Cannabis company Green Thumb beats revenue estimate but posts loss on noncash impairment

Green Thumb Industries Inc. posted a fourth-quarter loss on noncash impairments but managed to beat its revenue target as it built up its balance sheet despite headwinds in the sector.

Green Thumb’s
stock rose 0.6% on Wednesday.

The company late Tuesday said it lost $51.22 million, or 22 cents a share, in the fourth quarter, after reporting net income of $22.81 million, or 10 cents a share, in the year-ago quarter.

The loss includes a noncash, $57.4 million goodwill impairment charge and a $31.1 million write-off of its Essence trade-name intangible, both in its Nevada business.

Excluding these items, Green Thumb earned 5 cents a share, a penny short of the estimate of 6 cents a share in an analyst survey by FactSet.

Green Thumb’s revenue increased 6% to $259 million, ahead of the analyst estimate of $257 million.

“The lack of progress regarding cannabis regulation from our elected officials in Congress is mind-numbing,” said CEO Ben Kovler, adding that the companies face high tax burdens.

In a call with MarketWatch, Kovler said the company continues to open new dispensaries and take aim at states now introducing adult-use cannabis sales, such as Maryland.

“The industry is entering the middle innings,” Kovler said, with some mature markets and others opening up. He added that “nothing is a straight line” in legalization, with steps both forward and back in many states.

The legal-cannabis industry employs about 400,000 people, with $26 billion in sales, which is expected to triple over the next few years.

Green Thumb ended the fourth quarter with $178 million in cash, up $31 million from the third quarter but down $52 million from a year ago.

Cantor Fitzgerald analyst Pablo Zuanic reiterated a buy rating on Green Thumb Industries and said the company’s sales increase was driven by the legalization of adult-use sales in New Jersey as well as a boost from acquisitions.

With the best Ebitda (earnings before interest, taxes, depreciation and amortization) conversion to cash flow among cannabis companies, Green Thumb remains in better shape than its peers, with exposure to several markets that have recently legalized adult use, including New Jersey, Rhode Island and Connecticut, as well as others now coming online such as Maryland, Zuanic said.

Other states that may legalize adult use include Minnesota, Pennsylvania and Virginia, Zuanic said.

The marketplace remains challenging, however, with oversupply in some markets, high-interest rates and lack of access to capital.

Green Thumb’s stock is down 3.4% in in 2023, compared with a 5.5% drop by the ETFMG Alternative Harvest ETF

Also read: Cowen drops coverage of U.S. pot stocks on acquisition by Toronto-Dominion Bank

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