Key Takeaways; Cannabis Sector
- Flora Growth acquired JustCBD for $33 million in cash and stock.
- MedMen will exit Florida medical cannabis market with $83 million sale of assets & license to Green Sentry Holdings.
- Green Thumb beat estimates as Q4 revenue increased 4% sequentially to $244 million.
- Cronos Group Q4 revenue jumped 26% sequentially to $25.8 million.
- Tilray to buy $211 million of rival HEXO’s debt and form strategic partnership.
- Curaleaf reported Q4 and fiscal year 2021 results; revenue increased to $320 million.
- Village Farms beat estimates in Q4 as cannabis sales increased to $34.4 Million.
Key Takeaways; Psychedelic Sector
- Times columnist visited Awakn’s Bristol & London clinics to discuss the vast potential of psychedelics to treat addiction.
This week was perhaps the busiest week in the cannabis sector so far this year, as major American cannabis companies released their fourth-quarter financial results and others closed some lucrative acquisition deals, in general, it was a huge week for cannabis company earnings. In this article, we are going to hit on the top companies that dominated the headlines in the sector.
Top Marijuana Companies for Week
#1: Flora Growth
Flora Growth Corp. (NASDAQ: FLGC) paid $16 million in cash and 9.5 million privately issued Flora common shares for Just Brands LLC and High Roller Private Label LLC. Just Brands and High Roller are the owners of the JustCBD brand and all associated businesses.
In the fiscal year 2020, JustCBD achieved audited revenues of $28 million and EBITDA of $7 million across a variety of categories, including candies, tinctures, vape cartridges, creams, and pet wellness, among others, all of which have significant long-term development potentials. In Florida, the company has a production facility and a distribution center.
JustCBD is a well-known CPG brand with over 300 products and a seamless multichannel approach that comprises a direct-to-consumer business with over 300,000 customers and a network of over 14,000 stores across the United States and overseas, according to the company.
With JustCBD’s vast distribution over mainstream U.S. channels and its production facilities in Fort Lauderdale, Florida, the acquisition should strengthen Flora’s infrastructure in the United States. Flora expects JustCBD’s financial performance to contribute immediately to Flora’s revenues and earnings in 2022.
Flora is developing a networked, design-led collective of plant-based wellness and lifestyle brands, one community at a time, with the goal of delivering one of the most compelling consumer experiences in the world. Shares of Flora Growth trade on the NASDAQ as FLGC.
As a result of this announcement, the stock gained an increase of 11% on February 28, trading at $2.03.
#2: MedMen
MedMen Enterprises Inc. (OTC: MMNFF), based in California, said on Monday, February 28, that it is exiting the Florida medical cannabis market by selling its company license as well as all of its assets for $83 million. The multistate operator’s national footprint will be drastically reduced as a result of the move.
According to a press statement, MedMen sold all of its medical marijuana assets in the state of Florida to Green Sentry Holdings which is based in Fort Lauderdale, Florida. The deal is an all-cash transaction that included the company’s seven shops, cultivation facilities, and existing inventory. Also, MedMen agreed to license its trademarks to Green Sentry for two years as part of the deal. However, the deal is subject to termination rights, for a quarterly revenue-based fee.
According to the state Office of Medical Marijuana Use, MedMen currently had dispensaries in Fort Lauderdale, Miami Beach, Orlando, Pensacola, St. Petersburg, Tallahassee, and West Palm Beach.
The sale and pivot are part of MedMen’s new “asset-light” strategy, according to CEO Michael Serruya. In a statement, said Serruya that their long-term approach will involve an asset-light model that allows them to harness the MedMen brand’s power and strength. He went on to say that he’s “sure” that the move will put the company in a strong position for future growth.
According to Serruya, MedMen will continue to explore for more “trademark licensing options” across the industry. MedMen now has marijuana businesses in Arizona, California, Illinois, Massachusetts, and Nevada after leaving Florida.
#3: Green Thumb
Green Thumb Industries Inc. (OTCQX: GTBIF) released its fourth-quarter and full-year financial results for the period ending December 31, 2021.
GTI reported total revenue of $243.6 million in the fourth quarter of 2021, up 37.4 percent from $177.2 million in the fourth quarter of 2020. Additionally, net income in the fourth quarter of 2021 was $22.8 million, or $0.10 per basic and diluted share, compared to $22.4 million, or $0.11 per share the previous year. This also outperformed the $0.08 average analyst forecast on Yahoo Finance.
