Q1 2025 Green Thumb Industries Inc Earnings Call
Speaker Change: Ladies and gentlemen, the Greens and Industries Call will begin shortly. Thank you for your patience.
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Mack Miller: 呀 ✜ Mack Miller Yawn Macca ʕ•̀§⌭⌣•̀ʔ ✜ Em shoes Kill Seek More
Mack Miller: Good Day, and welcome to the green thumb industry's first quarter 2025 earnings call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero.
Mack Miller: On today's call, management will provide prepared remarks, and then we will open the call up to your questions.
Mack Miller: To ask a question, analysts may press stars at one on your touchtone telephone.
Mack Miller: If you are using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your questions, please press drawers and two.
Please note, this event is being recorded.
Mack Miller: I would now like to turn the conference over to Shay Caplice, Director of Communications for Green Fund. Please go ahead.
Shea Caplice: Thank you, Betsy. Good afternoon, and welcome to Green Thumbs' first quarter in 2025 earnings calls. I'm here today with founder and CEO , Ben Kovler, President Anthony Georgiadis, and Chief Financial Officer, Matt Faulkner.
Shea Caplice: Today's discussions and responses to questions may include forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from those statements.
Shea Caplice: These risks and uncertainties are detailed in the earnings press release issue today, along with the reports filed with the United States Securities and Exchange Commission and Canadian Securities Regulators, including our most recent annual report, Files on Form 10K.
Shea Caplice: This report, along with today's earnings, can be found under the Investors' section of our website.
Shea Caplice: Green thumb assumes no obligation to update or revise any forthcoming statements to reflect events or circumstances that may arise after the date of this call.
Speaker Change: Throughout the discussion, Granthamal first will reperson non-gaft financial measures, including EBITO and adjusted EBITO.
Speaker Change: A reconciliation of non-GAAP financial measures for the most directly comparable GAAP measures is included in our earnings press release, and SEC and CDR Club's filing.
Speaker Change: Please note that all financial information is provided in U.S. dollars unless otherwise indicated.
Thanks everyone, and now to your button.
Ben Kovler: Thank you, Shay. Good afternoon everyone, and thank you for joining our first quarter 2025 conference call. While we only talked a short while ago on our fourth quarter conference call, it certainly feels like a lot has changed.
Ben Kovler: The macro uncertainty created by the tariffs has ripple effects in many places and there's an elevated sense of angst for businesses and consumers.
Ben Kovler: In addition, we have the early clues where the current federal government is leading on traditional cannabis reform.
Ben Kovler: Despite the terrifiers, demand for THC remained at an all-time high while pricing pressure persists in many markets.
Ben Kovler: As we have discussed before, when pricing is down 20%, our team must deliver 25% more units to break even.
Ben Kovler: You can't escape that map, so I want to give a major shout-out to our team who managed to beat last year's strong first quarter revenue even in this environment.
Ben Kovler: First quarter of 2025 revenue came in at 280 million, about 4 million greater than the comparable period last quarter. Last year.
Ben Kovler: Adjusted in EBITDA with $85 million or 31% of revenue, and our first quarter cash flow from operations with $74 million.
Ben Kovler: As we said repeatedly, we built our business to succeed regardless of federal change. And from what I can see, that change is not on the agenda for the Trump administration.
Ben Kovler: The DEA had historically not been friendly to cannabis, and the nominee to head up the agency, Terry Cole, was pretty cagey about rescheduling at his recent congressional hearing.
Ben Kovler: Of course, there's always a chance for change, and this administration probably increases the odds of a left-field event, but we certainly can't bet on that, but we can bet on our balance sheet.
Ben Kovler: So I believe we will continue to succeed even with an apparent deck of cards stacked against us.
Ben Kovler: And when the cards are stacked against you, you can either resign to death or choose a different path, an alternative reality which includes success.
Ben Kovler: We've chosen the ladder and therefore we are continuing to evolve, evolve as we change our game. We are forcing new paths that can realize the value we have created while staying true to our mission.
