Wednesday , 21 October 2020

Curaleaf Holdings Q2 Financial Results: Despite Increased Revenue, Gross Profit & EBITDA, Net Losses Mounted

Curaleaf Holdings, Inc. (CSE: CURA; OTCQX: CURLF), a leading vertically integrated cannabis operator in the U.S., has reported its financial and operating results for Q2 ended June 30, 2019.

By Lorimer Wilson

Q2 Financial Highlights (All financial information is provided in U.S. dollars unless otherwise indicated.)

  • Managed Revenue increased 35% over the prior quarter.
    • Total Revenue increased 38% over the prior quarter.
    • Retail and wholesale revenue increased 44% over the prior quarter 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,
      • and increased wholesale revenue in Massachusetts as a result of adult-use dispensaries opening in the state.
  • Gross profit on cannabis sales increased by 44% over the prior quarter due to:
    • the mix in retail revenue over wholesale revenue
  • Gross profit margin increased to 40% from 38% in the prior quarter.
  • Adjusted EBITDA increased to $3.4M compared to a loss of $3.7M in the prior quarter for the first time in Company history.
  • Net loss increased by 281% to $24.4M, compared to a net loss of $6.4M in the second quarter of 2018 due to:
    • an increase of $5.8M in depreciation and amortization and
    • an increase of $3.8M in share-based compensation,
    • an increase of $4.4M in one-time charges, primarily acquisition related,
    • an increase of $3.4M in net interest expense and
    • an increase of $7.0M in provision for income tax.
  • Net loss per share increased to $0.05, compared to a loss of $0.02 in the prior quarter.

Balance Sheet and Liquidity was $107.3M of cash, $95.5M of outstanding debt and fully diluted shares outstanding of 461.3 million as of the end of Q2.

Q2 Operational Highlights

  • Announced the acquisition of Select, the leading cannabis wholesale brand in the U.S. which will 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.
  • Announced 4 additional acquisitions:
    • 2 in Arizona,
    • 1 in California and
    • 1 in Nevada
  • Acquired option to purchase Ohio Grown Therapies LLC’s medical cannabis cultivation and processing licenses and facility in Ohio.

Subsequent to Q2 Highlights

  • Announced the acquisition of Chicago, Illinois-based Grassroots, the largest private U.S. MSO thereby creating the world’s largest cannabis company with a 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 $28.3M.

6-Month Stock Performance

While Curaleaf’s stock price is up 45.7% since the beginning of 2019 (albeit down 37.7% from its 2019 peak), it was down 9.5% in July which compares favorably with the 10.4% loss for the basket of 21 non-penny “pot” stocks that I follow on a monthly basis.

Curaleaf’s strategy is to become the leading vertically integrated multi-state cannabis operator in the United States and they are well on their way to achieving that goal.