Record Second Quarter Pro Forma Revenue(1)(2)of $165.4 Million and Record Second Quarter Managed Revenue(1)of $121.4 Million;

Record First Half Managed Revenue(1) of $226.4 Million;

Record Adjusted EBITDA(1) of $28.0 Million as Operations Across 17 States Continue to Scale;

Completed Closing of the Grassroots Acquisition Expanding Presence to 23 States

WAKEFIELD, Mass., Aug. 17, 2020 /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, 2020. All financial information is provided in U.S. dollars unless otherwise indicated.

Q2 2020 Financial Highlights (Unaudited)

($ thousands, except per share amounts)Q2 2020Q1 2020 % qoq
Change		Q2 2019 % yoy
Change
Managed Revenue(1)$121,402$105,02216%$55,100120%
Total Revenue$117,480$96,49622%$48,489142%
Gross profit before impact of biological assets$60,636$52,48316%$26,020133%
Gross profit on cannabis sales(1) $42,735$33,04229%$15,257180%
Gross margin on cannabis sales(1) 43%43%
40%
Adjusted EBITDA(1)$27,994$20,00640%$4,412534%
Net income (loss) attributable to Curaleaf Holdings Inc.($2,029)($15,089)
($24,541)
Net income (loss) per share – basic and diluted($0.00)($0.03)
(0.05)


(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 closed acquisitions of Arrow Alternative Care (“Arrow”) and GR Companies, Inc. (“Grassroots”) as if they occurred on April 1, 2020.

Second Quarter Highlights

  • Record managed revenue of $121.4 million, which grew 120% year-over-year and 16% sequentially, despite estimated $25.6 million revenue related impact from COVID-19 largely in Nevada and Massachusetts
  • Record total revenue of $117.5 million, which grew 142% year-over-year and 22% sequentially
  • Record Adjusted EBITDA of $28.0 million, which grew more than five times 2019 levels and 40% sequentially
  • Generated cash flow from operations of $23.4 million
  • Select launched into 2 new states
  • Completed acquisition of Arrow in Connecticut
  • Completed acquisition of Maine Remedy assets that were previously managed

Post Second Quarter Highlights

  • Completed acquisition of Grassroots creating the world’s largest cannabis Company
  • Completed acquisition of Curaleaf NJ, Inc. and Maine Organic Therapy assets that were previously managed
  • Closed acquisition of Blue Kudu enabling further roll-out of Select products in Colorado
  • Select launched into 4 new states; now available in 12 states
  • Completed a private placement of approximately $24.5 million in net proceeds
  • Raised approximately $42.0 million in net proceeds related to sale/leaseback transactions

Joseph Lusardi, Chief Executive Officer of Curaleaf stated “Curaleaf, once again, delivered record quarterly results highlighted by managed revenues exceeding our outlook, as well as, a 40% sequential improvement in Adjusted EBITDA. The outstanding results come despite headwinds related to temporary COVID-19 related closures and restrictions in Massachusetts and Nevada. After quarter end, we successfully completed the transformative acquisition of Grassroots, expanding our presence into 6 new states, including the high-growth Illinois and Pennsylvania markets. The closing of Grassroots affirms our position as the world’s largest cannabis company when measured by both revenue and operating presence. Overall, Curaleaf remains well positioned for continued growth in the second half of 2020. This growth will be driven by organic initiatives, the integrations of the Select and Grassroots businesses, as well as, the closing of multiple strategic tuck-in acquisitions across a number of key states.”

Mike Carlotti, Chief Financial Officer of Curaleaf, added “Our top-line growth drove record adjusted EBITDA and an improved adjusted EBITDA margin. The strength of our balance sheet has allowed us to invest in our base business and opportunistically pursue additional strategic acquisitions. Looking forward, we anticipate a continued rise in managed revenue and adjusted EBITDA leading to strong sequential growth in the third quarter and second half of 2020 driven by organic growth, continued investment in key states, as well as, the integration of Select, Grassroots, Arrow and BlueKudu into our portfolio. Finally, we continue to make progress in converting and consolidating our managed entities in Maine, New Jersey and Massachusetts. As of today, we have consolidated all of our managed entities except for ATG which we expect to consolidate in the third quarter.”

