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Acreage Holdings Reports Third Quarter 2021 Results

Third consecutive quarter of positive Adjusted EBITDA*

NEW YORK, Nov. 10, 2021 (GLOBE NEWSWIRE) -- Acreage Holdings, Inc. (“Acreage”) (CSE: ACRG.A.U, ACRG.B.U), (OTCQX: ACRHF, ACRDF), a vertically integrated, multi-state operator of cannabis ‎cultivation and retailing facilities in the U.S., today reported its financial results for the third quarter of 2021 ending September 30, 2021 ("Q3 2021").

Third Quarter 2021 Financial and Operational Highlights
(Unaudited)

  • Consolidated revenue was $48.2 million, an increase of 52% year-over-year and 9% sequentially.

  • Gross margin increased to 49% from 43% in Q3 2020.

  • Net loss attributable to Acreage was $12.3 million, an improvement from a loss of $40.5 million in Q3 2020.

  • Adjusted EBITDA* was $6.5 million, compared to $(6.9) million for Q3 2020. Adjusted EBITDA* as a percentage of consolidated revenue was 13.5% for the third quarter of 2021.

  • Entered a definitive asset purchase and services agreement to divest the Company’s four Oregon retail dispensaries for total consideration of US $6.5 million.

  • Rebranded two medical cannabis dispensaries in Connecticut to continue positioning the Company's multi-state retail stores under The Botanist brand.

  • Subsequent to the quarter, Acreage completed the acquisition of cultivation, processing and retail operations in Ohio, establishing a market leadership position in the state.

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Management Commentary

Peter Caldini, CEO of Acreage Holdings, said: “At the beginning of fiscal 2021, we introduced a refreshed strategy focused on our key priorities, which include delivering improved financial results and generating shareholder value. Our successes throughout 2021 are the culmination of these refocused efforts to drive profitability, strengthen the balance sheet, and accelerate growth in our core markets.”

Mr. Caldini continued, “Over the third quarter, we divested our retail assets in Oregon to reprioritize our operations and position our business to capitalize on growth opportunities in our growing core markets. This disciplined approach has delivered another solid quarter of financial performance, with sequential revenue growth, reduced operating expenses, and strong gross margins, resulting in a third consecutive quarter of positive Adjusted EBITDA.”

“With our latest acquisition of the Greenleaf group of companies, we have established a vertically integrated footprint in the rapidly growing Ohio market. This acquisition not only enhances our operational platform with high-quality cultivation, processing, and retail assets but will drive our financial performance from the fourth quarter onward. We are confident that the solid foundation we have built over the past year will position us for continued success as we close out the fiscal year and enter our next phase of growth in 2022.”

Q3 2021 Financial Summary
(in thousands)

Three Months Ended September 30,

YoY% Change

Three Months
Ended June 30,
2021

QoQ%
Change

2021

2020

Consolidated Revenue

$48,151

$31,742

52%

$44,217

9%

Gross Profit

23,803

13,475

77%

23,875

(0.3)%

% of revenue

49 %

42 %

54 %

Total operating expenses

30,299

52,055

(42)%

30,632

(1)%

Net operating loss

(6,496)

(38,580)

(6,757)

Not loss attributable to Acreage

(12,297)

(40,548)

(2,553)

Adjusted EBITDA*

6,497

(6,883)

8,086

(20)%


Retail revenue for Q3 2021 was $30.8 million, an increase of $6.9 million or 29% compared to Q3 2020. The year-over-year growth was primarily driven by increased demand and production across various states, new store openings, and the consolidation of several Maine dispensary locations and their conversion to adult-use sales. The growth in retail revenue was slightly muted as a result of lower sales in the Oregon retail dispensaries and the sale of the Company’s Florida operations. Sequentially, retail revenue for Q3 2021 improved by $2.4 million or 8% compared to the second quarter of 2021.

