Thirteen of the major marijuana companies reported first quarter earnings in a busy week and on Thursday Curaleaf Holdings Inc. (CSE:CURA) took its turn. The Massachusetts-based cannabis company posted revenues of $35.3 million, a 10 per cent improvement over last quarter and nearly four times the $9.1 million sales it generated a year ago.
Curaleaf’s retail and wholesale revenues were up more than 380 per cent, taking up $27.8 million of total revenue for the quarter. This was mainly a result of acquisitions of new dispensaries in New York and Florida in the first three months of 2019.
The U.S. cannabis company logged $10.2 million in total losses, which sharply rose from its $2.3 million loss in last year’s same period.
However, with Curaleaf pursuing acquisitions and launching seven new dispensaries during the quarter, it’s not a surprise that its selling, general and administrative (SG&A) expenses rose by $15.9 million (215 per cent) from last year. Interest costs of $4.2 million pushed the loss down even deeper.
Curaleaf projects higher revenues, profits
Curaleaf projects sunnier days with pro forma revenue of $75.1 million, which includes sales generated from its pending and closed acquisitions.
One of those acquisitions is Cura Partners, which was announced earlier this month, and the other expansions give the company optimism for more growth ahead. Curaleaf plans for a significant market share in the industry and does not rule out further acquisitions.
Despite the heavy costs of growing the business, Curaleaf CFO Neil Davidson is still aiming for the company to not only be profitable, but to be generating strong cash flow as well:
“We are confident in our strategy and plans for accelerated growth in the back half of the year, as we build out a national platform and brands with the goal of producing profitable and positive cash flow over the long-term,” he said in the release.
But as investors know, “accelerated growth” for marijuana companies often leads to even more costs being added to a company’s financials in the near term making it hard to turn a profit.
Growth as a priority over profits seems to be the mantra of the largest cannabis firms so far, and investors should take Curaleaf’s goals with a grain of salt as it’s more likely a longer term goal.
Expansion and growth creates inefficiencies and expenses, and it’s hard to optimize operations when a company is still in these high-growth stages. Today, Curaleaf sits in seventh for the largest cannabis corporations by market capitalization, but if it keeps posting larger revenues it could help it propel further ahead in the top-10.
*All figures in USD