Glass House Brands Reports Record Second Quarter 2023 Financial Results

    Author microcapwatchPosted on Categories CannabisTags , , ,

    –Cash increased to $22.7 million from $16.4 million in Q1 2023, as operating cash flow reached a record $8.3 million

    – Adjusted EBITDA1 was $9.5 million versus a $0.1 million loss in Q1 2023

    -Revenue was $44.7 million, up 54% sequentially and 171% year-over-year

    -Gross margin was 55% versus 41% in Q1 2023, and 2% in the prior year period

    -Q2 Biomass production2 was up 311% year-on-year and biomass revenue increased 358% year-on-year

    -Cost per Equivalent Dry Pound of Production3 was $139 per pound, down 12% versus Q2 2022

    -Average selling price was $340 per pound, up 43% versus last year, and 17% versus Q1 2023

    -Conference Call to be held today August 14, 2023 at 5:00 p.m. ET

    LONG BEACH, CA and TORONTO, Aug. 14, 2023 /CNW/ – Glass House Brands Inc. (“Glass House” or the “Company”) (NEO: GLAS.A.U) (NEO: GLAS.WT.U) (OTCQX: GLASF) (OTCQX: GHBWF), one of the fastest-growing, vertically integrated cannabis companies in the U.S., today reported financial results for its second quarter ending June 30, 2023.

    Second Quarter 2023 Highlights

    (Unless otherwise stated, all results and dollar references are in U.S. dollars)

    • Net Sales of $44.7 million increased 171% from $16.5 million in Q2 2022 and up 54% sequentially from $29.0 million in Q1 2023;
    • Gross Profit was $24.4 million compared to $0.3 million in Q2 2022 and $12.0 million in Q1 2023;
    • Gross Margin was 55%, compared to 2% in Q2 2022 and 41% in Q1 2023;
    • Adjusted EBITDA1 was $9.5 million, compared to $(9.8) million in Q2 2022 and $(0.1) million in Q1 2023;
    • Cost per Equivalent Dry Pound of Production3 was $139 a decrease of 12% compared to the same period last year and down 29% sequentially versus Q1 2023;
    • Equivalent Dry Pound Production2 was 103,336 pounds, up 311% year-over-year and up 115% sequentially;
    • Cash balance was $22.7 million at quarter-end, up 39% from Q1 2023 quarter end.

    Management Commentary

    “The second quarter of 2023 was the best in our history. We achieved record levels of operating cash flow, exceeded Q2 guidance across several operating metrics and marked our first quarter of positive adjusted EBITDA1,” stated Kyle Kazan, Co-Founder, Chairman and CEO of Glass House.

    “In Q2 2023, we saw our biomass revenues and pounds sold more than quadruple versus the previous year. Revenues from our retail dispensaries doubled to $10 million year-over-year, due to growth from acquisitions. Consolidated gross margin surpassed 50% and cultivation cost per pound3 fell by 12% versus last year. Finally, Adjusted EBITDA1 flipped to a positive $9.5 million compared to negative $9.8 million a year ago.

    “I believe that our position as a vertically-integrated California cannabis company with a competitive core competency in the cost-efficient cultivation of premium flower is the reason why we’ve been able to persevere in this difficult market environment. We value our retail and brand businesses for the revenues and market awareness they provide, and we see potential for our brands to create significant shareholder value over the long term.”

    Kazan concluded, “We anticipate this momentum will continue through the remainder of 2023, and surpassing our second quarter guidance by significant margins only builds our confidence.”

    Second Quarter 2023 Operational Highlights

    Subsequent Events

    Q2 2023 Financial Results Discussion

    Net revenues for Q2 2023 were $44.7 million, 171% growth versus Q2 2022 and a 54% sequential increase versus Q1 2023. This result was 12% higher than the high end of our Q2 guidance range of $38 million to $40 million.

