With its fast-rising sales and sizzling stock performance, Curaleaf Holdings (CURLF 2.70%) leads the pack in the fast-growing U.S. cannabis market.
The multistate cannabis operator (MSO) announced its third-quarter results after the market closed on Tuesday. Did Curaleaf keep up its tremendous momentum? Here are the highlights from the company's Q3 update.
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By the numbers
Curaleaf reported managed revenue in the third quarter of $193.2 million, up 164% year over year and 59% quarter over quarter. This total included revenue from entities for which the company has management contracts, but that it doesn't consolidate into its International Financial Reporting Standards (IFRS) results.
The company announced IFRS revenue in Q3 of $182.4 million. This reflected a year-over-year jump of 195% and a quarter-over-quarter increase of 55%.
Curaleaf's significant revenue growth didn't translate to a profit in Q3, though. The company posted a net loss of $9.3 million, or $0.01 per share. This reflected deterioration from the net loss of $6.8 million in the prior-year period and the net loss of a little over $2 million in the previous quarter. However, Curaleaf's Q3 loss narrowly topped the average analyst estimate of a $0.02 per share net loss.
The cannabis operator generated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $42.3 million. This result was more than four times greater than Curaleaf's adjusted EBITDA in the prior-year period and a 51% jump from the second quarter of 2020.
Behind the numbers
Curaleaf delivered strong revenue growth in its retail and wholesale markets in Q3. Retail revenue more than tripled year over year to $135.3 million. Wholesale revenue soared nearly seven times over the prior-year period to $45 million.
New store openings in Arizona, Florida, Massachusetts, and New York were key to the company's retail revenue growth. Curaleaf's acquisitions from late 2019 and 2020 boosted retail revenue. These acquisitions were also important drivers of the company's wholesale revenue growth.
Curaleaf's management fee income fell to $2.1 million in Q3 from $11.1 million in the same period in 2019. This decline was expected, though, as the company completed its acquisition of Curaleaf NJ, its managed not-for-profit business in New Jersey.
Several factors were behind Curaleaf's worsening bottom line. Depreciation and amortization increased by $16.3 million year over year. Income tax expense and net interest expense rose $13.5 million and $13.3 million, respectively. Curaleaf also had a $10.1 million increase in one-time expenses.
Looking ahead
The election results brought some great news for Curaleaf. Arizona and New Jersey voted to legalize recreational marijuana. Curaleaf CEO Joseph Lusardi referenced these votes in the company's Q3 press release:
As we head into 2021, Curaleaf remains incredibly well positioned following the transformative legalization of adult-use cannabis in Arizona and New Jersey, and consequently the potential of future adult-use in New York, Pennsylvania, and Connecticut. Each of these markets presents an enormous opportunity for us, as the only MSO with a leading presence in every one of these states.
However, Curaleaf might not get all it wanted from the elections. The control of the U.S. Senate hinges on two runoff races in Georgia. If the GOP wins at least one of those seats, it will hold onto a majority in the Senate. That would likely lower the prospects of any type of federal marijuana legalization for the next couple of years at least.
