Yo, what is going on everybody? Thanks for checking in to our latest TDR Trade and Black podcast presented by Dutch. I'm your host Shadell's special Thursday edition as we continue earning season. Boris Jordan, chairman and CEO of Curleaf is going to come on in just a moment to talk about their latest print, followed by Anthony Cognio from New Lake Capital. All in all, things are steady right now in earning season for the cannabis industry. We got to report on these earnings and find out what's going to happen next. Let's welcome in AV here on a Thursday.
Thursday edition of Trade to Black. By the way, Trent Wbec is going to be joining us tomorrow morning at 11 am to talk about all this news regarding Virginia. I confirmed that with him about an hour ago.
Yes, I'm sure he's going to. Few people have been asking about the whole licensing structure and how that will work if adult use passes because all signs point to that direction. We'll talk about that and try to address any questions. Trent is the man when it comes to Virginia. Lots to get into today. I know there was a story that Tom posted on Marijuana Moment: Beer, wine, and spirits distributors tell Congress not to ban hemp THC products as demand for alcohol shifted downward. This is really heating up this topic, is it not?
It is. It is. And it's going to be a function of the CR with the appropriations language that's in there. We'll see what happens.
All right. We shall see. We'll talk about that a little bit later, but for now, it's earning season. So it's now time for our next interview. We had a lot of them this week. Let's welcome in.
We can. He's here. Well, he's here.
We're segueing. Chairman, CEO of Curleaf, Boris Jordan, back to the podcast. Good to see you. Haven't talked to you in a while. I missed you last time you were on, but did you miss me?
We always miss you. We always miss you.
How you been? I'm good. Tough day today though. Jesus.
I know. I was actually over in Germany.
You have the best quarter you've had in like two years and they sell you down 15%. It's hard to understand this sector.
Oh, it's cannabis. Nothing comes easy as we say. I will say I was over in Germany back in June and man, I got a chance to see that international market, but man, it looks like the cannabis industry like it was here 10 years ago. There was a lot of popularity and interest over in Germany and Europe.
Yeah, I mean Europe is in a good place right now. It's where we were call it five years ago, but it's actually in a better place because they've got a proper legal framework. Nothing's illegal. There's no difference between federal or regional. To be honest, it's a much safer market right now to invest in because you know what you're getting. The problem here is you've had the president come out in September and say it's going to be a few weeks and because of that everybody's waiting and there's a standstill. Regulators stand still, the House and senators stand still, state governors are at a standstill. Everybody's like we want to see where the administration's position is on cannabis. Of course I don't blame them. We do have a government shutdown so I get it. But it's tough for the industry.
Yeah. August 11th to be accurate is when he said that when he was actually asked that question. So you're going on three months now.
It's been three months. It's the longest few weeks in a while. But I get it. They've got a government shutdown. We'll see where it goes.
I think that's become a little big. I think you're going to see that shutdown end soon. Stuff's getting pretty bad. Some of the stuff that happened even this week with the elections is really telling. Some of the stuff that I saw with Trump today. I think he wants to sit down with the Republican party and get something done. But we shall see. Anyways, outside of that, we cover cannabis. Let's take a look at your Q3 print. 320 million in revenue, 69 million adjusted EBITDA, 50% gross margin. That's clear progress on operational discipline. Before we get into international expansion, can you walk us through how that margin recovery is tracking relative to internal targets?
Yeah, listen, it's our focus. When I came in a year ago almost exactly last August, I said that was our target and it wasn't going to be easy to get there. I had a lot of restructuring to do, focus on quality of product first and foremost, branding of products, supply chain, bringing our costs down. I cut about $180 million of cost out of the business. Product quality is as good as it has ever been. We're really focusing on branding. Our footsteps and our doors are up. A lot of our markets are turning back up. Even Massachusetts, we had an up quarter in Massachusetts and we saw good margin build. We had a very strong October and so this is not a freak out quarter. This is a trend that's starting and we feel good about it. We're not going to break any records in the US because overall the US is still under price compression, but the company itself is bucking the trend. If you look at this quarter, we were the only ones that expanded margin and expanded sales. That's a good sign for the company.
With the expansion in revenue and the expansion in margin, is that attributable to Ace and Anthem and the emphasis on things like Premium Flower in Florida? Are those starting to resonate and bear fruit with consumers?
