Cresco Labs maxes out in Illinois with 10th dispensary (CRLBF)
Cresco announced the approval and location of its tenth Illinois dispensary in Naperville under its national retail brand Sunnyside. The adult-use dispensary is located in one of the busiest shopping areas in Naperville, the 3rd largest city in Illinois, with approximately 150,000 residents. Upon final approval from the State of Illinois for the Naperville location, Cresco will operate the maximum allowed ten dispensaries in Illinois. August sales in the state for both medical-use and adult-use cannabis combined were approximately $95.5M, equating to roughly $1.15B in sales on an annualized basis and $599M YTD through August.
While still FCF negative, the company had a strong Q2, posting the best QoQ and YoY numbers for topline growth out of the top four public MSOs. The company has been EBITDA positive for the past five quarters, and Adj. EBITDA grew 416% sequentially in Q2. With their expanding presence in core markets experiencing high growth (Illinois and Pennsylvania), along with their significant brand building and wholesale strategy, we are bullish on their longer-term prospects.
Cresco Labs is a Hedgeye Cannabis Best Idea Long.
In LA county, cannabis delivery expands to 67 cities.
In a glimpse of what may soon become the norm across legalized markets, private company Dyrect guarantees its customers free delivery of cannabis products within 30 minutes or less. The company works with licensed local dispensaries to deliver to customers in California who meet the state's requirements to purchase adult-use marijuana. Orders are placed on-demand on the company's website, by phone, or by text. Dyrect, which launched at the beginning of this month, has expanded from 3 to 67 cities within three weeks in Los Angeles county, and the company plans on expanding to cities in Orange County by October.
Aurora reports Q4 and fiscal 2020 results (ACB)
After the close yesterday, Aurora reported its Q4 FY20 result, which was in line with its preliminary guidance released earlier this month, but the company faces significant issues. The company has guided to (A) EBITDA positive by 2Q21, but that looks to be nearly impossible. ACB has always focused on growing the flower, which is the least desirable aspect of the cannabis industry. The price for the flower is rapidly declining, requiring the company to shift its focus to vapes, pre-rolls, and the premium side of the flower market. If successful, this transition could take a year, and there is no guarantee the company will be successful. The likelihood the company can't make the change is more significant.
Q4 2020 total net revenue was CA$72.1M vs. versus FactSet Consensus of CA$73.2 million, a 5% QoQ decrease. Cannabis net revenue was CA$67.5 million in Q4, a 3% QoQ decrease. The company reported a net loss of CA$1.8B, which includes a CA$1.6B write-down. This marks the most significant quarterly loss in the history of the Canadian legal cannabis industry. Their fiscal 2020 loss was a whopping CA$3.3B loss. To put this number into perspective, the equity market capitalization of the company is $870 million.
Recently appointed CEO Miguel Martin said, "However, Aurora has slipped from its top position in Canadian consumer, a market that continues to support material growth and opportunity. My focus is, therefore, to re-position the Canadian consumer business immediately. We look to expand beyond the value flower segment, leverage our capabilities in science and product innovation, and put our effort on a finite number of emerging growth formats."
Their fiscal Q4 results also highlight the price compression that Canadian operators are experiencing on their top line. The total volume of dried consumer cannabis sold increased by 36% but was offset by a 30% decrease in the average net selling price per gram of consumer cannabis. Aurora's value segment brand, Daily Special, accounted for a more significant percentage of consumer cannabis net revenue, at 62% of flower revenue compared to 35% in the prior quarter.
Net revenue is expected to continue its sequential decline in Q2 FY21, with management guiding between CA$60M – CA$64M. The company is hoping to report positive Adj. EBITDA in Q2 FY21.
The stock traded up to 15.8% throughout the day but plummeted 18% after hours.
