2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20222023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to
Commission file number 000-56132
GREEN THUMB INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
British Columbia | 98-1437430 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification no.) |
325 West Huron Street, Suite 700 Chicago, Illinois | 60654 |
(Address of principal executive offices) | (zip code) |
Registrant’s telephone number, including area code - (312) 471-6720
Securities registered pursuant to Section 12(g) of the Act:
Subordinate Voting Shares
Multiple Voting Shares
Super Voting Shares
(Title of each Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of November 1, 2022,2023, there were 207,338,160210,095,615 shares of the registrant’s Subordinate Voting Shares, 3,853,10038,531 shares of the registrant’s Multiple Voting Shares (on an as converted basis) and 25,169,000226,690 shares of the registrant’s Super Voting Shares (on an as converted basis).outstanding.
GREEN THUMB INDUSTRIES INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED September 30, 20222023
TABLE OF CONTENTS
FINANCIAL INFORMATION | Page | |
Part I | ||
Unaudited Interim Condensed Consolidated Balance Sheets as of September 30, | 4 | |
Unaudited Interim Condensed Consolidated Statements of Operations for the three and nine months ended September 30, | 5 | |
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, | 6 | |
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, | 8 | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements | 10 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| |
Quantitative and Qualitative Disclosure About Market Risk |
| |
Controls and Procedures |
| |
Part II | ||
OTHER INFORMATION | ||
Legal Proceedings |
| |
Risk Factors |
| |
Sale of Unregistered Securities |
| |
Defaults Upon Senior Securities |
| |
Mine Safety Disclosure |
| |
Other Information |
| |
Exhibits |
| |
|
Use of Names
In this Quarterly Report on Form 10-Q, (this “Report”), unless the context otherwise requires, the terms “we,” “us,” “our,” “Company,” “Corporation” or “Green Thumb” refer to Green Thumb Industries Inc. together with its wholly-owned subsidiaries.
Currency
Unless otherwise indicated, all references to “$” or “US$” in this document refer to United States dollars, and all references to “C$” refer to Canadian dollars.
Disclosure Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains statements that we believe are, or may be considered to be, “forward-looking statements.” All statements other than statements of historical fact included in this document regarding the prospects of our industry or our prospects, plans, financial position or business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,” “anticipate,” “believe,” “plan,” “forecast,” “continue” or “could” or the negative of these terms or variations of them or similar terms or expressions of similar meaning. Furthermore, forward-looking statements may be included in various filings that we make with the Securities and Exchange Commission (the “SEC”), and in press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These known and unknown risks include, without limitation: cannabis remains illegal under U.S. federal law, and enforcement of cannabis laws could change; the Company may be subject to action by the U.S. federal government; state regulation of cannabis is uncertain; the Company may be subject to heightened scrutiny by Canadian regulatory authorities; the Company may face limitations on ownership of cannabis licenses; the Company may become subject to U.S. Food and Drug Administration or the U.S. Bureau of Alcohol, Tobacco Firearms and Explosives regulation; cannabis businesses are subject to applicable anti-money laundering laws and regulations and have restricted access to banking and other financial services; the Company may face difficulties acquiring additional financing; the Company faces intense competition; the Company faces competition from unregulated products; the Company is dependent upon the popularity and consumer acceptance of its brand portfolio; the Company lacks access to U.S. bankruptcy protections; the Company operates in a highly regulated sector and may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where the Company carries on business; the Company may face difficulties in enforcing its contracts; the Company has limited trademark protection; cannabis businesses are subject to unfavorable tax treatment; cannabis businesses may be subject to civil asset forfeiture; the Company is subject to proceeds of crime statutes; the Company faces exposure to fraudulent or illegal activity; the Company’s use of joint ventures may expose it to risks associated with jointly owned investments; the Company faces risks due to industry immaturity or limited comparable, competitive or established industry best practices; the Company faces risks related to its products; the Company is dependent on the popularity of and consumer acceptance of the Company’s brand portfolio; the Company’s business is subject to the risks inherent in agricultural operations; the Company may berelies on third party software providers for numerous capabilities that it depends upon to operate, and a disruption of one or more systems could adversely impacted by rising or volatile energy costs;affect the business; the Company faces risks related to its information technology systems and potential cyber-attacks and security breaches; the Company faces an inherent risk of product liability or similar claims; the Company’s products may be subject to product recalls; the Company may face unfavorable publicity or consumer perception; the Company’s voting control is concentrated; the Company’s capital structure and voting control may cause unpredictability; and issuances of substantial amounts of Super Voting Shares, Multiple Voting Shares or Subordinate Voting Shares may result in dilution; and the Company is governed by corporate laws in British Columbia, Canada which in some cases have a different effect on shareholders than the corporate laws in Delaware, United States.dilution. Further information on these and other potential factors that could affect the Company’s business and financial condition and the results of operations are included in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021,2022, and elsewhere in the Company’s filings with the SEC, which are available on the SEC’s website or at https://investors.gtigrows.com. Readers are cautioned not to place undue reliance on any forward-looking statements contained in this document, which reflect management’s opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this document.
3
Green Thumb Industries Inc.
Unaudited Interim Condensed Consolidated Balance Sheets
As of September 30, 20222023 and December 31, 20212022
(Amounts Expressed in United States Dollars)
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
| ||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
| (Audited) |
|
|
|
| (Audited) |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
| ||||||
Current Assets: |
|
|
|
|
|
|
|
|
|
| ||||||
Cash and Cash Equivalents |
| $ | 147,258 |
|
| $ | 230,420 |
|
| $ | 136,842 |
|
| $ | 177,682 |
|
Accounts Receivable |
|
| 30,638 |
|
|
| 22,099 |
| ||||||||
Inventories |
|
| 121,922 |
|
|
| 95,471 |
| ||||||||
Accounts Receivable, Net |
|
| 38,648 |
|
|
| 30,975 |
| ||||||||
Income Tax Receivable |
|
| 5,422 |
|
|
| 7,473 |
| ||||||||
Inventories, Net |
|
| 118,545 |
|
|
| 115,675 |
| ||||||||
Prepaid Expenses |
|
| 14,003 |
|
|
| 11,175 |
|
|
| 14,767 |
|
|
| 13,364 |
|
Other Current Assets |
|
| 4,739 |
|
|
| 5,065 |
|
|
| 5,957 |
|
|
| 6,182 |
|
Total Current Assets |
|
| 318,560 |
|
|
| 364,230 |
|
|
| 320,181 |
|
|
| 351,351 |
|
Property and Equipment, Net |
|
| 498,348 |
|
|
| 409,074 |
|
|
| 692,667 |
|
|
| 557,873 |
|
Right of Use Assets, Net |
|
| 243,371 |
|
|
| 176,327 |
|
|
| 240,036 |
|
|
| 242,357 |
|
Investments |
|
| 79,981 |
|
|
| 94,902 |
|
|
| 77,335 |
|
|
| 74,169 |
|
Investments in Associates |
|
| 27,384 |
|
|
| 30,337 |
|
|
| 25,355 |
|
|
| 25,508 |
|
Intangible Assets, Net |
|
| 640,988 |
|
|
| 675,491 |
|
|
| 551,422 |
|
|
| 589,519 |
|
Goodwill |
|
| 644,585 |
|
|
| 632,849 |
|
|
| 589,691 |
|
|
| 589,691 |
|
Deposits and Other Assets |
|
| 2,663 |
|
|
| 2,641 |
|
|
| 2,525 |
|
|
| 3,060 |
|
TOTAL ASSETS |
| $ | 2,455,880 |
|
| $ | 2,385,851 |
|
| $ | 2,499,212 |
|
| $ | 2,433,528 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
| ||||
LIABILITIES |
|
|
|
|
|
|
|
|
|
| ||||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
| ||||||
Accounts Payable |
| $ | 14,083 |
|
| $ | 14,086 |
|
| $ | 22,507 |
|
| $ | 18,423 |
|
Accrued Liabilities |
|
| 71,516 |
|
|
| 84,724 |
|
|
| 86,469 |
|
|
| 86,971 |
|
Acquisition Consideration Payable |
|
| — |
|
|
| 31,732 |
| ||||||||
Compensation Payable |
|
| 11,393 |
|
|
| 12,022 |
|
|
| 11,498 |
|
|
| 13,476 |
|
Current Portion of Notes Payable |
|
| 1,027 |
|
|
| 783 |
|
|
| 1,466 |
|
|
| 1,037 |
|
Current Portion of Lease Liabilities |
|
| 10,334 |
|
|
| 9,221 |
|
|
| 11,818 |
|
|
| 10,906 |
|
Contingent Consideration Payable |
|
| 12,121 |
|
|
| 50,284 |
|
|
| — |
|
|
| 11,400 |
|
Income Tax Payable |
|
| 8,965 |
|
|
| 1,527 |
|
|
| 16,124 |
|
|
| 4,358 |
|
Total Current Liabilities |
|
| 129,439 |
|
|
| 204,379 |
|
|
| 149,882 |
|
|
| 146,571 |
|
Long-Term Liabilities: |
|
|
|
|
|
|
|
|
|
| ||||||
Lease Liabilities, Net of Current Portion |
|
| 249,446 |
|
|
| 182,539 |
|
|
| 250,017 |
|
|
| 249,281 |
|
Notes Payable, Net of Current Portion and Debt Discount |
|
| 254,504 |
|
|
| 239,151 |
|
|
| 297,075 |
|
|
| 274,631 |
|
Contingent Consideration Payable |
|
| 29,829 |
|
|
| 33,581 |
|
|
| 32,789 |
|
|
| 30,543 |
|
Warrant Liability |
|
| 5,001 |
|
|
| 24,877 |
|
|
| — |
|
|
| 4,520 |
|
Deferred Income Taxes |
|
| 80,854 |
|
|
| 81,846 |
|
|
| 62,550 |
|
|
| 62,550 |
|
TOTAL LIABILITIES |
|
| 749,073 |
|
|
| 766,373 |
|
|
| 792,313 |
|
|
| 768,096 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
| ||||||
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
| ||||||
Subordinate Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2022: |
|
| — |
|
|
| — |
| ||||||||
Multiple Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2022: |
|
| — |
|
|
| — |
| ||||||||
Super Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2022: |
|
| — |
|
|
| — |
| ||||||||
Subordinate Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2023: |
|
| — |
|
|
| — |
| ||||||||
Multiple Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2023: |
|
| — |
|
|
| — |
| ||||||||
Super Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2023: |
|
| — |
|
|
| — |
| ||||||||
Share Capital |
|
| 1,660,799 |
|
|
| 1,633,672 |
|
|
| 1,702,344 |
|
|
| 1,663,557 |
|
Contributed Surplus |
|
| 16,325 |
|
|
| 21,245 |
|
|
| 16,052 |
|
|
| 23,233 |
|
Deferred Share Issuances |
|
| 36,262 |
|
|
| 36,262 |
|
|
| 12,973 |
|
|
| 36,211 |
|
Accumulated Deficit |
|
| (6,858 | ) |
|
| (70,063 | ) |
|
| (25,034 | ) |
|
| (58,085 | ) |
Equity of Green Thumb Industries Inc. |
|
| 1,706,528 |
|
|
| 1,621,116 |
|
|
| 1,706,335 |
|
|
| 1,664,916 |
|
Noncontrolling interests |
|
| 279 |
|
|
| (1,638 | ) |
|
| 564 |
|
|
| 516 |
|
TOTAL SHAREHOLDERS' EQUITY |
|
| 1,706,807 |
|
|
| 1,619,478 |
|
|
| 1,706,899 |
|
|
| 1,665,432 |
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
| $ | 2,455,880 |
|
| $ | 2,385,851 |
|
| $ | 2,499,212 |
|
| $ | 2,433,528 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
4
Green Thumb Industries Inc.
Unaudited Interim Condensed Consolidated Statements of Operations
Three and Nine Months Ended September 30, 20222023 and 20212022
(Amounts Expressed in United States Dollars, Except Share Amounts)
|
| Three Months Ended September 30, |
|
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
| 2023 |
|
| 2022 |
| ||||||||
|
| (in thousands) |
|
|
| (in thousands) |
|
| (in thousands) |
|
|
| (in thousands) |
| ||||||||||||||||||||
Revenues, Net of Discounts | $ |
| 261,194 |
| $ |
| 233,677 |
|
| $ |
| 758,105 |
| $ |
| 649,979 |
| $ |
| 275,398 |
| $ |
| 261,194 |
|
| $ |
| 776,322 |
| $ |
| 758,105 |
|
Cost of Goods Sold, Net |
|
| (129,954 | ) |
|
| (104,159 | ) |
|
|
| (378,127 | ) |
|
| (286,685 | ) |
|
| (141,592 | ) |
|
| (129,954 | ) |
|
|
| (392,515 | ) |
|
| (378,127 | ) |
Gross Profit |
|
| 131,240 |
|
|
| 129,518 |
|
|
|
| 379,978 |
|
|
| 363,294 |
|
|
| 133,806 |
|
|
| 131,240 |
|
|
|
| 383,807 |
|
|
| 379,978 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Selling, General, and Administrative |
|
| 82,479 |
|
|
| 71,449 |
|
|
|
| 214,402 |
|
|
| 202,836 |
|
|
| 84,779 |
|
|
| 82,479 |
|
|
|
| 249,515 |
|
|
| 214,402 |
|
Total Expenses |
|
| 82,479 |
|
|
| 71,449 |
|
|
|
| 214,402 |
|
|
| 202,836 |
|
|
| 84,779 |
|
|
| 82,479 |
|
|
|
| 249,515 |
|
|
| 214,402 |
|
Income From Operations |
|
| 48,761 |
|
|
| 58,069 |
|
|
|
| 165,576 |
|
|
| 160,458 |
|
|
| 49,027 |
|
|
| 48,761 |
|
|
|
| 134,292 |
|
|
| 165,576 |
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Other Income (Expense), Net |
|
| (2,085 | ) |
|
| 8,125 |
|
|
|
| 14,933 |
|
|
| 9,805 |
|
|
| (631 | ) |
|
| (2,085 | ) |
|
|
| 23 |
|
|
| 14,933 |
|
Interest Income, Net |
|
| 1,085 |
|
|
| 328 |
|
|
|
| 2,609 |
|
|
| 674 |
|
|
| 1,576 |
|
|
| 1,085 |
|
|
|
| 4,838 |
|
|
| 2,609 |
|
Interest Expense, Net |
|
| (4,644 | ) |
|
| (7,616 | ) |
|
|
| (16,113 | ) |
|
| (16,419 | ) |
|
| (4,639 | ) |
|
| (4,644 | ) |
|
|
| (11,324 | ) |
|
| (16,113 | ) |
Total Other Income (Expense) |
|
| (5,644 | ) |
|
| 837 |
|
|
|
| 1,429 |
|
|
| (5,940 | ) |
|
| (3,694 | ) |
|
| (5,644 | ) |
|
|
| (6,463 | ) |
|
| 1,429 |
|
Income Before Provision for Income Taxes And Non-Controlling Interest |
|
| 43,117 |
|
|
| 58,906 |
|
|
|
| 167,005 |
|
|
| 154,518 |
|
|
| 45,333 |
|
|
| 43,117 |
|
|
|
| 127,829 |
|
|
| 167,005 |
|
Provision For Income Taxes |
|
| 32,969 |
|
|
| 37,320 |
|
|
|
| 102,440 |
|
|
| 98,203 |
|
|
| 34,526 |
|
|
| 32,969 |
|
|
|
| 93,927 |
|
|
| 102,440 |
|
Net Income Before Non-Controlling Interest |
|
| 10,148 |
|
|
| 21,586 |
|
|
|
| 64,565 |
|
|
| 56,315 |
|
|
| 10,807 |
|
|
| 10,148 |
|
|
|
| 33,902 |
|
|
| 64,565 |
|
Net Income Attributable to Non-Controlling Interest |
|
| 319 |
|
|
| 1,376 |
|
|
|
| 1,360 |
|
|
| 3,685 |
|
|
| 295 |
|
|
| 319 |
|
|
|
| 851 |
|
|
| 1,360 |
|
Net Income Attributable To Green Thumb Industries Inc. | $ |
| 9,829 |
| $ |
| 20,210 |
|
| $ |
| 63,205 |
| $ |
| 52,630 |
| $ |
| 10,512 |
| $ |
| 9,829 |
|
| $ |
| 33,051 |
| $ |
| 63,205 |
|
Net Income Per Share - Basic | $ |
| 0.04 |
| $ |
| 0.09 |
|
| $ |
| 0.27 |
| $ |
| 0.24 |
| $ |
| 0.05 |
| $ |
| 0.04 |
|
| $ |
| 0.14 |
| $ |
| 0.27 |
|
Net Income Per Share - Diluted | $ |
| 0.04 |
| $ |
| 0.08 |
|
| $ |
| 0.26 |
| $ |
| 0.23 |
| $ |
| 0.05 |
| $ |
| 0.04 |
|
| $ |
| 0.14 |
| $ |
| 0.26 |
|
Weighted Average Number of Shares Outstanding - Basic |
|
| 237,002,873 |
|
|
| 226,529,671 |
|
|
|
| 236,546,078 |
|
|
| 221,059,870 |
|
|
| 239,459,783 |
|
|
| 237,002,873 |
|
|
|
| 238,248,852 |
|
|
| 236,546,078 |
|
Weighted average Number of Shares Outstanding - Diluted |
|
| 237,804,799 |
|
|
| 230,879,437 |
|
|
|
| 237,872,595 |
|
|
| 225,411,773 |
|
|
| 240,289,959 |
|
|
| 237,804,799 |
|
|
|
| 239,827,112 |
|
|
| 237,872,595 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
5
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity
Three and Nine Months Ended September 30, 20222023 and 20212022
(Amounts Expressed in United States Dollars)
|
| Share |
|
| Contributed |
|
| Deferred Share |
|
| Accumulated |
|
| Non-Controlling |
|
| Total |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Balance, July 1, 2021 | $ |
| 1,316,465 |
| $ |
| 13,159 |
| $ |
| 8,566 |
| $ |
| (113,079 | ) | $ |
| 4,046 |
| $ |
| 1,229,157 |
|
Issuance of shares for redemption of noncontrolling interest |
|
| 4,070 |
|
|
| (4,996 | ) |
|
| — |
|
|
| — |
|
|
| 926 |
|
|
| — |
|
Issuance of shares under business combinations and investments |
|
| 166,164 |
|
|
| 60 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 166,224 |
|
Shares issued as contingent consideration |
|
| 5,949 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,949 |
|
Issuance of deferred shares |
|
| — |
|
|
| — |
|
|
| 21,382 |
|
|
| — |
|
|
| — |
|
|
| 21,382 |
|
Distribution of deferred shares |
|
| 1,319 |
|
|
| — |
|
|
| (1,303 | ) |
|
| — |
|
|
| — |
|
|
| 16 |
|
Exercise of options, RSUs and warrants |
|
| 6,897 |
|
|
| (4,640 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,257 |
|
Stock-based compensation |
|
| — |
|
|
| 4,995 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,995 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,452 | ) |
|
| (6,452 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,210 |
|
|
| 1,376 |
|
|
| 21,586 |
|
Balance, September 30, 2021 | $ |
| 1,500,864 |
| $ |
| 8,578 |
| $ |
| 28,645 |
| $ |
| (92,869 | ) | $ |
| (104 | ) | $ |
| 1,445,114 |
|
Balance, January 1, 2021 | $ |
| 1,048,640 |
| $ |
| 4,893 |
| $ |
| 2,587 |
| $ |
| (145,499 | ) | $ |
| 3,537 |
| $ |
| 914,158 |
|
Issuance of shares for redemption of noncontrolling interest |
|
| 4,070 |
|
|
| (4,996 | ) |
|
| — |
|
|
| — |
|
|
| 926 |
|
|
| — |
|
Issuance of shares under business combinations and investments |
|
| 223,957 |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 223,979 |
|
Shares issued as contingent consideration |
|
| 18,622 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18,622 |
|
Issuance of deferred shares |
|
| — |
|
|
| — |
|
|
| 29,196 |
|
|
| — |
|
|
| — |
|
|
| 29,196 |
|
Distribution of deferred shares |
|
| 3,145 |
|
|
| — |
|
|
| (3,138 | ) |
|
| — |
|
|
| — |
|
|
| 7 |
|
Issuance of registered shares pursuant to Form S-1 |
|
| 155,803 |
|
|
| (305 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 155,498 |
|
Exercise of options, RSUs and warrants |
|
| 39,221 |
|
|
| (27,993 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,228 |
|
Stock-based compensation |
|
| — |
|
|
| 14,698 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14,698 |
|
Warrants and shares issued in association with note payable |
|
| 271 |
|
|
| 22,259 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,530 |
|
Shares issued for settlement of business obligation |
|
| 7,135 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,135 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,252 | ) |
|
| (8,252 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 52,630 |
|
|
| 3,685 |
|
|
| 56,315 |
|
Balance, September 30, 2021 | $ |
| 1,500,864 |
| $ |
| 8,578 |
| $ |
| 28,645 |
| $ |
| (92,869 | ) | $ |
| (104 | ) | $ |
| 1,445,114 |
|
|
| Share |
|
| Contributed |
|
| Deferred Share |
|
| Accumulated |
|
| Non-Controlling |
|
| Total |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Balance, July 1, 2022 | $ |
| 1,659,000 |
| $ |
| 9,165 |
| $ |
| 36,262 |
| $ |
| (16,687 | ) | $ |
| 314 |
| $ |
| 1,688,054 |
|
Exercise of options and RSUs |
|
| 1,799 |
|
|
| (718 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,081 |
|
Stock-based compensation |
|
| — |
|
|
| 7,878 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,878 |
|
Distributions to third party and limited liability |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (354 | ) |
|
| (354 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,829 |
|
|
| 319 |
|
|
| 10,148 |
|
Balance, September 30, 2022 | $ |
| 1,660,799 |
| $ |
| 16,325 |
| $ |
| 36,262 |
| $ |
| (6,858 | ) | $ |
| 279 |
| $ |
| 1,706,807 |
|
Balance, January 1, 2022 | $ |
| 1,633,672 |
| $ |
| 21,245 |
| $ |
| 36,262 |
| $ |
| (70,063 | ) | $ |
| (1,638 | ) | $ |
| 1,619,478 |
|
Noncontrolling interests adjustment for change in ownership |
|
| 2,379 |
|
|
| (17,735 | ) |
|
| — |
|
|
| — |
|
|
| 15,356 |
|
|
| — |
|
Issuance of shares under business combinations and investments |
|
| 1,406 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,406 |
|
Shares issued as contingent consideration |
|
| 13,111 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,111 |
|
Exercise of options and RSUs |
|
| 9,327 |
|
|
| (6,643 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,684 |
|
Stock-based compensation |
|
| — |
|
|
| 19,362 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19,362 |
|
Shares issued for settlement of business obligation |
|
| 904 |
|
|
| 96 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,000 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (14,799 | ) |
|
| (14,799 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 63,205 |
|
|
| 1,360 |
|
|
| 64,565 |
|
Balance, September 30, 2022 | $ |
| 1,660,799 |
| $ |
| 16,325 |
| $ |
| 36,262 |
| $ |
| (6,858 | ) | $ |
| 279 |
| $ |
| 1,706,807 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
6
Green Thumb Industries Inc.
