Why Columbia Care Says Its Cannabis Profits Will Grow

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A Columbia Care cannabis dispensary in the Chicago area. Business Wire

When recreational marijuana sales begin in New York next year, Columbia Care will be ready. Last month, the cannabis seller acquired one million square feet of growing capacity on the North Fork of the state’s Long Island.

“We’re now the largest producer in New York,” Nick Vita told Barron’s Monday afternoon after Columbia Care (ticker: CCHWF) released its March quarter financial results. News released prior to market opening was met by a 2% drop in Colombia’s share price to $ 6.03 while the Nasdaq Composite Index lost 0.4%.

American cannabis companies are among the fastest growing industries in the country, but stocks peaked in February.

The New York-based chain’s March sales weren’t as high as industry leaders like Curaleaf Holdings (CURLF) or Green Thumb Industries (GTBIF), but Columbia Care’s sales are growing fast. Revenue for March rose 220% to $ 93 million from the year-ago quarter, causing a loss of $ 15 million, or 5 cents per share. Income before interest, taxes, depreciation and amortization was $ 10 million, excluding non-cash and one-time charges.

At about 10% of sales, those Ebitda margins lagged behind what investors saw at Trulieve Cannabis (TCNNF) – where concentrated sales in Florida allowed Ebitda margins of 47% in the March quarter – or Green Thumb with Ebitda margins of 37 % in March.

According to Vita, the margins in Colombia reflect the investments in several countries. In 18 states, Colombia’s reach ranks second after Curaleafs 23. Curaleaf had an Ebitda margin of 24% for the March quarter.

“We have more markets that are making significant investments right now,” Vita told Barron’s. Colombia is aiming for growth first, he said, and then margin expansion. A sales boom is expected in many states where the company is licensed.

For example, next year New Jersey and New York will allow adult recreational sales. Before that, New York will allow dried cannabis flowers to be sold to medical customers – a change that stimulated sales when it did in medical marijuana markets like Florida and Pennsylvania. As the largest cultivation location on the east coast, the Long Island site in Colombia offers space for small operators who are licensed according to New York’s social justice regulations.

According to Vita, Colombia’s investments will be reflected in profit margins. “We’re about a quarter away from seeing all of these benefits,” he said.

Write to Bill Alpert at william.alpert@barrons.com