Tilray Brands Inc (TLRY)

[Bonno]

The nation’s largest cannabis multistate operators reported a slowdown in revenue growth in the second quarter, which ended June 30, with efforts to cut costs offset by oversupplied state markets.

Wholesale marijuana price compression continues to plague the industry in most states, including Arizona, Florida, New York, Ohio and Pennsylvania.

Also, the slow pace of reform at the federal and state levels is stunting growth opportunities, according to operators and analysts. (Although the recent news that health officials in the Biden administration recommended that marijuana be reclassified from a Schedule 1 substance to Schedule 3 is encouraging for the industry.)

Many MSOs cut costs in recent quarters, promising to “optimize” operations to generate cash and avoid borrowing at high interest rates.

But those efforts could also have slowed growth, said equity analyst Jesse Redmond, the head of the cannabis sector at Florida-based Water Tower Research.

Still, the top six MSOs generated an average of 1.6% quarter-over-quarter revenue growth and 6.5% quarter-over-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) growth, Redmond said.

“So that’s not terrible,” he told MJBizDaily reporter Kate Robertson.

“It shows we’re seeing a little bit of growth from new stores in existing states, because not much exciting has turned on and because of some improving prices, especially in California.”

But prices aren’t improving or stabilizing everywhere quite yet - one example of how fragmented state markets make it increasingly difficult to generalize about MSO performance, Redmond warned.