GLASF - Earnings call transcript Q4 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. Thank you for standing by. Welcome to the Glass House Brands Fourth Quarter and Year-end 2021 Investors Call. I would now like to hand the conference over -- call to Mr. John Brebeck, Glass House Brands, Vice President of Investor Relations. ahead. go Please

John Brebeck

or being may of future the anticipated everyone relating differ registration database. materially Listeners I'd Brands and uncertainties could Thursday, sir. conference Actual for go Brands. welcome Glass to to XX, constitute everyone from The X House these discussed introduce to certain I’d Thank Brands’ could in those or ahead. detailed like quarter Brands like be affect that House and in today, House XXXX. December statements. XXXX. ending I may fourth XX-month and These call is Chairman to questions factors results Glass Officer Kazan, reminded business year-end Glass in call this that SEDAR results and Chief call are and would matters today's you, risk via recorded that documents And period to are remind filings XXXX the statements Executive the that House risks given asked statements. Mr. may like financial periodic performance. forward-looking are answers that XX, forward-looking March subject to please accessed Glass to Kyle, Kyle be conference

Kyle Kazan

our quarter conditions details. facilities. our Officer, Thanks, the today's our discuss review strategic John. and for call. you of take market will will our Financial the Good for Mark few morning, results an minutes to vis-à-vis positioning Chief on California year-end priorities of for everyone financial an our and joining give I the Vendetti, update then overview to us business and thank provide a would like and

from our is take I'd produce well Farrar, Camarillo, million us with XXX,XXX includes operational which facility. world, and time X.X for not the pressures. example California and operational a such in at with cost. water nursery cannabis. I tag to your the of and as and well and which and commonly producing square propagation Phase XXXX. of fertilizer. and of capture on Following our investments we cannabis both system This which, start us inflationary our our The to the advanced feet in SoCal budget feet scale and price approaches the recycling located to is at of efficiency President an plant acquisition insulate highest lowest automated Mark, X flow thus allows facility a questions. cost cannabis. an Graham is quality a ebb approximately for cannabis of highest designed This highlight our and the on positions is square construction uses as like will is to nursery, used believe million making reduces the largest craft CapEx which COGS for technology of approach COGS for quality goal lowest helps and lower The system, which key and is The craft $XX of as to handling

fully craft foot largest produce Kubo will square California's future Clima us facility X increase by additional an us square expansion. is to Phase of million expected enabling Phase X.X most distribution SoCal operational, facility We're will efficient dry cannabis. phases to building new the our SoCal When entire Beyond greenhouse XXX,XXX the also Ultra footprint is the of a an greenhouse all the which feet, X through efficiency includes X support XXX,XXX Phase operation approximately and pounds high nursery, grower. of make approximately greenhouse. center,

for business to County. cannabis of completed second received report includes local the all Phase we for X to SoCal clone including licenses the and California square packhouse in I'm X have processing feet. long-term automation that distribution cultivation Ventura to Our of a all footprint facility, and operate from a state total million targeted packhouse and be approvals transplanting processing also is necessary X operations, the happy Phase the for license nursery and future. near

We these of greenhouse. plants forward flower the commenced and will harvest and our in already in activities be have to year. occur the sale nursery project we to look third transitioned from which facility first We quarter will this

facility of the our production. expect to SoCal We allow reduce cost us that significantly will

$XXX $XXX This to quarter, the that X% quarter lower facility. we than per of eventually typically costs output one shows in seasonality. XXXX, of pound SoCal a we costs due third Please to per volume pound production the from $XXX pound, biomass can production in more and reported however, quarter of per down savings believe lower we note,

a sales cost pound quarter. of possible in uptick in So, per is that quarterly

While life, the California, supplemental cogeneration also this acres and Situated friendly the capabilities. XX environmentally using ability cannabis manner. is energy with solar in cannabis cost costs, to facility quality effective, the us in of and enables produce agricultural will best cannabis grow outdoor extremely site's for area indoor it and efficient cultivation to an have arguably at in

