Cannabis companies have been seeing significant increases in revenues, especially in light of Canada’s nationwide legalization. However, with many companies choosing to expand aggressively in exchange for operational profits, there are a few companies that are losing money drastically.
This can be problematic for these businesses, as investors are beginning to move away from a sheer growth bias in favor of companies that are actually making money. One of these companies, Acreage Holdings (CSE: ACRG.U), announced today their Q4 and year-end financial results. While the press release mentioned impressive gross figures, investors were startled by the companies fourth-quarter net losses, which totaled almost $220 million.
Overall losses and revenues for the company have both drastically increased over the past year. Acreage said that income had grown to 10.5 million in Q4 with full fiscal revenue up to $21.1 million, a 380 percent and 173 percent increase over the same time periods last year. However, losses have ballooned from $4.8 million to $217.6 million, or $2.63 per share. Most of this setback has come from non-cash charges and non-recurring items, so investors hope that this figure will decrease over the next reporting periods.
Pro forma adjusted net losses, excluding these non-cash and non-recurring charges, were at 10.8 million in the Q4 – almost matching the revenues over the same period of time. Over the full fiscal year, adjusted net losses totaled $30.3 million. However, when looking at things from a fundamental perspective, Acreage has one of the largest revenue per share figures in the industry. Estimates for Acreage’s revenues per share are at the $3.3 level, well above the next contender, Kushco Holdings (OTCMKTS: KSHB), with only a $1.4 revenue per share.
During the recent quarter, Acreage made a few announcements, including the opening of two new dispensaries in Buffalo, NY and Worcester, MA. The company currently operates 24 dispensaries and also has deployed around $200 million in capital across various investments.
For more value-minded investors, Acreage’s position in the cannabis industry is an interesting one. Despite the strong losses in Q4, share prices are quite cheap, currently trading at a price to share ratio of 6.8, well below the market average. This is also helped by the low share count of the company, which among all other multi-state cannabis operators is among the lowest in the industry. However, most analysts don’t expect this to last as dilutions in the future seem likely through capital fundraising efforts, which would also expert a downward pressure on stock prices as well as impact the aforementioned financial metrics.
Should these dramatic quarter losses recede to more reasonable levels, Acreage looks like a very reasonable cannabis investment for investors.
Agreage Holdings Company Profile
Headquartered in New York City, Acreage is the largest vertically integrated, multi-state owner of cannabis licenses and assets in the U.S. with respect to the number of states with cannabis related licenses, according to publicly available information.
Acreage owns licenses or has management services agreements in place in 19 states (including pending acquisitions) with a population of more than 172 million Americans, and an estimated 2022 total addressable market of approximately $14 billion in legal cannabis sales, according to Arcview Market Research. Acreage is dedicated to building and scaling operations to create a seamless, consumer-focused branded cannabis experience. Acreage’s national retail store brand, The Botanist, debuted in 2018. –Acreage Holdings