Cannabis Watch: Green Thumb Industries CEO eyes cash flow in vein of Warren Buffett


Green Thumb Industries Inc. CEO Ben Kovler may be part of a new industry, but he gets inspiration from a major figure from the establishment, billionaire Warren Buffett.

“Warren Buffett said cash is like oxygen for a business – if you don’t have it, you’re gone,” Kovler told MarketWatch.

Kovler takes that adage to heart when running Green Thumb Industries GTBIF, -7.57% GTII, -6.32%, which manufactures and distributes a portfolio of branded cannabis products and which ended the first quarter with about $175 million in cash.

Of all the numbers in the company’s stronger-than-expected earnings, Kovler highlighted that Green Thumb Industries generated $55 million in cash during the quarter.

“For us, it’s all about continued execution, even though there’s a lot of noise, as we continue to build out a strong business,” Kovler said. “The business is producing cash with a protective moat of capital around it. We continue to invest capital in where we see opportunities such as Virginia, New York and Minnesota.”

For the first quarter, Green Thumb Industries said its earnings rose to $28.9 million or 12 cents a share, from $10.4 million, or 5 cents a share in the year-ago quarter.

Revenue increased 25% to $242.6 million from $194.4 million in the year-ago period as it opened 20 new stores and ended the quarter with 76 retail stores.

Wall Street analysts expected Green Thumb Industries to earn 6 cents a share on revenue of $237.6 million, according to FactSet data.

Green Thumb said the three months ended March 31st marked its seventh consecutive quarter of positive net income.

Benchmark analyst Mike Hickey said Green Thumb fell $7 million short of the analyst target of $74 million in adjusted operating earnings before interest, taxes, depreciation and amortization (Ebitda) and also below the year-ago figure of $71.4 million.

The miss “largely reflected inflation on raw material input and additional compensation for talent throughout the organization,” Hickey said. “The decrease also reflected pricing headwinds in Pennsylvania, Nevada and Massachusetts. We are cautious on inflationary impacts over the consumer and operating expenses, which could sustain over the medium term.”

Hickey estimates Green Thumb’s New Jersey business will generate $625 million to $775 million of revenue in 2022.

Kovler confirmed analyst comments that profit margins have been lower in some markets as they mature, but some areas could be sparked for more growth if adult use cannabis becomes legal.

One of Green Thumb’s fastest-growing product is Dogwalkers pre-rolled cannabis cigarettes, he said. The company donates a portion of sales from the product to local animal shelters.

“We can write a check [to the local shelter] and they can create more adoptions and we can make an impact and create more positivity,” Kovler said.

Green Thumb Industries shares are down 46% in 2022 compared to a loss of 45.8% by the AdvisorShares Pure US Cannabis ETF MSOS, -5.71%, including sharp losses in Thursday’s stock market swoon.

Also Read: Stifel and JPMorgan analysts trade blows on Scotts Miracle-Gro’s valuation

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