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity
Three and Nine Months Ended September 30, 20222023 and 20212022
(Amounts Expressed in United States Dollars)
|
| Share |
|
| Contributed |
|
| Deferred Share |
|
| Accumulated |
|
| Non-Controlling |
|
| Total |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Balance, July 1, 2022 | $ |
| 1,659,000 |
| $ |
| 9,165 |
| $ |
| 36,262 |
| $ |
| (16,687 | ) | $ |
| 314 |
| $ |
| 1,688,054 |
|
Exercise of options, RSUs and warrants |
|
| 1,799 |
|
|
| (718 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,081 |
|
Stock-based compensation |
|
| — |
|
|
| 7,878 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,878 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (354 | ) |
|
| (354 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,829 |
|
|
| 319 |
|
|
| 10,148 |
|
Balance, September 30, 2022 | $ |
| 1,660,799 |
| $ |
| 16,325 |
| $ |
| 36,262 |
| $ |
| (6,858 | ) | $ |
| 279 |
| $ |
| 1,706,807 |
|
Balance, January 1, 2022 | $ |
| 1,633,672 |
| $ |
| 21,245 |
| $ |
| 36,262 |
| $ |
| (70,063 | ) | $ |
| (1,638 | ) | $ |
| 1,619,478 |
|
Noncontrolling interests adjustment for change in ownership |
|
| 2,379 |
|
|
| (17,735 | ) |
|
| — |
|
|
| — |
|
|
| 15,356 |
|
|
| — |
|
Issuance of shares under business combinations and investments |
|
| 1,406 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,406 |
|
Shares issued as contingent consideration |
|
| 13,111 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,111 |
|
Exercise of options, RSUs and warrants |
|
| 9,327 |
|
|
| (6,643 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,684 |
|
Shares issued for settlement of business obligation |
|
| 904 |
|
|
| 96 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,000 |
|
Stock-based compensation |
|
| — |
|
|
| 19,362 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19,362 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (14,799 | ) |
|
| (14,799 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 63,205 |
|
|
| 1,360 |
|
|
| 64,565 |
|
Balance, September 30, 2022 | $ |
| 1,660,799 |
| $ |
| 16,325 |
| $ |
| 36,262 |
| $ |
| (6,858 | ) | $ |
| 279 |
| $ |
| 1,706,807 |
|
|
| Share |
|
| Contributed |
|
| Deferred Share |
|
| Accumulated |
|
| Non-Controlling |
|
| Total |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Balance, July 1, 2023 | $ |
| 1,693,429 |
| $ |
| 34,421 |
| $ |
| 12,973 |
| $ |
| (35,546 | ) | $ |
| 539 |
| $ |
| 1,705,816 |
|
Distribution of Contingent Consideration |
|
| 6,454 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,454 |
|
Exercise of options and RSUs |
|
| 2,461 |
|
|
| (694 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,767 |
|
Stock-based compensation |
|
| — |
|
|
| 7,215 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,215 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (270 | ) |
|
| (270 | ) |
Repurchase of Subordinate Voting Shares |
|
| — |
|
|
| (24,890 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24,890 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,512 |
|
|
| 295 |
|
|
| 10,807 |
|
Balance, September 30, 2023 | $ |
| 1,702,344 |
| $ |
| 16,052 |
| $ |
| 12,973 |
| $ |
| (25,034 | ) | $ |
| 564 |
| $ |
| 1,706,899 |
|
Balance, January 1, 2023 | $ |
| 1,663,557 |
| $ |
| 23,233 |
| $ |
| 36,211 |
| $ |
| (58,085 | ) | $ |
| 516 |
| $ |
| 1,665,432 |
|
Issuance of deferred shares |
|
| 20,454 |
|
|
| — |
|
|
| (20,454 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Distribution of contingent consideration |
|
| 12,524 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,524 |
|
Indemnification of deferred shares associated with post acquisition costs |
|
| — |
|
|
| — |
|
|
| (2,784 | ) |
|
| — |
|
|
| — |
|
|
| (2,784 | ) |
Exercise of options and RSUs |
|
| 5,809 |
|
|
| (3,126 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,683 |
|
Stock-based compensation |
|
| — |
|
|
| 20,835 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,835 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (803 | ) |
|
| (803 | ) |
Repurchase of Subordinate Voting Shares |
|
| — |
|
|
| (24,890 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24,890 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 33,051 |
|
|
| 851 |
|
|
| 33,902 |
|
Balance, September 30, 2023 | $ |
| 1,702,344 |
| $ |
| 16,052 |
| $ |
| 12,973 |
| $ |
| (25,034 | ) | $ |
| 564 |
| $ |
| 1,706,899 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
7
��
Green Thumb Industries Inc.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 20222023 and 20212022
(Amounts Expressed in United States Dollars)
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
CASH FLOW FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income attributable to Green Thumb Industries Inc. |
| $ | 63,205 |
|
| $ | 52,630 |
|
| $ | 33,051 |
|
| $ | 63,205 |
|
Net income attributable to non-controlling interest |
|
| 1,360 |
|
|
| 3,685 |
|
|
| 851 |
|
|
| 1,360 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation and amortization |
|
| 71,706 |
|
|
| 47,239 |
|
|
| 73,363 |
|
|
| 71,706 |
|
Amortization of operating lease assets |
|
| 31,906 |
|
|
| 24,760 |
|
|
| 35,996 |
|
|
| 31,906 |
|
Loss on extinguishment of debt |
|
| — |
|
|
| 9,882 |
| ||||||||
Loss on disposal of property and equipment |
|
| 1,514 |
|
|
| 822 |
|
|
| 2,815 |
|
|
| 1,514 |
|
Loss (earnings) on equity method investment |
|
| 2,382 |
|
|
| (1,330 | ) | ||||||||
Gain from lease modification |
|
| (3,330 | ) |
|
| — |
| ||||||||
Bad debt expense |
|
| 190 |
|
|
| 264 |
| ||||||||
Deferred income taxes |
|
| — |
|
|
| 8,217 |
| ||||||||
Impairment of long-lived property and equipment |
|
| 285 |
|
|
| — |
| ||||||||
Loss on equity method investments |
|
| 952 |
|
|
| 2,382 |
| ||||||||
Loss (gain) from lease modification |
|
| 87 |
|
|
| (3,330 | ) | ||||||||
Stock-based compensation |
|
| 19,362 |
|
|
| 14,698 |
|
|
| 20,835 |
|
|
| 19,362 |
|
Decrease (increase) in fair value of investments |
|
| 2,770 |
|
|
| (14,604 | ) | ||||||||
Interest on contingent consideration payable and acquisition liabilities |
|
| 2,782 |
|
|
| 2,874 |
| ||||||||
(Decrease) increase in fair value of contingent consideration |
|
| (31,787 | ) |
|
| 662 |
| ||||||||
Decrease in fair value of investments |
|
| 153 |
|
|
| 2,770 |
| ||||||||
Increase (decrease) in fair value of contingent consideration |
|
| 3,370 |
|
|
| (29,005 | ) | ||||||||
Decrease in fair value of warrants |
|
| (19,876 | ) |
|
| (5,451 | ) |
|
| (934 | ) |
|
| (19,876 | ) |
Shares issued for settlement of business obligation |
|
| 1,000 |
|
|
| 7,135 |
|
|
| — |
|
|
| 1,000 |
|
Gain on indemnification of deferred shares associated with post acquisition costs |
|
| (2,784 | ) |
|
| — |
| ||||||||
Amortization of debt discount |
|
| 6,837 |
|
|
| 4,954 |
|
|
| 7,128 |
|
|
| 6,837 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
| ||||||
Accounts receivable |
|
| (8,881 | ) |
|
| (3,782 | ) | ||||||||
Inventories |
|
| (26,038 | ) |
|
| (17,257 | ) | ||||||||
Accounts receivable, net |
|
| (7,673 | ) |
|
| (8,691 | ) | ||||||||
Inventories, net |
|
| (2,870 | ) |
|
| (26,038 | ) | ||||||||
Prepaid expenses and other current assets |
|
| (2,419 | ) |
|
| (5,993 | ) |
|
| (1,129 | ) |
|
| (2,419 | ) |
Deposits and other assets |
|
| (22 | ) |
|
| (979 | ) |
|
| 536 |
|
|
| (22 | ) |
Accounts payable |
|
| (259 | ) |
|
| (12,950 | ) |
|
| 4,084 |
|
|
| (259 | ) |
Accrued liabilities |
|
| (4,021 | ) |
|
| 3,517 |
|
|
| 4,052 |
|
|
| (4,021 | ) |
Operating lease liabilities |
|
| (27,599 | ) |
|
| (20,345 | ) |
|
| (32,114 | ) |
|
| (27,599 | ) |
Income tax payable |
|
| 7,438 |
|
|
| (15,881 | ) | ||||||||
Income tax receivable and payable, net |
|
| 13,818 |
|
|
| 7,438 |
| ||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
|
| 88,220 |
|
|
| 82,767 |
|
|
| 153,872 |
|
|
| 88,220 |
|
CASH FLOW FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
| ||||||
Purchases of property and equipment |
|
| (119,870 | ) |
|
| (117,160 | ) |
|
| (183,594 | ) |
|
| (119,870 | ) |
Proceeds from disposal of property and equipment |
|
| 112 |
|
|
| 109 |
|
|
| 319 |
|
|
| 112 |
|
Investments in securities and associates |
|
| (5,804 | ) |
|
| (31,053 | ) |
|
| (4,500 | ) |
|
| (5,804 | ) |
Proceeds from equity investments and notes receivable |
|
| 3,476 |
|
|
| 18,282 |
|
|
| 331 |
|
|
| 3,476 |
|
Settlement of acquisition consideration payable |
|
| (31,732 | ) |
|
| — |
|
|
| — |
|
|
| (31,732 | ) |
Purchase of businesses, net of cash acquired |
|
| (7,350 | ) |
|
| (18,458 | ) |
|
| — |
|
|
| (7,350 | ) |
NET CASH USED IN INVESTING ACTIVITIES |
|
| (161,168 | ) |
|
| (148,280 | ) |
|
| (187,444 | ) |
|
| (161,168 | ) |
CASH FLOW FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
| ||||||
Distributions to third parties and limited liability company unit holders |
|
| (14,799 | ) |
|
| (8,252 | ) | ||||||||
Distributions to limited liability company unit holders |
|
| (803 | ) |
|
| (14,799 | ) | ||||||||
Contributions from unconsolidated subsidiaries |
|
| 550 |
|
|
| 1,476 |
|
|
| — |
|
|
| 550 |
|
Net proceeds from issuance of registered shares pursuant to Form S-1 |
|
| — |
|
|
| 155,498 |
| ||||||||
Proceeds from exercise of options and warrants |
|
| 2,684 |
|
|
| 11,228 |
| ||||||||
Repurchase of Subordinate Voting Shares |
|
| (24,890 | ) |
|
| — |
| ||||||||
Proceeds from exercise of options and RSUs |
|
| 2,683 |
|
|
| 2,684 |
| ||||||||
Proceeds from issuance of notes payable |
|
| 2,102 |
|
|
| 175,500 |
|
|
| 16,654 |
|
|
| 2,102 |
|
Principal repayment of notes payable |
|
| (751 | ) |
|
| (64,703 | ) |
|
| (912 | ) |
|
| (751 | ) |
Prepayment penalty and other costs associated with refinancing |
|
| — |
|
|
| (3,200 | ) | ||||||||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES |
|
| (10,214 | ) |
|
| 267,547 |
| ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH: |
|
|
|
|
| |||||||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
|
| (83,162 | ) |
|
| 202,034 |
| ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH BEGINNING OF PERIOD |
|
| 230,420 |
|
|
| 83,758 |
| ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH END OF PERIOD |
| $ | 147,258 |
|
| $ | 285,792 |
| ||||||||
NET CASH USED IN FINANCING ACTIVITIES |
|
| (7,268 | ) |
|
| (10,214 | ) | ||||||||
CASH AND CASH EQUIVALENTS: |
|
|
|
|
| |||||||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
|
| (40,840 | ) |
|
| (83,162 | ) | ||||||||
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD |
|
| 177,682 |
|
|
| 230,420 |
| ||||||||
CASH AND CASH EQUIVALENTS END OF PERIOD |
| $ | 136,842 |
|
| $ | 147,258 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
8
Green Thumb Industries Inc.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 20222023 and 20212022
(Amounts Expressed in United States Dollars)
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest paid |
| $ | 13,699 |
|
| $ | 13,714 |
|
| $ | 15,564 |
|
| $ | 13,699 |
|
NONCASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
| ||||||
Accrued capital expenditures |
| $ | (10,217 | ) |
| $ | 12,869 |
|
| $ | (10,115 | ) |
| $ | (10,217 | ) |
Noncash increase in right of use asset |
| $ | (72,714 | ) |
| $ | (22,620 | ) |
| $ | (5,599 | ) |
| $ | (72,714 | ) |
Noncash increase in lease liability |
| $ | 72,714 |
|
| $ | 22,620 |
|
| $ | 5,599 |
|
| $ | 72,714 |
|
Warrant issuance associated with note payable |
| $ | — |
|
| $ | 22,530 |
| ||||||||
Mortgages associated with operating properties |
| $ | 7,350 |
|
| $ | 6,830 |
|
| $ | — |
|
| $ | 7,350 |
|
Shares issued for purchase of noncontrolling interest |
| $ | 2,379 |
|
| $ | 4,070 |
|
| $ | — |
|
| $ | 2,379 |
|
Issuance of shares associated with contingent consideration |
| $ | 13,111 |
|
| $ | 18,622 |
|
| $ | 12,524 |
|
| $ | 13,111 |
|
Deferred share issuances |
| $ | — |
|
| $ | 29,196 |
| ||||||||
Deferred share distributions |
| $ | — |
|
| $ | (3,138 | ) |
| $ | (20,454 | ) |
| $ | — |
|
Issuance of shares under business combinations |
| $ | 1,406 |
|
| $ | 223,979 |
|
| $ | — |
|
| $ | 1,406 |
|
Acquisitions |
|
|
|
|
|
|
|
|
|
| ||||||
Inventories |
| $ | 413 |
|
| $ | 6,183 |
|
| $ | — |
|
| $ | 413 |
|
Accounts receivable |
|
| (153 | ) |
|
| 552 |
|
|
| — |
|
|
| (153 | ) |
Prepaid expenses |
|
| 72 |
|
|
| 367 |
|
|
| — |
|
|
| 72 |
|
Property and equipment |
|
| 738 |
|
|
| 15,705 |
|
|
| — |
|
|
| 738 |
|
Right of use assets |
|
| 743 |
|
|
| 18,325 |
|
|
| — |
|
|
| 743 |
|
Intangible assets |
|
| 10,359 |
|
|
| 173,926 |
| ||||||||
Identifiable Intangible assets |
|
| — |
|
|
| 10,359 |
| ||||||||
Goodwill |
|
| 11,736 |
|
|
| 214,786 |
|
|
| — |
|
|
| 11,736 |
|
Deposits and other assets |
|
| 12 |
|
|
| 904 |
|
|
| — |
|
|
| 12 |
|
Liabilities assumed |
|
| (712 | ) |
|
| (11,032 | ) |
|
| — |
|
|
| (712 | ) |
Lease liabilities |
|
| (743 | ) |
|
| (18,325 | ) |
|
| — |
|
|
| (743 | ) |
Noncontrolling interests |
|
| 17,735 |
|
|
| — |
|
|
| — |
|
|
| 17,735 |
|
Contingent liabilities |
|
| (200 | ) |
|
| (61,853 | ) |
|
| — |
|
|
| (200 | ) |
Equity interests issued |
|
| (3,785 | ) |
|
| (285,339 | ) |
|
| — |
|
|
| (3,785 | ) |
Fair value of previously held equity interest |
|
| (14,500 | ) |
|
| — |
|
|
| — |
|
|
| (14,500 | ) |
Deferred income taxes |
|
| 991 |
|
|
| (35,741 | ) |
|
| — |
|
|
| 991 |
|
Settlement of noncontrolling interests |
|
| (15,356 | ) |
|
| — |
|
|
| — |
|
|
| (15,356 | ) |
|
| $ | 7,350 |
|
| $ | 18,458 |
|
| $ | — |
|
| $ | 7,350 |
|
ADDITIONAL SUPPLEMENTAL INFORMATION |
|
|
|
|
|
|
|
|
|
| ||||||
Decrease (increase) in fair value of investments |
| $ | 16,889 |
|
| $ | (14,604 | ) | ||||||||
Decrease in fair value of investments |
| $ | 153 |
|
| $ | 16,889 |
| ||||||||
Increase in fair value of equity method investments |
|
| (14,119 | ) |
|
| — |
|
|
| — |
|
|
| (14,119 | ) |
TOTAL DECREASE (INCREASE) IN FAIR VALUE OF INVESTMENTS |
| $ | 2,770 |
|
| $ | (14,604 | ) | ||||||||
TOTAL DECREASE IN FAIR VALUE OF INVESTMENTS |
| $ | 153 |
|
| $ | 2,770 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
9
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
1. Overview and Basis of Presentation
(a) Description of Business
Green Thumb Industries Inc. (“Green Thumb”Thumb,” the “Company,” “we” or the “Company”“us”), a national cannabis consumer packaged goods company and retailer, promotes well-being through the power of cannabis while being committed to community and sustainable, profitable growth. Green Thumb owns, manufactures, and distributes a portfolio of cannabis consumer packaged goods brands including &Shine, Beboe, Dogwalkers, Dr.Doctor Solomon’s, Good Green, incredibles, and RYTHM, to third-party retail stores across the United States as well as to Green Thumb owned Retailretail cannabis stores. The Company also owns and operates retail cannabis stores that include a rapidly growing national chain named RISE, which sell our products and third-party products. As of September 30, 2022,2023, Green Thumb has operationsrevenue in fifteen markets (California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Ohio, Pennsylvania, Rhode Island and Virginia), employs approximately 3,8004,400 people and serves hundreds of thousandsmillions of patients and customers annually.
