Chicago-based Green Thumb Industries, a cannabis company that operates in 12 states, reported $194.4 million in revenue for the first quarter—a 90% increase year-over-year due to increased demand. Ben Kovler, the CEO and founder of Green Thumb Industries, says understanding what drove the company’s growth is not difficult.
“American consumers want more weed,” says Kovler. “It’s simple.”
GTI had a strong first quarter, reporting the second highest revenues in the industry, behind only Massachusetts-based Curaleaf, and the industry’s highest margin. According to a note published by Cowen on Thursday, one of the reasons GTI is the equity research firm’s top pick is because it has the industry’s “healthiest” adjusted EBITDA margin of 36.7%.
Net income for the quarter was $10.4 million, compared with a net loss of $4.2 million a year earlier. The company also reported its fifth consecutive quarter with positive cash flow, generating $40 million.
Matt McGinley, an analyst who covers cannabis at Needham, referred to GTI’s quarter as “perfectly boring” in a good way. “Green Thumb’s first quarter had better than expected revenue growth, steady margin rate, and strong free cash flow generation,” McGinley wrote. “Suffice to say, assets with high rates of growth and consistency are unusual in the cannabis industry, or in any industry for that matter.”
McGinley says that with industry demand accelerating, GTI’s prospects for growth over the next two years are “excellent.”
GTI, which has a total of 97 retail locations and 13 manufacturing facilities across 12 states, generated most of its revenue from its core markets of Illinois, Pennsylvania, and Nevada. But it is gearing up for new recreational use markets like New York, where it’s converting a former prison into a manufacturing facility, and expanding to new states.
Earlier this month, GTI announced an $83 million acquisition of medical cannabis operator Dharma in Virginia. Virginia, which is set to legalize adult-use by 2024, has a limited program that will only license five companies to grow and sell cannabis.
Kovler is bullish on Virginia. “We love the Virginia market,” he says. “It’s the beginnings of what’s happening in the South, which is currently a [legal] cannabis desert.”
With 8.5 million people in the state, Kovler says being one of five companies to serve a new legal cannabis market will put GTI in the right place at the right time.
Timing is important to Kovler. On Friday, GTI will open a Cookies branded dispensary on the Las Vegas Strip, down the street from the Strat Hotel. Started by Bay Area hip-hop artist Berner and a longtime grower who goes by Jai, Cookies is a popular brand known for its cannabis strains. On Thursday, customers began lining up for the store’s grand opening on Friday morning.
After a brutal year on the Strip, casinos have been approved by the state gaming board to return to 100% capacity and tourists are starting to return to Sin City. (Analysts still say the Strip won’t fully recover until 2024.) Kovler says the “roaring ‘20s” have officially started as more Americans get vaccinated, summer approaches, and the economy is opening back up.
“Tourism is coming back in the West and cannabis will be part of it,” he says.
Kovler believes that “cannabis is the next great American growth story.” The U.S. cannabis industry generated $17.5 billion in annual sales in 2020 and will transform into a $100 billion juggernaut by 2030, Cowen estimates.
“There’s a tidal wave of demand coming,” says Kovler, “It’s actually monstrous, with no drop off.”