Acreage Holdings, Inc. (“Acreage”) (CSE: ACRG.A.U, ACRG.B.U), (OTC:
ACRHF, ACRDF) today reported financial results for the third
quarter of 2020.
THIRD QUARTER FINANCIAL HIGHLIGHTS
(UNAUDITED)
- Reported revenue was $31.7 million, a 42% increase compared to
the same period in 2019, and a 17% increase compared to the second
quarter of 2020.
- Partner revenue was $17.0 million, a 79% increase compared to
the same period in 2019, and a 2% increase compared to the second
quarter of 2020.
- Company-owned same store sales growth was 36%, marking the
seventh consecutive quarter of double-digit same store sales
comparisons.
- Same store sales growth for our managed entities was 22%.
- Gross margin was 42.5%, an 80 basis point decrease compared to
the same period in 2019, and a 110 basis point increase compared to
the second quarter of 2020. The year over year gross margin
decline was in large part due to a one-time significant wholesale
opportunity in Massachusetts, which did not repeat this year.
- Net loss attributable to Acreage was $35.7 million, while
adjusted net loss* attributable to Acreage was $14.3 million.
- Adjusted EBITDA* was a loss of $6.9 million compared to a
loss of $11.7 million in the same period in 2019.
- Managed Entities' EBITDA* was $4.7 million compared to a loss
of $0.6 million in the same period in 2019.
“I am pleased with another solid quarter of
improving fundamentals," said Bill Van Faasen, Interim Chief
Executive Officer of Acreage. "Our refocused strategy
continues to work. Operational excellence led to
improved financials and a stronger balance sheet. Our core
profitability is in sight in the first half of 2021. Much work
remains, but we are absolutely on the right path both short and
long-term, with a team that's as energized and results-focused as
it's ever been.”
EARNINGS CALL DETAILS
Acreage will host a conference call with
management on Thursday, November 12th at 8:30 A.M. EST. The call
will be webcast and can be accessed at
investors.acreageholdings.com. To listen to the live call, please
go to the website at least 15 minutes early to register, download
and install any necessary audio software.
ABOUT ACREAGE HOLDINGS, INC.
Headquartered in New York City, 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. Acreage’s wide range of national and regionally available
cannabis products include the award-winning Botanist brand, 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. More information is available
at www.acreageholdings.com.
On June 27, 2019, Acreage implemented an
arrangement under section 288 of the Business Corporations Act
(British Columbia) with Canopy Growth Corporation (“Canopy
Growth”), which was subsequently amended on September 23, 2020 (the
“Amended Arrangement”). Pursuant to the Amended Arrangement, upon
the occurrence (or waiver by Canopy Growth) of changes in federal
laws in the United States to permit the general cultivation,
distribution and possession of marijuana (as defined in the
relevant legislation) or to remove the regulation of such
activities from the federal laws of the United States (the
“Triggering Event”), Canopy Growth will, subject to the
satisfaction or waiver of certain closing conditions, acquire all
of the issued and outstanding Class E subordinate voting shares
(the “Fixed Shares”) on the basis of 0.3048 of a Canopy Growth
share per Fixed Share (following the automatic conversion of the
Class F multiple voting shares and subject to adjustment in
accordance with the terms of the arrangement agreement entered into
between Acreage and Canopy Growth on April 18, 2019, as amended on
May 15, 2019 and on September 23, 2020).
In addition, Canopy Growth holds an option,
exercisable at the discretion of Canopy Growth, to acquire all of
the issued and outstanding Class D subordinate voting shares (the
“Floating Shares”) at the time that Canopy Growth acquires the
Fixed Shares, for cash or Canopy Growth shares, as Canopy Growth
may determine, at a price per Floating Share based upon the 30-day
volume-weighted average trading price of the Floating Shares on the
CSE relative to the trading price of the Canopy Growth shares at
the time of the occurrence or waiver of the Triggering Event,
subject to a minimum price of US$6.41 per Floating Share.
For more information about the Amended
Arrangement please see the Acreage proxy statement and management
information circular dated August 17, 2020 (the “Circular”) and the
respective information circulars of each of Acreage and Canopy
Growth dated May 17, 2019, which are available on Acreage’s and
Canopy Growth’s respective profiles on SEDAR at www.sedar.com and
filed with the SEC on the EDGAR website at www.sec.gov. For
additional information regarding Canopy Growth, please see Canopy
Growth’s profile on SEDAR at www.sedar.com.
