Jushi Reports Solid Quarter, But Lowers Guidance

Jushi Holdings Inc.  (CSE: JUSH) (OTCQX: JUSHF) announced its financial results for the third quarter ending September 30, 2021 with total revenue rising 13.1 sequentially to $54.0 million, and an increase of 116.7% over last year. Yahoo Finance’s average analyst estimate was for revenues of $57 million causing Jushi to miss the estimates. The company also revised its guidance downward.

Jushi reported a net income of $38.2 million, an increase of $33.5 million sequentially, and $68.2 million year-over-year.  The earnings were $0.22 per basic share and a net loss of $0.08 per diluted share, compared to net income of $4.8 million, or $0.03 per basic share and a net loss of $0.08 per diluted share in the second quarter.  The estimate was for earnings of $(0.02). The adjusted EBITDA of $6.4 million was an increase of 38.5% sequentially and 124.9% year-over-year.

“Our financial performance in the third quarter demonstrates our ability to continue to drive strong top-line revenue growth and improved profitability, both on a sequential and year-over-year basis while continuing to invest in the business to support our future growth,” said Jim Cacioppo, Chief Executive Officer, Chairman and Founder of Jushi. “In the third quarter, we made significant progress strengthening all areas of our platform including growing our retail network through a strategic acquisition in Massachusetts, and the opening of two new stores in Pennsylvania. We also expanded access to our brands and products, including the introduction of flower in Virginia, and enhanced our wholesale capabilities with acquisitions in high-growth markets such as Massachusetts and Ohio.”

Jushi noted that the net loss per diluted share in the quarter was primarily due to the dilutive effects of the derivative warrants as accounted for under IFRS. The $33.5 million improvements in net income in the third quarter were primarily driven by the gain on fair value derivative liabilities of $55.1 million. Net income increased $68.2 million as compared to last year, driven by an increase in fair value gain on derivative warrants, revenue, and gross profit.

Revenue Breakdown

Jushi said that the increase in revenue was driven primarily by solid revenue growth at the BEYOND / HELLO stores in Pennsylvania, Virginia and Illinois, and less than one month of revenue contribution from the addition of two Nature’s Remedy stores in Massachusetts. Plus, increased operating activity at the company’s grower-processor facilities in Pennsylvania and Virginia, and a partial contribution from Nature’s Remedy’s Lakeville Facility also contributed to the increase in revenue. The 116.7% year-over-year increase in revenue was primarily driven by the build-out and expansion of the company’s retail store base, expanding from 10 to 24, and the modest expansion of the company’s wholesale business driven by an increase in cultivation and manufacturing activity.

Mr. Cacioppo added, “With our recently announced Acquisition Facility, we are well-positioned with a strong balance sheet to continue executing on our growth plans. We expect to accelerate our expansion plans by identifying and securing assets in new and existing markets and continuing to deliver a differentiated customer experience through our best-in-class retail and online platforms.”

Looking Ahead

Jushi revised its guidance for 2021 revenue to a range of $205 to $215 million and cited several reasons why the company won’t meet its original goals.

Mr. Cacioppo added, “We are revising our full year 2021 revenue guidance range to $205 to $215 million, and our 2021 Adjusted EBITDA guidance range to $21 to $25 million on an IFRS basis. The reduction in revenue and Adjusted EBITDA guidance was driven by (1) delays in new store openings, due to unforeseen regulatory approval timing-related delays; (2) slower than expected ramp-up of wholesale activity in Massachusetts due to the lack of wholesale operating infrastructure by the previous operator; (3) ongoing regulatory complexities that have impeded our ability to introduce our full suite of flower products in Virginia; and (4) a delay in signing and closing of acquisitions in Nevada. We also incurred greater than expected corporate overhead as we have ramped up hiring to support our continued growth.”

Mr. Cacioppo concluded, “While the pace at which we have been able to open new stores and launch new products has been slower than we initially anticipated, I am pleased with the progress we have made to date, and I am encouraged by our industry-leading organic growth as we continue to expand our footprint. We are also reaffirming guidance for 2022, as the challenges we have been experiencing will be substantially behind us by Q1 2022.”

NuLeaf Acquisition

In addition to delivering its earnings numbers, Jushi also announced that it was buying Nevada-based NuLeaf, Inc. for approximately $62.5 million. NuLeaf currently operates two high-performing adult-use and medical retail dispensaries in Las Vegas, NV, and Lake Tahoe, NV, in addition to a 27,000 sq. ft. cultivation facility in Sparks, NV, as well as a 13,000 sq. ft. processing facility in Reno, NV. Additionally, NuLeaf owns a third licensed retail dispensary located directly on Las Vegas Boulevard, which is expected to become operational in early 2022.

“We are thrilled to enter into an agreement to acquire NuLeaf, a vertically integrated operator with the potential to significantly increase our presence in the Nevada retail and wholesale markets,” said Cacioppo. “NuLeaf boasts a well-established retail network with top-quality, design-forward dispensaries in coveted high-traffic destination locations. In addition, NuLeaf’s cultivation and processing assets are strongly aligned with our strategic expansion strategy in Nevada. This acquisition is expected to generate significant top-line growth and be immediately accretive, as well as increase market share of Jushi’s best-in-class brands, and establish a leadership position in one of the largest cannabis markets in the U.S.”

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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