million. -
During the three months ended March 31, 2019, the Company repurchased
approximately 3.7 million shares of common stock for approximately
$19.6 million, or $5.33 per share. -
On April 11, 2019, the Company announced it had entered into a
definitive agreement to merge with Carter Validus Mission Critical
REIT II, Inc, or REIT II. See further discussion in “Agreement and
Plan of Merger” section below.
Michael Seton, Chief Executive Officer and President of the Company
stated, “We are pleased that on April 11th the Company entered into a
merger agreement to merge with Carter Validus Mission Critical REIT II,
Inc. In addition to providing a combination of cash and stock
consideration to stockholders of the Company in connection with the
closing of the merger, we anticipate the combined company would provide
an increased opportunity to maximize stockholder value through greater
portfolio diversification, enhanced size and scale, and increased
optionality for potential liquidity in the future.”
An explanation of FFO, MFFO, NOI and Tenant Reimbursements, as well
as reconciliations of such non-GAAP financial measures to the most
directly comparable U.S. GAAP measures, are included at the end of this
release.
Financial Results
Quarter Ended March 31, 2019, Compared to Quarter Ended March 31,
2018
-
Net income attributable to common stockholders was $2.1 million for
the quarter ended March 31, 2019, compared to net loss attributable to
common stockholders of $17.2 million for the quarter ended March 31,
2018. -
FFO attributable to common stockholders was $10.9 million for the
quarter ended March 31, 2019, compared to negative FFO attributable to
common stockholders of $7.0 million for the quarter ended March 31,
2018. -
MFFO attributable to common stockholders was $6.6 million for the
quarter ended March 31, 2019, a decrease of 16.5%, compared to MFFO
attributable to common stockholders of $7.9 million for the quarter
ended March 31, 2018.
The increase in net income attributable to common stockholders during
the period presented above primarily was the result of one-time write
offs in the first quarter of 2018. The Company wrote-off straight-line
rent and an in-place lease intangible asset related to one of the
Company’s former tenants, Bay Area Regional Medical Center, LLC, or Bay
Area, which experienced financial difficulties and ultimately ceased
operations. The write-offs were partially offset by a gain on the sale
of two data center properties during the quarter ended March 31, 2018.
The increase in FFO during the period presented above was the result of
the same factors, except for the gain on sales, which is removed when
calculating this metric. The decrease in MFFO during the periods
presented above primarily relates to legal and professional fees
incurred in connection with the merger transaction, as discussed below.
The straight-line rent and in-place lease intangible write-offs, which
are a part of overall straight-line rent and depreciation and
amortization line items, respectively, as well as gain on sales are
removed when calculating MFFO.
Operating Results
Quarter Ended March 31, 2019, Compared to Quarter Ended March 31,
2018
-
NOI from continuing operations was $19.3 million for the quarter ended
March 31, 2019, compared to net operating loss of $1.5 million for the
quarter ended March 31, 2018. -
Total revenue from continuing operations was $20.9 million for the
quarter ended March 31, 2019, compared to $1.5 million for the quarter
ended March 31, 2018.
The increases in NOI from continuing operations, total revenue from
continuing operations and same store rental revenue and tenant
reimbursements during the quarter ended March 31, 2019, are primarily
the result of write-offs in straight-line rent and tenant reimbursements
related to Bay Area during the first quarter of 2018. The Company
terminated the lease with Bay Area on August 13, 2018, and re-leased the
property to a new tenant, the Board of Regents of the University of
Texas System on October 24, 2018.
Portfolio Overview
The Company’s operating portfolio had a weighted average occupancy of
91.2% as of March 31, 2019, with two properties vacant, and a weighted
average remaining lease term of 11.9 years.
As of March 31, 2019, the Company owned 61 properties, located in 32
markets, comprised of approximately 2.4 million of leased rentable
square feet.
Balance Sheet and Liquidity
As of March 31, 2019, the Company had total principal debt outstanding
of $235.8 million, and a net debt leverage ratio, which is the ratio of
principal debt outstanding less cash to fair value of real estate, of
18.2%. The Company’s outstanding debt was comprised of 24% debt fixed
through the use of interest rate swaps and 76% variable rate debt.
At March 31, 2019, the Company had liquidity of $105.9 million,
consisting of $28.0 million in cash and cash equivalents and $77.9
million in borrowing base availability on the unsecured credit facility.
