Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) (“Curaleaf” or the “Company”), a leading U.S. provider of consumer products in cannabis, today reported its financial and operating results for the third quarter ended September 30, 2020. All financial information is provided in U.S. dollars unless otherwise indicated.
|Q3 2020 Financial Highlights (Unaudited)|
|($ thousands, except per share amounts)||Q3 2020||Q2 2020|| % qoq|
|Q3 2019|| % yoy|
|Gross profit before impact of biological assets||$91,775||$60,636||51%||$34,741||164%|
|Gross profit on cannabis sales(1)||$89,669||$42,735||110%||$23,602||280%|
|Gross margin on cannabis sales(1)||50%||43%||47%|
|Net income (loss) attributable to Curaleaf Holdings Inc.||($9,343)||($2,029)||($6,835)|
|Net income (loss) per share – basic and diluted||($0.01)||($0.00)||(0.01)|
|(1)||See “Non-IFRS Financial and Performance Measures” below for more information regarding Curaleaf’s use of Non-IFRS financial measures and other reconciliations.|
|(2)||Pro Forma Revenue includes the revenue from GR Companies, Inc. (“Grassroots”) as if it occurred on July 1, 2020.|
Third Quarter Highlights
- Record managed revenue of $193.2 million, which grew 164% year-over-year and 59% sequentially
- Record total revenue of $182.4 million, which grew 195% year-over-year and 55% sequentially
- Record Adjusted EBITDA of $42.3 million, which grew more than four times 2019 levels and 51% sequentially
- Closed acquisition of Grassroots creating the world’s largest cannabis Company, as measured by revenue
- Completed acquisition of Curaleaf NJ, Inc. and Maine Organic Therapy assets that were previously managed
- Closed private placement of approximately $24.5 million in net proceeds
- Raised approximately $41.0 million in net proceeds related to sale-leaseback transactions
Post Third Quarter Highlights
- Select launched into 3 new states, including Ohio, Illinois, Pennsylvania, now available in 16 states
- Opened 2 new dispensaries in Florida with 33 now open in state
- Completed Acquisition of Alternative Therapies Group in Massachusetts the last managed entity to be consolidated
- Voters in two key Curaleaf states approved cannabis for adult-use: New Jersey and Arizona
- Announced the divestiture of $31.5 million of assets in Maryland, supporting the optimization of Curaleaf’s vertically integrated presence in the state
Joseph Lusardi, Chief Executive Officer of Curaleaf stated, “Curaleaf’s record third quarter results were complemented by the successful completion of our acquisition of Grassroots, which expanded our presence into 6 new states, including high-growth markets such as Illinois and Pennsylvania. As we head into 2021, Curaleaf remains incredibly well-positioned following the transformative legalization of adult-use cannabis in Arizona and New Jersey, and consequently the potential of future adult-use in New York, Pennsylvania and Connecticut. Each of these markets present an enormous opportunity for us, as the only MSO with a leading presence in every one of these states. Looking forward, we expect our growth will be driven by organic initiatives, increased capacity and dispensaries in key states and the roll out of adult use in Arizona and New Jersey.”
Mike Carlotti, Chief Financial Officer of Curaleaf, added, “Curaleaf, once again, delivered record quarterly results highlighted by record managed revenues, total revenues, and a 51% sequential improvement in Adjusted EBITDA. We anticipate a continued rise in managed revenue and adjusted EBITDA leading to strong sequential growth in the fourth quarter and into 2021. Finally, as of October 8th, we consolidated our final managed entity, Alternative Therapies Group in Massachusetts, and accordingly will report only IFRS total revenue beginning in the first quarter of 2021, thus greatly simplifying our future financial reporting.”
Financial Results for the Third Quarter Ended September 30, 2020
Managed Revenue for the third quarter of 2020 was a record $193.2 million, an increase of 164.0% compared to $73.2 million in the third quarter of 2019. Managed Revenue for the third quarter increased 59.2% sequentially.
Total Revenue for the third quarter of 2020 was a record $182.4 million, an increase of 195.1% compared to $61.8 million in the third quarter of 2019. Total Revenue for the third quarter of 2020 increased 55.3% sequentially.
Retail revenue increased by 206.5% to $135.3 million during third the quarter of 2020, compared to $44.2 million in the third quarter of 2019. The increase in retail revenue was primarily due to organic growth and new store openings in in Florida, Massachusetts, Arizona and New York, coupled with the impact of Grassroots, Curaleaf NJ, Arrow, and Maine Organic Therapy acquisitions in 2020, the 2019 acquisitions of two dispensaries in Arizona in the third quarter of 2019 and acquisition of Acres in Nevada in late 2019.
