📈 Market Size, Momentum

• Rescheduling cannabis to a Schedule III drug would remove the onerous 280E tax provision which disallows the deductibility of operating expenses and taxes cannabis operators at the gross profit level

  • For FY 2024E, Curaleaf would save over ~$150M in 280E related taxes

• Rescheduling alone will not make cannabis federally legal and will not directly affect SAFE Banking

• Short of full federal legalization, legislative reform that specifically addresses cannabis banking is the only way to ensure that state-regulated cannabis businesses can access the same financial services as other legitimate businesses

🧾 Curaleaf Holdings, Inc. (CURLF)

• Investor Presentation

• Financial Results

Note: From Q2 2024 Results.

Highlights:

• Q2 Revenue of $342M (2% YoY), $151M Adj. Gross Profit and Adj. EBITDA of $73M, add-backs include $25M of Interest Expenses, $31M Provision for Income Taxes and $52M Depreciation & Amortization and $8M other add-backs

• Adjusted Gross Profit from Continuing Operatoins adds back $2.7M which include labor and overhead write-downs primarily associated with idling capacity

• 1.8x Debt to Trailing Twelve Months (TTM) Adj. EBITDA ratio ($563M Debt/$308M LTM Adj. EBITDA), $89M Cash

• Curaleaf International revenue of $25M, representing 78% YoY revenue growth. 2024 legal cannabis market of $1.9 billion in 2024 (~742 million population)

• Committed to developing highly formulated products backed by science. 179 new products launched in 2023 (~26% of FY 2023 revenue was generated by new products launched in the last 12 months)

• Priorities: Extend U.S. leadership by continuing to build out geographically diverse network of dispensaries and portfolio of winning brands; Optimizing the foundation and infrastructure to rapidly capitalize upon future domestic growth; Leverage U.S. strategy across Europe to extend global leadership position

🧾 Green Thumb Industries Inc. (GTBIF)

• Investor Presentation

• Financial Results

🧾 Trulieve Cannabis Corp. (TCNNF)

• Investor Presentation

• Financial Results

🧾 Verano Holdings Corp. (VRNOF)

• Investor Presentation

• Financial Results

🧾 Cresco Labs Inc. (CRLBF)

• Investor Presentation

• Financial Results

👋 Highly Objective is a weekly Cannabis newsletter and podcast curated by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment.  The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party.  The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.

Tilray Brands Reports Record Financial Results, Achieves 26% Net Revenue Growth.

https://finance.yahoo.com/video/why-tilray-big-beverage-bet-171533308.html?contentType=VIDEO

Financial Highlights – 2024 Fiscal Fourth Quarter

• Net revenue increased 25% to $229.9 million in the fourth quarter compared to $184.2 million in the prior year quarter

• Gross profit was $82.4 million in the fourth quarter compared to $67.2 million in the prior year quarter. Gross margin and adjusted gross margin² were both 36%

• Beverage-alcohol net revenue increased 137% to $76.7 million in the fourth quarter from $32.4 million in the prior year quarter. The increase was led by new product innovation and contributions from our Craft Acquisition brands

  • Beverage-alcohol gross profit increased 146% to $40.8 million in the fourth quarter from $16.6 million in the prior year quarter. Adjusted beverage-alcohol gross profit increased 130% to $41.0 million from $17.8 million in the prior year quarter

  • Beverage-alcohol gross margin increased to 53% in the fourth quarter compared to 51% in the prior year quarter and adjusted gross beverage alcohol margin² was 53% in the fourth quarter compared to 55% in the prior year quarter

• Cannabis net revenue increased 12% to $71.9 million in the fourth quarter compared to $64.4 million in the prior year quarter, driven in part by the acquisitions of HEXO and Truss

  • Cannabis gross profit and adjusted gross profit² decreased to $28.8 million in the fourth quarter from $39.5 million in the prior year quarter

  • Cannabis gross margin and adjusted gross margin² were 40% in the fourth quarter compared to 61% in the prior year quarter. A substantial portion of the decrease is a result of the completion of the HEXO advisory services agreement in Q1 fiscal 2024

• Distribution net revenue was $65.6 million in the fourth quarter compared to $72.6 million in the prior year quarter. The decrease was driven by management’s focus on discontinuing less profitable product lines demonstrated by Distribution’s gross margin increasing to 12% in the fourth quarter compared to 9% in the prior year quarter