    Wholesale biomass revenue of $30.6 million increased 358% versus Q2 2022 and was up 112% sequentially versus Q1 2023. In the quarter, product sold increased 354% year-on-year to 90,174 pounds of equivalent dry weight. The increase in weight available for sale was driven by a 311% increase in production2 versus last year to 103,336 pounds as a result of incremental production from the Company’s SoCal farm.

    Retail revenue in Q2 2023 of $10.1 million increased 108% year-over-year and was up 7% on a sequential basis. The year-over-year increase was primarily a result of incremental revenues from four retail locations we acquired in Q3 2022, and from three new stores – Farmacy Isla Vista which opened in mid-December last year, Farmacy Santa Ynez which opened in January, as well as NHC Turlock which opened in late April.

    Wholesale CPG revenues were $4.0 million, a decrease of 20% compared to the prior year and a 24% decline sequentially. We had expected negative sequential growth in our CPG wholesale sales due to the financial difficulties of HERBL, one of the state’s largest distributors, along with the challenges facing all brands in the current California marketplace. We are currently distributing our CPG product via our co-packer who is providing distribution service to our retail accounts. For our own stores, we now sell direct and treat this as an intercompany transaction instead of booking the sale through the distributor; and this reduced Q2 CPG revenue by $1.1 million – accounting for almost the entire sequential decline in CPG sales. Without the change, CPG sales would likely have been about flat.

    Consolidated gross profit was $24.4 million, or 55% of net revenues, compared to $0.3 million, or 2%, in Q2 2022 and $12.0 million, or 41% in Q1 2023. This is the highest gross margin percent ever achieved by Glass House. The two key drivers were wholesale biomass average selling price reaching $340 per pound, well above $290 per pound in the first quarter, and cost of production3 falling to $139 per pound in Q2 from $196 per pound in Q1 2023. 

    General and administrative expenses were $13.1 million for the quarter compared to $11.4 million in Q1 2023. The $1.7 million increase was primarily attributable to bad debt expense of $1.1 million as a result of HERBL ceasing business operations and to increased wholesale biomass taxes paid to Ventura County due to the large sequential increase in wholesale biomass revenues.

    Sales and marketing expenses were $1.0 million, up 11% year-on-year and 53% sequentially. Professional fees were $2.2 million, down 18% year-on-year and up 47% from Q1 2023. The sequential increase in professional fees was due to increased legal fees related to litigation, the Turlock acquisition and expenses related to our annual shareholders meeting. Our plan all along has been to limit growth in SG&A spending as we increased revenue to improve cash flow and profitability.

    Depreciation and amortization in Q2 2023 was $3.6 million, down 7% from Q1 2023.

    Adjusted EBITDA1 was $9.5 million in Q2 2023, compared to adjusted EBITDA loss of $(0.1) million in Q1 2023. This was driven by top-line growth, higher gross margins, and disciplined management of operating expenses.

    We generated $8.3 million of cash from operations in Q2 2023 versus cash generated from operations of $4.5 million in Q1 2023 and cash usage of $7.8 million in Q2 2022. In Q2, cash impact from net income turned positive for the first time, reaching $2.5 million from negative $4.1 million in Q1. Cash flow also benefited by $5.3 million because there was no income tax paid in the quarter.    

    Capital spending was $0.2 million in Q2, as there were no major spending projects in the quarter. Q1 capital spending was $1.1 million.

    2023 Outlook

    The Company is providing the following guidance for 2023 based on the strength of our second quarter results and current trends from the first half of 2023.

    2023 Cash Flow and EBITDA

    Based on our current wholesale average selling price, which we assume maintains for the balance of the year, we expect to have positive operating cash flow and positive adjusted EBITDA1 in Q3 and Q4.

