You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015.
Two of the largest MSOs kicked off earnings season this week, with GTI meeting Q4 revenue expectations but missing on adjusted EBITDA and Curaleaf following up Thursday with a slight miss on revenue but better than expected adjusted EBITDA.
For GTI, the call provided the company with the opportunity to discuss the sudden decline in its gross margin in Q4 from 55.4% to 52.8%.
On its Q3 call, after the company experienced a 5% revenue miss but fell short more substantially of the adjusted EBITDA expectations, Executive Chairman Boris Jordan had pointed to a flood of illicit market product hurting its business in New York and New Jersey.
One major point of differentiation for this call was that the company characterized its adjusted EBITDA margin as being burdened by 7% due to investments in developing markets, like Europe, which alone weighed on overall margins by 1%.
Jordan shared his expectation that New Jersey will launch adult-use on May 1st, but he anticipates that the roll out will be slow due to there being so few stores open in the state.
An interesting point that Jordan mentioned in the Q&A was that after a tough January, business began to pick up in mid-February and into March, something that we have seen in the data as well.
He continued to guide to a long-term adjusted EBITDA margin of 30% as he criticized Illinois for failing to issue the social equity licenses and expand the number of stores.
CFO Georgiadis suggested that the pressure on pricing was greatest in Pennsylvania and Nevada, noting that flower in the low to mid-range of quality is where it has been most intense.
Finally, Verano Holdings hasn’t scheduled a date and is due to report by the end of April.
We expect Trulieve and Verano to share 2022 guidance, while we aren’t sure that Cresco Labs will do so.
As we suggested two weeks ago, we believe that investors should be and likely are prepared for soft guidance.
Body and Mind has expanded within its existing footprint of Nevada, California, Arkansas and Ohio and has recently commenced operations in Michigan.
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