Glass House Group: Quarterly results

Glass House Group recently reported their quarterly numbers and also had their first conference call. The numbers on face value don’t look amazing but they actually were really good considering what is happening in the California cannibas market.

The company reported 29% Y-O-Y revenue growth. This doesn’t look great for a company operating in the biggest cannibas market in US. Although California market has been flooded with oversupply of cannibas. The demand is growing in California and the company is doing really good in building itself as the best brand in the biggest market. Their brand, Glass House Farms, got the 1st rank in the brand category. Also with company’s cost of production was $179/lb. This is amazing given lot of companies have production cost at multiples of this price.

The production costs will be a huge advantage as the California market goes through a shake out. The over supply is going to take out the inefficient players and consolidate the market. GHG having a cost advantage will be a huge moat. They already have the best flower in the market. Now if they can lower the cost to $100/lb, management re-iterated this is their goal once the 5.5M sq ft of production comes online, then you have the best brand at the lowest cost. The lowest cost allows the company to ride through these oversupply market conditions. Also it allows them to strategically get stronger by buying up assets at discounted prices.

I think the company is going to get stronger as we see the California market consolidate. We will see the company get a bigger moat as we get through this market correction.

I’m a backing up the truck and loading up. I highly recommend listening and re-listening to their conference call.

2 responses to “Glass House Group: Quarterly results”

  1. I am too considering adding to my position. I know the market has punished some of managements decisions but in my opinion they were the right decisions for long term shareholder value. I am really considering buying some of the common stock since at the current price the shares look more attractive than the warrants since the warrants are at least a 2X out of the money at this point. It would be good to hear the thoughts of a fellow shareholder.

    • Both are really cheap and I have considered buying both. You can win substantially with either one at these prices. The way I see it is in 5 years what do you think will happen. They have 3 different segments in which they can win: retail, wholesale distribution, brands. A winner in any 1 of those 3 would mean this company is a huge winner. So I look at what can happen in 5 years and then see where the stock or warrant would be priced.

      The warrants are 6 year out. So if the company is not able to deliver in 5 or 6 years, then there isn’t much optimism that they can deliver in year 7 or 10. So I don’t view the 6 year expiry of the warrants as a negative.

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