    Q3 2023 Outlook

    We expect Q3 2023 revenue to be between $45 million and $47 million. The increase vs. Q2 2023 is being driven by projected low-to-mid single digit percent growth in wholesale biomass revenue with pricing projected to increase slightly to above the Q2 2023 average selling price of $340 per pound as a seasonally favorable increase in the percentage of flowers and smalls relative to trim offsets a seasonal dip in prices due to increased summer output from outdoor and mixed light farms. We also assume that CPG and Retail revenue will collectively be flat relative to Q2 due to the continued difficult retail environment. Production2 is expected at 100,000 to 103,000 pounds, roughly in line with Q2 levels. While the second half of the year is usually our highest in terms of production, we do not expect the typical seasonal uptick in Q3 compared to Q2 this year due to efficiency improvements in post-harvest processing that boosted Q2 production by approximately 10,000 pounds and because unusually low sunlight levels in May, June and the first half of July reduced the normal seasonal lift in biomass bulk harvests that we typically see in Q3. As a reminder, plants harvested today are the cumulative result of sunlight in the preceding 60-90 days.

    We expect consolidated gross margin percent to be flat to up slightly versus Q2’s 55% as cost of production3 is projected to decline to $120 per pound, a 14% reduction from $139 per pound in Q2. Gross margin for CPG and Retail are projected to be flat to up slightly.

    In addition, we expect adjusted EBITDA1 to be similar to Q2 and expect operating cash flow to be about $4 million to $6 million, which is lower than the Q2 level of $8 million.

    We expect non-expansion capex to be below $1 million.

    2023 Fiscal Year

    We are raising our revenue guidance to $165 to $170 million4 for 2023 due to higher than projected wholesale biomass production. We are increasing our wholesale revenue projection to a range of $105 to $110 million from $100 million. Projected average selling price per pound remains at approximately $330 per pound, while we are raising our biomass production2 estimate to 350,000 to 355,000 pounds, an increase of 35,000 to 40,000 pounds over our previous guidance. We are maintaining our cost of production3 estimate at $140 per pound, with second half cost of production projected at $120 per pound or below. This is still an 8% decrease vs. the same period in 2022. This guidance represents an 84% increase for production at the mid-point of guidance and a 2% reduction in costs vs. FY 2022. 

    Revenue projections for our Retail and CPG businesses remain unchanged at $40 million and $20 million, respectively.

    None of the above guidance includes any impact from the ongoing retrofit of Greenhouse 5, which began in early July. We expect to have plants in Greenhouse 5 by early 2024, with the first sale projected for Q2 2024. Once operational, we expect Greenhouse 5 will increase our cultivation capacity by roughly 250,000 pounds to a total of 600,000 pounds. At current pricing, Greenhouse 5 is capable of producing over $80 million of incremental revenue annually and over $30 million in incremental EBITDA1.

    Financial results and analyses will be available on the Company’s website on the ‘Investors’ and ‘News & Events’ drop down menus (www.glasshousebrands.com) and SEDAR+ (www.sedarplus.ca).

    Unless otherwise stated, all results are in U.S. dollars.

    Net Income / (Loss)

     (000’s) 

    Q2 2022

    Q1 2023

    Q2 2023





     Revenues, net 

    $                  16,473

    $                  29,022

    $                  44,665

     Cost of goods sold 

    $                  16,219

    $                  17,066

    $                  20,293





     Gross profit 

    $                       254

    $                  11,956

    $                  24,372

     % of Net Sales 

    2 %

    41 %

    55 %





     Expenses: 



     General and administrative 

    $                  10,875

    $                  11,386

    $                  13,054

     Sales and marketing 

    $                       898

    $                       652

    $                       997

     Professional fees 

    $                    2,670

    $                    1,500

    $                    2,200

     Depreciation and amortization                                       

    $                    2,837

    $                    3,836

    $                    3,569

     Impairment 

    $                  23,007

    $                    1,328





     Total expenses 

    $                  17,281

    $                  40,382

    $                  21,149





     Gain (Loss) from Operations 

    $                 (17,028)

    $                 (28,425)

    $                    3,223





     Interest Expense 

    $                    1,571

    $                    2,080

    $                    2,547

     Other expense 

    $                   (6,139)

    $                    5,858

    $                  20,336





     Total other expense 

    $                   (4,568)

    $                    7,938

    $                  22,883





     Provision for income taxes 

    $                    1,733

    $                    2,422

    $                    5,246





     Net income (Loss) 

