Chart of the Week
The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from that week’s Deal Tracker that we believe are impactful for investors, companies and acquirers.
Viridian Capital Chart of the Week: ANALYSTS EXPECT ACCELERATING Y/O/Y % EBITDA DECLINES Q1:25
- Earnings releases for Q1: 25 commence next week, and we wanted to check in to see what analysts are thinking prior to any last-minute company attempts to guide their estimates.
- The table shows actual revenue and EBITDA for Q1:24A, Q4:24A, and consensus analyst estimates for Q1:25 for twelve major MSOs. Sequential quarter and Y/O/Y percentage changes are calculated based on Q1:25 estimates.
- The chart decomposes the Y/O/Y percent change in EBITDA into the component that is due to the projected change in EBITDA margins (green bars) and the part that is attributable to projected revenue changes (yellow bars)/ The red line depicts the total projected Y/O/Y projected change in EBITDA.
- Analysts expect eleven of the twelve companies to have lower y/o/y EBITDA for the quarter, with Marimed as the only gainer. Glass House is another outlier with an EBITDA increasing from $-1.6M in Q1:24 to $1.6M in Q1:25. GH is not on the chart as the percentage change from negative to positive is not well defined.
- Analysts project an aggregate decline for the group of 15.2%, a significant steepening of the 5.0% y/o/y decline experienced in Q4:24.f
- Seven companies, including Ascend, Cannabist, Cresco, Curaleaf, GTI, Trulieve, and Vireo, are expected to have larger y/o/y % EBITDA declines in Q1 than Q4. Four companies, AYR, Jushi, TerrAscemd, and Verano, are projected to have smaller y/o/y% EBITDA declines in Q1 versus gains in Q4. Five companies, including AYR, TerrAscend, Jushi, Verano, and Curaleaf, are expected to have lower percentage declines in Q1 vs Q4-
- As in Q4, the predominant cause for EBITDA declines is lower EBITDA margins as opposed to lower revenues. Of the 15.2% EBITDA decline for the group, 9.9% was attributable to lower projected EBITDA margins (24.0% in Q1:25 vs 26.7% in Q1:24), while 5.3% was attributable to lower revenues ($433M vs $510M).
- The most significant drags on margins include pricing declines in Florida, New Jersey, and Massachusetts. At the same time, Ohio, the only new rec state over the period, has produced less of a boost than expected. The growth outlook looks weak until 2026, when PA and VA may make meaningful contributions.
- Fundamentals are challenging, and stock price growth is hostage to reforms in Washington, and it’s too soon to bet on any of the recently introduced bills or suggestions of Trump support.
- Investors should refrain from the temptation to jump on each new speculative rally and make sure their portfolios can withstand more of the same challenges faced in the last year. Overall, economic weakening and a pressured consumer are factors that look to get worse before they get better.