The Company’s registered office is located at 250 Howe Street, 20th Floor, Vancouver, British Columbia, V6C 3R8. The Company’s U.S. headquarters are at 325 W. Huron St., Suite 700, Chicago, IL 60654.
(b) Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements include the accounts of Green Thumb and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the U.S. Securities & Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and, accordingly, certain information, footnotes and disclosures normally included in the annual financial statements, prepared in accordance with GAAP have been condensed or omitted in accordance with SEC rules and regulations. The financial data presented herein should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021,2022, (the “2021“2022 Form 10-K”). In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Certain previously reported amounts have been reclassified between line items to conform to the current period presentation. Results of interim periods should not be considered indicative of the results for the full year. These unaudited interim condensed consolidated financial statements include estimates and assumptions of management that affect the amounts reported in the unaudited interim condensed consolidated financial statements. Actual results could differ from these estimates.
(c) Significant Accounting Policies
There have been no changes to the Company’s significant accounting policies as described in Part II, Item 8, “NotesNote 2 to the Company's Consolidated Financial Statements”, Note 2 - Significant Accounting PoliciesStatements included in the 20212022 Form 10-K.
(d) Earnings per Share
Basic earnings per share is calculated using the treasury stock method, by dividing the net earnings attributable to shareholders by the weighted average number of common shares outstanding during each of the periods presented. Contingently issuable shares (including shares held in escrow) are not considered outstanding common shares and consequently are not included in the earnings per share calculation. Diluted earnings per share is calculated using the treasury stock method by adjusting the weighted average number of common shares outstanding to assume conversion of all dilutive potential common shares. The Company has three categories of potentially dilutive common share equivalents: restricted stock units, stock options and warrants. As of September 30, 2023, the Company had 10,229,895 options, 3,499,193 restricted stock units and 3,734,555 warrants outstanding. As of September 30, 2022, the Company had 9,725,907 options, 952,753 restricted stock units and 3,835,278 warrants outstanding. As of September 30, 2021, the Company had 5,625,661 options, 352,936 restricted stock units and 3,591,975 warrants outstanding.
10
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
1. Overview and Basis of Presentation (Continued)
(d) Earnings per Share (Continued)
In order to determine diluted earnings per share, it is assumed that any proceeds from the vesting of dilutive unvested restricted stock units, or exercise of unvested stock options and warrants would be used to repurchase common shares at the average market price during the period. Under the treasury stock method, the diluted earnings per share calculation excludes any potential conversion of stock options and convertible debt that would increase earnings per share or decrease loss per share. For the three months ended September 30, 2023, the computation of diluted earnings per share included 211,651 options and 618,525 restricted stock units. For the nine months ended September 30, 2023, the computation of diluted earnings per share included 153,215 options and 1,425,045 restricted stock units. There were no dilutive warrants during the three and nine months ended September 30, 2023 as the strike price was greater than the average stock price for the period. For the three months ended September 30, 2022, the computation of diluted earnings per share included 697,800 options, 57,128 restricted stock units and 46,998 warrants. For the nine months ended September 30, 2022, the computation of diluted earnings per share included 968,322 options, 226,564 restricted stock units and 131,631 warrants. For the three and nine months ended September 30, 2021,2023, the weighted average number of anti-dilutive stock options excluded from the computation of diluted earnings per share includedwere 3,022,9732,349,064 options, 223,661 restricted stock units and 1,103,1323,198,625 warrants. For the nine months ended September 30, 2021, the computation of diluted earnings per share included 3,041,286 options, 196,043 restricted stock units and 1,114,574 warrants., respectively. For the three and nine months ended September 30, 2022, the weighted average number of anti-dilutive stock options excluded from the computation of diluted earnings per share were 2,052,822 and 2,192,896, respectively. For the three and nine months ended September 30, 2021, the weighted average number of anti-dilutive stock options excluded from the computation of diluted earnings per share were 570,964 and 913,579, respectively.
(e) Recently AdoptedIssued Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to improve financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company adopted ASU 2020-06 on January 1, 2022. The adoption of the standard did not have a material impact on the Company's unaudited interim condensed consolidated financial statements.
(f) Recently Issued Accounting Standards
The Company reviews recently issued accounting standards on a quarterly basis and has determined there are no standards yet to be adopted which are relevant to the business for disclosure.
(g) Coronavirus Pandemic
In March 2020, the World Health Organization categorized coronavirus disease 2019 (together with its variants, “COVID-19”) as a pandemic. COVID-19 continues to spread throughout the U.S. and other countries across the world, and the duration and severity of its effects are currently unknown. The Company continues to implement and evaluate actions to strengthen its financial position and support the continuity of its business and operations.
The Company’s unaudited interim condensed consolidated financial statements presented herein reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and reported amounts of revenue and expenses during the periods presented. Such estimates and assumptions affect, among other things, the Company’s goodwill; long-lived assets and intangible assets; operating lease right of use assets and operating lease liabilities; valuation of deferred income taxes; the allowance for doubtful accounts; assessment of the Company’s lease and non-lease contract expenses; and measurement of compensation cost for bonus and other compensation plans. While the Company’s revenue, gross profit and operating income were not impacted during the first nine months of 2022, the uncertain nature of the spread of COVID-19 and the uncertainty of the impact of nationwide vaccine programs may impact the Company’s business operations for reasons including the potential quarantine of the Company’s employees or those of its supply chain partners.
11
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
2. INVENTORIES
The Company’s inventories include the following at September 30, 20222023 and December 31, 2021:2022:
|
| September 30, 2022 |
| December 31, 2021 |
| September 30, 2023 |
| December 31, 2022 |
|
| (in thousands) |
| (in thousands) | ||||
Raw Material | $ | 2,667 | $ | 5,278 | $ | 1,120 | $ | 3,070 |
Packaging and Miscellaneous |
| 10,105 |
| 8,622 |
| 10,756 |
| 9,847 |
Work in Process |
| 56,946 |
| 42,403 |
| 45,072 |
| 57,287 |
Finished Goods |
| 55,724 |
| 41,069 |
| 65,707 |
| 49,268 |
Reserve for Obsolete Inventory |
| (3,520) |
| (1,901) |
| (4,110) |
| (3,797) |
Total Inventories | $ | 121,922 | $ | 95,471 | ||||
Total Inventories, Net | $ | 118,545 | $ | 115,675 |
3. PROPERTY AND EQUIPMENT
At September 30, 20222023 and December 31, 2021,2022, property and equipment consisted of the following:
|
| September 30, 2022 |
| December 31, 2021 |
| September 30, 2023 |
| December 31, 2022 |
|
| (in thousands) |
| (in thousands) | ||||
Buildings and Improvements | $ | 130,806 | $ | 101,283 | $ | 340,641 | $ | 176,874 |
Equipment, Computers and Furniture |
| 113,897 |
| 83,281 |
| 158,327 |
| 122,568 |
Leasehold Improvements |
| 134,674 |
| 114,303 |
| 186,354 |
| 135,524 |
Land Improvements |
| 822 |
| 607 |
| 995 |
| 847 |
Capitalized Interest |
| 13,929 |
| 6,523 |
| 30,517 |
| 16,934 |
Total Property and Equipment |
| 394,128 |
| 305,997 |
| 716,834 |
| 452,747 |
Less: Accumulated Depreciation |
| (70,878) |
| (45,198) |
| (113,507) |
| (80,702) |
Property and Equipment, net |
| 323,250 |
| 260,799 |
| 603,327 |
| 372,045 |
Land |
| 23,743 |
| 20,258 |
| 33,725 |
| 29,106 |
Assets Under Construction |
| 151,355 |
| 128,017 |
| 55,615 |
| 156,722 |
Property and Equipment, net | $ | 498,348 | $ | 409,074 | $ | 692,667 | $ | 557,873 |
Assets under construction represent construction in progress related to both cultivation and dispensaryretail store facilities not yet completed or otherwise not ready for use.
Depreciation expense for the three and nine months ended September 30, 2023 totaled $12,885 thousand and $35,266 thousand, respectively, of which $8,298 thousand and $23,348 thousand, respectively, is included in cost of goods sold. Depreciation expense for the three and nine months ended September 30, 2022 totaled $9,695 thousand and $26,844 thousand, respectively, of which $6,393 thousand and $17,357 thousand, respectively, is included in cost of goods sold. Depreciation expense for the three and nine months ended September 30, 2021 totaled $6,235 thousand and $16,255 thousand, respectively, of which $3,905 thousand and $9,997 thousand, respectively, is included in cost of goods sold.
12
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
4. ACQUISITIONS
The Company has determined that the below acquisitions are business combinations under Accounting Standards Codification (“ASC”) 805, Business Combinations. They are accounted for by applying the acquisition method, whereby the assets acquired and the liabilities assumed are recorded at their fair values with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill. Operating results have been included in these unaudited interim condensed consolidated financial statements from the date of the acquisition. Supplemental pro forma financial information has not been presented as the impact was not material to the Company's consolidated financial statements. The goodwill recorded primarily includes the expected synergies resulting from combining the operations of the acquired entity with those of the Company.
On March 1, 2022, the Company acquired the remaining 50% ownership interests of ILDISP, LLC (“ILDISP”) from the Company's former membership interest partner for the purposes of expanding the Company's operational capacity in the Illinois market. Prior to March 1, 2022, one of the two retail stores owned by ILDISP, RISE Effingham, was consolidated by Green Thumb as the Company was determined to be the primary beneficiary of the variable interest entity. The other retail store was accounted for as an equity method investment given the Company's 50% ownership interest and its ability to significantly influence that store's operations.
The total consideration exchanged included $18,623 thousand in cash, which included $250 thousand in deferred consideration, which was paid in September 2022, along with 204,036 Subordinate Voting Shares of Green Thumb valued at $3,785 thousand, based on the fair value of the securities on their date of issuance, which was the closing price of Green Thumb's Subordinate Voting Shares as traded on the Canadian Securities Exchange (“CSE”) on the date of the transaction.
The Company allocated the total consideration exchanged to each of the acquired Retail stores. Accordingly, the consideration allocated to RISE Effingham was approximately $11,857 thousand in cash along with 128,218 Subordinate Voting Shares of Green Thumb that had a fair value on the date of issuance of $2,379 thousand. The remaining equity associated with the Company's purchase of the noncontrolling interest was closed to contributed surplus (deficit) of Green Thumb as of March 1, 2022.
The equity method investment associated with the other retail store owned by ILDISP was remeasured at fair value of $14,500 thousand as of the date of the transaction, and resulted in a gain on the fair value of the equity method investment of $14,119 thousand, which was recorded in other income (expense) on the unaudited interim condensed consolidated statement of operations. In addition, the Company allocated consideration of $6,766 thousand in cash along with 75,818 Subordinate Voting Shares of Green Thumb, with a fair value of $1,406 thousand, to the acquisition of the other retail store. After completing the preliminary allocation of the aggregate consideration exchanged for the assets acquired and liabilities assumed, the Company recorded a license intangible asset of $14,143 thousand and non-tax deductible goodwill of $7,718 thousand. The weighted average amortization period for the license intangible is 15 years. Acquisition related expenses associated with the transaction were not material.
The preliminary valuation was based on management's estimates and assumptions which are subject to change within the purchase price allocation period (generally one year from the acquisition date). The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the intangible asset acquired, the previously held equity method investment, and the residual goodwill.
During the current quarter, the Company finalized the purchase price allocations related to the acquisition of Mobley Pain Management and Wellness Center, LLC and Canwell Processing, LLC (collectively referred to as “Summit”) and GreenStar Herbals, Inc. (“GreenStar”) which were acquired on August 1, 2021 and September 1, 2021 respectively. The Company remeasured the assets acquired and liabilities assumed, with the assistance of an external valuation expert, which resulted in a reduction to the Company's license intangible and deferred tax liability of $3,784 thousand and $992 thousand, respectively, and an increase in the value of goodwill and contingent consideration of $2,992 thousand and $200 thousand, respectively.
13
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
5.4. INTANGIBLE ASSETS AND GOODWILL
(a) Intangible Assets
Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization of definite life intangibles is provided on a straight-line basis over their estimated useful lives. The estimated useful lives, residual values, and amortization methods are reviewed at each year end, and any changes in estimates are accounted for prospectively.
At September 30, 20222023 and December 31, 2021,2022, intangible assets consisted of the following:
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2023 |
| December 31, 2022 | ||||||||||||||||||||||||||
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Book Value |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Book Value |
|
| Gross Carrying Amount |
| Accumulated Amortization |
| Net Book Value |
| Gross Carrying Amount |
| Accumulated Amortization |
| Net Book Value | ||||||
|
| (in thousands) |
|
| (in thousands) |
|
| (in thousands) |
| (in thousands) | ||||||||||||||||||||||||||
Licenses and Permits | $ |
| 666,259 |
| $ |
| 102,922 |
| $ |
| 563,337 |
| $ |
| 655,900 |
| $ |
| 69,812 |
| $ |
| 586,088 |
| $ | 660,716 | $ | 146,739 | $ | 513,977 | $ | 660,716 | $ | 113,800 | $ | 546,916 |
Trademarks |
|
| 98,936 |
|
|
| 33,859 |
|
|
| 65,077 |
|
|
| 98,936 |
|
|
| 25,096 |
|
|
| 73,840 |
|
| 41,511 |
| 12,655 |
| 28,856 |
| 41,511 |
| 10,486 |
| 31,025 |
Customer Relationships |
|
| 24,438 |
|
|
| 12,563 |
|
|
| 11,875 |
|
|
| 24,438 |
|
|
| 9,944 |
|
|
| 14,494 |
|
| 24,438 |
| 16,054 |
| 8,384 |
| 24,438 |
| 13,435 |
| 11,003 |
Non-Competition Agreements |
|
| 2,565 |
|
|
| 1,866 |
|
|
| 699 |
|
|
| 2,565 |
|
|
| 1,496 |
|
|
| 1,069 |
|
| 2,565 |
| 2,360 |
| 205 |
| 2,565 |
| 1,990 |
| 575 |
Total Intangible Assets | $ |
| 792,198 |
| $ |
| 151,210 |
| $ |
| 640,988 |
| $ |
| 781,839 |
| $ |
| 106,348 |
| $ |
| 675,491 |
| $ | 729,230 | $ | 177,808 | $ | 551,422 | $ | 729,230 | $ | 139,711 | $ | 589,519 |
The Company recorded amortization expense for the three and nine months ended September 30, 2023 of $12,743 thousand and $38,097 thousand, respectively. The Company recorded amortization for the three and nine months ended September 30, 2022 of $14,823 thousand and $44,862 thousand, respectively. The Company recorded amortization for the three and nine months ended September 30, 2021 of $10,938 thousand and $30,984 thousand, respectively.
The following table outlines the estimated annual amortization expense related to intangible assets as of September 30, 2022:2023:
|
| Estimated |
| Estimated |
Year Ending December 31, |
| (in thousands) |
| (in thousands) |
Remainder of 2022 | $ | 15,034 | ||
2023 |
| 60,136 | ||
Remainder of 2023 | $ | 12,744 | ||
2024 |
| 59,554 |
| 50,392 |
2025 |
| 59,457 |
| 50,294 |
2026 |
| 51,445 |
| 47,332 |
2027 and Thereafter |
| 395,362 | ||
2027 |
| 46,803 | ||
2028 and Thereafter |
| 343,857 | ||
| $ | 640,988 | $ | 551,422 |
As of September 30, 2022,2023, the weighted average amortization period remaining for intangible assets was 12.1111.60 years.
(b) Goodwill
At September 30, 20222023 and December 31, 20212022 the balances of goodwill, by segment, consisted of the following:
|
| Retail |
| Consumer Package Goods |
| Total |
|
| (in thousands) | ||||
As of December 31, 2021 | $ | 274,811 | $ | 358,038 | $ | 632,849 |
Acquisition of ILDISP, LLC |
| 7,718 |
| — |
| 7,718 |
Adjustments to Preliminary Purchase Price Allocations |
| 3,776 |
| 242 |
| 4,018 |
As of September 30, 2022 | $ | 286,305 | $ | 358,280 | $ | 644,585 |
|
| Retail |
| Consumer Packaged Goods |
| Total |
|
| (in thousands) | ||||
As of December 31, 2022 | $ | 273,802 | $ | 315,889 | $ | 589,691 |
As of September 30, 2023 | $ | 273,802 | $ | 315,889 | $ | 589,691 |
1413
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
6.5. INVESTMENTS
As of September 30, 20222023 and December 31, 2021,2022, the Company held various equity interests in cannabis related companies as well as investments in convertible notesnote receivable instruments that had a combined fair value of $79,98177,335 thousand and $94,90274,169 thousand as of each period end, respectively. The Company measures its investments that do not have readily determinable fair value at cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company performs an assessment on a quarterly basis to determine whether triggering events for impairment exist and to identify any observable price changes.