Distributions
During the first quarter of 2019, the Company paid aggregate
distributions of $14.3 million ($7.8 million in cash and $6.5 million
reinvested in shares of common stock pursuant to the Company’s
Distribution Reinvestment Plan, or DRIP.
The Company declared weighted average distributions per share of common
stock in the amount of $0.08 and $3.14 in the first quarters ended March
31, 2019 and 2018, respectively. During the three months ended March 31,
2018, the Company paid the special cash distribution of $3.00 per share
of common stock in connection with the disposition of certain real
estate properties between December 2017 and January 2018.
Agreement and Plan of Merger
On April 11, 2019, the Company, along with REIT II, Carter/Validus
Operating Partnership, LP, or REIT I OP, Carter Validus Operating
Partnership II, LP, or REIT II OP, and Lightning Merger Sub, LLC, a
wholly owned subsidiary of REIT II, or the Merger Subsidiary, entered
into an Agreement and Plan of Merger, or the Merger Agreement.
Pursuant to the terms and conditions of the Merger Agreement, Carter
Validus Mission Critical REIT, Inc., will merge with and into the Merger
Subsidiary, and will be the surviving entity of the transaction.
Post-merger, the Merger Subsidiary will continue to operate as a wholly
owned subsidiary of REIT II.
At the time of the merger, and subject to the terms and conditions of
the Merger Agreement, each issued and outstanding share of the Company’s
common stock (or a fraction thereof), $0.01 par value per share, or REIT
I common stock, will be converted into the right to receive:
(i) $1.00 in cash; and
(ii) 0.4681 shares of REIT II Class A common stock, par value $0.01 per
share.
In order for the merger to be completed, among other conditions, the
Company’s stockholders must approve the merger and the other
transactions contemplated by the Merger Agreement, which requires the
affirmative vote of holders of a majority of the outstanding shares of
the Company’s common stock.
This is a summary of the terms and conditions of the Merger Agreement.
For a full description, see the Current Report on Form 8-K filed with
the Securities and Exchange Commission on April 11, 2019, and the
exhibits thereto.
Suspension of Distribution Reinvestment Plan
and Shift to Cash Distributions
In connection with the merger, on April 10, 2019, the Company’s board of
directors approved the suspension of the DRIP, and, therefore, suspended
the DRIP beginning with distributions that accrued in April 2019. All
stockholders now receive their distributions in cash.
Third Amended and Restated Share Repurchase
Program
In connection with entering into the Merger Agreement, on April 10,
2019, the Company’s board of directors approved the Third Amended and
Restated Share Repurchase Program, or the Third Amended & Restated SRP,
which became effective on May 11, 2019, and will apply beginning with
repurchases made on the 2019 third quarter repurchase date. Pursuant to
the Third Amended & Restated SRP, the Company will only repurchase
shares of common stock in connection with the death, qualifying
disability, or involuntary exigent circumstance (as determined by the
Company’s board of directors, in its sole discretion) of a stockholder,
subject to certain terms and conditions specified in the Third Amended &
Restated SRP. Further, pursuant to the Third Amended & Restated SRP, if
the Company does not repurchase all of the shares for which repurchase
requests were submitted in any quarter, outstanding repurchase requests
will not automatically roll over to the subsequent quarter.
Supplemental Information
The Company routinely announces material information to investors and
the marketplace using press releases, SEC filings and the Company’s
website at www.cvmissioncriticalreit.com.
The information that the Company posts to its website may be deemed
material. Accordingly, the Company encourages investors and others
interested in the Company to routinely monitor and review the
information that the Company posts on its website, in addition to
following the Company’s press releases and SEC filings. A glossary of
definitions and other supplemental information may be found attached to
the Current Report on Form 8-K filed May 17, 2019. A comprehensive
listing of the Company’s properties is also available at www.cvmissioncriticalreit.com.
About Carter Validus Mission Critical REIT, Inc.
Carter Validus Mission Critical REIT, Inc. is a public, non-traded
corporation headquartered in Tampa, Florida, that has elected to be
taxed as a real estate investment trust and invests in mission critical
healthcare real estate assets located throughout the United States.
Mission critical real estate assets are purpose-built facilities
designed to support the most essential operations of tenants.
