Cannabis companies are about to enter earnings season as accountants wrap up the books and publicly traded companies prepare to file financial statements with regulators. Green Market Report’s Executive Editor Debra Borchardt talked with Water Tower Research Equity Analyst Jesse Redmond to get his expectations for the upcoming cycle.
This interview has been edited for length and clarity.
We recently reviewed the first six months of cannabis sales at the state level and saw a rise in sales in March, April, and May. Do you think that is a harbinger of good news for the industry’s upcoming earnings?
Jesse Redmond: I think that state sales in general have been good, and I also think that flower prices have been stable. Year-to-date, we’re hovering around $1,000 a pound nationally, according to the Cannabis Benchmarks data.
When I dig into FactSet data – just looking at expectations for the top 10 MSOs and nothing magical about that – it captures a pretty good picture of what’s going on across the industry.
When you look at that data, you see revenue is expected to grow 1.1% quarter-over-quarter and 4% year-over-year. So a bit of an uptick in revenue for the quarter, but nothing really meaningful there. I think what we might be seeing there is that big drops in SG&A (selling, general, and administrative) expenses have taken place. Now there’s less fat to trim below that cost of goods sold line.
We saw big cuts from the Crescos (OTC: CRLBF) of the world, for example. TerrAscend (OTC: TSNDF) also had big SG&A cuts. Ascend Wellness (OTC: AAWH) did a good job as well.
I think it’s great that a lot of fat has been trimmed, especially as we may be entering growth mode. But in this quarterly number with revenue expanding and EBITDA expected to decline a bit, we’ll see what actually comes out in the numbers, but I think that might tell us that it’s getting harder to cut those SG&A expenses.
I would expect to hear some chatter about ramping up spending for the launch of the Ohio market, would you agree?
Redmond: I think that’s probably also what we’re seeing – a bit of an expense ramp ahead of Ohio. We saw that in Maryland, right? Where we saw the rampant expenses in Q2, then that paid off in the third quarter when that finally opened.
You’re sitting there staffing a store, you’re running all the facilities, and now you’re in that terrible period in Ohio where they’re totally ready to go, and you’re looking for somebody to stop by, check a few boxes and allow you to start earning some revenue. Meanwhile, those stores are fully ramped and fully running all of their expenses.
What about the debt restructuring? Do you think we’re going to start to see the effects of that?
Redmond: I don’t think that’ll be meaningful. I think there’s been some good work done, but in some cases, it’s just kind of kicking the can at similar rates. Even that new Ascend deal was great to see, but it wasn’t a material change.
There are lots of distressed properties for sale, but big companies have also been contracting. Do you think we’ll hear talk of capitalizing on deals or continued right-sizing?
Redmond: I think it’s lean and mean for sure until and when we get rescheduling done. I think especially with the IRS coming out with that statement a month or so ago, which wasn’t anything new, but they’re making it clear these taxes are due until the rescheduling is finalized.
So I think we could see some opportunistic M&A (mergers and acquisitions), especially in places like Florida. Same thing for Ohio. I think we could see some opportunistic things happen, but broadly speaking, I’d expect that to take place more in 2026 and especially more when we get rescheduling finalized.
Are there specific companies that you’re focused on for this earnings season?
Redmond: (Green Thumb Industries) is interesting, and I expect continued good things there, but the lack of transparency makes it more difficult to model, and you’re seeing a little bit of investor frustration on that side.
