Marijuana multistate operators see sluggish revenue, losses in first quarter

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Most of the largest U.S. marijuana multistate operators experienced revenue declines in the first quarter of 2022 versus the previous three months, reflecting seasonal factors, declining cannabis prices and inflationary pressures that could be curbing consumer spending.

Of the 12 largest MSOs, only Illinois-based Green Thumb Industries posted a net profit for the first three months of 2022.

Florida-headquartered Trulieve Cannabis, meanwhile, inched ahead of Curaleaf Holdings for the top spot in revenue.

But, based on revenue guidance, Massachusetts-based Curaleaf likely will reclaim the top position, perhaps as soon as second-quarter results are announced.

In a metric closely watched by investment analysts, half of the 16 largest marijuana MSOs beat EBITDA (earnings before interest, tax, depreciation and amortization) estimates, while half missed their projections – about what one would expect in a given quarter, according to Frank Colombo, director of data analytics at New York-based Viridian Capital Advisors.

“What is striking is how little correlation there is between missing EBITDA estimates and how the stock did,” Colombo told MJBizDaily via email.

In fact, the company that outperformed EBITDA estimates the most on a percentage basis – Nevada-based Planet 13 Holdings – had the worst relative stock performance, according to Viridian.

“Meanwhile, the company that missed estimates by the most was TerrAscend (with offices in New York and Toronto), but the stock slightly outperformed the market,” Colombo wrote.

“Our conclusion is basically that investors shrugged off the quarter’s numbers.”

Marijuana stock prices have been battered in the past 18 months, largely because of the lack of progress by Congress in reforming the nation’s marijuana laws.

Colombo wrote that cannabis stock investors also are now considering the following factors:

  • How well is a company positioned to take advantage of the emerging recreational marijuana markets in New Jersey and New York?
  • Is a company a potential takeover candidate?
  • How is the company’s liquidity situation? Will it need to raise money in what has become an unfavorable economic market to do so?

In addition, Colombo wrote, “it will be interesting to see if inflation and/or a weakening economy start to have an impact on margins.”

A new No. 1

Trulieve Cannabis captured the top spot in revenue on the strength of a 4% quarter-over-quarter increase, while Curaleaf’s revenues slipped 2% for the same period.

MSOs typically enjoy a strong bump in sales during the December holiday period, followed by weaker sales after the first of the year.

In 2022, marijuana companies also are facing such revenue-squeezing factors as declining prices.

Yet, the larger economy is experiencing inflation that affects the amount of money consumers have to spend on discretionary products such as cannabis.

Trulieve is the market leader in Florida’s billion-dollar-plus medical marijuana industry and has market-leading retail positions in Arizona and Pennsylvania, according to company regulatory filings.

But Trulieve doesn’t have a presence at this point in New York or New Jersey and is seeing more competition in Florida, where it once commanded roughly half the market share.

Trulieve still has nearly 50% of retail flower sales in Florida, according to the state’s May 27 weekly update, but its share of sales of other THC products has fallen to roughly 40%.

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Pablo Zuanic, investment analyst at New York-based financial services firm Cantor Fitzgerald, estimated in a recent research note that Arizona, Florida and Pennsylvania combined account for roughly 94% of Trulieve’s sales in the first quarter. Of those three, only Arizona has an adult-use market.

Zuanic noted that Trulieve management reaffirmed full-year sales guidance at $1.3 billion to $1.4 billion, but he said the high end of that estimate “may be a stretch in the current environment,” especially if medical marijuana sales in Pennsylvania are adversely affected by residents crossing the border to buy recreational products in New Jersey.

He also noted that there’s “no clear signs its core markets (such as Pennsylvania) will go rec in 2022 or even 2023.”

But Zuanic does believe that Trulieve is “likely to remain opportunistic” in terms of potential mergers and acquisitions to add depth and/or breadth to its footprint.

Curaleaf, meanwhile, is well-positioned to take advantage of new East Coast recreational marijuana markets, with operations in Connecticut, New Jersey and New York.

Executive Chair Boris Jordan told MarketWatch last month that despite a tough first quarter, the company still is on track to generate $1.4 billion to $1.5 billion in revenue this year.

In a news release, Jordan said the company experienced strong month-over-month sales in March.

Curaleaf likely will reclaim the top-revenue spot from Trulieve, according to its revenue guidance and Jordan’s comments.

The company is expected to benefit from the recent launch of the New Jersey recreational marijuana market, a growing share of Florida’s MMJ market as well as cultivation and retail expansion in other key states.

Vivien Azer, an investment analyst with New York-based investment banking firm Cowen, had a similar take on Curaleaf after it posted its first-quarter results last month.

“Despite deflationary/consumer headwinds, margins (and revenues) should expand sequentially from here,” she wrote in a note to investors.

In this case, deflation refers to marijuana price reductions.

Eye on Cresco

Illinois-headquartered Cresco Labs is another company that investment analysts are watching closely, because it is in the process of acquiring New York-based Columbia Care for roughly $2 billion.

That acquisition likely will catapult Cresco into the company of Trulieve and Curaleaf, depending on how many assets are sold as part of the Columbia Care transaction.

Columbia Care’s 12% quarter-over-quarter revenue decline was the most among the 12 largest MSO operators.

Cresco has issued guidance for “muted growth” for the second quarter of this year, according to a recent investment note by Cantor Fitzgerald’s Zuanic.

But if and when it closes on the Columbia Care transaction, Cresco will be in eight new states, including New Jersey and Virginia.

The company also is expected to have the top or No. 2 spot in the Colorado, Illinois, Massachusetts, Pennsylvania and Virginia markets.

In addition, Cresco will have a strong foothold in New York.

But Zuanic also warned of possible investment risks: the integration of the Columbia Care acquisition, subpar growth trends and stiffer competition in key states such as Illinois and Pennsylvania.

Jeff Smith can be reached at