Q1 2025 Green Thumb Industries Inc Earnings Call
Speaker Change: Ladies and gentlemen, the Green Thumb Industries call will begin shortly. Thank you for your patience.
Dramatic spook begins Let's hear it
Speaker Change: Good day and welcome to the Green Thumb Industries' 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.
Speaker Change: On today's call, management will provide prepared remarks and then we will open a call up to your questions.
Speaker Change: To ask a question, ALS may press star, then one, on your touchtone telephone.
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Please note, this event is being recorded.
Speaker Change: I would now like to turn the conference over to Shay Caplice, Director of Communications for Green Thumb. Please go ahead.
Shay Caplice: Thank you, Betsy. Good afternoon, and welcome to Green Thumb's first quarter of 2025 earnings call. I'm here today with Founder and CEO Ben Kovler, President Anthony Georgiadis, and Chief Financial Officer, Matt Faulkner.
Shay 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.
Shay 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 filed on Form 10K.
Shay Caplice: This report, along with today's earnings release, can be found under the Investor's section of our website.
Shay Caplice: Green Thumb assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call.
Shay Caplice: Throughout the discussion, Grant Thumbel first will reperson non-GAAP financial measures, including Ibedo and adjusted Ibedo
Shay Caplice: A reconciliation of non-guet financial measures for the most directly comparable GAAP measures is included in our earnings press release and SEC and CDR plus filing.
Shay Caplice: Please note that all financial information is provided in US 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.
Ben Kovler: 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 tariff fears, demand for THC remains 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 revenues 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 in dollars.
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.
And when the cards are stacked against you...
Ben Kovler: You can either resign to death or choose a different path, an alternative reality which includes success.
Ben Kovler: We've chosen the latter, and therefore we are continuing to evolve, evolve as we change our game. We are approaching 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.
Ben Kovler: For example, alcohol is long by and perspacings, it's over in Wallace, but the tide of American enterprises 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. 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. The THC beverage category is in its early stages of mainstream popularity. The THC beverage category is in its early stages of mainstream popularity.
Ben Kovler: Our job right now is to continue connecting our top-rated brands like Rhythm, Incredibles, Bebo, and Dog Walkers.
Ben Kovler: to satisfy and exciting customer experiences. For example, a few weeks ago we kicked off our Rhythm Budball Summer Series in New York City for the first time. Budball celebrates the hard work and contributions of cannabis professionals while showcasing the Rhythm 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.
Speaker Change: 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.
Speaker Change: We have a relentless team who shows up every day with a genuine commitment and love of the plant.
Speaker Change: 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
Speaker Change: 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.
Speaker Change: And finally, we have a season of visionary group of leaders who look to the horizon and a team that is dedicated to both our success and our mission.
Speaker Change: Every day is day one when you play the win and you win by keeping your head down and executing every day.
With that, I'll turn you call 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 in 85 million in EBITDA in the first quarter.
Anthony Georgiadis: That's a strong start and reflects our team's hard work and execution mindset.
Anthony Georgiadis: Let's take a moment to walk through some of the key developments in the choir and what we expect is the urine folds.
First Expansion
Anthony Georgiadis: In the first quarter, we invested 30 million in cat-backs, opening new stores in Florida and Nevada, and continuing to invest into our wholesale footprint in New Jersey and Connecticut [inaudible]
Anthony Georgiadis: Over the course of 2025, we expect to open, relocate, or remodel between 10 to 12 stores.
Anthony Georgiadis: We're also making selective investments in our CPG infrastructure, all with an eye toward improving capacity and efficiency.
Anthony Georgiadis: All in, we expect capital spending for the year to approximate 80 million about flat with last year.
2nd, Product Innovation 2nd,
Anthony Georgiadis: 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.
Anthony Georgiadis: We were excited about the roll-out of our rhythm-deliquid diamond vape plant.
Anthony Georgiadis: We've also refreshed our good green brand with a new look to better meet the needs of value conscious consumers
Anthony Georgiadis: Innovation is a moving target, and our team recognizes its power given the velocity of the industry and consumer trends.
Third, CPG Market Share
Anthony Georgiadis: Retail competition continues to heat up, with more stores opening in many of our markets.
Anthony Georgiadis: Our strategic response has been to build a strong, resilient CPG business.
Anthony Georgiadis: In tea markets like Illinois, New Jersey, Pennsylvania and Maryland, our branded products continue to climb the rankings
Led by the Strength, Led by the Strength of Rhythm Premium Flower.
Anthony Georgiadis: 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.
Anthony Georgiadis: Giving this somewhat limited near-term growth prospects across our market base, the company remains focused on its adult use opportunities in Minnesota, Pennsylvania, and Virginia .
Anthony Georgiadis: Minnesota is expected to launch a don't-use sale 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.
Anthony Georgiadis: We've learned over the years that patients and persistence are helpful traits in the political gap.
Fifth, Terrace
Speaker Change: 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 Bye.
Speaker Change: As we look ahead, our expectations on regulatory reform remain grounded in reality [inaudible]
Speaker Change: We said before that we don't expect sweeping federal form anytime soon, and nothing we've seen recently has changed that view.
Speaker Change: We all listen to the same DEA hearing you did, and we remain confused by the industry's false sense of optimism But at the same time, we're continuing to see pricing pressure in several of our markets
Speaker Change: Supply demand of balances, new competition, unregulated products being sold as hemp, and a consumer who's watching their wallet are all contributing factors.
Speaker Change: We have tools to manage this, operational efficiency, brand strength, and scale of them. We also recognize these tools have limits.
Speaker Change: Despite these concerns and overall industry malaise, we remain confident in the following [inaudible]
Speaker Change: One for team, results don't happen by accident. We've 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
Throughout our journey, many questions are conservative and natural approach.