Wholesale revenue increased nearly seven-fold to $45.0 million during the third quarter of 2020, compared to $6.5 million in the third quarter of 2019. Growth in wholesale revenue was due primarily to the addition of Select, Grassroots, New Jersey, Blue Kudu and an increase in California, Maryland and New York as a result of increased cultivation and harvest.
Management fee income decreased by 81.1% to $2.1 million during the third quarter of 2020, compared to $11.1 million in the third quarter of 2019. The decrease in the management fee income was primarily due to the acquisition of Curaleaf NJ, the managed not-for-profit in New Jersey in July 2020, offset by the management fees generated from ATG.
Gross profit before impact of biological assets for the third quarter of 2020 was $91.8 million, compared to $34.7 million for the third quarter of 2019. The increase was primarily due to the continued improvement in the operating capacity and efficiency of the Company’s cultivation and processing facilities.
Gross profit on cannabis sales was $89.7 million for the third quarter of 2020, resulting in a 50% margin, compared to $23.6 million in the third quarter of 2019. The increase was primarily due to the continued improvement in the operating capacity and efficiency of the Company’s cultivation and processing facilities.
Adjusted EBITDA was a record $42.3 million for the third quarter of 2020, compared to $10.4 million for the third quarter of 2019.
Net loss, attributable to Curaleaf Holdings, Inc., for the third quarter of 2020 was $9.3 million, compared to a net loss of $6.8 million in the third quarter of 2019. The decrease was primarily driven by a $16.3 million increase in depreciation and amortization and a $0.8 million increase in share-based compensation, both of which are non-cash, a $13.5 million increase in income tax expense, a $13.3 million increase in net interest expense and $10.1 million increase in one-time expenses. These were partially offset by a $10.2 million increase in the fair value of biological assets and a $10.3 million increase in other income.
Balance Sheet and Liquidity
As of September 30, 2020, the Company had $84.6 million of cash on hand, $280.0 million of outstanding debt net of unamortized debt discounts and the weighted average fully diluted shares outstanding during the quarter were 625.2 million.
Conference Call and Webcast Information
Curaleaf will host a conference call and audio webcast today at 4:30 pm ET to answer questions about the Company’s operational and financial highlights. The dial-in numbers for the conference call are +1-888-317-6003 (U.S.), +1-866-284-3684 (Canada) or +1-412-317-6061 (Int’l) Passcode: 1304323. Please dial-in 10 to 15 minutes prior to the start time of the conference call and an operator will register your name and organization.
The conference call will also be available via webcast, which can be accessed through the Investor Relations section of Curaleaf’s website, https://ir.curaleaf.com/events.
For interested individuals unable to join the conference call, a dial-in replay of the call will be available until November 24, 2020 at 11:59 pm ET and can be accessed by dialing +1-877-344-7529 (U.S.), +1-855-669-9658 (Canada) or +1-412-317-0088 (International) and entering replay pin number: 10148901. The online archive of the webcast will be available on https://ir.curaleaf.com/events for 90 days following the call.
Non-IFRS Financial and Performance Measures
In this press release Curaleaf refers to certain non-IFRS financial measures such as “Pro Forma Revenue”, “Managed Revenue”, “Gross Profit on Cannabis Sales” and “Adjusted EBITDA”. These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. Curaleaf defines “Managed Revenue” as total revenue plus revenue from entities for which the Company has a management contract but does not consolidate the financial results based on IFRS 10 – Consolidated Financial Statements. Curaleaf defines “Pro Forma Revenue” as “Managed Revenue” plus revenue from operations of pending and closed acquisitions as if such acquisitions occurred on July 1, 2020. The Company defines “Gross Profit on Cannabis Sales” as retail and wholesale revenues less cost of goods sold. “Adjusted EBITDA” is defined by Curaleaf as earnings before interest, taxes, depreciation and amortization less share-based compensation expense and one-time charges related to business development, acquisition, financing and reorganization costs. Curaleaf considers these measures to be an important indicator of the financial strength and performance of our business. 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 IFRS, 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 following tables provide a reconciliation of each of the non-IFRS measures to its closest IFRS measure.
