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Why Green Thumb Industries' Marijuana Sales Soared in Q4

By Keith Speights - Mar 27, 2020 at 7:02AM

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But the news wasn't as great for the U.S. cannabis operator's bottom line.

It's been a thumbs-down year so far for Green Thumb Industries (GTBIF 2.50%). The stock market crash caused by coronavirus worries has dragged the cannabis producer down big time, with its shares sinking nearly 60% earlier this month before rebounding somewhat.

Green Thumb Industries (GTI) announced its 2019 fourth-quarter and full-year results after the market closed on Thursday. Was there news that could help accelerate the stock's comeback? Here are the highlights from the company's Q4 update.

Shadow of a dollar sign over cannabis leaves

Image Source: Getty Images.

By the numbers

Green Thumb Industries announced fourth-quarter revenue of $75.8 million, a 265% increase from the $20.8 million reported in the same quarter of the previous year. This result was pretty much in line with the average analyst's Q4 revenue estimate of $75.74 million.

The company reported a net loss of $13 million, or $0.06 per share, based on generally accepted accounting principles (GAAP). Analysts expected a net loss of $0.03 in Q4. GTI posted a loss of $3.1 million, or $0.02 per share, in the same period in 2018. However, the financial results in the prior-year period used International Financial Reporting Standards rather than GAAP.  

GTI ended the fourth quarter with cash and cash equivalents of $46.7 million. Subsequent to the quarter, though, the company completed a sale-leaseback deal with Innovative Industrial Properties for two facilities that increased its cash stockpile by $57.2 million.

Behind the numbers

The tremendous year-over-year revenue growth was driven by several factors. GTI opened six new stores during Q4 in Florida, New Jersey, Ohio, and Pennsylvania. The company also achieved 50% year-over-year same-store-sales growth based on 14 stores that had been open for at least 12 months during the fourth quarter.

GTI's branded product sales in Q4 increased 10% from the third quarter of 2019. The company attributed this growth primarily to strong demand in Illinois and Pennsylvania. At the end of the year, GTI's branded products were sold in more than 700 retail stores, including its own Rise and Essence retail cannabis stores.

The cannabis operator also saw its Q4 gross profit margin increase to 54% from 51.2% in the previous sequential quarter. GTI said that this improvement stemmed from increased operating leverage at its production facilities, higher retail sales, and increased sales in its company-owned retail stores.

Looking ahead

Green Thumb Industries should deliver significant revenue growth in 2020 thanks to the launch of the recreational marijuana market in its home state of Illinois. The company hopes to replicate its success in Illinois in other states. CEO Ben Kovler said, "Illinois is a model for what's to come in states like Pennsylvania, New Jersey and Connecticut where we also have a strong position and are actively scaling."

Look for high levels of volatility with marijuana stocks, though, especially over the short term. It remains to be seen how the coronavirus pandemic will impact U.S. cannabis operators. The good news for GTI so far is that its retail cannabis stores have been designated as essential businesses in states that have required non-essential businesses to temporarily shut down.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Green Thumb Industries and Innovative Industrial Properties. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Green Thumb Industries Stock Quote
Green Thumb Industries
GTBIF
$11.09 (2.50%) $0.27
Innovative Industrial Properties Stock Quote
Innovative Industrial Properties
IIPR
$98.44 (2.15%) $2.07

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