Speaker Change: You're not moving fast enough with the line we often heard in the early days, but the Green Thumb we understand the power of compounding hard work, thoughtful strategy and discipline and financial management.
Speaker Change: Our collective decisions along the way and the compounded impact of those decisions have provided the company with the financial flexibility to spend into markets and categories with the greatest opportunity exist today.
Speaker Change: We cannot understate the importance of softening how any provides for our shoulders.
Third, Consumer Trends
Speaker Change: The charge was north of the big picture, alcohol used to declining, the demand for TNC is rising.
Speaker Change: We've long believed the demand for cannabis products would accelerate, and we're now seeing real evidence of that shift.
Speaker Change: With new product formats like THC beverages gaining traction, especially traditionally conservative regions, we're 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, were well positioned.
Speaker Change: We've got an incredibly talented team, a consumer who loves our products, and new 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 the caller over to Matt.
[inaudible]
Thanks, Anthony, and the whole everyone.
Speaker Change: 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 packaged goods sales.
Speaker Change: Overall, retail revenue declined 3% versus the first quarter of 2024 due to significant pricing of pressures across all markets.
Speaker Change: First quarter, 2025, Pomegranate sales for stores open at least 12 months, decreased 5% versus the prior year, based on 90 stores, due to continued pricing pressures.
Speaker Change: The sewer package is good, not revenue for the first quarter of 2025, increased 14% versus the prior year period. Jordan, by continued growth in New York and the addition of adult use sales in Ohio.
Speaker Change: Looking forward, we expect second-quarter sequential revenue to be flat due to the pricing of markets.
Speaker Change: First project for the first quarter was 143 million or 51% of revenue, down from 145 million or 53% of revenue year over year.
Speaker Change: The decreasing growth profit was primarily different by price compression.
Speaker Change: Turn to OPEX, Selling General Administrative Expenses for the 4th quarter where 101 million are 36% revenue compared to 74 million or 27% revenue for the 1st quarter last year.
Speaker Change: The increase in total expenses was primarily attributable to the 16 million favourable fair value adjustment associated with the company's contingent consideration liability recorded through in the prior year period.
Speaker Change: Best Unit, Ecclene Appreciation, Amortization, One-Time Transaction Cost, 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.
Speaker Change: The increase year over year is mainly attributed to the 11 environmental retail stores.
Speaker Change: The company generated net income at 8 million or 4 cents per diluted share down from net income with 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 course.
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Speaker Change: Adjusted Euda, which excludes non-cash stock-based compensation and other non-operating costs was $85 million down from $91 million for the first quarter of 2024.
Speaker Change: We expect to experience continued pricing challenges that will pressure margins and adjust the below 30% in the coming quarters.
Speaker Change: Win of the first quarter of the strong balance sheet including cast of 211 million and working
Speaker Change: Test build from operations for the first quarter, came in at 74 minutes [inaudible]
Speaker Change: In conclusion, we are pleased with our team's performance so far 2025 to appreciate their ongoing commitment to contributions to Green Thumb.
Speaker Change: Together, we remain committed to driving long-term growth, fostering pretty capital allocation and cost efficiency.
Speaker Change: We also appreciate the trust and confidence for our shareholders and look forward to providing further updates on our next call.
Speaker Change: 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 press a star, then one, on your touch, turn the phone [inaudible]
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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.
Speaker Change: Hi, good evening, and thank you very much for the question here.
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 and shareholder returns. [inaudible]
Speaker Change: Yeah, hey Aaron, it's been, I'll take that, I would say um...
Speaker Change: I think that the capital allocation sort of matrix is looking like, you know...
Speaker Change: Pop-Ex 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-Ex 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 $0.75 when it's-
Speaker Change: Playing in one way only gets us, you know, a middle or a dime [inaudible]
Speaker Change: But 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 where 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.
Ben Kovler: Okay, great. Thanks for calling there, Ben. I'll jump back into the queue.
Thank you. Thank you.
Speaker Change: The next question comes from Matt Bottomley with Ken Accordgenuity. 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: We have any more color on whether the mix is more geographic. I think.
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. Well 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. [inaudible]
Speaker Change: At least to 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.
Speaker Change: Sure, it's a good question. Thanks, Matt. I agree. You know, I'm just a little hesitant to give much detail, I would say.
Speaker Change: You know, we're sticking in the US. The phone rings a lot. We're not looking international, but 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.
Speaker Change: 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.
Speaker Change: You mentioned things like the refi-risk. We see material issues out there for players in the industry, we've been seeing it for a long time, it continues to actualize and
Speaker Change: You know, we've written down numbers and people were raising eyebrows on it, down the numbers are coming in and so...
Speaker Change: We'll see, it's about being transformational, there's not some big company where we're eyeing for some groundbreaking piece of news.
Speaker Change: 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.
Speaker Change: 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 ATV Capital Market. Please go ahead.
Hi, good evening, I think I'll start taking my question on.
Speaker Change: Is there a question on the same store sales decline of about 5% this quarter? I think that's a bit of an acceleration from what we've seen of the past two quarters, so...
Speaker Change: Serious if there's any specific states that may be striving that [inaudible]
ST Thank you very much, everyone.
Speaker Change: Yes, I'm Rico Anthony here. I'll take that good question. You know, I'm looking at the combination of really two things. Number one, you know, greater competition at retail.
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, but we've seen transactions and uniformities go up.
Speaker Change: Total Nut 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, the one to get more granular in terms of the markets when we're really seeing it, 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 six to nine months.
Thank you very much.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Ben for any closing remarks.
Ben Kovler: Well thanks everybody for joining and I 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.