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Generated $60 Million of Positive Operating Cash Flow in the Third Quarter and $71 Million in the First Nine Months of 2022

Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) (“Curaleaf” or the “Company”) , a leading international provider of consumer products in cannabis, today reported its financial and operating results for the third quarter ended September 30, 2022 . All financial information is provided in U.S. dollars unless otherwise indicated.

Third Quarter 2022 Financial Highlights (Unaudited)

($ thousands)

($ thousands, except per share amounts)

Three months ended

September 30, 2022

June 30, 2022

September 30, 2021

Total Revenue

$

339,728

$

337,553

$

317,125

Gross profit before impact
of biological assets

164,805

175,884

144,909

Gross margin before impact
of biological assets

49 %

52 %

46 %

Adjusted EBITDA (1)(2)

84,044

86,177

71,363

Net loss attributable to Curaleaf
Holdings Inc.

(51,475)

(28,336)

(54,524)

Net loss per share – basic
and diluted

$

(0.07)

$

(0.04)

$

(0.08)

(1)

Represents a Non-IFRS financial measure or Non-IFRS ratio without a standardized definition under IFRS, which may not be comparable to similar measures used by other issuers.

(2)

See “Non-IFRS Financial and Performance Measures” below for definitions and more information regarding Curaleaf’s use of Non-IFRS financial measures and Non-IFRS ratios. See the sections entitled “Adjusted EBITDA” below (pg. 4) for reconciliations of Non-IFRS measures to the most directly comparable IFRS measures.

Earnings Call: Monday, November 7, 2022, at 5:00 P.M. ET

Conference ID # is 10171942

Replay ID # is 9958653

U.S. Callers: +1-844-512-2926

U.S. Replay: +1-877-344-7529

International Callers: +1-412-317-6300

International Replay (Toll): +1-412-317-0088

Canadian Callers: +1-416-639-5883

Canadian Replay: +1-855-669-9658

The teleconference will be rebroadcasted starting at 7:00 P.M. ET

on November 7, 2022 and will end at 7:00 P.M. ET on November 14, 2022

Boris Jordan , Founder and Executive Chairman of Curaleaf, commented, “Our record third quarter was punctuated by the close of our landmark acquisition of a majority stake in Four20 Pharma. Since quarter end, we also closed on the  Tryke  acquisition one I expect will further strengthen our position in Arizona , Nevada , and Utah. Despite unexpected revenue impacts in Florida and New Jersey , our revenue grew 1% sequentially, gross margin before the impact of biological assets was 49% and adjusted EBITDA was 25%. We generated $60 million in operating cash flow during the quarter, ending with $198 million in cash on the balance sheet. The fundamentals of our business remain solid, our early advantage in Europe is taking shape and we are preparing for the year ahead by looking closely at operational efficiencies and optimizing our current assets.”

Matt Darin , Chief Executive Officer of Curaleaf, stated, “In the third quarter we proved once again that Curaleaf’s diverse geographic and channel revenue mix is a key distinguishing factor driving our performance, one that allows us to withstand regional challenges and still deliver on revenue targets. I’m pleased to report that we posted our 19 th quarter of consecutive retail growth, a 7% quarter-over-quarter growth in transactions, and we’re currently on pace to increase new product revenue 75% year-over-year. With a strategic focus on cost reduction, cultivation productivity and flower strain diversity, R&D, and technology investments, we delivered another record quarter with ample runway for continued success.”

Third Quarter Operating Highlights

  • Added two net new retail dispensaries in PA and Citrus Park, FL closing the quarter with 137 total locations, and serviced over 2,000 wholesale partner accounts.
  • Acquired a 55% stake in Four20 Pharma GmbH, a fully EU-GMP & GDP licensed German producer and distributor of medical cannabis, with a strategic pathway to acquire complete control of Four20 Pharma after two years of the commencement of adult-use in Germany .
  • Launched Plant Precision, a curated collection of edibles and a topical gel designed to target specific wellness categories.
  • Launched “The Farmer’s Select” program, an ongoing series of limited-edition collaborations with licensed legacy farmers and diverse operators in California .
  • Began expansion of Grassroots into new states, including the introduction of Infused Pre-rolls in California .

