Mr. Kyle Kazan reports

GLASS HOUSE BRANDS PROVIDES UPDATED GUIDANCE FOR FOURTH QUARTER AND FULL YEAR 2024

Glass House Brands Inc. has provided updated guidance for key metrics for fourth quarter 2024 and full-year 2024.

"I'm very excited to share that we are updating our guidance for Q4 2024 and full-year 2024 for key financial metrics," Kyle Kazan, co-founder, chairman and chief executive officer of Glass House, commented. "Two thousand twenty-four marked another year of rapid growth capped off by a fourth quarter that we expect to exceed the guidance provided in our Q3 2024 earnings call across all key areas, including revenue, gross margin, cultivation cost per pound, average selling price, adjusted EBITDA and operating cash flow. We expect to set new record highs for a variety of financial measures, including full-year revenue, wholesale biomass production and adjusted EBITDA.

"I want to extend my sincere thanks to our shareholders for your continued trust and support of our vision. We are also grateful to our employees, business partners, consumers and the communities we serve for their invaluable contributions to our continued success. We will provide an outlook for 2025 in late March, when we announce our final results."

Q4 2024 and full-year 2024 updated guidance

For the fourth quarter of 2024, the company expects total revenue to be between $52-million and $54-million versus previous guidance of $47-million to $49-million. This would represent growth of 31 per cent year over year at the midpoint of updated guidance as the company projects growth will exceed 20 per cent for all three business segments (wholesale, retail and consumer packaged goods).

The company projects average selling price will exceed $215 per pound for its wholesale biomass business, compared with previous guidance of $195 to $200 per pound and to $229 per pound in third quarter. During the fourth quarter, pricing exhibited the typical quarterly seasonal bounceback, while its previous guidance had assumed a more muted seasonal rebound in pricing. The company anticipates that Q4 2024 cost of production will be below $115 per pound, well below previous guidance of $125 per pound.

The company projects that consolidated gross margin for the fourth quarter of 2024 will be in the low forties, compared with its guidance of in the high 30-per-cent range. This reflects the stronger-than-projected rebound in Q4 wholesale biomass pricing, the projected lower cost of cultivation and anticipated stronger-than-expected margins from its retail business.

The company anticipates that fourth quarter adjusted EBITDA will be $7-million to $9-million, versus previous guidance of $3-million to $5-million and that operating cash flow will be $7-million to $9-million versus previous guidance of break-even to negative $1-million.

It estimates year-end 2024 cash balance will be approximately $37-million versus previous guidance of $23-million. The increase in its guidance for projected ending cash level is attributable to higher revenue than, lower cost of production than, lower inventory levels than and different timing of capital expenditure payments from what was assumed in its previous guidance. The previous guidance did not include any payments related to the employee retention tax credit. During the quarter, the company received $400,000 leaving $11.1-million it expects to receive in 2025 (1). The company anticipates that actual capex for Q4 will be $2.5-million to $3.0-million versus guidance of approximately $6-million, which included $5-million of phase 3 capex spending. The majority of Q4 capex was spent on phase 3 expansion.

Turning now to full-year 2024 preliminary results, the company's updated guidance implies the following full-year results.

The company expects that revenue will be a record-high $200-million to $202-million, up 25 per cent year over year versus the midpoint of updated guidance and representing a compound average annual growth rate of 47 per cent since 2021.

The company projects the full-year average selling price for wholesale biomass to exceed $243 per pound, versus $312 per pound in 2023. It anticipates full-year 2024 cost of production will be below $125 per pound, versus $136 in 2023.

The company expects combined 2024 retail and wholesale CPG revenue to exceed $61-million, and it projects that both business segments grew by over 10 per cent year on year, respectively. As regards retail, adjusting out the effect of its Turlock store, which was opened in April, 2023, it expects same-store sales will grow around 10 per cent, outpacing the overall California retail market, which fell by 6 per cent per headset data, by an astonishing 16 percentage points.

The company anticipates that full-year 2024 consolidated gross margin will be in the high 40-per-cent range, compared with 50.3 per cent in 2023. It is very pleased with its team's performance, given the more than 20-per-cent decline in average wholesale biomass selling price (based on updated guidance) and the deep discounts that characterized its retail dispensary strategic pricing plan. This performance has been enabled by reduced cultivation costs, tight cost management within the retail operation and the cost-saving initiatives it applied in its CPG supply chain and manufacturing processes.

The company projects that full-year 2024 adjusted EBITDA will be $38-million to $40-million, its second straight year of positive adjusted EBITDA and a 59-per-cent year-over-year increase at the midpoint of updated guidance, as well as a nearly $60-million increase versus 2022.

The company started 2024 with $33-million in cash and restricted cash and expects to end it with approximately $37-million. This was accomplished with minimal fundraising. It anticipates that operating cash flow will be between $27-million and $29-million, a 21-per-cent increase at the midpoint of updated guidance versus 2023 despite start-up working capital investment in Greenhouse 5.

As previously announced, during December, 2024, the company implemented a new $25-million at-the-market share distribution program, intended to increase its financial flexibility and support its expansion plans. During the fourth quarter of 2024, it made limited use of the facility as it felt market conditions were not well suited to fundraising. In all, it sold 10,000 common equity shares at an average price of $6.72 per share for aggregate net proceeds of approximately $65,600.

It began phase 3 expansion in the fourth quarter of last year, beginning the retrofit of greenhouse 2 along with investment in ancillary support facilities. Consistent with prior guidance, it expects to start generating revenue from greenhouse 2 by the fourth quarter of 2025, with production estimated at 275,000 pounds in its first full year.

As regards the potential commercial sale and distribution of hemp-derived cannabis, the company continues to closely monitor both state and federal regulatory developments with a view to announcing its hemp strategy during second quarter 2025.

Footnote

(1) Glass House applied for a total of $11.5-million in ERTC refunds, of which $423,000 was received in Q4 2024.

About Glass House Brands Inc.

Glass House is one of the fastest-growing, vertically integrated cannabis companies in the United States, with a dedicated focus on the California market and building leading, lasting brands to serve consumers across all segments. From its greenhouse cultivation operations to its manufacturing practices, from brand building to retailing, the company's efforts are rooted in the respect for people, the environment and the community that co-founders Kyle Kazan, chairman and chief executive officer, and Graham Farrar, board member and president, instilled at the outset. Whether it be through its portfolio of brands, which includes Glass House Farms, Plus Products, Allswell and Mama Sue Wellness, or its network of retail dispensaries throughout the state of California, which includes the Farmacy, Natural Healing Center and the Pottery, Glass House is committed to realizing its vision of excellence: outstanding cannabis products, produced sustainably, for the benefit of all.

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