Long after the markets closed on Monday, Acreage Holdings, Inc. (OTCQX: ACRHF, ACRDF) reported its financial results for the first quarter ended March 31, 2023. Revenue fell 1.6% from last year to $55 million. Sales fell sequentially by 2.7% from the fourth quarter. The net loss in the first quarter was $16 million, which was slightly higher than last year’s net loss of $13 million. It was a more normal number than the fourth quarter’s kitchen sink net loss of $119 million.
“Our focus on our core footprint while upholding strict cost controls has enabled us to maintain strong margins and continue to deliver positive Adjusted EBITDA despite continued volatility within the market,” said Peter Caldini, CEO of Acreage. “Over the first quarter, we were thrilled to have expanded our addressable market in Connecticut with the launch of adult-use sales at our thriving The Botanist Montville location, and just most recently in the second quarter, began serving adult-use consumers at our Danbury store. Additionally, continuing our commitment to diversifying our product portfolio, we debuted our innovative fast-acting gummies to consumers in Illinois, Maine, Massachusetts, and Ohio under our flagship brand The Botanist.”
Breaking down the revenue decline, Acreage noted that the year-over-year and sequential decreases were primarily due to continued industry headwinds and decreased pricing as a result of competitive pressures across various markets. Additionally, the company noted that the year-over-year decrease was also due to the divestiture of its operations in Oregon and was somewhat offset by the acquisition of a Maine dispensary in 2022. The company said that after adjusting for acquisitions and divestitures, revenue for the first quarter was relatively consistent with last year’s first quarter.
Balance Sheet Worries
Acreage ended the quarter with $14.3 million in cash and cash equivalents. At the end of March, $125.0 million was drawn under the Amended Credit Facility, with a further $15.0 million of long-term debt available from its committed debt facilities, but the company said that such funds are restricted for use to only eligible capital expenditures. Additionally, in April 2023, Acreage sold, with recourse, the rights to receive certain Employee Retention Tax Credits with an aggregate receivable value of $14.3 million for total proceeds of $12.1 million.
Total operating expenses for the quarter were $25.4 million, compared to $32.2 million last year. Operating expenses in the current quarter included a one-time bad debt charge of $1.3 million and a reversal of prior period bonus accruals of $2.5 million.
In the company’s annual report issued just a few weeks ago, Acreage noted that it was a going concern. The company now has an accumulated deficit of a whopping $678 million. However, the company said at the time that it believes it can weather this storm with incoming revenue and financial maneuvering. Acreage also announced a couple of weeks ago that its Chief Financial Officer Steve Goertz had resigned and the company was searching for a new CFO.
At the time Goertz said, “I am very proud of the work we have done since I joined Acreage, completing a turnaround of our financial position and overcoming numerous challenges. It has been a privilege to work with the exceptional team at Acreage and I am proud to have helped better position the company for its next phase of growth.
Acreage is hoping its revenue story is on the rebound. The company has launched adult-use retail operations in Connecticut, among an inaugural group of operators permitted to begin adult-use sales in the state. Sales were underway at The Botanist store in Montville which were followed later by The Botanist Danbury location.
The company also secured approval to relocate the its existing Atlantic City medical dispensary to Pennsauken, New Jersey, along with the approval of the company’s annual renewal of its license in the state. The company said it expects to start adult-use sales at the new Pennsauken location before the end of 2023.
Mr. Caldini continued, “Notably, during the quarter, we received shareholder approval for our strategic arrangement with Canopy and Canopy USA, bringing us one step closer to satisfying what is required to close the transaction. We have experienced numerous transformative achievements to bring Acreage to where it is today, and we could not be more excited for its expected bright future under Canopy USA. As we work to complete our arrangement with Canopy and Canopy USA, we will continue to focus on driving our business forward with a priority on managing cash flows in a volatile trading environment.”