As the biggest, multi-state cannabis companies report third-quarter earnings, a familiar theme is emerging: net losses.
Verano Holdings, which runs 158 dispensaries nationwide, reported a net loss of $44 million on $203 million in revenue. Cresco Labs, which runs 71 dispensaries nationwide, reported a net loss of $22 million on $165 million in revenue. Curaleaf, which runs 157 dispensaries nationwide, reported a net loss of $48 million on $274 million in revenue. Trulieve, which runs 232 dispensaries nationwide, reported a net loss of $27 million on $288 million in revenue.
And then there’s Green Thumb Industries (GTI). It runs 108 dispensaries nationwide and it just reported a net income of $23 million on $291 million in revenue. The company did post a small loss in the second quarter but otherwise it’s been able to string together a lot of positive quarters. So, what is it doing differently?
CEO Ben Kovler attributed his company’s success to maintaining a strong balance sheet.
“Our strong financial position also provides the headroom to stay forward-thinking amid persistent industry challenges. While federal reform remains uncertain and 280E taxation and limited access to capital continue to weigh on operators, cannabis demand continues to rise, making it one of the largest and fastest-growing consumer categories,” he said in a statement.
Kovler elaborated on that during his company’s third-quarter earnings call.
“...[We] always have enough cash on hand to be able to sleep very well. We understand our debt. We love our balance sheet, and we're investing in the facilities. We're investing in growth. We're investing, as [Green Thumb President Anthony Georgiadis] talked about, in Minnesota, in New York, and other places. We're ahead of the adult use markets in a couple states as they come, hopefully Virginia,” he said. “And then we have, you know, funds looking for strategic M&A that could make sense. But we're okay sleeping with a lot of cash, excess cash.”
Alan Brochstein, founder of Investor 420 and a cannabis industry analyst, said that Green Thumb is able to consistently post profits because it’s run more conservatively than other similar companies in the cannabis space.
“GTI has a much better balance sheet than its peers, and it isn't playing the very nasty games that its peers do regarding tax liabilities,” he said.
Brochstein pointed toward GTI’s income tax payable and deferred income taxes, which together total just $160 million, or about 55% compared to the company’s quarterly revenue. In comparison, GTI’s two largest peers have much higher tax liabilities:
Curaleaf at $759.1 million, or about 237% of last quarter's revenue; and Trulieve at $798.1 million, or about 277% of last quarter's revenue.
Of course, GTI isn’t operating without any exposure. The company is closely tied to RYTHM (formerly Agrify), a hemp-derived THC brand, through a licensing agreement. Kovler also serves as chairman and interim CEO of the company, which now faces serious threats to its business model after the Senate passed a government funding bill including a ban on hemp-derived and hemp-based THC products.
But overall, as the U.S. cannabis industry continues to face headwinds and regulatory challenges, GTI could be one of the best equipped to weather the storm.