The following table summarizes the changes in the Company’s investments during the nine months ended September 30, 20222023 and year ending December 31, 2021:2022:
|
| September 30, 2022 |
| December 31, 2021 |
| September 30, 2023 |
| December 31, 2022 |
| (in thousands) | (in thousands) | ||||||
Beginning | $ | 94,902 | $ | 40,795 | $ | 74,169 | $ | 94,902 |
Additions |
| 5,444 |
| 83,689 |
| 3,700 |
| 5,444 |
Disposals |
| (3,476) |
| (18,417) |
| (331) |
| (3,571) |
Fair value adjustment |
| (16,889) |
| 6,377 |
| (153) |
| (22,606) |
Transfers out |
| — |
| (17,542) | ||||
Transfers and other |
| (50) |
| — | ||||
Ending | $ | 79,981 | $ | 94,902 | $ | 77,335 | $ | 74,169 |
During the three and nine months ended September 30, 2022,2023, the Company recorded fair value gains (losses), net of interest income of $432775 thousand and $(16,889153) thousand, respectively,respectively. The fair value gains (losses) associated with the Company's equity investments in the amount of which $247724 thousand and $(17,368410) thousand as of the three and nine months ended September 30, 2023, respectively, was recorded within other income (expense), respectively, and on the Company's unaudited interim condensed consolidated statements of operations. The interest income portion associated with the Company's note receivable investments in the amount of $18551 thousand and $479257 thousand as of the three and nine months ended September 30, 2023, respectively related to various note receivable investments and was recorded towithin interest income on the unaudited interim condensed consolidated statements of operations.
(a) Equity Investments
As of September 30, 20222023 and December 31, 2021,2022, the Company held equity investments in publicly traded entities which have readily determinable fair values, which are classified as Level 1 investments, of $4,0222,094 thousand and $20,5832,535 thousand, respectively. During the three and nine months ended September 30, 2023, the Company recorded net gains (losses) on the change in fair value of such investments of $724 thousand and $(410) thousand, respectively, within other income (expense) on the unaudited interim condensed consolidated statements of operations. During the three and nine months ended September 30, 2022, the Company recorded net gains (losses) on the change in fair value of such investments of $124 thousand and $(14,169) thousand, respectively, within other income (expense) on the unaudited interim condensed consolidated statement of operations. During the three and nine months ended September 30, 2021, the Company recorded net gains (losses) on the change in fair value of such investments of $(4,282) thousand and $9,630 thousand, respectively, within other income (expense) on the unaudited interim condensed consolidated statementstatements of operations. During the nine months ended September 30, 20222023 and 2021,2022, the Company received proceeds from the sale of such investments of $2,39331 thousand and $18,2822,393 thousand, respectively. These investments are classified as trading securities on the Company's unaudited interim condensed consolidated balance sheets.
As of September 30, 20222023 and December 31, 2021,2022, the Company held equity investments in privately held entities that did not have readily determinable fair values, which are classified as Level 3 investments, of $42,03042,330 thousand and $33,06640,330 thousand, respectively. For the three and nine months ended September 30, 2023, there were no gains or losses on the change in fair value of such investments. During the three and nine months ended September 30, 2022, the Company recorded net gains (losses) on the change in fair value of such investments of $(295) thousand and $182 thousand, respectively, within other income (expense) on the unaudited interim condensed consolidated statement of operations. During the three and nine months ended September 30, 2021, the Company recorded net gains (losses) on the change in fair value of such investments of $0 thousand and $4,766 thousand, respectively, within other income (expense) on the unaudited interim condensed consolidated statementstatements of operations. There were no sales of these investments during these periods. These investments are classified as trading securities on the Company's unaudited interim condensed consolidated balance sheets.
See Note 1413 - Fair Value Measurements for additional details.
1514
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
6.5. INVESTMENTS (Continued)
(a) Equity Investments (Continued)
Unrealized gains and (losses) recognized on equity investments held during the three and nine months ended September 30, 2023 were $660 thousand and $(350) thousand, respectively. Unrealized losses recognized on equity investments held during the three and nine months ended September 30, 2022 were $137 thousand and $(13,825) thousand, respectively. Unrealized gains and (losses) recognized on equity investments held during the three and nine months ended September 30, 2021 were $(4,140) thousand and $14,596 thousand, respectively.
(b) Convertible NotesNote Receivable Instruments
The Company has made multiple investments in various note receivable instruments, including note receivable instruments with conversion features.
As of September 30, 2022 and December 31, 2021, theThe Company held note receivable instruments, which were classified as a Level 1 investment as they represent public debt of a publicly traded entity, and had a fair value of $22,21322,214 thousand as of September 30, 2023 and $December 31, 2022. During the three and nine months ended September 30, 2023, there were 23,534no thousand, respectively. Duringgains or (losses) on the change in fair value of such investments. For the three and nine months ended September 30, 2022, the Company recorded net gains (losses) on the change in fair value of such investments of $418 thousand and $(236) thousand, respectively within other income (expense) on the unaudited interim condensed consolidated statementstatements of operations. There were no gains or (losses) recognized on these investments during the three and nine months ended September 30, 2021. The Company received proceeds from the partial principal repayment of the note receivable of $1,083 thousand during the nine months ended September 30, 2022. The note receivable instruments have a stated interest rate of 13.0013% and a maturity date of April 29, 2025.30, 2025. These notesnote receivable instruments did not contain conversion features and are currently classified as trading securities on the Company's unaudited interim condensed consolidated balance sheets.
As of September 30, 20222023 and December 31, 2021,2022, the Company held note receivable instruments which were classified as Level 3 investments as they represent loans provided to privately held entities that do not have readily determinable fair values. The note receivable instruments had a combined fair value of $11,71610,697 thousand and $17,7199,090 thousand, respectively, with stated interest ranging between 0.91% and 10.0010% and terms between 159 months to five years. During the three and nine months ended September 30, 2023, there were no gains or (losses) recorded on the change in fair value of such investments, however, the company recorded accrued interest of $51 thousand and $257 thousand, respectively, within interest income on the unaudited interim condensed consolidated statements of operations. During the three and nine months ended September 30, 2022, the Company recorded net gains (losses)losses on the change in fair value of such investments of $0 thousand and $($3,145) thousand, respectively, within other income (expense) and accrued interest of $185 thousand and $479 thousand, respectively, within interest income on the unaudited interim condensed consolidated statement of operations. During the three and nine months ended September 30, 2021, there were no gains or (losses) recognized on these investments within other income (expense), however the company recorded accrued interest of $133 thousand and $208 thousand, respectively, within interest income on the unaudited interim condensed consolidated statementstatements of operations. These notesnote receivable instruments are classified as trading securities on the Company's unaudited interim condensed consolidated balance sheets.
See Note 1413 - Fair Value Measurements for additional details.
1615
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
7.6. LEASES
(a) Operating Leases
The Company has operating leases for its retail stores and processing and cultivation facilities located throughout the U.S,U.S., as well as for corporate office space located in Illinois. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date.
All real estate leases are recorded on the balance sheet. Equipment and other non-real estate leases with an initial term of twelve months or less are not recorded on the balance sheet. Lease agreements for some locations provide for rent escalations and renewal options. Certain real estate leases require payment for fixed and variable non-lease components, such as taxes, insurance and maintenance. The Company accounts for each real estate lease and the related non-lease components together as a single component.
The Company determines if an arrangement is a lease at inception. The Company must consider whether the contract conveys the right to control the use of an identified asset. Certain arrangements require significant judgment to determine if an asset is specified in the contract and if the Company directs how and for what purpose the asset is used during the term of the contract. For the three and nine months ended September 30, 2022,2023, the Company recorded operating lease expense of $11,628 thousand and $35,996 thousand, respectively compared to operating lease expense of $11,884 thousand and $31,906 thousand respectively, compared to operating lease expense of $8,733 thousand and $24,760 thousand for the three and nine months ended September 30, 2021,2022, respectively.
Other information related to operating leases as of September 30, 20222023 and December 31, 20212022 were as follows:
|
| September 30, 2022 |
| December 31, 2021 |
| September 30, 2023 |
| December 31, 2022 |
Weighted average remaining lease term (years) |
| 12.05 |
| 11.82 |
| 11.98 |
| 11.64 |
Weighted average discount rate |
| 12.44% |
| 13.60% |
| 12.41% |
| 12.42% |
Maturities of lease liabilities for operating leases as of September 30, 20222023 were as follows:
|
| Maturities of Lease Liability | ||||
Year Ending December 31, |
| Third Party |
| Related Party |
| Total |
|
| (in thousands) | ||||
Remainder of 2022 | $ | 10,142 | $ | 282 | $ | 10,424 |
2023 |
| 41,368 |
| 1,144 |
| 42,512 |
2024 |
| 41,068 |
| 1,027 |
| 42,095 |
2025 |
| 38,748 |
| 948 |
| 39,696 |
2026 |
| 37,029 |
| 970 |
| 37,999 |
2027 and Thereafter |
| 378,332 |
| 7,066 |
| 385,398 |
Total Lease Payments |
| 546,687 |
| 11,437 |
| 558,124 |
Less: Interest |
| (293,231) |
| (5,113) |
| (298,344) |
Present Value of Lease Liability | $ | 253,456 | $ | 6,324 | $ | 259,780 |
|
| Maturities of Lease Liability | ||||
Year Ending December 31, |
| Third Party |
| Related Party |
| Total |
|
| (in thousands) | ||||
Remainder of 2023 | $ | 10,669 | $ | 143 | $ | 10,812 |
2024 |
| 43,250 |
| 437 |
| 43,687 |
2025 |
| 41,114 |
| 343 |
| 41,457 |
2026 |
| 40,409 |
| 350 |
| 40,759 |
2027 |
| 40,793 |
| 357 |
| 41,150 |
2028 and Thereafter |
| 358,013 |
| 1,728 |
| 359,741 |
Total Lease Payments |
| 534,248 |
| 3,358 |
| 537,606 |
Less: Interest |
| (274,503) |
| (1,268) |
| (275,771) |
Present Value of Lease Liability | $ | 259,745 | $ | 2,090 | $ | 261,835 |
(b) Related Party Operating Leases
The Company entered intohas leasing arrangements that are related party transactions, with respect to its leasing arrangementsincluding for certain facilities in Florida, Maryland, Massachusetts and Nevada. Wendy Berger, a director of the Company, is a principal of WBS Equities, LLC, which is the Manager of Mosaic Real Estate, LLC, and owns the applicable facilities leased by the Company. Additionally, Mosaic Real Estate, LLC is indirectly owned in part by Ms. Berger (through the Wendy Berger 1998 Revocable Trust), Benjamin Kovler, the Chairman and Chief Executive Officer and a director of the Company (through KP Capital, LLC), and Anthony Georgiadis, the Chief Financial OfficerPresident and a director of the Company (through Three One Four Holdings, LLC and ABG, LLC) and William Gruver, a former director of the Company (held through ABG, LLC). The terms of these leases range from 7 years
17
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
7. LEASES (Continued)
(b) Related Party Operating Leases (Continued)
to 15 years. For the three and nine months ended September 30, 2022,2023, the Company recorded lease expense of $296139 thousand and $886415 thousand, respectively, compared to lease expense of $296 thousand and $891886 thousand for the three and nine months ended September 30, 2021, respectively, associated with these related party leasing arrangements.2022, respectively.
(c) Lease Modification
Danville Cultivation and Processing Facility
On June 29, 2022 the Company entered into the third amendment (the “Amendment”) to its existing lease agreement with Innovative Industrial Properties, Inc. (“IIP”) associated with its Danville, Pennsylvania cultivation and processing facility. The Amendment provided an additional tenant improvement allowance of $55,000 thousand to be used on enhancements to the facility. In addition to the tenant improvement allowance of $19,300 thousand received in prior years, the total tenant improvement allowance provided by IIP will be $74,300 thousand, and brings IIP's total investment in the property to $94,600 thousand. The Amendment to the lease was treated as a modification and resulted in a gain of $3,061 thousand as well as an increase in the right of use asset and related lease liability of $81,720 thousand.
1816
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
8.7. NOTES PAYABLE
At September 30, 20222023 and December 31, 2021,2022, notes payable consisted of the following:
|
| September 30, 2022 |
| December 31, 2021 |
| September 30, 2023 |
| December 31, 2022 |
|
| (in thousands) |
| (in thousands) | ||||
Charitable Contributions1 | $ | 812 | $ | 1,238 | $ | 400 | $ | 764 |
Private placement debt dated April 30, 20212 |
| 235,519 |
| 228,690 |
| 244,623 |
| 237,795 |
Mortgage notes3 |
| 19,200 |
| 10,006 |
| 53,518 |
| 37,109 |
Total notes payable |
| 255,531 |
| 239,934 |
| 298,541 |
| 275,668 |
Less: current portion of notes payable |
| (1,027) |
| (783) |
| (1,466) |
| (1,037) |
Notes payable, net of current portion | $ | 254,504 | $ | 239,151 | $ | 297,075 | $ | 274,631 |
1 In connection with acquisitions completed in 2017 and 2019, the Company is required to make quarterly charitable contributions of $50 thousand through October 2024 and annual charitable contributions of $250 thousand throughMay 2024, respectively. The net present value of these required payments has been recorded as a liability with interest rates ranging between 2.17% and- 7.00%.
2 The April 30, 2021 private placement debt, as amended on October 21, 2021 (the "Notes”“April 30, 2021 Notes”) was, were issued in an originala total amount of $249,934 thousand with an interest rate of 7.00%, maturing on April 30, 20242025. The April 30, 2021 Notes were issued at a discount, the carrying value of which was $14,4155,311 thousand and $21,24412,139 thousand as of September 30, 20222023 and December 31, 2021,2022, respectively.
3 Mortgage notes in the original amountwith an initial value of $19,94755,017 thousand and $10,43738,292 thousand, as of September 30, 2022 and December 31, 2021, respectively, were issued by the Company in connection with various operating properties. These mortgage notesproperties, and were issuedrecorded at a discount, the carryingsuch gross value of which, as of September 30, 20222023 and December 31, 2021, was $153 thousand and $162 thousand, respectively, and are presented net of principal payments of $594 thousand and $269 thousand, respectively. The2022. These mortgage notes mature between August 20, 2025 and June 5, 2035 with interest rates ranging between 5.00% and 9.50%.
(a) Extension The mortgage notes were issued at a discount, the carrying value of Maturity Date on Aprilwhich was $237 thousand and $437 thousand, respectively, and are presented net of principal payments of $1,262 thousand and $746 thousand as of September 30, 2021 Notes
On July 14,2023 and December 31, 2022, the Company exercised its right to extend the maturity date of the Notes by one year from April 30, 2024 to April 30, 2025. The extension to the maturity date did not involve any amendment to the Notes or any additional consideration to the existing lenders.respectively.
(b) Construction-to-Permanent Financing Arrangement
OnOctober 12, 2022, the Company entered into a construction-to-permanent financing arrangement (the “Construction Loan”) which provided funding for the construction of a cultivation and processing facility in the amount of up to $31,000 thousand. The Construction Loan will bear interest of U.S. prime rate plus 1%, with a floor of 5%, and mature upon the earlier of the completion of the construction, or 24 months. Interest only payments will be due on the first of each month beginning on November 1, 2022. Upon maturity, the Construction Loan will convert to a 10 year mortgage note with a fixed interest rate of 3% over the weekly average yield of the U.S. treasury securities adjusted to a constant maturity of five years, with a floor of 5%. Payments of both principal and interest will be due on the first day of each calendar month following conversion.
(c) Related Parties
A portion of the April 30, 2021 Notes are held by related parties as well as unrelated third-party lenders at a percentage of approximately 1% and 99%, respectively. The related parties consist of Benjamin Kovler, the Chairman and Chief Executive Officer of the Company (held through KP Capital, LLC and Outsiders Capital, LLC); Andrew Grossman, the Executive Vice President of Capital Markets of the Company (held through AG Funding Group, LLC); Anthony Georgiadis, the Chief Financial OfficerPresident and a director of the Company (held through Three One Four Holdings, LLC);LLC and Anthony Georgiadis and William Gruver, a former director of the Company (held through ABG, LLC).
1917
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
9.8. WARRANTS
As part of the financingterms of the Company’sCompany's issuance of the April 30, 2021 Notes, as well as other financing arrangements, the Company issued warrants to related parties, as well as unrelated third parties, which allow the holders to purchase Subordinate Voting Shares at an exercise price determined at the time of issuance.
The following table summarizes the number of warrants outstanding as of September 30, 20222023 and December 31, 2021:2022:
| Liability Classified |
| Equity Classified |
| ||||||||||||||||
| Number of Shares |
|
| Weighted Average Exercise Price (C$) |
| Weighted Average Remaining Contractual Life |
| Number of Shares |
|
| Weighted Average Exercise Price (USD) |
| Weighted Average |
| ||||||
Balance as of December 31, 2021 |
| 2,097,931 |
| C$ |
| 18.26 |
|
| 2.42 |
|
| 1,737,347 |
| $ |
| 31.83 |
|
| 4.38 |
|
Balance as of September 30, 2022 |
| 2,097,931 |
| C$ |
| 18.26 |
|
| 1.67 |
|
| 1,737,347 |
| $ |
| 31.83 |
|
| 3.63 |
|
| Liability Classified |
| Equity Classified |
| ||||||||||||||||
| Number of Shares |
|
| Weighted Average Exercise Price (C$) |
| Weighted Average Remaining Contractual Life |
| Number of Shares |
|
| Weighted Average Exercise Price (USD) |
| Weighted Average |
| ||||||
Balance as of December 31, 2022 |
| 1,997,208 |
| C$ |
| 18.03 |
|
| 1.50 |
|
| 1,737,347 |
| $ |
| 31.83 |
|
| 3.38 |
|
Balance as of September 30, 2023 |
| 1,997,208 |
| C$ |
| 18.03 |
|
| 0.75 |
|
| 1,737,347 |
| $ |
| 31.83 |
|
| 2.63 |
|
(a) Liability Classified Warrants Outstanding
The following table summarizes the fair value of the liability classified warrants at September 30, 20222023 and December 31, 2021:2022:
|
|
|
| Fair Value |
|
|
|
| Fair Value |
| ||||||||||||||||||||
Warrant Liability | Strike Price |
| Warrants Outstanding |
| September 30, 2022 |
| December 31, 2021 |
|
| Change |
| Strike Price |
| Warrants Outstanding |
| September 30, 2023 |
| December 31, 2022 |
|
| Change |
| ||||||||
|
|
|
|
| (in thousands) |
|
|
|
|
| (in thousands) |
| ||||||||||||||||||
Bridge Financing Warrants Issued April 2019 | C$22.90 |
|
| 100,723 |
| $ | - |
| $ | 676 |
|
| $ | (676 | ) | |||||||||||||||
Private Placement Financing Warrants Issued May 2019 | C$19.39 |
|
| 1,606,533 |
| 3,413 |
| 18,527 |
|
|
| (15,114 | ) | C$19.39 |
|
| 1,606,533 |
| $ | 1,820 |
| $ | 3,125 |
|
| $ | (1,305 | ) | ||
Modification Warrants Issued November 2019 | C$12.04 |
|
| 316,947 |
| 1,278 |
| 4,603 |
|
|
| (3,325 | ) | C$12.04 |
|
| 316,947 |
| 1,434 |
| 1,139 |
|
|
| 295 |
| ||||
Additional Modification Warrants Issued May 2020 | C$14.03 |
|
| 73,728 |
|
| 310 |
|
| 1,071 |
|
|
| (761 | ) | C$14.03 |
|
| 73,728 |
|
| 332 |
|
| 256 |
|
|
| 76 |
|
Totals |
|
|
| 2,097,931 |
| $ | 5,001 |
| $ | 24,877 |
|
| $ | (19,876 | ) |
|
|
| 1,997,208 |
| $ | 3,586 |
| $ | 4,520 |
|
| $ | (934 | ) |
During the three and nine months ended September 30, 20222023 and 2021,2022, the Company recorded a loss of $1,329 thousand, a gain of $934 thousand, a loss of $1,896 thousand and a gain of $19,876 thousand, and a gain of $13,462 thousand and $5,451 thousand, respectively, on the change in the fair value of the warrant liability within other income (expense) on the unaudited interim condensed consolidated statements of operations. As of September 30, 2023, the warrant liability was classified as a current liability, and recorded within accrued liabilities on the unaudited interim condensed consolidated balance sheets.
