Curaleaf Holdings Q2 Preview: Results Could Be Sector Moving

Curaleaf Holdings Inc. (CSE:CURA), one of the Canada-listed U.S. cannabis stocks, will report Q2/19 financial results on Tuesday, August 27, 2019, after markets close

SmallCapPower | August 27, 2019: Curaleaf Holdings Inc. (CSE:CURA) (OTCQX:CURLF), one of the Canada-listed U.S. marijuana stocks and multi-state operators (MSOs), will report Q2/19 financial results on Tuesday, August 27, 2019, after markets close. Analysts are expecting Curaleaf to report revenue of US$50.1M, positive EBITDA of US$5.1M, and a net loss US$6.8M.

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Revenue expected to grow 43.9% QoQ. During the quarter (April 1, 2019 to June 31, 2019), Curaleaf opened a new dispensary in Orange Park, Florida and acquired the Emerald dispensary in Phoenix, Arizona. The Company also increased its cultivation and processing capacity in Ohio to 15,000 sq. ft and 7,500 sq. ft. The facility is expected to be licensed by the second half of 2019. As of August 2019, Curaleaf operates in 12 states with 48 dispensaries (without Grassroots and Select), 13 cultivation sites, and 12 processing sites. The two additional dispensaries and increased cultivation and processing are expected to add to Curaleaf’s topline, with consensus estimates indicating US$50.1M in revenue.

M&A pipeline in full effect. On July 17, 2019, Curaleaf announced it would acquire Grassroots, the largest private MSO in the United States. Grassroots has 61 dispensary licenses (20 operational in 5 states), 8 cultivation licenses (5 operational in 5 states), and 7 processing licenses (5 operational in 5 states). Grassroots has operations in Illinois, Pennsylvania, Ohio, Michigan, North Dakota, and Oklahoma. Of note, Illinois, Pennsylvania, and Michigan are key states where Curaleaf has secured exposure. Grassroots had revenue of $28M in 2018 and $12M in Q1/2019, which implies a 2019E run-rate of $48M. This follows an announcement from May 1, 2019, where Curaleaf announced its plan to acquire Select Brands, a leading U.S. West Coast MSO. The transaction is expected to add ~300,000 sq. ft of cultivation space and 10 dispensaries (operational and pending) across Oregon, California, Nevada, and Arizona. The combined entity, with the Grassroots and Select acquisitions, will operate in 19 states, with 68 operational dispensaries, 26 processing and 20 cultivation facilities and licenses to open 131 dispensaries across the U.S.

Key takeaways. Curaleaf is making moves and plans to be the MSO with the largest footprint in key states on the East and West Coast. Of note, is Curaleaf’s exposure to Illinois through the Grassroots acquisition. Illinois is going to legalize adult-use cannabis consumption in 2020 and is the sixth-largest state by population in the United States. The state is expected to have an adult-use market of US$2.5B once the market matures. With the Grassroots acquisition, Curaleaf will have a Top 3 retail market share in Illinois. Curaleaf is focused on creating a robust presence in the United States through organic growth and strategic acquisitions.

Shares of Curaleaf closed Monday’s trading session down 1.1% to C$8.45. Curaleaf stock trades at a market cap of C$4.1B.

  • Market Cap: C$4.1B
  • YTD Return: 28.2%
  • Q2/19 Revenues Estimate: US$50.1M (5 estimates)
  • Q2/19 EBITDA Estimate: US$5.1M (3 estimates)
  • Q2/19 Net Loss Estimate: US$6.8M (3 estimates)
  • Earnings Date: Tuesday, August 27, 2019, after markets close

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