• Wellness net revenue increased 6% to $15.7 million in the fourth quarter from $14.8 million in the prior year quarter

• Net loss narrowed to ($15.4) million in the fourth quarter compared to net loss of ($119.8) million in the prior year quarter, almost all of which is a result of non-cash expenses. Adjusted net income² was $35.1 million in the fourth quarter compared to a loss of ($11.8) million in the prior year quarter

• Net loss per share narrowed to ($0.04) compared to ($0.15) in the prior year quarter. Adjusted net income (loss) per share² was $0.04 compared to a loss of ($0.02) in the prior year quarter

• Adjusted EBITDA² increased 37% to $29.5 million in the fourth quarter compared to $21.5 million in the prior year quarter

Financial Highlights – 2024 Fiscal Year

• Net revenue increased 26% to $788.9 million in fiscal 2024 compared to $627.1 million in the prior fiscal year

• Gross profit was $223.4 million, while adjusted gross profit² increased 14% to $235.6 million in fiscal 2024. Gross margin was 28% and adjusted gross margin² was 30%

• Beverage-alcohol net revenue increased 113% to $202.1 million in fiscal 2024 from $95.1 million in the prior fiscal year

  • Beverage-alcohol gross profit increased 91% to $88.6 million in fiscal 2024 from $46.3 million in the prior fiscal year. Adjusted beverage-alcohol gross profit² increased to $93.2 million from $50.8 million in the prior fiscal year

  • Beverage-alcohol gross margin was 44% in fiscal 2024 compared to 49% in the prior fiscal year and adjusted gross beverage alcohol margin² was 46% in fiscal 2024 compared to 53% in the prior fiscal year, reflecting lower contribution margins from the acquired brands

• Cannabis net revenue increased 24% to $272.8 million in fiscal 2024 compared to $220.4 million in the prior fiscal year, reflecting the acquisitions of HEXO and Truss as well as growth across international markets

  • Cannabis gross profit increased to $90.2 million in fiscal 2024 from $57.7 million in the prior fiscal year. Adjusted gross profit² was $97.8 million compared to $112.7 million in the prior fiscal year as a result of the advisory service agreement concluding in Q1 fiscal 2024

  • Cannabis gross margin was 33% in fiscal 2024 compared to 26% in the prior fiscal year. Adjusted cannabis gross margin² was 36% compared to 51% in the prior fiscal year

• Distribution net revenue and gross margin remained consistent at ~$259 million and 11% in fiscal 2024 compared to the prior fiscal year

• Wellness net revenue increased 5% to $55.3 million in fiscal 2024 from $52.8 million in the prior fiscal year

  • Wellness gross margin was 30% in fiscal 2024 compared to 29% in the prior fiscal year

• Net loss decreased to ($222.4) million in fiscal 2024 compared to net loss of $(1.4) billion in the prior fiscal year, almost all of which is a result of non-cash expenses. Net loss per share narrowed to $(0.33) and improved compared to a net loss of $(2.35) in the prior fiscal year

• Adjusted net income² increased to $6.2 million in fiscal 2024 compared to adjusted net income² of $0.4 million in the prior fiscal year. Adjusted net income per share² narrowed to $0.01 compared to $0.00 in the prior fiscal year

• Adjusted EBITDA² increased to $60.5 million in fiscal 2024 compared to $58.7 million in the prior fiscal year

• Strong financial liquidity position of ~$260.5 million, consisting of $228.3 million in cash and $32.2 million in marketable securities

• Reduced outstanding principal of the net convertible debt by $291.0 million compared to the previous fiscal year

• Net cash used in operating activities was $(30.9) million in fiscal 2024 compared to $7.9 million net cash from operating activities in the prior year

• Adjusted free cash flow² of $6.6 million in fiscal 2024 compared to $19.1 million in the prior year

¹ Circana volume sales L26W ending 7/7/24
² Adjusted EBITDA, Adjusted gross margin, Adjusted net income, adjusted gross profit and adjusted gross margin for each of our segments, and Adjusted net income (loss) are non-GAAP financial measures. See “Reconciliation of Non-GAAP Financial Measures to GAAP Measures” below for a reconciliation of these Non-GAAP Measures to our most comparable GAAP measure.