The following table summarizes the significant assumptions used in determining the fair value of the warrant liability as of each reporting date:
| September 30, |
| December 31, |
Significant Assumptions | 2022 |
| 2021 |
Volatility | 62.67% - 73.55% |
| 59.95% - 74.04% |
Remaining Term | 0.03 - 2.65 years |
| 0.78 - 3.39 years |
Risk Free Rate | 3.72% - 3.76% |
| 0.91% - 1.06% |
Seedate (see Note 1413 - Fair Value Measurements for additional details.details):
| September 30, |
| December 31, |
Significant Assumptions | 2023 |
| 2022 |
Volatility | 59.08% - 76.33% |
| 70.44% - 78.21% |
Remaining Term | 0.64-1.64 years |
| 1.39 - 2.39 years |
Risk Free Rate | 4.83% |
| 3.82% - 4.07% |
20
18
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
9.8. WARRANTS (Continued)
(b) Equity Classified Warrants Outstanding
The Company's equity classified warrants were recorded at fair value at each respective date of issuance. Equity classified warrants are not remeasured at fair value on a recurring basis and are carried at their issuance date fair value. The following table summarizes the fair valuecarrying amounts of the Company's equity classified warrants at September 30, 20222023 and December 31, 2021:2022:
|
|
|
| Fair Value |
|
|
|
|
| Issuance Date Fair Value |
| |||||||
|
|
| Warrants | September 30, | December 31, |
|
|
| Warrants |
| September 30, |
| December 31, |
| ||||
Warrants Included in Contributed Surplus | Strike Price |
| Outstanding | 2022 | 2021 | Strike Price |
|
| Outstanding |
| 2023 |
| 2022 |
| ||||
|
|
|
| (in thousands) |
|
|
|
|
| (in thousands) |
| |||||||
Mortgage Warrants Issued June 2020 | $9.10 |
| 35,000 | $181 | $ | 9.10 |
|
|
| 35,000 |
| $ | 181 |
| $ | 181 |
| |
Private Placement Refinance Warrants Issued April 2021 | $32.68 |
| 1,459,044 | 22,259 | $ | 32.68 |
|
|
| 1,459,044 |
| 22,259 |
| 22,259 |
| |||
Private Placement Refinance Warrants Issued October 2021 | $30.02 |
| 243,303 | 2,616 | $ | 30.02 |
|
|
| 243,303 |
|
| 2,616 |
|
| 2,616 |
| |
Totals |
|
| 1,737,347 | $25,056 |
|
|
|
| 1,737,347 |
| $ | 25,056 |
| $ | 25,056 |
|
The equity warrants were valued as of the date of issuance using a Black Scholes Option Pricing model. The following table summarizes the significant assumptions used in determining the fair value of the warrants as of each respective issuance date:
Significant Assumptions | Private Placement Refinancing Warrants |
| Private Placement Refinancing Warrants | Dispensary Mortgage Warrants | Private Placement Refinancing Warrants |
| Private Placement Refinancing Warrants | Mortgage Warrants |
Date of Issuance | October 15, 2021 |
| April 30, 2021 | June 5, 2020 | October 15, 2021 |
| April 30, 2021 | June 5, 2020 |
Volatility | 73% |
| 73% | 80% | 73% |
| 73% | 80% |
Estimated Term | 4 years |
| 4 years | 5 years | 4 years |
| 4 years | 5 years |
Risk Free Rate | 1.12% |
| 0.74% | 0.37% | 1.12% |
| 0.74% | 0.37% |
2119
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
10.9. SHARE CAPITAL
Common shares, which include the Company’s Subordinate Voting Shares, Multiple Voting Shares and Super Voting Shares, are classified as equity. Incremental costs directly attributable to the issuance of common shares are recognized as a deduction from equity. The proceeds from the exercise of stock options or warrants together with amounts previously recorded in reserves over the applicable vesting periods are recorded as share capital. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes.
(a) Authorized
The Company has the following classes of share capital, with each class having no par value:
(i) Subordinate Voting Shares
The holders of the Subordinate Voting Shares are entitled to receive dividends which may be declared from time to time and are entitled to one vote per share at meetings of the Company’s shareholders. All Subordinate Voting Shares are ranked equally with regard to the Company’s residual assets. The Company is authorized to issue an unlimited number of no par value Subordinate Voting Shares. During the ninethree months ended September 30, 2022, the2023, shareholders of the Company converted 33,34125,000 Multiple Voting Shares into 3,334,1002,500,000 Subordinate Voting Shares.
(ii) Multiple Voting Shares
Each Multiple Voting Share is entitled to 100 votes per share at shareholder meetings of the Company and is exchangeable for 100 Subordinate Voting Shares. At September 30, 2022,2023, the Company had 38,531 issued and outstanding Multiple Voting Shares, which convert into 3,853,100 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Multiple Voting Shares. During the ninethree months ended September 30, 2022, the2023, shareholders of the Company converted 33,34125,000 Super Voting Shares into 33,34125,000 Multiple Voting Shares and 33,34125,000 Multiple Voting Shares into 3,334,1002,500,000 Subordinate Voting Shares.
(iii) Super Voting Shares
Each Super Voting Share is entitled to 1,000 votes per share at shareholder meetings of the Company and is exchangeable for 100 Subordinate Voting Shares or one Multiple Voting Share. At September 30, 2022,2023, the Company had 251,690226,690 issued and outstanding Super Voting Shares which ultimately convert into 25,169,00022,669,000 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Super Voting Shares. During the ninethree months ended September 30, 2022, the2023, shareholders of the Company converted 33,34125,000 Super Voting Shares into 33,34125,000 Multiple Voting Shares.
(b) Issued and Outstanding
A reconciliation of the beginning and ending amounts of the issued and outstanding shares by class is as follows:
|
| Issued and Outstanding | ||||
|
| Subordinate |
| Multiple |
| Super |
As at January 1, 2022 |
| 201,768,312 |
| 38,531 |
| 285,031 |
Issuance of shares under business combinations and investments |
| 204,036 |
| — |
| — |
Distribution of contingent consideration |
| 667,080 |
| — |
| — |
Issuance of shares upon exercise of options and warrants |
| 311,535 |
| — |
| — |
Issuances of shares upon vesting of RSUs |
| 388,273 |
| — |
| — |
Shares issued for settlement of business obligation |
| 80,588 |
| — |
| — |
Exchange of shares |
| 3,334,100 |
| — |
| (33,341) |
As at September 30, 2022 |
| 206,753,924 |
| 38,531 |
| 251,690 |
|
| Issued and Outstanding | ||||
|
| Subordinate |
| Multiple |
| Super |
As at January 1, 2023 |
| 206,991,275 |
| 38,531 |
| 251,690 |
Distribution of contingent consideration |
| 1,614,871 |
| — |
| — |
Distribution of deferred shares |
| 680,089 |
| — |
| — |
Issuance of shares upon exercise of options |
| 365,521 |
| — |
| — |
Issuances of shares upon vesting of RSUs |
| 390,676 |
| — |
| — |
Repurchase of Subordinate Voting Shares |
| (2,500,001) |
| — |
| — |
Exchange of shares |
| 2,500,000 |
| — |
| (25,000) |
As at September 30, 2023 |
| 210,042,431 |
| 38,531 |
| 226,690 |
22
20
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
10.9. SHARE CAPITAL (Continued)
(b) Issued and Outstanding (Continued)
(i)Issuance Distribution of Deferred Shares Under Business Combinations and Investments
ILDISP, LLCAs part of the consideration exchanged for certain acquisitions completed throughout 2021, the Company deferred the distribution of Subordinate Voting Shares to secure the Company's indemnification rights associated with post-acquisition costs. The following table summarizes the activity during the nine months ended September 30, 2023:
Related Acquisition | As at December 31, 2022 | Distributed Shares | Cancelled Shares | As at September 30, 2023 |
Liberty Compassion, Inc. | 214,768 | (214,768) | — | — |
Dharma Pharmaceuticals, LLC | 229,878 | (229,878) | — | — |
Mobley Pain Management and Wellness Center, LLC and Canwell Processing, LLC | 264,760 | (12,305) | (84,122) | 168,333 |
GreenStar Herbals, Inc. | 161,306 | (161,306) | — | — |
Maryland Health and Wellness Center, Inc. | 61,832 | (61,832) | — | — |
LeafLine Industries, LLC | 386,002 | — | — | 386,002 |
Total | 1,318,546 | (680,089) | (84,122) | 554,335 |
As of September 30, 2023 and December 31, 2022, the Company held deferred shares in the amount of $12,973 thousand and $36,211 thousand, respectively. In accordance with the relevant acquisition agreement, a portion of the outstanding deferred shares were cancelled in order to indemnify the Company for post-acquisition costs. As the cancellation of the deferred shares occurred outside of the purchase price allocation measurement period (generally one year from the acquisition date), the Company recorded a gain of $2,784 thousand within selling general and administrative expenses on the Company's unaudited interim condensed consolidated statements of operations during the nine months ended September 30, 2023.
On March 1, 2022, the Company issued 204,036 Subordinate Voting Shares with a value of approximately $3,785 thousand, based on a 20 consecutive day volume weighted average price (“VWAP”), in connection with the Company's acquisition of the remaining ownership interests in two Illinois-based retail stores. The shares issued resulted in an increase in the Company's share capital and a corresponding increase in the net assets acquired. See Note 4 - Acquisitions for additional details.
(ii) Distribution of Contingent Consideration
Dharma Pharmaceuticals, LLC
In connection with the Company's 2021 acquisition of Dharma Pharmaceuticals, LLC (“Dharma”), the purchase agreement included contingent consideration of up to $65,000 thousand in Subordinate Voting Shares of Green Thumb, dependent upon the successful opening of up to five retail stores in the Virginia area within the first three years following the signing of the agreement and the legal sale of adult useadult-use cannabis in a Retail dispensaryretail store by January 1, 2025. On February 25, 2022,June 1, 2023 and July 10, 2023, the Company issued 667,080822,447 and 792,424 Subordinate Voting Shares, respectively, to the former owners of Dharma in connection with the successful opening of two Retailthe fourth and fifth retail stores in Virginia. The shares had a combined fair value of $13,11112,524 thousand at the date of issuance.
As of September 30, 20222023 and December 31, 2021,2022, the total estimated fair value of the contingent consideration associated with the acquisition of Dharma, which was valued based on athe probability weighting of the potential payments,payouts, was $41,03832,789 thousand, and $48,66541,943 thousand, respectively. As of September 30, 2022 and December 31, 2021,2022, $11,21011,400 thousand and $20,884 thousand, respectively,of the total value of the contingent consideration was included as awithin current liabilityliabilities on the Company's unaudited interim condensed consolidated balance sheets. As of September 30, 2023, no portion of the contingent consideration was included within current liabilities on the Company's unaudited interim condensed consolidated balance sheets.
(iii) Repurchase of Subordinate Voting Shares
On September 5, 2023, the Company announced that its Board of Directors authorized the Company to repurchase up to 5%, or 10,486,951 of its Subordinate Voting Shares over a 12-month period at an aggregate cost of up to $50,000 thousand. During the month of September 2023, the Company repurchased 2,500,000 Subordinate Voting Shares at an average price of $9.96 per share.
21
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
9. SHARE CAPITAL (Continued)
(c) Stock-Based Compensation
The Company operates equity settled stock-based remuneration plans for its eligible directors, officers, employees and consultants. All goods and services received in exchange for the grant of any stock-based payments are measured at their fair value unless the fair value cannot be estimated reliably. If the Company cannot estimate reliably the fair value of the goods and services received, the Company measures their value indirectly by reference to the fair value of the equity instruments granted. For transactions with employees and others providing similar services, the Company measures the fair value of the services by reference to the fair value of the equity instruments granted. Equity settled stock-based payments under stock-based payment plans are ultimately recognized as an expense in profit or loss with a corresponding credit to equity.
In June 2018, the Company established the Green Thumb Industries Inc. 2018 Stock and Incentive Plan, which was amended by Amendment No. 1 and Amendment No. 2 thereto (as amended, the “Plan”). The maximum number of shares that may be issuedRestricted Stock Units (“RSUs”) and options outstanding under the Plan at any time shall not exceed 10% of the then issued and outstanding shares on an as-converted basis.
The Company recognizes compensation expense for Restricted Stock Units (“RSUs”)RSUs and options on a straight-line basis over the requisite service period of the award. Non-market vesting conditions are included in the assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from the previous estimate. Any cumulative adjustment prior to vesting is recognized in the current period with no adjustment to prior periods for expense previously recognized.
The Company's optionOption and RSU awards generally vest over three years, and options typically have a life of five to ten years. Option and RSU grants under the Plan are determined by the Compensation Committee of the Company’s Board of Directors with the option price set at no less than 100% of the fair market value of a share on the date of grant.
Stock option activity is summarized as follows:
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life |
Balance as of December 31, 2022 | 9,577,947 | $12.71 | 4.80 |
Granted | 2,321,729 | 7.72 | 6.50 |
Exercised | (365,521) | 7.34 |
|
Forfeited | (1,304,260) | 12.25 |
|
Balance as of September 30, 2023 | 10,229,895 | $11.82 | 4.60 |
Vested | 5,341,985 | $17.24 |
|
Exercisable as of September 30, 2023 | 3,566,406 | $7.99 | 2.84 |
The Company used the Black-Scholes option pricing model to estimate the fair value of the options granted during the nine months ended September 30, 2023 and the year ended December 31, 2022, using the following ranges of assumptions:
| September 30, | December 31, |
| 2023 | 2022 |
Risk-free interest rate | 3.06% - 4% | 1.18% - 3.54% |
Expected dividend yield | 0% | 0% |
Expected volatility | 64% | 60% - 64% |
Expected option life | 3.5 – 4.5 years | 3 – 4.5 years |
As permitted under ASC 718, the Company has made an accounting policy choice to account for forfeitures when they occur.
22
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
9. SHARE CAPITAL (Continued)
(c) Stock-Based Compensation(Continued)
The following table summarizes the number of unvested RSU awards as of September 30, 2023 and December 31, 2022 and the changes during the nine months ended September 30, 2023:
|
| Number of Shares |
| Weighted Average Grant Date Fair Value |
Unvested Shares at December 31, 2022 |
| 947,502 | $ | 17.91 |
Granted |
| 3,307,909 |
| 7.67 |
Forfeited |
| (365,542) |
| 10.83 |
Vested |
| (390,676) |
| 15.50 |
Unvested Shares at September 30, 2023 |
| 3,499,193 | $ | 9.24 |
The stock-based compensation expense for the three and nine months ended September 30, 2023 and 2022 was as follows:
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 |
|
| (in thousands) |
| (in thousands) | ||||
Stock options expense | $ | 4,009 | $ | 6,003 | $ | 12,795 | $ | 12,985 |
Restricted Stock Units |
| 3,206 |
| 1,875 |
| 8,040 |
| 6,377 |
Total Stock Based Compensation Expense | $ | 7,215 | $ | 7,878 | $ | 20,835 | $ | 19,362 |
As of September 30, 2023, $45,048 thousand of total unrecognized expense related to stock-based compensation awards is expected to be recognized over a weighted-average period of 2.05 years.
23
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
10. SHARE CAPITAL (Continued)
(c) Stock-Based Compensation(Continued)
Stock option activity is summarized as follows:
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value |
|
|
|
| (in thousands) |
Balance as of December 31, 2021 | 5,383,275 | $14.02 | 3.59 | $48,803 |
Granted | 5,239,520 | 10.83 | 6.68 |
|
Exercised | (311,535) | 8.34 |
| 1,766 |
Forfeited | (585,353) | $13.10 |
|
|
Balance as of September 30, 2022 | 9,725,907 | $12.54 | 4.90 | $65,903 |
Vested | 5,516,261 | $9.34 |
|
|
Exercisable of September 30, 2022 | 3,448,842 | $11.67 | 2.74 | $21,433 |
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the applicable measurement date and the exercise price of such options, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on September 30, 2022 and December 31, 2021. This amount will change in future periods based on the fair market value of the Company’s Subordinate Voting Shares and the number of options outstanding.
The following table summarizes the weighted average grant date fair value and intrinsic value of options exercised for the nine months ended September 30, 2022 and 2021:
| Nine Months Ended September 30, | |
| 2022 | 2021 |
Weighted average grant date fair value (per share) of stock option units granted | $5.31 | $14.89 |
Intrinsic value of stock option units exercised, using market price at vest date (in thousands) | $1,766 | $13,567 |
The Company used the Black-Scholes option pricing model to estimate the fair value of the options granted during the nine months ended September 30, 2022 and the year ended December 31, 2021, using the following ranges of assumptions:
| September 30, | December 31, |
| 2022 | 2021 |
Risk-free interest rate | 1.18% - 3.40% | 0.33% - 1.39% |
Expected dividend yield | 0% | 0% |
Expected volatility | 60% - 64% | 73% |
Expected option life | 3 – 4.5 years | 3 – 3.5 years |
As permitted under ASC 718, the Company has made an accounting policy choice to account for forfeitures when they occur.
24
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
10. SHARE CAPITAL (Continued)
(c) Stock-Based Compensation(Continued)
The following table summarizes the number of unvested RSU awards as of September 30, 2022 and December 31, 2021 and the changes during the nine months ended September 30, 2022:
|
| Number of Shares |
| Weighted Average Grant Date Fair Value |
Unvested Shares at December 31, 2021 |
| 376,127 | $ | 15.55 |
Granted |
| 1,088,353 |
| 18.17 |
Forfeited |
| (123,454) |
| 18.63 |
Vested |
| (388,273) |
| 14.18 |
Unvested Shares at September 30, 2022 |
| 952,753 | $ | 18.36 |
The following table summarizes the weighted average grant date fair value of RSUs granted and total fair value of RSUs vested for the nine months ended September 30, 2022 and 2021:
|
| Nine Months Ended September 30, | ||
|
| 2022 |
| 2021 |
Weighted average grant date fair value (per share) | $ | 18.17 | $ | 30.23 |
Intrinsic value of RSUs vested, using market | $ | 6,455 | $ | 10,813 |
The stock-based compensation expense for the three and nine months ended September 30, 2022 and 2021 was as follows:
|
|
|
|
| ||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
|
| (in thousands) |
| (in thousands) | ||||
Stock options expense | $ | 6,003 | $ | 3,484 | $ | 12,985 | $ | 9,822 |
Restricted Stock Units |
| 1,875 |
| 1,511 |
| 6,377 |
| 4,876 |
Total Stock Based Compensation Expense | $ | 7,878 | $ | 4,995 | $ | 19,362 | $ | 14,698 |
As of September 30, 2022, $46,205 thousand of total unrecognized expense related to stock-based compensation awards is expected to be recognized over a weighted-average period of 2.06 years.
25
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
11. INCOME TAX EXPENSE
The following table summarizes the Company’s income tax expense and effective tax rates for the three and nine months ended September 30, 20222023 and 2021:2022:
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||
|
| (in thousands) |
| (in thousands) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Income before Income Taxes | $ | 43,117 | $ | 58,906 | $ | 167,005 | $ | 154,518 | $ | 45,333 | $ | 43,117 | $ | 127,829 | $ | 167,005 |
Income Tax Expense |
| 32,969 |
| 37,320 |
| 102,440 |
| 98,203 |
| 34,526 |
| 32,969 |
| 93,927 |
| 102,440 |
Effective Tax Rate |
| 76.5% |
| 63.4% |
| 61.3% |
| 63.6% |
| 76.2% |
| 76.5% |
| 73.5% |
| 61.3% |
The effective tax rates for the three and nine months ended September 30, 20222023 and 20212022 were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within the periods presented.
