Acreage Holdings Reports Fourth Quarter and Full Year 2021 Financial Results

NEW YORK – Acreage Holdings, Inc. (CSE:ACRG.A.U, ACRG.B.U), (OTCQX: ACRHF, ACRDF), a multi-state operator of cannabis cultivation and retailing facilities in the U.S., reported its financial results for the fourth quarter and full year ended December 31, 2021.

Fourth Quarter 2021 Financial Highlights

• Consolidated revenue was $58.1 million for Q4 2021, an increase of 84% year-over-year and 21% sequentially.
• Gross margin increased to 48% in Q4 2021 from 46% in Q4 2020.
• Adjusted EBITDA* was $8.5 million in Q4 2021, compared to a loss of $(3.5) million in Q4 2020. Adjusted EBITDA* as a percentage of consolidated revenue was 14.6% for the fourth quarter of 2021.

Full Year 2021 Financial Highlights

• Full year consolidated revenue increased 65% to $188.9 million in 2021 compared to $114.5 million in full year 2020.
• Full year gross margin increased to 51% in 2021 compared to 43% in full year 2020.
• Full year adjusted EBITDA* was $24.6 million in 2021, a $54.1 million improvement compared to a loss of $(29.5) million in full year 2020. Adjusted EBITDA* as a percentage of consolidated revenue was 13.0% for the full year 2021.

Fourth Quarter 2021 Operational Highlights

• Expanded the Company’s strategic footprint with the acquisition of market-leading operations in the state of Ohio, including a 70,000 sq. foot cultivation and processing facility and five operating retail stores.
• Increased cultivation capacity output nearly fourfold at the Egg Harbor facility in New Jersey to support the Company’s own retail network and the rapidly growing wholesale market ahead of the launch of adult-use sales.
• Secured a $150 million long-term debt agreement (“Credit Facility”) on attractive terms to repay existing debt, and fund working capital and future capital projects.

Management Commentary

“Throughout 2021 we focused on transforming our business and I am thrilled with the immense progress and success we achieved,” said Peter Caldini, CEO of Acreage. “Our positive results throughout 2021 were the culmination of our focused efforts to drive profitability, strengthen our balance sheet, and accelerate our growth in our core markets. We have accomplished many key priorities in a short period and are well-positioned to build on this momentum throughout 2022.”

Mr. Caldini continued, “Acreage made significant improvements in profitability during 2021, achieving its first quarter of positive EBITDA and then continuing the trajectory of positive EBITDA each subsequent quarter. In addition to the profitability improvements, Acreage strengthened its balance sheet through the sale of operations in Florida, repaid near-term debt obligations, and secured a $150 million credit facility. Lastly, Acreage accelerated growth in our core markets with the opening of a new retail location in New Jersey, the completion of cultivation expansion projects in Pennsylvania, Illinois, and New Jersey, the opening of an edibles kitchen in Massachusetts, and the acquisition of high-quality operations in California, Maine, and Ohio.”

Mr. Caldini concluded, “Over these last twelve months, we have built a solid foundation on which to scale our business in 2022. We will have a full year of operations in Ohio, California, and Maine, and we are very well established in New Jersey, New York, and Connecticut, which have pending adult-use sales that should drive significant growth in 2022 and beyond. 2021 was a great year for Acreage and we have set the stage to extend this success with the right footprint, operations, and team to continue to grow our business and further drive value for our shareholders.”

Q4 2021 Financial Summary

(in thousands)

Total revenue for Q4 2021 was $58.1 million, an increase of $26.6 million or 84% compared to Q4 2020. The year-over-year growth was primarily driven by the acquisitions of Ohio, California, and Maine operations over the past 12 months, the additional revenue available from the completion of expansions at several of our cultivation facilities, coupled with increased demand and production across various states. This revenue growth was somewhat offset by revenue declines due to divestitures and declines within our operations that are being held for sale. Additionally, total revenue for Q4 2021 improved sequentially by $9.9 million or 21% compared to the third quarter of 2021.

Total gross profit for Q4 2021 was $27.6 million, an increase of $13.1 million or 90% compared to Q4 2020. Growth in revenue and efficiencies achieved at Acreage’s production facilities drove the increase in gross profit. Total gross margin increased to 48% in Q4 2021 compared to 46% in the fourth quarter of 2020.

Total operating expenses for Q4 2021 increased by $13.1 million, or 26% to $63.2 million, from Q4 2020. Excluding equity-based compensation expenses, losses and write-downs, impairments, and depreciation and amortization expenses, all of which are non-cash in nature, total operating expenses for Q4 2021 decreased $0.4 million or 2.0% compared to the corresponding period of fiscal 2020. 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.

Consolidated EBITDA* for the fourth quarter of 2021 was a loss of $(32.9) million, which was an improvement compared to a consolidated EBITDA* loss of $(36.7) million in the previous year’s comparable period. Adjusted EBITDA* for the fourth quarter of 2021 was $8.5 million, which was a significant improvement compared to Adjusted EBITDA* loss of $(3.5) million in the fourth quarter of 2020 and a sequential improvement from Adjusted EBITDA* of $6.5 million in the third 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 $9.8 million, indicating the Company’s core markets are still being negatively impacted by its non-core operations.

Net loss attributable to Acreage for Q4 2021 was $(40.4) million, compared to $(36.9) million in the fourth 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 offset by increases in depreciation and amortization expenses and interest charges.

Balance Sheet and Liquidity

Acreage ended the year with $44.3 million in cash and cash equivalents and restricted cash. During Q4 2021, the Company secured a $150 million Credit Facility with a syndicate of lenders. Under the terms of the Credit Facility, $100 million was available for immediate use and a further $50 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 December 31, 2021, $75 million was drawn under this facility. The remaining current availability under this facility of $25 million, together with cash and cash equivalents and restricted cash on hand of $44.3 million, provides funding of $69.3 million until December 31, 2022, at which time the Company expects the $50 million committed accordion to also be available.

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 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.‎

(This information is primarily sourced from Acreage Holdings, Inc.  Highly Capitalized has neither approved nor disapproved the contents of this news release. Read our Disclaimer here).