It’s Earnings Season 

Plus, legal cannabis states pull in $20 billion in taxes

Friday, May 10, 2024

Good morning.

Cannabis earnings season continues apace, with more of the big names reporting yesterday. All that and more in today’s newsletter. 

And if you’re in New York, or just interested in the New York market, tune in to the Cannabis Control Board meeting in Albany at 10:30 AM. Watch it here.

-JB & JR

This newsletter is 1,289 words or about a 6.5 minute read.

💡What’s the big deal?

A clear look into ‘Big Cannabis’ financials

Driving the news: It’s earnings season.

It’s one of the few opportunities we get for an inside look at how big cannabis companies are performing — and where they expect to invest, divest, or otherwise change up their strategies.

It’s also the first time we’ve heard directly from cannabis executives about how they expect rescheduling to affect their business, what it means when the 280E tax goes away (a lot of extra cash), and how they’re planning to list on major US exchanges the second they’re able

It’s now Friday, and most of the large companies have reported. Here’s where we stand so far for the first quarter (companies listed by quarterly revenue):

  • Curaleaf reported a $48.3 million net loss on $338.9 million of revenue. The company lost 7 cents per share, an important metric for financial performance.

  • Trulieve reported a $23 million net loss on $298 million revenue, up 4%. The company lost about 16 cents per share. 

  • Green Thumb Industries had a knock-out quarter, posting a $31 million profit on $276 million total revenue, up 11% year-over-year.

  • Verano Holdings posted a $5 million net loss on $221 million of revenue, down about 3% year-over-year.

  • Ascend Wellness Holdings reported an $18.2 million loss on $142 million revenue, up 24.7% year-over-year.

  • The Cannabist Co reported a $34.6 million net loss on $122.6 million of revenue.

  • TerrAscend reported a $14.9 million net loss, down year-over-year, on $80.6 million of revenue. 

  • Village Farms reported a $2.9 million loss on $78.1 million revenue, up 21% year-over-year.

  • Jushi Holdings reported an $18.4 million net loss on $65.5 million of revenue. 

  • MariMed reported a $1.3 million loss on $37.9 million revenue and beat consensus estimates for earnings-per-share.

  • Goodness Growth Holdings reported a $4.8 million profit on $24.1 million revenue. 

  • Leafly reported a $2.4 million net loss on $9 million of revenue, a near 20% decline year-over-year. 

Why it matters: This quarter was yet another reminder that there really is a Big Three of US cannabis: Curaleaf, Trulieve, and Green Thumb Industries. GTI was the only profitable one of the three but all showed promising revenue growth. 

These companies want to look attractive to the big, institutional asset managers they’re trying to woo. I’m not a financial analyst, but I’m not sure we’re there yet. 

That being said, there are promising signs of an industry turnaround, especially the top-line revenue growth and narrowing losses in what is historically the weakest sales quarter of the year. 

Our take: I generally don’t find earnings calls too revealing. It’s mostly execs talking up their book, skipping over the weak parts of their balance sheet, and getting peppered by analysts who are incentivized to keep their access rather than ask the tough questions. 

And the snapshot you get from the financial results are just that: A snapshot. The story always looks much different when you look at the numbers on a day-to-day basis. 

This quarter was a bit more revealing, however, given the context of rescheduling and potentially, getting rid of the 280E tax. 

Retail investors should do their own homework about what stocks to pick. Certainly they shouldn’t trust me. But for broader industry coverage, it’s worth listening to the execs to pick up on broader industry trends. 

There are three key takeaways, as I see it.

1 | 280E be gone

Every company expects rescheduling to happen, and they expect the 280E tax to vanish as a result. They’re all strategizing about how to claim refunds for the past year, as Trulieve has tried. And they’re all talking up how much more free cash flow they’ll have to invest in their business or even to buy up other companies. We’re going to see a lot of industry consolidation as soon as rescheduling hits. Curaleaf’s Boris Jordan said outright the cannabis cultivator would file as a normal company next year and that 280E doesn’t apply to it. 

2 | The Nasdaq cometh

Most executives said they’re actively looking to list on the Nasdaq, which already lists Canadian cannabis companies, as soon as they’re able. We’ve written about why that’s so beneficial for US cannabis companies — especially for attracting institutions, and much-needed capital, into the sector. 

3 | Hemp-derived beverages are the new pre-rolls.  

Low dose, hemp-derived THC beverages, which aren’t subject to the same restrictions as regular THC, are going to be the next big thing. Or so executives think. A lot of them say there’s a Trojan Horse effect where hemp-derived beverages show up on store shelves first, and then cannabis is normalized as a result. Thus, both Curaleaf and Goodness Growth said they’re actively looking to launch hemp-derived drinks. I’m a bit skeptical, but hemp-derived beverages sitting on grocery store shelves next to beer and soda in places like Minnesota is a huge win for the industry.


🗨️ Quote of the day

“Well, the bottom line is that there have been great experiments in the states on legalization of marijuana,” Sen. Chuck Schumer said at a Thursday press conference, discussing his push to crackdown on Zyn, Gen Z’s favorite nicotine pouch. “Crime hasn’t gone up. Drug addiction hasn’t gone up. People have more freedoms.”

Schumer introduced the Cannabis Administration and Opportunity Act last week, along with Sens. Cory Booker and Ron Wyden

Though Schumer has talked a big game about cannabis reform, there has been little to show for it during his tenure as Senate Majority Leader. 

Quick hits

States that have legalized cannabis have reported over $20 billion in cannabis tax revenue, according to the pro-legalization nonprofit Marijuana Policy Project.

Colorado cannabis dispensaries will now be able to sell food — as long as sales don’t account for more than 20% of revenue, reports MJ Biz Daily. So we guess the food better not be too good. 

Ontario cannabis producers will now be able to sell products “farm-gate,” meaning that products can be sold directly at cultivation facilities

Wisconsin’s governor, Tony Evers (D), said he’s “hopeful” the state will legalize cannabis if Democrats take control of the state’s legislature. He said that Wisconsin is surrounded by states with legal cannabis, and that his administration has been “working hard” over the past few years to make it happen. 

New York Rep. Crystal Peoples-Stokes, the Assembly Majority Leader and one of the main architects of New York’s legalization bill, told The City NY that the state should have just funded the embattled $200 million social equity fund, rather than go with an outside lender. Read more about the battle over the fund here

And in other New York news, the state is awarding 28 new licenses per month, and has opened 119 dispensaries total, according to an analysis from attorney Jeff Schultz. Not bad after a slow start. 

📰 What we’re reading

😜 One fun thing

Stormy Daniels, the, uh, er, um “actress” that rocketed to fame after a dalliance with the former president, now has a weed strain named after her, per The Fresh Toast.

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