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Why Curaleaf Holdings' Revenue Soared to All-Time Highs in Q3

By Keith Speights - Nov 20, 2019 at 6:00AM

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The U.S. cannabis company's pending acquisitions could lead to these Q3 records being broken soon.

Some marijuana stocks might be performing horribly in 2019, but not Curaleaf Holdings ( CURLF 0.62% ). The U.S. cannabis operator's share price is still up 13% year to date despite giving up most of its gains from earlier this year.

Curaleaf announced its third-quarter results after the market closed on Tuesday. And there was plenty for investors to like. Here are the highlights from the company's Q3 update.

A casting of a dollar sign shadow on cannabis leaves

Image Source: Getty Images

By the numbers

Curaleaf reported revenue of $61.8 million in the third quarter. That reflected a huge 189% year-over-year jump from the $21.4 million reported in the same period in 2018.

The company recorded adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $9 million in Q3. This marked a significant improvement from the adjusted EBITDA loss of $3.2 million in the prior-year period.

Curaleaf announced a net loss of $7.4 million, or $0.01 per share, in the third quarter. In the prior-year period, Curaleaf posted a net loss of $35.6 million, or $0.05 per share. 

The company ended the third quarter with a cash position of $91.2 million. This reflected a decrease from the $266.6 million on hand as of Dec. 31, 2018.

Behind the numbers

The key to Curaleaf's strong revenue growth was its retail and wholesale cannabis business. Retail and wholesale sales more than tripled year over year to $50.7 million. Most of this increase stemmed from organic growth in two major markets -- Florida and New York -- plus additional growth from the company's acquisitions in Arizona and Maryland. Curaleaf also benefited from higher wholesale revenue thanks to new dispensaries opening in Massachusetts to serve the state's adult-use recreational marijuana market.

Curaleaf's gross profit before the impact of biological assets improved to $34.7 million in Q3 from $13.9 million in the prior-year period. The company attributed this nice jump to added operating capacity at its cultivation and processing facilities.

The company's bottom line also improved from the same period last year. However, this was primarily due to a big loss related to the change in fair value of convertible notes in the third quarter of 2018.

Probably the main takeaway from Curaleaf's Q3 results is that they're the best in the company's history. CFO Neil Davidson noted that the company reported record total and managed revenue as well as record adjusted EBITDA.

Looking ahead

Curaleaf CEO Joseph Lusardi highlighted pending acquisitions as the most important things for investors to look forward to in the near term. He stated, "We look forward to the closing and integration of the Select and Grassroots acquisitions which are expected to bring significant operational capacity to Curaleaf in key markets."

The company recently changed the terms of its acquisition of Cura Partners, which markets the Select line of cannabis products. Instead of paying 95.5 million subordinate voting shares upfront, Curaleaf will only pay 55 million shares.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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