Beverage Alcohol Drives Large Majority of Revenue Growth

Tilray Brands (TLRY) Q4 2024 Earnings Call Transcript

Call participants: Irwin Simon—Chairman and CEO; Carl Merton—CFO; Denise Faltischek—President, International Business and Chief Strategy Officer; Berrin Noorata—Chief Corporate Affairs and Communications Officer; Robert Moskow—TD Cowen Analyst; Andrew Carter—Stifel Analyst, Aaron Grey—Alliance Global Partners Analyst, Owen Bennett—Jefferies Analyst, Frederico Gomes—ATB Capital Markets Analyst.

• Shock Top finished Q4 with 13.5% growth year over year since Tilray Brands acquired the brand

• After its first acquisition in beer (SweetWater), they were selling 2.5 million cases, expects to sell 12–13 million cases of beer next year (FY2025)

• All brands, except for Shock Top, have exited their co-manufacturing agreements and are now being produced in Tilray facilities

• Goal is to bring consolidated beverage alcohol margins back up above 40%

  • Prior GM at SweetWater was in the high 40s, low 50s

• Plan to launch new hemp-derived delta-9 beverages strategically in selected markets, including Texas and New Jersey, where Tilray can leverage its existing beverage distribution network. Tilray’s beer distributors that have reached out to them, want the product right away because they have seen how well the sales are doing in markets where it is available

• Spent ~$30M this year on CapEex, spent a little over $20M the year before

• $10M headwind to EBITDA this year from price compression

• Product seems to be selling as soon as it comes into the market in Germany

📈 Market Size, Momentum

Note: From Q1 2024 Results.

🧾 Curaleaf Holdings, Inc. (CURLF)

• Investor Presentation

• Financial Results

🧾 Green Thumb Industries Inc. (GTBIF)

• Investor Presentation

• Financial Results

🧾 Trulieve Cannabis Corp. (TCNNF)

• Investor Presentation

• Financial Results

🧾 Verano Holdings Corp. (VRNOF)

• Investor Presentation

• Financial Results

🧾 Cresco Labs Inc. (CRLBF)

• Investor Presentation

• Financial Results

👋 Highly Objective is a weekly Cannabis newsletter and podcast curated by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment.  The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party.  The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.

Source: MJBizDaily, updated as of February 6, 2023

Monthly Sales By State

California

Source: Department of Cannabis Control

2023 Sales: $4.42B (annualized based on 1H 2023), 2022 Sales: $4.90B, 2021 Sales: $5.3B, 2020 Sales: $4.26B

Sales & Price Per Unit

Active Licenses

Harvest Report

Michigan

Source: Cannabis Regulatory Agency

Adult-Use Product Sales

Plants

Active Licenses

Sales By Region

Colorado

Source: Department of Revenue

Sales Total

New Jersey

Source: Cannabis Regulatory Commission

Cannabis Sales Totals – 2023

👋 Highly Objective is a weekly Cannabis newsletter and podcast curated by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment.  The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party.  The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.

Casa Verde Capital. Casa Verde can participate in all stages of the financing cycle, with a focus on investing in scalable, capital-efficient businesses, led by world-class entrepreneurs. Given the natural overlap across the value chain, Casa Verde’s portfolio companies frequently work together to help solve operational issues and also create significant value for the businesses involved.

Website: Casa Verde Capital

Founded: 2015, Currently investing out of Fund II

Team: Karan Wadhera (Managing Partner), Carter Lewis (Vice President), Tony Graham (Vice President), David Colton (Associate)

Total AUM: $350.00M ($45.0M Fund I, 2018), ($115.0M Fund II, 2021), Dry Powder $60.98M (Pitchbook)

Stage: Seed, Early Stage

Sector: Consumer Products and Services, Software, Healthcare, Financial Services

Typical Check Size: $2.5M–$15.0M

Portfolio Companies: Prelude, Frontier Risk, Sanity Group, Kompliant, Canasative Group, TSUMo Snacks (out of business), Vangst, Dutchie, Pistil Data, Endless West, AceCann, Delix, Surfside, Bespoke Financial (out of business), LEUNE, Proper Labs, Greenbits (acquired by Dutchie), Miss Grass, Indose, Cargocast (out of business), Metrc, GreenTank, Oxford Canabise (LSE: OCTP), Leaflink, Cannalysis (exited), Trellis (exited), Merry Jane, FunkSac, Eaze, El Capital Advisors

Recent Investments:

• Prelude ($5.2M Seed, November 2023)

• Frontier Risk ($3.1M Seed, August 2023)

• Sanity Group ($37.5M Series B, September 2022)

Intrinsic Capital Partners is a private equity firm that focuses on life science and technology companies within the legal cannabinoid market. The firm employs institutional investment discipline and brings extensive operational experience to its investments.

