On March 3, 2022 Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) ("Curaleaf" or the "Company"), a leading international provider of consumer products in cannabis, reported its financial and operating results for the fourth quarter and year ended December 31, 2021 (Press release, Curaleaf Holdings, MAR 3, 2022, View Source [SID1234609494]). All financial information is provided in U.S. dollars unless otherwise indicated.
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A webcast of the call can be accessed on the investor relations section of the Curaleaf website at ir.curaleaf.com
The teleconference will be available for replay starting at approximately 7:00 P.M. ET on March 3, 2022, and will end at 7:00 P.M. ET on March 10, 2022
Boris Jordan, Executive Chairman of Curaleaf, commented, "2021 was another exceptional year for Curaleaf. We reached a significant milestone by generating over 90% revenue growth and exceeding $1.2 billion of total revenue for the first time. We continued to deliver gross and Adjusted EBITDA margin expansion and ended the year with one of the strongest balance sheets in the industry to support our ongoing growth strategies. In addition, we announced strategic acquisitions that have strengthened our ability to continue gaining share in key U.S. markets as well as internationally. Looking to 2022, we remain focused on executing our plan for strong, above market revenue growth and margin accretion, and believe we are incredibly well positioned to benefit from significant near-term catalysts such as the anticipated launch of New Jersey’s adult use market."
Joe Bayern, Chief Executive Officer of Curaleaf, stated, "In 2021, we made significant progress strengthening all areas of our business including growing our retail and wholesale distribution, introducing new products, expanding our cultivation and production capacity, and entering new markets such as Europe. I believe our focus and strong execution in 2021 set us up extraordinarily well for the significant growth opportunities that lie ahead in 2022 and beyond. I am incredibly proud of the hard work and dedication of all our team members who have made our continued success possible. I believe Curaleaf is better positioned than ever to capitalize on the massive and growing cannabis opportunity."
Fourth Quarter 2021 Operating Highlights
Added eight new retail dispensaries including five in Florida, two in Colorado, and one in Arizona.
Entered into a definitive agreement to acquire Tryke Companies, a vertically integrated MSO in Nevada, Arizona, and Utah.
Entered into a definitive agreement to acquire Natural Remedy Patient Center, LLC, a Safford, Arizona dispensary.
Entered into a definitive agreement to acquire Bloom Dispensaries, a single state operator in Arizona.
Completed the offering of $475 million aggregate principal amount of 8.0% Senior Secured Notes due 2026 and retired all prior indebtedness, increasing liquidity and materially reducing the average interest rate on the Company’s outstanding debt.
Signed a national distribution agreement with Southern Glazer’s Wine & Spirits to bring Curaleaf’s Hemp and Select CBD product lines into Southern Glazer’s distribution network.
Full Year 2021 Operating Highlights
Significantly expanded retail, wholesale, and cultivation operations through organic growth and strategic acquisitions.
Increased retail locations from 96 to 117 as of December 31, 2021.
Reached approximately 2,300 active wholesale accounts as of December 31, 2021, an increase of over 90% from year end 2020.
Grew cultivation sites from 23 to 25.
Expanded total cultivation and production capacity by over 2.5 million square feet to approximately 4.4 million square feet.
Significant focus on R&D activities drove the introduction of 147 new products in our markets, with approximately 11% of full year 2021 revenue generated by new products launched in the last 12 months.
Entered the European market through the successful acquisition of EMMAC Life Sciences Group and subsequently rebranded to Curaleaf International.
Completed the acquisition of Los Sueños Farms, the largest outdoor grow in Colorado.
Post Fourth Quarter 2021 Highlights
Completed the acquisition of Bloom Dispensaries adding four retail locations and two cultivation and processing facilities totaling 63,500 square feet in Arizona.
Continued to organically expand our retail footprint, opening two additional dispensaries in Florida and three in Pennsylvania. As of March 3, 2022, Curaleaf retail operations totaled 126 nationwide.
Total revenue was a record $320 million for the fourth quarter of 2021, an increase of 1% from $317 million in the third quarter of 2021 and 39% from $230 million in the fourth quarter of 2020. The Company’s year-over-year revenue growth primarily reflects continued organic growth driven by new retail store openings, the addition of new wholesale partner accounts, product launches, and the expansion of cultivation and production facilities.
Retail revenue was $226 million, compared with $225 million in the third quarter of 2021, and up 37% from $165 million in the fourth quarter of 2020. Retail revenue represented 71% of total revenue. Curaleaf’s year-over-year retail revenue growth was supported by 21 new stores added in 2021.
Wholesale revenue was $94 million, an increase of 2% from the third quarter of 2021 and 46% year-over-year and represented 29% of total revenue. Wholesale revenue growth was supported by the addition of new wholesale partner accounts, which increased by more than 90% from year-end 2020 to approximately 2,300 total accounts.
Gross profit on cannabis sales was $159 million for the fourth quarter of 2021, an increase of 10% from $144 million in the third quarter of 2021 and 45% from $110 million in the fourth quarter of 2020. Gross profit margin was 49.7%, an increase of approximately 410 basis points from the prior quarter and 190 basis points from the fourth quarter of 2020. The increase in gross margin reflects continued efficiency in the Company’s cultivation and processing facilities and improving economies of scale. In addition, the sequential increase in gross margin partially reflects a loss on inventory related to the Eureka, California facility divestiture and the write down of certain other inventory in the third quarter of 2021, which did not recur.
Net loss attributable to Curaleaf Holdings, Inc. was $28 million, compared with a net loss of $55 million in the third quarter of 2021 and $37 million in the fourth quarter of 2020. The year-over-year improvement in net loss was primarily driven by an approximately $20 million increase in operating income and $2 million of lower income tax expense, partially offset by $15 million of higher other expense, net.
