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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 05/02/2025

Viridian Capital Chart of the Week: WHERE IS THE 2ND HALF GROWTH COMING FROM? DOWNWARD REVISIONS AHEAD!

  • Last week’s Viridian Chart of the Week previewed upcoming Q1:25 earnings releases, which begin this week. We noted what appeared to be accelerating percentage declines in EBITDA for the top 13 MSOs. EBITDA for the group is expected to be down 15% y/o/y for the quarter compared to a drop of 5% for the 4th quarter.
  • We were intrigued, however, when we noticed that those decline rates exceeded the declines predicted for the full year 2025. This week’s chart looks at the growth in revenues and EBITDA by half-year periods.
  • We were quite surprised to see that analysts are actually forecasting second-half 2025 y/o/y growth in both revenues and EBITDA for the group. Eleven of the thirteen companies are expected to have 2nd half y/o/y gains in revenue, and eight of them have projected EBITDA gains.
  • Is it possible that the analysts just haven’t sharpened their pencils for the second half? Or maybe they are waiting for the 1st quarter’s releases to revise their 2nd quarter and 2nd half estimates? Because we are not sure where the growth will come from. Second-half comparisons are actually more difficult because Ohio went rec in the second half of 2024.
  • With price compression hitting stride in Florida and New Jersey, no new adult rec markets coming online, already weak consumer spending, and an economy that many economists believe will tip into recession, we are skeptical that 2nd half results will be up y/o/y.
  • Investors should be prepared for a series of downward revenue and EBITDA revisions and maintain some dry powder for attractive entry points.