Glass House Loses $39M Despite Increasing Revenue

Glass House Brands Inc. (NEO: GLAS.A.U) (OTCQX: GLASF) managed to increase revenues year-over-year by 108% but also lost nearly $39 million in the first quarter of 2023, the company reported in its earnings on Monday.

The losses are up 195% year-over-year, following a $19.8 million loss in the same time period a year prior, and are up 231% from the final quarter of last year, when Glass House posted a $16.7 million loss.

The company also asserted that it had to pay a “non-cash impairment charge” of $23 million this past quarter “related to the Plus Products Holdings acquisition.”

But Glass House leadership said they were confident in their vertically integrated business model, particularly with increasing wholesale prices in California, which the company said should bolster revenues through 2023.

“Our performance in the first quarter of 2023 continues to demonstrate that our unique business model has significant competitive advantages that we are just beginning to unlock, which we expect will lead to tremendous growth in both revenues and profitability in the future,” CEO Kyle Kazan said in a press release.

Revenues for Q1 were $29 million, up 108% from $13.9 million a year ago, though the result was also down sequentially from Q4 by 10%. Wholesale revenues, retail revenues and consumer packaged goods revenues were all up year-over-year, but were down from Q4, which the company said was due to seasonality.

Wholesale Rebound

But the California cannabis wholesale market has begun rebounding since a widespread price decline started in Q2 last year, Glass House reported, which marked some of the quarter’s bright spots for the company.

It reported that wholesale prices for cannabis biomass surged to $290 per pound, which led Glass House to revise its financial projections for 2023:

• Second quarter revenue projected to be $38 million-$40 million, a significant increase from Q1, and revenues for all of 2023 are expected to hit $160 million.
• Average selling wholesale price is expected to climb as high as $330 per pound, and Glass House is expecting to grow 315,000 pounds of cannabis this year, up from an anticipated 310,000.
• Consumer packaged goods revenues were revised downward to $20 million from $25 million due to the “difficult retail landscape.”
• Retail revenue from Glass House’s four retail stores was also revised downward, to $40 million from $50 million, due to the “extremely competitive marketplace” and “new stores not meeting internal projections.”

Part of the reason that Glass House is bullish on its wholesale prospects is the contracting legal cannabis farming landscape in California, Kazan said.

“We are increasingly optimistic about future pricing trends based on the latest results in our business as well as what we are seeing across the industry in California relative to capacity and licensing renewals,” Kazan said. “From June 2022 through the end of April, we estimate licensed California cultivation capacity has fallen by more than 16 million sq. ft. of canopy, representing about a 21% reduction in acreage under cultivation.”

Also in Q1, Glass House:

• Opened its ninth Farmacy-branded retail location, a shop in the town of Santa Ynez.
• Closed a $4.7 million Series C stock offering.
• Announced the addition of another 1 million square feet of greenhouse space at its cultivation facility in Southern California, which will roughly double its production capacity.