Adjusted EBITDA was $80 million for the fourth quarter of 2021, an increase of 12% from $71 million in the third quarter of 2021 and 48% from $54 million in the fourth quarter of 2020. Adjusted EBITDA margin was 24.9%, an increase of 240 basis points from 22.5% in the prior quarter and 140 basis points from 23.5% in the fourth quarter of 2020. The sequential increase in Adjusted EBITDA primarily reflects higher gross profit margin driven by continued efficiency in the Company’s cultivation and processing facilities and improving economies of scale. On a year-over-year basis, the increases in Adjusted EBITDA and Adjusted EBITDA margin primarily reflect higher revenue and gross profit margin partially offset by higher SG&A expense related to increased headcount ahead of new store openings and marketing in support of new product rollouts.
Total revenue for the year ended 2021 was a record $1,210 million, an increase of 93% from $627 million for the year ended 2020.
Retail revenue was $860 million for the year ended 2021, an increase of 103% from $423 million for the year ended 2020. The increase in retail revenue was primarily driven by organic growth from new store openings, expansion of cultivation and production capacity, and new product introductions. Retail revenue growth in 2021 also reflects a full year of revenue recognized from the Company’s acquisition of GR Companies, Inc. ("Grassroots"), which closed in July 2020, and to a lesser extent, the partial year benefit of the acquisitions of EMMAC Life Sciences Limited ("EMMAC") in August 2021 and Los Sueños Farms and related entities ("Los Sueños") in October 2021.
Wholesale revenue was $347 million, an increase of 113% from $163 million for the year ended 2020. Growth in wholesale revenue was primarily due to organic growth from wholesale partner account additions, new product introductions such as Select Squeeze, Select Fresh, Clique by Select, and Select Snooze Bites, and increased cultivation and production capacity. Wholesale revenue growth also reflected the above-mentioned acquisitions of Grassroots, EMMAC and Los Sueños.
Gross profit on cannabis sales was $586 million for the year ended 2021, an increase of 113% from $275 million in 2020. Gross profit margin was 48.5% an increase of approximately 160 basis points from 46.9% in 2020. The increases in gross profit and gross margin were primarily driven by revenue growth and the continued improvement in the operating capacity and efficiency of the Company’s cultivation and processing facilities.
Net loss, attributable to Curaleaf Holdings, Inc., for the year ended 2021 was $102 million, compared with a net loss of $57 million for the year ended 2020. The $103 million increase in operating income in 2021 was offset primarily by $69 million of higher total other expense, net, and $86 million of higher income tax expense. The year-over-year increase in total other expense, net, was primarily due to an approximately $38 million gain on investment in 2020 that did not recur, $27 million of higher interest expense net of interest income, and $11 million of higher other expenses, partially offset by $9 million of lower impairment charges on intangible assets.
Adjusted EBITDA for the year ended 2021 was $298 million, an increase of 107% from $144 million in 2020. Adjusted EBITDA margin was 24.6%, an increase of 160 basis points from 23.0% in the prior year. The increases in Adjusted EBITDA and Adjusted EBITDA margin primarily reflect higher revenue and gross profit margin partially offset by higher SG&A expense related to increased headcount in support of new store openings and marketing in support of new product rollouts.
Balance Sheet and Cash Flow
As of December 31, 2021, the Company had $299 million of cash and $436 million of outstanding debt net of unamortized debt discounts.
During the fourth quarter of 2021, Curaleaf invested $55 million, net in capital expenditures, focused on cultivation, processing, and selective retail expansion in strategic markets. For the year ended 2021, Curaleaf invested $172 million, net in capital expenditures.
Shares Outstanding
As of December 31, 2021, and September 30, 2021, the Company’s weighted average subordinate voting shares outstanding amounted to 707,450,310 and 703,545,262 shares, respectively.
As of December 31, 2021, and September 30, 2021, Company’s issued and outstanding subordinate voting shares plus multiple voting shares amounted to 708,340,434 and 704,818,302 shares, respectively.
Other
The Company has made an immaterial restatement to the initial purchase accounting for the Select acquisition. Adjustments have been made to all of the comparative period financial statements presented herein, which reflect a decrease in intangible assets, deferred tax liability, and amortization expense, as well as an increase in goodwill and income tax expense, as applicable. The net impact of these adjustments on the Company’s Consolidated Statements of Profits and Losses for the year ended December 31, 2020, was a positive $4.6 million to Net loss attributable to Curaleaf Holdings, Inc. Additional detail will be provided in the Company’s Consolidated Annual Financial Statements.
Non-IFRS Financial and Performance Measures
Curaleaf reports its financial results in accordance with IFRS and uses a number of financial measures and ratios when assessing its results and measuring overall performance. Some of these financial measures and ratios are not calculated in accordance with IFRS. Curaleaf refers to certain Non-IFRS financial measures and ratios such as "Gross Profit on Cannabis Sales", "Gross Margin on Cannabis Sales", "Adjusted EBITDA", and "Adjusted EBITDA Margin". These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. The Company defines "Gross Profit on Cannabis Sales" as retail and wholesale revenues less cost of goods sold. "Gross Margin on Cannabis Sales" is defined by Curaleaf as gross profit on cannabis sales divided by retail and wholesale revenues. "Adjusted EBITDA" is defined by Curaleaf as earnings before interest, taxes, depreciation and amortization less share-based compensation expense and other add-backs related to business development, acquisition, financing and reorganization costs. "Adjusted EBITDA Margin" is defined by Curaleaf as Adjusted EBITDA divided by total revenue. 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 tables provided in this press release contained in the sections "Gross Profit on Cannabis Sales" and "Adjusted EBITDA" (pgs. 3-7) provide reconciliations of Non-IFRS measures to the most directly comparable IFRS measures.