First Quarter 2024 Revenue was $30.1 million, exceeding guidance and up 9% year-over-year Biomass production reached 61,334 pounds in Q1, ahead of guidance and up 28% year-over-year with no expansion in cultivation footprint Cost per Equivalent Dry Pound of Production(1) was $182 per pound, a 7% decrease versus Q1 2023 Finished the First Quarter with a cash balance of $24 million Greenhouse 5 is now running at full capacity and will have its first full quarter of production and sales in Q2 of this year. Q2 2024 revenue projected to achieve a new record high of between $52 million to $54 million Conference Call to be held today May 14, 2024 at 5:00 p.m. ET LONG BEACH, CA and TORONTO, May 14, 2024 /CNW/ - Glass House Brands Inc. ("Glass House" or the "Company") (CBOE CA: GLAS.A.U) (CBOE CA: GLAS.WT.U) (OTCQX:GLASF) (OTCQX:GHBWF), one of the fastest-growing, vertically integrated cannabis companies in the U.S., today reported financial results for the first quarter ended March 31, 2024. First Quarter 2024 Highlights(Unaudited results, unless otherwise stated, all results and dollar references are in U.S. dollars) Net Sales of $30.1 million, an increase of 9% from $27.6 million in Q1 2023 and down 26% sequentially from $40.4 million in Q4 2023; Gross Profit was $12.5 million, compared to $12.6 million in Q1 2023 and $18.0 million in Q4 2023; Gross Margin was 42%, compared to 46% in Q1 2023 and 45% in Q4 2023; Adjusted EBITDA(2) was $(1.6) million, compared to $0.5 million in Q1 2023 and $3.8 million in Q4 2023. Operating Cash Flow was negative $1.9 million, compared to $4.5 million in Q1 2023 and $1.4 million in Q4 2023. Cost per Equivalent Dry Pound of Production was $182 a decrease of 7% compared to the same period last year. Equivalent Dry Pound Production(3) was 61,334 pounds, up 28% year-over-year; Cash balance was $24.4 million at quarter-end versus $16.4 million at the end of Q1 2023. Management Commentary "The first quarter of 2024 was another very successful quarter for Glass House where we exceeded Q1 guidance across all operating metrics including cash, sales, production and Adjusted EBITDA," stated Kyle Kazan, Co-Founder, Chairman and CEO of Glass House. "We produced 61,300 pounds of biomass, revenue of $30.1 million and gross profit of $12.5 million or 42% of net revenue during the first quarter, all ahead of our guidance. Greenhouse 5 is now running at full capacity and will have its first full quarter of production and sales in Q2 of this year. We are very pleased with the initial production volumes, quality and yields that are coming out of this facility, and are confident that the facility will continue to pick up steam as the year progresses." "I am particularly proud of our retail and CPG teams. We saw a 4% increase in CPG revenue versus Q4 2023 with Allswell revenue growing by 20%. The Allswell eighth priced at $9.99 out-the-door, including taxes, has been one of our most successful launches ever and shows the strength of our vertical integration, from farm to consumer. In early March, we introduced this new pricing across all of our stores, and it resulted in the Allswell Eighth becoming our best-selling product by unit sales volume, up from the No. 2 position in January and February. This offering dovetailed nicely with our retail dispensary strategic pricing plan, driving increased foot traffic to our dispensaries across the board in March." First Quarter 2024 Operational Highlights Glass House Brands Named to 2024 OTCQX Best 50 Glass House Brands Commences Cultivation in Greenhouse 5 at the SoCal Farm Glass House Brands Announces Resignation of Board Member John Pérez Glass House Brands to Participate in Inaugural Benzinga Cannabis Market Spotlight Event Glass House Brands Announces Intent to Restate Certain Historical Financial Statements Glass House Brands to Participate in the 36th Annual Roth Conference to be Held March 17th-19th, 2024 Final Judgment of $2,865,000 Entered Against Element 7 in Favor of GH Group Subsequent Events Glass House Brands CEO Kyle Kazan to Headline the Keynote Session at the Benzinga Cannabis Capital Conference on April 16-17 Glass House Brands to Hold 3rd Annual Investor Sesh on Friday, June 21st (Register Here) Q1 2024 Financial Results Discussion Net revenues for Q1 2024 were $30.1 million, 9% growth versus Q1 2023 and a 26% sequential decrease versus Q4 2023. This exceeded our previous Q1 2024 guidance range of $28 million to $29 million. The sequential decline was driven by the typical seasonal reduction in production of biomass due to lower sunlight levels for plants harvested in Q1 compared to Q4. Wholesale biomass revenue of $15.9 million increased 10% versus Q1 2023 and was down 40% sequentially. Biomass production reached 61,334 pounds in Q1, ahead of guidance and up 28% year-over-year with no expansion in cultivation footprint. Retail revenue in Q1 2024 was $9.9 million, compared to $9.6 million in the previous quarter and $9.4 million in Q1 2023. It should be noted that during the quarter we made changes to our retail loyalty program that reduced our points liability by approximately $0.3M and improved sales and margin by the same amount. Wholesale CPG revenues were $4.3 million compared to $4.1 million last quarter and $3.7 million in Q1 2023. The CPG market remains very competitive given the ongoing price discounting and heavy promotional activity. As stated in Q4 2024, we are committed to our policy of selling to dispensaries that are current on payments and limiting our credit exposure, so we are not heavily concentrated on any one customer. As a result, we have not experienced material AR payment defaults and, during the first quarter, the percentage of our accounts that were current on their payments averaged over 70%, a percentage we believe is among the best in California cannabis.  