Yeah, I think Premium Florida was the largest driver. Ace and Anthem, we can't keep it on the shelves. It's flying off. It's a high class problem. We can't manufacture enough of it yet. We've ordered a lot of automation equipment. We are going to be on top of it. I think by December we should have enough of it out in the market, but we can't keep it on the shelves. We're selling out the minute we get it. We've even had to limit wholesale, only selling to 20 of our top accounts because I've got to make sure they've got enough. That's not really driving the sales. What's driving the sales is the quality of the flower, the improvement of the flower. We've seen that in Florida in all our metrics. Curleaf is back in the flower game. That's where we were missing out a year ago.
You like where you're at as far as being back at CEO. What's it been now? How long's it been?
Year. A year and a month, a year and two months. It wasn't because I wanted to do it, to be honest. I was kind of enjoying my life down in Florida, playing some golf, being a chairman. I came back because things were tough, but that's what you do when you're an entrepreneur. I'm having fun. I'm happy the results are coming in. It's only going to get better.
What are the notable day-to-day changes that you could highlight that's different today versus 12 months ago?
Well, I'm not playing golf, that's for sure. My tan is gone. The biggest changes are definitely flower quality. I've upgraded all the people, cut a lot of costs. I've brought in a lot of top CPG executives that are helping me. I'm an entrepreneur, but I know what I don't know. I needed strong people. They have made a significant impact. Rahul Pinto, our new CEO that came from Albertson's, who knows retail, has really been traveling around the country fixing merchandising assortment. One of the problems we had, particularly in Florida, was we didn't have the right products in the right quantities in the right places at the right time. Now we have all of those things. We have data and automation. The minute we run out of a product, we get it. The other thing is demand planning. Our growers were making decisions on what to grow instead of merchandisers. Now we reverse that. The people responsible for revenue tell the growers what products in what categories they need. We've reversed a lot of things that were wrong and they're working.
How are you thinking about loyalty? We've seen some of your peers in Florida scale their loyalty programs. How is Curleaf tackling their loyalty strategy with the consumer?
Listen, we have 2.1 million customers around the country in our loyalty program. Loyalty programs work. Our loyalty customers spend significantly more. Some of the problems we still have to fix are that we have two different platforms, one in Florida and New Jersey and another for the rest of the country. We're working on choosing the right platform to unify. That's a big lift, unifying IT systems, making sure data is clean. These are things still in front of us, which is why I'm excited because we've already made so much progress and we're nowhere near done. We have another six months in my opinion and the results will continue to improve.
Someone just asked me a direct question. How much of a role is tech playing in your business right now?
It's going to play a much bigger role. I generally come from my most successful businesses being tech businesses. I still own one of the fastest growing online insurance companies in the world. Tech is something I understand. It wasn't the number one focus because if you don't have good product, tech doesn't matter. My first focus was to get the product right, branding right. Now I'm really focusing on data and tech.
Okay. Are you guys working with Dutch? Duch on that if I'm correct.
Dutch is the predominant provider of our POS and back office system.
Before we get into Europe, I want to touch on hemp. How are you feeling about that category? How is it performing?
I'm being very careful about hemp. I think the beverage business will survive, but there's a lot of uncertainty around hemp right now. When a senior senator retires, McConnell is retiring this year, he gets to ask for a piece of legislation that the Senate will pass. He's a very senior person, played a critical role. It's likely they're going to give him what he wants. He asked for closing a loophole on hemp. He doesn't like that the hemp legislation was his and he feels he released cannabis. He was always a prohibitionist. He's a hard liquor guy, whiskey and bourbon. Those guys are getting crushed by the hemp industry. So we have to be careful. I think beverage will survive but there's a lot of risk. Before I allocate expensive capital, I'm cautious. We built a canning line and gummy line in Kentucky. We have supply chain in place, in seven states. We're investing in new formulations, but I'm not going all out yet. I'll wait for certainty on legislation.
Do you think alcohol distribution is at odds with alcohol producers right now?
I think the beer industry is with us. I think it's the hard alcohol that's against us.
So you think as he exits stage left, this is probably what he's going to want?
Oh, it's not probably, it's what he wants.
What does that look like for the industry if that happens?
