Cannabis MSOs Seek Balance Between Margin, Market Growth

New cannabis strategies have emerged as Q1 2023 earnings roll in and age-old business sentiments remain.

The first gust of earnings season is fading, but cautious optimism remains for many cannabis executives – though many are seeking a leaner approach after half a decade of breakneck growth.

One of the giants, Curaleaf Holdings Inc. (OTCPK: CURLF), discussed that balance between margin expansion and market share growth in its first-quarter earnings conference call on Wednesday.

In that call, Executive Chairman Boris Jordan emphasized the company’s commitment to bolstering margins and generating cash, despite current market challenges.

“What we’ve done is, we’ve just made an alignment given market circumstances to focus right now on building up our margins in order to generate cash. Cash is important in the current environment,” Jordan said.

Q1 Takeaways

In general, first-quarter earnings reports this year spotlighted the disparity between actual revenues and consensus analyst estimates, with the most significant miss at 6.4% and the largest beat at 5%, according to a recent note from Viridian Capital Advisors.

The cannabis-focused analyst firm also noted a lack of correlation between revenue misses and stock performance. Instead, the more critical focus appears to be on long-term EBITDA revisions, which tend to correlate more closely with stock price movements.

Only three companies recorded positive 2023 EBITDA revisions, including:

In contrast, four companies had greater than 10% downward revisions, including:

“We believe that slowing downward EBITDA revisions is required for the market to find a solid bottom,” Viridian wrote on May 12.

Source: Viridian Capital Advisors

When the firm looked at sequential revenue growth from Q4 2022 to Q1 2023 for 16 of the top multistate operators, it posited that seasonal factors contributed to some revenue declines in the period. Viridian projected that aggregate sequential revenue would decline 3.1% in Q1 2023, though “this is not much worse” than the 2.1% decline in Q1 2022.

“Still, there IS an underlying deceleration of revenue growth projected for 2023,” the firm wrote, with the charted companies expected to only post 4.9% growth, down from 15.7% in 2022.

That deceleration is attributed to multiple factors, including reduced capital spending and M&A activity due to “the contraction in cannabis capital markets.” Wholesale price compression, inflation, and declining profitability and growth expectations have also contributed to a slowdown.

State Trends

Despite some new markets, such as New Jersey, finding success, New York’s rollout has been sluggish, diverting hefty loads revenue to the illicit market.

To reignite growth, Viridian pointed toward now-age-old solutions such as the opening of new recreational states, resurgence in capital markets, and industry consolidation. And regulatory changes in states like New York and California could help unlock their massive cannabis economies, too.

Curaleaf’s Jordan also expressed reservations about the New York market, especially around conversion fees in a market plagued with an uncontrolled illicit segment. He underscored ongoing negotiations with the state and the importance of a program that promotes migration from the illicit to the regulated market.

The MSO’s CEO, Matt Darin, highlighted the company’s renewed focus on key markets, such as New Jersey and Illinois, for capitalizing on wholesale growth opportunities and brand expansion. But other previously challenging markets are likewise seeing promising trends.

“Massachusetts is a market that got very oversupplied, but we’re now seeing some really strong opportunities,” he said, highlighting how Missouri has become a “great success story.”

Jordan also touched on the potential Florida ballot initiative and the company’s significant lobbying expenses at federal and state levels, signaling support for the initiative.

“The growth opportunities for Curaleaf going into 2024, 2025, and 2026 are quite substantial,” Jordan said, noting a primary focus on European assets and further expansion in markets where they have significant share, like Arizona and Florida.

“We still have significant CapEx that we’re making this year to the tune of $7 million.”

Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the latest cannabis news delivered right to your inbox

The Morning Rise

Unpack the industry with the daily cannabis newsletter for business leaders.

 Sign up

About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


Recent Tweets

Get the latest cannabis news delivered right to your inbox

The Morning Rise

Unpack the industry with the daily cannabis newsletter for business leaders.