Curaleaf Reports Fourth Quarter and Fiscal Year End 2022 Results
- Record fiscal year 2022 revenue of $1.34 billion and Adjusted EBITDA(1) of $305 million, representing an increase of 12% and 17% from fiscal 2021, respectively
- Fourth quarter 2022 Revenue of $352.5 million, representing an increase of 14% year-over-year, and Adjusted EBITDA(1) of $73 million
- Operating cash flow of $46 million and cash on balance sheet of $163 million
NEW YORK, May 1, 2023 /PRNewswire/ — Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) (“Curaleaf” or the “Company”), a leading international provider of consumer products in cannabis, today reported its financial and operating results for the fourth quarter and year ended December 31, 2022. All financial information is reported in accordance with U.S. generally accepted accounting principles (GAAP) and is provided in U.S. dollars unless otherwise indicated.
Boris Jordan, Executive Chairman of Curaleaf, commented, “2022 was another record year for Curaleaf that further solidified our leadership position in the industry. In the fourth quarter, we delivered sales growth of 14% to $352.5 million , with an adjusted gross margin1 of 47% and adjusted EBITDA margin of 21%. For the year, we grew revenue by 12% to $1.34 billion , with an adjusted gross margin of 50% and adjusted EBITDA margin of 23%. We generated $46 million in operating cash flow and ended the year with $163 million in cash on our balance sheet. We have a strong cash position and will continue to invest in the right opportunities for growth domestically and abroad. I am pleased that we took the necessary actions in Q4 and early Q1 to reduce expenses and streamline the organization, positioning us for years of profitable growth to come.”
Curaleaf accomplished a great deal last year; we launched 171 new products, introduced three new brands, opened 28 new stores, completed six acquisitions, expanded our European presence with the German market, converted to GAAP accounting, and built out the management team with high caliber talent.
Matt Darin, Chief Executive Officer of Curaleaf
Further, we sold over $600 million of our own brands through our own stores, which speaks to the strength of our retail business as a key competitive advantage – our gross margins are strong, we have an unrivaled geographically diverse footprint, and are constantly improving the cannabis customer experience. We are excited about, and well positioned for the future.
1 Adjusted EBITDA, adjusted gross margin and adjusted net loss attributable to Curaleaf Holdings, Inc. are non- GAAP financial measures, and adjusted EBITDA Margin, Adjusted Gross Margin and Adjusted Net Loss per share are Non-GAAP financial ratios, in each case without a standardized definition under GAAP and which may not be comparable to similar measures used by other issuers. See “Non-GAAP Financial and Performance Measures” below for definitions and more information regarding Curaleaf’s use of Non-GAAP financial measures and Non- GAAP ratios. See the section entitled “Reconciliation of Non-GAAP financial measures” below for a reconciliation of the Non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measures.
Fourth Quarter 2022 Financial Highlights
- Net Revenue of $352.5 million, a 14% increase year-over-year, and 4% increase quarter-over-quarter
- Gross profit of $78.1 million and gross margin of 22%
- Adjusted gross profit net of add-backs of $165.4 million, adjusted gross margin of 47% inclusive of a 240 basis point impact from an expense reclassification into cost of goods sold
- Net loss attributable to Curaleaf Holdings, Inc. of $260.3 million or net loss per share $0.36
- Adjusted net loss attributable to Curaleaf Holdings, Inc.(1) of $162 million or net loss per share(1) of $0.23.
- Adjusted EBITDA of $73M or 21% of revenue, excluding non-cash goodwill impairments and inventory write-downs totaling $225 million
- Cash position at quarter end totaled $163M
Full Year 2022 Financial Highlights
- Net revenue of $1.336 billion, a 12% increase year-over-year
- Gross profit of $579 million and gross margin of 43%
- Adjusted gross profit(1) net of add-backs of $671.9 million, a 18% increase year-over-year
- Adjusted gross margin(1) of 50.3% inclusive of a 60bp impact from an expense reclassification into cost of goods sold
- Operating cash flow of $46 million
- Net loss attributable to Curaleaf Holdings, Inc. of $370 million or net loss per share of $0.52
- Adjusted net loss(1) attributable to Curaleaf Holdings, Inc. of $252 million or net loss per share(1) of $0.35
- Adjusted EBITDA(1) of $305 million or 23% of revenue, excluding non-cash goodwill impairments and inventory write-downs of $225 million
Fourth Quarter and FY 2022 Financial Highlights (Unaudited)
($ thousands)
Fourth Quarter 2022 Operational Highlights
- Added eight net new retail dispensaries including four in Nevada, three in Florida, and two in Arizona.
- Completed the acquisition of Tryke Companies, a vertically integrated MSO operating in Arizona, Nevada, and Utah.
