Earnings season is in full swing with a host of public U.S. cannabis companies reporting quarterly revenues well above their year-ago performance.
The chart above offers a glance at the 10 leading U.S. firms by Q4 revenue, which includes a mix of:
- Multistate operators (MSOs), including Cresco Labs, Curaleaf Holdings, Green Thumb Industries, Harvest Health & Recreation, MedMen and Trulieve.
- CBD producers Charlotte’s Web and CV Sciences.
- Ancillary cannabis firm KushCo Holdings, a maker and supplier of cannabis packaging, supplies and accessories.
It’s a leaderboard well worth watching as these firms embark on massive expansions in 2019 that will require serious spending and expert execution to gain market share and create a dominant national footprint.
Path to Profitability
As M&A activity continues to ramp up, analysts and investors are closely tracking capital expenses, which vary widely across multistate operators in various stages of accelerated growth.
While anticipated, intense capital outlays continue to be a drag on earnings and fuel losses.
Trulieve and Cresco maintain their positions as the most profitable MSOs, posting full-year net income of $43 million and $3.9 million, respectively.
Comparatively:
- Los Angeles-based MedMen reported revenue of $29.9 million and a net loss of $64.6 million for the quarter ended Dec. 29.
- Green Thumb Industries, a Chicago-based firm with operations in 12 states, reported a Q4 loss of $20.8 million on revenue of $3.1 million.
- Harvest of Phoenix reported a net loss for the quarter of $71.1 million—which included a noncash fair-value charge of $50.7 million tied to convertible debt that was converted into equity during the year.
- Wakefield, Massachusetts-based Curaleaf, which operates in 12 states, posted Q4 revenue of $32 million and a quarterly loss of $16.5 million.
Those firms that can keep tight rein on cap ex while investing in organic and acquisitive growth will be able to chart the straightest and likely fastest path to profitability.
A Glance at Guidance: Poised to Surpass Cannabis Giant Canopy Growth?
For those cannabis firms offering guidance on their full-year revenues, some enormous numbers are hitting the charts—fueled in large part by recent activity and their M&A pipelines.
Here’s a quick overview:
- Curaleaf is forecasting a $400 million revenue figure for 2019, based on its plans to open 67 dispensaries in 12 states by the end of the year.
- Harvest Health & Recreation boosted its 2019 revenue guidance to $350 million-$400 million. The estimate is a big leap from its previous prediction of $223 million and driven largely by its recent acquisitions of Verano Holdings, CannaPharmacy and Devine Holdings. While the company has just 13 dispensaries currently open, it’s on pace to have more than 120 stores in operation by the end of 2020. While the CannaPharmacy and Devine deals have not closed yet, Harvest is including revenues (specific amounts not disclosed) in its guidance.
- Trulieve reaffirmed its fiscal 2019 guidance of $214 million in revenue and gross profit of $145 million—which would be a 68% spike year-over-year. That forecast doesn’t factor in sales from recently announced acquisitions in California and Massachusetts or the anticipated opening of 14 new recreational dispensaries in Florida. Trulieve has said it expects to update the outlook as the company gains more insight on the timing of those new additions.
Across the board, these estimates all exceed the 2019 revenue forecast of $184.8 million for Canadian cannabis giant Canopy Growth—which boasts a nearly $15 billion market cap.
Whether these forecasts pan out, only time will tell. But the projections underscore just how quickly U.S. operators could leap frog in sales—and value—past their Canadian cohorts that continue trade at bubble-like multiples.
As the year unfolds, we’ll continue to track this leaderboard, highlighting the key metrics that investors should consider as industry growth accelerates.