I think the House is going to have to support it. We'll fight it there. I think we'll lose in the Senate because they support a senator. He wants it and they'll support him. We got to fight it in the House and we have a fair chance. Today the beer and beverage distributors came in saying, 'Please don't get rid of this, we need it because people are drinking less alcohol.' But two days ago consumer products companies came out against it, like Coca-Cola. So you've got both sides. I'm not a heavyweight like them. I got to be nimble and careful. This thing will be around for a long time. I've got my brands, formulations, ready to go full bore when we get transparency.
Understandable.
Yeah. I can't help but feel with all this stuff that's developed in the last 60 days, it's probably not the focal point of President Trump as far as rescheduling. But when you add all these moving parts, this is part of a delay going on right now. Do you agree with that or am I reading it wrong?
Listen, cannabis is one of the most controversial issues out there. The irony is it's being used by 80% of the population, but the white-haired octogenarians in government are still opposed. There's a lot of lobbying. The pharma industry is petrified. We're going to have a big announcement in the next couple weeks on a breakthrough in our R&D in Europe on neuropathic pain medication. The pharma industry is very worried because we can produce these medicines at a much cheaper price and they're healthier and not addictive. They want them to be addictive to sell more. We're at odds. They have a lot of money and are against this industry. I do think the president will reschedule. I'm more positive than ever. But he'll do it on his timetable, not ours. My gut is it can't be a quick rash decision. There are a lot of moving parts, like pharma is worried. So they have to think it through.
That's what I was going to say, Boris. If they see it as such a threat and a scalable cheap alternative, why aren't they just going on an acquisition spree?
They can't right now in the United States. In Europe, I'll tell you something, they are poking around. But you've got two problems: rescheduling in the US, and in Europe and England the proceeds of crime issue. These are archaic pieces of legislation that need to be moved. The proceeds of crime makes it illegal for investing in this sector, even though the industry is legal. So they can't have control. They don't want minority stakes. I think we're on the precipice of change, but these things take time. Markets are impatient, as we saw today.
Well, I think the big thing is ongoing conversations. A couple years ago we didn't even have these types of conversations. No news is bad news. One last thing, how does RFK view cannabis? I know he's a big advocate for psychedelic medicine. As head of HHS, do you have any insight on his view?
From everything I've heard, he's always been supportive. But when he got appointed, he came out a little skeptical in an interview. They got to him. During his confirmation hearings, there was a lot of pressure to go slow. But deep down he is supportive. If the president comes to him on rescheduling, he will be supportive. How can you not support doing the science?
I feel like this rescheduling conversation is leading towards announcing closer to the midterms. I think that's probably the case.
I've gotten out of predicting when this happens. I believe the president will honor his commitment. He's doing it in every other area. This is an 80/20 issue, very popular. They need the youth vote. This will be front and center.
Boris, with the European unit, it's growing double digits year over year. Or was it quarter over quarter?
What markets are you looking at to drive future growth in the EU? We're seeing headlines from France, Italy, Turkey, Portugal.
I mentioned on the earnings call: the three countries we are already in with licensing and facilities are Spain, France through negotiations with a pharmaceutical, and Turkey where we're breaking ground. Those will start programs in the second half of 2026. But don't look for revenue in 2026; it will take time. 2027 and 2028 will be big. In the UK, Curleaf is the largest player and it's less than half a percent penetrated. Germany less than 1%. Poland less than half a percent. These countries are growing at double or triple digit rates. Those new markets coming online in 2027/28 will add more catalysts. We're talking about 200 million people in those three countries.
Do you see that business outpacing the US business in a rescheduled or descheduled world eventually, just with the TAM?
The US is the big kahuna in consumer products, but it's held back by lack of capital investment. Rescheduling will free up capital, bring down costs, and you'll see consolidation and growth. In Europe, it's a different issue with strict regulation and a medical market. I like the moat of medical now. Over the next three years, Curleaf will have over a half a billion dollar business in Europe, growing 25-50%. Then new markets in 27/28, we could have a half to a billion dollar business. Hopefully by then the US is rescheduled and growing modestly, while Europe compounds.
One other big thing announced in the quarter was Robin Hood listed Glass House within their platform. You were one of the first MSOs to list on the TSX. Has your team explored being listed on Robin Hood or waiting for reform?
Two things happened. First, we got included in the S&P index in Canada on the TSX. That's a big deal. More indices are coming in March like MSCI. On Robin Hood, we've had numerous conversations. They have rules that require a stock price above $5, which makes no sense. Glass House is a fraction of our market cap and revenue, yet they can be there. So they need to look at their rules. We are the most liquid stock in the industry, trading at three times the volume. We'll do whatever to get retail investment, but we really want institutional investment to anchor capital structures. What happened today should never happen to a player our size, down 15% on strong earnings. It doesn't make sense.
