Glass House Brands Reports Record Setting Fourth Quarter 2024 Financial Results

• Full year net revenue was $200.9 million, a 25% increase year-over-year
• Fourth quarter revenue was $53.0 million, up 31% year-over-year reflecting over 20% growth in all three business segments
• Fourth quarter adjusted EBITDA was $9.0 million, up 139% year-over-year
• Biomass production was 165,074 pounds in the fourth quarter, up 60% year-over-year
• Fourth quarter cost per equivalent dry pound of production was $110, down from $121 per pound for the equivalent period last year
• Fourth quarter consolidated gross profit margin was 43%, compared to 45% in Q4 2023
• Cash and restricted cash balance rose to $36.9 million on December 31, 2024, compared to $35.1 million on September 30, 2024
• Conference call to be held today March 25, 2025, at 5:00 p.m. ET

Fourth Quarter 2024 Highlights

(Unless otherwise stated, all results and dollar references are in U.S. dollars)

• Revenue of $53.0 million, an increase of 31% from $40.4 million in Q4 2023.
• Gross Profit was $22.8 million, compared to $18.0 million in Q4 2023.
• Gross Profit Margin was 43%, compared to 45% in Q4 2023.
• Adjusted EBITDA¹ was $9.0 million, compared to $3.8 million in Q4 2023.
• Operating Cash Flow was $8.2 million, compared to $1.4 million in Q4 2023.
• Equivalent Dry Pound Production² was 165,074 pounds, up 60% year-over-year.
• Cost per Equivalent Dry Pound of Production³ was $110 per pound, a decrease of 9% compared to the same period last year.
• Cash, Restricted Cash and Cash Equivalents balance was $36.9 million at year-end versus $35.1 million at the end of Q3 2024.

"2024 was another year of meaningful development for Glass House Brands positioning the Company for its next wave of expansion in the years ahead,” said Kyle Kazan, Co-Founder, Chairman and CEO of Glass House. "We commenced commercial operation of Greenhouse 5 in January, completing Phase II expansion at our SoCal Farm. Greenhouse 5 had its first full quarter of production and sales in Q2 and since that time, production volumes, quality and yields from this facility have all substantially exceeded our original expectations. In the fourth quarter, we began Phase III expansion, including the retrofit of Greenhouse 2 along with investments in related support facilities. We expect initial revenues from this facility by year-end, with production estimated at 275,000 pounds in its first full year of operation while generating consistently high-quality cannabis flower bringing total annual capacity to more than 1 million pounds of biomass.”

"We exited the year strongly, with fourth quarter results exceeding our initial guidance across most of our key metrics including revenue, gross profit margin, cultivation cost per pound, average selling price, adjusted EBITDA and operating cash flow. Consolidated fourth quarter revenue rose 31% year-over-year, reflecting over 20% growth in all three business segments. Our fourth quarter cultivation cost was $110 per pound, a considerable improvement compared to our original expectation of $125 per pound. For the full year, our cost of cultivation decreased 10% annually to $123 per pound. This decline represents an acceleration in the rate of cost reduction compared to 2023, when our cultivation costs fell by 6%.”

"Our retail and CPG teams also delivered strong quarterly results, including our best quarter for CPG wholesale revenues since the end of our distribution relationship with Herbl. Retail dispensary revenue grew 23% year-over-year to $12 million, which is particularly impressive given the highly competitive / destructive California retail sales market, which has shown negative growth since 2022 per Headset Data. These results reflect the strategic product initiatives we implemented throughout 2024, including our retail dispensary strategic pricing plan and the decision to focus on our top CPG brands specifically Glass House Farms, PLUS Products and Allswell.”

"In addition to these initiatives, we have also taken steps to strengthen our balance sheet. Recently, we secured a new $50 million senior secured credit facility that strengthens our balance sheet, significantly improves our cash flow and pushes out the maturity of our senior secured debt into 2030. This transaction was completed at attractive terms on par with non-cannabis businesses, which speaks to our lender's confidence in our vision for this company's continued expansion. Having said that, even with this greater financial flexibility, in 2025 managing costs and expenses will remain a priority as that is baked into our corporate DNA.”

