Acreage Holdings, Inc. (“Acreage”) (CSE: ACRG.A.U, ACRG.B.U), (OTC: 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 second quarter of 2021 ending June 30, 2021.
SECOND QUARTER RESULTS (UNAUDITED)
During the second quarter of 2021, Acreage continued to improve its financial performance and made progress towards its strategic initiatives. Highlights for the quarter are summarized below.
- Consolidated revenue was $44.2 million, a 63% increase compared to the same period in 2020 and a sequential increase of 15% compared to the first quarter of 2020.
- Gross margin was 54.0%, an increase of 12.6 percentage points compared to the same period in 2020.
- Net loss attributable to Acreage in the second quarter of 2021 was $2.6 million, an improvement from the net loss attributable to Acreage of $37.2 million for the same period in 2020.
- Adjusted EBITDA* in the second quarter of 2021 was $8.1 million compared to a loss of $6.5 million in the same period in 2020. Adjusted EBITDA* as a percentage of consolidated revenue was 18.3% for the second quarter of 2021. This marks the second consecutive quarter of positive adjusted EBITDA* for the company and validates management’s refocused strategic plan.
“I am once again pleased with our financial performance in the second quarter as we reported our second consecutive quarter of positive Adjusted EBITDA*,” said Peter Caldini, Chief Executive Officer of Acreage. “Additionally, our revenue growth accelerated to 63% year over year, and our gross margin remained strong at 54.0%. On an operating basis, our team continues to be focused on both driving profitability and accelerating our growth in our core markets.”
Retail revenue for the second quarter of 2021 was $28.4 million, an increase of $8.5 million or 43% compared to the second quarter of 2020. The year-over-year growth was primarily driven by the consolidation of our New Jersey operations in June 2020, the conversion to adult use and consolidation of several of our Maine operations in the second quarter of 2021 and same store sales growth of 2.7%. Additionally, retail revenue for the second quarter of 2021 improved sequentially by $2.5 million or 10% compared to the first quarter of 2021.
Wholesale revenue for the second quarter of 2021 was $15.5 million, an increase of $8.4 million or 117% compared to the second quarter of 2020. The year-over-year growth in wholesale revenue was primarily driven by the consolidation of our California operations in May 2021, coupled with increased capacity and maturing operations in the Company’s Pennsylvania, Massachusetts, and Illinois cultivation facilities. This resulted in increased supply and improved product mix in each of the respective markets. Additionally, wholesale revenue for the second quarter of 2021 improved sequentially by $5.5 million or 55% compared to the first quarter of 2020.
Total gross profit for the second quarter of 2021 was $23.9 million, an increase of $12.7 million or 113% compared to the second quarter of 2020. Both the growth in revenue and efficiencies achieved at our production facilities drove the increase in gross profit. Total gross margin was 54.0%, up 1,260 basis points compared to total gross margin of 41.4% in the second quarter of 2020.
Total operating expenses for the second quarter of 2021 were $30.6 million, a decrease of $19.9 million or 39% from the corresponding period of fiscal 2020. 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 the second quarter of 2021 decreased $3.6 million or 17% compared to the corresponding period of fiscal 2020. The Company continues to ensure that its cost base is appropriate to support the business and its expected growth while working to drive its profitability.
Consolidated EBITDA* for the second quarter of 2021 was $6.7 million, which was a significant improvement compared to a consolidated EBITDA* loss of $37.8 million in the previous year’s comparable period. Adjusted EBITDA* for the second quarter of 2021 was $8.1 million, which was also a significant improvement compared to Adjusted EBITDA* loss of $6.5 million in the second quarter of 2020 and a sequential improvement from Adjusted EBITDA* of $1.6 million in the first quarter of 2021. This marks the second consecutive quarter of positive EBITDA* and positive Adjusted EBITDA*, which management believes validates its refocused strategy. Finally, 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 $9.8 million, indicating the Company’s core markets are still being negatively impacted by its non-core operations.