• Website: Intrinsic Capital Partners

• Founded: 2016

• Team: Led by a team of experienced investors and operators with a background in institutional investment management

  • Ross Desmarais, Partner

  • Howard Goodwin, Partner

  • Cornelius Merlini, Partner

  • Jerry Stahlecker, Partner

• Total AUM: Not specified, but has a growth equity fund of $102 million​ (Home)

• Stage: Growth equity

• Sector: Life sciences, technology, and other sectors related to the legal cannabis and hemp industries

• Portfolio Companies: Includes a variety of businesses across life sciences and technology, addressing unmet needs in the cannabis industry​ (Home)

• Recent Investments:

  1. Biopharmaceutical Research Company – Drug Discovery (August 2023)

  2. Green Scientific Labs (Florida Operations) – Commercial Services (July 2023)

  3. ACT LAB – Laboratory Services (Healthcare) (June 2023)

  4. Rx Green Technologies – Agricultural Chemicals (May 2023)

  5. NextEvo Naturals – Pharmaceuticals (April 2023)

Merida Capital Holdings: Merida Capital Holdings is a private equity firm focused on the cannabis industry's growth drivers, including cultivation technologies, pharmaceutical formulations, and recreational cannabis products. They invest in companies that have transitioned from startups to revenue-generating businesses, aiming to accelerate growth in these entities. Founded in 2016 and headquartered in Rye, NY, Merida manages $252 million across five funds and co-investments, with a portfolio of over 75 companies. The firm employs 19 professionals across North America, targeting investments in companies operating within the legalized cannabis market across the U.S. and internationally​ (PitchBook)​ (MeridaCap).

Website: Merida Capital Holdings

Founded: 2016

Team: Led by Co-Founder and Managing Partner Mitchell Baruchowitz, with key personnel like President Daisy Mellet and CFO Florinda Koka​ (PitchBook).

Total AUM: $252 million across five funds and co-investments​ (MeridaCap).

Stage: Growth and expansion of well-established companies

Sector: Cannabis cultivation, pharmaceuticals, recreational cannabis, and supporting services

Portfolio Companies: Includes over 75 companies such as Vella Bioscience, Materia Medica Processing, and Happy Cabbage Analytics​ (PitchBook)

Latest Investments (as of August 15, 2024):

• Vella Bioscience: Manufacturer of an Innovation-led femtech company intended to revolutionize and elevate sexual wellness. The company creates clinically validated, patented products that address the unmet needs specific to women's bodies & their sexual fulfillment, enabling women to increase their arousal and ease of orgasm. The company raised an estimated $5.00 million of Seed-3 funding from Merida Capital Holdings and other undisclosed investors on April 17, 2023, putting the company's pre-money valuation at $40M.

• Materia Medica Processing: Producer of tetrahydrocannabinol-free cannabidiol extract formulation derived from the hemp plant Italy designed to develop branded retail products. The company's CBD is made through a manufacturing process that has high concentrations of CBD while eliminating all psychoactive compounds, allowing a high concentration of cannabidiol and maintaining the entire spectrum of terpenes, ensuring customers receive organic products as per their requirements. The company received EUR 2.2 million of development capital from Merida Capital Holdings and Kairos Partners on October 13, 2022.

• Happy Cabbage Analytics: Developer of a cannabis data analytics and insights platform intended to help clients refine communications, loyalty marketing and operations. The company's platform analyzes dispensary data to understand customer preferences and behavior and features customer targeting based on their buying habits, enabling clients to deliver customized and distinct marketing campaigns and promote their products. The company raised $600,000 of venture funding in the form of convertible promissory notes from undisclosed investors on February 27, 2024. Previously, the company raised $6.24 million of venture funding from Delta Emerald Ventures and other undisclosed investors on August 30, 2023. As a part of the transaction, $4.24 million was initially raised in the form of convertible and SAFE notes and subsequently converted to equity. The funds will be used to strengthen the company's lead in optimizing inventory and maximizing sell-through at retail.