Financial Results for the Second Quarter Ended June 30, 2020
Managed Revenue for the second quarter of 2020 was a record $121.4 million, an increase of 120% compared to $55.1 million in the second quarter of 2019. Managed Revenue for the second quarter increased 16% sequentially.

Total Revenue for the second quarter of 2020 was a record $117.5 million, an increase of 142% compared to $48.5 million in the second quarter of 2019. Total Revenue for the second quarter of 2020 increased 22% sequentially.

Retail revenue increased by 112% to $66.3 million during second the quarter of 2020, compared to $31.3 million in the second quarter of 2019. Growth in retail revenue was primarily due to organic growth and new store openings in Florida, Massachusetts and New York, impact of the Select acquisition, as well as, the acquisitions of three dispensaries in Arizona, two dispensaries in Nevada and from Maryland due to the addition of the HMS/MI businesses and Elevate Takoma, offset partially by the unforeseen negative impact of COVID-19 in Massachusetts and Nevada.  

Wholesale revenue increased by 422% to $33.3 million during the second quarter of 2020, compared to $6.4 million in the second quarter of 2019. Growth in wholesale revenue was due primarily to the addition of Select.

Management fee income increased by 66% to $17.9 million during the second quarter of 2020, compared to $10.8 million in the second quarter of 2019. Growth in management fee income was due primarily to growth in New Jersey and management fees generated from Alternative Therapies Group (“ATG”) in Massachusetts.

Gross profit before impact of biological assets for the second quarter of 2020 was $60.6 million, compared to $26.0 million for the second 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 $42.7 million for the second quarter of 2020, resulting in a 43% margin, compared to $15.3 million in the second 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 $28.0 million for the second quarter of 2020, compared to $4.4 million for the second quarter of 2019.

Net loss for the second quarter of 2020 was $2.0 million, compared to a net loss of $24.5 million in the second quarter of 2019. The increase was primarily driven by a $19.2 million increase in the fair value of biological assets and a $1.1 million decrease in one-time charges. These benefits were partially offset by a $9.5 million increase in depreciation and amortization and a $0.3 million increase in share-based compensation, both of which are non-cash, a $5.3 million increase in income tax expense, and a $7.0 million increase in net interest expense.

Balance Sheet and Liquidity
As of June 30, 2020, we had $122.8 million of cash, $283.3 million of outstanding debt net of unamortized debt discounts and 533.2 million fully diluted shares outstanding.

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 +1-888-317-6003 (U.S.), +1-866-284-3684 (Canada) or +1-412-317-6061 (Int’l) Passcode: 0446838. 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 August 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: 10146052. 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 April 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.

Managed Revenue
($ thousands)



Q2 2020

Q1 2020

Q2 2019
Retail revenue$66,275
$56,633
$31,341
Wholesale revenue
33,304

20,422

6,385
Management fee income
17,901

19,441

10,763
Total Revenue
117,480

96,496

48,489
Revenue from managed entities, net of MSA fees
3,922

8,526

6,611
Managed revenue$121,402
$105,022
$55,100


Gross Profit on Cannabis Sales
($ thousands)



Q2 2020

Q1 2020

Q2 2019
Retail and wholesale revenues$99,579
$77,055
$37,726
Cost of goods sold
56,844

44,013

22,469
Gross profit on cannabis sales$42,735
$33,042
$15,257


Adjusted EBITDA
($ thousands)



Q2 2020

Q1 2020

Q2 2019
Net income (loss) $(1,836)
$(15,452)
$(24,435)
Interest expense, net
9,916

9,804

2,895
Income tax recovery (expense)
13,534

13,249

8,192
Depreciation and amortization (1)
17,869

14,906

8,338
Share-based compensation
4,833

4,501

4,489
Other (income) expense
77

(2,608)

1,047
Change in fair value of biological assets
(20,591)

(15,556)

(1,392)
One time charges 
4,192

11,162

5,278
Adjusted EBITDA$27,994
$20,006
$4,412


(1)Depreciation and amortization expense in Q2 2020, Q1 2020 and Q4 2019 include amounts charged to cost of goods sold on the statement of profits and losses. Prior period Q2 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 the leading vertically integrated U.S. multi-state cannabis operator with a mission to improve lives by providing clarity around cannabis and confidence around consumption. As a high-growth cannabis company 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 87 dispensaries, 22 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)
($ thousands)