Wholesale revenue for Q3 2021 was $17.1 million, an increase of $9.3 million or 119% compared to the third quarter of 2020. The year-over-year growth in wholesale revenue was primarily driven by increased capacity and maturing operations at the Company's Pennsylvania, Massachusetts, and Illinois cultivation facilities, resulting in increased supply and improved product mix in each of the respective markets. Additionally, the Company’s wholesale operations in California, acquired in the second quarter of 2021, contributed to an increase in wholesale revenue in the third quarter. Sequentially, wholesale revenue for Q3 2021 improved by $1.5 million or 10% compared to the second quarter of 2021.

Total gross profit for Q3 2021 was $23.8 million, an increase of $10.3 million or 77% compared to Q3 2020. Growth in revenue and efficiencies achieved at Acreage’s production facilities drove the increase in gross profit. Total gross margin increased to 49% in Q3 2021 compared to 43% in the third quarter of 2020.

Total operating expenses for Q3 2021 decreased by $21.8 million or 42% to $30.3 million from Q3 2020. Total operating expenses for Q3 2021 includes a $2.3 million write-off of the capital assets at the Sewell, New Jersey locations, net of expected insurance recoveries, that were damaged by Hurricane Ida. Excluding equity-based compensation expenses, losses and write-downs, and depreciation and amortization expenses, all of which are non-cash in nature, total operating expenses for Q3 2020 decreased $17.6 million or 47% compared to the corresponding period of fiscal 2020.

Consolidated EBITDA* for the third quarter of 2021 was a loss of $1.3 million, an improvement compared to a consolidated EBITDA* loss of $38.3 million in the previous year's comparable period. Adjusted EBITDA* for the third quarter of 2021 was $6.5 million, an improvement compared to Adjusted EBITDA* loss of $6.9 million in the previous year’s comparable period. Adjusted EBITDA from core operations*, which excludes markets where the Company has entered into definitive agreements to exit and start-up ventures such as beverages and CBD, was $7.5 million, indicating the Company's core markets are still being impacted by its non-core operations.

Net loss attributable to Acreage for Q3 2021 was $12.3 million, a $28.3 million improvement compared to the third quarter of 2020. Revenue growth, gross margin improvements, operating expense reductions, and net gains on disposal of assets all contributed to the net income improvements and were somewhat offset by increases in depreciation and amortization expenses and interest charges.

Balance Sheet and Liquidity

The company ended the quarter with $29.5 million in cash and restricted cash. During Q3 2021, the Company entered into a definitive agreement and management services agreements to sell, upon regulatory approval, four retail dispensaries in Oregon for total consideration of $6.5 million, consisting of a $0.25 million cash payment at the time of signing and a 10-month secured promissory note.

Managed Services Agreements (MSA) Performance

In addition to operating corporately owned production and cultivation facilities and retail dispensaries, Acreage manages operations or provides consulting services on behalf of several third parties. During the third quarter of 2021, these managed entities generated net sales of $16.1 million, which was a decrease of $0.9 million or 6% compared to the third quarter of 2020, driven primarily by same-store sales growth that was offset by the acquisition and consolidation of various entities.

Managed entities generated EBITDA of $3.4 million for the third quarter of 2021, a decrease of $1.4 million compared to the third quarter of 2020.

Earnings Call

Management will host a conference call on November 11, 2021, at 10:00 a.m. ET to discuss the results in detail.

Webcast:

Click Here

Dial-in:

(833) 921-1669 (toll-free) or (236) 389-2667

Conference ID:

3398442

The webcast will be archived and can be accessed via Acreage’s website at investors.acreageholdings.com.

About Acreage Holdings, Inc.

Acreage is a multi-state operator of cannabis ‎cultivation and retailing facilities in the U.S., including the company’s national retail store ‎brand, The Botanist. With its principal address in New York City, Acreage’s wide range of national and regionally available cannabis products include the award-winning The Botanist brand, premium brand Superflux in Illinois and Ohio, the highly recognizable Tweed brand, the Prime medical brand in Pennsylvania, the Innocent edibles brand in Illinois, and others. Acreage also owns Universal Hemp, LLC, a hemp subsidiary dedicated to the distribution, marketing and sale of CBD products throughout the U.S. Since its founding in 2011, Acreage has focused on building and scaling operations to create a ‎seamless, consumer-focused, branded experience. Learn more at www.acreageholdings.com and follow us on Twitter, LinkedIn, Instagram, and Facebook.

