Another MSO, Curaleaf (CURLF), has a record-breaking quarter
For the second quarter, Curaleaf posted record total revenue of $117.5M vs FactSet Consensus $111M, a 142% YoY increase and a 22% QoQ increase. Adjusted EBITDA also hit a record high at $28.0M vs FactSet Consensus $20.0M, growing 534% YoY and 40% QoQ.
Retail revenue grew 112% YoY to $66.3M – the growth was primarily driven due to new store openings in FL, MA, and NY, the realized impact of the Select acquisition, and the acquisition of dispensaries in AZ and NV. Wholesale revenue grew 422% YoY to $33.3M, with the increase mostly due to the Select acquisition as well. Net loss was still negative at $2.0M, however, it’s an improvement from Q2 2019’s net loss of $24.5M. Gross margin on cannabis sales expanded to 42.9%, a 250 bps YoY increase. Despite the significant topline growth, OpEx sequentially declined by 5.6% to $59.5M. Curaleaf’s cash position fell by ~30% sequentially to $122.8M in Q2, in line with the company’s expansion efforts. As of Q2’s end, the company had $283.3M of outstanding debt net of unamortized debt discounts. Management expects capital expenditures and acquisitions costs to rise in Q3 2020. After the quarter’s end, Curaleaf closed the acquisition of Grassroots and expanded their presence into six new states, bringing their total US footprint to 23 states.
By the end of 2020, the company expects to add more than 250,000 sq. ft. of new capacity in key states such as AZ, FL, and MA and almost double flower canopy square footage compared to the year’s start (excl. capacity acquired through Grassroots). In early 2021, Curaleaf will bring a 110,000 sq. ft. facility online in NJ in anticipation of adult-use.
Trump weighs in on federal legalization with concerns for increased Democratic voter turnout
Yesterday, at a campaign rally in Oshkosh, WI, Trump made clear where he stands on marijuana legalization: “the next time you run please don’t put marijuana on the ballot at the same time you’re running, you brought out like a million people that nobody ever knew were coming out.” His remark on federal legalization was directed at former Wisconsin Gov. Scott Walker (R), essentially blaming his 2018 election loss to current Gov. Tony Evers (D) on ostensibly increased voter turnout due to marijuana legalization initiatives on the ballot.
Trump’s opposition to federal legalization does not appear to stem from public safety or health concerns – rather, he seems more concerned with the secondary effect of the issue increasing Democratic turnout and thereby compromising his electoral chances.
Advanced Flower Capital announces first closing of cannabis mortgage REIT
AFC Gamma Inc., a Florida-based, commercial-mortgage REIT, announced that it had completed a first close of its $200M investment vehicle, having raised approximately $80M of equity from over 20 large family offices. Additionally, AFC Gamma has a credit line of up to $40M, providing the REIT with approximately $120 million of capacity to lend to cannabis operators.
The company has already provided debt financing for five companies, including dispensaries, cultivators, processors, and combined operations. To date, AFC Gamma has funded about $50 million in six transactions across five borrowers and has committed approximately an additional $30 million, to its existing borrowers and to two new loan originations closing shortly.
AFC Gamma joins IIPR in filling the capital gap that cannabis companies face due to federal prohibition. AFC Gamma’s significant capital raise comes on the heels of IIPR announcing that it had raised roughly $225M in a stock offering in June.
