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Green Thumb Industries Q2 Results: 1 Thumb Up, 1 Thumb Down

By Keith Speights – Aug 28, 2019 at 10:15PM

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The U.S. cannabis operator tripled its revenue from the prior-year period but reported a deteriorating bottom line.

Green Thumb Industries (GTBIF -4.00%) , or GTI, delivered record-high sales of $27.9 million when the company reported its first-quarter results in May. Unfortunately, the news wasn't good enough to halt the cannabis stock's slide. GTI's shares had more than doubled year to date by early April but have since given up most of those early gains.

The U.S. cannabis operator announced its second-quarter results after the market closed on Wednesday. Here's what you'll want to know about GTI's latest quarterly update.

Shadow of a dollar sign over marijuana leaves.

Image Source: Getty Images.

By the numbers

Green Thumb Industries reported Q2 revenue of $44.7 million, a whopping 228% year-over-year jump and an impressive 60% quarter-over-quarter increase. This figure easily beat the consensus Wall Street analysts' Q2 revenue estimate of $38.9 million.

The company posted a net loss in the second quarter of $22.2 million, or $0.12 per share. In the prior-year period, GTI recorded positive earnings of $392,888. Analysts expected the company to report a net loss of $0.04 per share.

GTI announced negative earnings before interest, taxes, depreciation, and amortization (EBITDA) of $9 million in Q2, with adjusted operating EBITDA of $5 million. In the first quarter of 2019, the company recorded an adjusted operating EBITDA loss of $0.4 million.

The company ended the second quarter with cash and cash equivalents totaling $135.8 million. It had $96.3 million of total debt.

Behind the numbers

GTI's sequential revenue growth in Q2 was the highest ever for the company. This growth was fueled by organic growth with the company's consumer products and retail operations, including increased traffic in its Rise and Essence retail stores. GTI also benefited from the acquisition of Integral Associates in Nevada.

Green Thumb Industries has a presence in 12 markets and generated revenue in Q2 from 10 of them. The company especially enjoyed heavier store traffic in Illinois and Pennsylvania.

While GTI set records with its soaring sales, the company's bottom line didn't look so great. Its operating expenses increased significantly. GTI also incurred much higher interest expenses as a result of its increased debt load. In addition, the company's year-over-year comparison was negatively affected by the decrease in value from a variable note receivable, which caused a swing from $34.5 million in total other income in the prior-year period to a $12.3 million expense in the second quarter.

Aside from its financial performance, GTI also made operational progress in the second quarter. The company launched a rebranding of its Rise cannabis retail stores to improve the customer experience. It also opened six new stores in the second quarter as well as three new stores after quarter end.

Looking ahead

GTI completed several acquisitions in recent months that should boost its future revenue. The company also plans to open nine new stores by the end of 2019, bringing its total store count to as high as 40. GTI owns licenses for up to 95 retail cannabis locations.

Investing in marijuana stocks can be tricky, though. GTI's poor stock performance in recent months, despite its tremendous sales growth, underscores the challenges for investors. There could be plenty of volatility ahead for GTI. But if the company can keep its rapid revenue growth going while also achieving progress in improving its bottom line, the stock should resume its winning ways from earlier this year.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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