Acreage Holdings Reports First Quarter 2022 Financial Results

Acreage Holdings, Inc. (“Acreage” or the “Company”) (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 first quarter ended March 31, 2022 (“Q1 2022”).

First Quarter 2022 Financial Highlights

• Consolidated revenue was $56.9 million for Q1 2022, an increase of 48% year-over-year.
• Gross margin of 52% compared to 48% in Q4 2021, and 54% in Q1 2021.
• Adjusted EBITDA* was $8.6 million in Q1 2022, compared to $1.6 million in Q1 2021. Adjusted EBITDA* as a percentage of consolidated revenue was 15.2% for the first quarter of 2022.

First Quarter 2022 Operational Highlights 

• Expanded the Company’s premier brand portfolio with the launch of Superflux, currently available in dispensaries across Illinois, Massachusetts, and Ohio. Superflux is a premium brand focused on honoring the cannabis craft, with each step of the development process designed to preserve the essence of cannabis in all its product forms: flower, live resin vapes, and concentrates.
• Enhanced customer selection and experience by introducing a variety of new and innovative products under The Botanist brand in select markets.
• Completed a licensing agreement with botanica to manufacture and distribute Mr. Moxey’s top-selling and award-winning THC mints in Acreage’s operating markets as regulations allow, including Ohio, New Jersey, Pennsylvania, Illinois, New York, and Maine.
• Strengthened the senior leadership team with the appointment of Dennis Curran as the Company’s Chief Operating Officer and the addition of Steven Strom to its Board of Directors.

Subsequent Events

• Commenced adult-use operations in New Jersey as part of an inaugural group of cannabis operators permitted to launch adult-use sales in the state. Acreage’s products, including its flagship brand The Botanist, are now available for adult-use consumers at its Egg Harbor Township and Williamstown dispensaries in southern New Jersey.
• Closed the sale of the Company’s cultivation and processing facility in Medford, Oregon for total consideration of $2.0 million, and closed its dispensary in Powell, Oregon.
• Completed the consolidation and conversion of its dispensary in Brewer, Maine to adult-use.
• Appointed Corey Sheahan as General Counsel.

Management Commentary 

“In the first quarter of 2022, we achieved our fifth consecutive quarter of positive Adjusted EBITDA and sequentially improved our gross margin, while continuing to grow revenue despite industry headwinds and pandemic related challenges in Q1,” said Peter Caldini, CEO of Acreage. “We remain focused and committed to delivering against our strategic priorities of accelerating our growth in our core markets, driving profitability, and strengthening our balance sheet.”

Mr. Caldini continued, “Operationally, we have worked to enhance our product offerings, including our newly launched craft brand Superflux and the recent rollout of a variety of innovative products under The Botanist brand across our footprint. This targeted approach to bringing consumers the premium products they are looking for in each of our markets has enabled us to maintain a top position in many of our core states.”

Mr. Caldini concluded, “Following the end of the quarter we were thrilled to begin adult-use sales in New Jersey. We are well-prepared for this market having recently completed the expansion of our Egg Harbor facility in anticipation of adult-use sales beginning this year. We have had a very successful launch and are looking forward to leveraging our expertise from New Jersey as we prepare for pending adult-use sales in New York and Connecticut. 2022 has started on strong footing for us and we remain committed to further delivering shareholder value as we execute on the significant growth opportunities ahead.”

Q1 2022 Financial Summary 
(in thousands)

Total revenue for Q1 2022 was $56.9 million, an increase of $18.5 million or 48% compared to Q1 2021. The year-over-year growth was primarily driven by the acquisitions of Ohio, California, and Maine operations over the past 12 months, which was somewhat offset by revenue declines due to the divestiture of Florida operations in April 2021 and declines within the Company’s operations that are being held for sale. Additionally, total revenue for Q1 2022 declined sequentially by $1.2 million or 2% compared to the fourth quarter. Excluding the Company’s California and Oregon operations which are not considered core, however, revenue for the three months ended March 31, 2022, increased slightly by 0.5% on a sequential basis as the Company was able to overcome challenges associated with the pandemic and industry pricing pressures which negatively impacted revenues.

Total gross profit for Q1 2022 was $29.5 million, an increase of $8.9 million or 43% compared to Q1 2021. Growth in revenue and efficiencies achieved at Acreage’s production facilities drove the increase in gross profit. Total gross margin was 52% in Q1 2022 compared to 54% in the first quarter of 2021. Excluding other revenue which has no associated costs of goods sold and which included non-recurring revenue in the prior comparable period, gross margin improved from 50% for the three months ended March 31, 2021, to 52% for the three months ended March 31, 2022.

Total operating expenses for Q1 2022 increased by $13.4 million, or 71% to $32.2 million, from Q1 2021. Excluding equity-based compensation expenses, losses, write-downs and recoveries, impairments, and depreciation and amortization expenses, all of which are non-cash in nature, total operating expenses for the three months ended March 31, 2022, increased $3.6 million or 19% compared to the corresponding period of fiscal 2021. The rate of increase in operating expenditures was significantly lower than the rate of increase in revenues and is due to Acreage’s expanded operations through growth and acquisitions.

Adjusted EBITDA* for the first quarter of 2022 increased to $8.6 million, compared to Adjusted EBITDA* of $1.6 million in the first quarter of 2021 and a slight improvement from Adjusted EBITDA* of $8.5 million in the fourth quarter of 2021. Adjusted EBITDA from core operations*, which excludes markets where Acreage has entered into definitive agreements to exit and start-up ventures such as beverages and CBD, was $9.3 million, indicating the Company’s core markets are still being negatively impacted by its non-core operations. Consolidated EBITDA* for the first quarter of 2022 was $1.3 million, compared to a consolidated EBITDA* of $1.6 million in the previous year’s comparable period.

Net loss attributable to Acreage for Q1 2022 was $(12.7) million, compared to $(7.8) million in the first quarter of 2021.

Balance Sheet and Liquidity

Acreage ended the quarter with $32.6 million in cash and cash equivalents. During Q4 2021, the Company secured a $150.0 million Credit Facility with a syndicate of lenders. Under the terms of the Credit Facility, $100.0 million was available for immediate use and a further $50.0 million is available in future periods under a committed accordion option once certain, predetermined milestones are achieved. Acreage intends to use the proceeds of the Credit Facility to fund expansion initiatives, repay existing debt, and provide additional working capital. As of March 31, 2022, $75.0 million was drawn under this facility. The remaining current availability under this facility of $25.0 million, together with cash and cash equivalents and restricted cash on hand of $32.6 million, provides funding of $57.6 million until December 31, 2022, at which time the Company expects the $50.0 million committed accordion to also be available.

Earnings Call

Management will host a conference call on May 6, 2022, at 10:00 a.m. ET to discuss the results in detail.

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