Due to its cannabis operations, the Company is subject to the limitations of the U.S. Internal Revenue Code of 1986, as amended (“IRC”) Section 280E under which the Company is only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E. Therefore, the effective tax rate can be highly variable and may not necessarily correlate with pre-tax income and provides for effective tax rates that are well in excess of statutory tax rates.
Taxes paid during the nine months ended September 30, 20222023 and 20212022 were $95,30780,398 thousand and $109,70395,307 thousand, respectively.
2624
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
12.11. OTHER INCOME (EXPENSE)
For the three and nine months ended September 30, 20222023 and 20212022 other income (expense) was comprised of the following:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, | ||||||||
|
| 2022 |
| 2021 |
|
| 2022 |
| 2021 |
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
|
| (in thousands) |
|
| (in thousands) |
| (in thousands) |
|
| (in thousands) | ||||||||
Fair value adjustments on equity investments | $ | 247 | $ | (4,075) |
| $ | (17,368) | $ | 14,604 | $ | 724 | $ | 247 |
| $ | (410) | $ | (17,368) |
Fair value adjustments on equity method investments |
| — |
| — |
|
| 14,119 |
| — |
| — |
| — |
|
| — |
| 14,119 |
Loss on extinguishment of debt |
| — |
| — |
|
| — |
| (9,882) | |||||||||
Fair value adjustments on warrants issued |
| (1,896) |
| 13,462 |
|
| 19,876 |
| 5,451 |
| (1,329) |
| (1,896) |
|
| 934 |
| 19,876 |
Earnings (loss) from equity method investments |
| (441) |
| (316) |
|
| (2,382) |
| 1,330 |
| (202) |
| (441) |
|
| (952) |
| (2,382) |
Other |
| 5 |
| (946) |
|
| 688 |
| (1,698) |
| 176 |
| 5 |
|
| 451 |
| 688 |
Total Other Income (Expense) | $ | (2,085) | $ | 8,125 |
| $ | 14,933 | $ | 9,805 | $ | (631) | $ | (2,085) |
| $ | 23 | $ | 14,933 |
13. 12. COMMITMENTS AND CONTINGENCIES
The Company is subject to lawsuits, investigations and other claims related to employment, commercial and other matters that arise out of operations in the normal course of business. Periodically, the Company reviews the status of each significant matter and assesses the potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable, and the amount can be reliably estimated, such amount is recognized in other liabilities.
Contingent liabilities are measured at management’s best estimate of the expenditure required to settle the obligation at the end of the reporting period and are discounted to present value where the effect is material. The Company performs evaluations to identify contingent liabilities for contracts. Contingent consideration is measured upon acquisition and is estimated using probability weighting of potential payouts. Subsequent changes in the estimated contingent consideration from the final purchase price allocation are recognized in the Company’s unaudited interim condensed consolidated statementstatements of operations.
(a) Contingencies
The Company’s operations are subject to a variety of local and state regulations. Failure to comply with one or more of those regulations could result in fines, sanctions, restrictions on its operations, or losses of permits that could result in the Company ceasing operations in that specific state or local jurisdiction. The Company may be subject to regulatory fines, penalties, or restrictions in the future as cannabis and other regulations continue to evolve and are subject to differing interpretations.
(b) Claims and Litigation
From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. The following is an update to the status of previously disclosed matters as of September 30, 2023:
Cresco Labs New York, LLC and Cresco Labs LLC (“Plaintiffs”) filed an amended complaint against one of the Company’s subsidiaries, Fiorello Pharmaceuticals, Inc. (“Defendant”) on November 20, 2018, in the Supreme Court of the State of New York, alleging Defendant breached the parties’ Equity Purchase Agreement Letter of Intent (“LOI”) relating to the acquisition of Defendant by Plaintiffs. As of September 30, 2023, the Company believed the potential exposure associated with the complaint was de minimis and reduced the estimated liability accordingly. Subsequently, on October 18, 2023, all pending motions were withdrawn and Plaintiffs' claims were dismissed with prejudice.
At September 30, 2022 and December 31, 2021,2023, there were no other pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s consolidated operations. There are also no proceedings in which any of the Company’s directors, officers or affiliates is an adverse party or has a material interest adverse to the Company’s interest.
(c) Construction Commitments
As of September 30, 2022,2023, the Company held approximately $102,5007,100 thousand of open construction commitments to contractors on work being performed.
2725
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
14.13. FAIR VALUE MEASUREMENTS
The Company applies fair value accounting for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers all related factors of the asset by market participants in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; and
Level 3 – Inputs for the asset or liability that are not based on observable market data.
(a) Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, investments, accounts payable and accrued liabilities, notes payable, warrant liability, and contingent consideration payable.
ForIt was not practicable to estimate the fair value of the Company's long-term notes payable, (whichwhich consist of charitable contributions, private placement debt and mortgage notes), for whichnotes, since there were no quoted market prices or active trading markets, it was not practicable to estimate the fair value of these financial instruments.markets. The carrying amount of notes payable at September 30, 20222023 and December 31, 20212022 was $255,531298,541 thousand and $239,934275,668 thousand, respectively, which includes $1,0271,466 thousand and $7831,037 thousand, respectively, of short-term debt due within one year.
Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of the inputs to fair value measurements.The fair values of the Company’s financial instruments associated with each of the three levels of the hierarchy are:
|
| As of September 30, 2022 |
| As of September 30, 2023 | ||||||||||||
| (in thousands) | (in thousands) | ||||||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Cash and Cash Equivalents | $ | 147,258 | $ | — | $ | — | $ | 147,258 | $ | 136,842 | $ | — | $ | — | $ | 136,842 |
Investments |
| 26,235 |
| — |
| 53,746 |
| 79,981 |
| 24,308 |
| — |
| 53,027 |
| 77,335 |
Contingent Consideration Payable |
| — |
| — |
| (41,950) |
| (41,950) |
| — |
| — |
| (32,789) |
| (32,789) |
Warrant Liability |
| — |
| — |
| (5,001) |
| (5,001) |
| — |
| — |
| (3,586) |
| (3,586) |
| $ | 173,493 | $ | — | $ | 6,795 | $ | 180,288 | $ | 161,150 | $ | — | $ | 16,652 | $ | 177,802 |
|
| As of December 31, 2022 | ||||||
| (in thousands) | |||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Cash and Cash Equivalents | $ | 177,682 | $ | — | $ | — | $ | 177,682 |
Investments |
| 24,749 |
| — |
| 49,420 |
| 74,169 |
Contingent Consideration Payable |
| — |
| — |
| (41,943) |
| (41,943) |
Warrant Liability |
| — |
| — |
| (4,520) |
| (4,520) |
| $ | 202,431 | $ | — | $ | 2,957 | $ | 205,388 |
28
26
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
14. FAIR VALUE MEASUREMENTS (Continued)
(a) Financial Instruments (Continued)
|
| As of December 31, 2021 | ||||||
| (in thousands) | |||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Cash and Cash Equivalents | $ | 230,420 | $ | — | $ | — | $ | 230,420 |
Investments |
| 44,117 |
| — |
| 50,785 |
| 94,902 |
Contingent Consideration Payable |
| — |
| — |
| (83,865) |
| (83,865) |
Warrant Liability |
| — |
| — |
| (24,877) |
| (24,877) |
| $ | 274,537 | $ | — | $ | (57,957) | $ | 216,580 |
(b) Remeasurement of Contingent Consideration Arrangements
The Company remeasured its contingent consideration arrangements associated with its 2021 acquisitions of Mobley Pain Management and Wellness Center LLC and Canwell Processing LLC (collectively “Summit”) and GreenStar Herbals Inc. (“GreenStar”) using Monte Carlo simulation models. During the three and nine months ended September 30, 2022, the remeasurement resulted in a net (loss)/gain of $(191) thousand and $34,289 thousand, respectively. The change in the fair value of the contingent consideration was driven by a change in management's estimates and projections of the acquired entities' ability to achieve the performance targets as agreed to in the 2021 acquisition agreements along with the change in fair value of the shares to be issued.
The amount was recorded, net, within selling, general, and administrative expenses on the unaudited interim condensed consolidated statement of operations. Significant assumptions used in the Company's September 30, 2022 remeasurement include Green Thumb's stock price as of September 30, 2022 and projected earnings metrics and revenue targets as of such period then ended.
29
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
15. VARIABLE INTEREST ENTITIES
The following table presents the summarized financial information about the Company’s consolidated variable interest entities (“VIEs”) which are included in the unaudited interim condensed consolidated balance sheet as of September 30, 2022 and the consolidated balance sheet as of December 31, 2021. All of these entities were determined to be VIEs as the Company possesses the power to direct activities through management services agreements (“MSAs”):
|
| ILDISP, |
| Other |
|
| ILDISP, |
| Other |
|
| September 30, 2022 |
|
| December 31, 2021 | ||||
|
| (in thousands) |
|
| (in thousands) | ||||
Current assets | $ | — | $ | 648 |
| $ | 4,118 | $ | 1,033 |
Non-current assets |
| — |
| 1,974 |
|
| 3,290 |
| 1,761 |
Current liabilities |
| — |
| 419 |
|
| 10,719 |
| 854 |
Non-current liabilities |
| — |
| 622 |
|
| 413 |
| 696 |
Noncontrolling interests |
| — |
| 279 |
|
| (1,862) |
| 224 |
Equity attributable to Green Thumb Industries Inc. |
| — |
| 1,302 |
|
| (1,862) |
| 1,020 |
On March 1, 2022, the Company acquired the remaining 50% minority interest in ILDISP, for $11,857 thousand in cash and the issuance of 128,218 shares of Green Thumb, which had a fair value of $2,379 thousand. As a result, the remaining equity associated with the noncontrolling interest was closed to accumulated surplus (deficit) of Green Thumb as of March 1, 2022. See Note 4 - Acquisitions for additional details.
30
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
15. VARIABLE INTEREST ENTITIES (Continued)
The following tables present the summarized financial information about the Company’s VIEs which are included in the unaudited interim condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021:
|
| Three Months Ended | |||||||
|
| September 30, 2022 |
|
| September 30, 2021 | ||||
|
| ILDISP, |
| Other |
|
| ILDISP, |
| Other |
|
| (in thousands) |
|
| (in thousands) | ||||
Revenues, Net of Discounts | $ | — | $ | 2,306 |
| $ | 6,331 | $ | 3,981 |
Net income attributable to noncontrolling interests |
| — |
| 319 |
|
| 1,017 |
| 359 |
Net income attributable to Green Thumb Industries Inc. |
| — |
| 269 |
|
| 1,017 |
| 713 |
Net income | $ | — | $ | 588 |
| $ | 2,034 | $ | 1,072 |
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended | |||||||
|
| September 30, 2022 |
|
| September 30, 2021 | ||||
|
| ILDISP, |
| Other |
|
| ILDISP, |
| Other |
|
| (in thousands) |
|
| (in thousands) | ||||
Revenues, Net of Discounts | $ | 3,543 | $ | 6,805 |
| $ | 18,275 | $ | 11,115 |
Net income attributable to noncontrolling interests |
| 462 |
| 898 |
|
| 2,658 |
| 1,027 |
Net income attributable to Green Thumb Industries Inc. |
| 462 |
| 761 |
|
| 2,658 |
| 1,602 |
Net income | $ | 924 | $ | 1,659 |
| $ | 5,316 | $ | 2,629 |
As of September 30, 2022 and December 31, 2021, the VIE included in the Other Non-material VIEs is Bluepoint Wellness of Westport, LLC. As of September 30, 2021, VIEs included in the Other Non-material VIEs are Bluepoint Wellness of Westport, LLC and Meshow, LLC.
31
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
16.14. SEGMENT REPORTING
The Company operates in two segments: the cultivation, production and sale of cannabis products to Retailretail stores (“Consumer Packaged Goods”) and retailing of cannabis to patients and consumers (“Retail”). The Company does not allocate operating expenses to these segments,business units, nor does it allocate specific assets. Additionally, the Chief Operating Decision Maker does not review total assets or net income (loss) by segments; therefore, such information is not presented below.
The below table presents segment informationrevenues by type for the three and nine months ended September 30, 20222023 and 2021:2022:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, | ||||
|
| 2022 |
| 2021 |
|
| 2022 |
| 2021 |
|
| (in thousands) |
|
| (in thousands) | ||||
Revenues, Net of Discounts |
|
|
|
|
|
|
|
|
|
Retail | $ | 199,632 | $ | 161,016 |
| $ | 564,951 | $ | 441,241 |
Consumer Packaged Goods |
| 127,676 |
| 121,074 |
|
| 368,692 |
| 343,014 |
Intersegment Eliminations |
| (66,114) |
| (48,413) |
|
| (175,538) |
| (134,276) |
Total Revenues, Net of Discounts | $ | 261,194 | $ | 233,677 |
| $ | 758,105 | $ | 649,979 |
Depreciation and Amortization |
|
|
|
|
|
|
|
|
|
Retail | $ | 9,921 | $ | 8,041 |
| $ | 29,881 | $ | 21,693 |
Consumer Packaged Goods |
| 14,597 |
| 9,132 |
|
| 41,825 |
| 25,546 |
Intersegment Eliminations |
| — |
| — |
|
| — |
| — |
Total Depreciation and Amortization | $ | 24,518 | $ | 17,173 |
| $ | 71,706 | $ | 47,239 |
Income Taxes |
|
|
|
|
|
|
|
|
|
Retail | $ | 18,589 | $ | 21,302 |
| $ | 58,460 | $ | 55,251 |
Consumer Packaged Goods |
| 14,380 |
| 16,018 |
|
| 43,980 |
| 42,952 |
Intersegment Eliminations |
| — |
| — |
|
| — |
| — |
Total Income Taxes | $ | 32,969 | $ | 37,320 |
| $ | 102,440 | $ | 98,203 |
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 |
|
| (in thousands) |
| (in thousands) | ||||
Revenues, Net of Discounts |
|
|
|
|
|
|
|
|
Retail | $ | 205,441 | $ | 199,632 | $ | 582,363 | $ | 564,951 |
Consumer Packaged Goods |
| 150,425 |
| 127,676 |
| 412,096 |
| 368,692 |
Intersegment Eliminations |
| (80,468) |
| (66,114) |
| (218,137) |
| (175,538) |
Total Revenues, Net of Discounts | $ | 275,398 | $ | 261,194 | $ | 776,322 | $ | 758,105 |
Depreciation and Amortization |
|
|
|
|
|
|
|
|
Retail | $ | 9,598 | $ | 9,921 | $ | 27,539 | $ | 29,881 |
Consumer Packaged Goods |
| 16,030 |
| 14,597 |
| 45,824 |
| 41,825 |
Intersegment Eliminations |
| — |
| — |
| — |
| — |
Total Depreciation and Amortization | $ | 25,628 | $ | 24,518 | $ | 73,363 | $ | 71,706 |
Income Taxes |
|
|
|
|
|
|
|
|
Retail | $ | 18,551 | $ | 18,589 | $ | 50,890 | $ | 58,460 |
Consumer Packaged Goods |
| 15,975 |
| 14,380 |
| 43,037 |
| 43,980 |
Intersegment Eliminations |
| — |
| — |
| — |
| — |
Total Income Taxes | $ | 34,526 | $ | 32,969 | $ | 93,927 | $ | 102,440 |
Goodwill assigned to the Consumer Packaged Goods segment as of September 30, 20222023 and December 31, 20212022 was $358,280315,889 thousand and $358,038315,889 thousand, respectively. Intangible assets, net assigned to the Consumer Packaged Goods segment as of September 30, 20222023 and December 31, 20212022 was $297,160266,884 thousand and $317,454286,922 thousand, respectively.
Goodwill assigned to the Retail segment as of September 30, 20222023 and December 31, 20212022 was $286,305273,802 thousand and $274,811273,802 thousand, respectively. Intangible assets, net assigned to the Retail segment as of September 30, 20222023 and December 31, 20212022 was $343,828284,538 thousand and $358,037302,597 thousand, respectively.
The Company’s assets are aggregated into two reportable segments (Retail and Consumer Packaged Goods). For the purposes of testing goodwill, Green Thumb has identified 30 reporting units. The Company determined itstwo reporting units by first reviewing the operatingwhich align with our reportable segments based on the geographic areas in which Green Thumb conducts business (or each market). The markets were then further divided into reporting units based on the market operations (Retail and Consumer Packaged Goods) which were primarily determined based on the licenses each market holds.. All revenues are derived from sales occurringcustomers domiciled in the United States and all assets are located in the United States.
3227
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
This management discussion and analysis (“MD&A”) of the financial condition and results of operations of Green Thumb Industries Inc. (the “Company”, or “Green Thumb”, “we” or “us”) is for the three and nine months ended September 30, 20222023 and 2021.2022. It is supplemental to, and should be read in conjunction with, the Company’s unaudited interim condensed consolidated financial statements as of September 30, 20222023 and the consolidated financial statements for the year ended December 31, 20212022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20212022 filed with the U.S. Securities and Exchange Commission on March 1, 20222023 (the “2021“2022 Form 10-K”) and the accompanying notes for each respective period. The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Financial information presented in this MD&A is presented in United States dollars (“$” or “US$”), unless otherwise indicated.
This MD&A contains certain “forward-looking statements” and certain “forward-looking information” as defined under applicable United States securities laws. Please refer to the discussion of forward-looking statements and information set out under the heading “Disclosure Regarding Forward-Looking Statements,” identified in the ‘‘Risks and Uncertainties’’ section of this MD&A and in Part II, Item 1A, “Risk Factors”Factors of the 20212022 Form 10-K.” As a result of many factors, the Company’s actual results may differ materially from those anticipated in these forward-looking statements and information.
COVID-19 Considerations
In March 2020, the World Health Organization categorized coronavirus disease 2019 (together with its variants “COVID-19”) as a pandemic. COVID-19 continues to spread throughout the U.S. and other countries across the world, and the duration, and severity of its effects are currently unknown. The Company continues to implement and evaluate actions to strengthen its financial position and support the continuity of its business and operations in the face of this pandemic and other events.
The Company’s priority during the COVID-19 pandemic is protecting the health and safety of its employees and its customers, following the recommended actions of government and health authorities. In the future, the pandemic may cause reduced demand for the Company’s products and services if, for example, the pandemic results in a recessionary economic environment or potential new restrictions on business operations or the movement of individuals.
During the first nine months of 2022, the Company’s revenue, gross profit and operating income were not negatively impacted by COVID-19 and the Company generally maintained the consistency of its operations. However, the effects of COVID-19 may impact its business operations for reasons including the potential quarantine of Green Thumb employees or those of its supply chain partners.
33
OVERVIEW OF THE COMPANY
Established in 2014 and headquartered in Chicago, Illinois, Green Thumb a national cannabis consumer packaged goods company and retailer, promotes well-being through the power of cannabis through branded consumer packaged goods and people-first retail experiences, while being committedgiving back to community and sustainable profitable growth.the communities in which it serves. As of September 30, 2022,2023, Green Thumb has operations in 15fifteen U.S. markets, employs approximately 3,8004,400 people and serves hundreds of thousandsmillions of patients and customers annually.