Ben Kovler: Fortunately, we have the capital resources and a strong balance sheet that we believe will support our long-term plan over the next four years and beyond.
Ben Kovler: What keeps us focused is how we can optimize the long-term opportunity related to consumers.
https://www.kenhub.com
Ben Kovler: For example, alcohol is long-bidened for space and consumer and wallets, but the tide of American into preferences is clearly turning.
Ben Kovler: Hangovers might be temporary, but alcohol's lingering impact on health is not, and consumers are taking note. Alcohol consumption is declining, especially among younger adult consumers.
Ben Kovler: And this gives us a long runway for future engagement as THC drinks game momentum.
Ben Kovler: The THC beverage category is in its early stages of mainstream popularity and we are bullish on its opportunity as a legal product and are encouraged by both the data on the ground and our position in the space.
Ben Kovler: Our job right now is to continue connecting our top-rated brands like rhythm, incredible, people, and dog walkers.
Ben Kovler: to satisfy and exciting customer experiences. For example, a few weeks ago we kicked off our RISM Budball Summer Series in New York City for the first time. Budball celebrates the hard work and contributions of cannabis professionals while showcasing the RISM lifestyle.
Ben Kovler: We're looking forward to sharing that connection between cannabis and music to more Americans across the country as our brands continue to pop up at mainstream music and lifestyle events this summer and beyond.
Ben Kovler: Budball Philly is next week featuring musical guest Philadelphia's own The Roots hope to see many of you at that event
Ben Kovler: Our team has worked long and hard to construct a foundational distinction for Green Thumb. That includes we have an incredible portfolio of highly regarded products and brands and the innovative drive that attracts great and like-minded partners.
Ben Kovler: We have a relentless team who shows up every day with a genuine commitment and love of the plant.
Ben Kovler: We have a set of very productive assets and a strong position in states where the launch of adult youth sales is coming soon, like Minnesota, Virginia, and Pennsylvania.
Ben Kovler: Our ability to generate cash and maintain a strong balance sheet gives us the financial flexibility to build on our track record of high-conviction capital allocation.
Ben Kovler: And finally, we have a season that visionary group of leaders look to the horizon and a team that is dedicated to both our success and our mission.
Ben Kovler: Every day is day one when you play to win, and you win by keeping your head down and executing every day.
With that, I'll turn you all over to Anthony.
Anthony
Anthony Georgiadis: Thanks Ben. Well, you just heard the headline numbers. After record-setting 2024, our team rolled right into the new year without missing much of a beat, generating 280 million revenue, and 85 million in EBITDA in the first quarter.
Ben Kovler: That's a strong start and reflects our team's hard work and execution mindset.
Ben Kovler: Let's take a moment to walk through some of the key developments of the choir, and what we expect is the urine folds.
First Expansion [inaudible]
Ben Kovler: In the first quarter, we invested 30 million in gap-backs, opening new stores in Florida and Nevada and continuing to invest into our wholesale footprint in New Jersey and Connecticut.
Ben Kovler: Over the course of 2025, we expect to open, relocate, or remodel between 10 to 12 stores.
Ben Kovler: We're also making selected investments in our CPG infrastructure, all with an eye toward improving capacity and efficiency.
Ben Kovler: All men, we expect capital spending for the year to approximate 80 million about flat with last year.
2nd, Product Innovation Foundation.
Ben Kovler: Our brand innovation teams are doing a nice job staying ahead of the consumer. We've been scaling our rhythm remix pre-rolls, which launched Illinois last year.
Ben Kovler: He works on it about the roll-ass of our rhythm liquid diamond vape plant [inaudible]
Ben Kovler: We've also refreshed our good green brand with a new look to better meet the needs of value conscious consumers.
Ben Kovler: Innovation is a moving target, and our team recognizes its power given the velocity of the industry and consumer trends.
Third, CPG Market Share [inaudible]
Ben Kovler: Retail competition continues to heat up with more stores opening in many of our markets.
Ben Kovler: Our strategic response has been to build a strong, resilient CPG business.