In addition, total sales for the year 2021 were $893.6 million, increasing 60.5 percent from the previous year. Increased scale in GTI’s consumer packaged goods and retail operations, particularly in Illinois and Pennsylvania, fueled revenue growth, according to the company.
Expanded distribution of Green Thumb’s branded products, 10 new store openings, 12 acquired locations, and higher traffic in the Company’s 73 open and running retail stores were key year-over-year performance drivers. For the entire year 2021, net income was $75.4 million, or $0.34 per basic and diluted share.
RYTHM, Dogwalkers, Incredibles, Beboe, Doctor Solomon’s, and Good Green were among Green Thumb’s consumer brands, which were manufactured, distributed, and sold in stores around the USA.
GTI further stated that this was the company’s seventh consecutive quarter of positive cash flow from operations, and that it ended the quarter with $230.4 million in cash. According to the company; California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Virginia all contributed to Green Thumb’s fourth-quarter revenue.
#4: Cronos Group
Cronos Group Inc. (NASDAQ: CRON) released its fourth-quarter and full-year financial results for fiscal year 2021 on March 01, 2022. According to the report, Cronos had net revenue of $25.8 million in the fourth quarter, up $8.7 million from the same period the previous year.
Cronos attributed the increase to sustained development in the adult-use market in Canada as well as higher sales in the Israeli medical market. However, the company once again reported a staggering net loss of $133 million in the quarter, with earnings per share of ($0.36).
Net revenue for the full year was $74.4 million, up $27.7 million from the previous year. The increase was related to sustained growth in the adult-use market in Canada and higher sales in the Israeli medical market, according to the company.
The full-year operational loss was startling at $560 million, with a net loss of $389 million. This was considerably worse than the $321 million net loss in 2020. For the year, the earnings per share were ($1.07).
Despite the positive net revenue, the stock fell 2% to $3.50 in early trading hours on Tuesday; this price is way down from its year highs of $11.67.
Cronos Group is a cutting-edge worldwide cannabinoid firm dedicated to developing cannabis research, technology, and product development in order to create revolutionary intellectual property. Cronos Group is developing a portfolio of renowned brands, which include; Spinach, PEACE NATURALS, Lord Jones, and Happy Dance.
#5: Tilray
Tilray Brands, Inc. (NASDAQ: TLRY), based in New York, said on March 3, 2022 that it intends to purchase up to $211 million (267.5 million Canadian dollars) in outstanding senior secured notes issued by Hexo Corp., thus bailing out its insolvent rival and forging a strategic partnership with the Quebec cannabis producer. The deal will bring two of the Canada’s top cannabis market share leaders together, bolstering their respective positions and paving the way for enhanced production efficiencies in the face of competitive market dynamics.
Hexo issued the senior secured convertible notes, which are now held by funds linked with HT Investments MA LLC. According to Tilray, the company will be able to exercise conversion rights at a price of C$0.90 per HEXO Share and acquire a large equity ownership holding in HEXO. In addition, Tilray Brands stated in the statement that the acquisition of the Notes will be immediately accretive to the company. However, Tilray Brands’ proposed purchase of the Notes from HTI will not result in any revenues for Hexo.
Within two years of the deal’s completion, the proposed alliance between Tilray and Hexo is estimated to yield up to C$50 million in cost synergies, which will be shared evenly. Both companies have been collaborating to assess cost-cutting synergies and other production efficiencies, especially in the areas of cultivation and processing services, Cannabis 2.0 products such as pre-rolls, beverages, and edibles, as well as shared services and procurement.
Hexo sent a warning in December 2021, that the company was in peril. The company said in its filing that the existing funds on hand, when combined with operational cash flow, would not be sufficient to fund possible Senior Secured Convertible Note redemption obligations. The company added that cash payments toward the Senior Secured Convertible Note may also jeopardize the capacity to fulfill capex budgets, convertible debt, and other commitments. As a result, management had been evaluating other means to acquire funding and it just seems the source of the funds might be one of their competitors.