Green Thumb’s core business is manufacturing, distributing and marketing a portfolio of owned cannabis consumer packaged goods brands (which we refer to as our Consumer Packaged Goods business), including &Shine, Beboe, Dogwalkers, Dr.Doctor Solomon’s, Good Green, incredibles and RYTHM. The Company distributes and markets these products primarily to third-party licensed retail cannabis stores across the United States as well as to Green Thumb-owned Retailretail stores (which we refer to as our Retail business).
The Company’s Consumer Packaged Goods portfolio is primarily generated from plant material that Green Thumb grows and processes itself, which we use to produce our consumer packaged goods in 17eighteen manufacturing facilities. This portfolio consists of stock keeping units (“SKUs”) across a range of our Consumer Packaged Goods products,cannabis product categories, including flower, pre-rolls, concentrates, vape, capsules, tinctures, edibles, topicals and other cannabis-related products (none of which are individually material to the Company). These Consumer Packaged Goods products are sold in Retail locationsretail stores throughout the U.S. including at Green Thumb'sThumb’s own RISE and other Retailretail stores.
Green Thumb owns and operates a national cannabis retail chain called RISEwhich are that provides relationship-centric retail experiences aimed to deliver a superior level of customer service through high-engagement consumer interaction, a consultative, transparent and education-forward selling approach and a consistently available assortment of cannabis products. In addition, Green Thumb owns Retailretail stores under other names, primarily where naming is subject to licensing or similar restrictions.restrictions or in certain instances where we co-own the store. The income from Green Thumb’s Retailretail stores is primarily derived from the sale of cannabis-related products, which includes the sale of Green Thumb produced products as well as those produced by third parties, with an immaterial (under 10%) portion of this income resulting from the sale of other merchandise (such as t-shirts and accessories for cannabis use). The RISE stores currently are currently located in tenfourteen of the states in which we operate. As of September 30, 2022,2023, the Company had 7785 open and operating Retail locations.retail stores. The Company’s new store opening plans will remainis fluid, depending on market conditions, obtaining local licensing, construction and other permissions and are subject to the Company’s capital allocation plans and the evolving situation with respect to COVID-19.plans.
3428
Results of Operations – Consolidated
The following table sets forth the Company’s selected consolidated financial results for the periods, and as of the dates, indicated. The (i) unaudited interim condensed consolidated statements of operations for the three and nine months ended September 30, 20222023 and 20212022 and (ii) unaudited interim condensed consolidated balance sheet as of September 30, 20222023 and December 31, 20212022 have been derived from, and should be read in conjunction with, the unaudited interim condensed consolidated financial statements and accompanying notes presented in Part I, Item 1 of this Report.quarterly report on Form 10-Q.
The Company’s unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP and on a going-concern basis that contemplates continuity of operations and realization of assets and liquidation of liabilities in the ordinary course of business.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| QTD Change |
| YTD Change |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| QTD Change |
| YTD Change | ||||||||||||
|
| 2022 |
| 2021 |
|
| 2022 |
| 2021 |
|
| $ | % |
| $ | % |
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
|
| $ | % |
| $ | % |
|
| (in thousands, except share and per share amounts) |
|
|
| (in thousands, except share and per share amounts) |
|
| Increase (Decrease) | |||||||||||||||||||||||
Revenues, Net of Discounts | $ | 261,194 | $ | 233,677 |
| $ | 758,105 | $ | 649,979 |
| $ | 27,517 | 12% | $ | 108,126 | 17% | $ | 275,398 | $ | 261,194 |
| $ | 776,322 | $ | 758,105 |
| $ | 14,204 | 5% | $ | 18,217 | 2% |
Cost of Goods Sold, Net |
| (129,954) |
| (104,159) |
|
| (378,127) |
| (286,685) |
|
| (25,795) | (25)% |
| (91,442) | 32% |
| (141,592) |
| (129,954) |
|
| (392,515) |
| (378,127) |
|
| 11,638 | 9% |
| 14,388 | 4% |
Gross Profit |
| 131,240 |
| 129,518 |
|
| 379,978 |
| 363,294 |
|
| 1,722 | 1% |
| 16,684 | 5% |
| 133,806 |
| 131,240 |
|
| 383,807 |
| 379,978 |
|
| 2,566 | 2% |
| 3,829 | 1% |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Selling, General, and Administrative |
| 84,779 |
| 82,479 |
|
| 249,515 |
| 214,402 |
|
| 2,300 | 3% |
| 35,113 | 16% | ||||||||||||||||
Total Expenses |
| 82,479 |
| 71,449 |
|
| 214,402 |
| 202,836 |
|
| 11,030 | 15% |
| 11,566 | 6% |
| 84,779 |
| 82,479 |
|
| 249,515 |
| 214,402 |
|
| 2,300 | 3% |
| 35,113 | 16% |
Income From Operations |
| 48,761 |
| 58,069 |
|
| 165,576 |
| 160,458 |
|
| (9,308) | (16)% |
| 5,118 | 3% |
| 49,027 |
| 48,761 |
|
| 134,292 |
| 165,576 |
|
| 266 | 1% |
| (31,284) | (19)% |
Total Other Income (Expense) |
| (5,644) |
| 837 |
|
| 1,429 |
| (5,940) |
|
| (6,481) | (774)% |
| 7,369 | 124% |
| (3,694) |
| (5,644) |
|
| (6,463) |
| 1,429 |
|
| 1,950 | 35% |
| (7,892) | (552)% |
Income Before Provision for Income Taxes And Non-Controlling Interest |
| 43,117 |
| 58,906 |
|
| 167,005 |
| 154,518 |
|
| (15,789) | (27)% |
| 12,487 | 8% |
| 45,333 |
| 43,117 |
|
| 127,829 |
| 167,005 |
|
| 2,216 | 5% |
| (39,176) | (23)% |
Provision for Income Taxes |
| 32,969 |
| 37,320 |
|
| 102,440 |
| 98,203 |
|
| (4,351) | (12)% |
| 4,237 | 4% |
| 34,526 |
| 32,969 |
|
| 93,927 |
| 102,440 |
|
| 1,557 | 5% |
| (8,513) | (8)% |
Net Income Before Non-Controlling Interest |
| 10,148 |
| 21,586 |
|
| 64,565 |
| 56,315 |
|
| (11,438) | (53)% |
| 8,250 | 15% |
| 10,807 |
| 10,148 |
|
| 33,902 |
| 64,565 |
|
| 659 | 6% |
| (30,663) | (47)% |
Net Income Attributable to Non-Controlling Interest |
| 319 |
| 1,376 |
|
| 1,360 |
| 3,685 |
|
| (1,057) | (77)% |
| (2,325) | (63)% |
| 295 |
| 319 |
|
| 851 |
| 1,360 |
|
| (24) | (8)% |
| (509) | (37)% |
Net Income Attributable To Green Thumb Industries Inc. | $ | 9,829 | $ | 20,210 |
| $ | 63,205 | $ | 52,630 |
| $ | (10,381) | (51)% | $ | 10,575 | 20% | $ | 10,512 | $ | 9,829 |
| $ | 33,051 | $ | 63,205 |
| $ | 683 | 7% | $ | (30,154) | (48)% |
Net Income Per Share - Basic | $ | 0.04 | $ | 0.09 |
| $ | 0.27 | $ | 0.24 |
| $ | (0.05) | (56)% | $ | 0.03 | 13% | $ | 0.05 | $ | 0.04 |
| $ | 0.14 | $ | 0.27 |
| $ | 0.01 | 25% | $ | (0.13) | (48)% |
Net Income Per Share - Diluted | $ | 0.04 | $ | 0.08 |
| $ | 0.26 | $ | 0.23 |
| $ | (0.0) | (50)% | $ | 0.03 | 13% | $ | 0.05 | $ | 0.04 |
| $ | 0.14 | $ | 0.26 |
| $ | 0.01 | 25% | $ | (0.12) | (46)% |
Weighted Average Number of Shares Outstanding – Basic |
| 237,002,873 |
| 226,529,671 |
|
| 236,546,078 |
| 221,059,870 |
|
|
| 239,459,783 |
| 237,002,873 |
|
| 238,248,852 |
| 236,546,078 |
|
| ||||||||||
Weighted Average Number of Shares Outstanding – Diluted |
| 237,804,799 |
| 230,879,437 |
|
| 237,872,595 |
| 225,411,773 |
|
|
|
| 240,289,959 |
| 237,804,799 |
|
| 239,827,112 |
| 237,872,595 |
|
|
|
|
| September 30, 2022 |
| December 31, 2021 |
| September 30, 2023 |
| December 31, 2022 |
|
| (in thousands) |
| (in thousands) | ||||
Total Assets | $ | 2,455,880 | $ | 2,385,851 | $ | 2,499,212 | $ | 2,433,528 |
Long-Term Liabilities | $ | 619,634 | $ | 561,994 | $ | 642,431 | $ | 621,525 |
Three Months Ended September 30, 20222023 Compared to the Three Months Ended September 30, 20212022
Revenues, Netnet of Discounts
Revenue for the three months ended September 30, 20222023 was $261,194$275,398 thousand, up 12%an increase of 5% from $233,677$261,194 thousand for the three months ended September 30, 2021, driven by contributions from both Retail and Consumer Packaged Goods. Key performance drivers for the Retail business for the quarter were:2022. The increase in revenue was largely due to legalization of adult useadult-use sales in New Jersey,Maryland, which began on April 21, 2022, as well as new store openings including acquired Retail stores, particularly in Illinois, Maryland, Massachusetts, Minnesota, Rhode Island and Virginia and increased store traffic to Green Thumb’s open and operating Retail stores, particularly in Illinois. July 1, 2023.
The Company generated revenue from 77 Retail locations85 retail stores during the quarter, compared to 6577 in the same quarter of the prior year. SinceDuring the three months ended September 30, 2021,2023, the Company acquiredopened one Retailretail store in Illinois,Nevada, and one retail store in Maryland, five in Minnesota and opened five new Retail stores in Massachusetts, Nevada, Virginia and Minnesota that contributed to the increase in Retail revenues.Florida.
35
The key drivers for the increase in Consumer Packaged Goods revenues was increased sales in New Jersey due to legalization of adult use sales, which began on April 21, 2022, and growth in Illinois. In addition, the Company also acquired one cultivation and processing facility in Minnesota since September 30, 2021.
Cost of Goods Sold, Netnet
Cost of goods sold are derived from Retailretail purchases made by the Company from its third-party licensed producers operating within our state markets and costs related to the internal cultivation and production of cannabis. Cost of goods sold for the three months ended September 30, 20222023 was $129,954$141,592 thousand, up 25%an increase of 9% from $104,159$129,954 thousand for the three months ended September 30, 2021,2022, driven by increased volume from openthe launch of adult-use sales in Maryland as described above, and operating Retail stores, new and acquired Retailretail store openings in Illinois, Maryland, Massachusetts, Minnesota, Nevada and Virginia, and expansion of the consumer products sales primarily in Illinois and New Jersey as described above.Florida.
29
Gross Profit
Gross profit for the three months ended September 30, 20222023 was $131,240$133,806 thousand, representing a gross margin on the sale of branded cannabis flower and processed and packaged products including concentrates, edibles, topicals and other cannabis products, of 50%49%. This is compared to gross profit for the three months ended September 30, 20212022 of $129,518$131,240 thousand, or a 55%50% gross margin. The decrease in gross margin (percent) was primarily driven by price compression. The increase in gross profit (dollars) was directly attributable to the revenue increase as described above.
Total Expenses
Total expenses for the three months ended September 30, 2023 were $84,779 thousand, or 31% of revenues, net of discounts, resulting in an increase of $2,300 thousand over the same period in the prior year. Total expenses for the three months ended September 30, 2022 were $82,479 thousand or 32% of revenues, net of discounts, resultingdiscounts. The increase in a increase of $11,030 thousand over the same period in the prior year. Total expensestotal expense for the three months ended September 30, 2021 were $71,449 thousand or 31% of revenues, net of discounts. The increase in total expenses2023 was attributable to Retailan increase in retail salaries and benefits depreciation expense and other operational and facility expenses, mainly as a result of the Company’s additionlegalization of fiveadult-use sales in Maryland, which began on July 1, 2023, as well as new and seven acquired Retail stores over the prior year period. In addition, an increase in intangible amortization expense and corporate staff salaries also contributed to the overall increase in total expenses.locations opened since September 30, 2022.
Total Other Income (Expense)
Total other income (expense) for the three months ended September 30, 20222023 was $(5,644)$(3,694) thousand, a changean increase of $(6,481)$1,950 thousand, primarily due to favorable fair value adjustments to the Company's equity investments, as well as a reduction in unfavorable fair value adjustments associated withto the Company's warrant liability offset by a reduction in interest expense associated with the Company's contingent consideration arrangementsrecorded during the three months ended September 30, 2022.2023.
Income (Loss) Before Provision for Income Taxes and Non-Controlling Interest
Income before provision for income taxes and non-controlling interest for the three months ended September 30, 20222023 was $43,117$45,333 thousand, an decreaseincrease of $(15,789)$2,216 thousand compared to the three months ended September 30, 2021.2022.
As presented under the heading “Non-GAAP Measures” below, after adjusting for non-cash equity incentive compensation of $7,878$7,215 thousand and $4,995 thousand and other nonoperating (income) expenses, of $3,306 thousand and $944$7,878 thousand in the three months ended September 30, 2023 and 2022, respectively, and 2021,other nonoperating (income) expenses, of $1,119 thousand and $3,306 thousand in the three months ended September 30, 2023 and 2022, respectively, adjusted operating earnings before interest, depreciation, and amortization (“EBITDA”) was $84,463$82,989 thousand and $81,181$84,463 thousand, in the three months ended September 30, 2022 and 2021, respectively.
Provision for Income Taxes
Income tax expense is recognized based on the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end. For the three months ended September 30, 2022,2023, federal and state income tax expense totaled $32,969$34,526 thousand compared to expense of $37,320$32,969 thousand for the three months ended September 30, 2021.2022.
3630
Net Income Attributable to Green Thumb Industries
Net income attributable to the Green Thumb Industries for the three months ended September 30, 2022 was $9,829 thousand or $0.04 per basic and diluted share, compared to a net income of $20,210 thousand, or $0.09 per basic and $0.08 per diluted share in the same period in the prior year. The reduction in net income of $10,381 thousand was primarily due to favorable fair value adjustments to the Company’s warrant liability as reflected within other income (expense), net during the comparable period in the prior year.
Nine Months Ended September 30, 20222023 Compared to the Nine Months Ended September 30, 20212022
Revenues, Netnet of Discounts
Revenue for the nine months ended September 30, 20222023 was $758,105$776,322 thousand, up 17%an increase of 2% from $649,979$758,105 for the nine months ended September 30, 2021, driven by contributions from both Retail and Consumer Packaged Goods2022. The increase in revenue was largely due to legalization of adult useadult-use sales in New Jersey, which began on April 21, 2022, legalization of adult-use sales in Maryland, which began on July 1, 2023, legalization of adult-use sales in Connecticut, which began on January 10, 2023, continued growth in Illinois, andexisting markets, as well as revenue generated from new and acquired store openings, particularlyretail stores opened in Maryland, Massachusetts, Minnesota, Rhode Island and Virginia. the current period, partially offset by price compression.
The Company generated revenue from 77 Retail locations85 retail stores during the period compared to 6577 in the same period of the prior year. During the nine months ended September 30, 2022,2023, the Company opened three new Retail stores. Since September 30, 2021, the Company acquiredtwo retail stores in Pennsylvania, two retail stores in Virginia, one Retailretail store in Illinois, one in Maryland, five in Minnesota, and opened five new Retailtwo retail stores in Massachusetts, Nevada, Virginia and Minnesota that contributed to the increaseone retail store in Retail revenues.
The key drivers for the increase in Consumer Packaged Goods revenues was increased sales in New Jersey due to legalization of adult use sales which began on April 21, 2022, and growth in Illinois and Virginia. In addition, the Company also acquired a cultivation and processing facility in Minnesota since September 30, 2021.Florida.
Cost of Goods Sold, Netnet
Cost of goods sold are derived from Retailretail purchases made by the Company from its third-party licensed producers operating within our state markets and costs related to the internal cultivation and production of cannabis. Cost of goods sold for the nine months ended September 30, 20222023 was $378,127$392,515 thousand, up 32%an increase of 4% from $286,685$378,127 thousand for the nine months ended September 30, 2021,2022, driven by increased volume from openthe launch of adult-use sales in New Jersey and operating Retail stores,Maryland as described above, and new and acquired Retailretail store openings in Illinois, Maryland, Massachusetts,Pennsylvania, Virginia, Minnesota, Nevada and Virginia, and expansion of the consumer products sales primarily in Illinois and New Jersey as described above.Florida.
Gross Profit
Gross profit for the nine months ended September 30, 20222023 was $379,978$383,807 thousand, representing a gross margin on the sale of branded cannabis flower and processed and packaged products including concentrates, edibles, topicals and other cannabis products, of 50%49%. This is compared to gross profit for the nine months ended September 30, 20212022 of $363,294$379,978 thousand or a 56%50% gross margin. The decrease in gross margin (percent) was primarily driven by price compression. The increase in gross profit (dollars) was directly attributable to the revenue increase as described above.
Total Expenses
Total expenses for the nine months ended September 30, 2023 were $249,515 thousand or 32% of revenues, net of discounts, resulting in an increase of $35,113 thousand over the same period in the prior year. Total expenses for the nine months ended September 30, 2022 were $214,402 thousand or 28% of revenues, net of discounts, resulting in an increase of $11,566 thousand over the same perioddiscounts. Total expenses were lower in the prior year. Total expenses for thefirst nine months ended September 30, 2021 were $202,836 thousand or 31% of revenues, net of discounts. The increase in total expenses was attributable2022 primarily due to Retail salaries and benefits, depreciation expense and other operational and facility expenses mainly as a result of the Company’s addition of five new and seven acquired retail stores over the prior year period. In addition, an increase in intangible amortization expense and corporate staff salaries contributed to the overall increase in total expenses which was partially offset byfavorable fair value adjustments associated with the remeasurement of the Company's contingent consideration arrangements associated with two acquisitions that occurred in 2021.recorded during the nine months ended September 30, 2022.
Total Other Income (Expense)
Total other income (expense) for the nine months ended September 30, 20222023 was $1,429$(6,463) thousand, a changedecrease of $7,369$7,892 thousand mainlyover the same period in the prior year, primarily due to a one-time favorable fair value adjustmentsadjustment associated with the Company's acquisition of ILDISP, as well as the change in the fair value of the Company's warrant liability,LLC recorded during nine months ended September 30, 2022, partially offset by unfavorable fair value adjustments on the Company's equity investmentsan increase in capitalized interest during the nine months ended September 30, 2022.2023.
37
Income (Loss) Before Provision for Income Taxes and Non-Controlling Interest
Net operating income before provision for income taxes and non-controlling interest for the nine months ended September 30, 20222023 was $167,005$127,829 thousand, an increasea decrease of $12,487$39,176 thousand compared to the nine months ended September 30, 2021.2022.
As presented under the heading “Non-GAAP Measures” below, after adjusting for non-cash equity incentive compensation of $19,362$20,835 thousand and $14,698$19,362 thousand, and other nonoperating (income) expenses, of $(26,405)$6,549 thousand and $9,425$(26,405) thousand in the nine months ended September 30, 20222023 and 2021,2022, respectively, Adjusted Operating EBITDA was $235,039 thousand and $230,239 thousand, and $231,820 thousand, in the nine months ended September 30, 2022 and 2021, respectively.
31
Provision for Income Taxes
Income tax expense is recognized based on the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end. For the nine months ended September 30, 2022,2023, federal and state income tax expense totaled $102,440$93,927 thousand compared to expense of $98,203$102,440 thousand for the nine months ended September 30, 2021.
