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Florida, the third largest state in population at 22 million, has a mature medical cannabis program dominated by publicly-traded MSOs. The program has improved after initially limiting its patients to medical cannabis derivatives exclusively by adding flower and then edibles. Florida puts out data weekly, but it isn’t related at all to dollar-volume. The most recent report from the Office of Medical Marijuana Use is a good example of the type of information conveyed – how many patients and how much unit volume for each licensed company by type:
Leading Cannabis Companies in Florida
The leading 4 companies, Trulieve, Verano Holdings, Curaleaf and Ayr Wellness, have more than 59% of the licensed dispensaries. In the week ending 9/15, they produced 74% of the formulated products in Florida and almost 76% of the state’s flower sold.
An Unusual Program
Florida’s program is unusual in that the market is almost completely vertically integrated, meaning that almost all of the sales to customers are produced by the dispensary’s owner. There is very little wholesale activity. Consequently, the margins in the state tend to be higher than other states. For example, the projected 2023 adjusted EBITDA margins at Trulieve and Verano are 34.9% and 36.6%, respectively. This is considerably higher than peers, which are 16% (Planet 13 Holdings) to 32.1% (Green Thumb Industries). While we don’t strongly predict margin pressure in Florida that we have been seeing in other states, it would decline sharply were the state to become substantially less vertically integrated. The Florida Supreme Court in May 2021 upheld this aspect of their program.
Florida Cannabis Data
The state releases unit volumes each week, but it doesn’t share historical growth rates. Florida revealed that it now has 751,311 qualified patients, which is 3.4% of the state’s population, a healthy percentage. This week, the growth from a year ago was 22.0%, a record-low. At the end of 2021, the annual growth rate was 41.9%. Looking at data from BDSA Analytics, one can get a better sense of dollar volume. In July, sales of $193.8 million grew 27.2%. This was a bit higher than the 24-25% annual growth rate in patients during the month.
Since a year ago, with patient count up 22.0% as of 9/15, the unit volume of MMJ products has grown 23.6% Flower sales are up just 11.7%. With patient growth strong but slowing and companies improving their production capabilities, we think that the market could get more competitive even without a move towards wholesaling.
Adult-Use Could Be Coming
We don’t project big problems in Florida, and we also note that the state could move towards legal adult-use and that we think would be good for the incumbents. The state’s residents may vote on adult-use in 2024 if activists are successful in collecting 900K valid signatures from registered voters.
As one of the nine American publicly-traded cannabis companies generating over 100 million of quarterly revenue, Ayr Wellness is poised to benefit from new growth from states turning on adult-use such as New Jersey and Massachusetts. The company’s stock is down substantially YTD and its Q2 results from August came in-line with expectations. Founder and CEO Jonathan Sandelman said, “With our core operating footprint in place, the vast majority of our capex behind us, and a strong, $117 million cash position on our balance sheet, we believe that we are well-placed to weather this economic environment and emerge stronger on the other side.”
Get up to speed by visiting the Ayr Wellness Investor Dashboard that we maintain on their behalf as a client of New Cannabis Ventures. Click the blue Follow Company button in order to stay up to date with their progress.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
Greenlight, a private multi-state operator, has 23 operational dispensaries and another 15 under construction. The company, which has largely grown its footprint by winning licenses, focuses on Midwestern states that competitors have generally overlooked. However, the company sees opportunities there as those states are preparing to transition to adult use. In an exclusive interview, CEO John Mueller, a serial entrepreneur, talks about the company’s market presence, upcoming ballot initiatives and plans to grow the company.
Michigan cannabis sales slipped sequentially in August. Medical sales fell 53.9% from a year ago to $18.5 million, down 12.4% sequentially. Adult-use sales expanded 50.9% year-over-year to record $189.4 million, and were up 0.3% sequentially. Sales are up 26.1% so far this year at $1.45 billion.
Fire & Flower Q2 revenue fell 6% to C$40.7 million from C$43.3 million in the prior-year period. The company reported higher revenue with less retail stores but also a large decline in digital revenue, which weighed on the company’s Q2 results. Newly installed CEO Stephane Trudel has been on the job for just one month out of the reported quarter and has said that the company is “focused on the transformation of our business and strategic opportunities with a goal to deliver positive Adjusted EBITDA and Free Cash Flow.”
High Tide reported Q3 revenue nearly doubled to $95.4 million compared to $48.1 million in the same quarter last year. Sequentially, revenue increased by 18%. The company noted that its results came despite a global softening of e-commerce sales as pandemic-related restrictions are being lifted. “I have always strived to underpromise and over-deliver. This is a value that I consistently instill in our team. We set targets and are held accountable as a team if we do not meet them. I am happy to report that based on our latest financial results, we are consistently outperforming our targets as communicated to the market,” said Raj Grover, President and CEO.
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Alan & Joel