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Earnings Call Transcripts·

Curaleaf Holdings, Inc. – Third Quarter 2026 Conference Call - Curaleaf Holdings, Inc.

CURLF

  • Explicit Guidance:

    • Q4 2026 Revenue: Expect sequential increase of 1% to 2%, implying a midpoint revenue of approximately $358 million.
    • FY2026 Capital Expenditures: Guidance remains at approximately $80 million for the full year.
    • FY2026 Cash Flow: Expect operating cash flow to reach a target of approximately $150 million for the year; Q4 operating cash flow expected to increase significantly to offset Q3 timing impacts.
    • Q4 2026 Margins: Guidance suggests adjusted gross margins in the range of 48% to 49%, with adjusted EBITDA expected to be roughly flat with Q3 ($78 million).
    • Domestic Gross Margins: US EBITDA margins and gross margins expected to remain at 50% or higher in the absence of the German headwind.

  • Business-Segment Outlook:

    • US Domestic: Anticipates continued year-over-year growth of 7-8% per quarter; Florida same-store comps are up year-over-year with strong new store startup returns.
    • Florida Expansion: Aiming to end 2026 with 89-90 stores; growth pace expected to slow in 2027 due to location saturation, though new store openings will continue.
    • International (Germany): Expects Q4 growth to be tempered by "irrational pricing" and price compression driven by illegal product dumping (prices fell from €3.50 to €0.95 per gram in one quarter); views this as a transitory issue pending regulatory enforcement.
    • International (Other Markets): UK and Poland showing robust growth; Spain to begin fulfilling sales immediately following product registration; France market launch expected in 2027; Turkey regulatory framework expected in early 2027 with manufacturing to follow in H2 2027.
    • Product Innovation: Expect continued contribution from "CUMVID" medical inhalation devices and brand portfolio growth (e.g., Select, Anthem) to offset pricing pressures.

  • Market and Competitive Outlook:

    • Pricing Dynamics: Anticipates stabilization of price compression in retail dispensaries in Massachusetts and Illinois after two consecutive quarters of increases; expects market correction in Germany following regulator action.
    • Hemp Market Transition: Preparing for the "hemp shutdown" (expected December 2026) to drive demand to legal cannabis; marketing plans in place to convert intoxicating hemp consumers to adult-use products in key states like Ohio and Illinois.
    • Competition: Notes price compression driven by Canadian competitors dumping product in Europe; believes EU GMP certification and vertical integration provide structural advantages over non-compliant entrants lacking wholesale access.
    • M&A Environment: Evaluating a competing bid for Aurora (currently ~10% lower than the Organigram bid); plans to improve their own bid substantially pending due diligence access.

  • Macro / Industry Outlook:

    • Federal Regulation: Conviction remains high that federal cannabis rescheduling (via the ALJ process) is imminent and represents a major catalyst; expects final ALJ recommendations shortly.
    • Tax Treatment: Anticipates greater clarity from Treasury regarding 280E tax treatment for adult-use cannabis, potentially strengthening the balance sheet.
    • DEA Registrations: Reports receiving federal registrations for medical dispensaries on a daily basis (over 80 received); notes no immediate expectation of DEA allowing exports from medical operations as capacity is prioritized for domestic growth.
    • Consumer Environment: Aware of macro headwinds including persistently high energy prices and rising interest rates impacting consumer confidence.
    • European Regulation: Expecting enforcement action in Germany regarding greenwashing and illegal product dumping, similar to UK precedents, which could restore margin health.

  • Strategic Initiatives:

    • Aurora Acquisition: Continuing pursuit of Aurora bid contingent on access to due diligence; views the deal as highly accretive compared to the competing Organigram transaction.
    • Supply Chain & Vertical Integration: Strengthening supply chain via new contracts (e.g., Canara) and EU GMP certifications; aiming to secure assets at favorable prices to address verticality needs in Europe.
    • AI Implementation: Deploying AI tools across pricing, merchandising, IT, legal, finance, and operations to drive productivity; viewing AI as a long-term efficiency driver still in early stages.
    • Cost Reduction: Progressing on plan to reduce expenses by $20 million in H2 2026; core SG&A expected to remain efficient with continued operating leverage.
    • Capacity Expansion: Focusing domestic capex on supply growth to meet 7-8% quarterly growth rather than export capacity.

  • Risks and Headwinds to Outlook:

    • German Market: Severe price compression and flooding of illegal product in Germany could delay Q4 growth and margin recovery; regulatory enforcement timing is uncertain.
    • Consumer Pressure: Persistent high energy costs and interest rates may constrain consumer discretionary spending.
    • Location Saturation: Florida store expansion pace may slow in 2027 due to difficulty securing premium locations in an increasingly saturated market.
    • M&A Execution: Aurora acquisition success contingent on due diligence access and favorable financing terms; failure to get details could halt the bid.
    • Regulatory Delays: Potential procedural delays in federal rescheduling process or Treasury guidance on tax treatment.
    • Currency: Foreign currency translation impacts on international margins.

  • Management Tone on the Future:

    • Confidence: Expresses high conviction in the long-term regulatory outlook, specifically regarding rescheduling and the "hemp shutdown" tailwind.
    • Cautious Optimism: While confident in the strategic platform and brand strength, management adopts a conservative stance on Q4 guidance due to transitory German headwinds and seasonal promotions.
    • Resilience: Emphasizes that the business is "gaining traction" and that domestic momentum is broad-based despite macro pressures.
    • Strategic Discipline: Reaffirms commitment to "disciplined execution" and capital allocation, requiring due diligence before making significant M&A bids.

  • Miscellaneous:

    • Index Inclusions: Curaleaf added to FTSE Russell All Cap Canada Index in September; S&P TSX inclusion noted as prior milestone.
    • Institutional Ownership: BlackRock, Vanguard, and JP Morgan established positions/custody, broadening the shareholder base.
    • Q3 Financials: Revenue $353M (+11% YoY); Adjusted EBITDA $78M (22% margin); Cash position $105M.