    $                 (14,192)

    $                (38,785)

    $                (24,905)

     

    Adjusted EBITDA

     (000’s) 

    Q2 2022

    Q1 2023

    Q2 2023





     Net income (loss) 

    $                 (14,192)

    $                (38,785)

    $                 (24,905)

     Interest 

    $                    1,571

    $                    2,080

    $                    2,547

     Depreciation and amortization  

    $                    2,837

    $                    3,836

    $                    3,569

     Taxes 

    $                    1,733

    $                    2,422

    $                    5,246

     EBITDA (non-GAAP) 

    $                   (8,052)

    $                (30,447)

    $                (13,544)





     Share-based Compensation Expense 

    $                    3,491

    $                    1,631

    $                    1,532

     Stock Appreciation Rights Expense 

    $                         92

    $                            –

    $                         14

     Loss on Equity Method Investments 

    $                         73

    $                    2,264

    $                        (36)

     (Gain) Loss on Change in Fair Value of Derivative Liabilities    

    $                         53

    $                        (13)

    $                       143

     Impairment Expense 

    $                            –

    $                  23,007

    $                    1,328

     Loss on Extinguishment of Debt 

    $                            –

    $                            –

    $                            –

     Loss on Disposition of Subsidiary 

    $                            –

    $                            –

    $                            –

     Non-Operational Startup Costs 

    $                         99

    $                            –

    $                            –

     Change in Fair Value of Contingent Liabilities 

    $                   (6,314)

    $                    3,410

    $                  19,100

     Non-Operational Notes Receivable Bad Debt Reserve 

    $                            –

    $                            –

    $                            –

     Loan Amendment Fee 

    $                            –

    $                            –

    $                    1,000

     Acquisition Related Professional Fees 

    $                       792

    $                            –

    $                            –

     Adjusted EBITDA (non-GAAP) 

    $                   (9,766)

    $                      (149)

    $                    9,538

     

    Select Balance Sheet Information

     (000’s) 

    Q2 2022

    Q1 2023

    Q2 2023





     Cash, Cash Equivalents and Restricted Cash 

    $                  17,451

    $                  16,368

    $                  22,690

     Accounts receivable, net 

    3,652

    3,681

    3,589

     Prepaid expenses and other current assets 

    5,327

    4,627

    4,317

     Inventory 

    12,252

    14,681

    16,699

     Current portion of notes receivable 

    6,061

    1,301

    –

     Total Current assets 

    $                  44,744

    $                  40,658

    $                  47,295

     Operating and finance lease right-of-use assets, net 

    3,610

    10,562

    12,212

     Investments 

    6,869

    1,982

    2,018

     Property, plant and equipment, net 

    212,648

    214,473

    211,134

     Intangible Assets, Net and Goodwill 

    34,975

    47,036

    46,797

     Deferred Tax Asset 

    773

    1,160

    1,569

     Other assets 

    3,627

    3,711

    3,574

     Total Assets 

    $                307,246

    $                319,584

    $                324,599





     Accounts payable and accrued liabilities 

    $                  11,918

    $                  25,852

    $                  28,032

     Income taxes payable 

    7,070

    9,412

    14,736

     Contingent earnout liability 

    44,056

    18,059

    32,714

     Shares payable 

    2,757

    8,596

    8,595

     Current portion of operating and finance lease liabilities 

    561

    1,123

    1,506

     Current portion of notes payable 

    9,490

    48

    49

     Total current liabilities 

    $                  75,852

    $                  63,090

    $                  85,632

     Operating and finance lease liabilities, net of current portion        

    3,085

    9,560

    10,855

     Other non-current liabilities 

    1,631

    4,877

    5,013

     Deferred tax liabilities 

    –

    –

    –

     Notes payable, net of current portion 

    61,886

    62,887

    63,632

     Total Liabilities 

    $                142,455

    $                140,414

    $                165,132

     Preferred Equity Series B and C 

    –

    58,299

    59,839

     APIC, Accumulated Deficit and Non-Controlling Int. 