Consolidated gross profit was $12.5 million, or 42% of net revenues, compared to $12.6 million, or 46%, in Q1 2023 and $18.0 million, or 45% in Q4 2023. The lower gross margin is mainly due to a higher sales mix of trim relative flower and smalls than in Q4 and Q1 of last year. Average selling price was $282 per pound, just above guidance of $280 per pound and up from $272 per pound in the fourth quarter of 2023. Cost per pound was $182, slightly lower than guidance of $185, and wholesale gross margin was 39%. General and administrative expenses were $13.5 million in Q1 2024, up 19% from $11.4 million last year and up 2% from $13.3 million last quarter. The increase versus 2023 is almost entirely driven by an increase in stock compensation from new equity grants effective January 1, 2024. Excluding stock compensation, general and administrative expenses increased 2% versus the same period last year. G&A was up slightly in Q1 versus Q4 2023 because the Q1 2024 increase in stock compensation was offset by lower salary expense in Q1 versus Q4 2023 as there was no bonus accrual in Q1 2024. Sales and marketing expenses were $0.48 million, down from $0.65 million during the same period last year and down from $0.63 million in Q4. Professional fees of $3.7 million were up versus $1.5 million in Q1 2023 and $1.9 million in Q4 2023. The $1.8 million increase versus Q4 2024 is related to incremental expenses from the restatements for 2021, 2022 and the first quarter of 2023 that were completed in Q1 2024 and higher legal fees related to litigation.  Depreciation and amortization in Q1 2024 were $3.7 million, versus $3.5 million in Q4 and $3.8 million in the same period last year. Adjusted EBITDA was $(1.6) million in Q1, above the high end of guidance of $(2.0) to $(4.0) million. The sequential decrease from positive $3.8 million in Q4 was mainly due to lower gross profit due to the seasonal decline in revenue and a lower gross margin percent. As of the end of the first quarter, the Company had $24.4 million in cash, compared to $16.4 million at the end of the first quarter of 2023 and $32.5 million at year-end 2023. This was ahead of our guidance of $21 million for quarter-end cash, as operating cash flow for the first quarter was better than originally anticipated at negative $1.9 million, versus guidance of negative $3 million to negative $4 million. Both inventory and accounts receivable were slightly lower than budget and Q1 Capex spending also benefited ending cash relative to guidance, as it was $2.4 million versus guidance of $4 million, as some of the expected capex payments were pushed into the second quarter.  2024 Outlook The Company is providing the following guidance for the second quarter of 2024 based on the strength of our first quarter results and current trends in 2024. Q2 2024 Outlook We expect to set a new record high for single quarter revenue at $52.0 million to $54.0 million, up 76% sequentially and 19% percent year-on-year at the mid-point of guidance We are raising Q2 biomass production guidance to 128,000 to 130,000 pounds from a previous 125,000 to 127,000 pounds, as initial production levels have somewhat outperformed expectations with the increase coming from trim. This will represent 110% sequential and 25% year-on-year growth at the mid-point of guidance. We expect visibility on Greenhouse 5's production capabilities to improve as we move through Q2 and as we complete several planting and harvest cycles in the greenhouse. Average selling price for wholesale biomass is projected to be $330 to $335 per pound which is down from our prior guidance of $350 to $355 due to a higher mix of trim being sold compared to prior guidance. It is also slightly below our second quarter 2023 ASP of $340 per pound. The new guidance assumes that pricing of flowers and smalls remains at the same levels seen during the second half of Q1 2024. Cost of production is projected to fall to $150 per pound, down 18% sequentially but an 8% increase year-over-year, due to start-up costs from Greenhouse 5. Retail and CPG revenue is expected to be roughly flat from Q1 as we continue to expect a highly promotional and price driven retail landscape. We expect consolidated gross margin to be approximately 50% which is up about 8 percentage points versus the Q1 level of 42%, driven mainly by a higher margin in wholesale biomass as a result of the higher mix of flower production during the second quarter versus the first quarter. In addition, we expect Adjusted EBITDA to be a positive $10 million to $12 million and operating cash flow to be a positive $8 million to $10 million. We expect to see cash end the quarter at around $25 million as Greenhouse 5 output and sales ramp up in May/June. Within the quarter, we expect cap ex spending to be about $4 million as we make the final payments associated with Phase 2 and add some additional investments in automation and infrastructure at the Camarillo farm. Similar to the first quarter, we will make $1.9 million in dividend payments and $1.9 million in debt amortization payments. 