XX% a XX% flower kilogram per to facility us, for ESG of grow. advantage. carbon Our uses commitment compared more less energy competitive a less and the it's average than is generates dioxide indoor

will both experience providing prime advantage what we Santa Triangle, license, loading regulatory well Eureka retail as and pharmacy be properties and currently of Vista referred areas Santa during as single dispensaries I branded of heart to third and the customer quarter, robust our dispensaries Turning expect into world. location The retail Emerald the quarter. locations Isla the to our are expect some our as three retail cannabis operating Eureka our to be markets, locations. offer open will the and of as and fourth limited these Ynez the All of Vista which extends our reach are location existing to which in in same award-winning stores. these the Isla footprint, a to the four we Ynez capital the as

stores X our these we a period, would consolidate not after diligence, existing additional the that we we about today. be extremely retail Dunsmuir like to I pursue And the due financials similar stores. that to to up decided ramp average the XX-month note after in are pharmacy opportunity. on expect to performance to revenue three We excited

to Adding to as new we number portfolio and through of to are expanding retail We wins presence. to license stores and maximize investing continue well-positioned scale new acquisitions, penetration. vertical to brand on By stores, provides the increasing we mix and We our advantage. targets in our what potential network of partnerships. refer opportunities own the remain new our our focused retail exploring a expect

sold our brands House own we stores of operate more compared to have XXx and volume non-Glass historically We operated stores.

such close the of of the flower top We're the because edibles increase to state's expect agreement top adding transaction, through it ranked this and cannabis wholesale will our five in the PLUS, a California. we categories. we combination tax acquire one leverages Late last during efficiency. more would is which our definitive to and edible that about higher in leading position us our CPG April. place the extremely business a segment, year, brands advantage is announced vertical PLUS While company margins company month core in production, we will focus excited in coming with both the our

the come as clear, bottomed Finally, November, in in would flower commoditization we remain. they is I market conditions much flower as today too on conditions as be all market. would as these wholesale current but destructive, will describe in To extreme expected as industries address mature. the the California. prices I natural challenges there Wholesale pricing

survive, to cease to pattern that strategy the the many on will and other forced slowly but coming thrive to of Following going experienced was is cycle, states, not efficient part this to was SoCal levels the of which Knowing to eventually COGS the we precisely saw our why low most operations. will expect the this will forward. purchased set persevere we be growers facility but rebound, continue not and only since our growers pre-commoditization. pricing I sights

remains demand flower, the not quarter. a strong we increase disruption. our top product is market experiencing exceeded strong. Because a third sold causing line of the in driven versus in Oversupply issue dry demand projections are we for original growth by as continued for that revenue quite the clarity, our the For XX% price

were to the or Glass have success. if even on allow positive to is above lean periods. phase and transaction Brands Farms Since another brand will expansion based in House SoCal, Glass that ranking top maintained expand pricing continues and lower the late House should for for fully ensure position to us our end we almost will is for our turn In data, first nobody we prolonged as the fourth call this into when BDSA I Mark? now a the our new this factor The three review a continued unsustainable XXXX, at us financials of of one we other expect strength to transition margins over number at have push facility -- also ranked the profitably quarter that Our else year. sorry, With the Mark quarter. can. grow and will of words, the

Mark Vendetti

Thanks, everyone. Kyle, and good morning,

flat and results versus be over are million U.S X% reminder, QX QX a declined CPG These 'XXand XX% financial down for the beat The to XXXX sequential declined increase was Total X% X% by GAAP. be and MD&A, $XX.X the and As revenue slightly dollars sales results by to prepared I in guidance XXXX. compared driven can X% reported which sales, Retail our revenue of a and wholesale million. an found increase U.S XXXX. will in growth QX represent QX for $X.X increased in which biomass sales QX. our quarter today statements was sharing over

using Headset consolidated to as the is cannabis which We X% Ana. a landscape. we compared note Barbara, and compares partnership California are pleased and for to sales Santa estimated our quarter with QX. declined From the dispensary difficult method. dispensaries Pottery navigate total results in This Santa X% to cannabis of Please market our in three continue the the retail a perspective, the sales equity accounted includes Berkeley decline

while revenue. benchmarks. decrease in to QX cases, our sales continue over both in quarter in year. biomass, smalls In cannabis held quarter, despite market revenue in fourth wholesale XX% the revenue when QX, it our drop compared the Prices our and quarter. into for third versus million in compared fall dropped to increased XXXX This continued started QX. the gross In Average margin the the a XX%. in beat Within we relevant declines resulted flower earlier fell decreased to prices $X.X XX% that pricing flower XX% X% of price CPG

