Acreage Archives - Green Market Report

Adam JacksonAugust 9, 2022
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Acreage Holdings, Inc. (CSE: ACRG.A.U, ACRG.B.U), (OTCQX: ACRHF, ACRDF) delivered positive results in the second quarter as the company moves away from established western markets in favor of emerging markets east of the Mississippi. The company reported its financial results for the first quarter ending June 30, 2022 after the market closed on Monday.

Acreage reported total revenue of $61.4 million, an increase of $17.1 million or 39% versus the second quarter of last year. The company posted a gross margin of 50% versus 52% in the previous quarter and 54% in last year’s second quarter. Acreage also posted a net loss of $9.9 million, versus $2.5 million in the same period last year.

New Jersey For the Win

Acreage said that growth over the past year was primarily driven by expansion into Ohio in addition to the green-lighting of adult-use sales in New Jersey, “which was somewhat offset by declines within the company’s operations that were held for sale.” The Botanist (Acreage’s dispensary name) is now available to adult-use consumers at the Egg Harbor Township and Williamstown dispensaries in southern New Jersey. Acreage also closed the sale of its four Oregon retail dispensaries branded as Cannabliss & Co.

“We were thrilled to execute on a significant milestone with the launch of adult-use sales in the state of New Jersey during the second quarter,” said CEO Peter Caldini. “The initial performance of our retail stores during the roll-out has been strong, and we believe there is an even bigger opportunity to further optimize our cultivation and wholesale capabilities to serve this growing market. We are working diligently to improve our New Jersey cultivation and processing operations to take advantage of the market opportunities that are available to us.”

Additionally, total revenue for the second quarter improved sequentially by $4.5 million or 8% versus the first quarter. The company said it was able to “overcome challenges associated with industry pricing pressures which negatively impacted revenues.”

Total operating expenses for the second quarter decreased by $3.3 million, or 11%, to $27.3 million, from the same quarter last year. Increases in compensation and general and administrative expenses were more than offset by reductions in equity-based compensation expenses, losses on notes receivable, and depreciation and amortization expenses, the company said.

Adjusted EBITDA was $10.4 million in the second quarter, versus $8.1 million in the same period last year and $8.6 million in the previous quarter this year. Adjusted EBITDA as a percentage of consolidated revenue was 16.9% for the quarter.

Looking Ahead

The company said it ended the quarter with $29.3 million in cash and cash equivalents. Additionally, $100.0 million was drawn under the credit facility entered in the fourth quarter last reporting year. A further $50 million is available in future periods under a committed accordion option once certain predetermined milestones are achieved, Acreage said, as it intends to use the money to “fund expansion initiatives, repay existing debt and provide additional working capital.”

“With the conclusion of our operations in Oregon following the end of the quarter, we are in a more favorable position to drive development in our core markets, where we see the best opportunity to foster long-term growth and enhance shareholder value,” Caldini added. “During the latter half of the year, we will continue our preparation for pending adult-use sales in these developing Northeastern markets, such as New York and Connecticut, in addition to strengthening our presence in New Jersey.”


Debra BorchardtJune 14, 2019
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A forum called “Insights From The Front Lines Of The Cannabis Industry” was held on June 13 on a beautiful summer evening in New York City atop the Empire Hotel. New York was named the Empire state because it was considered to be the center of all business in America and it has become the center of cannabis investing even though the plant isn’t fully legal in the state. That could change soon.

The event was hosted by MGO, Ello, Wilson Elser, and Aon. The panelists included Kevin Murphy Chairman and CEO, Acreage Holdings (CSE: ACRG.U), Tiffany Liff Managing Director, Cresco Capital Partners, Evan Eneman CEO, MGO / ELLO Cannabis Alliance, Matt Markiewicz Managing Director, Innovation Shares, Eduardo Provencio General Counsel, Mary’s Brands, and Mitch Baruchowitz Managing Partner, Merida Capital.

New York’s legalization was discussed as Murphy said it is quickly changing. “Last week, I’d have said there was a 20% chance. Today I give it a 60/40 chance. I think on Wednesday it may happen,” he said. That sure sent a buzz through the crowd. He conceded that having former Speaker of the House John Boehner on the company’s board kept his company informed of political maneuverings. Murphy has also been actively working on the SAFE Banking Act. As a company with its roots in New York, he is keen to see changes at the state level.

Access To Capital

A key theme seemed to emerge among some of the panelists was the access to capital. “The industry has gone from basement growers who just wanted to have a bigger basement to getting a license. Now it is about the aggregation of licenses,” said Murphy. “Our biggest competition isn’t from each other but from the black market.”

Liff also noted that in the early days’ companies were forced to go public even if they weren’t really ready because there was no other way to access capital. “There are more options now,” she said. She also reiterated that she really focuses on backing the management team.

“Running a public company is not that awesome,” said Murphy. “There is an extra layer or two of accountability. Having said that, it gives us the opportunity to access capital.”

Baruchowitz pointed out that new companies often give themselves rich valuations based on angel investors and believe this should bring them more capital. “When your angel round is friends and family, that doesn’t justify certain valuations. They get shocked when they get asked the hard questions as they ask for more capital. A lot of the newcomers don’t know the grind.”

Illegal vs. Legal

Baruchowitz noted that since New York didn’t have the same ballot pressures that other states have, legalization could come easier. Having said that, the panelists noted that the quasi-illegal status has had some benefits. Baruchowitz said he believes the medicalization of cannabis is about to go on hyperdrive through legalization.

The illegality of cannabis has also caused some volatility in the cannabis company stocks. Markiewicz runs an ETF and noted that the volatility scares many advisors. He keeps an eye out for negative sentiment when reviewing his companies. The illegal nature attracts some less than savory players at times. Still, Murphy said that ETF’s provide liquidity for the stocks. “The more liquidity, the better for all of us,” he said.


