Green Thumbs 3Q22 Earnings Report Roundup.
Green Thumb Industries (GTBIF) is a Hedgeye Cannabis Best Idea Long.
GTI reported revenue of $261.2 million in the quarter, up 2.7% sequentially and up 11.8% YoY. Revenue growth was primarily driven by increased retail sales in New Jersey and Illinois. Consumer Packaged Goods gross revenue increased 5.9% QoQ, with retail revenue increasing 3.6% QoQ. EBITDA was $73.3 million or 28.1% of revenue versus $75.2 million or 32.2% of revenue for the comparable period. Adjusted Operating EBITDA was $84.5 million or 32.3% of revenue as compared to $81.2 million or 34.7% of revenue for the third quarter of 2021. This was a 7% sequential improvement. Gross profit came in at $131.2 million or 50.2% of revenue compared to $129.5 million or 55.4% of revenue in the comparable period last year. Gross profit performance reflected increased sales in the Company's retail business, new and acquired stores, New Jersey adult-use sales, and continued growth in the Illinois market. As of the end of the quarter, current assets were $318.6 million, including cash and cash equivalents of $147.3 million. The total debt outstanding was $255.5 million.
Also discussed in the quarter was their new partnership with Circle K down in Florida. Through the exclusive agreement, Green Thumb can lease space adjacent to Circle K locations in Florida, where the retailer currently operates approximately 600 locations. GTI plans to expand its medical cannabis retail footprint in Florida through leasing arrangements with Circle K, the global convenience store retailer. Subject to regulatory approvals following construction, Green Thumb plans to launch its test and learn phase of the rollout in 2023, with approximately ten "RISE Express" branded medical dispensaries adjacent to Circle K stores in various Florida locations.
Overall, it was a pretty solid quarter for Green Thumb when they beat top-line estimates and improved margins while facing all the headwinds it did in the quarter. It wasn't all sunshine and smiles, though in the quarter, there are signs that this Company is facing significant industry and macro headwinds. Comparable sales (stores open at least 12 months) declined 1.6% on a base of 59 stores. They ended the quarter with 77 stores, which is a 30% unit growth compared to last year. New markets like New Jersey and opening new stores in the 14 markets that they operate is what is growing the top line number. Same-store sales being down 1.6% compared to last year doesn't only make sense but is less bad than expected when you think that we estimate that the average price per unit sold in Illinois was down 11.4% YoY and Maryland was down 20.7% to name a few states. Management had this to say about price, "While there is price compression in certain markets, unit growth increased 22% year over year, according to BDSA. We believe this clearly indicates that cannabis is an essential purchase for American consumers." More on this is below.
Illinois Cannabis Sales.
Illinois cannabis sales came in at ~$157M in October, a sequential decline of 1.0% and growing YoY by 1.3%. So sales were up 1.3% YoY, but unit volumes sold were up 14.3% compared to last year. And for those who are wondering why I am not very negative about GTI's negative SSS comp, it is because of this factor. You have an 11.4% price compression in this market compared to last year, a similar trend to what we are seeing in many North American markets. What you have in the cannabis industry is the exact opposite of what you see in most industries, especially restaurants. Restaurants have been able to raise prices because of food inflation which keeps their margins intact. Still, the only top-line growth and SSS comps that many of these casual dining names are printing are only improving due to increased menu prices and not increased traffic or margins. A company like GTI can print a top-line beat, a slight SSS comp decline, and improving margins, all while they see these macro headlines.
Verano's Low-Dose Edibles.
Verano Holdings (VRNOF) today announced the launch of BITS(TM), a new line of low-dose, high-function edibles that allow cannabis consumers to do more with less. Each of BITS' five initial flavors offers a blend of 5 mg of THC, complementary cannabinoids, and adaptogens designed to enhance, not overtake, and to make the cannabis edible experience less intimidating, more accessible, and enjoyable. Designed with function in mind, BITS(TM) aims to enhance everyday experiences by tapping into the many benefits of cannabis and adaptogens. "Launching BITS adds another powerful and complementary piece to our growing portfolio that appeals to a broad base of cannabis consumers of all experience levels," said George Archos, Verano Founder, and Chief Executive Officer. "With the introduction of BITS across several core markets, we're excited to drive further momentum while delivering more variety to cannabis consumers to address their diverse individual tastes and wellness needs."