values internal XXXX. able XX% analytics, caused forward-looking January flower within average but our Farms million impacted but Glass potential in of On up three unchanged BDSA was our brands. first $X or prices Berkeley with XX% year. declining smalls smalls non-cash X%, is In overproduction quarter fourth fiscal demand. in and which a XXXX. brand for environment to current have increase in XXXX due Gross particularly sales XX% was obsolete XXXX for a a was higher by wholesale of CPG and had in decrease belief If $XX.X biomass inventory the reached rank QX consistent their $XX.X mainly reduced November, -- lost increased inventory expenses prices February fiscal X%. of top mentioned, increased opened year negative values achieve or Kyle the the XX% current we year. during weights reinforce The was brand remainder strong below revaluation results to between California second the that increase revenues have quarter, full quarter budgeting it lack flower been the prior We in and Revenue for higher plants our wholesale reserves are a of for a versus up of The to to wholesale Again, to $X than not XXXX XXXX increase our versus pricing of our prices related grew revenue XX% points. the the other million we The we smalls bottom continue well would million -- These and year-over-year XX with well, in for during pricing our January stands biomass average. were XX% to prices, XX% XX and pricing shown rebounded experienced margin average from as negatively with in XXXX. flower increased versus XX% sold large by the from is a percentage XX% year, the gross an in as consistent and negative as to decrease QX. XXXX. As primarily $X.X from the quarter our store the in actual result XXXX, Retail margin which our our that almost sheet reflect declines in million, of would the in House impact of priced balance XXXX. and these our of roughly biomass the by each for number results biomass driven quarter X% the our inventory by and business by words, slow-moving selling a growth. XX% been the in versus by current current mix that XXXX half versus pricing as for prices lower more the in million These brand costs. biomass the flower of Wholesale weight These product driven to total year XX% live of million the sold sales in revenue prior production decreased in QX. included reflected sold in $XX.X weight by quarter flower costs increasing expenses on growth dry QX by

our because taxes, costs, to note adjusted The contain points QX declines EBITDA cost, costs. for of in amortization, occurred million transaction and $X.X restructuring to and revaluation. venture. and gross million non-operational of The QX notes The due comments, XX% in decrease Depreciation majority negative QX. primarily $X.X of QX primarily negative million in gross 'XX of additional margin 'XX. in SoCal was to the and Adjusted reserve footprint facility interest, share-based transaction million increased points. margin the general QX million and million $X additional Element by Gross to was fiscal receivable reference million relating pricing and also XXXX is startup in SoCal compared expenses operating which restricted 'XX of compensation and to as margin quarter. XXXX million caused additional The $X.X of other $X.X to by and our gross depreciation We cash, spent $X.X XX X compared when We versus $X.X increased approximately 'XX quarter. XX% the QX quarter million year the expansion that before the decrease non-cash earlier half in hurt biomass EBITDA addition, 'XX, of define margin for to to cash the was XXXX, the related G&A second in of the increased margin, related spending $X.X initiatives. associated the QX. earlier an earnings Professional fiscal is expenses amortization QX. wholesale million fiscal negatively support In expenses XXXX. we average seasonal during by million QX in our by $XX in margin. charged to increased at to company's QX adjusted million of XXXX $X digital compared with 'XX a up the to for versus fourth versus margins lower ended quarter the most by for QX trade 'XX including capital the in revenue decreased due and $X biomass of discussed by lost to wholesale an revenues in retail decrease impacted XX primarily the accounted price inventory within reduced pricing issued is facility promotions, $X the marketing $XX reserve. from end compared the that $X inventory $X.X related reserves with bad to and million current million Pottery admin million QX expansion of reserves gross There $X.X debt an marketing is our in marketing.

debt in was to a $XX compares During of CapEx compensation term $XXX spent $XX We spent the that QX. cash. SoCal loan the of in facility. resulting QX quarter flow $XX of proceeds of company WhiteHawk with credit Partners bad cash and $X.X the hit majority offset items of gross entered million flow including quarter, million on PhaseX share-based million of net addition closed on in was on provide December, during for proceeds. in million. loan to our million company $XX of million, the Operating to million negative into with non-cash $XX negative $X.X million Capital and depreciation gross million. $X cash loss up initial with This operating in the million facility The quarter $X.X the expense Net by amortization of

we Looking conditions wholesale to pricing the of that assuming House market which Brands. purposes more facility for critical of are budgeting level into addition Glass persists even the XXXX, year, the difficult SoCal the makes throughout and current

rates approaching As and new to The with Kyle third expect revenue high up through from the mentioned, for difficult produce to QX. allow to quarter X we us the year the cannabis, Phase year -- approach ramping conditions. the an and cost output of sales in generating begin extremely succeed of rest facility these quality in of craft will annualized in ability low production the

final We trends. million run in annualized expect of This are stages this XXXX our on rate and an based PLUS in of to close revenue $XX April. has acquisition the brand

get incremental plans actively farms use presence We both distribution House sales. the help Gummies to distribution retail have already begun integration respective Glass planning to also and and to PLUS are other developing improve

