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👀 Welcome To The Show 👀

Author

Anthony Varrell
August 12, 2024

GM Everyone,

Here we go, the start to another week in the cannabis industry. We have another earnings season under our belts and are a week away from the DNC, which many people believe could be the opportune time for the administration to drop the final ruling on cannabis rescheduling. Will we get it this week? I would say the odds are below average, but there is one thing I am certain of: I’m not certain of anything. We are due for something to happen in our favor as the industry has been growing, but we've been mostly stuck in the mud from a regulatory perspective for a couple of years now.

Pretty please, Garland come out and play.

Today’s letter can be read in 7 minutes and 38 seconds.

💸 High Impact

Top 5 Earnings Reports From Last Week

Trulieve - Alright, listen up. Revenue's up 2% from last quarter, and 8% from last year, raking in $303 million. Gross margin? A solid 60%. Yeah, there’s a $12 million loss, but hey, it’s half of what it was before. Adjusted net income is barely in the green at $0.2 million, but EBITDA is up 36% year over year. Cash flow? Looking good at $71 million, and they’re sitting on $356 million. Expansion? Florida and Ohio just got new spots.

GTI - Here’s the deal: Q2 revenue hit $280 million, up 11% year-over-year. They’ve got $196 million in cash. Net income? A cool $21 million, or $0.09 per share. Adjusted EBITDA is solid at $94 million, making up 34% of revenue. Six months of operations brought in $104 million in cash, even after paying $53 million in taxes. And, they bought back 1.6 million shares for $20 million. Boom, that’s how it’s done.

TerrAscend - Q2 net revenue is up 7.5% to $77.5 million. Gross profit margin dipped to 48.6%, but the net loss is cut in half to $6.2 million. EBITDA from continuing ops skyrocketed 186% to $18.6 million. Adjusted EBITDA jumped 21.9% to $15.6 million. Cash flow? They’re sitting pretty at $13.1 million, and free cash flow flipped to $11.7 million from a negative. Solid quarter, making moves.

Cresco Labs - Q2 revenue hit $184 million, with a gross profit of $95 million. Adjusted gross margin jumped to 52%, a nice 570 bps bump. SG&A got slashed by 14% to $53 million. Yeah, there’s a $51 million net loss, but that’s thanks to a one-time $61 million tax hit. Adjusted EBITDA? Up 33% to $54 million. They pulled in $17 million in cash flow and kept the top spot in Illinois, Pennsylvania, and Massachusetts.

Verano Holdings - Second Quarter 2024 delivered a mixed bag: revenues edged up 0.5% to $222 million, right on target but still down 5% from last year. Gross profit held at 51% of revenue, while SG&A costs ate up 39%. The bottom line shows a $22 million net loss, translating to -10% of revenue. Adjusted EBITDA came in at a respectable $71 million, or 32% of revenue. Cash flow added $8 million, though $19 million went into capital expenditures.

📈 Dog Walkers

MDMA Gets Shot Down

Lykos Therapeutics just hit a wall with the FDA, which rejected their application for midomafetamine (MDMA) as a PTSD treatment. The FDA isn't buying it yet—they're demanding another Phase 3 trial before giving the green light. This is a huge setback, especially since Lykos had Priority Review status and Breakthrough Therapy designation. CEO Amy Emerson called the decision “deeply disappointing,” and it’s a major blow for millions struggling with PTSD. Despite backing from top researchers, the FDA’s concerns about the treatment’s durability and bias issues from prior MDMA use have put the brakes on Lykos’ plans.

California Faces Major Shake Up

Alright, here's the deal: California's got a bill, AB 2223, that's stirring the pot—literally. The bill aims to pull hemp-derived cannabinoids into the state's regulated cannabis market, but not everyone’s thrilled. Governor Newsom’s office just threw in some last-minute amendments that could flip the entire industry on its head. Licensed cannabis growers are freaking out about competing with out-of-state hemp companies that won’t face the same heavy regulations. Meanwhile, parents using CBD for their kids' medical conditions are worried their access could get cut off. The clock’s ticking, with the bill needing to clear committee by August 16. This could be a massive shakeup, and stakeholders are pushing back hard.

Avicanna Closes Shoppers Deal

Here’s the scoop: Avicanna just locked down a major deal, snagging the Medical Cannabis by Shoppers unit from Shoppers Drug Mart for CA$2.6 million, plus some earnout cash based on net revenue over two years. They’re rolling out MyMedi.ca, a new platform replacing Shoppers’ system, to serve thousands of patients. CEO Aras Azadian is pumped, calling this a "transformational milestone." And to top it off, they raised CA$1.5 million through a private placement with an 18% interest rate. Avicanna’s gearing up for some big moves in the cannabis space!

🗞️ The News

📭 Research

Initiating Coverage: Green Thumb Industries - Download Here

Reconfirming Buy Rating: MariMed - Download Here

Initiating Coverage Of Verano Holdings Corp. - Download Here

Initiating Coverage: TerrAscend - Download Here

📺 YouTube

Would We Invest In These Five Small Cap Stocks? | TDR Small Cap Sunday

What we covered:

✅ On our latest Trade to Black Small Cap Sunday Podcast, we provide research for five small-cap stocks. We have a Canadian Cannabis company from Montreal called MTL Cannabis Corp (CSE: MTLC). Second, the human resource software company, Asure (NASDAQ: ASUR), is from Austin, Texas. A second Cannabis-focused biotech company from Toronto, Ontario, is known as Avicanna (OTC: AVCNF). Fourth, a company focused on finding products to sell on Amazon; this is interesting as we will learn about selling on Amazon, known as Aterian (NASDAQ: ATER). Last, we will review some observations on SNDL (NASDAQ: SNDL) earnings reported last week.