New York-based Acreage Holdings’ fourth-quarter net loss widened sharply compared to the year before, but analysts say that should not be cause for great concern as the company spent heavily on expanding its footprint in 2018.
Revenue for the firm nearly quadrupled last year.
The company, which trades on the Canadian Securities Exchange under the ticker symbol ACRG.U, hosted a call with analysts and investors Wednesday to discuss the latest results.
Here are the top takeaways Investor Intelligence subscribers should know:
Earning Highlights
- Acreage reported revenue of $10.5 million for the fourth quarter ended Dec. 31, 2018, up from $2.2 million for the same period in 2017. Full-year fiscal 2018 revenue totaled $21.1 million, up 173% from the same period in 2017.
- The company’s net loss for the final quarter of 2018 totaled $217.6 million versus $4.7 million a year earlier. For the year, Acreage totaled $219.7 million versus $7.6 million for fiscal 2017.
Early Analyst & Market Reaction
- Acreage stock dropped 2% early Wednesday, trading at $17.08 a share. The stock closed Tuesday at $17.44.
- The reported net loss, according to Cormark Securities analyst Jesse Pytlak, “is linked to fair-value accounting adjustments and nonrecurring items, rather than operational issues. This misunderstanding could trigger a negative reaction in the stock.”
- Overall, however, Pytlak told Investor Intelligence that Acreage is demonstrating “positive advancement” as it continues to build out its footprint and post strong pro forma results. The company posted pro forma revenue of $23 million in the fourth quarter and $77.2 million for the full fiscal year. “Pro forma results are much more relevant to the stage of the company’s evolution,” he said.
Rapid Expansion Continues
- Acreage currently boasts the largest footprint among U.S.-based multistate operators (MSO) with operations or licenses in 19 states. Executives said Acreage is on track to have up to 60 dispensaries operating by the end of the year, which implies the opening of up to 40 new locations in 2019.
- The company deployed $202 million in capital in 2018 – via cash, stock and debt – “to increase our footprint,” spending $46 million in the fourth quarter alone.
- As M&A activity ramps up in the industry with major deals such as Harvest Health & Recreation’s $850 million acquisition of Verano, Acreage President Kevin Murphy told analysts and investors to expect to see “a number of MSOs coming together to try to be competitive in that race.”
- Executives also noted that Acreage is beginning to garner interest from global consumer packaged goods firms, though additional details weren’t shared. “Although it could be some time before these companies are able to directly participate in the sector, this interest being demonstrated is clearly positive,” Pytlak said.
Boosting Acreage Intellectual Property?
- Murphy said the company is also working to launch a “proprietary product that has huge potential to disrupt vape market” later this year. Further details weren’t disclosed on the call.
Up Next
- Acreage said it expects to report its first-quarter earnings results on May 14 after the market closes. It will host a call with analysts and investors May 15.
- For now, given the fast-paced growth underway, Acreage officials said they don’t plan to issue formal financial targets for quarterly or full-year earnings.