Post Third Quarter Operating Highlights

  • Added six new retail dispensaries across Arizona , Nevada and Florida and closed one in Colorado bringing total current store count to 142.
  • Completed license transfer in IL to Deerfield location and commenced adult use sales
  • Completed the acquisition of Tryke Companies, a privately held vertically integrated, multi-state cannabis operator with retail dispensaries in Nevada and Arizona , and an extensive portfolio of processing licenses with 65,000 square feet of total canopy cultivation with capacity to expand to 80,000 square feet over the next three years.
  • Commenced adult-use sales at Curaleaf Bordentown, New Jersey location, the Company’s third and final location to sell adult-use cannabis in the Garden State.
  • Launched Find, a cannabis flower brand designed to provide consumers with high quality cannabis flower at an accessible price point. Now available in Massachusetts , Find will expand to eight additional states across the country.
  • Launched new holiday flavors for Endless Coast and X-bites product lines.

Financial Results for the Third Quarter Ended September 30, 2022

Revenue (Unaudited)

($ thousands)

Three months ended

September 30, 2022

June 30, 2022

September 30, 2021

Retail revenue

$

259,652

$

251,920

$

224,543

Wholesale revenue

78,903

84,403

92,041

Management fee income

1,173

1,230

541

Total Revenue

$

339,728

$

337,553

$

317,125

Number of retail stores

137

135

109

Wholesale accounts

2,026

2,200

2,100

Total revenue increased by 7% to $340 million during the third quarter of 2022, compared to $317 million in the third quarter of 2021. The Company’s year-over-year revenue growth primarily reflects continued growth driven by new retail store openings and commencement of adult-use in New Jersey , the acquisition of Bloom Dispensaries, the addition of new wholesale partner accounts, product launches, and the expansion of cultivation and production facilities.

Retail revenue increased by 16% to $260 million during the third quarter of 2022, compared to $225 million in the third quarter of 2021, representing 76% of total revenue. Growth in retail revenue was primarily due to strong growth across Curaleaf’s footprint and the opening of 28 new stores over the year, namely in Arizona (including the acquisition of Bloom Dispensaries), Florida , Maine , and Pennsylvania and the commencement of adult-use in New Jersey .

Wholesale revenue decreased 14% to $79 million during the third quarter of 2022, compared to $92 million in the third quarter of 2021, representing 23% of total revenue. Contraction in wholesale revenue during the quarter was largely due to continued rationalization of the Company’s wholesale business in lower margin states.

Gross profit excluding the impact of biological assets was $165 million for the third quarter of 2022, compared to $145 million in the third quarter of 2021. Gross profit margin excluding the impact of biological assets reached 48.5%, compared to 45.7% in the third quarter of 2021 largely resulting from the increase in vertically integrated products sold in our dispensaries and the mix of revenue from higher margin states.

Net Income / (Loss) (Unaudited)

($ thousands)

Three months ended

September 30, 2022

June 30, 2022

September 30, 2021

Total Revenue

$

339,728

$

337,553

$

317,125

Gross profit

152,999

167,996

182,734

Income from operations

11,422

23,364

42,381

Total other expense, net

(24,340)

(6,517)

(38,955)

Income tax expense

(41,777)

(45,066)

(60,313)

Net loss

(54,695)

(28,219)

(56,887)

Less: Net (loss) income attributable to non-controlling interest

(3,220)

117

(2,363)

Net loss attributable to Curaleaf Holdings, Inc.

$

(51,475)

$

(28,336)

$

(54,524)

For the third quarter of 2022, net loss attributable to Curaleaf Holdings, Inc. was $51 million , compared to a net loss of $55 million in the third quarter of 2021. The decrease in net loss was due to higher revenues and corresponding expense leverage partially offset by a decrease in gross profit due to an increase in unrealized fair value gain on growth of biological assets.

Adjusted EBITDA (Unaudited)

($ thousands)

Three months ended

September 30, 2022

June 30, 2022

September 30, 2021

Net (loss) income

$

(54,695)

$

(28,219)

$

(56,887)

Interest expense, net

26,556

25,099

25,054

Income tax expense

41,777

45,066

60,313

Depreciation and amortization (1)

43,933

42,506

34,739

Share-based compensation

6,352

6,039

13,180

Other (income) expense

(2,216)

(18,582)

13,900

Change in fair value of biological assets

11,806

7,888

(37,825)

Other add-backs (2)

10,531

6,380

18,889

Adjusted EBITDA (3)

$

84,044

$

86,177

$

71,363

Adjusted EBITDA Margin (3)

24.7 %

25.5 %

22.5 %

(1)

Depreciation and amortization expense include amounts charged to cost of goods sold on the statement of profits and losses.

(2)

Other add-backs primarily include acquisition related expenses including fair market value adjustments on inventory related to acquisitions, legal fees, accounting and professional fees.

