💪Strong MSO Earnings
GTI +31% rev. Q/Q, Columbia Care +64% rev. Q/Q. Curaleaf / Trulieve / Cresco Labs report this week
A reminder that sometimes these emails ends up in “promotions” if you’re on gmail, so make sure to add to the address book.
After taking a closer look Canadian LPs earnings, I also paid close attention to earnings for GTI and Columbia Care, and think we’re reaching a point where if investors can get much more comfortable around Cannabis stocks. GTI had a very strong quarter — $157M in revenue (54% GM, 37% growth Q/Q) and $53.9M in EBITDA (33.9% margin). They look to be closing in on Curaleaf’s market leading position (based on market cap.) To round out the week, MSOs also received positive news in West Virginia, with Trulieve, Verano and Columbia Care each receiving one of 10 licenses awarded.
☝️I’m looking to host a zoom (tentatively Thursday afternoon) to bring some newsletter readers together to talk shop (Cannabis stocks for the first one), if you’re interested in joining, just fill out this google form.
San Francisco cannabis market expands slowly but surely via social equity program Over the past few years, there’s been a slow but steady march to significantly expand the industry, potentially by 100+ new licensed businesses. 11 new social equity permits been issued to date by the San Francisco Office of Cannabis. And the agency has a long way to go in processing applications. The office, which has received 380 cannabis business applications (139 applications had been processed, and 24 were in the final phase) as of October, will be issuing permits on a rolling basis for the eight different license types. It’s unclear how many of the 380 applications will make it to the finish line, particularly among retailers. The San Francisco Board of Supervisors is weighing a proposal – introduced in February – to cease accepting new retail marijuana license applications. The city also already limits corporate interests in retail operations to a maximum of 4.
IL licenses bogged down Even as Springfield's third recreational marijuana dispensary opened this month, the state's recreational cannabis program isn't panning out as planned. There are problems with the program that state officials boasted would be a national model when the legislature last year legalized recreational marijuana. No new licenses have been granted for growing Cannabis since recreational sales began with product supplied by growers first licensed under the state's medical marijuana program. No dispensaries outside those affiliated with retailers licensed to sell medical Cannabis have been permitted to sell recreational marijuana. Under the legalization statute, the state was supposed to have issued new licenses for retailers no later than May 1, the deadline for granting new growing licenses was July 1.
A lottery to determine the winners of the next wave of 75 licenses has been delayed indefinitely after a string of lawsuits were filed in the wake of the announcement that just 21 groups qualified in September. Though Gov. J.B. Pritzker later created a process to give the more than 900 losing applicants another shot, that plan has also prompted legal action from three of the finalists. State Rep. La Shawn Ford, D-Chicago, is now pushing a legislative fix that would add 75 additional dispensary licenses, meaning there could eventually be a total of 150 new licenses.
Headset: Cannabis Market — October Review for CA.
$342.3M in Sales (16% Y/Y growth)
AOV: $65, 5.2M purchases
25% market share for top 10 brands (brand concentration)
Lawmakers can’t agree on best way to set up NJ’s legal Cannabis industry. The bill that would create a legal marijuana industry was abruptly pulled from scheduled hearings in Trenton on Thursday. Voters approved an amendment to the state Constitution to legalize recreation marijuana for adults, but lawmakers and the Governor are the ones who will have to work out the details. “If you price yourselves too high here, between the sales tax and local taxes and excise taxes, you're going to price yourself out of the market,” says Democratic state Sen. Paul Sarlo. “And the black market will continue to exist. That's my concern here quite frankly.” Negotiations are ongoing between the state's three top Democratic leaders over what the tax rate for legal cannabis should be. The amendment voters approved takes effect Jan. 1, but it may still be illegal to buy and sell weed until the new cannabis economy is set up. A Senate panel passed a separate bill that would decriminalize marijuana possession.
John Fetterman Can Save the Democratic Party — if the Democrats Let Him. [My favorite Politician right now, worth watching / reading the interview] Pennsylvania’s lieutenant governor on why Democrats must embrace legal weed, what he thinks about fracking, and why Trump has a clear lane to running in 2024. [Here’s my favorite part of the interview] The big winner in November was legal weed. “I say that when you’re to the right of South Dakota on anything, you really need some gut check time. That one blew me away, South Dakota. Their governor is popular, and she railed against it, and they still passed it. It’s such a unifying thing. And people don’t, I guess, intellectualize how strong the libertarian streak is in the Republican Party.”