Ben Kovler: In key markets like Illinois, New Jersey, Pennsylvania and Maryland, our branded products continue to climb the rankings
Led by the strength of rhythm premium flower.
Ben Kovler: Brand Loyalty isn't something you can manufacture overnight. It comes from consistency, quality and trust, and we're working hard to earn and rear in that trust every day.
Fourth, the Don't Use Opportunities.
Ben Kovler: Giving this somewhat limited near-term growth prospects across our market base. The company remains focused on its own use opportunities in Minnesota, Pennsylvania, and Virginia.
Ben Kovler: Minnesota is expected to launch a don't use sales later this year so we plan to be ready. We're also investing time and effort in Pennsylvania and Virginia advocating for responsible and don't use legislation.
Ben Kovler: We've learned over the years that patients and persistence are helpful traits in the political game.
Fifth, Terrace.
Ben Kovler: At the moment, there's no clear picture on what terrorists might mean for our business. We'll know more as policy takes shape, but in the meantime, our procurement supply chain teams are doing what they can to insulate our operations and minimize financial impact.
and last, for Outlook for 2025.
Ben Kovler: As we look ahead, bar expectations on regulatory reform remain grounded in reality.
Ben Kovler: We said before that we don't expect sweeping federal form anytime soon, and nothing we've seen recently has changed that view.
Ben Kovler: We all listen to the same DEA hearing you did, and we remain confused by the industry's false sense of optimism. Come. At the same time, we're continuing to see pricing pressure in several of our markets.
Ben Kovler: Supply demand of balances, new competition, unregulated products being sold as hemp, and the consumers who are watching their wallet are all contributing factors.
Ben Kovler: We have tools to manage this, operational efficiency, brand strength, and scale among them, but we also recognize these tools have limits.
Ben Kovler: Despite these concerns and overall industry malaise, we remain confident in the following.
Ben Kovler: One, our team, results don't happen by accident. We built a culture that rewards merit, challenges assumptions, and puts in the work. That's not always glamorous, but it's what moves the needle over the long term.
Two are balance sheet [inaudible]
Ben Kovler: Throughout our journey, many questions are conservative financial approach. You're not moving fast enough, it was a line we often heard in the early days, but agreeing that we understand the power of compounding hard work, thoughtful strategy, and discipline financial management.
Ben Kovler: Our collective decisions along the way and the compounded impact of those decisions have provided the company with a financial flexibility to spend in markets and categories with the greatest opportunity exists today.
Ben Kovler: We cannot understate the importance of soft now any provides for our shareholders.
Third Consumer Trends
Ben Kovler: The charge was nor the big picture. I'll call it used to declining. The demand for TNC is rising.
Ben Kovler: We've long believed the demand for cannabis products would accelerate, and we're now seeing real evidence of that shift.
Ben Kovler: with new product formats like THC beverages gaining traction, especially in traditionally conservative regions, or increasingly bullish on long-term category growth.
Speaker Change: We're trying to wait for the man that Ben has been talking about since the day I met him, it's big and getting bigger by the day.
Speaker Change: In terms of final thoughts, despite the noise, the noise, the competition, the regulatory policy hurdles, and many others, for real position.
Speaker Change: We've got an incredibly talented team, a consumer who loves our products and the growing market in the largest economy in the world. We love the setup and our humble do have positioned ourselves to be in the center of it all. With that, I'll turn my call over to Matt.
Next Anthony, and a whole other one.
Matt Faulkner: From the first quarter, we delivered 280 million in revenue in 1% increase compared to the part of your period.
Revenue was driven by increased consumer package good sales.
Matt Faulkner: Overall, retail revenue to mind 3% versus the first quarter of 2024 due to significant pricing of pressures across all markets.
Matt Faulkner: First quarter, 2025, Palmeville sales were stores open at least 12 months, increased 5% versus the prior year, based on 90 stores due to continued pricing pressures.
Matt Faulkner: And so, in fact, it's a good net revenue for the first quarter of 2025, increased 14% versus the priority of the period. Gerald, by continued growth in New York and the addition of adult use sales in Ohio.
