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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... CURALEAF REPORTS RECORD THIRD QUARTER 2020 FINANCIAL AND OPERATIONAL RESULTS

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 2020Q2 2020 % qoq
Change
Q3 2019 % yoy
Change
Managed Revenue(1)$193,220$121,40259%$73,192164%
Total Revenue$182,408$117,48055%$61,820195%
Gross profit before impact of biological assets$91,775$60,63651%$34,741164%
Gross profit on cannabis sales(1) $89,669$42,735110%$23,602280%
Gross margin on cannabis sales(1) 50%43%
47%
Adjusted EBITDA(1)$42,295$27,99451%$10,439305%
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.

Managed Revenue








($ thousands)











Q3 2020

Q2 2020

Q3 2019
Retail revenue
$135,344
$66,275
$44,152
Wholesale revenue

44,958

33,304

6,529
Management fee income

2,106

17,901

11,139
Total Revenue

182,408

117,480

61,820
Revenue from managed entities, net of MSA fees

10,812

3,922

11,372
Managed revenue
$193,220
$121,402
$73,192




















Gross Profit on Cannabis Sales








($ thousands)











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




















Adjusted EBITDA








($ thousands)











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
Share-based compensation

5,430

4,833

4,673
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
Adjusted EBITDA
$42,295
$27,994
$10,439


(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)
($ thousands)




September 30,
December 31,



2020
2019
Assets






Current assets:






Cash

$84,586
$42,310
Accounts receivable


22,961

18,335
Inventory, net


182,877

63,210
Biological assets


37,609

19,197
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
Notes receivable




57,166
Property, plant and equipment, net


200,339

129,812
Right-of-use assets


275,889

82,794
Intangible assets, net


806,749

185,635
Goodwill


439,320

69,326
Investments


62,807

51,209
Prepayment of acquisition consideration


160,226

Other assets


34,343

8,825
Total assets

$2,359,230
$736,926








Liabilities and Shareholders’ Equity






Current liabilities:






Accounts payable

$30,795
$12,742
Accrued expenses


44,805

18,016
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
Notes payable


273,695

87,953
Lease Liabilities


259,219

81,319
Non-controlling interest redemption liability


2,694

2,694
Contingent consideration liability 


41,228

32,616
Other long term liability


246

Total liabilities


973,590

333,480








Shareholders’ equity:






Share capital


1,728,874

693,699
Treasury shares


(5,208)

(5,208)
Reserves


(177,890)

(146,819)
Accumulated deficit


(159,370)

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


1,386,406

408,762
Redeemable non-controlling interest


(2,694)

(2,694)
Non-controlling interest   


1,928

(2,622)
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


2020
2019
2020
2019
Revenues:











Retail and wholesale revenues
$180,302
$50,681
$356,937
$116,176
Management fee income

2,106

11,139

39,448

29,386
Total revenues

182,408

61,820

396,385

145,562
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
Gross profit

115,783

48,551

265,051

96,319
Operating expenses:











Selling, general and administrative

72,664

33,497

158,986

84,795
Share-based compensation

5,430

4,673

14,764

10,944
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 income

40

2,568

6,459

7,488
Interest expense

(12,357)

(4,852)

(34,208)

(12,999)
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

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