Mr. Dennis Curran reports

ACREAGE REPORTS SECOND QUARTER 2023 FINANCIAL RESULTS

Acreage Holdings Inc. has released its financial results for the second quarter ended June 30, 2023 (Q2 2023).

Second Quarter 2023 Financial Highlights

• Consolidated revenue of $58.1 million, an increase of 3.8% compared to quarter ended March 31, 2023 ("Q1 2023").
• Gross margin was 36%. Excluding the impact of non-cash inventory adjustments, gross margin for Q2 2023 was 44%.
• Adjusted EBITDA* was $6.8 million and Adjusted EBITDA* as a percentage of consolidated revenue was 12%.

Second Quarter and Recent Operational Highlights

• Expanded the Company's leadership team to include deep cannabis operational expertise, and appointed Dennis Curran to Chief Executive Officer and Carl Nesbitt to Chief Financial Officer.
• Streamlined governance structure and rightsized the Board of Directors in preparation for the completion of the Company's previously announced strategic arrangement (the "Floating Share Arrangement") with Canopy Growth Corporation and Canopy USA, LLC.
• Achieved record revenue in New Jersey and Connecticut with year-over-year increases of 35% and 31%, respectively, compared to the quarter ended June 30, 2022 ("Q2 2022").
• Launched adult-use retail operations in Connecticut at The Botanist locations in Montville and Danbury, with both locations achieving strong initial performance.
• Progressed ongoing infrastructure project at the Company's Egg Harbor facility to support demand in New Jersey and to unlock premium biomass production for further expansion of Acreage's in-market product suite.
• Entered partnership with the Last Prisoner Project to participate in the Roll It Up for Justice Program and inmate letter-writing initiative to further advance criminal justice reform and support those being impacted by the failed War on Drugs.
• Helped pass 280E reform in Ohio, Connecticut, and Maine to allow for state-level deductions of usual and necessary business expenses for cannabis operators.

Product Innovation and Recent Launches

• Debuted several new and innovative products across the Company's house of brands to drive market share growth and increase customer loyalty.
  • Launched Journeyman THC Lemonades in Illinois, in partnership with Botanica. The clean, vegan, and gluten-free THC beverages are available in three refreshing flavors, Tropical Lemonade, Berry Lemonade, and Tart Lemonade.
  • Introduced the first-ever Superflux flower in the New England, Massachusetts region in June, followed by a broader retail launch in July, and launched Stem 1g Live Resin Disposable Vapes in Massachusetts, Illinois, and Ohio.
  • Launched the first ever The Botanist Flower in Maine with four strains, and The Botanist Cherry Punch Extra High Potency Fruit Chew in Ohio and Illinois.
  • Introduced seasonal and limited-time The Botanist edibles, including the Mango Iced Tea Gummy and Botanist Pride Medley Gummy, in Illinois, Maine, Massachusetts, and Ohio.

Management Commentary

"I am pleased with the progress we made in the second quarter on our continued efforts to drive meaningful revenue growth and achieve operational savings to deliver cash flow improvements for the business," said Dennis Curran, Chief Executive Officer of Acreage. "Our commitment to introducing differentiated products and delivering exceptional customer experiences has had a profound impact in several of our core markets, including the nascent New Jersey and Connecticut adult-use markets. The robust revenue growth in New Jersey is incredibly encouraging as we deepen our operations and build a leadership position in the state, and our recent launch of adult-use sales in Connecticut has already garnered positive consumer feedback with demand ahead of our expectations."

Mr. Curran concluded, "Across our footprint, we have continued to implement optimization initiatives to further drive operational excellence and strongly position each market to achieve sustained growth. This includes strengthening our inventory management, cost analysis, and production planning, which we believe will enable us to unlock higher margins and continue to deliver positive Adjusted EBITDA as we move into the second half of the year."

Total revenue for Q2 2023 was $58.1 million compared to $61.4 million in Q2 2022 and $56.0 million in Q1 2023. The year-over-year decrease was primarily due to the divestiture of the Company's operations in Oregon and market price compression across various markets. The year-over-year decrease was somewhat offset by revenue growth in both New Jersey and Connecticut following the commencement of adult-use sales.

Total gross profit for Q2 2023 was $21.1 million compared to $30.6 million in Q2 2022. Total gross margin was 36% in Q2 2023 compared to 50% in Q2 2022. Margin was impacted by cost increases due to inflation, as well as price compression across various markets during the quarter. Additionally, wholesale cost of goods sold for Q2 2023 included $4.5 million of non-cash inventory adjustments due to excess inventory in select markets and carrying values of inventory exceeding net realizable value. Excluding these non-cash inventory adjustments, gross margin for Q2 2023 was 44%.

Total operating expenses for Q2 2023 were $26.2 million compared to $27.3 million in Q2 2022. The reduction in operating expenses can be attributed to a decrease in general and administrative expenses related to lower professional fees and office expenses achieved by continued cost controls. This also included reductions in equity-based compensation expenses and depreciation and amortization expenses when compared to Q2 2022.

Adjusted EBITDA* for Q2 2023 was $6.8 million compared to Adjusted EBITDA* of $10.4 million in Q2 2022 and Adjusted EBITDA* of $10.6 million in Q1 2023.

Net loss attributable to Acreage for Q2 2023 was $(16.2) million, compared to $(9.9) million in Q2 2022.

Amendment to Credit Facility

On April 28, 2023, Acreage further amended its existing credit facility (the "Credit Facility") such that $15.0 million was available for immediate draw, but such funds would be maintained in a segregated account until dispersed and be restricted for use to only eligible capital expenditures. Additionally, the Company has agreed to limit the total amounts outstanding under the Credit Facility to $140.0 million and to, at all times subsequent to April 28, 2023, maintain collateral (as defined in the Credit Facility) equal to or greater than the outstanding amount under the Credit Facility.

Balance Sheet and Liquidity

Acreage ended Q2 2023 with $16.4 million in cash and cash equivalents and $13.6 million of restricted cash, with such funds restricted for use to only eligible capital expenditures.

About Acreage Holdings, Inc.

Acreage is a multi-state operator of cannabis cultivation and retailing facilities in the U.S., including the Company's national retail store brand, The Botanist. With its principal address in New York City, Acreage's wide range of national and regionally available cannabis products include the award-winning brands The Botanist and Superflux, the Prime medical brand in Pennsylvania, and others. Since its founding in 2011, Acreage has focused on building and scaling operations to create a seamless, consumer-focused, branded experience.

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