    164,791

    120,871

    99,629

     Total Shareholders’ Equity 

    164,791

    179,170

    159,468

     Total Liabilities and Shareholders’ Equity 

    $                307,246

    $                319,584

    $                324,599

     

    Equity Table

     (000’s) 

     Q2 23 

     Q1 23 

     Change 

     Comments 





     Total Equity and Exchangeable Shares 

    70,030

    68,376

    1,654

     Plus Performance RSU’s (1.3M), Exercise of RSU’s and Convertible Notes 

     Total Warrants 



     Series C 

    1,000

    1,000

    –

     Exercise price of $5.00 with an expiration date of  August 2027 

     Series B 

    10,000

    10,000

    –

     Exercise price of $5.00 with an expiration date of  August 2027 

     Series A 

    2,654

    2,654

    –

     Exercise price of $10.00 with an expiration date of June 2024 

     SPAC 

    30,665

    30,665

    –

     Exercise price of $11.50 with an expiration date of June 2026 

     Total Warrants 

    44,319

    44,319

    –





     Stock Options 

    1,436

    1,452

    (17)

     Exercise Price between $2.26 and $4.60 with expiration dates from October

    2024 to October 2026 

     RSU’s 

    1,663

    1,874

    (211)

     Up to 3-year vesting through 2026 

     Total 

    3,099

    3,326

    (227)





     Share Price at Quarter End 

    $                3.30

    $               2.75

    $               0.55





     Convertible Debentures 



     Series A 

    $            11,895

    $           11,895

    $                     –

     8% semi annual interest, cash or shares, higher of 10 day VWAP 5 trading

    days prior to pay date or $4.08, Maturity 4/15/27 

     Series B 

    $              4,111

    $             4,111

    $                     –

     8% semi annual interest, cash or shares, lower of 10 day VWAP 5 trading

    days prior to pay date or $10.00, Maturity 4/15/27 

     Total 

    $            16,006

    $           16,006

    $                     –

     # of Shares if converted assuming share price at quarter end 

    4,161

    4,410

    (249)

     

    Select Cash Flow Information

     (000’s) 

    Q2 2022

    Q1 2023

    Q2 2023





     Net Income (Loss) 

    $                 (14,192)

    $                (38,785)

    $                (24,905)





     Share-based compensation 

    $                    3,491

    $                    1,631

    $                    1,532

     Depreciation and amortization 

    $                    2,837

    $                    3,836

    $                    3,569

     Other 

    $                   (5,683)

    $                  29,246

    $                  22,260





     Cash From Net Income (Loss) 

    $                 (13,547)

    $                  (4,071)

    $                    2,456





     Accounts receivable 

    $                       277

    $                    2,053

    $                     (924)

     Prepaid expenses and other current assets                           

    $                    2,428

    $                    3,720

    $                       310

     Inventory  

    $                   (2,316)

    $                  (2,623)

    $                  (1,768)

     Other assets  

    $                        (27)

    $                       (48)

    $                         (6)

     Accounts payable and accrued liabilities  

    $                    3,671

    $                    3,432

    $                    2,800

     Income taxes payable 

    $                    1,589

    $                    1,862

    $                    5,324

     Other 

    $                       149

    $                       133

    $                         73





     Working Capital Impact 

    $                    5,770

    $                    8,529

    $                    5,808





     Operating Cash Flow 

    $                  (7,777)

    $                    4,458

    $                    8,265





     Purchases of property and equipment  

    $                  (7,596)

    $                  (1,090)

    $                     (206)

     Other 

    $                  (3,744)

    $                       (45)

    $                     (233)

     Net Investing Activities 

    $                (11,340)

    $                  (1,135)

    $                     (438)





     Distributions to Preferred Shareholders 

    $                      (860)

    $                  (1,367)

    $                  (1,376)

     Other 

    $                  12,595

    $                       269

    $                     (129)

     Net Financing Activities 

    $                  11,735

    $                  (1,099)

    $                  (1,505)