You sound like Jim Copley from 24 hours ago. He had good news in Virginia and decent earnings and was saying the same thing because they were down yesterday. That's the nature of the industry. But you need institutional capital to anchor cap structures. It's why you can't do deals now, capital is too expensive and volatile.
Yeah. Speaking of cap structure, you expanded your revolving credit line to $100 million with Needham Bank. Given the capital environment, do you see a lot of M&A with distressed assets available?
More customers in these independent dispensaries are asking us for our products. And that's a testament to the work the team has done to really raise the quality and the innovation at Curaleaf. So I'm very delighted with that and I think you're going to see a lot more of that going forward.
Don't fall asleep on New York either. It seems to be a good turnaround story, is it not?
It's the best market in the states after Florida right now by far.
I mean still number one. I don't want to turn this into a political show, but what do you think of that news last night? The mayor of New York City. I realize there's nothing he's really going to implement. You already have a recreational and medicinal program within the state, but is there anything that he does to maybe improve cannabis or that really has no relevance?
Don't pass up the fact that socialists can screw anything up. I mean, I can tell you right now, yes, the program's good. The regulator has gotten much better. There was enforcement, but you know, if he allows illicit stores to start opening again, if he allows them to run amok in New York City, he can screw a very good program that took a long time to get going, that finally has gotten going, that finally has good regulation around it. The OCM, the regulators are doing their job, and he can mess it up. So I don't know if this is his number one priority, but this is a guy that openly said he wants to shut down the police. And if that's the case, who's going to be shutting down these illicit stores? They've been closing these illicit stores a lot in New York. Literally every week, illicit stores are being shut down under Mayor Adams. Now, what's this guy going to do? We don't know. I don't want to prejudge. He's already addressing some of the issues in the campaign, for instance, anti-Semitism and these other issues. Maybe he'll change his position on law and order as well. I would like to think that he will, and if he does that, then we've got a good program in New York.
As everyone in the industry is kind of, I don't want to harp on rescheduling again, but I figured I would ask. Trump obviously said a couple weeks, it's been a couple months. You're one of the largest figures in the space, especially now being at the helm of Curaleaf. Is there continued attempts at dialogue or pressure being put on the executive branch or within the federal government from the industry to get to rescheduling? Or is it kind of balls in their court? It's going to be a decision that Donald's going to make when he decides to make that.
Anthony, I think there was a lot of pressure put on early on. Correct. And I think the industry got reassurances that this was going to happen. And there was a view that we shouldn't overdo the pressure and that we should sit back a little bit and take the administration for their word, and so we've done that. If it doesn't happen, if things continue to drag out, if we get the feeling that it's not happening, then I think you'll see pressure come back on. But right now, we're taking the administration's word for it. They said that they were going to do this.
And I know it's difficult to take politicians' word for it.
I get, but this is one politician that I feel I can take his word for it. So I'm playing the game, putting a proposal together and now you just wait, right?
You know, sometimes you got to do that.
I recently we were involved in a deal at Curaleaf that will be announced shortly where we waited for a long time and we were announced to be the winner in it, and it'll happen soon. Sometimes you just got to wait and be patient.
Yeah.
How's the golf game?
I told you it's not happening. I went to my Florida house last weekend for the first time in a year.
Yeah. I have a beautiful home in Florida. I love it down there. I've got a boat, I've got a golf course membership, I got everything. I haven't been there for a year because I feel that you got to lead by example. And if you're telling people to be in the office and work and to kill it, you got to do it yourself. So here I am sitting in Stamford, Connecticut doing my job.
I always enjoy it when I get into it. I do think this is a young man's game, cannabis, and I'm developing a strong team underneath me. But I'm not going to step away from this role until this company is fully turned around and we're firmly in that leadership position where we need to be. And I think we're almost there. We're certainly there from a revenue perspective, but I want to be there in all aspects of it. And then I'll hand it over to the next generation to run it.
Will we see you in Washington in a week and a half?
I'm actually coming. I don't go to conferences very often, but I'm going to that one because I've got some other meetings around Washington around that time. So I decided to show up to the conference. Yep.