• Miss Grass: Operator of a cannabis brand intended to make products accessible and eradicate the stigma relating to it. The company offers an education-led online magazine and signature products with a curated online marketplace that includes a premium cannabis shop, through the lens of luxury and self-care and also educates on the history, culture, and science of the plant-all in the spirit of conscious consumption, enabling customers to access the products and information about the social and wellness uses of cannabis. The company raised $5 million of Series A venture funding from Merida Capital Holdings, Treehouse Global Ventures and Receptive Capital on August 19, 2022. Pres10 Ventures, Listen Ventures, and The Helm also participated in the round.

• Foundry Works: Operator of a platform building the most impactful brands in cannabis intended for consumer wellbeing. The company's portfolio of brands is powered by innovation in its genetic, cultivation, manufacturing and technology programs. The company received an undisclosed amount of development capital from Merida Capital Holdings approximately in August 2022.

Entourage Effect Capital is a private equity and venture capital firm based in New York, focusing on investments in the cannabis and hemp industries. The firm combines financial acumen with industry expertise to support innovative companies in the legal cannabis market.

Website: Entourage Effect Capital

Founded: 2016

Team: Led by a team of professionals with extensive experience in finance and the cannabis sector.

• Matthew Hawkins (Founder & Managing Partner)

• Roman Stahl (Partner)

• Tiffany Liff (Partner)

• Dov Szapiro (Partner)

• Andrew Sturner (Partner)

Total AUM: Not specified

Stage: Growth and early-stage venture capital

Sector: Cannabis, hemp, and related industries

Portfolio Companies: Includes a range of businesses within the cannabis and hemp sectors, such as cultivation, technology, and consumer products.

Recent Investments:

Tuatara Capital is a private equity and venture capital firm based in New York, specializing in investments within the cannabis and hemp industries. The firm focuses on early-stage and growth-stage investments in companies that are driving innovation in the legal cannabis market.

Website: Tuatara Capital

Founded: 2014

Team: Led by a team of experienced professionals with backgrounds in finance, cannabis, and business development.

• Al Foreman, Partner

• Marc Riiska, Partner

• Sergey Sherman, Managing Director

Total AUM: Not specified

Stage: Early and growth-stage venture capital

Sector: Cannabis, hemp, and related industries

Portfolio Companies:

• Long Play develops premium nationally scalable brands in partnership with artists. The Company has exclusive rights to use the Willie Nelson brand and owns various product lines, including Willie’s Reserve, Willie’s Remedy, and Willie’s Rescue

• GreenDot Labs is an ultra-premium brand of cannabis products for the medical-use and social consumption markets

• Slang Worldwide is leading global consumer packaged goods company with a robust portfolio of renowned cannabis brands. The Company is listed on the Canadian Securities Exchange under the ticker symbol SLNG and on the Frankfurt Stock Exchange under the trading symbol 84S

• Weedmaps (through acquisition of Enlighten) is a leading retail technology company offering a suite of retail technologies for dispensaries including point-of-sale kiosks, customer royalty platforms, digital smart menus, sales data analytics and business intelligence

Recent Investments:

JW Asset Management is an investment management firm based in New York, specializing in the cannabis sector. The firm focuses on providing capital to high-growth companies in the legal cannabis and hemp markets, leveraging deep industry expertise and a strategic approach to drive value.

Website: JW Asset Management

Founded: 2013

Team: Composed of experienced investment professionals with a focus on the cannabis industry.

• Jason Wild, Founder & Chief Investment Officer

• Jason Klarreich, EVP, CFO

• David Pykon, VP Trading & Operations

• Sam Goldman, Analyst

Total AUM: Not specified

Stage: Growth and early-stage venture capital

Sector: Cannabis, hemp, and related industries

Portfolio Companies: Includes a variety of companies within the cannabis sector, spanning cultivation, production, and retail.

Recent Investments:

Navy Capital is a private equity and venture capital firm based in New York, focused on investments in the cannabis industry. The firm provides growth capital to companies in the legal cannabis and hemp markets, with a focus on scalable and innovative businesses.

Website: Navy Capital

Founded: 2014

Team: Led by a team of seasoned investment professionals with deep expertise in the cannabis sector.

• Sean Stiefel, Founder & Managing Partner)

• John Kaden, Executive Chairman

• Chetan Gulati, Head of Research

• Dennis Deng, Analyst

• Mike Song, Analyst

Total AUM: Not specified

Stage: Growth and early-stage venture capital

Sector: Cannabis, hemp, and related industries

Portfolio Companies: Includes a range of companies across the cannabis industry, including cultivation, technology, and consumer products.

Recent Investments: