Curaleaf Holdings Archives - Green Market Report

Debra BorchardtDebra BorchardtDecember 19, 2019
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15min6290

The Green Market Report sat down with Curaleaf’s CEO Joe Lusardi at last week’s MJ Biz conference in Las Vegas NV. This interview has been edited for grammatical purposes.

Debra Borchardt:             The Select deal – you brought those numbers I guess to a new reality. Where are you now with that transaction? Because you’ve pretty drastically changed the valuation on that.

Joe Lusardi:                         I’m not sure I’d characterize it that way. What I would say is that we reduced the base consideration. The transaction, if they do what we think they’re going to do, will be 90 million shares. So it’s just, we restructured it to de-risk it and make some of the consideration an earnout. And we thought that that was the prudent thing to do given what was going on in the vape environment.

Now you’re maybe aware that the Massachusetts vape ban lifted today. The CDC is saying that we’ve already reached the peak of people showing up with lung disease. And that started the decline, which all points to the fact that the problem is largely from the black market. So we’re actually pretty confident in that category overall, and that consumers are going to come back to that form factor, and we feel pretty good about the transaction, to be honest. And I think it’s also important to know that the Select brand is not just the vape brand, it’s a family of products. So you’re going to be seeing a number of new products from Select over the coming months. One is a gummy that’s now available in a couple of markets. You’re going to see a spray, a tincture, and a couple of other novel form factors in the Select brand. So we feel good about the transaction.

Debra Borchardt:             Were you surprised at all with any of the Select sales numbers when you really started to peel back some of the layers on Select? Because I had heard a lot of rumors out in the market about Select before you guys got interested in them.

Joe Lusardi:                         There’s no manipulation of the numbers. I mean we did a pretty thorough diligence of the business. What I would say is that they clearly felt the impact of the vape crisis. We did a thorough vetting of the transaction before we did the deal. We’re very optimistic. Again, I said that consumers are becoming more aware that they should buy regulated products. Select’s whole brand ethos is about safety and quality, and I think you’ll continue to see that as they pioneer new hardware and new products. So I think we felt very good with the transaction. We’re trying to close it on January 2nd. We’re working with regulators right now. We’ve cleared the DOJ HSR review, which is a pretty big event. So everything looks to be on track for early January close.

Debra Borchardt:             You just put in a new executive, Joe Bayern, a president that was from INDUS Holdings, but he seemed like he had mostly a CPG background. We’re seeing a lot of that within the cannabis industry, this whole hiring of CPG executives. What is the thought process for you guys behind that?

Joe Lusardi:                         I would characterize Curaleaf as an early-stage consumer product company. And I think people that come out of that industry, that have a depth of knowledge and building brands, building infrastructure and taking companies from small to bigger is highly relevant for where we are in our growth curve. So I’m ecstatic that he joined the team. He’s a bit of a unicorn in that he also had cannabis experience. But that’s not why we hired him. We hired him for his experience before cannabis.

It’s helpful that he’s been in the industry for 11 months and we don’t have to explain Cannabis 101. But we hired him because he has worked on some very significant transformations of businesses, including Cadbury, Dr. Pepper, Snapple, he was on the senior team that built VOSS Water, which is now a premier global water brand. So he’s a very capable executive, has skills that I certainly don’t have. And it’s going to be a huge addition to the team.

Debra Borchardt:             So you just mentioned that Select has got new products coming out. What’s really your strategy then for 2020?

Joe Lusardi:                         The marketing people would kill me if I say too much more. But what I’ll tell you, we really think that consumers are coming to cannabis and they’re looking for a variety of form factors. So you know, flower already represents less than half the sales and in most states, vapes are coming out strong and the edible category continues to grow. And so I think that’s where you’re going to see a lot of development in 2020, particularly for brands like Select. And I think that those products are really exciting because they’re consumer packaged goods, right? And so they lend themselves to marketing, form factors, predictability, consistency, and really brand building. So that’s why we’re really excited about what we have ahead of us.

What makes Curaleaf unique is that when we close Grassroots in the spring, we will have a platform unlike any other cannabis company really in the world. And what’s really exciting is we’re going to take the number one brand from the West Coast and move it all across the United States. So Select will be the number one brand in most major markets in the country for 2020, and no one else is going to do that.

Debra Borchardt:             When you look at Illinois and Michigan, everybody’s saying Michigan is going to be the next big market. Oh no, it’s Illinois. Which is it?