#6: Curaleaf
Curaleaf Holdings, Inc. (OTC: CURLF) released its fourth-quarter and year-end financial and operating results on Thursday, March 3, 2022.
Total revenue for the fourth quarter of 2021 was $320 million, up 1% from $317 million in the third quarter of 2021 and up 39% from $230 million in the fourth quarter of 2020. According to Curaleaf, new retail shop openings, the addition of new wholesale partner accounts, product releases, and the expansion of cultivation and production facilities, accounted for the income increase. The net loss for the quarter was $28 million, compared to a net loss of $55 million in the third quarter and $37 million in the fourth quarter of previous year.
Curaleaf attributed the decrease in net loss to a $20 million rise in operating income and a $2 million reduction in income tax expense, partially offset by a $15 million increase in other expenses, net, year over year. The earnings per share were ($0.04), which fell short of the ($0.03) analyst expectation from Yahoo Finance.
The company indicated on its results call that it expects a weaker cannabis market in the first quarter owing to inflation concerns. In addition, revenues for 2022 are expected to be in the region of $1.4-$1.5 billion, according to the company’s conference call.
According to the full year results, total revenue for the year ended 2021 was $1.2 billion, up 93 percent from $627 million for the year ended 2020. How it was below the expected revenues, which the company anticipated would be $1.6 billion.
The net loss for the year was $102 million, compared to $57 million in the previous year. The $103 million gain in operating income in 2021 was largely offset by $69 million in increased total other expense, net, and $86 million in higher income tax expense, according to the business.
The Company also reported that they had $299 million in cash and $436 million in outstanding debt, net of unamortized debt discounts, as of December 31, 2021.
#7: Village Farms
Village Farms International, Inc. (NASDAQ: VFF) released financial results for the quarter and year ended December 31, 2021 on March 1, 2022. Sales for the fourth quarter grew by 55 percent to $72.8 million, compared to $47.4 million in the same period last year.
On Yahoo Finance, the average analyst forecast for sales was $70 million. This means that the company beat analysts’ estimates in their fourth-quarter report.
The net income for the quarter was $2.1 million, which was a drop compared to $7 million the previous year. Despite the loss, the company had its 13th straight quarter of positive adjusted EBITDA. For the quarter, profits per share were $0.03, above the average analyst expectation of $0.02 on Yahoo Finance.
Sales for the entire year totaled $268 million, up 58 percent from the previous year’s $170 million. However, compared to previous year’s net income of $11.6 million, the net loss for the year was $9.1 million. The net loss was caused by a drop in operating loss of ($8,738) for the year ended December 31, 2021, compared to ($14,268) for the year ended December 31, 2020, according to the company.
The company also reported that the acquisitions of Pure Sunfarms for $23,631 and the gain on the settlement agreement with Emerald for $4,681 boosted 2020 net income significantly.
Cannabis net sales in Canada were CA$120.8 million in 2021, up from CA$76.1 million in 2020. Pure Sunfarms, Village Farms’ cannabis business, was the top-selling dried flower brand in Alberta, British Columbia, and Ontario, three of Canada’s four main markets, according to the company.
Shares of Village Farms International are traded as VFF on the NASDAQ.
Top Psychedelic Companies for Week
#1: Awakn
Awakn Life Sciences Corp. (NEO: AWKN) (OTCQB: AWKNF), a biotechnology company that researches, develops, manufactures, and distributes psychedelic medications to treat addictions, announced on February 25, 2022, that The Times columnist and broadcaster, David Aaronovitch, visited Awakn’s Bristol and London clinics to discuss the vast potential of psychedelics to treat addiction and also highlight Awakn’s evidence-based clinical approach to helping patients suffering from alcohol use disorder (AUD).
The aftermath of the visit resulted in David Aaronovitch publishing an article on The Times website about his visit at Awakn’s clinics. In the article, the columnist praised the company for being a leading company in developing and delivering treatments for addictions and substance use disorders (SUDs) and alcohol use disorder (AUD). David also praised Awakn for its unique studies into ketamine treatment for addiction and gambling addiction.
Awakn Life Sciences is a biotechnology firm that develops, manufactures, and distributes psychedelic medications to help people overcome addiction. Awakn’s team includes world-renowned chemists, scientists, psychiatrists, and psychologists who are working to develop the next generation of psychedelic substances and therapies for use in combination.
