Last night both AYRWF and FFNTF posted strong results and remained top of the Hedgeye Best Idea list. We will have a detailed note out on each company shortly.
Ayr Wellness reports 2Q21 (A)EBITDA $27.4M vs. FS $27.6M and 2Q21 Revenue of $91.3M vs. FS $90.7M. In addition, they gave guidance of 3Q21 Guidance of Revenue approximately $100M vs. FS $108.8M and (A) EBITDA on a US GAAP basis is expected to be in line with 2Q21 vs. FS $35.8M. The company also updates Guidance 2022 of Revenue $800M vs. prior guidance $725M and FS $707.3M and Reaffirms adjusted EBITDA $300 vs. FS $290.0M.
4Front Ventures (FFNTF) reports 2Q21 EPS ($0.01) vs year-ago $0.00. Also, reports 2Q21 systemwide revenue $34.4 vs FactSet $36.2M and (A)EBITDA $7.5M vs FS $9.8M.
FY Guidance (Dec 2021): Revenue $170-180M vs FS $183.1M (A)EBITDA $40-50M vs FS $55.1M
Kovler Not Worried
Almost all the Canadian LPs have expressed their ambitions to enter the more profitable US market. Like us, Ben Kovler believes that it is unlikely to happen soon and, if it does, will not have a significant impact on the market. Canadian LPs are not legally allowed to acquire shares of US cannabis businesses since they are federally illegal. Many companies have purchased options to buy businesses when there is legalization or have bought non-cannabis businesses to convert them in the future. Although this is the case, many Canadian CEOs have been expressing that they have already entered the US market, which for the most part is illegal at the moment."That's just dissuading, misleading, and lying to investors and the media about what they can do," Kovler said, referring to Canadian cannabis companies that have publicly telegraphed their ambitions to enter the US. "Because they're not US operators. They don't own it." Another question we've asked is, why would these US companies want to sell to a Canadian LP when there are juggernauts in the US who are well funded and can offer the same if not better expertise and management. The US cannabis market is where all the players want to be, and as Kovler said, there is a 'moat,' and the American consumer is on the inside.
VFF Entry into the US
Village Farms who already has operations in Texas from their tomato business will acquire 100% of Balanced Health Botanicals. Balanced Health Botanicals is a profitable CBD company. The deal was valued at $75 Million. $30 Million in cash and the remaining $45 Million in VFF stock. The company expects 2022 sales to be $30 Million and adjusted EBITDA to be $4.5 Million. The company operates its online sales channel through www.theCBDDistillery.com. It is a top-five US CBD brand with more than 30,000 monthly orders. VFF expects this acquisition to give them channels to distribute cannabis to customers when legalization is passed. However, until then, whenever legalization may come, it is just a CBD company. Taking that one step further, the CEO CRON recently "we're not happy with the results in the U.S. CBD market," suggesting they are many challenges, making the VFF bot a layup.
Veterans Push for Medical in South
“I’ve lost more men to suicide since we went to Afghanistan in ’01 than I have in combat,” said Roth, a war veteran who said he doesn’t use cannabis himself but wants others to have the option. “It’s just unacceptable for these guys to go overseas and win the battle and come home and lose the battle to themselves.” Roth is among several who formed an advocacy group called NC families for Medical Cannabis. The group testified before the legislature and also visited lawmakers individually. North Carolina is home to eight military bases and has one of the largest veteran populations in the country. The veterans hope their voices will push a crucial lever to sway some Republican lawmakers to get the medical marijuana bill through. It is not just North Carolina, though. All states in America have veterans who are advocating for medical marijuana laws. Still, 14 states in America have no form of legislature passed. These mostly republican veterans are hoping their voice can be heard by the conservative lawmakers blocking these bills.
