Glass House Brands Inc. (NEO: GLAS.A.U) (OTCQX: GLASF) reported that revenues rose 7% sequentially bringing in $18.4 million in the fourth quarter ending in December. It was a 44% increase over the same time period last year. Glass House said that the sequential revenue growth was driven by wholesale biomass sales, which increased 31% over Q3 2021.
The adjusted EBITDA was a loss of $9.1 million which rose over the third quarters loss of $5.4 million. The sequential decrease of $3.8 million was primarily caused by lower wholesale pricing and inventory reserves in the quarter that negatively impacted gross margin.
Full Year Results
Glass House reported that revenue increased 44% in 2021 to $69.4 million, an increase of $21.2 million. The company attributed the rise to an increase in its CPG business and retail operations. Glass House’s CPG business increased 93% as a result of the strong growth in Glass House Farms branded sales. Retail sales increased by 50%, driven mainly by the full year impact of the company’s Berkeley store, which opened in January of 2021 and produced $6.8 million in revenue during the year.
The adjusted EBITDA was a loss of $11.8 million for 2021, compared to a loss of $0.3 million for 2020. The increase was due to a lower gross profit coupled with higher non-excludable operating expenses.
Kyle Kazan, Glass House Chairman and CEO said, “Looking at the quarter, despite a destructive wholesale pricing environment in California, we exceeded our original projections for top line revenue growth driven by a 31% increase in wholesale biomass sales versus Q3. Demand for our high-quality products has remained robust; and as our new facility gets up and running, we will be ready to meet it. We expect our Phase I retrofit at our SoCal facility to increase our annual production capacity by 180,000 pounds, bringing our overall total capacity to 270,000 pounds.
Wholesale biomass revenue increased 8% but was negatively impacted by large declines in wholesale prices, particularly during the second half of 2021. On average for the fiscal year, the company experienced a 38% decrease in flower prices and 45% decrease in smalls between 2020 and 2021. Had 2020 prices held throughout 2021, revenues would have been $12.1 million higher.
“With the first phase of our SoCal cultivation facility operational; and its construction on time and on budget; and the receipt of our nursery, cultivation and processing licenses, we are well on our way to becoming the top vertically integrated operator in California,” said Kazan. “I am delighted with our progress and thrilled to have started cultivation, with the first product sales expected in the third quarter, ahead of our initial projections.”
Glass House said that looking ahead and assuming wholesale and CPG pricing remain stable throughout this year and next, it will be able to fully utilize the Phase 1 capacity of the SoCal Facility and that production will be commensurate with current production metrics. Glass House believes this will put the company on a path to begin generating positive cash flow from operations by early 2023.
Mr. Kazan continued, “We have been expecting the commoditization of cannabis and related pricing pressure since we founded the Company. Consolidation has always been our thesis, and the distress in the market is what consolidation looks like. Wholesale flower prices are unsustainably low in California, and the other states which have experienced similar pressure bottomed before rising to a level which supports efficient cultivators. Growers of all sizes will be forced to discontinue operations unless they can find a way to decrease their costs. For this reason, I am particularly thankful that we leaned into the SoCal Facility, which should do exactly that. We expect our margins and top line growth to be directly and positively affected as we expand cultivation.”