(3)

Represents a non-IFRS measure or Non-IFRS ratio. See “Non-IFRS Financial and Performance Measures” below for definitions and more information regarding Curaleaf’s use of Non-IFRS financial measures and Non-IFRS ratios. The table above provides a reconciliation of Net Loss, the most comparable IFRS measure, to Adjusted EBITDA, a non-IFRS measure.

Adjusted EBITDA was $84 million for the third quarter of 2022, compared to $71 million for the third quarter of 2021. The year-over-year increase in adjusted EBITDA was primarily driven by solid revenue growth, along with an improvement in gross profit before the impact of biological assets combined with operating expense leverage. The year-over-year increase in Adjusted EBITDA margin reflects an increase in gross margin before the impact of biological assets due to a higher mix of sales from higher margin retails sales and SG&A leverage on the higher sales base.

Balance Sheet and Cash Flow

As of September 30, 2022 , the Company had $198 million of cash and $599 million of outstanding debt net of unamortized debt discounts. Approximately $433 million of the outstanding debt, net of unamortized debt discounts, are senior secured notes which bear a fixed interest rate of 8.00% per annum and are not due until December 2026 .

During the first nine months of 2022, Curaleaf invested $99 million net in capital expenditures mostly attributable to cultivation, processing, and retail sites development activities. The Company expects to invest approximately $125 million in capital expenditures for the full year 2022.

Shares Outstanding

As of September 30, 2022 and June 30, 2022 , the Company’s weighted average subordinate voting shares outstanding amounted to 709,802,875 and 709,434,324  shares, respectively.

As of September 30, 2022 and June 30, 2022 , the Company’s issued and outstanding subordinate voting shares plus multiple voting shares amounted to 710,715,124 and 710,136,421 shares, respectively.

Other

As disclosed in the Company’s Consolidated Annual Financial Statements for the year ended December 31, 2021 , the Company made an immaterial restatement to the initial purchase accounting for the Select acquisition. Adjustments have been made to the comparative period financial statements presented herein, which reflect a decrease in amortization expense, as applicable. The net impact of the adjustment on the Company’s Interim Consolidated Statements of Profits and Losses for the three and nine months ended September 30, 2021 , was a positive $2.4 million and $7.2 million , respectively, to Net loss attributable to Curaleaf Holdings, Inc.

Non-IFRS Financial and Performance Measures

Curaleaf reports its financial results in accordance with IFRS and uses a number of financial measures and ratios when assessing its results and measuring overall performance. Some of these financial measures and ratios are not calculated in accordance with IFRS. National Instrument 52-112 respecting Non-IFRS and Other Financial Measures Disclosure prescribes disclosure requirements that apply to the following types of measures used by Curaleaf: (i) non-IFRS financial measures; (ii) non-IFRS ratios; (iii) total of segments measures; (iv) capital management measures; and (v) supplemental financial measures. Curaleaf refers in this earning release to certain Non-IFRS financial measures and ratios such as “Adjusted EBITDA”, and “Adjusted EBITDA Margin”. Management believes that these non-IFRS and other financial measures provide useful information to investors regarding Curaleaf’s financial condition and results of operations. These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. These measures are presented as supplemental information and in addition to the financial measures and ratios that are calculated and presented in accordance with IFRS.

“Adjusted EBITDA” is defined by Curaleaf as earnings before interest, taxes, depreciation and amortization less share-based compensation expense and other add-backs related to business development, acquisition, financing and reorganization costs. The  Company  believes  Adjusted  EBITDA  provides  improved  continuity  with  respect  to  the  comparison  of  our operating performance over a period of time .

“Adjusted EBITDA Margin” is a percentage representing  the Adjusted EBITDA divided by total revenue. We use Adjusted EBITDA Margin to facilitate a comparison of our operating performance on a consistent basis from period to period and to provide for a more complete understanding of factors and trends affecting our business.

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 table provided in this press release contained in the section “Adjusted EBITDA” (pg. 4) provides reconciliations of Non-IFRS measures to the most directly comparable IFRS measures.