*NON-GAAP MEASURES, RECONCILIATION AND DISCUSSION
(UNAUDITED)
This release contains tables that reconcile our
results of operations reported in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”) to adjusted results that exclude the impact of certain
items identified as affecting comparability (non-GAAP). We use
EBITDA, adjusted EBITDA, adjusted net loss attributable to Acreage,
among other measures, to evaluate our actual operating performance
and for planning and forecasting future periods. We believe the
adjusted results presented provide relevant and useful information
for investors because they clarify our actual operating
performance, make it easier to compare our results with those of
other companies and allow investors to review performance in the
same way as our management. Since these measures are not calculated
in accordance with GAAP, they should not be considered in isolation
of, or as a substitute for, our reported results as indicators of
our performance, and they may not be comparable to similarly named
measures from other companies. The tables below reconcile our
results of operations in accordance with GAAP to the adjusted
results mentioned above:
|
Reconciliation of GAAP to Non-GAAP Measures |
| US$ (thousands, except per
share amounts) |
|
Q3'20 |
|
Q3'19 |
|
FY'20 |
|
FY'19 |
|
Net loss (GAAP) |
|
$ |
(42,036 |
) |
|
$ |
(49,502 |
) |
|
$ |
(308,635 |
) |
|
$ |
(129,571 |
) |
|
Income tax expense (benefit) |
|
3,826 |
|
|
2,327 |
|
|
(21,633 |
) |
|
6,125 |
|
|
Interest expense (income), net |
|
4,541 |
|
|
(1,094 |
) |
|
6,023 |
|
|
(2,576 |
) |
|
Depreciation and amortization |
|
1,396 |
|
|
2,182 |
|
|
4,888 |
|
|
5,313 |
|
| EBITDA
(non-GAAP)* |
|
$ |
(32,273 |
) |
|
$ |
(46,087 |
) |
|
$ |
(319,357 |
) |
|
$ |
(120,709 |
) |
| Adjusting items: |
|
|
|
|
|
|
|
|
|
(Income) loss from investments, net |
|
433 |
|
|
1,696 |
|
|
195 |
|
|
(294 |
) |
|
Loss on impairment of intangible assets |
|
— |
|
|
— |
|
|
187,775 |
|
|
— |
|
|
Loss on notes receivable |
|
— |
|
|
— |
|
|
8,161 |
|
|
— |
|
|
Write down of assets held-for-sale |
|
2,893 |
|
|
— |
|
|
11,003 |
|
|
— |
|
|
Equity-based compensation expense - Plan |
|
7,607 |
|
|
13,673 |
|
|
33,388 |
|
|
48,228 |
|
|
Equity-based compensation expense - Plan (Plan of Arrangement
Awards) |
|
2,688 |
|
|
10,772 |
|
|
14,680 |
|
|
11,086 |
|
|
Equity-based compensation expense - other |
|
150 |
|
|
3,729 |
|
|
17,301 |
|
|
8,530 |
|
|
Transaction costs |
|
3,114 |
|
|
1,330 |
|
|
3,114 |
|
|
7,580 |
|
|
Other non-recurring expenses |
|
8,505 |
|
|
3,147 |
|
|
17,755 |
|
|
9,180 |
|
| Adjusted EBITDA
(non-GAAP)* |
|
$ |
(6,883 |
) |
|
$ |
(11,740 |
) |
|
$ |
(25,985 |
) |
|
$ |
(36,399 |
) |
* Due to the Company's transition from IFRS to U.S. GAAP,
certain expenses related to leased assets formerly classified as
depreciation and interest expense are now included in EBITDA as a
general and administrative expense. The Company's lease expenses
associated with non-finance leases were $2,499 and $1,935 in Q3'20
and Q3'19, respectively. The Company's lease expenses associated
with non-finance leases were $7,620 and $4,317 for FY'20 and FY'19,
respectively.
|
Reconciliation of GAAP to Non-GAAP Measures |
| US$ (thousands, except per
share amounts) |
|
Q3'20 |
|
Q3'19 |
|
FY'20 |
|
FY'19 |
|
Net loss attributable to Acreage Holdings, Inc.
