October Financial Reports Reveal Ongoing Canadian Cannabis Challenges

The Public Cannabis Company Revenue & Income Tracker, managed by New Cannabis Ventures, ranks the top revenue producing cannabis companies. This data-driven, fact-based tracker will continually update based on new financial filings so that readers can stay up to date. Companies must file with the SEC or SEDAR and be current to be considered for inclusion.

When we launched this resource in May 2019, companies with quarterly revenue in excess of US$2.5 million qualified. As the industry has scaled and as more companies have gone public, we have raised the minimum several times subsequently, including a move to US$5 million in October 2019, to US$7.5 million in June 2020, to US$10 million in November 2020 and US$12.5 million in August 2021.

Due to the rapid growth in the cannabis industry, we raised the minimum to US$25 million (C$31 million) to qualify for what we are now calling the senior list and introducing a junior list with a minimum of US$12.5 million (C$15.5 million) in September. At the time of our last update in early October, 35 companies qualified for inclusion, including 31 filing in U.S. dollars and 4 in the Canadian currency, and the number of Canadian companies increased to 5 as HEXO Corp (TSX: HEXO) (NASDAQ: HEXO) joined the list, bringing the total to 36. The junior list now includes 12 reporting in U.S. dollars and 6 in Canadian dollars with the addition of Humble & Fume (CSE: HMBL) (OTC: HMBLF), which reports in Canadian dollars. On a combined basis, the Public Cannabis Company Revenue & Income Tracker includes 54 companies. We expect to add additional companies in the months ahead, and, due to pending or recently completed mergers, we anticipate some removals as well.

In May 2019, we added an additional metric, “Adjusted Operating Income”, as we detailed in our newsletter. The calculation takes the reported operating income and adjusts it for any changes in the fair value of biological assets required under IFRS accounting. We believe that this adjustment improves comparability for the companies across IFRS and GAAP accounting. We note that often operating income can include one-time items like stock compensation, inventory write-downs or public listing expenses, and we recommend that readers understand how these non-cash items can impact quarterly financials. Many companies are moving from IFRS to U.S. GAAP accounting, which will reduce our need to make adjustments. Please note that our rankings include only actual reported revenue and not pro forma revenue. We also note that companies with non-cannabis operations must provide segment-level financial reports that detail not only revenue but also operating profit to be have their operating profit included in the tracker. Currently, Jazz Pharma (NASDAQ: JAZZ) and Tilray (TSX: TLRY) (NASDAQ: TLRY) aren’t providing this information.

Since our last update, Tilray (TSX: TLRY) (NASDAQ: TLRY) and Turning Point Brands (NYSE: TPB) both reported financials. Tilray Q1 cannabis-related revenue, which included a full contribution from both legacy Tilray and from legacy Aphria, showed growth of 38% from a year ago. Adult-use cannabis sales were below expectations at $51 million. Adding the Q1 Aphria revenue from a year ago and the Q2 Tilray revenue suggests that the company saw a 6% year-over-year decline in contrast to 49% growth in the overall Canadian adult-use market. Turning Point Brands missed consensus expectations for its overall revenue, which was impacted by a sequential decline in its Zig-Zag segment sales.

American Dollar Reporting – Public Cannabis Company Revenue Tracker

Looking to the first part of November, many of the largest American companies will be reporting financials, including Scotts Miracle-Gro (NYSE: SMG), Curaleaf (CSE: CURA) (OTC: CURLF), Green Thumb Industries (CSE: GTII) (OTC: GTBIF), Trulieve (CSE: TRUL) (OTC: TCNNF), Cresco Labs (CSE: CL) (OTC: CRLBF), Verano Holdings (CSE: VRNO) (OTC: VRNOF), Hydrofarm (NASDAQ: HYFM) and GrowGeneration (NASDAQ: GRWG), all of which reported revenue in excess of $125 million in Q2. According to Sentieo, Scotts Miracle-Gro overall revenue is expected to decline 23% from a year ago in its fiscal Q4 to $1.046 billion. The company will be providing guidance for fiscal 2022, and it shared its preliminary expectations in August that its Hawthorne Gardening Company sales should grow at least 10-20%. For all of fiscal 2021, the company suggested that the unit is expected to grow 40-50%, which would be $1.52-1.62 billion. With the year-to-date revenue of $1.095 billion, Hawthorne, then, should post Q4 revenue of $425-525 million. In Q4 of fiscal 2021, it reported revenue of $352 million, suggesting year-over-year growth of 21% to 49% compared to the 48% it reported in Q3.

The top 5 MSOs by revenue are expected to see Q3 revenue expand significantly from a year ago. Curaleaf Q3 revenue is expected to grow 86% to $340 million, up 9% sequentially. GTI Q3 revenue is projected to increase 48% to $233 million, up 5% sequentially. Trulieve’s Q3 revenue won’t include a material contribution from Harvest, as that acquisition closed on the last day of September. The company’s revenue is projected by analysts to have grown 63% to $221 million, up 3% sequentially. Cresco Labs is expected to have increased revenue in Q3 43% to $220 million, up 5% sequentially. Verano Q3 revenue is expected to have increased 250% from a year ago, before the AltMed acquisition and several others, to $225 million, up 13% sequentially.

Finally, both Hydrofarm and GrowGeneration have already pre-announced disappointing Q3 results. Hydrofarm has suggested that its revenue fell from Q2 to $121-124 million, a 27% increase roughly from a year ago “driven entirely by M&A growth.” GrowGeneration has indicated that revenue was $114-116 million, up 109% from a year ago at the mid-point but down from Q2 as well.

During October, HEXO Corp and Valens Company (TSX: VLNS) (OTC: VLNCF) reported financials. HEXO’s Q4 revenue was ahead of expectations due to a large shipment to Israel, but there was substantial deterioration in its operating profit. Its growth in adult-use sales during the quarter of  21% to C$29.8 million substantially trailed the 57% year-over-year growth in the overall Canadian market. Valens’ revenue advanced from the prior quarter and from a year ago but was short of prior expectations.

Canadian Dollar Reporting – Public Cannabis Company Revenue Tracker

During November, two of the Senior list companies will report financials, including Canopy Growth (TSX: WEED) (NASDAQ: CGC) and Aurora Cannabis (TSX: ACB) (NASDAQ: ACB). According to Sentieo, analysts  expect Canopy Growth Q2 revenue advanced just 8% from a year ago to C$144 million. Adjusted EBITDA is expected to improve from -C$64 million in Q1 to -C$52 million. Aurora Cannabis Q1 revenue is expected to decline nearly 10% to C$61 million, with adjusted EBITDA expected to be -C$16  million.

For those interested in more information about companies reporting in November, we publish comprehensive earnings previews for subscribers at 420 Investor, including for Focus List members mentioned here, Canopy Growth, Cresco Labs, Curaleaf, GrowGeneration, GTI, Trulieve, Scotts Miracle-Gro and Verano.

Visit the Public Cannabis Company Revenue Tracker to track and explore the complete list of qualifying companies. We have recently created a way for our readers to access our library of Revenue Tracker articles. For our readers who are interested in staying on top of scheduled earnings calls in the sector, we have have created and continually update the Cannabis Investor Earnings Conference Call Calendar.

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email