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Solid Profits Show Strength of Growing Cannabis Space

CannabisNewsWire Editorial Coverage: The cannabis markets have already produced some amazing financial results, but all indications are the industry is only at the beginning of an impressive ascent.

Quarter-over-quarter sales growth is one of the indicators used to indicate upside potential. With that in mind, Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF) (WLDFF Profile) revenues have increased 11 consecutive quarters, quarter on quarter, ever since the company started selling its hemp-based CBD products. Similar quarterly sales spikes and strategic acquisitions foreshadowed dramatic price increases in some of the largest names in the cannabis universe. Green Thumb Industries Inc. (CSE: GTII) (OTCQX: GTBIF) more than tripled its revenues from one year ago, both on a year-over-year and quarter-over-quarter basis, and Scotts Miracle-Gro Company (NYSE: SMG) announced company-wide sales increased 17% in its fiscal second quarter. Trulieve Cannabis Corp. (CSE: TRUL) (OTC: TCNNF) grew its first-quarter 2019 revenues by 192% year-over-year to $44.5 million while Acreage Holdings Inc.’s (CSE: ACRG) (OTCQX: ACRGF) first-quarter 2019 performance showed revenues up 487% to $12.9 million.

  • Cannabis run is far from over, new winners emerging
  • Branding, marketing and retail reach signals of success
  • Year-over-year and sequential growth helps identify future potential

Good Times Have Just Begun

Legal cannabis is a recent worldwide phenomenon, and the emerging market seems to have almost unlimited potential. The global legal marijuana market, valued at just $9.3 billion in 2016, is expected to blow past $146 billion within the next six years.

According to a United Nations report, cannabis is the most widely consumed drug on the planet, with approximately 270 million global consumers using cannabis, equivalent to about 4% of the world’s population, barely a dent in market penetration. As marijuana makes its way into the mainstream, usage among all age groups seems certain to increase. However, among the most coveted 18-to-34-year-old demographic, the acceptance appears to be increasingly widespread.

Millennials are about three times and Gen Z about four times more likely to use cannabis than aging Boomers. Seeing the numbers, savvy cannabis companies are moving forward full speed in product and brand development to capture this coveted demographic and market share, now and for decades to come. As public perceptions change and legalization increases, the number of users is certain to skyrocket in an essentially untapped market. A global transition is already underway. Growth trajectory is virtually vertical, presenting a once-in-a-generation investment opportunity.

Retail Reach

Founded in 2012 as a private company, Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF) went public in 2014 and has seen impressive growth since day one. Wildflower is an integrated health-and-wellness company creating distinct brands that incorporate the synergistic effects of plants and their extracts. The company’s latest quarterly sales set records, up 78% over the previous quarter, validating corporate strategy, the popularity of its products and the continued expansion of market share. Intent on boosting revenue and earnings even further, Wildflower is about to finalize the acquisition of a preeminent cannabis retailer in Vancouver that also owns multiple cannabis licenses.

Wildflower’s latest press release is further evidence of the company’s rapid growth and global reach. The company reported third-quarter sales were up by 78% over the second quarter, the 11th consecutive quarter of revenue growth, since Wildflower Brands began selling products. On top of these stellar results the company is further expanding its retail footprint and product distribution with the accretive acquisition of Vancouver-based City Cannabis Corp.

City Cannabis is a premier cannabis retailer holding two of the three City of Vancouver licenses to sell cannabis and is the only company with multiple licenses in British Columbia. With margins of 50%, City Cannabis had revenues of $1.8 million for the reporting period that began with the opening of its two stores in early January. The combined quarterly revenues of Wildflower Brands and City Cannabis equates to an impressive $4.3 million. Wildflower expects to close on the City Cannabis deal before the end of June, and the acquisition will immediately be accretive to Wildflower’s earnings upon closing.

Bringing City Cannabis and Wildflower together will result in revenue operations in three U.S. states and two Canadian provinces with a combined North American target market of more than 75 million people. The positive net income generated by City Cannabis comes from just two operating properties, even though the company holds an additional seven leases at various stages of permitting approvals.

Commenting on the financials, Wildflower CEO William MacLean stated, “We are pleased with the financial results of both Wildflower and City Cannabis. Sales through every Wildflower distribution channel are up, and sales at City’s licensed retail outlets continue to grow month over month. The positive net income is particularly impressive with City Cannabis carrying a total of nine leases, which are at various stages of the permitting process.”