is CPG approximately manage increase to discussed with when organization. basis expected addition, Brands overhead our results. call. to this this I combine we and revenue to Glass combined acquisition difficult $XX of the The forma state on of to brand look In California both on aggressively pro the a we million as House on Kyle based have XXXX plans have market

the and they acquisitions we strategic we at with will the year price This by be additional we there Development assets rigorously important Officer, the correct to As of opportunities unfolds, Business It assets good be set. at acquire very led evaluate many make values believe to Erik and arise. is right Thoreson. the Chief will stretch as effort continue will our opportunities

of we and strategy, sources acquisition the feel and needed. capital be help as of our can part we we attractive scale, potential fund expansion will With size evaluate acquisitions. most additional As this partners to

having in Finally, even the facility, are started cultivation of focused the cash our flow the company. more SoCal we on potential

now Assuming remain stable utilize we and into on positive fully generate path are to next X from wholesale pricing our our the were and and the capacity, production deliver early I believe call able we to will Phase current throughout Kyle. to over and cash turn XXXX. by operations we back CPG year metrics flow production

Kyle Kazan

Mark. Thanks,

incarcerated in I John? I organization's $XX,XXX to organization release Directors while cause, to cannabis important this I'd the organization back passionate about Angelos. support related honored about, Weldon nonprofit is a the individuals take pardon that, to Brebeck. was Project assist ongoing cause the Weldon moment to for John organization a Having is Board. to former in We House The to to and Finally, like a as of project's prohibition gaining co-founded the nonviolent With dedicated XXXX, to The look December, federal initiatives turn and Weldon prisoner, cannabis for particularly call nonviolent Weldon forward the talk support by member I all fundraising Project. I'm to since donate ending of with the the further will the to a worked along offenses. Board cannabis. was join cannabis equally mission honored Project of lean the of Glass prisoners, with spearheading

John Brebeck

call Kyle. the to the Operator, Thank the I'd this to you, question-and-answer like over you. of At over portion turning operator begin point, to turn to the call.

Operator

ROTH question Please go ahead. Thank Scott comes Capital. Fortune from with Instructions] first you, sir. [Operator Your

Scott Fortune

that how to post-harvest color the put Good processes of provide can on start morning. standpoint? indoor are California, quality that the developing facility on And you kind your and the compete and at market timings. to you a quality And the looking on little that the your ability the the Very follow-up here standpoint? update what question Phase place with from appreciate kind eventually X plantings with and for the early flower in but in you in of California and SoCal facility that. then, of from But

Kyle Kazan

feel Scott, you. getting So, your Thank for thank you up we because early pain.

to and the thanks going I'm follow-up. that. the can I that, and with Graham ask for second So, even question first start to answer

Graham Farrar

that campaign flower. flower marketing you're connoisseurs taste those along to grew blind even influencers cultivated facility. of it with indoor the even where Glass for Thanks much of the quality going of greenhouses. Sure. path further which and the premium Scott? note facility, with a after of kind in the design our the And our on choice SoCal do would product, cannabis we did going actually our question. existing House line particularly on with between Hey, quality a are that Yes, how's I get indoor is because existing going think SoCal goal, Farms the our an there. test growers greenhouses, so that of was very greenhouses we and The part that past was to we

If control, for is you climate ultimate SoCal what the climate control. doing good about naturally. gives and for think just that indoor, entire facility it's But nature mother really leveraging us built shorthand

[indiscernible] in that first them it. and take were expect To through that control, continue high question, the your same, to planet. the to to flowering her supplement going There's mother expectations COX a greenhouses, Phase then for with is pressure -- is goal way her lot and functionally roll compete not that's which and cost lower just greenhouses much behind outdoor. entirely is sustainable our the and control, all flowering So, -- retrofit. to our going It nature, at greenhouses. positive supplementation, competing to -- at second we providing competing more humidity the a consumers a basically a We're polish is indoor X, with be the product we temperature

have we that's the the all the think cost. square really to carrying a vegetable a greenhouses, way footage grower great covers leased a I used is cannabis not in for setup where that currently there,

to be for from So, excited facility but the anxious yet we parts additional burn having aren't converted. that not not of expansion, can and

So, are, our expectation now, in is plenty costs like there's we're supply. if cost, the we're could We see case sell after we where to with market that phases after much going quality and we be see demand think to the of is the what to the X, growing, quality we had going and excited Xx going as that which the for we're that. and just be finished Phase targeting, as do we the additional to

Kyle Kazan

got numbers Mark, of on little And the some ask color -- let me a on Scott, second the question. bit he's

