Cannabis Watch: Green Thumb CEO eyes ‘wonderfully boring’ execution of new market growth plan

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Green Thumb Industries Inc. rode a 37% rise in fourth-quarter sales to a slightly higher profit on Tuesday as the cannabis company continued spending to prepare for adult use sales in Virginia, New York and elsewhere.

“The headline for the quarter is continued strong execution — it’s wonderfully boring,” CEO Ben Kovler told MarketWatch. “People talk about how clean [our plan and earnings] are and we continue to execute against it.”

Green Thumb Industries
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reported net income of $22.81 million, or 10 cents a share in the three months ended Dec. 31, up slightly from $22.47 million, or 11 cents a share in the year-ago quarter.

Sales increased to $243.6 million, from $177.2 million in the year-ago quarter as the cannabis company grew scale in its consumer packaged goods and retail businesses, particularly in Illinois and Pennsylvania.

Analysts surveyed by FactSet expected Green Thumb Industries to earn 8 cents a share on $238 million of revenue.

Shares of Green Thumb Industries fell 3% on Tuesday. The stock has lost 16.4% so far in 2022, compared to a drop of 19.7% by the AdvisorShares Pure Cannabis ETF 
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Cowen analyst Vivien Azer reiterated her outperform rating and $45 price target on Green Thumb Industries. She said the company’s gross margin contracted by 260 basis points sequentially, but that management has committed to holding gross margins at or above 50%. The company’s revenue grew 4% over the previous quarter and beat expectations, she said.

“Margins were under press due to price compression,” Azer said.

Kovler said timing on some states opening up adult use sales has been difficult to predict, but over time the company’s business will grow.

“The setup for Green Thumb is good as we look out a year or  two, or three-plus,” Kovler said. “Thinking about our business quarter-to-quarter is a little too short term for us. We believe in the long term.”

Although the stock has been down, it’s still trading three times higher than when the company went public three years ago, he said.

Green Thumb closed out the year with more than $230 million in cash, Kovler said. 

It has the lowest cost of capital in the industry, he said. It’s carrying $250 million in debt at an interest rate of about 7%.  With capital expenditures of about $229 million last year, it’s also the largest spender in the industry.

Green Thumb opened new retail stores in Massachusetts and Nevada in the fourth quarter, part of its 10 store openings and purchase of 12 new stores in 2021.

The company’s fourth quarter revenue reflected activity at 73 retail stores in California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Virginia.

Comparable sales growth for stores opened at least 12 months was 6% on a base of 48 stores.

Fourth-quarter earnings before interest, taxes, amortization and depreciation (Ebitda) rose to $75.6 million from $61.3 million.

Selling, general and administrative expenses rose to $74.3 million from $53.2 million.

Green Thumb has not inked a slew of celebrity endorsements outside of paying an undisclosed sum in 2019 for renown tattoo artist Scott Campbell’s Beboe brand, but it remains open to any opportunities that make sense for the company, Kovler said. 

Cronos Group posts wider loss

Canadian cannabis company Cronos Group
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said Tuesday its fourth-quarter loss increased to $133.89 million, or 36 cents a share, from $111.71 million, or 31 cents a share, in the year-ago quarter.

Net revenue increased to $25.8 million from $17.05 million. Cronos booked a $119.9 million impairment charge in the latest quarter as a result of plan to exit its Peace Naturals Campus.

Analysts expected a loss of 11 cents a share on revenue of $23.9 million, according to a survey by FactSet.

“Our fourth quarter 2021 results indicate positive momentum, which we will look to carry forward as we begin to implement our strategic and operational realignment initiatives,” CEO Kurt Schmidt said in a statement.

Shares of Cronos group fell 3.6%. The stock is down 12% so far in 2022, compared to a drop of 17.2% by the Cannabis ETF
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