- Launched Find, a flower brand meeting the trend of the economizing consumer with high quality cannabis flower at an accessible price point.
- Unveiled the national rebrand and ongoing expansion of Grassroots premium flower brand and launched Grassroots Diamond Infused Pre-Rolls.
- Began adult-use sales at Bordentown Township, New Jersey location, the Company’s third location to sell adult-use cannabis in the Garden State.
Full Year 2022 Operational Highlights
- Opened 28 locations across key strategic markets, including Arizona, Florida, Maryland and Pennsylvania.
- 21 new stores opened and seven stores added via acquisition.
- Introduced 171 products to market in 2022, with three new brand launches throughout the year.
- New brand launches include Endless Coast, Find, and Plant Precision, targeting a variety of price points and product need states.
- New products launched in 2022 accounted for approximately 18% of full year 2022 revenue.
- Completed the acquisition of Bloom Dispensaries in Arizona.
- Completed majority stake acquisition of Germany’s Four20 Pharma.
Post Fourth Quarter 2022 Highlights
- Announced cost reduction plan and discontinued operations in California, Colorado and Oregon as a part of Curaleaf’s continued effort to streamline its business.
- Reduced payroll hours by 10% coupled with other expense reductions across the organization resulting in over $60 million of annual gross run rate expense savings, above the previously anticipated savings of $40 million.
- Continued to strategically expand its retail footprint in Florida, opening five additional stores. As of May 1, 2023, Curaleaf retail operations totaled 152 nationwide.
- Gained approval to sell to adult-use customers at its Stamford, Connecticut location in January immediately following the opening of adult-use sales, and at its Hartford, Connecticut location in March.
- Completed the acquisition of Deseret Wellness, providing three dispensaries in Utah.
Financial Results for the Fourth Quarter Ended December 31, 2022
Revenue
($ thousands)
Total revenue was a record $352.5 million in the fourth quarter of 2022, an increase of 4% from $339.7 million in the third quarter of 2022 and 14% from $308.7 million in the fourth quarter of 2021. The Company’s year-over-year revenue growth primarily reflects continued organic growth driven by new retail store openings and the significant focus on research and development, resulting in the introduction of 171 products in 2022 and three new brand launches.
Retail revenue was $277.5 million, compared with $259.7 million in the third quarter of 2022, and up 23% from $225.6 million in the fourth quarter of 2021. Retail revenue represented 79% of total revenue. Curaleaf’s year-over-year retail revenue growth was supported by 28 new stores added in 2022, and the further expansion of adult-use cannabis around the country.
Wholesale revenue was $73.8 million, a decrease of 6% from the third quarter of 2022 and represented 21% of total revenue. Wholesale revenue declined 10% year-over-year due to price compression, a proactive reduction of wholesale accounts in California, and an intentional reduction of low profit raw material sales.
Net Income / (Loss)
($ thousands)
Net loss attributable to Curaleaf Holdings, Inc. was $260.3 million, compared with a net loss of $51.4 million in the third quarter of 2022 and $73.0 million in the fourth quarter of 2021. The year-over-year degradation in net loss was mainly due to $225 million of non-cash goodwill impairments and inventory write-downs primarily associated with the state exits of CA, CO, and OR.
Financial Results for the Year Ended December 31, 2022
Revenue (Audited)
($ thousands)
Total revenue for the year ended 2022 was a record $1,336 million, an increase of 12% from $1,196 million for the year ended 2021.
Retail revenue was $1,015 million for the year ended 2022, an increase of 18% from $860 million for the year ended 2021. 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. In 2022, Curaleaf launched the brands Endless Coast, Find, and Plant Precision, targeting a variety of price points and product need states.
Wholesale revenue was $316 million, a decrease of 5% from $333 million for the year ended 2021. The decline in wholesale revenue was primarily due to price compression, a reduction of wholesale accounts in California, and an intentional reduction of low profit raw material sales.
Net Income / (Loss) (Audited)
($ thousands)
Net loss, attributable to Curaleaf Holdings, Inc., for the year ended 2022 was $370 million, compared with a net loss of $206 million for the year ended 2021. The $164 million degradation in net loss in 2022 was primarily due to the $225 million non-cash goodwill impairment and inventory write-downs associated with the CA, CO, and OR state exits, as well as increased SG&A expenses
Balance Sheet and Cash Flow
As of December 31, 2022, the Company had $163 million of cash and $623 million of outstanding debt net of unamortized debt discounts.
During the fourth quarter of 2022, Curaleaf invested $39 million, net in capital expenditures, focused on cultivation, processing, and selective retail expansion in strategic markets. For the year ended 2022, Curaleaf invested $138 million, net in capital expenditures.
Shares Outstanding
For the fourth quarter of 2022 and 2021, the Company’s weighted average subordinate voting shares outstanding amounted to 715,796,271 and 707,450,310 shares, respectively.
