TerrAscend's Jason Wild: Not all EBITDA numbers are created equally
Nov 22, 2023
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TerrAscend's Executive Chairman Jason Wild and famed lawyer David Boies discuss the importance of focus in the cannabis industry and why not all EBITDA numbers are equal. They also explore the practice of cannabis companies avoiding taxes and the potential consequences. Additionally, they discuss the potential impact of rescheduling cannabis and advice for retail investors in the industry.
TerrAscend focuses on deepening its presence in specific states to achieve scale and competitive advantage in the cannabis industry.
Jason Wild predicts rescheduling cannabis and highlights the potential entry of CPG and alcohol industries in the cannabis market.
Deep dives
Tarasen's Approach to Scaling Its Business
Tarasen, a cannabis company, has focused on deepening its presence in a few key states rather than expanding into numerous states. By concentrating resources and achieving scale in specific regions like New Jersey, they believe they have an advantage over single-state operators and larger multi-state operators spread too thin. This strategy allows Tarasen to maintain a more personal connection and better monitor operations. Additionally, Tarasen highlights the importance of being cash flow positive rather than solely focusing on EBITDA, as high tax rates and interest expenses can erode profitability. Overall, by strategically selecting states for expansion and ensuring financial stability, Tarasen aims to drive growth and competitive advantage in the cannabis industry.
Factors Influencing Cannabis Legislation and Reform
Tarasen's chairman, Jason Wild, discusses his views on future cannabis legislation and reform. He predicts that rescheduling cannabis from Schedule I to Schedule III will likely be the near-term driver of change, as this reclassification would alleviate the burden of 280E tax regulations. Wild also notes that the pharmaceutical industry may not be a major obstacle to cannabis legalization, as most companies are not actively lobbying against it. He believes that the CPG (consumer packaged goods) and alcohol industries may be more inclined to view cannabis as a threat and potentially enter the market. While Wild acknowledges the potential for legislative progress, he emphasizes the importance of being self-sufficient and profitable while remaining open to strategic opportunities in the ever-changing cannabis landscape.
Tarasen's Focus on Growing and Scaling the Business
Tarasen has implemented a strategy of going 'deep, not wide' by concentrating on key states rather than pursuing widespread expansion. The company aims to own a substantial market share in specific regions by acquiring the best assets available. This approach allows Tarasen to leverage scale and operational efficiencies while maintaining a strong presence in each state. They prioritize cash flow rather than solely relying on EBITDA, ensuring they can cover expenses and generate sustainable profitability. Tarasen's focus lies in strategic acquisitions in up-and-coming states, taking advantage of low valuation expectations and potential opportunities for consolidation. Overall, their goal is to achieve steady revenue growth and maximize shareholder value through selective expansion and increased market share.
Tarasen's Outlook on the Cannabis Industry and Investor Considerations
Tarasen's Chairman, Jason Wild, expresses optimism for the cannabis industry and encourages investors to focus on sustainable companies with strong fundamentals. He advises against speculating on potential legislative changes and instead suggests investing in companies that are well-positioned regardless of reforms. Wild emphasizes the importance of profitability, cash flow, and effective cost management as indicators of long-term success. He believes that companies demonstrating operational excellence during challenging times will be the ones to thrive in the future. Rather than chasing short-term gains, investors should seek out companies with growth potential, financial stability, and a track record of adapting to industry dynamics. Wild also highlights the potential for competition and market consolidation as larger non-cannabis companies enter the space in the future.
TerrAscend's Executive Chairman Jason Wild returns. Focused on not spreading itself too thin ("we'd rather be more focused, spend more money, get more scale, like we did in Jersey") and why not all EBITDA numbers are created equally (8:50). Should cannabis companies pay their taxes? (11:40) Pushing for real legislative change with famed lawyer David Boies (13:30).