|Q3 2020||Q2 2020||Q3 2019|
|Management fee income||2,106||17,901||11,139|
|Revenue from managed entities, net of MSA fees||10,812||3,922||11,372|
|Gross Profit on Cannabis Sales|
|Q3 2020||Q2 2020||Q3 2019|
|Retail and wholesale revenues||$||180,302||$||99,579||$||50,681|
|Cost of goods sold||90,633||56,844||27,079|
|Gross profit on cannabis sales||$||89,669||$||42,735||$||23,602|
|Q3 2020||Q2 2020||Q3 2019|
|Net income (loss)||$||(8,931)||$||(1,836)||$||(7,434)|
|Interest expense, net||17,431||9,916||4,178|
|Income tax recovery (expense)||18,745||13,534||5,279|
|Depreciation and amortization||26,657||17,869||10,361|
|Other (income) expense||(10,874)||77||(580)|
|Change in fair value of biological assets||(24,008)||(20,591)||(13,810)|
|One time charges||17,845||4,192||7,772|
|(1)||Depreciation and amortization expense in Q3 2020, Q2 2020 and Q3 2019 include amounts charged to cost of goods sold on the statement of profits and losses. Prior period Q3 2019 has been adjusted to reflect the current period calculation of Adjusted EBITDA.|
About Curaleaf Holdings
Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) (“Curaleaf”) is a leading U.S. provider of consumer products in cannabis, with a mission to improve lives by providing clarity around cannabis and confidence around consumption. As a vertically integrated, high-growth cannabis operator known for quality, expertise and reliability, the company and its brands, including Curaleaf and Select provide industry-leading service, product selection and accessibility across the medical and adult-use markets. Curaleaf currently operates in 23 states with 96 dispensaries, 23 cultivation sites and over 30 processing sites, and employs over 3,000 team members across the United States. Curaleaf is listed on the Canadian Securities Exchange under the symbol CURA and trades on the OTCQX market under the symbol CURLF. For more information please visit www.curaleaf.com.
|Condensed Interim Consolidated Statements of Financial Position (Unaudited)|
|September 30,||December 31,|
|Assets held for sale||33,530||—|
|Prepaid expenses and other current assets||15,307||6,479|
|Total current assets||376,870||149,531|
|Deferred tax asset||2,687||2,628|
|Property, plant and equipment, net||200,339||129,812|
|Intangible assets, net||806,749||185,635|
|Prepayment of acquisition consideration||160,226||—|
|Liabilities and Shareholders’ Equity|
|Income tax payable||35,486||15,114|
|Current portion of lease liability||39,787||11,835|
|Current portion of notes payable||6,290||17,000|
|Current contingent consideration liability||9,700||—|
|Liabilities held for sale||3,483||—|
|Other current liabilities||6,805||31,549|
|Total current liabilities||177,151||106,256|
|Deferred tax liability||219,357||22,642|
|Non-controlling interest redemption liability||2,694||2,694|
|Contingent consideration liability||41,228||32,616|
|Other long term liability||246||—|
|Total Curaleaf Holdings, Inc. shareholders’ equity||1,386,406||408,762|
|Redeemable non-controlling interest||(2,694)||(2,694)|
|Total shareholders’ equity||1,385,640||403,446|
|Total liabilities and shareholders’ equity||$||2,359,230||$||736,926|
|Condensed Interim Consolidated Statements of Profits and Losses (Unaudited)($ thousands, except for share and per share amounts)|
|Three Months Ended||Nine Months Ended|
|September, 30||September, 30|
|Retail and wholesale revenues||$||180,302||$||50,681||$||356,937||$||116,176|
|Management fee income||2,106||11,139||39,448||29,386|
|Cost of goods sold||90,633||27,079||191,490||66,692|
|Gross profit before impact of biological assets||91,775||34,741||204,895||78,870|
|Realized fair value amounts included in inventory sold||(48,706)||(15,004)||(92,322)||(40,836)|
|Unrealized fair value gain on growth of biological assets||72,714||28,814||152,478||58,285|
|Selling, general and administrative||72,664||33,497||158,986||84,795|
|Depreciation and amortization||21,318||8,938||48,243||21,029|
|Total operating expenses||99,412||47,108||221,993||116,768|
|Income (Loss) from operations||16,371||1,443||43,058||(20,449)|
|Other income (expense):|
|Interest expense related to lease liabilities||(5,114)||(1,894)||(9,404)||(4,209)|
|Gain on investment||10,606||—||10,606||—|
|Other income (expense)||268||580||2,799||(494)|
|Total other income (expense), net||(6,557)||(3,598)||(23,748)||(10,214)|
|Income (Loss) before provision for income taxes||9,814||(2,155)||19,310||(30,663)|
|Income tax benefit (expense)||(18,745)||(5,279)||(45,528)||(12,033)|
|Net loss and comprehensive loss||(8,931)||(7,434)||(26,218)||(42,696)|
|Less: Net income (loss) attributable to non-controlling interest||412||(599)||242||(1,112)|
|Net loss attributable to Curaleaf Holdings, Inc.||$||(9,343)||$||(6,835)||$||(26,460)||$||(41,584)|
|Loss per share attributable to Curaleaf Holdings, Inc. – basic and diluted||$||(0.01)||$||(0.01)||$||(0.05)||$||(0.09)|
|Weighted average common shares outstanding – basic and diluted||625,228,556||464,073,130||555,629,066||461,045,835|