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2/28/2023
Good afternoon, and welcome to the Green Thumbs fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the conclusion of formal remarks. During the question and answer session, we would ask for a limit of one question per person. As a reminder, a live audio webcast of the call is available on the Investor Relations section of Green Thumbs' website. and will be archived for replay. I'd like to remind everyone that today's call is being recorded. I will now turn the call over to Shannon Weaver, Vice President of Communications. Please go ahead.
Thank you, Betsy. Good afternoon, and welcome to Green Thumb's fourth quarter and full year 2022 earnings call. I'm here today with founder and CEO Ben Kobler, President Anthony Georgiades, and Chief Financial Officer Matt Faulkner. Today's discussion and responses to questions may include forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. These risks and uncertainties are detailed in the earnings press release issued today, along with the reports filed with the United States Securities and Exchange Commission and Canadian securities regulators, including the 2021 annual report filed on Form 10-K. This report, along with today's earnings release, can be found under the Investors section of our website. Greensum assumes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. Throughout the discussion, Greensum will refer to non-GAAP financial measures, including EBITDA, adjusted operating EBITDA, and adjusted net incomes. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is included in our earnings press release and SEC and CEDAR filings. Please note all financial information is provided in U.S. dollars unless otherwise indicated. Thanks, everyone, and now here's Ben.
Thanks, Shannon. Good afternoon, everyone, and thank you for joining our fourth quarter and year-end 2022 conference call. have evolved the format for today's call now that anthony has assumed the role of president and matt is our new cfo i'll lead off with an overview of our results and some observations on the current state of the industry anthony will discuss our operations matt will dive into the financials and then i'll close with some final comments all right so let's get started we feel good about our fourth quarter and full year 2022 results hosting 259 million dollars of revenue with $81 million of adjusted operating EBITDA, and $1.02 billion in sales, with $311 million of adjusted operating EBITDA, respectively. Like other companies across industries, we face new challenges in 2022. The highest inflationary environment in 40 years has hit consumers in the pocketbook, high interest rates that further squeeze access to capital, especially in cannabis, and the concern about a recession that continues to loom over the economy. Even so, Green Thumb reached a new milestone in 2022 as we crossed $1 billion in revenue. This is a 14% increase in revenue year-over-year, and it represents nearly 5x category growth, which was 3%. But 2022 was not just an income statement differentiator for Green Thumb. We are also proud of our year-ending cash position of $178 million and full-year cash flow from operations of nearly $160 million, both of which are net of paying the government almost $120 million in cash. Additionally, in 2022, we extended the maturity of our senior debt $250 million at 7% to April 2025. On a GAAP basis, we reported a net loss of $51 million in the fourth quarter and net income of $12 million for the year. both of which included $89 million impairment charge related to our Nevada business that Matt will cover in more detail. Without this impairment charge, our net income would have been $12 million for the fourth quarter and $75 million for the year. I also want to point out that concerns around price compression in our industry are very real. The days of bad margins and easy money in cannabis are waning. As people digest punitive tax rates and high costs of capital, the dollars run out and margins slip. We are in the midst of a washout that will leave the industry with fewer operators, not more. This is ironic as politicians and operators are talking about including more folks, not less. The pricing pressure has squeezed margins to a spot that given 280E, there is not the cash flow for the marginal player. But if we zoom out, we see year-over-year unit growth of 28%, which is the best indicator for us of debt consumer demand given the changes in pricing. This massive unit growth on a like-for-like basis continues to show us that cannabis is an essential purchase for American consumers. By now, you probably know that cash is king at Green Thumb. It guides every decision we make and every dollar we spend. Given no meaningful federal relief on 280E and banking restrictions, having a strong balance sheet is absolutely critical to executing our growth strategy and creating sustainable value for our stakeholders. Over the past three years, we have paid $340 million in state and federal income tax. To give you a glimpse at some of the irony in current tax policy, during that same time, Illinois collected over $1 billion in cannabis tax dollars. Yet our business and new social equity startups in Illinois cannot deduct dispensary employee wages or dispensary rent on their Illinois tax return. A solid double dip by the state. The U.S. cannabis industry reached $26 billion in 2022. That is tremendous growth from virtually zero a decade ago. This kind of growth attracts a lot of prospectors and get-rich-quick hopefuls. For a variety of reasons, these folks will get caught and eaten by the bear. We believe true success in this industry boils down to managing capital and producing amazing products. We believe in Rhythm, Dog Walkers, Incredibles, and Bebo. We've been doing what we said we would do since going public in 2018. So by now, most of you know us. Focused, disciplined, hardworking, and true believers in the right to well-being through cannabis and the long-term viability and vibrancy of our industry. For those just getting to know us, we look forward to demonstrating these traits to you consistently over the short and long term. We are confident that our company is in good shape to weather the macro turbulence by paying attention to the fundamentals, studying the consumer, and practicing common sense while running a sustainable business. What does worry me is the dimming promise for fresh participation in this industry, especially for black and brown entrepreneurs. Green Thumb has strongly advocated for the opportunity to build wealth among those most impacted by the war on drugs. With the best intentions, many states instituted social equity license programs. This generated a lot of excitement and hope in those communities. But there's been some unintended consequences that have led to widespread disappointment. When you're in an industry with severely restricted access to capital and you have to contend with the 280E tax penalty as a single operator, it becomes very difficult to create real value once awarded a license to operate a retail or cultivation facility. The very people that social equity licenses were supposed to help are left pretty helpless. We believe everyone would benefit from a solution to these problems from the federal government. Consumers would have more buying options, a new cohort of entrepreneurs would emerge, communities would thrive from new business formations, and existing operators could expand product distribution. Until then, Green Dump will continue to fight the good fight by advocating loudly and supporting organizations and programs geared towards preparing those entrepreneurs for the hurdles ahead. It is by no means hopeless, but it's taking too long for state social equity programs to achieve meaningful results. With almost 9 out of 10 Americans favoring some form of cannabis-led legalization, you would think federal representatives would pay closer attention to their constituents and pass safe banking. But right now, the best way to create change is to drive more people to vote, especially the younger generations. That's why Rise Dispensaries is a premier sponsor of Ed Count's Cannabis Voter Project, and we look forward to registering new voters and increasing voter participation across the country at dispensaries as well as concerts and festivals. We look out and continue to see an industry that can triple in size over the next decade. And while we have entered the middle innings, this is a marathon, and not all runners will finish. We are confident in the agreements we have in place since 2014. We have the right team, the right assets, and the right states. We respect the plant, believe in the product, and the well-being it creates. Now I'll turn the call over to Anthony, our newly appointed president, to talk about our operational progress in 2022 and what to expect in 23. Anthony?
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