Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 11% year-over-year to $280 million.
- EBITDA reached over $90 million, showcasing strong profitability.
- Cash flow from operations was $20 million after significant tax payments.
- Repurchased 1.6 million shares for approximately $20 million, indicating confidence in the company's value.
- Strong brand presence with top-rated brands like RYTHM, Dogwalkers, Incredibles, and Beboe.
Negative Points
- Continued price compression in most markets, affecting overall revenue.
- Inflationary pressures and national anxiety around upcoming elections create uncertainty.
- Retail revenue decreased by 9% compared to the prior-year period.
- Second-quarter comparable sales decreased by 2.3% from a base of 76 stores.
- Increased SG&A expenses, driven by compensation costs and the addition of new retail stores.
Q & A Highlights
Q: Ben, just wondering if I can get a little more color from you with respect to your anticipation in Ohio. Not in terms of specific monetary guidance or anything like that, but if you relate it to maybe what we saw in Maryland, where that was almost effectively a doubling of the market within months. Given that you're already at the state level max of five, I'm just wondering if you can give us an idea of what the back half of the year might suggest, considering that market turning online tomorrow.
A: Hey, Matt. Thanks. It's Ben. Yes, you're right. I mean, just to level set for everybody, on Friday, we learned that Ohio started adult use tomorrow, so Tuesday of this week, which is tomorrow. For RISE, that means all five stores will convert to -- 21 and older folks can come in and buy for the first time. And this is not new for us, right? Like you said, Matt, we led the charge in New Jersey. We led the charge in Maryland. We led the charge in Illinois. We've around for Nevada, Massachusetts, New York, and several others. So we're optimistic. I'm not sure what else to tell you except numbers. So the numbers I would tell you, yeah, we think it easily will double as the market. Holistically, it should be bigger. Ohio has been hampered for several different reasons, product, branding, sizing. We're optimistic about the new regulator in the future, and we're excited about tomorrow. We don't see a gangbuster boulder in a pond start. We see crawl, walk run, making sure this thing gets off to a good start. Everybody's on the same page, and we're excited for tomorrow. I'll be out there. Everybody's welcome. 21 and over, bring your ID. I will see you at RISE throughout Ohio.
Q: Your ability to continue gaining market share and realizing operating efficiencies continues to be impressive. Can you talk about where you see opportunities to continue that momentum and how that plays into your CapEx plans for the second half? And then just kind of higher level, should we be thinking about your efficiency gains and ability to kind of offset price compression as more a function of CapEx projects or operating cost leverage?
A: Yeah, I can start, Eric, and maybe Anthony will come in on the second part. So I mean I think the first part is where the growth, where are we optimistic, going forward, and I think -- we think when you have an edge on the vision of what's happening in cannabis in the country. So it's like to have the pieces in place ahead of time, which means tomorrow morning, open five stores for nonmedical sales in Ohio. And what that means in the next year or two, places like Virginia, Minnesota, and a few other states on the market. And then it's even thinking outside the box and being ahead of that. So we have a balance sheet to do it and we have the ability and the power to make a few mistakes too and not slip over the boat. So we see we see our ability to play offense and really accelerate on the gas and press and press big time. That's what we do to the advantage of shareholders. So it's a pretty good situation where we are there in terms of the actual detail of the operating efficiencies and price.
Q: Ben, can you maybe give more context regarding your letter to Jim Koch regarding the merger with Boston Beer. I mean, obviously, I know it's something that you guys thought through very carefully, and it's not a publicity stunt, for sure. But they are low growth, right? Why dilute your story with a low-growth company? The idea of a US listing, I mean, Boston Beer could lose their Nasdaq listing if they were to merge with a (inaudible) touching company, right? At least that's what we've seen from other cases, even the ones that are trying to have ring fence structure. So maybe just some context about what you try to do there.
A: Yeah, thanks, Pablo. It's Ben. I honestly don't have much more to say than the letter. I think we've been pretty forthcoming where our thinking is. So I'm not going to rearticulate it here. Just for the record, there are listed companies on US exchanges that own licenses to operate marijuana in regulated markets,. They're taking in revenue and they're listed. So we think US listing is just a matter of time and the right lawyers, the right conversations, and the right blow of the wind for people to feel the right cover. But again, for the US American citizens to not be able to buy stock in the American company that rolls the joints that they smoke doesn't make any sense. So eventually, we know that's going to be a fact. Buy what you own. Peter Lynch style investing should take over for the sector because American consumers and especially young, new , interested consumers want to have access to this sector. And so far, it's been blocked out. It doesn't make sense. Again, there's 428,000 Americans that work in cannabis and they're all breaking federal law right now. And you know, everything DC seems distracted and not quite able to get around to it. So it's quite frustrating, but we view Green Thread as a listing on the US exchange here eventually. I can't tell you when, but obviously, we will follow in the footsteps of the other big companies that are listed on the New York Stock Exchange or Nasdaq that are in the marijuana business.
Q: Could you provide some color in terms of standouts in terms of formats or brands or where you have seen the most success in the first half of the year for that? And then you've spoken about pricing pressure in the sector. Can you speak to your current comparability in terms of the price gaps within respective price segments and whether or not that's changed and driven some of the success that you've seen?
A: Okay. So yeah, let's answer that first. So in terms of the products, the brands, look, RYTHM and Dogwalkers, along with strength within the Incredibles and Beboe depending on the market and where they're launched, right? But overall, we're pretty pleased. Look, we look at the same data as everyone else. We take a look at BDSA and Headset data. And in many markets, we're making strong progress. There are some markets where maybe we're not making the progress that we'd like to make. I can tell you we're going to be working hard on those. But taking a step back, we feel really good about the progress we've made thus far. And again, it comes back to high-quality products, right? We've got strength within the flower category, given how we kind of build this business, with highly automated indoor facilities that can achieve just exceptional humidity and temperature levels and whatnot. So we have the ability to produce the high-quality flower. That helps us on the RYTHM side as well on the Dogwalkers side of the business. And then it's really just continuing to meet the consumer with where the demand is within the category such as pre-roll
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
