This is a copy of the January 6th edition of our weekly Newsletter, which we have been publishing since October 2015.
Friends,
As the cannabis industry rapidly matures, its publicly-traded companies are beginning to act like those in other sectors. For example, during this last “earnings season”, where companies shared quarterly financials for the quarter ending 9/30, many companies hosted conference calls for analysts and investors. There were so many, in fact, that some overlapped with others. We’re pleased to share with our readers a cannabis conference call calendar that will be updated regularly.
Another welcome change has been that several cannabis companies are now providing guidance, or forward-projections of financial aspects of their company. Typically, this type of information is centered on revenue, but some companies are providing guidance for other items, like free cash flow or measures of earnings, like EBITDA (earnings before interest, taxes, depreciation and amortization).
Providing guidance signals to investors that a company has an ability to forecast its own business. Importantly, it also gives investors a way to keep score. Companies that provide guidance and meet or beat it over time earn confidence, while those that fail to meet the goals are viewed negatively.
Investors like guidance because it helps them to understand their potential investment return. Management has much better insight into their operations than outsiders do, so they should be able to better assess the future. This is especially important when looking at multi-state operators in the U.S., where business is done state-by-state and many of the operations are ramping up over time.
On the contrary, one major reason to avoid giving guidance is that the business is too difficult to forecast. If a management team really can’t confidently provide guidance, it shouldn’t do so, as it would be risking its credibility. The best policy is to give as much forward-looking guidance as possible, even if it falls short of forecasting specific revenue levels.
While Canadian companies have not historically provided forward-looking guidance, many of the American cannabis companies are doing so. Charlotte’s Web was one of the first, including revenue and EBITDA guidance for 2018 and 2019 in the IPO prospectus. Curaleaf Holdings included 2019 guidance for sales and free cash flow when it reported Q3. Harvest Health & Recreation has provided very detailed sales and EBITDA projections for 2019 and 2020. KushCo Holdings gave FY19 sales guidance when it reported its Q4 financials. Finally, Trulieve posts a deck on its website with 2019 and 2020 sales and EBITDA guidance.
The sector has evolved, with cannabis companies beginning to provide guidance. This is especially helpful given that there are few institutional-grade analysts covering many of the companies, especially those in the U.S., and that most investors don’t have access to the analyst forecasts if there is coverage. It will be interesting to see how the results compare to the forecasts as the year plays out.
To learn more about Charlottes Web Holdings, a client of New Cannabis Ventures, visit the company’s Investor Dashboard that we maintain on its behalf and 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:
- Exclusive: 39 Top Revenue Generating Cannabis Stocks Ranked as of December 28th
- Exclusive: American Cannabis Operators Decline 18.0% in December
- Exclusive: Canadian Cannabis Producers Decline 11.9% in December
- Charlotte’s Web Announces Former Coca-Cola Exec as Chief Growth Officer
- Exclusive: Global Cannabis Stocks Decline 20.3% in December
- Exclusive: Health Canada Adds 6 New Licensed Cannabis Processors
- Maryland Cannabis Operator Announces $20 Million Capital Raise to Fund Northeast Expansion
- TILT Holdings to Buy Cannabis Vaporization Technology Company Jupiter Research for $210 Million
Save $100 off the Early Bird admission price to the International Cannabis Business Conference, which returns for the 5th time to San Francisco for an event that will appeal to operators and investors. Panel discussion topics include a look at legalization in California, development of the capital markets, international markets, the mainstreaming of CBD and more.
To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.
Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers as well as the American Cannabis Operator Index.
View the Public Cannabis Company Revenue Tracker, which ranks the top revenue producing cannabis stocks that generate industry sales of more than $2.5m per quarter.
Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.
Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.
Consider subscribing to 420 Investor, Alan’s comprehensive stock due diligence platform since 2013 for more in-depth information and market intelligence about the publicly traded cannabis sector.
Find your place in the cannabis industry by visiting our Careers and Jobs Page and learn which companies are hiring aggressively.
Sincerely,
Alan & Joel