Verano Holdings acquires AltMed, Creating One of the Largest U.S. Private Cannabis Companies. After terminating it’s deal with Harvest earlier this year, Verano has found a new dance partner in AltMed and is instead looking to compete as an MSO. Verano and AltMed had an initial conversation by phone four or months ago, then reconnected about two months ago. Establishes Verano as one of the three largest MSOs in the United States based on 2021 internal projections compared to current FactSet 2021 consensus estimates for revenue (currently $800M+ for top 3) and EBITDA. Creates a scale market leader well positioned for growth and accelerates expansion in limited license, high-growth markets – specifically Florida (AltMed has 10% market share in FL) and Arizona. Combined, the companies will operate in 14 states, with 8 cultivation facilities and 44 active retail locations. ~32 additional retail locations are planned. Verano has ~1,000 employees, while AltMed has ~700.
Hydrofarm files for $100M NASDAQ IPO. Hydrofarm operates across Canada and the U.S., serving 2000+ wholesale customers with 2 Canadian and 6 U.S. distribution centers. It sells a range of products that include lighting, cultivation equipment, grow media, nutrients and supplies. The vast majority of its customers are specialty hydroponic retailers. In the first three quarters of 2020, the company increased its revenue 40% to $254.8M (18.7% GM) compared to the first three quarters of 2019, with ~83% of revenue generated in the U.S. The company reported an operating profit of $10.7M. The company is led by CEO Bill Toler, who joined in 2019 after retiring as CEO of Hostess Brands in 2018.
Advanced Flower Capital — $22M Secured Credit Facility to Organic Remedies fund expansion within PA. The credit facility is designed to provide capital to complete the build out of Organic Remedies' ~240,000 sq ft cultivation and processing facility, as well as build out three additional dispensaries, under its Clinical Registrant (CR) medical marijuana license.
Revenue increased 31.3% Q/Q and 131.1% Y/Y to $157.1M
Adjusted EBITDA increased 50.2% to $53.2M (33.9% of revenue) Q/Q driven by continued operational scale and increased operating leverage
Net income of $9.6M ($0.04 EPS)
Revenue: $54M (39% GM), up 64% Q/Q and 145% Y/Y
EBITDA: $4M+, up $9M Q/Q and $16M Y/Y
Cash: $41.1M, down $1.2M from Q/Q
2020 Outlook: $234M - $265M (40%+ GM)
Completed $20.4M Add-on Debt Financing at 170 bps Discount to Prior Offering in Q2 from $140B+ AUM fund
Revenue: $61.6M (46.6% GM), up 86Y/Y and 11% Q/Q
EBITDA: $10.5M, up from $4.1M Q/Q
2020 Revenue target increased to $225M+, up from $215-220M
Cash: $62.8M, Debt: $293.7M, Contingent consideration: $13.6M
As of September 30, 2020, Harvest owned, operated, or managed 37 retail locations in seven states, including 15 open dispensaries in Arizona. Harvest owned and operated dispensaries exclude retail locations serviced through Interurban.
Revenue: $14.1M (40% Y/Y & 43% Q/Q). Owned brands grew from 73% to 84% Q/Q.
EBITDA: $2.3M up from ($3.9M) Q/Q.
Net income: $2.4M, compared to a net loss of ($4.8M) Q/Q
GM: 41.5%, compared to negative margin of (9%) in Q/Q
Reflects strategic product mix improvements as increased flower volumes were realized and the continuing impact from cost reduction efforts
Indus Board Member Brian Shure joining Company as CFO. Shure was most recently President at Ambrose Capital Partners. He also previously served as CFO of MedData and CFO at Cardon Outreach.
🏬New Store Openings / New Product Launches
Gage Cannabis — Lansing, MI. Gage operates provisioning centers in Adrian, Ferndale, Lansing and Traverse City, as well as the Cookies store in Detroit.
💻Hiring | 🔍Looking
Ulta to open shop-in-shop inside Target stores. Each shop will be ~1,000 sq ft and staffed with Target employees trained by Ulta, 100+ s/s are planned.
DoorDash releases filing to go public. Last valued at $16B, and has raised $2.5B. Revenue of $1.9B with ($149M) in losses through September. The company said it has 1M Dashers (delivery workers) and 18M+ customers. It also had 5M+ customers on its $9.99/month DashPass service as of 9/30. DoorDash has the lead in U.S. market share, with 49% of meal delivery sales in September compared with Uber’s 22% and GrubHub’s 20%.
VF acquires Supreme for $2.1B. The Supreme® brand is expected to contribute at least $500M of revenue and $0.20 of adjusted EPS in fiscal 2022.