Green Thumb Industries Inc: Cannabis Company With Huge Cash Position & Aggressive Expansion Plans

Green Thumb Industries Inc Triples Q4 and 2018 Revenue

Investors in Green Thumb Industries Inc (OTCMKTS:GTBIF, CNSX:GTII) have seen its share price advance 84.5% year-to-date and it continues to have great momentum. While the company does not hog the spotlight like larger cannabis players, this may not always be the case.

A national cannabis retailer and consumer packaged goods company, Green Thumb Industries has made huge strides since its reverse takeover (RTO) in June 2018.

Over the last 10 months, the Chicago-based company has expanded the infrastructure of its consumer products and retail businesses to 13 production facilities and has the opportunity to open 88 retail locations across 12 states.

Thanks to the growth of new store openings, the growth of its branded products, and a broader acceptance of adult-use recreational marijuana across the U.S., Green Thumb Industries tripled its fourth-quarter revenue year-over-year and sequentially.

Green Thumb Industries Inc Overview

Green Thumb Industries cultivates, produces, and dispenses cannabis in the United States.

The vertically integrated company sells a number of branded cannabis products, including flower, edibles, concentrates, and topicals. It also owns and operates a growing chain of national retail cannabis stores called Rise. (Source: “Overview,” Green Thumb Industries Inc, last accessed April 12, 2019.)

Recreational marijuana use is not yet legal in the U.S. on a federal level, but the rapidly growing national footprint of Green Thumb Industries Inc’s retail brand will help it take advantage of that eventuality.

Green Thumb Industries currently operates 13 manufacturing facilities and has licenses for 88 retail locations and operations across 12 states, including California, Colorado, Nevada, Florida, New York, Pennsylvania, and Ohio.

On the retail front, Green Thumb Industries entered Florida in January 2019, opening a Rise dispensary in Deerfield Beach, its 15th store nationwide.

During the second quarter, Green Thumb expects to open five new Rise stores in Florida, Pennsylvania, and Ohio. Throughout 2019, the company expects to open 15 new stores.

The company has also been busy when it comes to business development. During and subsequent to the fourth quarter, Green Thumb Industries:

• Entered the Ohio market, winning five retail licenses and won a processing license, allowing it to produce and distribute its brand in the state.
• Closed the acquisition of KSGNF, LLC, which is licensed to operate a cultivation/processing facility and a maximum of 35 retail locations in Florida.
• Signed a definitive agreement to acquire Las Vegas, Nevada-based Integral Associates, which comes with three retail locations, as well as two additional cultivation and processing locations. It also scored eight additional retail licenses in Reno and Las Vegas.
• Won the ability to open 12 new stores in Pennsylvania, which only awarded 23 new licenses after receiving 180 applications.
• Entered New Jersey in December by winning a license to cultivate and manufacture consumer products and operate one retail store. Green Thumb Industries is only one of six applicants to be awarded a new state license.
• Entered Connecticut through the acquisition of Advanced Grow Labs, one of only four companies in the state licenses to grow and process cannabis. The February 2019 acquisition also includes controlling interest in one retail store.
• Entered California and Colorado in February 2019 through the acquisition of For Success Holding Company, the Los Angeles-based home to luxury lifestyle brand Beboe products. Integral Associates also obtained a retail license in West Hollywood, opening up the lucrative California retail market.

Green Thumb Stock

(Source: “Green Thumb Industries Inc. (GTBIF),” Yahoo! Finance, last accessed April 12, 2019.)

Green Thumb stock took off after its June RTO. Like most marijuana stocks though, Green Thumb Industries Inc’s share price took a hit in October. The sell-off had nothing to do with Green Thumb or the cannabis industry; it was a marketwide swoon, which got worse in December.

Since late December though, GTBIF stock has rebounded, up more than 84% year-to-date. Even though the company has made big gains in 2019, it is still trading well under its pre-fourth-quarter sell-off highs of $25.00.

At a time when analysts are calling into question the sky-high valuations of some of the biggest cannabis names, Green Thumb Industries, while still in its infancy, appears more aligned.

Chart courtesy of StockCharts.com

Q4 Revenue Up 237%, 2018 Revenue Up 278%

On April 9, Green Thumb Industries announced its financial results for the fourth quarter and year ended December 31, 2018.

Fourth-quarter revenue came in at $20.8 million, a 237% increase over the $6.1 million in the same period the previous year and a 21% increase over the $17.2 million recorded in the third quarter. (Source: “Green Thumb Industries (GTI) Announces Full Year 2018 Revenue of $62.5 Million, 278% Year-Over-Year Growth,” Green Thumb Industries Inc., April 9, 2019.)

Green Thumb Industries reported a fourth-quarter net loss of $3.1 million ($0.02 per share), contrasted with a net loss of $2.4 million for the fourth quarter of 2017.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) was $4.8 million compared with a loss of $2.0 million in the fourth quarter of 2017. Adjusted EBITDA was $12.4 million.

During the fourth quarter, Green Thumb Industries closed a bought deal financing transaction and raised $78.8 million. The company ended last year possessing cash and cash equivalents of $146.0 million and long-term liabilities worth $17.1 million. Green Thumb has just $7.2 million in total debt.

Full-year 2018 revenue was $62.5 million, a 278% increase over the $16.5 million recorded in 2017. For full-year 2018, the net loss was $7.7 million, compared to $3.7 million in 2017. EBITDA was $27.7 million, compared to EBITDA loss of $3.0 million in 2017, while adjusted EBITDA came in at $21.5 million.

During 2018, Green Thumb Industries completed an RTO and two bought deal financing transactions totaling approximately $250.0 million.

Green Thumb Industries founder and CEO Ben Kovler said:

2018 was a momentous year for GTI. In just six months following our RTO in June and in the beginning of 2019, we have expanded the infrastructure for our consumer products and retail businesses to now include 13 production facilities and the ability to open 88 retail locations across 12 states including pending acquisitions.

(Source: Ibid.)

Analyst Take

Green Thumb Industries Inc had a strong 2018, with fourth-quarter revenue advancing 237% and full-year revenue increasing 278%. The company’s net loss increased, but that was the result of corporate growth, not throwing good money at bad investments.

During the fourth quarter, Green Thumb Industries generated operating revenue in five markets. It also made capital investments related to the build-out of new markets in Florida, Nevada, Ohio, and New York, all of which are expected to generate revenue in the first half of 2019.

Since the start of 2019, the company has been generating consumer product revenue in Nevada and retail revenue in Florida. Thanks to its aggressive expansion plans, Green Thumb Industries plans to open 88 stores within the next two years.

And the company plans to use its huge $146.0-million cash reserve for business development, which includes wholesale capacity expansion, strategic initiatives, and working capital.

In 2019, look for Green Thumb Industries to establish a leading brand portfolio, accelerate its retail growth, expand its infrastructure, and increase its profits.