Consolidated Statements of Financial Position

($ thousands)

As of

September 30, 2022

December 31, 2021

Assets

Audited

Current assets:

Cash and cash equivalents

$

197,681

$

299,329

Accounts receivable, net

62,472

64,570

Inventories, net

438,014

391,195

Biological assets

80,965

78,600

Assets held for sale

111,000

80,583

Prepaid expenses and other current assets

31,595

35,667

Current portion of notes receivable

2,315

Total current assets

921,727

952,259

Deferred tax asset

3,467

2,593

Notes receivable

842

Property, plant and equipment, net

418,190

379,720

Right-of-use assets, net

356,652

285,111

Intangible assets, net

1,151,375

1,010,008

Goodwill

673,637

605,496

Investments

3,372

4,401

Other assets

18,948

22,048

Total assets

$

3,547,368

$

3,262,478

Liabilities and shareholders’ equity

Current liabilities:

Accounts payable

$

78,739

$

26,751

Accrued expenses

95,341

87,583

Income tax payable

167,269

140,019

Current portion of lease liability

24,153

19,279

Current portion of notes payable

1,940

1,966

Current contingent consideration liability

23,482

9,155

Liabilities held for sale

15,826

18,472

Other current liabilities

30,168

12,171

Total current liabilities

436,918

315,396

Deferred tax liability

332,305

299,333

Notes payable

597,182

434,123

Lease liability

400,397

298,281

Non-controlling interest redemption liability

58,239

72,140

Contingent consideration liability

3,799

28,839

Other long term liability

9,891

5,876

Total liabilities

1,838,731

1,453,988

Shareholders’ equity:

Share capital

2,239,427

2,225,940

Treasury shares

(5,208)

(5,208)

Reserves

(161,301)

(162,085)

Accumulated other comprehensive income

(32,955)

(9,996)

Accumulated deficit

(391,106)

(291,395)

Redeemable non-controlling interest contingency

(58,239)

(72,140)

Total Curaleaf Holdings, Inc. shareholders’ equity

1,590,618

1,685,116

Non-controlling interest

118,019

123,374

Total shareholders’ equity

1,708,637

1,808,490

Total liabilities and shareholders’ equity

$

3,547,368

$

3,262,478

Consolidated Statements of Profits and Losses (Unaudited)

($ thousands, except for share and per share amounts)

Three months ended September 30,

Nine months ended September 30,

2022

2021

2022

2021

Revenues:

Retail and wholesale revenues

$

338,555

$

316,584

$

986,699

$

887,961

Management fee income

1,173

541

3,656

1,689

Total revenues

339,728

317,125

990,355

889,650

Cost of goods sold

174,923

172,216

494,796

461,036

Gross profit before impact of biological assets

164,805

144,909

495,559

428,614

Realized fair value amounts included in inventory sold

(120,731)

(112,691)

(349,322)

(263,408)

Unrealized fair value gain on growth of biological assets

108,925

150,516

353,802

342,837

Gross profit

152,999

182,734

500,039

508,043

Operating expenses:

Selling, general and administrative

103,931

101,800

311,207

269,849

Share-based compensation

6,352

13,180

17,484

36,457

Depreciation and amortization

31,294

25,373

92,830

68,979

Total operating expenses

141,577

140,353

421,521

375,285

Income from operations

11,422

42,381

78,518

132,758

Other income (expense):

Interest income

32

129

101

495

Interest expense

(15,449)

(15,659)

(44,454)

(40,079)

Interest expense related to lease liabilities

(11,139)

(9,524)

(31,092)

(27,423)

Other income (expense), net

2,216

(13,901)

22,241

(11,182)

Total other expense, net

(24,340)

(38,955)

(53,204)

(78,189)

(Loss) income before provision for income taxes

(12,918)

3,426

25,314

54,569

Income tax expense

(41,777)

(60,313)

(129,985)

(133,645)

Net loss

(54,695)

(56,887)

(104,671)

(79,076)

Less: Net loss attributable to non-controlling interest

(3,220)

(2,363)

(4,875)

(4,887)

Net loss attributable to Curaleaf Holdings, Inc.

$

(51,475)

$

(54,524)

$

(99,796)

$

(74,189)

Loss per share attributable to Curaleaf Holdings, Inc. – basic and diluted

$

(0.07)

$

(0.08)

$

(0.14)

$

(0.11)

Weighted average common shares outstanding – basic and diluted

709,638,533

703,545,262

709,802,875

695,830,455

Consolidated Statements of Cash Flows (Unaudited)

($ thousands, except for share and per share amounts)

Nine months ended September 30,

2022

2021

(As Restated)

Cash flows from operating activities:

Net loss

$

(104,671)

$

(79,076)

Adjustments to reconcile loss to net cash provided (used) in operating activities:

Depreciation and amortization

127,467

95,157

Share-based compensation

17,484

36,457

Non-cash interest expense

39,748

32,872

Unrealized gain on changes…



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