Grow, Grow, Grow

Already a solid presence in California, Wildflower owns 14 cannabis licenses for recreational and medical cannabis cultivation, manufacturing, retail distribution and delivery. Wildflower’s expansion into Canada with the acquisition of City Cannabis strengthens the company’s global growth strategy, which includes strategic distribution deals already in place in the European Union and South Africa. In addition to capturing revenues from retail operations, the City acquisition gives Wildflower another channel to market its enormously popular products and launch into the over-the-counter market with its CBD formulations and accessories.

Wildflower continues to capture ever-greater market share with innovation, retail expansion and a growing family of popular brands. The company’s strategic partnerships, acquisitions and organic growth are all bolstered by its marketing genius to lock in more loyal consumers. Grabbing national and celebrity attention, Wildflower used ingenious product placement during the 2019 Oscars by including its CBD+ Healing Stick in each of the gift bags of the stars.

The company has also employed an innovative pop-up store approach in SoHo, New York, to introduce Wildflower Wellness products. Wildflower identified a compatible high-profile retail venue and struck a deal with the outlet, then marketed its products in the upscale establishment for a limited time period, raising market uptake and visibility.

Big Names

In addition to fourth-quarter growth, Green Thumb Industries Inc. (CSE: GTII) (OTCQX: GTBIF) reported increased revenue generation from two states to five states by operationalizing both consumer packaged goods and retail business units, including strong branded products distribution and the opening of seven new Rise™ stores nationwide. “In just six months following our RTO in June and in the beginning of 2019, we have expanded the infrastructure for our consumer products and retail businesses to now include 13 production facilities and the ability to open 88 retail locations across 12 states including pending acquisitions,” said GTI founder and COE Ben Kovler. “At the same time, we have built an incredible team that is over 500 strong to support our strategy to distribute brands at scale. With the growth of our branded product distribution, new store openings and adult-use markets coming on line, we are very pleased to have more than tripled our revenues from one year ago both year-over-year and quarter-over-quarter.”

Scotts Miracle-Gro Company (NYSE: SMG) earns its spot as a marijuana stock thanks to the company’s Hawthorne Gardening subsidiary, which ranks as the top supplier of hydroponic gardening products to the U.S. cannabis industry. In Scotts’ fiscal 2019 first quarter, this business contributed 47% of the company’s total revenue. SMG notes that each state’s cannabis industry and regulatory system are still in the process of maturing and says that “our experience growing an expansive, thriving business enterprise, and the company’s history of collaborating with government entities and other stakeholders to address difficult regulatory issues can provide invaluable insight and expertise to officials grappling with the challenges inherent in building comprehensive regulation for the cannabis industry. We are committed to working with regulatory bodies at all levels of government to help achieve these goals.”

Trulieve Cannabis Corp. (CSE: TRUL) (OTC: TCNNF), a vertically integrated “seed-to-sale” company and the first and largest fully licensed medical cannabis company in the State of Florida, achieved its goal of reaching 30 stores by end of Q2 with 28 Trulieve dispensary locations operating in Florida, one in California, and one added through its Connecticut acquisition. As noted in announcing its first-quarter results, Trulieve estimates that its expansion into Massachusetts, along with its continued growth in Florida, Connecticut and California, will push 2020 revenues in the range of $380 million-to $400 million, generating $140 million-$160 million in adjusted EBITDA. “Our first quarter results reflect our ability to deliver on our strategic initiatives, translating into continued strong financial performance,” said CEO Kim Rivers. “In addition to delivering on strong financial results we also achieved many significant milestones in the first quarter of the year. Growth continued in Florida with the opening of four new dispensaries, completing the first sale of smokable flower in Florida, and settling with the Florida Department of Health, allowing us an additional 14 stores above the state cap…”

Acreage Holdings Inc. (CSE: ACRG) (OTCQX: ACRGF) is gaining ground as it works toward increasing its national footprint and expanding in the western United States. Despite delayed dispensary openings caused by local regulators in both Massachusetts and Ohio, the company grew its Q1 revenues by 487%. The company is also on the fringe of an acquisition by Canopy Growth (TSX: WEED) (NYSE: CGC), a move Acreage founder, CEO and Chairman Kevin Murphy said “will provide us the ability to rapidly accelerate our growth plan as the transaction makes us the most attractive partner in U.S. cannabis.” Shareholders from both companies are voting on Canopy Growth’s potential acquisition of Acreage expected to “create greater shareholder value than as competitors in the U.S.”

Skepticism about the cannabis has disappeared; there’s little question about either the viability or the profitability of the newly respected cannabis sector. Significant money has already been made in the nascent industry, and it appears that a plethora of new winners will be created in the burgeoning sector.

For more information on Wildflower Brands, visit Wildflower Brands Inc. (CSE: SUN) (OTCQB: WLDFF)

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