Debra BorchardtApril 18, 2019
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Acreage Holdings, Inc. (CSE: ACRG.U) (OTC: ACRGF) (FSE: 0ZV) announced that on April 17, its subsidiary, High Street Capital Partners agreed to acquire Nevada-based Deep Roots Medical in a deal valued at $120 million. The cash and stock transaction will mark Acreage’s entry into the Nevada market.

This deal plants another flag in Acreage’s growing empire bringing the footprint up to 20 (including pending acquisitions) making it the largest company in the US cannabis industry. The state is only home to three million residents, but the tourist population swells that number to 43 million. Arcview Market Research estimates that Nevada will generate nearly $800 million in legal cannabis sales by 2022.

Kevin Murphy, Founder, Chairman, and Chief Executive Officer of Acreage Holdings, Inc., commented, “We continue to deliver on our shareholder commitments to aggressively expand our presence in the West.  We could not be more excited for what we believe will become a leading operator in the state of Nevada, one of the most important states in the cannabis industry.”

Deal Terms

The total deal is valued at $120 million, including $100 million in common units of High Street Capital Partners, LLC and $20 million in cash.  High Street Capital Partners, LLC will issue up to 4,761,905 common units at a deemed value of $21.00 per unit.  Certain Deep Roots employees will have a portion of their issued common units be subject to a lock-up schedule.  The deal is expected to close in the second quarter of 2019.

Canopy Growth Acquisition

Both Acreage Holdings stock and Canopy Growth Inc. (CGC) stock rose yesterday on rumors that Canopy would acquire Acreage in a multi-billion deal. On Thursday morning, the companies jointly announced that they had reached an agreement for Canopy to acquire Acreage. Acreage shareholders will receive a payout of $300 million and will receive 0.5818 of a common share of Canopy for each Acreage Subordinate Voting Share held. The estimated valued of the deal is $3.4 billion.

Deep Roots Operations:

Deep Roots is a vertically integrated operation that includes cultivation, manufacturing & processing, a wholesale and distribution business, and seven retail dispensary licenses. The company described its operations as follows:

Cultivation: 18,000 SF of indoor flowering canopy for high-end flower housed in a 40,000 SF building in Mesquite, NV.

Manufacturing & Processing: Housed in the same 40,000 SF building in Mesquite, Deep Roots has a manufacturing facility and a butane extraction lab to produce their distillates and edibles.  The facility has ample space to build a Form Factory to expand its own internal house of brands throughout Nevada as well as other third-party brands it has agreements with.

Brands: Deep Roots currently manufactures and produces four internally developed brands.

  • Deep Roots utilizes its name for flower and concentrates and currently produces distillate cartridges, disposable pens, shatter, wax, and distillate for edibles, under the Deep Roots brand name.
  • Chillers hard candies has an extensive variety of flavors including watermelon, lemon, cinnamon, mango, and pineapple.  They are typically sold in a tube with ten hard candies, each containing 10mg of THC.
  • Bluebirds – a line of pre-rolled products that typically come in packs of one or three, made from various strains of Deep Roots’ high-quality flower.
  • Helix Twist – a line of gummies that come in six flavors including Sour Cherry, Key Lime, Blood Orange, Cucumber Serrano, and Ginger Peach.

Wholesale and distribution business: Deep Roots currently sells and distributes its Deep Roots, Chillers, Bluebirds, and Helix Twist branded products, and other third-party brands, into nearly 80% of the retail dispensaries in Nevada, making it one of the most connected wholesale operations in the state.

Retail Dispensary operations: Deep Roots has licenses to operate seven retail dispensaries, one of which is currently in operation, another is under construction, and five additional locations that are currently in development. Of the five remaining licenses to be developed, four are in the greater Las Vegas area and the fifth is in Reno.

 


William SumnerApril 11, 2018
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In a sign that cannabis finally going mainstream, one of Washington D.C.’s biggest power players is coming to the legal cannabis industry. On April 11, 2018, Acreage Holdings, a vertically integrated cannabis company, announced the appointment of former Speaker of the United States House of Representatives John Boehner and former Massachusetts governor Bill Weld to its Board of Advisors.

Operating in 11 U.S. states, Acreage is one of the largest multi-state actively-managed cannabis corporations in the country.

Weld served as Governor of Massachusetts from 1991 until 1997 when resigned his position as governor to become the nominee for the United States ambassador to Mexico. When his nomination was blocked by Congress, Weld returned to Massachusetts where he entered into the private sector.

In 2016, Weld ran as the Libertarian Party’s nominee for Vice President and campaigned on a platform of cannabis reform.

As Speaker of the United State House of Representatives from 2010 to 2015, Boehner oversaw a troubled and divided Congress. Clashing with Republicans and Democrats alike, Boehner worked repeatedly with then-president Barack Obama to pass a sweeping budget overhaul but ultimately failed due to partisan gridlock.

Boehner’s addition to Acreage’s board of advisors marks a radical change in the former speaker, who at one time said he was “unalterably opposed” to legalized cannabis.

Both Weld and Boehner will join Acreage’s board immediately and have agreed to also joint the company’s board of directors as soon as it is formed. In a joint statement, Weld and Boehner said the following:

“While the Tenth Amendment has allowed much to occur at the state level, there are still many negative implications of the Federal policy to schedule cannabis as a Class 1 drug: most notably the lack of research, the ambiguity around financial services and the refusal of the VA to offer it as an alternative to the harmful opioids that are ravishing our communities. We are excited to join the team at Acreage in pursuit of their mission to bring safe, consistent and reliable products to patients and consumers who could benefit. We have full confidence in their management team and believe this is the team that will transform the debate, policy, and landscape around this issue.”


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