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Cannabis companies Q3 results are a mixed bag

Many companies in the cannabis space have released their Q3 results. While it’s definitely not safe to assume the state of the cannabis industry based on these, they surely provide some info on how the sector is going. 

The vertically-integrated company Verano reported quite positive results. Q3 revenue indeed increased by 2% to $228 million. On the other hand, the net loss amounted to $43 million, compared to $10 million in the prior quarter. “I am very pleased with our performance in the third quarter and how our team demonstrated focus and adaptability in driving our business forward in an increasingly challenging environment,” said George Archos, Verano Founder, Chairman, and Chief Executive Officer. “In the face of economic headwinds, industry dynamics, and legislative uncertainty, we delivered revenue growth and strong Adjusted EBITDA margins, underscoring our focus on superior operations and efficiency. We significantly bolstered our growing product portfolio by scaling our signature Verano brand across core markets, introducing our value flower and extract brand Savvy, launching Ric Flair’s Ric Flair Drip Cannabis line in partnership with Tyson 2.0, and most recently, releasing a low-dose, high-function edibles line, BITS, which combine tailored adaptogens with cannabinoids and 5 mg of THC to appeal to a broad base of cannabis consumers,” says George Archos, founder, chairman, and CEO of Verano. 

Charlotte’s Web
For the three months ended September 30, 2022, net revenue was $17.0 million, a decrease of 28.1% versus $23.7 million in Q3-2021. The decrease was primarily due to lower comparable customer shipments, ongoing consumer shifts from tinctures to lower-priced gummies and formats, and lower relative traffic to the company’s e-commerce store, the company says. Business-to-business net revenue was $5.3 million, a decrease of $3.3 million, or 38.1%, lower year-over-year primarily due to lower comparable shipments to some of the company’s largest retail customers. “We’ve made significant progress this year realigning resources to strengthen Charlotte’s Web for long-term growth by executing on our strategic imperatives around innovation, expanding channels and distribution, growing our international presence, and furthering potential FDA pathways,” says Jacques Tortoroli, CEO of Charlotte’s Web. “Importantly, we have also restructured our sales organization and streamlined operations, which reduced expenses by 38%, now below $70 million on an annualized run rate. We believe this positions us for sustained improvement in topline growth and profitability as our key initiatives continue to gain traction.” 

“We took decisive action to reduce our operating expenses in the quarter while still generating record sales. These factors combined to drive substantial improvement in adjusted EBITDA margins quarter over quarter and positive cash flow from operations,” says Jason Wild, executive chairman of TerrAscend. Net revenue indeed increased 3.4% sequentially and 36.4% year over year to $67 million. GAAP net loss for the third quarter was $311 million compared to $14.2 million of net income for the previous quarter. The net loss for the quarter was driven by $331 million.

CEA Industries
Revenue in the third quarter of 2022 increased 37% to $5.1 million compared to $3.7 million for the same period in 2021. The increase was primarily attributed to some recovery in the supply chain that enabled the delivery of products with fewer delays. Operating expenses in the third quarter of 2022 were $1.7 million compared to $1.2 million for the same period in 2021. Net loss in the third quarter of 2022 was $1.0 million or $(0.13) per share, compared to a net loss of $0.4 million or $(1.69) per share for the same period in 2021. The net loss per share for the third quarter of 2022 was lower than the net loss per share in the year-ago quarter due to higher issued and outstanding shares as of the third quarter of 2022.

“Q3 was highlighted by strong revenue growth on a sequential and year-over-year basis, reflecting both the benefit of our investments in sales and marketing this year and less disruption to our operations from past supply chain issues,” said Tony McDonald, Chairman and CEO of CEA Industries Inc. “We recently signed contracts with two non-cannabis vertical agriculture companies, which reflects our focus on diversifying the customer base beyond our traditional cannabis customers. Although we are proud of our sales growth, we acknowledge that the macro environment continues to present challenges as we work through a prolonged inflationary environment and certain residual supply chain headwinds.”

4Front Ventures
Systemwide Pro Forma Revenue totaled $37.3 million, representing a 9% increase from the second quarter of 2022. GAAP revenue increased 25% year-over-year to $32.5 million. The company expects positive operational cash flow by December 2022. “Over the last twelve months, we have remained focused on executing our winning strategy of replicating operational excellence,” says Ceo Gontmakher, Chief Executive Officer of 4Front. “Owing to our success in Washington, we have strongly positioned 4Front across our footprint in what we believe to be the best value creation opportunity in the supply chain – as a low-cost, high-quality supplier of cannabis consumer packaged goods. Our growth in Massachusetts in the third quarter is a clear example of our strategy coming to fruition, as we capitalized on our low-cost production methodologies to improve the quality of our grow and drive sales volumes across all product categories.” 

TILT Holdings
TILT Holdings, the last but not least in our overview of financial reports, has reported a decline in revenue to $40.5 million this quarter from the $53.4 million that was recorded in the previous period of the year. Net loss for the quarter was %15.7 million, compared to a net income of $1.0 million in the prior year period. According to the company, the net loss was primarily driven by lower gross profit, tax expense, and a revaluation of warrant liabilities. At the same time, year-to-date cash provided by operations was up to $8.3 million, compared to cash used of $3.9 million in the previous year. The company explains this by the reduction of accounts receivable and conversion of inventory. 

“The macro-economic challenges facing operators in the cannabis sector have been well documented throughout 2022,” says CEO Gary Santo. “Macroeconomic pressures have affected consumer spending habits, and both retail and wholesale pricing volatility has been exacerbated by cannabis supply and demand imbalances occurring in key markets such as Massachusetts and Pennsylvania. However, TILT’s brand partner strategy continues to outperform the market with modest to no declines in our wholesale pricing. While still in the early days of executing a mix-shift in our product offerings, wholesale brand partner sales increased 15% sequentially and now account for nearly 40% of our wholesale revenue mix, contributing to stable gross margin on a year-over-year basis as we continue to scale our CPG business.”