Joe Lusardi:                         It’s Illinois.

Debra Borchardt:             Illinois?

Joe Lusardi:                         That’s not debatable, it’s 13 million people in 55 stores. The numbers stack up really well. It’s just math, I’m not a genius.

Debra Borchardt:             But I’m sure you’ve heard people say the same thing like, “Oh, Michigan is going to be the big one.”

Joe Lusardi:                         Look, I think Michigan is a really interesting market. It has a very prolific caregiver market that has a huge amount of patients in the state. It’s really, really going to come down to how the market structurally changes, because you have a lot of what I would say, activity, that hasn’t always necessarily fit within the framework or the regulations. There’s been a lot of caregivers and a lot of dispensaries that are operated that were not fully licensed by the state. And so if they can corral all that activity and really push it out through the regulated channel, unlike California, then Michigan has a chance to be a very big market, a regulated market. There’s no denying that both Michigan and California are big cannabis markets, that’s for sure undeniable, but can they be good regulated markets? We’ll see. California clearly is struggling with that concept.

Debra Borchardt:             And Massachusetts recently started their adult-use sales. Everybody was saying, “Oh, all the New Yorkers are going to go across the state lines, and that really doesn’t seem to be happening. I think a lot of people thought that Massachusetts was going to be the domino that was going to tip a lot of the other Northeastern states. And that doesn’t really seem to have happened.

Joe Lusardi:                         Massachusetts. My home state has clearly not lived up to expectations in 2019. I would say that that was largely driven by factors out of the operator’s control. It was really driven by how the government rolled out the program. I think that only now the state has 30 stores open. So this…

Debra Borchardt:             And they’re disappointing. I’ve been in a couple of them and I’m like, “You got to be kidding me.” But I’m used to going to California dispensaries, and such.

Joe Lusardi:                         I mean California has had a 20 years quasi-legal marijuana market. So you’re not going to get there tomorrow. But it’s also true that because Massachusetts has been, I’ll say deliberately in rolling out the program, it’s supply constraint. So you don’t have a diversity of manufacturers. You don’t have a diversity of growers. You don’t have a diversity of stores, there isn’t a really prolific wholesale market.

It’s a very challenging operating environment right now. The early numbers are promising. I think 2020 will be a big year for Massachusetts. It will be a big leap forward. We just opened our first adult-use store in November. We’re going to open up two more, one in Provincetown, we think in early 2020 and then another in the state. So it’s going to be a good year for Curaleaf and I think that as more operators get open, the market will develop, there’ll be more specialization in manufacturing. There’ll be more products, and the shelves will fill up, and it’ll be a more wholesome retail experience, but it’s unreasonable to expect it will be like California. It’s just, we don’t have that history. Right? The East Coast has been very deliberately rolled out with a limited number of players, very capital intensive.

Debra Borchardt:             Very, very conservative.

Joe Lusardi:                         So it’s going to take time. But I mean anecdotally, if you go to the stores out in the Berkshires and you’d go in the parking lot, there’s a lot of New York license plates in those parking lots. And what I would also say is that I do think it will be a catalyst in 2020 because it’s putting a lot of pressure already on Connecticut. If it had rolled out the program faster, the pressure would have been greater. But Connecticut clearly needs to address a massive budget shortfall and I think they’re going to look to cannabis as one avenue.

Maine is going to go adult use this spring. Governor Mills has been fantastic and is really driving the program. So you’ll have two Northeast states, Connecticut is under a lot of pressure. New York, the dialogue is going to be very active in January through March, I mean the Lieutenant Governor came out today and said that it’s long overdue. So that’s interesting. And Governor Murphy in New Jersey said he’s going to take another crack at it, so it’s going to happen. Governor Wolf in Pennsylvania supports it. Progress is not linear or sometimes quick, but I genuinely feel like maybe the dominoes are falling, not as fast as people hope, but they’re going to fall.

Debra Borchardt:             So it sounds like you’ll be ready to put a close to 2019. 2020 looks a lot more promising.

Joe Lusardi:                         I have to say for Curaleaf, despite the pain in the equity markets, this is a fantastic year for our business. We had a major inflection point in Q3 we showed 30% top-line growth for the second quarter in a row, we’re adjusted EDITDA positive two quarters in a row. We’re opening stores, we’re executing on our business. We’re turning all of the investment we’ve made into cash-generating assets. So this is the best year in our company history. I mean, it was really a great year, operationally. 2020 sets up to be even better.


