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US medical and wellness cannabis provider, Curaleaf Holdings (OTCQX:CURLF), has recently completed a new $50 million revolving credit facility to fund future growth and potential acquisitions.

Originally established in 2010 as PalliaTech, a medical device company, Curaleaf operates in 23 states with 97 dispensaries, 23 cultivation sites and over 30 processing sites. It employs over 3,000 people across the United States and is headquartered in Wakefield, Massachusetts. The company’s main focus is on highly populated, limited license states such as New York, New Jersey, Pennsylvania, Arizona, Florida, Illinois and Massachusetts.

The rise and rise of Curaleaf Holdings

This latest capital injection comes just over a year after the closing of a senior secured term loan facility totalling $300 million which we believe helped to fund the closed acquisition in July 2020 of GR Companies. GR Companies – or Grassroots – is one of the largest private multi-state cannabis operators in the United States.

Curaleaf shares, which are traded on the OTCQX, have been climbing steadily in the last year from $6.20, and are now trading at around $14 per share. With market capitalisation currently of £11 billion, Curaleaf looks to have taken full advantage of the opportunities that abound in the cannabis sector.

Since their public offering in October 2018, Curaleaf has successfully closed on and integrated 14 businesses. The firm has recently acquired brands such as Select (a well-known cannabis wholesale brand in the US), Eureka, Acres, OGT, Grassroots, Arrow Alternative Therapies Group and Blue Kudu. All these operate across the medical and adult-use cannabis markets.

Why is Curaleaf a market leader?

The acquisition of Grassroots, in particular, is a coup for Curaleaf. Firstly, because it claims to be the world’s largest cannabis company by revenue and the most diversified vertically integrated cannabis US company, its expanded dispensary presence now offers access to medical or adult use cannabis to 192 million people in the country.

Secondly, since the Grassroots acquisition, Curaleaf has reported record revenue. The Q3 2020 results show that managed revenue was a record $193.2 million, an increase of 164% compared to $73.2 million in Q3 2019. Retail revenue increased by 206.5% to $135.3 million during Q3 2020, compared to $44.2 million in Q3 2019. The firm also expects to raise approximately $65 to $75 million of proceeds from asset dispositions relating to the Grassroots transaction over the next few months.

Curaleaf highlighted that there have been six consecutive quarters of positive AEBITDA by Q3 2020 – $42.3M of AEBITDA in 3Q 2020, compared to $10.4 million for the third quarter of 2019. The firm made a loss in Q3 2020, albeit a small one at $9.3 million. Joseph Lusardi, Chief Executive Officer of Curaleaf, anticipates a continued rise in revenue and EBITDA throughout 2021.

According to the Q3 2020 results, total liabilities were around $866 million – $177 million of which is due within the year – and despite a cash buffer of $86.4 million and $23 million due in receivables, it has $280 million in outstanding debt. The fact that the debt raise in January 2020 was $185.7 million after fees and the retirement of prior senior-debt obligations must also be taken into consideration.

Nevertheless, with a strong customer base, not to mention being granted an essential services designation by most US states during COVID-19, Curaleaf’s rapid expansion could well be turning a profit soon.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Philippa Aylmer

Philippa Aylmer

Philippa Aylmer is a freelance writer within the investment management sector.

She began her career in the late 90s writing about emerging markets for the Euromoney titles while based in Pakistan. Since then, she has covered hedge funds, ETFs, wealth management and fintech.

As well as news, on the client side, Philippa advises on media relations and editorial strategy, writing about the topical and technical issues of investment management

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Comments

This Post Has One Comment

  1. An excellent write-up. I think it is also important to take into account that part of the reason Curaleaf would be profitable if it weren’t so aggressively expanding. Right now Curaleaf is in a race for national market-share with Crisco Labs, Trulieve, and GrowGen, among others. It is eating this debt so that when national legalization occurs, it will be as expansive as possible.

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