"Looking ahead, in 2025 while we plan for pricing pressure in California to persist in the near-term, we will continue to drive operational efficiencies, execute on our strategic product initiatives and place emphasis on our leading brands to drive further growth throughout our retail, CPG and wholesale businesses. We have a winning strategy and even with our outperformance in 2024, we believe we are well positioned for above market growth this year. At the same time, we have obtained our hemp license for Greenhouse 4 and are actively growing and testing hemp-derived cannabis. It is clear that there is massive demand throughout the country, and we are confident that we could sell everything we grow, that is 2018 Farm Bill compliant. We intend to formalize our plans here by the second quarter of this year. Further, our Phase III investment plans remain unchanged, regardless of our plans for hemp,” Mr. Kazan concluded.

Subsequent Events

• Glass House Brands Announces New $50 Million Senior Secured Loan
• Glass House Brands Named to 2025 OTCQX Best 50 for the Second Year in a Row

Revenues for Q4 2024 were $53.0 million, representing growth of 31% compared to the year-ago period, and a 17% decrease from Q3 2024. All three business segments delivered more than 20% year-on-year growth. The sequential decline was consistent with historical seasonal trends.

The wholesale biomass business achieved revenue of $36.3 million, accounting for 68% of total revenue and increasing 36% versus the same period in 2023 and down 24% sequentially on seasonal trends. Biomass production grew by 60% year-over-year to reach 165,074 pounds.

Retail and CPG revenue combined increased 5% sequentially and 23% year-on-year to $16.8 million, reflecting the continued success of our retail strategic pricing initiative and consumer demand for our brands. It is also the fourth consecutive quarter that retail and CPG revenue have outperformed our guidance, despite the current highly promotional and price-driven retail landscape.

Q4 2024 retail revenue was $11.8 million, versus $11.2 million in the previous quarter and up 23% compared to $9.6 million the fourth quarter last year. Retail gross profit margin was 46% in the fourth quarter, up 2% percentage points from 44% in the third quarter reflecting our cost savings initiatives.

Wholesale CPG revenues were $5.0 million, representing 4% sequential and 22% year-over-year growth.

Fourth quarter consolidated gross profit was $22.8 million, compared to $18.0 million for the year-ago period and $33.4 million in Q3 2024. Gross profit margin was in line with guidance at 43% and compared to 45% in the fourth quarter of 2023 and 52% in the third quarter of 2024.

Average selling price was $220 per pound, compared to guidance of $195 to $220 per pound and to $272 in the fourth quarter of 2023.

General and administrative expenses were $14.8 million for the fourth quarter of 2024, up 11% from $13.3 million last year and 3% from $14.4 million in the third quarter.

Sales and marketing expenses were $0.64 million, roughly flat with $0.63 million during the same period last year and up slightly from $0.62 million in the prior quarter.

Professional fees were $1.4 million in Q4, compared to $0.9 million in Q3 2024 and $1.9 million in Q4 2023.

Depreciation and amortization in Q4 2024 were $3.9 million, up from $3.7 million in Q3 and up from $3.5 million in the same period last year.

Adjusted EBITDA was $9.0 million, down from a record high of $20.4 million in the third quarter of 2024 but up from $3.8 million versus the same period last year.

Operating cash flow was $8.2 million, compared to $1.4 million in the year-ago period and $13.2 million in the third quarter of 2024.

As of December 31, 2024, the Company had $36.9 million of cash and restricted cash, up from $35.1 million at the start of the fourth quarter. The Company spent $2.6 million in capex in the fourth quarter, which was mostly for Phase III expansion at Camarillo. The Company also paid $1.9 million in preferred stock dividend payments and $1.9 million in principal on the WhiteHawk loan in line with the terms of the credit facility before replacing it with our recently announced new $50 million senior secured loan which closed on February 28, 2025.

Year End 2024 Financial Results Discussion

Revenues for 2024 were $200.9 million, an increase of 25% from 2023, primarily driven by increased wholesale biomass production and sales from the Company's SoCal Farm.

Wholesale biomass revenue was $139.1 million, increasing 32% versus 2023. The Company sold a record high 568,000 pounds of wholesale biomass in 2024 versus 339,000 pounds in 2023, a 68% increase. Average selling price was $245 per pound during 2024, down 21% vs. 2023. Production grew 71% to 608,500 pounds, also a record high.

Retail revenue reached $43.8 million and increased by 12% versus 2023.

Wholesale CPG revenues were $18.0 million, compared to $16.1 million in 2023.

