Wednesday , 21 October 2020

Cannabis Central: Green Thumb Industries Q2 Financial Report Impressive But Stock Price Remains Weak

Green Thumb Industries Inc. (CSE:GTII; OTCQX:GTBIF), a national cannabis consumer packaged goods company and retailer of a portfolio of branded cannabis products, reported its financial results yesterday for the second quarter ended June 30, 2019.

By Lorimer Wilson

Headquartered in Chicago, Illinois, GTI has 13 manufacturing facilities, licenses for 95 retail locations and operations across 12 U.S. markets.

Q2 Financial Highlights (All currency is in U.S. dollars, unless otherwise noted) are as follows:

  • Revenue increased 228% year-over-year and 60% quarter-over-quarter which was driven by:
    • the distribution expansion of GTI’s branded product portfolio to third-party retailers,
    • the addition of Integral Associates in Nevada, and
    • increased store traffic to GTI’s 25 open and operating retail stores, particularly in Illinois and Pennsylvania
    • revenue from ten of its twelve markets: Nevada, Illinois, Pennsylvania, Massachusetts, Florida, Maryland, Connecticut, California, Ohio and Colorado.
  • Gross margins improved to 52% from 46% year-over-year and from 47% in the prior quarter due to:
    • increased operating efficiencies as the business continues to scale.
  • Total operating expenses increased by 169% for the second quarter as compared to the same period last year and by 24.5% compared to the last quarter as a result of:
    • increased headcount related expenses as the Company continues to scale the business,
    • non-recurring acquisition related expenses and
    • non-cash expenses related to stock-based compensation.
  • Total other expenses decreased by 81.3% for the same period last year reflecting a decrease in:
    • value from a variable note receivable in other income (expense) and
    • debt-related interest expenses.
  • Net loss increased by 129% from the previous quarter primarily due to:
    • a decrease in value from a variable note receivable in other income (expense)
    • and debt-related interest expenses.
  • EBITDA was a loss of $9.4 million.
  • Adjusted Operating EBITDA was a gain of $5.0 million.
  • Total assets were $1.1 billion, including cash and cash equivalents of $135.8 million and long-term liabilities of $153.4 million.
  • Total debt outstanding was $96.3 million as a result of:
    • capital investments related to the build out of new markets in New York and New Jersey in preparation for revenue generation over the next six months.

Consumer Packaged Goods Business Development

During Q2:

  • Brand portfolio sales increased by 276% over the prior year period and 70% quarter-over-quarter driven by:
    • a combination of market growth and new distribution of the company’s brand portfolio. Capacity expansion efforts in Pennsylvania, Illinois, and Massachusetts are progressing according to plan.
  • Launched Beboe Therapies, a CBD-infused skin-care line, in April that is available online and at select luxury retailers.
  • Completed the acquisition of Integral Associates LLC in June which added two cultivation and processing facilities in Las Vegas.
  • Closed on the acquisition of MC Brands LLC in June thereby adding the edibles brand incredibles to its brand portfolio.
  • Completed the re-branding of Dogwalkers, the portfolio’s leading pre-roll brand.

Subsequent to the end of Q2:

  • Was awarded a cultivation license by the Ohio Department of Commerce in August that will be located in Toledo as part of a processing and manufacturing facility that will also produce GTI’s branded product portfolio.
  • Closed on the acquisition of New York-based Fiorello Pharmaceuticals Inc. in August allowing the production and distribution of GTI’s brand portfolio throughout the state.

Retail Business Development

  • Retail revenue increased 189% year-over-year and 60% quarter-over-quarter, driven by:
    • organic growth generated from increased transaction activity at existing stores
    • and the addition of Essence retail stores. Second quarter revenue included sales generated from 25 open stores across the country.
  • Comparable store sales increased 27% off a store base of 15 stores driven by:
    • transaction growth
    • and higher average ticket sales.
  • Launched a re-brand of its Rise retail concept to provide an enhanced look and feel.
  • Opened 6 Rise stores in the second quarter and 3 subsequent to the quarter including:
    • 4 in Florida which brings the total to 5 with licenses to open 30 additional locations
    • 2 in Ohio during the quarter and a third subsequent to the quarter with plans to open 2 more stores
    • 2 in Pennsylvania bringing the total to 6 with licenses to open 12 additional locations and now
    • has 31 open stores across the nation with licenses to open a total of 95 more locations and
    • with the recent New York license acquisition will have a total store count of 35 to 40 at year end.
  • Began adult-use sales in Amhurst, Massachusetts in May boosting store traffic and sales.
  • Acquired Evergreen Dispensary, LLC., owner of Salveo Health & Wellness, a retail store located in Canton, Illinois in May
  • Granted the option to open one additional retail store per license in Illinois when adult-use sales become legal there beginning January 1, 2020.
  • Deepened the retail footprint in Southern California through key retail license wins in Pasadena, Culver City, and West Hollywood, which also includes a consumption lounge.
  • Closed on the acquisition of New York-based Fiorello Pharmaceuticals Inc. in August which includes four retail stores in Manhattan, Rochester, Halfmoon and Nassau County, three of which are open.

The impressive growth in GTI’s business has not been reflected in its stock price which is down 46.7% from its $21.65 peak on April 4th of this year, was down 13.4% during the month of July and is already down 8.5% this month. Such dismal performance is illustrated in the chart below:

Editor’s Note:  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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