Mark Vendetti

to period. within XX-day EBITDA. Scott, sales a were agreement going to is out I and with our do target over EBITDA million credit sales So, $XX performance WhiteHawk, related metrics same the called that $X.XX think, over is period The that have say we and million target certain, I'm

ramp is facility, move that once the second we the expectation should our So, to the year-end. phase we'll project. on as hit before we hit And that, up of we

Scott Fortune

bringing you the onerous at how looking any provide process on helpful. regulations. California color. for owners standpoint you bureaucratic are bit organic the now? governors switching you. are retail you color of And make And little Thank to a it the I there's the to geared then legislature House are Are lot Obviously, the still at from of get slow [ph] what and interesting appreciate that the It's valuation expand here. also you and even that Can to the of in city then your California seeing? presence? then potential that store M&A -- looking impressed that? set kind potentially to taxes repeal And Glass retail retail board, on the stores proves, seeing these starting organic kind approaching that side, levels side, more

Kyle Kazan

Yes.

you I as engaged questions. focused, tell that, will imagine, Scott, we leaders. So, and you state can are good California with representatives being our very

just, think If that ROTH -- chance I away. our And would cultivation say tax I I you throw you people that, largest pin we're probably second me what me see that that XX% if the think cost Conference, would ask to at go to going grow ask I in. that's it's

be the were will it, development. make I to us, regards not the tell many ire adding look great will other in real They I of it to watching for it'll outs, they and just great So, ahead went any away here law, you, when ignore to it us illicit. local illegal governor tell I but the ADU from haven't it and pass competitive frustrated And and their the that threatened the be caught took estate does. big with you allows state California they owner went what In one they still mayors an the control city of which allowing local LA. to at of the talked just units market, more it'll is comes for will retail. of XX% when got the action, call legislature, cities and

And I are Nicole that you the Governor serious tell so, about increasing. and would

what little think bit a is that see -- of I up cities are is you'll we'd expectation see So, where velocity opening. my more more pick and

it kind we're losing of California, a not environment, last the are most So acquisitions, -- at. said, acknowledging we destructive regards you're companies now, the vertically right money. question, It's in call. like integrated that's if in to on is as looking And

go have a if And XXXE, really are two with if even stores, a or you it's banking. now. you right or you faced don't you and so, And have retailer stores, one tough have say, five

sure. next XX to interest going large think you to is there far. And see I'm I than tell consolidation a more tell start would have couple you're to we you us, that the other would too. I months So, speak that I with for XX But thus over companies to sure

Graham Farrar

Yes, I can that add too, bit just Scott. to a little

retail, which to legislative topics the And reform. the we exactly bills on spots governor lower more believe circulating that there's basically the side, there's four aiming at. right are [indiscernible], On be and currently two tax taxes

four reform So, circulating tax. removing proposes single bills one the of every on tax cultivation side, them there's the

still side, the improvement. conservative which on would want elsewhere, So, the an tax be most to they put

On XX% the most excise but aggressive proposing side, they're tax, not only tax cutting to to do they remove want from the X%. cultivation

mentioned, would basically that there's reform So, we're good still would And because side, that out in doing on the Kyle Kyle the give mentioned, our a of there. tack XX% to retail template XX%, a doing lot sell is they're to. so store, that's position municipalities, lot even into and The state the really they're is friction has and retail some have a revenue that a is ordinance where I on to because a brands an accretive a think vertical as be additional positive allowed from think own, been ban of stores. about unit a the them basis, integration they the breakeven can on door, in thing going developments cannabis us, our could own I we their which on to easy build very prohibited pathway a of from with not -- a have cities lot

integration the from we significant vertical a different lots in retail us. that And and everything and together. brands synergies even by that's ways power them still of increase represents the where a find CPG that's there's putting So store for and sales processing, breakeven taking can cultivation, of

Scott Fortune

in queue. unpacking jump for will Thanks the I that. appreciate and that, I back

Operator

are you. over There Brebeck, further Instructions] to Mr. you. no questions. Thank [Operator back

John Brebeck

in earnings. apologies. earnings Okay. about you been our call for to call welcome join our We in months for has 'XX a very us much. we QX This reporting QX month's our X when time, -- time Thank you

our hour. call. So, This Operator, joining early at us for thank concludes back you. turn you to this it all

Operator

and gentlemen, and call please today. concludes you thank your Ladies ask We participating conference this for you for Have great lines. your a disconnect that day.

Glass House Brands (GLASF) 17 Mar 222021 Q4 Earnings call transcript