     Cash Change 

    $                   (7,381)

    $                    2,225

    $                    6,322





     Cash and cash equivalents, beginning of period 

    $                  24,833

    $                  14,144

    $                  16,368





     Cash and Cash, Equivalents, End of Period 

    $                  17,451

    $                  16,368

    $                  22,690

     

     Revenue 

     (000’s $) 

    Q122

    Q222

    Q322

    Q422

    Q123

    Q223

    FY21

    FY22











     Retail (B2C) 

    $     4,858

    $     4,839

    $     6,440

    $   10,593

    $     9,373

    $   10,073

    $   21,734

    $   26,731

     Wholesale CPG (B2B) 

    $     3,992

    $     4,945

    $     7,862

    $     5,989

    $     5,182

    $     3,954

    $   25,543

    $   22,788

     Wholesale (Biomass (B2B) 

    $     5,122

    $     6,689

    $   13,954

    $   15,607

    $   14,467

    $   30,639

    $   22,169

    $   41,373

     Total 

    $   13,972

    $   16,473

    $   28,257

    $   32,189

    $   29,022

    $   44,665

    $   69,447

    $   90,891











     Sequential % Change 









     Retail (B2C) 

    -5 %

    0 %

    33 %

    64 %

    -12 %

    7 %



     Wholesale CPG (B2B) 

    -41 %

    24 %

    59 %

    -24 %

    -13 %

    -24 %



     Wholesale (Biomass (B2B) 

    -21 %

    31 %

    109 %

    12 %

    -7 %

    112 %



     Total 

    -24 %

    18 %

    72 %

    14 %

    -10 %

    54 %














     % change to LY 









     Retail (B2C) 

    -3 %

    -24 %

    23 %

    106 %

    93 %

    108 %

    50 %

    23 %

     Wholesale CPG (B2B) 

    -31 %

    -19 %

    13 %

    -11 %

    30 %

    -20 %

    93 %

    -11 %

     Wholesale (Biomass (B2B) 

    14 %

    8 %

    180 %

    140 %

    182 %

    358 %

    8 %

    87 %

     Total 

    -8 %

    -12 %

    65 %

    75 %

    108 %

    171 %

    44 %

    31 %











     Gross Profit 

     (000’s $) 

    Q122

    Q222

    Q322

    Q422

    Q123

    Q223

    FY21

    FY22











     Retail (B2C) 

    $     2,084

    $     2,037

    $     2,651

    $     4,482

    $     4,871

    $     5,487

    $     9,419

    $   11,253

     Wholesale CPG (B2B) 

    $        655

    $          89

    $     1,078

    $       (917)

    $        921

    $        239

    $     5,174

    $        905

     Wholesale (Biomass (B2B) 

    $       (400)

    $    (1,872)

    $     5,011

    $     6,661

    $     6,165

    $   18,646

    $     1,427

    $     9,400

     Total 

    $     2,339

    $        254

    $     8,726

    $   10,219

    $   11,956

    $   24,372

    $   16,019

    $   21,538











     % of Revenue 









     Retail (B2C) 

    43 %

    42 %

    41 %

    42 %

    52 %

    54 %

    43 %

    42 %

     Wholesale CPG (B2B) 

    16 %

    2 %

    14 %

    -15 %

    18 %

    6 %

    20 %

    4 %

     Wholesale (Biomass (B2B) 

    -8 %

    -28 %

    36 %

    43 %

    43 %

    61 %

    6 %

    23 %

     Total 

    17 %

    2 %

    31 %

    32 %

    41 %

    55 %

    23 %

    24 %











     Wholesale Biomass Production and Cost per Pound 

    Q122

    Q222

    Q322

    Q422

    Q123

    Q223

    FY21

    FY22











     Equivalent Dry Pounds of Production 

    16,729

    25,173

    74,624

    75,344

    48,099

    103,336

    96,785

    191,870

     % change to LY 

    7 %

    9 %

    164 %

    153 %

    188 %

    311 %

    79 %

    98 %











     Cost per Equivalent Dry Pounds 

    $        238

    $        159

    $        134

    $        127

    $        196

    $        139

    $

    $        189

    $        143

          of Production 









     % change to LY 

    -2 %

    -18 %

    -25 %

    -24 %

    -18 %

    -12 %

    -14 %

    -24 %











     Ending Operational Canopy (000 sq. ft) 