William SumnerWilliam SumnerAugust 28, 2019
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7min6260

It’s time for your Daily Hit of cannabis financial news for August 28, 2019.

On the Site

SLANG Worldwide

SLANG Worldwide Inc. (CNSX: SLNG) delivered its financial results in Canadian dollars for the second quarter ending June 30, 2019, with revenue increased sequentially by 44% to $7.2 million and a big jump over last year’s $440,000 for the same time period. More importantly, Slang reported a net income of $17.5 million in the quarter versus a net loss of $13 million for the same time period in 2018. An even bigger accomplishment sequentially with a net loss of $16.1 million in the first quarter.

Environmental Issues Decided For San Diego Cannabis Dispensaries

On August 19, 2019, the Supreme Court of California issued a unanimous opinion in Union of Medical Marijuana Patients, Inc. (“UMMP”) v. City of San Diego. Except for the parties and the limited number of individuals who follow litigation involving environmental law, this case has moved through the California court system with little notice.

Texas Cannabis Report Ceases Publishing

In June 2013 Texas Cannabis Report launched as a premier news agency dedicated to covering the issue of cannabis activism and policy. Texans did not have a reliable source of news in this area, prompting our formation. Six years later there has been much progress made in ensuring this under-served community has access to quality and reliable information.

Green Thumb Industries

Green Thumb Industries Inc.  (CSE: GTII) (OTCQX: GTBIF) reported that its second-quarter revenue increased 228% to $44.7 million for the period ending June 30, 2019, over last year’s $13.6 million.  Revenue grew 60% over the first quarter of 2019. The company said that the revenue growth was driven by organic growth across GTI’s consumer products and retail businesses, strategic acquisitions and increased store traffic.

In Other News

TILT Holdings

TILT Holdings Inc. (CSE: TILT) (OTCQB: SVVTF) has released its financial results for the quarter ending on June 30, 2019. Revenue was $39 million, up 13% from the previous quarter. EBITDA was a loss of $4 million, up from a loss of $7.9 million. The net loss was $48.9 million. “The second quarter was a highly productive period for TILT. We continue to optimize our organization, including the dismissal and re-alignment of senior leadership, accelerate integration efforts, dramatically reduce overhead and instill an enhanced focus on profitable growth. TILT is making progress on our key initiatives to drive operational stability and progress toward profitability…” commented TILT Holdings interim CEO Mark Scatterday.

Origin House

Origin House (CSE: OH) (OTCQX: ORHOF) released its financial results for the three and six month period ending on June 30, 2019. Revenue for the quarter was $21.4 million. The gross margin was $4.4 million and adjusted EBITDA was a loss of $21 million. The net loss was $34.9 million. “”I am very proud of the entire Origin House team for generating another quarter of record revenue growth, leveraging the California brand support and distribution platform we built over the past several years, to deliver results for shareholders,” said Origin House CEO Marc Lustic.

Curaleaf Holdings

Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) announced the release of its financial results for the second quarter. Total revenue for the quarter rose from $35.25 million in the previous quarter to $48.48 million. Adjusted EBITDA was $3.35 million, up from a loss of $3.6 million. The net loss was $24.54 million. “With the industry’s largest operational footprint, we have the scale to rapidly accelerate growth across the country. I continue to believe Curaleaf is the best positioned operator in the cannabis space with the potential to create substantial shareholder value,” said Curaleaf CEO Joseph Lusardi.

TerrAscend

TerrAscend Corp. (CSE: TER) (OTCQX: TRSSF) announced that it has signed a definitive agreement to purchase ABI SF, LLC, which operates a Bay Area cannabis cultivation facility and owns the premium cannabis brand State Flower. Initially, TerrAscend agreed to purchase 49.9% of State Flower for $2.85 million, along with extending a line of credit up to $3.75 million for cultivation facility improvements. The company has since upped its stake to 50.1%.

Vibe Bioscience

Vibe Bioscience Ltd. (CSE: VIBE) released its financial results for the three and six months ending on June 30, 2019. Quarterly revenue rose from $1.31 million in the first quarter to $3.09 million. The gross margin was $1.2 million and adjusted EBITDA was $113,322.


William SumnerWilliam SumnerJuly 24, 2019
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4min3890

It’s time for your Daily Hit of cannabis financial news for July 24, 2019.

