Cannabis Stock Green Thumb Industries Reports Strong Q1 Financials
Green Thumb industries shareholders have had a rough 2020 so it’s nice to finally get some good news with yesterday’s financial results. Thursday’s announcement of strong revenues and EBITDA growth has given GTII stock a nice 15% bump today. Total revenue for the first quarter of 2020 increased 267.6% year-over-year and 35.4% quarter-over-quarter to $102.6 million. This was driven by organic growth across the Company’s consumer packaged goods and retail businesses. Adjusted operating EBITDA was $25.5 million for the first quarter 2020, representing an 85% increase from the prior quarter and a 13-fold increase from the first quarter 2019.
There are many reasons to add GTII to your marijuana stock watchlist and we’ll cover those soon. For now, let’s dive into some of the highlights from their latest earnings call.
- Total revenue increased 35% quarter-over-quarter and 268% year-over-year.
- Adjusted Operating EBITDA increased 85% quarter-over-quarter, providing the Company with positive free cash flow from operations.
- Successfully launched adult-use sales in Illinois on January 1, 2020.
- Robust consumer demand continues across all operating markets despite COVID-19.
- Strong balance sheet to support growth initiatives.
Green Thumb Industries Inc. (“Green Thumb,” or the “Company”) (CSE: GTII) (OTCQX: GTBIF), a leading national cannabis consumer packaged goods company and owner of Rise™ and Essence retail stores, today reported its financial results for the first quarter ended March 31, 2020. Financial results are reported in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and all currency is in U.S. dollars.
“Our business model continues to prove out and we delivered outstanding first-quarter results,” said Green Thumb Founder and Chief Executive Officer Ben Kovler. “We achieved a major milestone by breaking $100 million in quarterly revenue along with substantial EBITDA growth. These factors helped contribute to our positive free cash flow from operations. We believe that our operational strength and resilience, supported by a strong balance sheet, continue to differentiate and position us for long-term success, especially during these challenging times.”
Green Thumb Industries: Financial Highlights
- Revenue: Total revenue for the first quarter 2020 increased 267.6% year-over-year and 35.4% quarter-over-quarter to $102.6 million. Quarterly revenue was driven by organic growth across the Company’s consumer packaged goods and retail businesses.
- Gross Margin: Gross margin for the first quarter 2020 was 51.6% as compared to 45.8% for the first quarter 2019.
- Net Income (Loss) Attributable to Green Thumb: Net loss attributable to the Company for the first quarter 2020 was $4.2 million or ($0.02) per basic and diluted share, as compared to a net loss of $14.1 million or ($0.07) per basic and diluted share for the fourth quarter 2019.
- Adjusted Operating EBITDA: Adjusted Operating EBITDA(1), which is a non-GAAP financial measure as described below and in an accompanying financial table in this release, was $25.5 million for the first quarter 2020, representing an 85% increase from the prior quarter and a 13-fold increase from the first quarter 2019.
- Balance Sheet: As of March 31, 2020, current assets totaled $140.8 million and included cash and cash equivalents of $71.5 million. Total debt outstanding was $92.9 million, $0.2 million of which is due within 12 months.
- Capital Markets & Financing: In January and March 2020, respectively, Green Thumb completed sale and leaseback transactions with Innovative Industrial Properties (“IIP”) of its Toledo, Ohio processing facility and Oglesby, Illinois cultivation and processing facility. In total, these transactions provide the Company with $57.2 million of non-dilutive capital.
(1) EBITDA and Adjusted Operating EBITDA are non-GAAP financial measures. Please see the “Supplemental Information (Unaudited) Regarding Non-GAAP Financial Measures” at the end of this press release for a reconciliation of non-GAAP to GAAP measures.
Why do we Recommend Green Thumb Industries as a strong cannabis stock for 2020?
There are many reasons to like GTI marijuana stock as an interested observer. The company is vertically integrated, with a focus on building brands, and creating a unique and attractive retail experience that builds loyal visitors. This supports their bid to preserve strong margins in an industry that will likely eventually experience price compression and falling margins.
GTI: Expanding Current Operations & Production
They currently operate 25 dispensaries and plan to have 40-50 operating in a few years, roughly doubling their number. They target roughly $3.6 mil in revenue from each store. This suggests they could generate close to $180 million in revenue from their retail side in a few years.
Currently, they grow at least 25,000 kgs year, which at $6 gram generates about $125 million. When expansions are done, they expect to have a future capacity of 50,000-60,000 kgs a year. We think that $400-430 million is a good estimate of where their future revenue could be in a few years.
GTI: Solid Cash Position
They also have a strong cash position (over $65 million) and appear to have excellent access to capital. This suggests they should have the money they need to invest to make their growth plans come true – even amid the COVID crisis. This is something that many other cannabis companies will struggle with and will cause these companies to inevitably shutter their doors.
Bottom Line: Is Green Thumb Industries a Good Marijuana Stock Investment?
All this is promising news. But does it make GTI a good marijuana stock investment? For many, this depends on how much money they will generate in the future, versus how much revenue is baked into their current stock price.
The GTI stock price was down in 2019, just like all cannabis stocks, but is up over 30% in the last month. The price to sales is down to 13 (from 20) but is still too high for our liking. But does this mean it’s not a buy? Or is it too early or too late to buy this marijuana stock?
Is it too late to buy this marijuana stock?
No. In fact, we think this is a good company that is fairly priced today for revenue the company should achieve in the coming years.
Given their current and future production of 50,000-60,000 kgs a year we believe that $400-430 million is a reasonable estimate of where their future revenue could be in a few years.
In other words, it looks to us like a good long-term investment, not a stock that will win a race for the highest gains in the next year or two. Instead, one that will produce an even-handed long term increase for long-term investors.
See the full financial results from GlobalNewsWire here.
Cannabis Stock Green Thumb Industries Reports Strong Q1 Financials
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