    332

    332

    959

    959

    959

    959

    332

    959











     Wholesale Biomass Sold and Average Selling Price per Pound 

    Q122

    Q222

    Q322

    Q422

    Q123

    Q223

    FY21

    FY22











     Equivalent Dry Pounds Sold 

    17,894

    19,859

    68,512

    66,127

    49,923

    90,174

    69,153

    172,392

     % change to LY 

    41 %

    38 %

    265 %

    184 %

    179 %

    354 %

    235 %

    149 %











     Equivalent Dry Pounds Sold  

    $        188

    $        237

    $        204

    $        236

    $        290

    $        340

    $

    $        233

    $        218

          Average Selling price 









     % change to LY 

    -29 %

    -30 %

    7 %

    29 %

    54 %

    43 %

    -58 %

    -6 %











     Equivalent Dry Pounds Average Selling Price excludes the impact of cultivation tax. 











    Conference Call

    The Company will host a conference call to discuss the results today, August 14, 2023 at 5:00 p.m. Eastern Time.

    Webcast:             Register Here

    Dial-In Number:  1-888-664-6392

    Conference ID:   96853256 

    Replay:               1-888-390-0541

    Replay Code:      853256#

    (replay available until 12:00 midnight Eastern Time Monday, August 21, 2023)

    Non-GAAP Financial Measures

    Glass House defines EBITDA as Net Loss (GAAP) adjusted for interest and financing costs, income taxes, depreciation, and amortization. Adjusted EBITDA is defined as EBITDA excluding share-based compensation, stock appreciation rights expense, loss (income) on equity method investments, change in fair value of derivative liabilities, change in fair value of contingent liabilities, acquisition related professional fees, and non-operational start-up costs.

    EBITDA and Adjusted EBITDA are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. Such supplemental non-GAAP financial measures are not standardized financial measures under U.S. GAAP used to prepare the Company’s financial statements and might not be comparable to similar financial measures disclosed by other companies and, thus, should only be considered in conjunction with the GAAP financial measures presented herein.

    The Company has provided a table above that provides a reconciliation of the Company’s net loss to Adjusted EBITDA for the three months ended June 30, 2023 compared to three months ended June 30, 2022 and three months ended March 31, 2023.

    Footnotes and Sources:

    1. EBITDA and Adjusted EBITDA are non-GAAP financial measures that are not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. Please see “Non-GAAP Financial Measures” herein for further information and for a reconciliation of such non-GAAP measures to the closest GAAP measure.
    2. Includes all dry production (flower, smalls and trim) plus equivalent dry weight for wet weight and fresh frozen not converted into dry weight by the Company.
    3. Cost per Equivalent Dry Pound of Production, is the application of a subset of Costs of Goods Sold for cannabis biomass production (including all expenses from nursery and cultivation to curing and trimming – the point at which product is ready for sales as wholesale cannabis or to be transferred to CPG) applied to the Company’s metric of dry production which includes all dry production (flower, smalls and trim) plus equivalent dry weight for wet weight and fresh frozen that is not converted into dry goods by the Company.
    4. The Company has provided guidance that 2023 revenues will reach $165 to $170 million. The statement assumes the following in revenues from each source: 1) Annualized wholesale biomass sales of $105 to $110 million; 2) Annualized retail revenues of $40 million; 3) Annualized wholesale CPG revenues of $20 million.

