Acreage’s Q3 Missed Expectations, but It’s Optimistic


Nov. 14 2019, Published 11:31 a.m. ET

Acreage Holdings (ACRGF) reported its third-quarter earnings results on November 12. The company’s earnings were lower than analysts’ expectations. It missed its revenue estimates by almost 47%. Since it reported its results, the company has seen a fall of 1.64% in its stock. Its current price is $4.87.

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Financial highlights of Acreage’s third quarter

Acreage Holdings reported $22.4 million in revenue in the third quarter, a YoY (year-over-year) increase of 307%. Its reported revenue was considerably lower than analysts’ estimate of $42.2 million. The company’s revenue comes mostly from four geographies: New England, the mid-Atlantic, the Midwest, and the West. The company further reported a net loss of $39.9 million, almost eight times its loss in the third quarter of 2018. Analysts expected it to report a $15.0 million net loss in the third quarter.

Further, Acreage reported EBITDA of -$12.3 million, implying a sequential fall of 161.9%. Analysts had expected it to report EBITDA of -$9.1 million. Its actual EBITDA was 35% lower. Further, its EPS stood at -$0.17, 15% better than the estimate of -$0.20.

The company’s third-quarter expenses also included $1.1 million worth of Canopy Growth (CGC) (WEED) transaction costs. It recently entered into an agreement with Canopy. Subject to some conditions, Canopy now has the option to acquire all of Acreage stock. If Canopy exercises its option, Acreage will become a wholly owned subsidiary of Canopy.

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Making the shift to US GAAP

Acreage Holdings is transitioning from international financial reporting standards to US GAAP (generally accepted accounting principles). The company will no longer be considered a foreign private company by the US Securities and Exchange Commission. Therefore, it will use US GAAP for filing the statements. Its upcoming 2019 consolidated financial statements will be prepared using US GAAP.

Management’s take on financials

Acreage believes that the third quarter marked huge progress for its long-term goals. It’s launched cannabis brands and developed its wholesale business over time, and it believes its brands have been receiving a great response. It can also boast that it’s achieved complete retail distribution in Pennsylvania.

Acreage believes it has adequate funds to expand its business further. It has many expansion and acquisition plans in the cards. Even though the industry has been facing a hard time for the last few months, Acreage is optimistic about the future

Acreage’s chair and CEO, Kevin Murphy, said in its earnings release, “The third quarter was highlighted by tremendous progress of our long-term plan….The last six months have been challenging for the entire industry, but as I have emphasized since day one, this is a long game and I have never been more optimistic about the future of Acreage.”



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