For more information and documents related to the Acreage and Canopy Growth Corporation plan of arrangement, please visit: https://investors.acreageholdings.com/acreage-canopy-deal/

Forward Looking Statements And Non-GAAP Measures

This news release and each of the documents referred to herein contains “forward-looking information” and ‎‎“forward-looking statements” within the meaning of applicable Canadian and United States securities legislation, ‎respectively. All statements, other than statements of historical fact, included herein are forward-looking ‎information, including, for greater certainty, statements regarding the Amended Arrangement, including the likelihood of completion thereof, the ‎occurrence or waiver of the Triggering Event, the satisfaction or waiver of the closing conditions set out in the Arrangement Agreement and other statements with respect to the proposed transactions with Canopy Growth. ‎Often, but not always, forward-looking statements and information can be identified by the use of words such as ‎‎“plans”, “expects” or “does not expect”, “is expected”, “estimates”, “intends”, “anticipates” or “does not anticipate”, ‎or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, ‎‎‎“would”, “might” or “will” be taken, occur or be achieved. ‎

Forward-looking statements or information involve known and unknown risks, uncertainties and other ‎factors which may cause the actual results, performance or achievements of Acreage or its ‎subsidiaries to be materially different from any future results, performance or achievements expressed or ‎implied by the forward-looking statements or information contained in this news release. Risks, uncertainties and other factors involved with forward-looking ‎information could cause actual events, results, performance, prospects and opportunities to differ ‎materially from those expressed or implied by such forward-looking information, including, but not ‎limited to financing and liquidity risks, and the risks disclosed in the Company’s Annual Report on Form 10-K for the year ended ‎December 31, 2020, ‎dated March 25, 2021 and the Company’s other public filings, in each case filed with the SEC on the EDGAR website at www.sec.gov and with ‎Canadian securities regulators ‎and available on the issuer profile of Acreage on SEDAR at www.sedar.com. Although Acreage has attempted to identify ‎important factors that could cause actual results to differ materially from those contained in forward-looking ‎information, there may be other factors that cause results not to be as anticipated, estimated or intended. ‎

Although Acreage believes that the ‎assumptions and factors used in preparing the forward-looking information or forward-looking ‎statements in this news release are reasonable, undue reliance should not be placed on such information ‎and no assurance can be given that such events will occur in the disclosed time frames or at all. The ‎forward-looking information and forward-looking statements included in this news release are made as of ‎the date of this news release and Acreage does not undertake any obligation to publicly update such ‎forward-looking information or forward-looking statements to reflect new information, subsequent events ‎or otherwise unless required by applicable securities laws.

Neither the Canadian Securities Exchange nor its Regulation Service Provider has reviewed and does not accept ‎responsibility for the adequacy or accuracy of the content of this news release.‎

For more information, contact:

Steve Goertz
Chief Financial Officer
investors@acreageholdings.com

Courtney Van Alstyne
MATTIO Communications
ir@mattio.com

US GAAP FINANCIAL HIGHLIGHTS (UNAUDITED)

US GAAP Statements of Financial Position

September 30, 2021

December 31, 2020

US$ (thousands)

(unaudited)

(audited)