June 30,
December 31,


2020
2019
Assets





Current assets:





Cash
$122,763
$42,310
Accounts receivable

18,197

18,335
Inventory, net

129,763

63,210
Biological assets

27,025

19,197
Assets held for sale

35,050

—
Prepaid expenses and other current assets

7,342

6,479
Total current assets

340,140

149,531
Deferred tax asset

2,687

2,628
Notes receivable

83,635

57,166
Property, plant and equipment, net

179,687

129,812
Right-of-use assets

81,010

82,794
Intangible assets, net

404,110

185,635
Goodwill

179,955

69,326
Investments

51,244

51,209
Other assets

10,110

8,825
Total assets
$1,332,578
$736,926







Liabilities and Shareholders’ Equity





Current liabilities:





Accounts payable
$25,300
$12,742
Accrued expenses

30,585

18,016
Income tax payable 

40,308

15,114
Current portion of lease liability

13,415

11,835
Current portion of notes payable 

6,290

17,000
Current contingent consideration liability

9,700

—
Liabilities held for sale

3,612

—
Other current liabilities

337

31,549
Total current liabilities

129,547

106,256
Deferred tax liability

85,587

22,642
Notes payable

273,559

87,953
Lease Liabilities

81,868

81,319
Non-controlling interest redemption liability

2,694

2,694
Contingent consideration liability 

81,662

32,616
Total liabilities

654,917

333,480







Shareholders’ equity:





Share capital

992,141

693,699
Treasury shares

(5,208)

(5,208)
Reserves

(155,469)

(146,819)
Accumulated deficit

(150,027)

(132,910)
Total Curaleaf Holdings, Inc. shareholders’ equity

681,437

408,762
Redeemable non-controlling interest

(2,694)

(2,694)
Non-controlling interest   

(1,082)

(2,622)
Total shareholders’ equity

677,661

403,446
Total liabilities and shareholders’ equity
$1,332,578
$736,926
Condensed Interim Consolidated Statements of Profits and Losses (Unaudited)
($ thousands, except for share and per share amounts)


Three Months Ended
Six Months Ended

June, 30
June, 30

2020
2019
2020
2019
Revenues:










Retail and wholesale revenues$99,579
$37,726
$176,635
$65,494
Management fee income
17,901

10,763

37,342

18,246
Total revenues
117,480

48,489

213,977

83,740
Cost of goods sold
56,844

22,469

100,856

39,614
Gross profit before impact of biological assets
60,636

26,020

113,121

44,126
Realized fair value amounts included in inventory sold
(22,423)

(15,478)

(43,613)

(25,833)
Unrealized fair value gain on growth of biological assets
43,014

16,870

79,761

29,471
Gross profit
81,227

27,412

149,269

47,764
Operating expenses:










Selling, general and administrative
40,466

28,029

86,324

51,298
Share-based compensation
4,833

4,489

9,334

6,270
Depreciation and amortization
14,237

7,195

26,924

12,091
Total operating expenses
59,536

39,713

122,582

69,659
Income (Loss) from operations
21,691

(12,301)

26,687

(21,895)
Other income (expense):










Interest income
3,573

2,436

6,419

4,919
Interest expense
(11,357)

(3,983)

(21,849)

(8,147)
Interest expense related to lease liabilities
(2,132)

(1,348)

(4,290)

(2,315)
Other income (expense)
(77)

(1,047)

2,529

(1,073)
Total other income (expense), net
(9,993)

(3,942)

(17,191)

(6,616)
Income (Loss) before provision for income taxes
11,698

(16,243)

9,496

(28,511)
Income tax benefit (expense)
(13,534)

(8,192)

(26,783)

(6,753)
Net loss and comprehensive loss
(1,836)

(24,435)

(17,287)

(35,264)
Less: Net income (loss) attributable to non-controlling interest
193

106

(170)

(513)
Net loss attributable to Curaleaf Holdings, Inc.$(2,029)
$(24,541)
$(17,117)
$(34,751)
Loss per share attributable to Curaleaf Holdings, Inc. – basic and diluted$(0.00)
$(0.05)
$(0.03)
$(0.08)
Weighted average common shares outstanding – basic and diluted
533,192,806

461,313,741

520,446,921

459,499,816
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