Matt Faulkner: Looking forward, we expect second quarter sequential revenue to be flat due to the pricing of markets.
Matt Faulkner: Rose Project, for the first quarter, was 143 million or 51% of revenue, down from 145 million or 53% of revenue year over year.
Matt Faulkner: The decrease in growth profit was primarily different by price compression.
Matt Faulkner: Turn to OPEX, selling general administrative expenses for the 4th quarter where 101 million or 36% revenue compared to 74 million or 27% revenue for the first quarter last year.
Matt Faulkner: The increase in total expenses was primarily attributable to a 16 million favourable fair value adjustment associated with the company's contingent consideration liability recorded during the prior year of peers.
Matt Faulkner: S.T. Uniteschling Appreciation, Amortization, One-Time Transaction Costs, and Stock-Based Combe, which we refer to as normalized operating costs, approximated $69 million compared to $64 million in the first quarter of last year.
Matt Faulkner: The increased zero-year is mainly attributed to the 11 environmental retail stores.
Matt Faulkner: The company generated net income of 8 million or 4 cents per diluted share down from net income of 31 million or 13 cents per diluted share in the prior year period due to the fair value adjustment of contingent consideration last year during the quarter.
Matt Faulkner: The Justin Udo, which excludes non-cast stock-based compensation and other non-operating costs was $85 million down from $91 million for the first quarter of 2024.
Matt Faulkner: We expect to experience continued pricing challenges that will pressure margins and adjust to the below 30% in the coming quarters.
Matt Faulkner: Win of the first quarter of the strong balance sheet including cast of 211 million and working
Thank you.
Matt Faulkner: Castel from Operations for the first quarter came in at 74th [inaudible]
Matt Faulkner: In conclusion, we are pleased with our team's performance so far, 2025, and appreciate their ongoing commitment to contributions to Green Thumb.
Matt Faulkner: Together, we remain committed to driving long-term growth, volunteering, pretty capital allocation and cost efficiency.
Matt Faulkner: We also appreciate the trust and confidence for our shareholders and look forward to providing further updates on our next call.
Matt Faulkner: With that, I will open the call to your questions. Operator?
Who will now begin the question and answer session?
Speaker Change: To ask a question, you may present $1,000 on your touch to unphoned phone.
Speaker Change: If you are using a speaker phone, please pick up your handsets before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press stars and two.
We ask that you limit yourself to one question.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question today comes from Aaron Grey with Alliance Global Partners. Please go ahead.
Erin Gray: Hi, good evening, and thank you very much for the question here, so...
Speaker Change: We're still able to take a high level one in terms of capital allocation and how you're thinking about shareholder returns. We have a healthy balance sheet on pace for another year of strong cash flow generation. So just given the current stock price, how best to think about capital allocation in shareholder returns.
Speaker Change: You know, you utilize the buyback, but curious, you know, if the Depeche Stock Race offers more opportunity to get more aggressive there, or if you're seeing some other opportunities via M&A or otherwise. Thank you very much.
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Speaker Change: Yeah, hey Aaron, it's been, I'll take that. I would say...
Speaker Change: Good, we're trying to be opportunistic in terms of the stock buyback.
Speaker Change: I think that the capital allocation sort of matrix is looking like, you know.
Speaker Change: Topax, and can we fund the business? Do we have enough money to cover the debt? That was the year ago plan. Can we cover the cap-axe and what's needed to invest in the business to grow? We're out there looking at M&A.
Speaker Change: I keep in mind we made a pretty strategic investment in the fourth quarter last year and then funded that and so we're out there looking I think in the buy back you know
Speaker Change: It's sometimes a little bit tricky to look at you've got to be a little careful in terms of the size
Speaker Change: And so, you know, with our limits in terms of data, liquidity and things like that, trying to see the bigger picture and take a little bit more of a longer term, meaning even if we buy up to the mass in the open market...
Speaker Change: There could be a chance bigger blocks show up and there's larger blocks of stock out there that could come available for sale that we would be very interested in buying as a strategic asset for the business and the best interest of shareholders.