On the Site

Executive Spotlight: Nick Ortega, Co-Founder & CEO of Claybourne Industries

Nick Ortega is the Co-Founder and CEO of Claybourne Industries, a cultivator and distributor specializing in growing brands throughout California. Claybourne’s house brand, Claybourne Co, is known for its innovative flower products such as The Claybourne Power PackTM and the Claybourne Top Shelf 1oz jar.

Fire & Flower Holdings

You may not be able to purchase cannabis from your local gas station, but that hasn’t stopped the international convenience store chain Alimentation Couche-Tard (TSX: ATD.A ATD.B) from staking a claim in the industry. Today it was announced that the company would purchase a stake in Fire & Flower Holdings Corp. (TSXV: FAF) $25.9 million.

80% Of Vape Products Could Be Fakes

In a time of designer bags, jewelry, shoes, and a slew of other consumer goods being knocked off, the cannabis industry has also fallen victim to counterfeit products. Imagine going into what you believe is a legitimate cannabis dispensary or online shop and being sold what you think is a King Pen, Brass Knuckles, or Heavy Hitter vape, only to find that in comparison to what you’re inhaling, “you’re better chewing on lead paint.”

In Other News

Curaleaf

In the wake of the news that Curaleaf Holdings (OTCMKTS: CURLF) had received a warning letter from the United States Food and Drug Administration over “unsubstantiated health claims,” the national pharmacy retailer CVS has announced that they will no longer sell Curaleaf products. In a statement, Mike DeAngelis, CVS’ senior director, corporate communications, said that the company has no plans to resume selling Curaleaf products once they are pulled from the shelves. In response to the FDA letter, Curaleaf representatives say that the company “will work collaboratively with the FDA to resolve all issues addressed in the agency’s letter.”

Green Growth Brands

Green Growth Brands Inc. (CSE: GGB) (OTCQB: GGBXF) announced that it had raised C$50.2 million in a bought deal offering led by Canaccord Genuity Corp. At C$2.45 per unit, Green Growth Brands sold 20.5 million units of the company. Each unit is comprised of one common share and half of one common share purchase warrant. The company has also extended to the underwriters an over-allotment option to purchase an additional 3,075,000 units at the offering price, totaling C$7.53 million. The closing is expected to close on August 21, 2019.


William SumnerWilliam SumnerJuly 23, 2019
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4min21990

It’s time for your Daily Hit of cannabis financial news for July 23, 2019.

On the Site

Consumer Preference Is Shaping Cannabis Consumption

As the restrictions on cannabis start loosening, new consumer demands are shaping the industry. The following infographic is contributed content from Ionic Brands.

Executive Spotlight: Marion Mariathasan of Simplifya

If there is someone who exemplifies a smart investor in the cannabis industry, it’s Marion Mariathasan, currently the co-founder and CEO of Simplifya, the industry’s leading regulatory compliance tool for licensees and those who audit them. Green Market Report caught up with Mariathasan to hear about his path to where he is now in the cannabis space.

Amplify Investments

Amplify Investments is getting into the cannabis industry. Today, Amplify ETF’s announced the launch of Amplify Seymour Cannabis ETF (NYSE Arca: CNBS), an actively managed ETF covering the cannabis industry. Tim Seymour, CIO of Seymour Asset Management and CNBC Fast Money co-host, will act as the fund’s portfolio manager.

In Other News

Curaleaf

Today, Curaleaf Holdings (OTCMKTS: CURLF) received a warning letter from the United States Food and Drug Administration regarding what the agency says are unsubstantiated health claims on its products; including the company’s  CBD Lotion, Pain-Relief Patch, Tincture, Disposable Vape Pen, and its Bido CBD for Pets. “You should take prompt action to correct the violations cited…” reads the letter. “Failure to promptly correct these violations may result in legal action without further notice, including, without limitation, seizure and injunction.” Curaleaf has 15 days to respond to the FDA’s letter and take corrective actions.

Sundial Growers

Sundial Growers, an early-stage Canadian cannabis producer, announced today the terms of its initial public offering (IPO). Hoping to raise $130 million, the company is offering 10 million shares ranging in price between $12 and $14. Founded in 2006, the company recorded an annual revenue of $1 million. Sundial hopes to lists its shares on the NASDAQ market under the symbol SNDL.  Cowen, BMO Capital Markets, RBC Capital Markets, Barclays, and CIBC Capital Markets are leading the IPO as joint bookrunners.



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