- Consolidated Revenue: $54 million, record quarterly high.
- Consolidated Gross Profit: $29 million, 53% of net revenue.
- Wholesale Biomass Revenue: $39 million, record quarterly high.
- Retail Revenue: $11 million, record quarterly high.
- Biomass Production: Over 149,000 pounds.
- Biomass Sales: Over 137,000 pounds.
- Wholesale Biomass Gross Profit: $23 million.
- General and Administrative Expenses: $17.4 million, up 33% year-over-year.
- Sales and Marketing Expenses: $0.68 million, down from $1 million last year.
- Professional Fees: $1.9 million, down from $3.7 million in Q1 2024.
- Depreciation and Amortization: $3.7 million.
- Adjusted EBITDA: $12.4 million, record high.
- Operating Cash Flow: $8.9 million.
- Cash Balance: Ended Q2 with $25.9 million.
- CapEx: $3.9 million in Q2.
- Wholesale Biomass Average Selling Price: $283 per pound.
- Wholesale Biomass Cost per Pound: $148 per pound.
- Retail Revenue: $10.9 million in Q2.
- Retail Gross Margin: 47% in Q2.
- CPG Revenue: $4 million, gross margin of 22%.
- Q3 2024 Revenue Guidance: $65 million to $67 million.
- Q3 2024 Biomass Production Guidance: 185,000 to 195,000 pounds.
- Q3 2024 Average Selling Price Guidance: $280 to $285 per pound.
- Q3 2024 Cost of Production Guidance: $120 per pound.
- Q3 2024 Adjusted EBITDA Guidance: $18 million to $20 million.
- Q3 2024 Operating Cash Flow Guidance: $18 million to $20 million.
- FY 2024 Revenue Guidance: Revised to $205 million to $210 million.
- FY 2024 Adjusted EBITDA Guidance: Revised to $40 million to $45 million.
- FY 2024 Operating Cash Flow Guidance: Revised to low $30 million range.
- FY 2024 Wholesale Biomass Production Guidance: Revised to 575,000 to 585,000 pounds.
- FY 2024 Wholesale Biomass Average Selling Price Guidance: Revised to $2.75 to $2.80 per pound.
Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Glass House Brands Inc (GLASF, Financial) achieved record quarterly highs in consolidated revenue ($54 million), consolidated gross profit ($29 million), and wholesale biomass revenue ($39 million).
- The company won multiple awards at the California State Fair Cannabis Awards, highlighting the exceptional quality of their products.
- Greenhouse 5 outperformed expectations in terms of quantity and quality, becoming the company's most efficient greenhouse.
- The Allswell brand has driven significant growth in retail dispensary revenues, becoming a top three flower brand by units sold in California.
- Glass House Brands Inc (GLASF) has integrated cutting-edge photo optical sorters into their production process, increasing throughput and improving sorting accuracy.
Negative Points
- The average selling price for wholesale biomass decreased to $283 per pound, below the guidance of $330 to $335 per pound.
- General and administrative expenses increased by 33% year-over-year, primarily due to bonus approvals and increased wholesale cannabis sales taxes.
- The company revised its full-year revenue guidance down to $205 million to $210 million from the previous $215 million to $220 million due to the current wholesale biomass pricing environment.
- Retail gross margin decreased to 47% in Q2 from 53% in Q1, partly due to the strategic pricing plan implemented earlier in the year.
- The company faces ongoing legal challenges, including an appeal in the catalyst lawsuit that was dismissed in June 2024.
Q & A Highlights
Q: How far along are you in discussions with distributors for hemp-derived cannabis, and are you concerned about potential legislation closing the loophole allowing hemp-derived cannabis in the market?
A: We are in the early stages of discussions and have been monitoring potential legislative changes. While there is a risk of regulatory changes, our cultivation expertise is fully applicable to both hemp-derived and traditional cannabis, allowing us to pivot as needed. (Kyle Kazan, CEO; Mark Vendetti, CFO)
Q: What are the modifications planned for Greenhouse 5, and will they require significant capital investment?
A: The modifications are intermediate in nature, such as adjusting gutter spacing and adding shade screens. These changes are more about labor and minor capital expenditures rather than major retrofits, and they will be implemented opportunistically without halting production. (Kyle Kazan, CEO)
Q: Can you provide insights into the lower-than-expected pricing for cannabis and what might stabilize or increase prices in the future?
A: Pricing declined earlier and more drastically than expected, possibly due to expiring licenses and market overlap with hemp-derived cannabis. While we can't control pricing cycles, we focus on reducing costs and improving efficiency, which positions us well for long-term success. (Graham Farrar, President)
Q: What is the cost and timing for converting Greenhouse 2, and how does supplemental lighting play into your long-term strategy?
A: Greenhouse 2 will require more extensive retrofitting due to its age, including potential upgrades to lighting systems. Supplemental lighting helps increase output and quality, and reduces seasonal fluctuations, making it a valuable investment. (Graham Farrar, President)
Q: How is the Allswell $9.99 out-the-door pricing strategy impacting your retail stores and plans for expansion to third-party retailers?
A: The strategy has significantly increased store traffic and sales, making Allswell a top-selling brand. However, we are focusing on implementing this pricing in our own stores rather than expanding it to all third-party retailers. (Kyle Kazan, CEO)
Q: How has the Allswell strategy affected average basket size and overall sales in your stores?
A: While average transaction values have slightly decreased, the increase in store traffic has more than compensated, making Allswell our largest unit driver. The brand is also performing well outside our stores. (Mark Vendetti, CFO)
Q: What are the potential benefits and challenges of entering the hemp-derived cannabis market?
A: The hemp market offers lower regulatory burdens, the ability to use credit cards, and direct-to-consumer opportunities, potentially leading to higher gross margins. However, we are carefully evaluating the market and regulatory landscape before making a final decision. (Graham Farrar, President; Kyle Kazan, CEO)
Q: What is the estimated size of the hemp-derived cannabis market?
A: Estimates suggest the market could be as large as $28 billion, potentially surpassing the licensed cannabis market. The market is growing quickly, especially in states like Texas, Florida, and New York, which allow hemp-derived products. (Graham Farrar, President)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
