TerrAscend throws its chips in New Jersey with plans to purchase seven additional dispensaries, even though its stock only trades for a small fraction of what it once was worth and the executives question openly why Wall Street does not recognize their successful operations.
Executives said that during Thursday’s earnings call for the fourth quarter, the company was actively seeking to acquire seven “qualified dispensaries owned by diverse groups” in New Jersey where they already hold the leading market share.
Jason Wild, executive chairman of the company, said, “Our pipeline looks strong and we hope to have more news to share in the future.” He later revealed his frustration over the stock’s performance.
According to Lit Alerts, a market measurement company, the planned expansion will more than triple TerrAscend’s Garden State footprint. The firm currently has three Apothecarium branded dispensaries, which are all ranked in the top 10 of the approximately 200 dispensaries in the state based on total sales.
TerrAscend executives said product innovation is at the heart of its New Jersey Strategy. The company has launched over 60 new products throughout the state in 2024. Its brands have ranked among the top three in categories such as edibles, flower, and vapes.
Ziad Ganem, President and CEO of Ziad Group Inc. explained that innovation on multiple fronts has been a key factor in our success in New Jersey. In 2025, we’ll continue to add at least 2 strains of cannabis in each harvest cycle.
In order to maintain its position as a leader in the New Jersey market, management credits having developed strong relationships from medical only days until adult use sales begin in 2022.
“We are introducing our brand to patients.” We learned a lot from the New Jersey patients. The patients of New Jersey were the first to be contacted. Ghanem stated that we tested our products with New Jersey patients and created a bond between them and the brands. What you see is the culmination of five or six years’ work.
He said: “This retail growth would increase our state leadership, provide us with additional scale and improve margins as we vertically incorporate each new store.”
To support this growth, Boonton Manufacturing and Cultivation Company is expanding their cultivation facility.
What’s free?
TerrAscend has seen its stock plummet by around 90% compared to the days prior to revenue.
Wild said that if you had told him five years earlier, we’d be reporting quarters with revenue of $74,000,000, gross margins over 50%, and positive cash flows, he would have felt pleased. If you told me five years ago that we would report a quarter with $74 million in revenue, over 50% gross margins and positive cash flow, I wouldn’t have believed it,” Wild said to analysts.
Wild announced plans to implement “aggressively,” the $10 million stock repurchase plan of the company when the blackout period in trading ends “in 48 hours or less.”
Wild concluded by saying, “Our stock value has fallen so far that our own real estate is worth more than it was at this time.” The fact is that we also have another $27million of cash. “At this point you can either get the business or the real estate free.”
TerrAscend’s New Jersey Strategy is different from the approach it took in Ohio where its executives admitted deliberately slowing down acquisition plans when valuations dropped.
“While we are disappointed at the speed of Ohio M&A, we’re extremely proud of the discipline that we showed,” Ghanem told analysts. “I’m glad we waited … Some of those conversations are circling back, and they are at a much, much, much better and lower valuation for us.”
Ghanem, when asked by an analyst about New Jersey’s acquisitions timelines, admitted that the deals were taking longer than they had anticipated.
We hoped to present something today that was similar to the presentation we made in Ohio. But with M&A, as you know, sometimes what you expect to happen takes an extra few weeks or a month or two,” he said.
TerrAscend, whose success was evident in New Jersey, has been a template for many other markets. Maryland in particular, is a good example, with the company climbing from position 13 to number 6 in just over a year. The company also has maintained positive cash flow for more than two years, a rarity in the sector where many operators continue to struggle with cash generation.