The post-election landscape raises uncertainty for cannabis MSOs, with investors hoping for potential relief from the new administration. Verano ( VRNOF ) , Green Thumb (OTC:GTBIF), and Gold Flora ( GRAM ) show mixed results, balancing strategic gains with regulatory challenges. While full federal legalization remains a distant possibility, Pablo Zuanic, from Zuanic & Associates, suggests a gradual shift towards rescheduling cannabis to Schedule III, potentially extending into late 2025.

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Verano Holdings: Market Headwinds

Verano ( VRNOF ) posted Q3 results reflecting a mixed performance, with $227 million in sales, marking a 5% sequential decline. The drop was partly attributed to seasonality and market pressures in key states like Florida. Despite acquiring assets from The Cannabist Company ( CBSTF ) , which were only partially reflected in Q3, Verano’s financial health is strained by a high debt burden—standing at 40% of the last twelve months (LTM) sales, and substantial tax liabilities of 32%. Adjusted EBITDA margins fell by 200 basis points to 30%, indicating pressure on profitability​.

The company remains Overweight in Zuanic's ratings, but concerns about its exposure to the Florida market may hinder short-term recovery, particularly given the state's rejection of adult-use legalization in the recent election. This has led to a 44% drop in Verano's ( VRNOF ) stock post-election, highlighting the vulnerability of Florida-dependent operators​.

Green Thumb Industries: Resilient But Cautious

Green Thumb reported a stronger Q3 performance, with $287 million in sales, up 2% sequentially. The company stands out with robust cash flow management, generating an adjusted operating cash flow of $139 million, representing 17% of sales.

With relatively low leverage—net debt at just 7% of LTM sales—and healthier adjusted EBITDA margins of 31%, Green Thumb appears well-positioned to navigate the current regulatory uncertainty.

In terms of financial leverage, Cresco Labs ( CRLBF ) carries the highest combined debt and tax liabilities at 80% of last twelve months (LTM) sales, followed closely by Curaleaf ( CURLF ) at 79% and Verano ( VRNOF ) at 72%. Green Thumb, on the other hand, stands out with a low leverage ratio of 9% of LTM sales, bolstered by strong cash flow performance.

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Gold Flora: Expansion Amidst Market Challenges

Gold Flora ( GRAM ), a California-focused operator, showcased significant operational improvements in Q3 2024. The company's adjusted gross margins surged from 54% in Q1 to 65% in Q3, with EBITDA margins reaching 9%, a notable turnaround from -6% in the first half of the year. The brand's strategic push into the vaping segment, particularly with its Gramlin line, has been met with strong market reception, becoming a top-10 brand in California.

However, according to Zuanic Gold Flora's ( GRAM ) financial stability remains a concern. The company's debt obligations have increased, with tax liabilities now at $44 million, up from $28 million at year-end 2023. A planned expansion of indoor cultivation capacity by 50% and new store openings are aimed at bolstering revenue growth.

Benchmarking Tier 1 MSOs: Financial Health

EBITDA Margins: In Q3 2024, Trulieve led with a 34% EBITDA margin, followed by Green Thumb at 31%, and Verano ( VRNOF ) at 30%, each down sequentially. Cresco held steady at 29%, while Curaleaf ( CURLF ) improved to 23%.

Cash Flow Performance: Green Thumb excelled with an adjusted operating cash flow (OCF) of $139 million (17% of sales). Trulieve and Verano ( VRNOF ) followed with $37 million (4%) and $30 million (5%), respectively. Curaleaf ( CURLF ) broke even at $4 million, while Cresco lagged at -$3 million.

Valuation Comparisons: Green Thumb and Curaleaf ( CURLF ) trade at an EV-to-sales ratio of 2.2x. Trulieve is at 1.8x, with Cresco and Verano ( VRNOF ) at 1.6x. For EV to EBITDA, Curaleaf ( CURLF ) leads at 10x, Green Thumb at 7x, and the rest between 5.2x and 5.5x.

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