Full year consolidated gross profit was a record high $97.4 million, up 20% versus $81.0 million in 2023. Full year gross profit margin was 48%, a decline of only 2 percentage points compared to 50% in 2023 despite the meaningful broader price declines. The resilience of our gross profit margin despite the 21% drop in average selling price was enabled by a reduction in cultivation costs, tight cost management within retail operations and cost savings initiatives in our CPG supply chain and manufacturing processes.

General and administrative expenses were $60.1 million in 2024 compared to $52.9 million in 2023, an increase of 14%.

Our efforts to minimize operating expenses paid off again in 2024, as cash operating expenses, which exclude impairment charges, depreciation and amortization and stock compensation were $57.2 million, increasing by only 3% year-on-year. This is the second straight year in which cash operating expense was well below top line growth.

Sales and marketing expenses were $2.4 million, down 15% compared to $2.8 million in 2023.

Professional fees were $7.8 million, up 6% compared to $7.3 million in 2023.

Depreciation and amortization for the full year 2024 was $15.0 million compared to $14.6 million for the full year 2023.

For the full year, we generated a record high of $40.3 million of Adjusted EBITDA or a 20% Adjusted EBITDA margin. This compared to 2023 Adjusted EBITDA of $24.5 million.

Full year 2024 operating cash flow was $28.4 million, a $5.2 million increase versus $23.2 million in 2023. In both cases, the increase was primarily attributable to the increase in revenue and improvement in gross profit margin despite start-up working capital investment in Greenhouse 5.

2025 Outlook

The Company is providing the following guidance for the first quarter of 2025 based on the strength of fourth quarter and year end results and current trends in 2025. This guidance does not contain any operating impact from the Greenhouse 2 expansion.

Q1 2025 Outlook

We expect Q1 revenue to be between $42 million to $44 million, an increase of 43% year-over-year at the mid-point of guidance. Anticipated growth year-over-year reflects a meaningful increase across all business segments but led by wholesale biomass.

We anticipate Q1 biomass production of 144,000 pounds to 146,000 pounds, representing 136% year-over-year growth at the mid-point of guidance.

We project that the average selling price for wholesale biomass will be in the range of $190 to $200 per pound. This compares with $282 million in Q1 2024.

We project that Q1 2025 cost of production will be $130 per pound, compared to $182 per pound in Q1 2024.

We expect consolidated gross profit margin to be approximately 40%, versus 42% last year in Q1. Gross profit margin comparison stems from lower average sales prices being partially offset by reduced cost of production.

We project that adjusted EBITDA will be $1 million to $3 million versus a loss of $1.6 million in the first quarter last year and operating cash flow to be $1 million to $3 million, versus negative $1.9 million last year. Capex is projected to be approximately $9 million, primarily related to Phase III expansion. This will result in an expected cash balance of approximately $36 million at quarter end. Guidance does not include the $11.1 million Employee Retention Tax Credit payments.

Full year 2025 Outlook

We anticipate full year 2025 revenue to be between $220 million and $230 million, an increase of 12% year-over-year at the mid-point of guidance. Anticipated growth year-over-year reflects meaningful increase across business segments and led by wholesale biomass.

We anticipate full year biomass production of 760,000 pounds to 780,000 pounds, representing 27% year-over-year growth at the mid-point of guidance.

We project full year 2025 average selling price for wholesale biomass will be in the range of $215 to $220 per pound. This compares with $245 million in 2024 reflecting continued pricing pressure in California similar to 2024 as well as an increase in trim within the sales mix.

We project that 2025 cost of production will be $112 per pound, compared to $123 per pound in Q1 2024 with the decrease reflecting the benefit of increased scale, achieved operational efficiencies and process improvements which have improved yield from our plants resulting in higher contribution of trim production with very little incremental cost.

We expect consolidated gross profit margin to be approximately 48%, versus 48.5% last year. Gross profit margin comparison stems from lower average sales prices being partially offset by reduced cost of production.

We project that adjusted EBITDA will be in the mid $40 million range and for operating cash flow to be in the low $40 million range, versus $28.4 million last year. This will result in an expected cash balance of approximately $50 million at year-end. This ending cash guidance assumes $30 million of CAPEX primarily for Phase 3 expansion. Guidance does not include the receipt of $11.1 million Employee Retention Tax Credit payments or any additional use of the ATM.

Financial results and analyses will be available on the Company's website on the 'Investors' and 'News & Events' drop down menus (www.glasshousebrands.com) and SEDAR+ (www.sedarplus.ca).

Unless otherwise stated, all results are in U.S. dollars.