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be any
sale of securities in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under
the securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the requirements
of the federal securities laws. The Company and REIT II expect to
prepare and file with the SEC a Registration Statement on Form S-4
containing a proxy statement/prospectus. WE URGE INVESTORS TO READ THE
PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED BY THE
COMPANY AND REIT II IN CONNECTION WITH THE PROPOSED MERGER WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE COMPANY, REIT II AND THE PROPOSED MERGER. INVESTORS ARE URGED TO
READ THESE DOCUMENTS CAREFULLY AND IN THEIR ENTIRETY. Investors will be
able to obtain these materials and other documents filed with the SEC
free of charge at the SEC’s website (www.sec.gov).
In addition, these materials will also be available free of charge by
accessing the Company’s website (www.cvmissioncriticalreit.com)
or by accessing REIT II’s website (www.cvmissioncriticalreitii.com).
Participants in the Proxy Solicitation
Information regarding the Company’s directors and executive officers is
available in its Annual Report on Form 10-K filed with the SEC on March
22, 2019, and information regarding REIT II’s directors and executive
officers is available in its Annual Report on Form 10-K filed with the
SEC on March 22, 2019. Certain directors and executive officers of the
Company and/or REIT II and other persons may have direct or indirect
interests in the merger due to securities holdings, pre-existing or
future indemnification arrangements and rights to severance payments and
retention bonuses if their employment is terminated prior to or
following the merger. If and to the extent that any of the participants
will receive any additional benefits in connection with the merger, the
details of those benefits will be described in the proxy
statement/prospectus relating to the merger. Investors and security
holders may obtain additional information regarding the direct and
indirect interests of the Company and REIT II and their respective
executive officers and directors in the merger by reading the proxy
statement/prospectus regarding the merger when it becomes available.
Forward-Looking Statements
Certain statements contained herein, other than historical fact, may be
considered “forward-looking statements” within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and are intended to be
covered by the safe harbor provided by the same. These statements are
based on management’s current expectations and beliefs regarding
operational strategies, anticipated events and trends, the economy, and
other future conditions and are subject to a number of trends and
uncertainties. No forward-looking statement is intended to, nor shall
it, serve as a guarantee of future performance. You can identify the
forward-looking statements by the use of words such as “anticipate,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,”
“outlook,” “plan,” “potential,” “predict,” “project,” “seek,” “should,”
“will” and other similar terms and phrases, including references to
assumptions and forecasts of future results. Forward-looking statements
are subject to various risks and uncertainties, and factors that could
cause actual results to differ materially from the Company’s
expectations include, but are not limited to, the risk that the merger
will not be consummated within the expected time period or at all; the
occurrence of any event, change or other circumstances that could give
rise to the termination of the Merger Agreement; the inability of the
Company to obtain stockholder approval of the merger or the failure to
satisfy the other conditions to completion of the merger; risks related
to disruption of management’s attention from the ongoing business
operations due to the merger; availability of suitable investment
opportunities; changes in interest rates, the availability and terms of
financing; general economic conditions; market conditions; legislative
and regulatory changes that could adversely impact the business of the
Company; and other factors, including those described under the section
entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for
the year ended 2018, and subsequent quarterly reports filed on Form 10-Q
with the SEC, copies of which are available at www.sec.gov.
The Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events, or otherwise, except as required by law.
