GLASF - Glass House Forecasts Big Third Quarter
Glass House Brands Inc. (OTCQX: GLASF and GHBWF) reported financial results for its second quarter ending June 30, 2022, with sales falling by 12% to $16.5 million from $18.7 million for the same time period in 2021. On a positive note, sales increased 18% sequentially from $14.0 million in the first quarter. the loss from operations was $17 million, which increased sequentially from the first quarter’s loss of $13 million.
“We continued to make solid progress against our strategic growth priorities during the second quarter, “stated Kyle Kazan, Chairman and CEO of Glass House Brands, “The initial harvest
from our SoCal farm was completed in late May followed by the first sales of cannabis grown at the facility in June, both well ahead of schedule and significantly faster than the previous ramp up of our Casitas and Padaro farms. Over the past few years, our Casitas and Padaro farms have established a strong reputation for consistently growing high quality cannabis at a low cost. So, I can’t emphasize enough how thrilled we are that the SoCal farm is already producing cannabis with a higher and more consistent quality than the Casitas and Padaro farms. In addition, it has shown particular promise at growing high quality genetics at extremely close to indoor quality. Volume has ramped quickly and in July we produced 22,000 pounds of biomass across all three facilities, compared to a total of 25,000 pounds in the entire second quarter.”
Guidance Is Rich
Glass House is forecasting that in the third quarter it expects to achieve revenues of between $27 million and $30 million which is a 64% to 82% increase vs. the second quarter this year. “This assumes the wholesale pricing we are currently experiencing in Q3 remains constant through the balance of the quarter. Our Q4 revenue target is $50M and assumes Q4 wholesale pricing remains consistent with Q3 and includes revenue from our NHC acquisition as well as a partial quarter for our new Farmacy stores.” The company is also forecasting that it will triple its revenues to $200 million by 2023. The company is also forecasting it will be free cash flow positive by the first quarter of next year.
“Our aggressive retail expansion also remains firmly on track and we are on pace to have at least 11 dispensaries by year-end 2022, up from three just over a year ago when we started our
life as a public company. We closed our acquisition of the remaining 50% equity stake in The Pottery Dispensary in July and expect to open three new Farmacy locations in the fourth quarter. In May, we announced the acquisition of three Natural Healing Center (“NHC”) dispensaries and we are moving forward on closing these acquisitions. In addition, we are very happy to announce that we have agreed to acquire Natural Healing Center’s flagship Grover Beach store for $15.9 million, with $8.1m of the purchase price in assumed debt, $7.7 million in stock and $0.1 million in cash net of working capital. The Grover Beach store is the crown jewel of NHC’s dispensaries and netted US$16m in revenues in 2021. It is one of only four total dispensaries in Grover Beach and is the No. 1 taxpayer in the city, given its high sales volume and strong cash flow generation. The deal multiple based on the annualized EBITDA of the Grover Beach store in the first half of 2022 is 4.8x.”
Looking Ahead
Glass House said it has a long-term target of reducing cultivation costs to $100 per pound. The company said, “The management team is now ready to provide projections for the average cost of production across all 3 farms of $150 per pound for Q3 and $125 per pound for Q4 of this year. Please note that the SoCal farm is completing its ramp up through Q3. The projected improvement to $125 per pound in Q4 represents a 25% reduction from Q4 last year.”