Curaleaf Reports Second Quarter 2019 Financial and Operational Results
- Reported Record Pro Forma Revenue¹ ² of $110.9 million and Managed Revenue¹ of $55.1 Million
- Generated $3.4 million of Adjusted EBITDA¹ as Operations Continue to Scale
- Announced Acquisition of Grassroots, Inc. the Largest Private U.S. MSO for approximately $875 million Creating World’s Largest Cannabis Company and Expanding Presence to 19 States
WAKEFIELD, Mass., Aug. 27, 2019 /PRNewswire/ — Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) (“Curaleaf”or the “Company”), a leading vertically integrated cannabis operator in the U.S., today reported its financial and operating results for the second quarter ended June 30, 2019. All financial information is provided in U.S. dollars unless otherwise indicated.
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 of closed and pending acquisitions of Eureka Investment Partners, LLC (“Eureka”), Absolute Healthcare, Inc.’s Emerald Dispensary operations, Acres Cannabis (“Acres”), Phytotherapeutics Management Services, LLC, Glendale Greenhouse, Cura Partners, Inc. (“Select”) and GR Companies, Inc. (“Grassroots”) as if they occurred on January 1, 2019.
Second Quarter Highlights
- Reported record quarterly pro forma revenue of $110.9 million, managed revenue of $55.1 million and Adjusted EBITDA of $3.4 million
- Announced the acquisition of Select, the leading cannabis wholesale brand in the U.S.; Select transaction would combine Curaleaf’s retail locations, vertical integration, wellness brand and strong East Coast market presence with Select’s wholesale model, lifestyle brand and leading West Coast market presence.
- Acquired exclusive rights to operate Absolute Healthcare, Inc.’s Emerald dispensary in Gilbert, Arizona one of the highest grossing dispensaries in the state
- Announced two additional acquisitions in Arizona, both of which closed in August 2019
- Glendale Greenhouse, a vertically integrated cannabis operation in the Phoenix metro area
- Phytotherapeutics Management Services, the license of which will be applied to a newly developed flagship dispensary located at 2175 N 83rd Avenue
- Closed on acquisitions of Eureka in Northern California and Blackjack in Las Vegas, Nevada
- Acquired option to purchase Ohio Grown Therapies LLC’s medical cannabis cultivation and processing licenses and facility in Ohio
Post Second Quarter Highlights
- Announced acquisition of Chicago, Illinois-based Grassroots, the largest private U.S. MSO for approximately $875 million creating world’s largest cannabis company which will expand presence to 19 states
- Received approval for change of ownership and control in Massachusetts
- Signed a sale-leaseback agreement with Freehold Properties, Inc. for six properties valued at $28.3 million
We have made significant progress over the last few months in executing on our strategy to become the leading vertically integrated multi-state cannabis operator in the United States. The recently announced acquisitions of Select and Grassroots, as well as, tuck in acquisitions in Arizona, California, Nevada and Ohio position Curaleaf as the undisputed leader in the cannabis industry.
Joseph Lusardi, Chief Executive Officer of Curaleaf
With the industry’s largest operational footprint, we have the scale to rapidly accelerate growth across the country. I continue to believe Curaleaf is the best positioned operator in the cannabis space with the potential to create substantial shareholder value.
Neil Davidson, Chief Financial Officer of Curaleaf, added, “We achieved a number of milestones in the second quarter, foremost, we generated positive Adjusted EBITDA for the first time in Company history, and we achieved record pro forma revenue of $111 million. As our operations continue to ramp, we expect to see further improvement in our overall operating margins and an improving and accelerating cash flow profile. We continue to focus on positioning ourselves as the industry leader through prudent capital allocation to deliver strong organic growth.”
Financial Results for the Second Quarter Ended June 30, 2019
Managed Revenue for the second quarter was $55.1 million an increase of 219% over the prior year and 35% over the prior quarter. Pro Forma Revenue was $110.9 million.
Total Revenue for the second quarter of 2019 increased 231% year-over-year to $48.5 million, compared to $14.6 million in the second quarter of 2018. Total Revenue for the second quarter of 2019 increased 38% over the prior quarter.
Retail and wholesale revenue increased more than three-fold to $37.7 million during the quarter, compared to $11.5 million in the second quarter of 2018. The increase in retail and wholesale revenue was primarily due to organic growth in Florida resulting from opening dispensaries, the opening of two dispensaries in New York, contributions from acquisitions in Arizona and Maryland, as well as increased wholesale revenue in Massachusetts as a result of adult-use dispensaries opening in the state.
Gross profit before impact of biological assets for the second quarter of 2019 was $26.0 million, compared to $7.8 million for the second quarter of 2018. The increase was due to continued improvement in the operating capacity of the Company’s cultivation and processing facilities.
Gross profit on cannabis sales¹ was $15.3 million in the second quarter of 2019, resulting in a 40% margin, compared to $4.6 million in the second quarter of 2018. The increase was due to the mix in retail revenue over wholesale revenue and continued improvement in the operating capacity of the Company’s cultivation and processing facilities.
Adjusted EBITDA¹ was $3.4 million for the second quarter of 2019, compared to a loss of $3.8 million for the second quarter of 2018.
Net loss for the second quarter of 2019 was $24.4 million, compared to a net loss of $6.4 million in the second quarter of 2018 due to an increase of $5.8 million in depreciation and amortization and an increase of $3.8 million in share-based compensation, both of which are non-cash, an increase of $4.4 million in one-time charges, primarily acquisition related, an increase of $3.4 million in net interest expense and an increase of $7.0 million in provision for income tax. Net loss per share for the second quarter of 2019 was $0.05, compared to a loss of $0.01 in the second quarter of 2018.
Balance Sheet and Liquidity
As of June 30, 2019, we had $107.3 million of cash, $95.5 million of outstanding debt and fully diluted shares outstanding of 461.3 million.
Conference Call and Webcast Information
Curaleaf will host a conference call and audio webcast today at 5:00 pm ET to answer questions about the Company’s operational and financial highlights. The dial-in numbers for the conference call are +1-877-407-9039 (U.S. Toll-Free) or +1-201-689-8470 (International). 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/ir-calendar.
For interested individuals unable to join the conference call, a dial-in replay of the call will be available until September 10, 2019 at 11:59 pm ET and can be accessed by dialing +1-844-512-2921 (U.S. Toll Free) or +1-412-317-6671 (International) and entering replay pin number: 13693392. The online archive of the webcast will be available on https://ir.curaleaf.com/ir-calendar for 30 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 January 1, 2019. 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 acquisition and financing related costs. Curaleaf considers these measures to be an important indicator of the financial strength and performance of our business. The following tables provide a reconciliation of each of the non-IFRS measures to its closest IFRS measure.
About Curaleaf Holdings
Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) (“Curaleaf”) is the leading vertically integrated multi-state cannabis operator in the United States. It is a high-growth cannabis company with a national brand known for quality, trust and reliability. The company is positioned in highly populated, limited license states, and currently operates in 12 states with 48 dispensaries, 14 cultivation sites and 13 processing sites. Curaleaf has the executive expertise and research and development capabilities to provide leading service, selection, and accessibility across the medical and adult-use markets, as well as in the CBD category through its Curaleaf Hemp brand. On May 1, 2019, Curaleaf announced the acquisition of the Select brand from Cura Partners for approximately $949 million. On July 17, 2019, Curaleaf announced the acquisition of Grassroots for approximately $875 million.