Balance Sheet (amounts in thousands, |
||||||||||
(Unaudited) March 31, 2019 |
December 31, 2018 | |||||||||
ASSETS | ||||||||||
Real estate: | ||||||||||
Land | $ | 72,700 | $ | 72,700 | ||||||
Buildings and improvements, less accumulated depreciation of $106,906 and $100,897, respectively |
801,260 | 806,637 | ||||||||
Total real estate, net | 873,960 | 879,337 | ||||||||
Cash and cash equivalents | 28,015 | 43,133 | ||||||||
Acquired intangible assets, less accumulated amortization of $24,056 and $23,822, respectively |
55,907 | 59,681 | ||||||||
Right-of-use assets – operating leases | 10,001 | — | ||||||||
Other assets, net | 43,465 | 40,964 | ||||||||
Assets of discontinued operations, net | 393 | 401 | ||||||||
Total assets | $ | 1,011,741 | $ | 1,023,516 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Liabilities: | ||||||||||
Notes payable, net of deferred financing costs of $70 and $75, respectively |
$ | 17,749 | $ | 36,214 | ||||||
Credit facility | 218,000 | 190,000 | ||||||||
Accounts payable due to affiliates | 1,550 | 1,329 | ||||||||
Accounts payable and other liabilities | 12,188 | 16,703 | ||||||||
Intangible lease liabilities, less accumulated amortization of $5,118 and $5,712, respectively |
11,132 | 16,537 | ||||||||
Operating lease liabilities | 13,765 | — | ||||||||
Liabilities of discontinued operations, net | 12 | 13 | ||||||||
Total liabilities | 274,396 | 260,796 | ||||||||
Stockholders’ equity: | ||||||||||
Preferred stock, $0.01 par value per share, 50,000,000 shares authorized; none issued and outstanding |
— | — | ||||||||
Common stock, $0.01 par value per share, 300,000,000 shares authorized; 204,348,165 and 203,114,678 shares issued, respectively; 180,644,686 and 183,081,839 shares outstanding, respectively |
1,806 | 1,831 | ||||||||
Additional paid-in capital | 1,600,015 | 1,612,969 | ||||||||
Accumulated distributions in excess of earnings | (864,615 | ) | (852,505 | ) | ||||||
Accumulated other comprehensive income | 139 | 425 | ||||||||
Total stockholders’ equity | 737,345 | 762,720 | ||||||||
Total liabilities and stockholders’ equity | $ | 1,011,741 | $ | 1,023,516 | ||||||
Quarterly Income Statement (amounts in |
||||||||||
Three Months Ended |
||||||||||
2019 | 2018 | |||||||||
Revenue: | ||||||||||
Rental revenue | $ | 20,916 | $ | 1,535 | ||||||
Expenses: | ||||||||||
Rental expenses | 1,609 | 3,000 | ||||||||
General and administrative expenses | 2,891 | 1,609 | ||||||||
Asset management fees | 2,404 | 2,465 | ||||||||
Depreciation and amortization | 8,793 | 28,821 | ||||||||
Total expenses |
15,697 | 35,895 | ||||||||
Income (loss) from operations | 5,219 | (34,360 | ) | |||||||
Other expense: | ||||||||||
Interest expense, net | (3,071 | ) | (2,214 | ) | ||||||
Provision for loan losses | — | (1,190 | ) | |||||||
Total other expense | (3,071 | ) | (3,404 | ) | ||||||
Income (loss) from continuing operations | 2,148 | (37,764 | ) | |||||||
Income from discontinued operations | — | 20,533 | ||||||||
Net income (loss) attributable to common stockholders | $ | 2,148 | $ | (17,231 | ) | |||||
Other comprehensive (loss) income: | ||||||||||
Unrealized (loss) income on interest rate swaps, net | $ | (286 | ) | $ | 636 | |||||
Other comprehensive (loss) income | (286 | ) | 636 | |||||||
Comprehensive income (loss) attributable to common stockholders | $ | 1,862 | $ | (16,595 | ) | |||||
Weighted average number of common shares outstanding: | ||||||||||
Basic | 180,618,895 | 185,673,400 | ||||||||
Diluted | 180,641,395 | 185,673,400 | ||||||||
Net income (loss) per common share attributable to common stockholders: |
||||||||||
Basic: | ||||||||||
Continuing operations | $ | 0.01 | $ | (0.20 | ) | |||||
Discontinued operations | — | 0.11 | ||||||||
Net income (loss) attributable to common stockholders | $ | 0.01 | $ | (0.09 | ) | |||||
Diluted: | ||||||||||
Continuing operations | $ | 0.01 | $ | (0.20 | ) | |||||
Discontinued operations | — | 0.11 | ||||||||
Net income (loss) attributable to common stockholders | $ | 0.01 | $ | (0.09 | ) | |||||
Distributions declared per common share | $ | 0.08 | $ | 3.14 | ||||||
Use of Non-GAAP Information
Net operating income, a non-GAAP financial measure, is defined as total
revenues, less rental expenses, which excludes depreciation and
amortization, general and administrative expenses, acquisition related
expenses, asset management fees and interest expense, net. The Company
believes that net operating income serves as a useful supplement to net
income because it allows investors and management to measure unlevered
property-level operating results and to compare operating results to the
operating results of other real estate companies between periods on a
consistent basis. Net operating income should not be considered as an
alternative to net income determined in accordance with GAAP as an
indicator of financial performance, and accordingly, the Company
believes that in order to facilitate a clear understanding of the
consolidated historical operating results, net operating income should
be examined in conjunction with net income as presented in the condensed
consolidated financial statements and data included on the Company’s
Quarterly Report on Form 10-Q filed with the SEC on May 15, 2019.