Speaker Change: So, you know, it could be an opportunity to collect 75 cents when playing in one way only gets us, you know, a nitola or a dime.
Speaker Change: We certainly have a balance, you were very comfortable with it, we're looking at it, and we're answering the phone a lot. I would say, you know, the M&A discussion has evolved. There are assets we are interested in, we're listening to what's out there and we're watching what's happening.
Speaker Change: The capital markets are pretty bleeding and we know our cash is a unique asset and that should help all of us including our shareholders.
Speaker Change: Okay, great, take your car there Ben, I'll jump back in the queue [inaudible]
Speaker Change: The next question comes from Matt Bottomley with Canacor Genuity. Please go ahead.
Matt Bottomley: Yeah, thanks very much. Good evening, everyone. And Ben, maybe I'll just piggyback off of what you just sort of mentioned in your last couple of sentences.
Matt Bottomley: I don't have any more color on whether the mix is more geographic.
Innovative Pipeline Versus
Matt Bottomley: You know, CPG, what types of things are out there? I think that there's like obviously a pretty big advantage here given your balance sheet that if there was something worthwhile doing that you guys are probably best situated to take advantage of that while everyone else is, you know, I think, you know, stuck with refies and some of the other things that are plaguing the sector right now. So I think, at least for the investors I talked to you a little more granularity on maybe the classifications of what M&A looks good to you would be helpful. . . . . .
Matt Bottomley: Sure, it's a good question. Thanks, Matt. I agree. I'm just a little hesitant to give much detail, I would say.
Matt Bottomley: You know, we're sticking in the US. The phone rings a lot. We're not looking international. So we're interested. We're getting smarter on it, but that is not down the center of the place for us. There's not a fancy amount of math going on. We don't want to inherit other people's big problems.
Matt Bottomley: And we understand our business and in states we are in, we can get better, meaning we can increase our margin, we can get better, but pricing is coming down, way down.
Matt Bottomley: You know, we've written down numbers and people were raising eyebrows out of it, now the numbers are coming in and so...
Matt Bottomley: We'll see, it's nothing transformational, there's not some big company we're eyeing for some groundbreaking piece of news
Matt Bottomley: I would say there's some of that and then there's also deals that are like forward looking where we think the industry is headed that we can play around it.
Matt Bottomley: You know, we're answering the phone and any of the people you're talking to that are in dire straits on the call if they think something makes sense for us. Okay, thanks Ben.
Thank you, Matt.
Speaker Change: The next question comes from Frederico Gomes with ATB Capital Market. Please go ahead.
Hi, good evening, thanks for taking my question.
Speaker Change: Is there a question on things to conceal the decline of about 5%?
this week.
Speaker Change: I'm curious if there's any specific states that may be striving that for us.
Mathew Faulkner, Benjamin Kovler, Anthony Georgiadis
Speaker Change: Yeah, from Rico Ampens here. I'll take that. Good question. I'm looking at the combination of really two things. Number one, you know, greater competition and retail. Thank you.
Speaker Change: You know, as stores open up, obviously that's less the pie, the pie just gets sliced into two more pieces. The other component is that, you know, Matt mentioned it in his prepared remarks, it's just the price erosion.
Speaker Change: Right, so as we've seen pricing come down, what we've seen transactions and reunify you to go up.
Speaker Change: Totally not revenue is common or pressure. So, you know, elistically, those are two of the primary drivers and we just zoom out and look at it.
Speaker Change: You know, we wanted to get more granular in terms of the markets when we're really seeing it, you know, Illinois, New Jersey are two they kind of stand out in terms of where we've seen a lot of new competition as well as some relatively sizable price movement in the last, you know, six to nine months.
Thank you very much.
Speaker Change: This includes our question and answer session. I would like to turn the conference back over to Ben for an closing remark.
Ben Kovler: Well, thanks everybody for joining and think it's certainly a sign of the times on this call in the participation. We're here. We're working. We'll talk to you in 90 days. Thanks everybody.
Ben Kovler: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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