OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS
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Chart of the Week
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.
Week ended 10/04/2024
Viridian Capital Chart of the Week: Many Major MSOs CAN be Self Financing in 2025, But S3 Would Be a BIG Help
- The chart shows the 2025 sources and uses of cash for fourteen significant MSOs.
- The orange line shows estimated 2025 Earnings Before Interest, Taxes, Depreciation, and Rent (EBITDAR). We chose this metric as it is the primary funding source for the fixed charges on the graph.
- The black line shows EBITDAR plus cash. Several of the companies on the graph have substantial cash balances as of their latest balance sheets, and this cash can be a buffer for those whose EBITDAR only marginally covers all required cash uses.
- The bottom black bar is our estimate of what tax expense would be for the companies if 280e is eliminated. The red bar directly above it depicts the additional tax expense derived from 280e. The importance of 280e relief can be seen by the gap (if any) between the orange EBITDAR line and the top of the stacked bars showing the uses of cash.
- The brown bar represents Viridian estimates of operating lease payments for 2025. The green bars show estimates of 2025 interest expense. Purple bars depict consensus estimates of 2025 Capex, and the blue bars at the top show Viridian estimates of 2025 debt maturities.
- The chart shows that six of the fourteen companies, including Green Thumb (GTII: CSE), Trulieve (TRUL: CSE), Verano (VRNO: Cboe), Cresco (CL: CSE), Glass House (GLASF: CSE), and MariMed (MRMD: CSE) have sufficient cash flow to fund all fixed charges for 2025. All of the companies except Schwazze (SHWX: CSE) would have adequate cash flow if 280e were eliminated.
- One factor that is not considered is the potential need to repay prior tax liabilities now housed in “uncertain tax liability” accounts on the balance sheet. These liabilities are pretty significant. Curaleaf and Trulieve have over $200M, while Ascend, AYR, Cresco, and Jushi all have more than $50M. The IRS would most likely allow for the payment of these back taxes over time rather than as a lump sum, but the amounts are somewhat concerning. Note that we take a conservative view of these liabilities in our liquidity measures in the Credit Tracker model.
- 2025 is shaping up to be a relatively benign year for MSO credit, with a few companies requiring modest refinancing. However, 2026 is a more challenging year when substantial maturities that have been extended will once again come due.