2024 Fiscal Year Outlook We are maintaining revenue guidance of $215 to $220 million for 2024, a 35% increase at the mid-point of guidance. We continue to expect Adjusted EBITDA to exceed $50 million during 2024 and for operating cash flow to be in the mid $30 million range. Cash flow will grow at a slower rate than Adjusted EBITDA due to working capital associated with starting up Greenhouse 5. This guidance does not include the $11.5 million ERTC refund we expect to receive later this year. We are raising our guidance for wholesale biomass production by 5,000 pounds to 525,000 to 535,000 pounds, which represents a 49% increase over 2023 at the mid-point of guidance. Cost per pound is projected to be $135 per pound, which is roughly flat to our 2023 cost of $136 per pound. The increase in guidance for 2024 wholesale biomass production reflects the higher-than-expected production in the first quarter and the increase in our Q2 guidance. Although Greenhouse 5 is delivering ahead of expectations, it is nonetheless still in its first full quarter of operations. Therefore, we are maintaining our current production guidance for the second half of the year until we have additional experience from which to develop a more robust baseline of expectations. We expect pricing to drop in the second half of the year as compared to the first half of the year following a similar pattern to last year as industry production increases in the second half. We are planning on flower and smalls pricing to be modestly lower than last year in the second half but we expect our average selling price in the second half of 2024 to be about flat to up slightly as a result of an improved product mix vs. the second half of 2023. We are revising our projected average selling price to between $310 and $315 per pound for the year, down slightly from the previous $315 to $320, due to the higher percentage of trim we are seeing in our sales mix. Combined revenues from Retail and CPG are projected to be up mid-single digits in the second half of the year as we expect our retail dispensary strategic pricing plan will drive higher sales as foot traffic builds. However, we are planning for the difficult market conditions in both retail and the branded business to continue in 2024. 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). Unaudited results, unless otherwise stated, all results are in U.S. dollars. Net Income / (Loss)  (000's)  Q123 Q423 Q124  Revenues, net  $                  27,555 $                  40,429 $                  30,101  Cost of goods sold  $                  14,981 $                  22,417 $                  17,574  Gross profit  $                  12,574 $                  18,012 $                  12,526  % of Net Sales  46 % 45 % 42 %  Expenses:   General and administrative  $                  11,386 $                  13,287 $                  13,528  Sales and marketing  $                       652 $                       634 $                       477  Professional fees  $                    1,500 $                    1,898 $                    3,663  Depreciation and amortization  $                    3,836 $                    3,545 $                    3,716  Impairment  $                  19,670 $                  31,816 $                            -  Total expenses  $                  37,045 $                  51,180 $                  21,384  Gain (Loss) from Operations  $                 (24,471) $                (33,168) $                   (8,858)  Interest Expense  $                    2,080 $                    3,033 $                    2,205  Other expense  $                    5,858 $                    6,132 $                    6,371  Total other expense  $                    7,938 $                    9,165 $                    8,577  Provision for income taxes  $                    2,374 $                  (4,218) $                       834  Net income (Loss)  $                 (34,783) $                 (38,115) $                 (18,269) Adjusted EBITDA  (000's)  Q123 Q423 Q124  Net income (loss)  $                 (34,783) $                 (38,115) $                 (18,269)  Interest  $                    2,080 $                    3,033 $                    2,205  Depreciation and amortization   $                    3,836 $                    3,545 $                    3,716  Taxes  $                    2,374 $                   (4,218) $                       834  EBITDA (non-GAAP)  $                 (26,492) $                 (35,755) $                 (11,513)  Share-based Compensation Expense  $                    1,631 $                    1,909 $                    3,272  Stock Appreciation Rights Expense  $                            - $                       119 $                       345  Loss on Equity Method Investments  $                    2,264 $                        (35) $                        (18)  (Gain) Loss on Change in Fair Value of Derivative Liabilities  $                        (13)