Canadian cannabis on the upswing? 📈

🇺🇸 vs 🇨🇦
Big Canadian cannabis companies are outperforming their US peers

Cannabis earnings season has wrapped up, and one emerging trend is clear: Big US cannabis companies are struggling, while their Canadian counterparts, for the most part, are trending toward profitability.

It’s a remarkable turnaround from just a few years ago, when federal legalization looked to be just around the corner — and all the investment dollars flowed to American companies poised to take advantage.

But despite several US cannabis companies pulling in more revenue than their Canadian counterparts, there is little to no profit to be found among publicly traded companies in America. This is in part because Canada has consistent federal regulations as opposed to a hodge-podge of state rules operating under a federal government that still prohibits the plant. 

Canada can also export cannabis, opening markets such as Europe, Israel and Australia, while American companies can’t even export to other states. 

What they’re saying: "From an operating perspective, our sector is battling pervasive and persistent headwinds. There is increasing urgency around the pace of change as federal regulation remains unresolved. Liquidity is tight for most and receivables are aging. The efforts required to offset those headwinds mean we all have to work even harder to simplify and reduce costs in the business." Cannabist CEO David Hart during their first-quarter earnings call on May 8.

And also: "The broader regional market challenges we discussed on our last call have persisted throughout the first quarter, with price compression continuing to be the biggest headwind per BDSA data. While transaction volumes held steady, lower pricing put pressure on our top line and margins." Ascend Wellness CEO Sam Brill during his company's May 12 earnings call.

We looked at over a dozen earnings reports over the last two weeks, and it was clear that most of the big Canadian companies are generally doing well, while there is a lot of red on the American side of the cannabis industry.

Organigram and Cronos Group reported net income of $42 million and $7.7 million, respectively.

Ascend Wellness, Verano, Green Thumb Industries (GTI), Trulieve, and Curaleaf each reported over $100 million in quarterly revenue, and yet GTI is the only company in the group that turned a profit at $8 million for the past quarter.

Glass House Brands, Vireo Health, Jushi, TerrAscend, Cannabist, Ascend Wellness, Verano, Trulieve, Curaleaf, iAnthus, and MariMed all posted losses for the first three months of the year.

Oversupply and resulting price compression in closed state markets can explain a lot of what is causing cannabis companies to struggle, but those factors are also present in the Canadian market.

The biggest difference, however, is that American companies are unable to trade between states thanks to federal illegality, have limited access to capital given the lack of investors and high borrowing rates, and they are unable to write off most operating costs due to 280E — a tax code that prevents cannabis companies from deducting regular business expenses. 

Canada also has debt protection: While Canada’s large cannabis companies showed strong numbers last quarter, there has also been a growing trend of smaller companies being crushed by debt. Many US companies in the same position do not have the option of bankruptcy court as long as cannabis remains federally illegal in America.

Canada’s market has already experienced some of the growing pains associated with maturing cannabis markets, where oversupply causes prices to fall and businesses to fail.

In contrast, Canadian companies in financial trouble have the option to enter CCAA which functions similarly to bankruptcy in the United States. Every year almost a dozen cannabis companies enter CCAA protection, which allows the beleaguered companies to restructure while being protected from their current debt holders.

CCAA filings have generally been increasing over the last few years, but so far 2025 appears to be a lighter year for debt protection. Cannabis filings have not kept pace with the total number of companies seeking protection.

• 2022: 35 filings, 14 cannabis companies

• 2023: 64 filings, 7 cannabis companies

• 2024: 74 filings, 11 cannabis companies

• 2025: 19 filings, 2 cannabis companies

Whether this is the result of a market correction or a general result of fewer regulatory hurdles, legal cannabis remains more lucrative up north than in the United States.

-ZH

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