The following is a reconciliation of net income (loss) attributable to
common stockholders, which is the most directly comparable GAAP
financial measure, to net operating income (loss) from continuing
operations for the three months ended March 31, 2019 and 2018 (amounts
in thousands):
Three Months Ended March 31, |
||||||||||
2019 | 2018 | |||||||||
Revenue: | ||||||||||
Rental revenue | $ | 20,916 | $ | 1,535 | ||||||
Expenses: | ||||||||||
Rental expenses | 1,609 | 3,000 | ||||||||
Net operating income (loss) from continuing operations | 19,307 | (1,465 | ) | |||||||
Expenses: | ||||||||||
General and administrative expenses | 2,891 | 1,609 | ||||||||
Asset management fees | 2,404 | 2,465 | ||||||||
Depreciation and amortization | 8,793 | 28,821 | ||||||||
Income (loss) from operations | 5,219 | (34,360 | ) | |||||||
Other expense: | ||||||||||
Interest expense, net | (3,071 | ) | (2,214 | ) | ||||||
Provision for loan losses | — | (1,190 | ) | |||||||
Income (loss) from continuing operations | 2,148 | (37,764 | ) | |||||||
Income from discontinued operations | — | 20,533 | ||||||||
Net income (loss) attributable to common stockholders | $ | 2,148 | $ | (17,231 | ) | |||||
The Company generates almost all of the net operating income from
property operations. In order to evaluate the overall portfolio,
management analyzes the net operating income of same store properties.
The Company defines “same store properties” as operating properties that
were owned and operated for the entirety of both calendar periods being
compared and excludes properties under development. By evaluating the
property net operating income of the same store properties, management
is able to monitor the operations of the Company’s existing properties
for comparable periods to measure the performance of the current
portfolio and determine the effects of new acquisitions on net income.
The following table presents same store and non-same store components of
net operating income (loss) from continuing operations for the three
months ended March 31, 2019 and 2018 (amounts in thousands):
Three Months Ended March 31, |
||||||||||
2019 | 2018 | |||||||||
Revenue: | ||||||||||
Same store rental revenue | $ | 20,109 | $ | 2,721 | ||||||
Non-same store rental revenue | — | 50 | ||||||||
Same store tenant reimbursements | 801 | (1,240 | ) | |||||||
Non-same store tenant reimbursements | 2 | — | ||||||||
Other operating income | 4 | 4 | ||||||||
Total revenue | 20,916 | 1,535 | ||||||||
Expenses: | ||||||||||
Same store rental expenses | 1,608 | 2,983 | ||||||||
Non-same store rental expenses | 1 | 17 | ||||||||
Net operating income (loss) from continuing operations | $ | 19,307 | $ | (1,465 | ) | |||||
One of the Company’s objectives is to provide cash distributions to its
stockholders from cash generated by the Company’s operations. The
purchase of real estate assets and real estate-related investments, and
the corresponding expenses associated with that process, is a key
operational feature of the Company’s business plan in order to generate
cash from operations. Due to certain unique operating characteristics of
real estate companies, the National Association of Real Estate
Investment Trusts, or NAREIT, an industry trade group, has promulgated a
measure known as FFO which the Company believes is an appropriate
supplemental measure to reflect the operating performance of a REIT. The
use of FFO is recommended by the REIT industry as a supplemental
performance measure. FFO is not equivalent to the Company’s net income
as determined under GAAP.
The Company defines FFO, consistent with NAREIT’s definition, as net
income (computed in accordance with GAAP), excluding gains (or losses)
from sales of property and asset impairment write-downs, plus
depreciation and amortization of real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect FFO on the same basis.
The Company, along with others in the real estate industry, consider FFO
to be an appropriate supplemental measure of a REIT’s operating
performance because it is based on a net income analysis of property
portfolio performance that excludes non-cash items such as depreciation
and amortization and asset impairment write-downs, which the Company
believes provides a more complete understanding of its performance to
investors and to its management, and when compared year over year,
reflects the impact on the Company’s operations from trends in occupancy.
Contacts
Investor Relations Contact:
Miranda
Davidson
[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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