Curaleaf Impressed with Strong Q3 2019 Earnings

Curaleaf (CURLF) reported strong third-quarter earnings on November 19, and the stock has increased by 15.2% since then. Let’s take a look at Curaleaf’s performance.

Curaleaf Impressed with Strong Q3 2019 Earnings

Curaleaf’s strong third-quarter earnings

Curaleaf reported a 189% increase YoY (year-over-year) in total revenue to $61.8 million. Sequentially, its total revenue rose 27% from $48.4 million in the second quarter. The company also saw a 205% YoY increase in retail and wholesale revenue.

The company noted in its November 19 press release that organic growth in Florida and New York, as well as acquisitions in Arizona and Maryland, contributed to the boost in sales. However, the company fell short of analysts’ estimate of $63 million in revenue.

Unlike its Canadian peers, Curaleaf reported a positive adjusted EBITDA of $9 million for the third quarter. Comparatively, it reported a loss of $3.2 million in Q3 of 2018. However, Curaleaf reported EPS of -$0.01 in the third quarter.

Management’s view

Curaleaf CFO Neil Davidson noted during the earnings release, “The third quarter demonstrated the power of our increased scale as we reported record total and managed revenue, record adjusted EBITDA and expanded operating margins as we benefited from increased scale and strong demand in key markets. Our main focus continues to be prudent capital allocation, operational improvement and integration of our pending and closed acquisitions to drive continued strong overall growth and operating leverage.”

Key takeaways from the earnings call

The company noted during its earnings call that vaping concerns affected their sales. Notably, September’s vape sales took a toll on most of their markets. However, the company is working with regulators to improve the rules relating to vape products in Massachusetts.

Among its other markets, Curaleaf showed ongoing progress in sales in Arizona, Massachusetts, Florida, and New Jersey.

Curaleaf announced that by the end of November, it would have 28 operating stores in Florida. It also expects to open 12 stores by the middle of next year, as it believes Florida is the fastest-growing medical cannabis market in the US.

Curaleaf’s outlook

In its earnings call, Curaleaf’s management said the company expects to show a 20%–30% sequential increase in revenue in Q4 2019. For fiscal 2020, the company expects to generate revenue of $1.0 billion–$1.2 billion.

Comparing Curaleaf with its peers

While Curaleaf’s earnings impressed investors, Canadian cannabis companies disappointed investors. Last week, Canopy Growth (CGC) (WEED) reported lower-than-expected results for the second quarter of fiscal 2020. Its revenue of 78.6 million Canadian dollars missed analysts’ estimates. It also reported EBITDA of -155.7 million Canadian dollars. To learn more, please read Canopy Growth Stock Falls after Weak Q2 Earnings.

Aurora Cannabis’s (ACB) revenue rose 153.57% but missed consensus estimates. Its EBITDA also came in at -39.67 million Canadian dollars. To learn more, please read Aurora Cannabis: Good or Bad News for Its Q1 Earnings?

Curaleaf and peers’ stock performance

Curaleaf stock has gained 15.2% since it reported its third-quarter earnings on November 19. Yesterday, Aurora Cannabis gained 12.8%, Cronos Group gained 2.5%, and Canopy Growth gained 15.1%. The North American cannabis industry, as tracked by the Horizons Marijuana Life Sciences Index ETF (HMMJ) gained 5.7% yesterday.

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