Performance
Green Thumb Earnings
GTBIF is a LONG
Industry concern over slowing sales (January was a disappointing month, and March is looming); pricing pressure in PA and other markets is consequential, but also transitory with significant new markets coming on. The current shadows over the industry are a more significant issue for smaller players that can't deal with it from a position of strength like GTI.
GTI posted 4Q21, revenues of $243.6 million (up 37.4%) and $76 million of (A) EBITDA (up16% and 31% margin); net revenue increased 4% QoQ with CPG revenue growing 3% QoQ retail revenue growing 8% QoQ. This big issue was the gross margins of 53% a 260 bps decline QoQ. The decline in gross margins was primarily attributable to moderate pricing pressure experienced on both our business's CPG and retail sides. Long-term guidance remains to keep this metric at or above 50%.
On the SG&A side, it came in at $74 million (up 39.5%), a $3 million increase in QoQ. On the earnings call, the company said it continues to invest in future growth. "The lion's share of this quarter-over-quarter revenue – quarter-over-quarter increase is both payroll and marketing related, principally reflecting our team expansion to close to 4,000 members. In 2022, we will continue to monitor our overall SG&A closely spend relative to our top-line growth and margin performance, to maintain gross margins and adjusted operating EBITDA margins at or above 50% and 30%, respectively."
If they were not doing this, I would be worried, because the number of new states coming on is significant. On the more immediate horizon NJ & CT recreational sales could start in 2Q22. Add to that, NY & MN have recently started selling medical flower sales, which should lead to stronger trends in those nascent markets. Then from there, we have six other states that could start recreational sales in the next two years (NY/VA/RI/MD/OH/PA.)
RHODE ISLAND LAWMAKERS UNVEIL LEGALIZATION PLAN
As we mentioned above GTI has several bullish catalysts coming, and RI is one.
GTI entered three new states in 2021, Virginia, Rhode Island, and Minnesota. While the smallest state by area, Rhode Island is the second-most densely populated after New Jersey. In August, GTI acquired one of three available state licenses, which gained us a medical dispensary and a cultivation facility. Yesterday, Rhode Island Democrats seemed ready to make another run at recreational marijuana legalization. On Tuesday, the house and Senate introduced legislation that would legalize consumption and sales for anyone at least 21 years old on Oct. 1, 2022. There's widespread agreement among lawmakers that they should establish an adult-use market, but reaching an agreement on the details is challenging. That's unlikely to change even though the House and Senate are on the same page regarding the legalization framework. Two contentious issues: Lawmakers want to create a new state agency to oversee the regulated market. At the same time, Democratic Gov. Dan McKee's legalization plan calls for the Department of Business Regulation to supervise the new industry. In addition, progressive advocates have identified automatic expungements of old marijuana-related crimes as a top priority. Unfortunately, the new proposal only provides a mechanism for ex-offenders to request those records scrapped.
