Acreage Holdings Reports Third Quarter 2021 Results

11/11/2021, 1:15 AM (Source: GlobeNewswire)

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.

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 cash1,098  22,097 
Inventory33,520  23,715 
Notes receivable, current1,552  2,032 
Assets held-for-sale19,272  62,971 
Other current assets15,470  4,663 
Total current assets98,780  148,020 
Long-term investments38,921  34,126 
Notes receivable, non-current81,434  97,901 
Capital assets, net103,853  89,136 
Operating lease right-of-use assets22,349  17,247 
Intangible assets, net124,534  138,983 
Goodwill37,604  31,922 
Other non-current assets1,493  4,718 
Total non-current assets410,188  414,033 
TOTAL ASSETS$508,968  $562,053 
    
LIABILITIES AND MEMBERS’ EQUITY   
Accounts payable and accrued liabilities$25,317  $18,913 
Taxes payable27,378  14,780 
Interest payable1,444  3,504 
Operating lease liability, current1,525  1,492 
Debt, current16,377  27,139 
Non-refundable deposits on sale1,750  750 
Liabilities related to assets held-for-sale2,808  18,154 
Other current liabilities8,844  13,010 
Total current liabilities85,443  97,742 
Debt, non-current126,186  153,318 
Operating lease liability, non-current21,830  16,609 
Deferred tax liability27,024  34,673 
Other liabilities37  2 
Total non-current liabilities175,077  204,602 
TOTAL LIABILITIES260,520  302,344 
    
Members' equity234,922  241,031 
Non-controlling interests13,526  18,678 
TOTAL MEMBERS’ EQUITY248,448  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.

 


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