Exclusive Interview with Curaleaf President and CEO Joseph Lusardi
Multi-state operator Curaleaf (CSE: CURA) (OTC: CURLF) is on a mission to make the most accessible cannabis enterprise in the United States. Correct now, the enterprise is in 12 states, but it is targeting expansion by way of a mixture of organic development and acquisitions. President and CEO Joseph Lusardi spoke with New Cannabis Ventures about the current Grassroots and Cura Partners bargains, funding and corporate duty. The audio of the complete conversation is offered at the finish of this written summary.
Leadership at Curaleaf
Lusardi has been in the cannabis market considering the fact that 2009, and he is joined by a quantity of other seasoned and passionate people on the Curaleaf group. He points to Robert Winnicki, the company’s SVP of Analysis and Item Improvement, and CFO Neil Davidson as examples. Winnicki, a chemist, opened 1 of the initial cannabis testing labs in Colorado about 10 years ago, according to Lusardi. Davidson has substantial capital markets expertise.
Industry Tactic and Footprint
Curaleaf’s approach targets populous, restricted-license states. The enterprise started with licenses up and down the east coast and then started to expand westward by way of strategic acquisitions. Curaleaf has constructed its business enterprise 50 % by way of organic development and 50 % by way of acquisitions, according to Lusardi.
Rather than searching at international expansion, Curaleaf is really focused on a domestic approach. It has 49 dispensaries, and it will have licenses to open 131 dispensaries after Grassroots is consolidated. The enterprise also has extra than 1 million square feet of production space and 1,600 workers, each anticipated to double subsequent year.
For the time getting, vertical integration is a necessity for MSOs like Curaleaf. As such, the enterprise is heavily invested across the complete provide chain, according to Lusardi. But, it is maintaining in thoughts a future exactly where cultivation becomes extra commoditized. Curaleaf is directing a lot of power into its merchandise and brand for that future.
Curaleaf has a single brand that shares the enterprise name, rather than several solutions. Its retail retailers and the merchandise inside are all branded below the Curaleaf name. Inside that brand, the enterprise delivers extra than 250 SKUs.
As a vertically integrated enterprise, Curaleaf has handle more than its complete provide chain from the raw material applied to make its merchandise to packaging. It has fielded concern more than the current news about vaping and overall health issues, but Lusardi has self-assurance in his company’s merchandise. He sees this situation as one more indication of a require for federal study and oversight in a regulated cannabis industry.
Lusardi has a background in private equity M&A, and Curaleaf has normally been very acquisitive. He sees the current Grassroots and Choose bargains as very accretive for shareholders.
The $875 million acquisition of Grassroots will give the enterprise a complementary footprint. The two corporations have practically no industry overlap. Grassroots is operating in crucial markets like Illinois, Ohio, and Pennsylvania. The company’s footprint will span 19 states subsequent year. That quantity might go up to 20–now that public corporations can personal assets in Colorado, Curaleaf might pursue an chance in that industry.
Curaleaf was constructed as a overall health and wellness enterprise. It did not have significantly in the way of an adult-use brand, but the acquisition of Choose adjustments that. Choose is 1 of the best brands on the west coast, touching extra than 900 retailers. Plus, Lusardi sees Select’s commitment to compliance, testing, and trusted merchandise as complementary to the Curaleaf approach.
Providing Back to the Neighborhood
Curaleaf has a corporate social duty group that aids guide the company’s commitment to providing back to the neighborhood. The enterprise runs discount applications for veterans and the economically disadvantaged in its retailers. Plus, Curaleaf is actively involved with the Veterans Cannabis Project, which creates awareness of how veterans can advantage from cannabis use. The enterprise performs with the system in 5 states and plans to launch it across the nation, according to Lusardi.
Freehold Properties Leaseback Transaction
Curaleaf has acquired true estate as it has grown, but the enterprise does not want to be a true estate owner. Rather, it sees the greatest use of capital is for earnings-producing assets, according to Lusardi. Not too long ago, the enterprise freed up capital by way of a $28.three million leaseback agreement with Freehold Properties. This deal will permit Curaleaf to invest additional in its personal infrastructure.
The enterprise has been mostly funded by way of equity. Prior to going public in 2018, Curaleaf was financed by its Executive Chairman Boris Jordan and his partners. In October 2018, the enterprise did a $400 million public supplying.
Curaleaf has much less than $90 million in debt, according to Lusardi. He imagines that the price of capital will continue to go down and the company’s credit profile will enhance. Debt financing might be a future funding selection for the enterprise.
Curaleaf reported $48.five million in second-quarter income, and Lusardi is confident the enterprise is on a sturdy development trajectory. Assuming it can close Grassroots and Choose just before the finish of the year, the enterprise is projecting best-line income of $1 billion to $1.two billion for 2020, according to Lusardi. The enterprise is also expecting to produce 30 % or higher EBITDA margins subsequent year. Lusardi recommends investors watch retailer openings, income, and EBITDA to track the company’s results.
Although execution in such a swiftly developing industry is a challenge, Lusardi is bullish on the future. He sees extra and extra states adopting healthcare and adult-use applications. Curaleaf’s footprint positions it for results in a quantity of states, such as New York, New Jersey, and Connecticut, which might introduce adult-use applications in addition to current healthcare applications.
To understand extra, check out the Curaleaf internet site. Listen to the complete interview:
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