ASSETS

Cash and cash equivalents

$

27,868

$

32,542

Restricted cash

1,098

22,097

Inventory

33,520

23,715

Notes receivable, current

1,552

2,032

Assets held-for-sale

19,272

62,971

Other current assets

15,470

4,663

Total current assets

98,780

148,020

Long-term investments

38,921

34,126

Notes receivable, non-current

81,434

97,901

Capital assets, net

103,853

89,136

Operating lease right-of-use assets

22,349

17,247

Intangible assets, net

124,534

138,983

Goodwill

37,604

31,922

Other non-current assets

1,493

4,718

Total non-current assets

410,188

414,033

TOTAL ASSETS

$

508,968

$

562,053

LIABILITIES AND MEMBERS’ EQUITY

Accounts payable and accrued liabilities

$

25,317

$

18,913

Taxes payable

27,378

14,780

Interest payable

1,444

3,504

Operating lease liability, current

1,525

1,492

Debt, current

16,377

27,139

Non-refundable deposits on sale

1,750

750

Liabilities related to assets held-for-sale

2,808

18,154

Other current liabilities

8,844

13,010

Total current liabilities

85,443

97,742

Debt, non-current

126,186

153,318

Operating lease liability, non-current

21,830

16,609

Deferred tax liability

27,024

34,673

Other liabilities

37

2

Total non-current liabilities

175,077

204,602

TOTAL LIABILITIES

260,520

302,344

Members' equity

234,922

241,031

Non-controlling interests

13,526

18,678

TOTAL MEMBERS’ EQUITY

248,448

259,709

TOTAL LIABILITIES AND MEMBERS' EQUITY

$

508,968

$

562,053



US GAAP Statements of Operations

US$ (thousands)

Q3'21

Q3'20

FY'21

FY'20

Retail revenue, net

$

30,794

$

23,914

$

85,038

$

61,362

Wholesale revenue, net

17,077

7,798

42,634

21,513

Other revenue, net

280

30

3,090

164

Total revenues, net

48,151

31,742

130,762

83,039

Cost of goods sold, retail

(16,279

)

(14,134

)

(43,412

)

(37,004

)

Cost of goods sold, wholesale

(8,069

)

(4,133

)

(19,049

)

(11,395

)

Total cost of goods sold

(24,348

)

(18,267

)

(62,461

)

(48,399

)

Gross profit

23,803

13,475

68,301

34,640

OPERATING EXPENSES

General and administrative

8,466

14,819

23,067

40,237

Compensation expense

10,699

8,306

32,236

30,740

Equity-based compensation expense

4,168

10,445

17,191

65,369

Marketing

583

46

992

1,514

Impairments, net

2,339

3,157

187,775

Loss on notes receivable

1,726

8,161

Write down (recovery) of assets held-for-sale

2,893

(8,616

)

11,003

Legal settlements, net

14,150

322

14,150

Depreciation and amortization

4,044

1,396

9,670

4,888

Total operating expenses

30,299

52,055

79,745

363,837

Net operating income (loss)

(6,496

)

(38,580

)

(11,444

)

(329,197

)

OTHER INCOME (LOSS)

(Loss) income from investments, net

489

(433

)

(777

)

(195

)

Interest income from loans receivable

1,067

1,606

4,125

5,083

Interest expense

(3,620

)

(6,147

)

(14,072

)

(11,106

)

Other income (loss), net

81

(656

)

7,825

(853

)

Total other (loss) income

(1,983

)

(5,630

)

(2,899

)

(7,071

)

Loss before income taxes

(8,479

)

(44,210

)

(14,343

)

(336,268

)

Income tax (expense) benefit

(5,579

)

(3,826

)

(11,661

)

21,633

Net loss

(14,058

)

(48,036

)

(26,004

)

(314,635

)

Less: net loss attributable to non-controlling interests

(1,761

)

(7,488

)

(3,347

)

(64,941

)

Net loss attributable to Acreage Holdings, Inc.

