Free Cash Flow (Cannabis)
Operating cash flow minus capital expenditures — the cleanest measure of cannabis operator financial health given 280E tax drag and capital intensity.
Definition
Free Cash Flow (FCF) is operating cash flow minus capital expenditures (capex). For cannabis operators, FCF is often a more honest signal than EBITDA or net income because: (1) the 280E tax burden distorts net income relative to peers; (2) heavy cultivation and retail capex makes EBITDA materially overstate steady-state cash conversion; (3) working-capital swings from inventory build cycles can hide structural cash burn. Institutional cannabis investors heavily weight quarter-over-quarter FCF trajectory in MSO models.
Also known as: FCF, Free Cash Flow
Why It Matters for Investors
FCF positivity is the single most-cited proof point on MSO earnings calls. Operators with sustained positive FCF — Green Thumb, Trulieve, Verano in recent quarters — trade at premium multiples to peers still burning cash. Watch the cash flow statement, not the press-release EBITDA number.
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