Glass House Earnings + Call Notes
California cannabis leader reports Q224.
$53.9M Revs; est. $52.9M
$12.4M AEBITDA; est. $11.3M
$28.7M GP; est. $26.6M
53.2% GM; est. 50.3%
$8.9m CFFO; est. $8.4m
note: only one analyst covers the name.
Record quarterly highs included consolidated revenue and gross profit, wholesale biomass revenue and gross profit, biomass production and sales and retail revenue.
Q224 Revs $53.9M at high end of guidance and up 21% year- over-year.
Biomass production was 149,000 pounds, 20,000 pounds ahead of the mid-point of guidance and up 45% year-over-year.
Quarter-end cash and restricted cash balance was $25.9 million.
Q324 revenue projected at a record quarterly high of $65 million to $67 million.
Q324 quarter-end cash and restricted cash balance projected to be $38-$40M, a new high since completion of Phase I expansion
Notice to vacate given to farmers leasing Greenhouse 2 for next expansion with one-third already empty.
Considering cultivating “Hemp-Derived Cannabis,” which was legalized in the 2018 federal Farm Bill, in Greenhouse 2 but no formal decision has been made.
Call Notes
GLASF Lilac Diesel strain was awarded the best of California.
^ Golden Bear trophy, at California state awards.
^ along w/ 3 gold awards + 1 silver.
Begun planting process in Greenhouse 5 expansion.
Expect Greenhouse 2 to be the next greenhouse expansion.
^ gave notice to produce business to vacate.
^ approx. 30% of GH2 move out.
GLASF experience would also benefit hemp-derived products.
Looking at expanding into a new greenhouse for hemp products for national expansion.
Hemp derived greenhouse would require some adjustments.
Will allow GLASF timeline to evaluate whether to plant hemp or cannabis.
Met / exceeded all guidance metrics.
Q2 production from GH5 beat quality + quantity expectations / guidance.
GH5 already the most efficient greenhouse.
^ flower yield per sq ft already significantly higher than GH6.
Back porting many modifications of GH5 back into GH6 over the coming months.
Incorporated photo-optical sorters into end of Q2 / beginning of Q3.
Sorters capable of processing 80lbs/hour, 2,500lbs/day assuming only 2 shifts/day.
Assume sorters increase throughput, sorting accuracy, and reducing costs.
GLASF allows operators to pick up supply at 1 consolidated location vs. a number of wholesale sellers.
Q2 decrease in pricing continued “sale at market pricing” strategy.
Retail pricing plan implemented late Q1.
Retail revs up 6% QoQ, 10% YoY.
Introduced Allswell $10/8th at end of Q1.
Paying bills on time, a preferred partner for retail partners.
Current environment favoring larger retail chains, while smaller chains are having a harder time getting favorable pricing + offering attractive pricing.
Recently introduced Allswell vape surpassed expectations.
^ now #4 selling vape in-stores.
^ increased from 6 SKUs to 12 SKUs.
Inventory older than 3mo accounted for only 9% of total inventory.
^ over 6mo accounting for only 2%.
145% QoQ increase in wholesale biomass revenue.
$12.4m aEBITDA
$8.9m CFFO
$3.9m capex, mainly on completing GH5 expansion + expanding GH1 capacity.
$1.9m preferred dividends + $1.9m in principal on loan.
Wholesale biomass at 72% of total revenue.
^ up 28% YoY and 135% QoQ
Wholesale biomass produced up 45% YoY, exceeded high end of guidance by almost 20k pounds, exceeded estimates.
$148/COGS/lb, below $150/lb guidance.
Expected COGS to be above last year period, still in start up mode for GH5.
Wholesale GM of 58% despite anticipated lower average selling price.
3rd highest quarterly GM ever.
Retail + CPG revenue increased 5% QoQ/ 6% YoY to $14.9m.
^ higher than guidance of flat QoQ.
Strategic retail pricing initiatives underway.
CA YoY revenue decline of 8%.
Price compression continues to be a significant factor in CA revenue decline.
Avg item price in June decreased 9% YoY.
^ number of units saw slight increase of 1% YoY.
Many CA brands facing CF and liquidity shortfalls.
^ expect situation to accelerate throughout the year.
Retail GM of 47%, down from 53% in Q1.
$4m CPG revenue, down 6% QoQ and up 1% YoY; 22% GM.
First6mo, number of active mixed/outdoor cult licenses declined by 368 / 61 per mo.
2.4m sq ft of cultivation left market during this period.
Number of licenses continues to fall, but rate of decline slowed considerably vs. ’23.
Q3 ’24 guidance – Revenue of $65-67m
Q3 ’24 guidance – Biomass production of 185,000 to 195,000lbs.
^ up 27% QoQ and 87% YoY growth
Expect visibility on GH5 production capabilities to improve throughout the year.
Q3 ’24 guidance – Project avg wholesale price to be $280-285/lb.
Q3 ’24 guidance – Flower pricing weaker than expected since 2H of Q2.
^ in recent weeks, fell below lowest levels seen in ’23.
Think current flower pricing reaching economically unsustainable level for many.
Surviving cultivators are better operators.
Forecast for remainder of year assumes ’22 – ’23 level pricing.
Q3 ’24 guidance – Expect consolidated GM to be in low-50s.
Q3 typically highest production of sales / flower vs. trim.
Q3 ’24 guidance – Expect aEBITDA + OPCF to be in $18-20m range.
$2m CAPEX, $1.9m dividend, $1.9m debt payment.
2024 guidance - $205-210m revenues (down from $215-220m)
2024 guidance - aEBITDA to $40-45m (down from “over $50m”)
2024 guidance - OPCF in low $30m’s (from “mid $30m range”)
2024 guidance - Wholesale biomass up to 575,000-580,000lbs, up 50,000lbs.
2024 guidance - COGS/lb projected to be $130.
2024 guidance - $275-280/lb ASP (down from $310-315/lb)
2024 guidance – Retail/CPG revenue to increase mid-single digits in 2H.
Could service hemp, or both markets in new greenhouse, depending on how hemp regulations get rolled out / how farm bill ends up.
Could always pivot back to cannabis if restrictive hemp framework is released.
Pricing declined earlier / more drastically than last year.
GH2 is a bit older than GH5 + GH6.
^ would be a larger project from a construction point of view.
Wouldn’t be as quick of a construction timing + as cheap as a build.
Pricing for wholesale hemp flower is higher than what GLASF sells their flower for.
Plenty of demand out there, a lot of brands have already moved into that.
Focus is to use $10/8th for owned stores / managed stores.
^ not meant for all in-state stores.
Have seen ATV’s drop slightly, not significantly, a few percent.
Pretty good when thinking of how aggressive GLASF has been on pricing.
Traffic has more than made up for drop in ATV.
Co-generation on site built to power high cost HPS lighting + heat / climate controls + CO2.
All very efficient from a production point of view.
Could look at partial + full upgrade for LED.
Less regulatory burden w/ hemp.
Hemp license is $900 and covers multiple years.
Cannabis license annual, higher cost, requires plant tags, etc.
On hemp D2C side, see Cookies doing D2C hemp in a larger way.
Would be beneficial to allow payment through credit cards, online payments, etc.
Seen numbers of over 7,000 hemp dispensaries in TX.
Seeing hemp derived gummies shipped.
FL TX NY all have ability to ship hemp flower + products into those markets.
Hemp market delivering on what cannabis market was expected to look like.
/end
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CB1 has a position and nothing contained herein should be considered advice.