     

    ABOUT GLASS HOUSE

    Glass House is one of the fastest-growing, vertically integrated cannabis companies in the U.S., with a dedicated focus on the California market and building leading, lasting brands to serve consumers across all segments. From its greenhouse cultivation operations to its manufacturing practices, from brand-building to retailing, the company’s efforts are rooted in the respect for people, the environment, and the community that co-founders Kyle Kazan, Chairman and CEO, and Graham Farrar, Board Member and President, instilled at the outset. Through its portfolio of brands, which includes Glass House Farms, PLUS Products, Allswell, Forbidden Flowers, and Mama Sue Wellness, Glass House is committed to realizing its vision of excellence: outstanding cannabis products, produced sustainably, for the benefit of all. For more information and company updates, visit www.glasshousebrands.com and https://glasshousebrands.com/press-releases/.

    Forward Looking Statements

    This news release contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as “forward-looking statements”). Forward-looking statements reflect current expectations or beliefs regarding future events or the Company’s future performance or financial results. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates”, “targets” or “believes”, or variations of, or the negatives of, such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. Forward-looking statements in this news release include, without limitation, the company’s: potential to create significant shareholder value from its brands over the long-term; projection that the current momentum in its operating business will continue through the remainder of 2023; projection of producing positive cashflow and positive Adjusted EBITDA in both Q3 and Q4 2023; guidance that revenues will be $45 to $47 million in Q3 2023; projection that Q3 pricing will increase slightly to above the Q2 23 average selling price of $340 per pound as a seasonally favorable increase in the percentage of flowers and smalls relative to trim offsets a seasonal dip in prices due to increased summer output from outdoor and mixed light farms; guidance that Q3 2023 CPG and Retail revenue will collectively be flat compared to Q2 2023; projection that Q3 2023 wholesale biomass production will be 100,000 to 103,000 pounds, roughly in line with Q2 levels; guidance that Q3 consolidated gross margin percent will be flat to up slightly versus Q2’s 55% with cost of production projected to decline to $120 per pound; guidance that Q3 2023 adjusted EBITDA will be similar to Q2 2023 and that Q3 2023 operating cash flow will be about $4 to $6 million; guidance that Q3 2023 non-expansion capex will be below $1 million; guidance that fiscal year 2023 revenues will reach $165 to $170 million due to higher than initially projected wholesale biomass production; guidance that fiscal year 2023 wholesale biomass revenue will be $105 to $110 million; projection that fiscal year 2023 average selling price per pound will be $330 per pound; estimate that fiscal year 2023 biomass production will reach 350,000 to 355,000 pounds; guidance that fiscal year 2023 cost of production will be $140 per pound, with second half 2023 cost of production at $120 per pound or below; guidance that fiscal year 2023 retail revenues will be $40 million and fiscal year 2023 CPG revenues will be $20 million; projection that Glass House will have plants in Greenhouse 5 by early 2024, with the first sale from Greenhouse 5 projected for Q2 2024; ability to fund its planned retrofit of Greenhouse 5; projection that once operational, Greenhouse 5 will increase cultivation capacity by roughly 250,000 pounds to a total of 600,000 pounds; projection that at current pricing, Greenhouse 5 is capable of producing over $80 million of incremental revenue annually and over $30 million in incremental EBITDA. All forward-looking statements, including those herein are qualified by this cautionary statement.

    Although the Company believes that the expectations expressed in such statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the statements. There are certain factors that could cause actual results to differ materially from those in the forward-looking information, including financial and operational results not proving to be as expected or on the timelines expected; the Company not completing certain proposed acquisition or financing transactions at all, or on the timelines expected; the Company not achieving the synergies expected; and other risks disclosed in the Company’s Annual Information Form and other public filings on SEDAR+ at www.sedarplus.ca. Accordingly, readers should not place undue reliance on forward-looking statements.

    For more information on the Company, investors are encouraged to review the Company’s public filings on SEDAR+ at www.sedarplus.ca. The forward-looking statements and financial outlooks contained in this news release speak only as of the date of this news release or as of the date or dates specified in such statements. The Company disclaims any intention or obligation to update or revise any forward- looking information, whether as a result of new information, future events or otherwise, other than as required by law.

    SOURCE Glass House Brands Inc.

    Featured image: Megapixl © CannabisPic

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