Net Income Attributable to Green Thumb Industries
Net income attributable to the Green Thumb Industries for the nine months ended September 30, 2022 was $63,205 thousand or $0.27 per basic and $0.26 per diluted share, compared to a net income of $52,630 thousand, or $0.24 per basic and $0.23 per diluted share in the same period in the prior year. The increase in net income of $10,575 thousand was primarily due to favorable fair value adjustments as reflected within other income (expense), net during the current year.2022.
Results of Operations by Segment
The following table summarizes revenues net of sales discounts by segment for the three and nine months ended September 30, 20222023 and 2021:2022:
|
| Three Months Ended September 30, |
|
|
| Three Months Ended September 30, |
| 2023 vs. 2022 | ||||||
|
| 2022 |
| 2021 |
| $ | % |
| 2023 |
| 2022 |
| $ | % |
|
| (in thousands) |
|
|
| (in thousands) |
| Increase (Decrease) | ||||||
Retail | $ | 199,632 | $ | 161,016 | $ | 38,616 | 24% | $ | 205,441 | $ | 199,632 | $ | 5,809 | 3% |
Consumer Packaged Goods |
| 127,676 |
| 121,074 |
| 6,602 | 5% |
| 150,425 |
| 127,676 |
| 22,749 | 18% |
Intersegment Eliminations |
| (66,114) |
| (48,413) |
| (17,701) | 37% |
| (80,468) |
| (66,114) |
| 14,354 | 22% |
Total Revenues, Net of Discounts | $ | 261,194 | $ | 233,677 | $ | 27,517 | 12% | $ | 275,398 | $ | 261,194 | $ | 14,204 | 5% |
|
|
|
|
|
|
| ||||||||
|
| Nine Months Ended September 30, |
|
| ||||||||||
|
| 2022 |
| 2021 |
| $ | % | |||||||
|
| (in thousands) |
|
| ||||||||||
Retail | $ | 564,951 | $ | 441,241 | $ | 123,710 | 28% | |||||||
Consumer Packaged Goods |
| 368,692 |
| 343,014 |
| 25,678 | 7% | |||||||
Intersegment Eliminations |
| (175,538) |
| (134,276) |
| (41,262) | 31% | |||||||
Total Revenues, Net of Discounts | $ | 758,105 | $ | 649,979 | $ | 108,126 | 17% |
|
| Nine Months Ended September 30, |
| 2023 vs. 2022 | |||
|
| 2023 |
| 2022 |
| $ | % |
|
| (in thousands) |
| Increase (Decrease) | |||
Retail | $ | 582,363 | $ | 564,951 | $ | 17,412 | 3% |
Consumer Packaged Goods |
| 412,096 |
| 368,692 |
| 43,404 | 12% |
Intersegment Eliminations |
| (218,137) |
| (175,538) |
| 42,599 | 24% |
Total Revenues, Net of Discounts | $ | 776,322 | $ | 758,105 | $ | 18,217 | 2% |
Three Months Ended September 30, 20222023 Compared with the Three Months Ended September 30, 20212022
Revenues, Netnet of Discounts,discounts, for the Retail segment were $199,632$205,441 thousand, an increase of $38,616$5,809 thousand or 24%3%, compared to the three months ended September 30, 2021.2022. The increase in Retail revenues,revenue was primarily due to the legalization of adult-use sales in Maryland, which began on July 1, 2023, partially offset by price compression.
Revenues, net of discounts, was primarily driven by legalization of adult use in New Jersey, which began on April 21, 2022, as well as new store openings including acquired Retail stores in Illinois, Maryland, Massachusetts, Minnesota, Nevada and Virginia and increased store traffic to Green Thumb’s open and operating Retail stores, particularly in Illinois.
Revenues, Net of Discounts, for the Consumer Packaged Goods segmentSegment were $127,676$150,425 thousand, an increase of $6,602$22,749 thousand or 5%18%, compared to the three months ended September 30, 2021.2022. The key drivers for the increase in Consumer Packaged Goods revenues was increasedprimarily due to the legalization of adult-use sales in New Jersey due to legalization of adult use sales,Maryland, which began on April 21, 2022, and continued growthJuly 1, 2023, as well as the legalization of adult-use sales in Illinois. In addition, the Company also acquired a cultivation and processing facility in Minnesota since September 30, 2021.Connecticut, which began on January 10, 2023.
38
Intersegment eliminations associated with the Consumer Packaged Goods segmentSegment were $(66,114)$80,468 thousand, an increase of $(17,701)$14,354 thousand or 37%22% compared to the three months ended September 30, 2021.2022. The increase in intersegment eliminations was driven by increased intercompany sales to Company-owned Retailretail stores as well as to newly acquired Retail stores as discussed above.primarily in Pennsylvania and Maryland. Consumer Packaged Goods revenues, net of intersegment eliminations, made up 24%25% of total revenues during the three months ended September 30, 20222023 as compared to 31%24% during the three months ended September 30, 2021.2022.
Due to the vertically integrated nature of the business, the Company reviews its revenue at the Retail and Consumer Packaged Goods level while reviewing its operating results on a consolidated basis.
32
Nine Months Ended September 30, 20222023 Compared with the Nine Months Ended September 30, 20212022
Revenues, Netnet of Discounts,discounts for the Retail segment were $564,951,$582,363, an increase of $123,710$17,412 or 28%3%, compared to the nine months ended September 30, 2021.2022. The increase in Retail revenues, net of discounts, was primarily driven by the legalization of adult useadult-use sales in New Jersey, which began on April 21, 2022, continued growthand the legalization of adult-use sales in Illinois, and new and acquired store openings in Illinois, Maryland, Massachusetts, Minnesota, Nevada and Virginia and increased store traffic to Green Thumb’s open and operating Retail stores, particularly in Illinois.which began on July 1, 2023, partially offset by price compression.
Revenues, Netnet of Discounts,discounts, for the Consumer Packaged Goods segmentSegment were $368,692$412,096 thousand, an increase of $25,678$43,404 thousand or 7%12%, compared to the nine months ended September 30, 2021.2022. The key drivers for the increase in Consumer Packaged Goods revenues was increasedprimarily driven by the legalization of adult-use sales in New Jersey, due to legalization of adult use sales, which began on April 21, 2022, and continued growththe legalization of adult-use sales in Illinois. In addition, the Company also acquired a cultivation and processing facility in Minnesota since September 30, 2021.Maryland, which began on July 1, 2023.
Intersegment eliminations associated with the Consumer Packaged Goods segmentSegment were $(175,538)$218,137 thousand, an increase of $(41,262)$42,599 thousand or 31%24% compared to the nine months ended September 30, 2021.2022. The increase in intersegment eliminations was driven by increased intercompany sales to Company-owned Retailretail stores as well as to newly acquired Retail stores as discussed above.primarily in Pennsylvania and Maryland. Consumer Packaged Goods revenues, net of intersegment eliminations, made up 25% of total revenues during the nine months ended September 30, 20222023 as compared to 32%25% during the nine months ended September 30, 2021.2022.
Due to the vertically integrated nature of the business, the Company reviews its revenue at the Retail and Consumer Packaged Goods level while reviewing its operating results on a consolidated basis.
39
Drivers of Results of Operations
Revenue
The Company derives its revenue from two revenue streams: a Consumer Packaged Goods business in which it manufactures, sells and distributes its portfolio of Consumer Packaged Goods brands including &Shine, Beboe, Dogwalkers, Dr. Solomon’s, Good Green, incredibles, and RYTHM, primarily to third-party customers; and a Retail business in which it sells finished goods sourced primarily from third-party cannabis manufacturers in addition to the Company’s own Consumer Packaged Goods products direct to the end consumer in its Retailretail stores, as well as direct-to-consumer delivery where applicable by state law.
For the three and nine months ended September 30, 2022,2023, revenue was contributed from Consumer Packaged Goods and Retail sales across California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Ohio, Pennsylvania, Rhode Island and Virginia.
Gross Profit
Gross profit is revenue less cost of goods sold. Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and other supplies, fees for services and processing, and allocated overhead which includes allocations of rent, utilities and related costs. Cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis product, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes. Gross margin measures our gross profit as a percentage of revenue.
During the nine months ended September 30, 2022,2023, the Company continued to be focusedfocus on creating sustainable, profitable growth of the Company’s business while pursuing expansion. Green Thumb expects to continue its growth strategy for the foreseeable future as the Company expands its Consumer Packaged Goods and Retail footprint within its current markets with acquisitionswhile considering strategic acquisition and partnerships, and scales resources into new markets.partnership opportunities.
Total Expenses
Total expenses other than the cost of goods sold consist of selling costs to support customer relationships and marketing and branding activities. It also includes a significant investment in the corporate infrastructure required to support the Company’s ongoing business.
Retail selling costs generally correlate to revenue. As new locationsstores begin operations, these locationsstores generally experience higher selling costs as a percentage of revenue compared to more established locations,stores, which experience a more constant rate of selling costs. As a percentage of sales, the Company expects selling costs to remain constant in the more established locationsstores and increase in the newer locationsstores as the business continues to grow.
33
General and administrative expenses also include costs incurred at the Company’s corporate offices, primarily related to back office personnel costs, including salaries, incentive compensation, benefits, stock-based compensation and other professional service costs.costs, and fair value adjustments on the Company's contingent consideration arrangements. The Company expects to continue to invest considerably in this area to support expansion plansthe business by attracting and retaining top-tier talent. Furthermore, the business.Company anticipates an increase in stock-based compensation expenses related to recruiting and hiring talent, along with legal and professional fees associated with being a publicly traded company in Canada and registered with the U.S. Securities and Exchange Commission.
Provision for Income Taxes
The Company is subject to income taxes in the jurisdictions in which it operates and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. As the Company operates in the federally illegal cannabis industry, it is subject to the limitations of the U.S. Internal Revenue Code of 1986, as amended (“IRC”) Section 280E, under which taxpayers are only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E and a higher effective tax rate than most industries. Therefore, the effective tax rate can be highly variable and may not necessarily correlate to pre-tax income or loss.
40
Non-GAAP Measures
EBITDA, Adjusted Operating EBITDA, and Adjusted EBITDA are non-GAAP measures and do not have standardized definitions under GAAP. The following information provides reconciliations of the supplemental non-GAAP financial measures, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP. The Company has provided the non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. These supplemental non-GAAP financial measures 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. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, | ||||||||
|
| 2022 |
| 2021 |
|
| 2022 |
| 2021 |
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
|
| (in thousands) |
|
| (in thousands) |
| (in thousands) |
|
| (in thousands) | ||||||||
Net Income Before Non-Controlling Interest | $ | 10,148 | $ | 21,586 |
| $ | 64,565 | $ | 56,315 | $ | 10,807 | $ | 10,148 |
| $ | 33,902 | $ | 64,565 |
Interest Income, net |
| (1,085) |
| (328) |
|
| (2,609) |
| (674) |
| (1,576) |
| (1,085) |
|
| (4,838) |
| (2,609) |
Interest Expense, net |
| 4,644 |
| 7,616 |
|
| 16,113 |
| 16,419 |
| 4,639 |
| 4,644 |
|
| 11,324 |
| 16,113 |
Provision For Income Taxes |
| 32,969 |
| 37,320 |
|
| 102,440 |
| 98,203 |
| 34,526 |
| 32,969 |
|
| 93,927 |
| 102,440 |
Other Income (Expense), Net |
| 2,085 |
| (8,125) |
|
| (14,933) |
| (9,805) | |||||||||
Total Other Income |
| 631 |
| 2,085 |
|
| (23) |
| (14,933) | |||||||||
Depreciation and amortization |
| 24,518 |
| 17,173 |
|
| 71,706 |
| 47,239 |
| 25,628 |
| 24,518 |
|
| 73,363 |
| 71,706 |
Earnings before interest, taxes, depreciation and | $ | 73,279 | $ | 75,242 |
| $ | 237,282 | $ | 207,697 | $ | 74,655 | $ | 73,279 |
| $ | 207,655 | $ | 237,282 |
Stock-based compensation, non-cash |
| 7,878 |
| 4,995 |
|
| 19,362 |
| 14,698 |
| 7,215 |
| 7,878 |
|
| 20,835 |
| 19,362 |
Acquisition, transaction and other non-operating (income) costs |
| 3,306 |
| 944 |
|
| (26,405) |
| 9,425 |
| 1,119 |
| 3,306 |
|
| 6,549 |
| (26,405) |
Adjusted Operating EBITDA (non-GAAP measure) | $ | 84,463 | $ | 81,181 |
| $ | 230,239 | $ | 231,820 | |||||||||
Adjusted EBITDA (non-GAAP measure) | $ | 82,989 | $ | 84,463 |
| $ | 235,039 | $ | 230,239 |
34
Liquidity, Financing Activities During the Period, and Capital Resources
As of September 30, 20222023, and December 31, 2021,2022, the Company had total current liabilities of $129,439$149,882 thousand and $204,379$146,571 thousand, respectively, and cash and cash equivalents of $147,258$136,842 thousand and $230,420$177,682 thousand, respectively, to meet its current obligations. The Company had working capital of $189,121$170,299 thousand as of September 30, 2022, an increase2023, a decrease of $29,270$34,481 thousand as compared to December 31, 2021.2022. This increasedecrease in working capital was primarily driven by an additional $55,000 thousand tenant improvement allowance providedpurchases of property, plant, and equipment as partwell as the repurchase of the third amendment to the lease of one of2,500,000 Subordinate Voting Shares through the Company's cultivation and processing facilities in Danville, Pennsylvania with Innovative Industrial Properties, Inc. (“IIP”).share repurchase program.
The Company is an early-stage growth company, generating cash from revenues, deploying its capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and long term. Capital reserves are primarily being utilized for capital expenditures, facility improvements, strategic investment opportunities, product development and marketing, as well as customer, supplier, and investor and industry relations.
While the Company's revenue, gross profit and operating income were not materially impacted by COVID-19 and the Company maintained the consistency of its operations during the first nine months of 2022, the effects of COVID-19 may impact the Company's business operations for reasons including the potential quarantine of employees or those of supply chain partners. The Company takes a cautious approach in allocating its capital to maximize its returns while ensuring appropriate liquidity. Given the current uncertainty of the future economic environment, the Company has taken additional measures in monitoring and deploying its capital to minimize the negative impact on its current operations and expansion plans.
41
Cash Flows
Cash Used in Operating Activities, Investing and Financing Activities
Net cash provided by (used in) operating, investing and financing activities for the nine months ended September 30, 20222023 and 2021,2022, were as follows:
|
| Nine Months Ended September 30, |
| Nine Months Ended September 30, | |||||
|
| 2022 |
| 2021 |
| 2023 |
| 2022 | |
|
| (in thousands) |
| (in thousands) | |||||
Net Cash Provided by Operating Activities | $ | 88,220 |
| $ | 82,767 | $ | 153,872 | $ | 88,220 |
Net Cash Used in Investing Activities | $ | (161,168) |
| $ | (148,280) | $ | (187,444) | $ | (161,168) |
Net Cash Provided by (Used in) Financing Activities | $ | (10,214) |
| $ | 267,547 | ||||
Net Cash Used in Financing Activities | $ | (7,268) | $ | (10,214) |
Off-Balance Sheet Arrangements
As of September 30, 2022,2023, the Company does not have any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of the Company, including, and without limitation, such considerations as liquidity and capital resources.
Changes in or Adoption of Accounting Practices
Refer to the discussion of recently adopted/issued accounting pronouncements under Part I, Item 1, Notes to Unaudited Interim Condensed Consolidated Financial Statements, Note 1 - 1—Overview and Basis of Presentation of this Report.Presentation.
Critical Accounting Policies and Significant JudgementsJudgments and Estimates
There were no material changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the 2021our 2022 Form 10-K.
4235
ITEM 3. QUANTITATIVEQUANTITAVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our market risk disclosures as set forth in Part II Item 7A “Quantitative and Qualitative Disclosures about Market Risk,” included in the 2021of our 2022 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company's management carried out an evaluation under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)Exchange Act). Based upon that evaluation, management identified a material weakness in our internal control over financial reporting which was also disclosed in the 2021 Form 10-K. As a result of this material weakness, management concluded that our disclosure controls and procedures were not effective as of September 30, 2022.
Remediation Plan and Status for Material Weakness
In response to the identified material weakness in the 2021 Form 10-K, the Company's management, with the oversight of the Audit Committee of the Company's Board of Directors, have developed a plan to remediate the material weakness including designing and implementing improved processes and internal controls with the intent of ensuring proper application of relevant accounting guidance. The Company took steps during the first three quarters of 2022 to enhance the control environment and will continue to evaluate these controls over the remainder of the year.2023.
Changes in Internal Control Over Financial Reporting
Except as noted above, thereThere have been no changes in the Company's internal control over financial reporting during the third quarter of 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Control Systems
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be or have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
4336
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to a variety of legal proceedings that arise out of operations in the normal course of business. While the results of these legal proceedings cannot be predicted with certainty, the Company believes that the final outcome of these proceedings will not have a material adverse effect, individually or in the aggregate, on our results of operations or financial condition.
ITEM 1A. RISK FACTORS
There have been no material changes toFor a discussion of our potential risks and uncertainties, see the risk factors disclosedinformation under the heading "Risk Factors" in Part I, Item 1A, “Risk Factors,” of the 2021our 2022 Form 10-K.
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES, AND ISSUER PURCHASE OF EQUITY SECURITIES
Recent Sales of Unregistered Securities
Subordinate Voting Shares
During the three months ended September 30, 2022, shareholders ofOn July 10, 2023, the Company converted 28,341 Multipleissued 792,424 Subordinate Voting Shares into 2,834,100 Subordinate Voting Shares.as contingent consideration associated with the Company's July 2021 acquisition of Dharma Pharmaceuticals, LLC.
Multiple Voting Shares
During the three months ended September 30, 2022, shareholders of the Company converted 28,341 Super Voting Shares into 28,341 Multiple Voting Shares and 28,341 Multiple Voting Shares into 2,834,100 Subordinate Voting Shares.None.
Super Voting Shares
None.
Recent Issuer Purchases of Equity Securities
(Dollars in thousands except per share amounts) | ||||||
Period | Total Number of Shares Purchased |
| Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program (1) |
| Approximate Dollar Value of Shares that may yet be Purchased Under the Program |
July 1, 2023 through | — | $ | — | — | $ | — |
August 1, 2023 through | — |
| — | — |
| — |
September 1, 2023 through | 2,500,000 |
| 9.96 | 2,500,000 |
| 25,110 |
| 2,500,000 | $ | 9.96 | 2,500,000 | $ | 25,110 |
(1) On September 5, 2023, the Company announced that its Board of Directors authorized the repurchase of up to 5%, or 10,486,951, of its Subordinate Voting Shares, over a 12-month period at a cost of up to $50,000 thousand. During the three months endedmonth of September 30, 2022, shareholders of2023, the Company converted 28,341 Superrepurchased 2,500,000 Subordinate Voting Shares into 28,341 Multiple Voting Shares.at an average price of $9.96 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
4437
ITEM 6. EXHIBITS
The following exhibits are filed with this report:
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101.INS | Inline XBRL Instance Document |
101.SCH | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (embedded with Inline XBRL File) |
4538
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GREEN THUMB INDUSTRIES INC. |
/s/Benjamin Kovler |
By: Benjamin Kovler |
Title: Chief Executive Officer |
Date: November 3, 20229, 2023
GREEN THUMB INDUSTRIES INC. |
/s/ |
By: |
Title: Chief Financial Officer |
Date: November 3, 20229, 2023
4639