Net loss for the second quarter of 2021 was $3.3 million, a $41.1 million improvement compared to the comparable period 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.
SECOND QUARTER YEAR-TO-DATE RESULTS (UNAUDITED)
Total revenue for the six months ended June 30, 2021, increased by $31.3 million or 61% as compared to the corresponding period of fiscal 2020. Excluding acquisitions, divestitures/closures and the impact of revenue declines in the Company’s Oregon operations which are being held for sale, total revenue increased by $21.3 million or 48% for the six months ended June 30, 2021, as compared to the corresponding period of fiscal 2020.
Gross margin for the six months ended June 30, 2021 was 53.9%, compared to 41.3% for the six months ended June 30, 2020. The increase in gross margin was driven by revenue growth exceeding the growth in costs of goods sold as a result of a greater level of vertical integration and production efficiencies being achieved at the Company’s maturing facilities.
Consolidated EBITDA* for the six months ended June 30, 2021 was $8.3 million, which was a significant improvement compared to a consolidated EBITDA* loss of $286.6 million in the previous year’s comparable period. Adjusted EBITDA* for the six months ended June 30, 2021 was $9.7 million, which was also a significant improvement compared to Adjusted EBITDA* loss of $18.6 million in the year ago comparable period. Net loss for the six months ended June 30, 2021 was $11.9 million, a $254.7 million improvement compared to the comparable period of 2020.
MANAGED SERVICES AGREEMENTS (MSA) PERFORMANCE
In addition to operating corporately owned production and cultivation facilities and retail dispensaries, Acreage manages operations on behalf of several third parties. During the second quarter of 2021, these managed entities generated net sales of $16.9 million, which was an increase of $0.2 million or 1% compared to the second quarter of 2020, driven primarily by same store sales growth of 87% and offset by the acquisition and consolidation of various entities.
Managed entities generated EBITDA of $4.8 million for the second quarter of 2021, an increase of $1.8 million compared to an EBITDA of $3.0 million in the second quarter of 2020.
BALANCE SHEET AND LIQUIDITY
The company ended the quarter with $37.8 million in cash and restricted cash. During the second quarter of 2021, the Company closed on the previously announced sale of its Florida operations for total proceeds of $60 million. The cash provided by this sale, including the proceeds from the subsequent sale of notes receivable received from the buyer of the Florida operations as consideration, and together with restricted cash, were used to repay $44.1 million in debt during the quarter.
The company has worked to ensure that sufficient capital is available and is consistently monitoring for advantageous opportunities.
STRATEGIC DISCUSSION
The Company continues to believe its refocused strategy is the key to continued improvements in its financial results and shareholder value. The Company remains focused on three key strategic objectives – driving profitability, strengthening the balance sheet, and accelerating growth in its core markets.
In addition to the Company’s strong financial performance, several key initiatives were completed in the second quarter of 2021 in accordance with these strategic objectives:
- The Company completed the sale of Florida operations for an aggregate $60.0 million during the quarter.
- The Company utilized the proceeds from the sale of its Florida operations, including the proceeds from the subsequent sale of notes receivable received from the buyer of the Florida operations as consideration, to repay $44.1 million in debt during the quarter.
- In Pennsylvania, the recent completion of the expansion of the existing facility allowed the Company to increase production capacity by 20% in the quarter.
- In Illinois, the Company completed construction of its cultivation and processing facility during the second quarter of 2021, ahead of schedule, bringing on-line over 80K square feet of additional capacity and processing capabilities to service the state.
- In Connecticut, the Company launched an enhanced loyalty program to increase customer retention and drive profitability.
- In Maine, the Company converted to adult use and consolidated two dispensary locations, bringing the total for the state to 3 consolidated, adult use locations.
EARNINGS CALL DETAILS
Acreage will host a conference call with management on Tuesday, August 10th at 9:00A.M. Eastern Daylight Time. 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.