For the years ended December 31, 2022, and December 31, 2021, the Company’s weighted average subordinate voting shares outstanding amounted to 711,159,444 and 698,759,274 shares, respectively.
As of December 31, 2022, and December 31, 2021 Company’s issued and outstanding subordinate voting shares plus multiple voting shares amounted to 717,490,830 and 708,340,434 shares, respectively.
2021 and 2022 Restatement Update
As previously disclosed, the 2022 full year results include restated revenue amounts for the first, second, and third quarters of 2022 as compared with what was previously reported, and the reduction of aggregate revenue for the full 2022 fiscal year is 0.5%. Similarly, 2021 full year results were also restated, and the reduction of aggregate revenue for the year was 1.1% of revenue. Details of the full audited financial statements can be found in the tables of this release.
Conference Call Information
The Company will host a conference call and audio webcast for investors and analysts on Monday, May 1, 2023 at 5:00 P.M. ET to discuss Q4 and 2022 earnings results. The call can be accessed by dialing 1-844-512-2926 in the U.S., internationally 1-412-317-6300, or from Canada 1-416-639-5883. The conference ID # is 7713604.
A replay of the conference call can be accessed at 1-877-344-7529, or internationally 1-412-317-0088, or from Canada 1-855-669-9658 using the replay ID # 1100731.
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 May 1, 2023, and will end at 11:59 P.M. ET on May 8, 2023.
Non-GAAP Financial and Performance Measures
Curaleaf reports its financial results in accordance with GAAP 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 GAAP. Curaleaf refers to certain Non-GAAP financial measures and ratios such as “Adjusted Gross Profit”, “Adjusted Gross Margin”, “Adjusted Net Loss”, “Adjusted Net Loss Per Share”, “Adjusted EBITDA”, and “Adjusted EBITDA Margin”. These measures do not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other issuers. The Company defines “Adjusted Gross Profit” as Gross Profit net of cost of goods sold and related other add-backs. “Adjusted Gross Margin” is defined by Curaleaf as gross profit net of add-backs divided by total revenues. “Adjusted Net Loss” is defined by Curaleaf as Net Loss less other add-backs. “Adjusted Net Loss per Share” is defined by Curaleaf as Adjusted Net Loss divided by the weighted average shares outstanding. “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 GAAP, 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 below provide reconciliations of Non-GAAP measures to the most directly comparable GAAP measures.
Gross profit was $78.1 million in the fourth quarter of 2022, compared with $161.8 million in the third quarter of 2022. Adjusted gross profit net of add-backs for the fourth quarter was $165.4 million compared with $166.1 million in the third quarter of 2022. Adjusted gross margin for the fourth quarter of 2022 was 46.9%, a decrease of 200 basis points compared with the third quarter of 2022. The decrease in gross margin was due to a full year allocation of $8.5 million of expenses reclassified into cost of goods sold which reduced adjusted gross margin by 240 basis points, and geographic mix; partially offset by increased operational efficiencies and the addition of higher margin Tryke, and improved international gross margins helped by the addition of Four 20 Pharma.
Adjusted EBITDA was $73.2 million for the fourth quarter of 2022, a decrease of 4% from $76.4 million in the third quarter of 2022 and an increase of 16% from $63.3 million in the fourth quarter of 2021. Adjusted EBITDA margin was 20.8%, a decrease of 170 basis points from 22.5% in the prior quarter and an increase of 20 basis points from 20.5% in the fourth quarter of 2021. The sequential decrease in Adjusted EBITDA primarily reflects lower gross profit margin driven by geographic mix and pricing pressure in certain markets, coupled with expense deleverage driven by additional headcount associated with Tryke, Four 20 Pharma, and new store openings.
Adjusted EBITDA for the year ended 2022 was $305.4 million, an increase of 17% from $261.8 million in 2021. Adjusted EBITDA margin was 22.9%, an increase of 100 basis points from 21.9% in the prior year. The increases in Adjusted EBITDA and Adjusted EBITDA margin primarily reflect higher revenue and higher gross margin partially offset by higher SG&A expense related to increased headcount in support of new store openings and acquisitions, and marketing in support of new product rollouts.
About Curaleaf Holdings
Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) (“Curaleaf”) is a leading international provider of consumer products in cannabis 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, Select, and Grassroots provide industry-leading service, product selection and accessibility across the medical and adult-use markets. In the United States, Curaleaf currently operates in 19 states with 152 dispensaries, and employs nearly 5,500 team members. Curaleaf International is the largest vertically integrated cannabis company in Europe with a unique supply and distribution network throughout the European market, bringing together pioneering science and research with cutting-edge cultivation, extraction and production. 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 https://ir.curaleaf.com.