(GAAP) |
|
$ |
(35,748 |
) |
|
|
$ |
(38,716 |
) |
|
|
$ |
(244,894 |
) |
|
|
$ |
(99,634 |
) |
|
| Net loss per share
attributable to Acreage Holdings, Inc. (GAAP) |
|
$ |
(0.35 |
) |
|
|
$ |
(0.43 |
) |
|
|
$ |
(2.49 |
) |
|
|
$ |
(1.17 |
) |
|
| Adjusting
items:(1) |
|
|
|
|
|
|
|
|
|
(Income) loss from investments, net |
|
$ |
363 |
|
|
|
$ |
1,313 |
|
|
|
$ |
156 |
|
|
|
$ |
(223 |
) |
|
|
Loss on impairment of intangible assets |
|
— |
|
|
|
— |
|
|
|
150,220 |
|
|
|
— |
|
|
|
Loss on notes receivable |
|
— |
|
|
|
— |
|
|
|
6,529 |
|
|
|
— |
|
|
|
Write down of assets held-for-sale |
|
2,427 |
|
|
|
— |
|
|
|
8,802 |
|
|
|
— |
|
|
|
Equity-based compensation expense - Plan |
|
6,382 |
|
|
|
10,585 |
|
|
|
26,710 |
|
|
|
36,658 |
|
|
|
Equity-based compensation expense - Plan (Plan of Arrangement
Awards) |
|
2,255 |
|
|
|
8,340 |
|
|
|
11,744 |
|
|
|
8,426 |
|
|
|
Equity-based compensation expense - other |
|
126 |
|
|
|
2,887 |
|
|
|
13,841 |
|
|
|
6,484 |
|
|
|
Transaction costs |
|
2,613 |
|
|
|
1,030 |
|
|
|
2,491 |
|
|
|
5,762 |
|
|
|
Other non-recurring expenses |
|
7,136 |
|
|
|
2,436 |
|
|
|
14,204 |
|
|
|
6,978 |
|
|
|
Tax impact of adjustments above |
|
130 |
|
|
|
(264 |
) |
|
|
(24,648 |
) |
|
|
86 |
|
|
| Total
adjustments |
|
$ |
21,432 |
|
|
|
$ |
26,327 |
|
|
|
$ |
210,049 |
|
|
|
$ |
64,171 |
|
|
| Adjusted net loss
attributable to Acreage Holdings, Inc. (non-GAAP)* |
|
$ |
(14,316 |
) |
|
|
$ |
(12,389 |
) |
|
|
$ |
(34,845 |
) |
|
|
$ |
(35,463 |
) |
|
| Adjusted net loss per share
attributable to Acreage Holdings, Inc. (non-GAAP)* |
|
$ |
(0.14 |
) |
|
|
$ |
(0.14 |
) |
|
|
$ |
(0.35 |
) |
|
|
$ |
(0.42 |
) |
|
| Weighted average shares
outstanding - basic and diluted |
|
103,450 |
|
|
|
89,262 |
|
|
|
98,304 |
|
|
|
84,817 |
|
|
| Weighted average NCI ownership
% |
|
16.10 |
|
% |
|
22.59 |
|
% |
|
20.00 |
|
% |
|
23.99 |
|
% |
(1) Adjusting items have been reduced by the
respective non-controlling interest percentage for the period.
MANAGED ENTITIES SELECTED FINANCIAL RESULTS
This release contains tables that display the results of
entities which we have management or consulting agreements with,
whom we earn a management fee from. These figures are not included
within our consolidated results.
|
Managed Entity Net Sales |
| US$ (thousands) |
|
|
Q3'20 |
|
Q3'19 |
|
FY'20 |
|
FY'19 |
|
|
New England |
|
$ |
6,754 |
|
|
$ |
4,515 |
|
|
$ |
16,960 |
|
|
$ |
12,783 |
|
| |
Mid-Atlantic* |
|
— |
|
|
2,157 |
|
|
7,515 |
|
|
5,479 |
|
| |
Midwest |
|
8,377 |
|
|
2,121 |
|
|
18,402 |
|
|
5,353 |
|
| |
West |
|
1,887 |
|
|
707 |
|
|
4,216 |
|
|
1,623 |
|
| Revenue
from Entities under Management or Consulting
Agreements |
|
$ |
17,018 |
|
|
$ |
9,500 |
|
|
$ |
47,093 |
|
|
$ |
25,238 |
|
|
Managed Entity EBITDA |
| US$ (thousands) |
|
|
Q3'20 |
|
Q3'19 |
|
FY'20 |
|
FY'19 |
|
|
New England |
|
$ |
2,007 |
|
|
$ |
627 |
|
|
$ |
3,866 |
|
|
$ |
1,870 |
|
| |
Mid-Atlantic* |
|
— |
|
|
(373 |
) |
|
(165 |
) |
|
(752 |
) |
| |
Midwest |
|
2,549 |
|
|
(671 |
) |
|
3,628 |
|
|
(2,250 |
) |
| |
West |
|
184 |
|
|
(148 |
) |
|
(367 |
) |
|
(976 |
) |
| EBITDA
from Entities under Management or Consulting
Agreements |
|
$ |
4,740 |
|
|
$ |
(565 |
) |
|
$ |
6,962 |
|
|
$ |
(2,108 |
) |
* Following the acquisition of Compassionate Care
Foundation, Inc. on June 26, 2020, figures for the Mid-Atlantic
region are reported in consolidated results.
FORWARD LOOKING STATEMENTS
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 Circular, Acreage’s management
information circular dated May 17, 2019 filed on May 23, 2019,
Acreage’s annual report on Form 10-K for the year ended December
31, 2019 dated May 29, 2020 and the amendment thereto on Form
10-K/A dated August 14, 2020, and Acreage’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.
| Media
Contact: |
Investor
Contact: |
| Howard Schacter |
Steve West |
| Vice President of
Communications |
Vice President, Investor
Relations |
|
h.schacter@acreageholdings.com |
investors@acreageholdings.com |
| 917-893-5300 |
917-893-5300 |
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