Cannabis Chart Of The Week: Revenue And EBITDA Beats Are Great, But The Real Story Is Cash Flow From Operations
Portfolio Pulse from Viridian Capital Advisors
The recent earnings reports from eight major Multi-State Operators (MSOs) in the cannabis industry show mixed results on revenue and EBITDA, but the standout detail is the positive Cash Flow from Operations (CFFO) in Q3. Most companies beat consensus projections for CFFO, with tax deferrals being a significant driver. Investors are advised to focus on CFFO rather than revenue or EBITDA, and to distinguish between repeatable cash flows and future cash outflows due to deferred payments. The Viridian Cannabis Deal Tracker provides insights into capital raise and M&A activity in the cannabis sector.
November 13, 2023 | 4:47 pm
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POSITIVE IMPACT
Curaleaf had a minor revenue miss but an EBITDA beat and positive CFFO in Q3, partly due to reduced receivables and inventory. Tax deferrals also contributed to their cash flow.
Curaleaf's positive CFFO and EBITDA beat, despite a slight revenue miss, indicate a strong operational performance. The tax deferrals are a positive short-term factor but may lead to future cash outflows.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
Green Thumb had the largest revenue beat among the MSOs and a minimal impact from tax deferrals on its CFFO, indicating strong underlying financial health.
Green Thumb's significant revenue beat and minimal reliance on tax deferrals for its CFFO suggest a robust financial position, likely to be viewed positively by investors.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90
POSITIVE IMPACT
Trulieve had a revenue beat and generated cash from reduced receivables and inventory, indicating good cash management. Future cash flows may be impacted by the decision to accrue but not pay 280e taxes.
Trulieve's positive performance and cash generation from operations are encouraging, but the decision on tax accruals could be a concern for future cash flows.
CONFIDENCE 80
IMPORTANCE 75
RELEVANCE 85
NEUTRAL IMPACT
MariMed missed on EBITDA by a large margin, but its CFFO was positively influenced by tax deferrals, which accounted for a significant portion of its cash flow.
MariMed's EBITDA miss may raise concerns, but the positive CFFO due to tax deferrals could offset some negative sentiment in the short term.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEUTRAL IMPACT
TerrAscend had the largest EBITDA beat, but its CFFO would turn negative without tax deferrals, indicating potential future cash flow issues.
TerrAscend's strong EBITDA performance is overshadowed by the fact that its positive CFFO is heavily dependent on tax deferrals, which may not be sustainable long-term.
CONFIDENCE 75
IMPORTANCE 70
RELEVANCE 75
NEUTRAL IMPACT
Verano beat analyst estimates for CFFO, but without tax deferrals, it would have missed these estimates, suggesting reliance on non-recurring financial strategies.
Verano's CFFO beat is less impressive when considering the significant role of tax deferrals, which may not be a reliable indicator of future performance.
CONFIDENCE 75
IMPORTANCE 65
RELEVANCE 70
NEGATIVE IMPACT
Planet 13 had a revenue miss and a significant EBITDA miss. The company's CFFO would have been more negative without tax deferrals.
Planet 13's misses on both revenue and EBITDA, along with a reliance on tax deferrals to improve CFFO, suggest potential financial instability that could negatively impact the stock price.
CONFIDENCE 80
IMPORTANCE 75
RELEVANCE 80