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Green Growth Brands: Revenues Rose 29% in Q4


Oct. 24 2019, Updated 12:22 p.m. ET

On Wednesday, Green Growth Brands (GGB) (GGBXF) reported its fourth-quarter earnings after the market closed. For the quarter ending on June 30, the company reported revenues of $7.2 million—a rise of 29.2% from $5.6 million in the third quarter. Overall, the growth in the MSO (multi-state operations) business and CBD operations drove the company’s revenues.

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Green Growth’s fourth-quarter performance

During the quarter, Green Growth’s MSO business generated $5.5 million—an increase of 7.0% from the previous quarter. The revenues from the company’s CBD operations grew 271% sequentially to $1.7 million.

Green Growth stated that its Los Vegas dispensary, The+Source, generates revenues at an annualized rate of $15,000 per selling square foot—one of the highest rates in the industry. At the end of the fourth quarter, the company operated 58 CBD shops. Notably, 52 shops opened in the fourth quarter.

In a press release, Green Growth CEO Peter Horvath, said, “In a short-time we have built a pathway to open up to 47 dispensaries in three key states and established the first, best and only vertical CBD distribution network in the country.”

He also said, “As we look ahead to fiscal 2020, our focus will shift from foundation building to operating and executing, which we expect to result in a steep sequential growth in both our CBD and MSO businesses.”

Higher net losses

For the fourth quarter, Green Growth reported a net loss of $31.5 million or $0.19 per share. In comparison, the company reported a net loss of $0.07 per share in the third quarter. The lower gross margin, higher operating expenses, and higher other costs raised the company’s net losses. Meanwhile, Green Growth’s gross profits fell from $108,477 to -$576,101. The operating expenses increased from $17.1 million in the third quarter to $20.1 million.

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Recent acquisitions

In August, Green Growth completed its acquisition of Spring Oaks. The acquisition gave the company licenses to open and operate 35 dispensaries in Florida. Also, the company completed the acquisition of Henderson Organic Remedies in August.

Expansion in the CBD business

In December 2018, the US legalized hemp—a type of cannabis that contains less THC and more CBD. In May, BDS Analytics and Arcview Market Research expected the US CBD market to reach $20 billion by 2020. So, several cannabis players are expanding their CBD operations in the US. Currently, Green Growth operates 160 CBD shops. The company plans to open 200 stores by the holiday shopping season.

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Peers’ CBD operations

In July, Aurora Cannabis (ACB) signed an agreement with UFC to conduct a clinical research program to test the effectiveness of hemp-derived CBD in treating various ailments in MMA athletes. The company plans to utilize the data to develop hemp-derived CBD topicals. For more on the company’s CBD initiatives, read Aurora Cannabis Focuses on the US CBD Market.

Canopy Growth (CGC) (WEED) is also expanding its CBD operations in the US. During the first-quarter earnings call, the company’s management announced that it planted hemp in thousands of acres in association with American farmers. The company added that it acquired processing capabilities and hemp biomass to produce CBD products. Recently, Canopy Growth acquired a 72% stake in BioSteel Sports Nutrition, which provides it an entry to the sports nutrition products segment.

To drive the CBD business, Cronos Group (CRON) acquired four of Redwood Holding Group’s subsidiaries in September. These companies manufactured hemp-derived CBD infused skincare and other products under the brand name “Lord Jones.” Cronos Group will report its third-quarter earnings on November 12.

Green Growth’s stock performance

On Wednesday, Green Growth closed the day 1.3% higher before the announcement of its fourth-quarter earnings. However, the company has lost 67.3% of its stock value YTD as of Wednesday. During the same period, Aurora Cannabis, Canopy Growth, and Cronos Group have fallen 28.9%, 22.7%, and 20.3%, respectively.

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