Tilray announces agreement to take over Four20 as cannabis firms report earnings
In this week's "Rising High," The Fly's recurring series focused on cannabis stock news, we look back over Tilray’s retail acquisition, cannabis firms’ earnings reports and an analyst upgrade on Canopy Growth.
TILRAY TO ACQUIRE 420 INVESTMENTS: Tilray (TLRY) announced Thursday that it has entered into a definitive agreement to acquire all of the issued and outstanding securities of 420 Investments, an adult-use cannabis retail operator headquartered in Calgary, Alberta. Four20 currently operates six licensed retail locations and has 16 additional locations secured in locations in Alberta, including Canmore, Calgary and Edmonton. The company said, “Tilray and High Park will leverage Four20's retail expertise and brand and market knowledge to expand into other Canadian provincial markets where licensed producer retail ownership will be permitted in the future.” Under the terms of the agreement, Tilray will deliver up to C$110M consisting of C$70M in Tilray class 2 common stock at closing and $40M in common stock subject to the achievement of certain performance milestones by Four20. It is anticipated that the closing of the transaction will be completed by the end of 1Q20.
EARNINGS:On Thursday, Biome Grow (BIOIF) reported Q2 revenue of C$1.35M which compared to Q1 revenue of C$340,574. The company also said average selling price per gram increased by 15% from $6.80 to $7.86 while the average cost per gram cultivated product declined to $2.31 from $2.72 sequentially. Biome CEO Khurram Malik said, "We're very proud of the work our Highland Grow team in Nova Scotia has done to achieve a significant sequential ramp up in business in the second quarter. We are also very proud that Highland Grow was able to achieve profitability less than two quarters after entering commercial production.”
On Wednesday, Green Thumb Industries (GTBIF) reported Q2 revenue increased 228% year-over-year to $44.7M from $13.6M in 2Q18. CEO Ben Kovler said, “We are pleased to report another solid quarter of positive yet disciplined momentum with record revenue and positive adjusted operating EBITDA as our strategic plan delivers on operating efficiencies from scale. Continued execution of key priorities such as the closing of Integral Associates, accelerated store openings, and expanded distribution of our brand portfolio sets us up well for the future."
On Tuesday, Curaleaf (CURLF) reported Q2 total revenue of $48.5M, a 231% year-over-year increase compared to $14.6M in 2Q18. CFO Neil Davidson said, “We achieved a number of milestones in the second quarter, foremost, we generated positive Adjusted EBITDA for the first time in Company history, and we achieved record pro forma revenue of $111M.”
On Wednesday, Origin House (ORHOF) reported Q2 revenue of C$21.4M compared to C$3.5M for the same period in 2018. CEO Marc Lustig said, “I am very proud of the entire Origin House team for generating another quarter of record revenue growth, leveraging the California brand support and distribution platform we built over the past several years, to deliver results for shareholders. It speaks to the strength and maturity of our organization that we were able to increase our share of shelf in California while preparing to integrate with Cresco Labs.”
Additionally on Wednesday, TILT Holdings (SVVTF) reported Q2 revenue of $39M, an increase from zero in the same period in 2Q18 and 13% compared to 1Q19. The company also reported preliminary unaudited July revenue of $15M and the first month of positive adjusted EBITDA of $0.5M. “The second quarter was a highly productive period for TILT. We continue to optimize our organization, including the dismissal and re-alignment of senior leadership, accelerate integration efforts, dramatically reduce overhead and instill an enhanced focus on profitable growth,” interim CEO Mark Scatterday said.
On Monday, iAnthus Capital (ITHUF) reported Q2 reported revenues of $19.2M which compared to $256,000 for the period last year. CEO Hadley Ford said, “The first half of 2019 has been an exciting time for team iAnthus, and I want to thank all of our employees, nearly 700 strong, for all of their hard work. We have integrated the MPX and iAnthus businesses, and the team effort is beginning to show in our results. MPX products are now carried in three states in over 110 stores and we'll be adding California, Massachusetts and Florida later this year. We continue to generate operational efficiencies without limiting growth.”
GREEN THUMB ACQUIRES FIORELLO: Green Thumb Industries announced Monday it has closed on a transaction to acquire New York-based Fiorello Pharmaceuticals, one of only 10 companies approved to operate a medical marijuana company in the state. Assets include a manufacturing and cultivation facility in Schenectady County and a retail store in each of the following locations: Manhattan, Rochester, Halfmoon and Nassau County, three of which are open.
SEAPORT UPGRADES CANOPY GROWTH TO BUY: Seaport Global analyst Brett Hundley upgraded Canopy Growth (CGC) to Buy from Neutral on Monday with a $31 price target. Canopy shares have now "round-tripped themselves" year-to-date and are down 7.4% compared to a 13.6% increase in the S&P 500, Hundley said. Although the analyst moderated his sales and margin expectations, he believes the new bar is "increasingly achievable." Further, the beta for cannabis generally, and Canopy specifically, "needs to improve ahead”, the analyst contended. He said he thinks the North American cannabis industry can "actually help to provide some safety for investors" and finds Canopy Growth shares attractive.
OTHER CANNABIS STOCKS: Publicly-traded companies in the space include Aurora Cannabis (ACB), Aphria (APHA), CV Sciences (CVSI), CannTrust Holdings (CTST), Cronos Group (CRON), General Cannabis (CANN), Innovative Industrial Properties (IIPR), India Globalization Capital (IGC), ICC International Cannabis (KNHBF), MediPharm Labs (MEDIF), Indiva (NDVAF), OrganiGram (OGRMF), KushCo (KSHB), MedMen Enterprises (MMNFF), Elixinol Global (ELLXF), Planet 13 Holdings (PLNHF), Wayland Group (MRRCF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), Sunniva (SNNVF), Sproutly (SRUTF), DionyMed Brands (HMDEF), GrowGeneration (GRWG), Harvest Health & Recreation (HRVSF), Trulieve (TCNNF), Zynerba (ZYNE), Greenlane (GNLN), Delta 9 (VRNDF), Canopy Rivers (CNPOF), and Westleaf (WSLFF).