$

(12,297

)

$

(40,548

)

$

(22,657

)

$

(249,694

)


*NON-GAAP MEASURES, RECONCILIATION AND DISCUSSION (UNAUDITED)

This release contains tables that reconcile our results of operations reported in accordance with accounting principles generally accepted in the United States of America (“GAAP”) to adjusted results that exclude the impact of certain items identified as affecting comparability (non-GAAP). We use EBITDA, adjusted EBITDA, adjusted EBITDA from core operations, adjusted net loss attributable to Acreage, same store sales trends, among other measures, to evaluate our actual operating performance and for planning and forecasting future periods. We believe the adjusted results presented provide relevant and useful information for investors because they clarify our actual operating performance, make it easier to compare our results with those of other companies and allow investors to review performance in the same way as our management. Since these measures are not calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, our reported results as indicators of our performance, and they may not be comparable to similarly named measures from other companies. The tables below reconcile our results of operations in accordance with GAAP to the adjusted results mentioned above:

Reconciliation of GAAP to Non-GAAP Measures

US$ (thousands, except per share amounts)

Q3'21

Q3'20

FY'21

FY'20

Net loss (GAAP)

$

(14,058

)

$

(48,036

)

$

(26,004

)

$

(314,635

)

Income tax expense (benefit)

5,579

3,826

11,661

(21,633

)

Interest expense (income), net

2,553

4,541

9,947

6,023

Depreciation and amortization

4,590

1,396

11,384

4,888

EBITDA (non-GAAP)*

$

(1,336

)

$

(38,273

)

$

6,988

$

(325,357

)

Adjusting items:

Loss (income) from investments, net

(489

)

433

777

195

Impairments, net

818

187,775

Loss on Sewell facility

2,339

2,339

Loss on notes receivable

1,726

8,161

Write down (recovery) of assets held-for-sale

2,893

(8,616

)

11,003

Equity-based compensation expense

4,168

10,445

17,191

65,370

Legal settlements, net

14,150

322

14,150

Gain on business divestiture

(109

)

(11,791

)

Transaction costs

3,114

3,114

Other non-recurring expenses

1,924

355

6,425

9,605

Adjusted EBITDA (non-GAAP)*

$

6,497

$

(6,883

)

$

16,179

$

(25,984

)

EBITDA from beverage and CBD

539

2,014

EBITDA from businesses under definitive agreements to exit

498

2,192

Adjusted EBITDA from core operations (non-GAAP)*

$

7,534

$

(6,883

)

$

20,385

$

(25,984

)



Reconciliation of GAAP to Non-GAAP Measures

US$ (thousands, except per share amounts)

Q3'21

Q3'20

FY'21

FY'20

Net loss attributable to Acreage Holdings, Inc. (GAAP)

$

(12,297

)

$

(40,548

)

$

(22,657

)

$

(249,694

)

Net loss per share attributable to Acreage Holdings, Inc. (GAAP)

$

(0.11

)

$

(0.39

)

$

(0.21

)

$

(2.54

)

Adjusting items:(1)

Loss (income) from investments, net

$

(403

)

$

363

$

639

$

156

Impairments, net

672

150,220

Loss on Sewell facility

1,928

1,923

Loss on notes receivable

1,419

6,529

Write down (recovery) of assets held-for-sale

2,427

(7,082

)

8,802

Equity-based compensation expense

3,436

8,763

14,131

52,295

Legal settlements, net

11,872

265

11,320

Gain on business divestiture

(90

)

(9,692

)

Transaction costs

2,613

2,491

Other non-recurring expenses

1,586

298

5,281

7,684

Tax impact of adjustments above

(33

)

130

(5,549

)

(24,648

)

Total adjustments

$

6,424

$

26,466

$

2,007

$

214,849

Adjusted net loss attributable to Acreage Holdings, Inc. (non-GAAP)*

$

(5,873

)

$

(14,082

)

$

(20,650

)

$

(34,845

)

Adjusted net loss per share attributable to Acreage Holdings, Inc. (non-GAAP)*

$

(0.05

)

$

(0.14

)

$

(0.19

)

$

(0.35

)

Weighted average shares outstanding - basic and diluted

110,193

103,450

108,385

98,304

Weighted average NCI ownership %

17.57

%

16.10

%

17.80

%

20.00

%

(1) Adjusting items have been reduced by the respective non-controlling interest percentage for the period.