- All regulatory approvals for the acquisition of the Grover Beach and Lemoore Natural Healing Center Dispensaries by Glass House Brands have been obtained, and the transaction has officially closed
- Consolidation of the financial results for the Grover Beach and Lemoore dispensaries into Glass House Brands financials will begin, effective immediately
- Glass House aims to reach a revenue run rate of US$200M+ within the next 12 months1
LONG BEACH, CA and TORONTO, Sept. 7, 2022 /CNW/ - Glass House Brands Inc. ("Glass House" or the "Company") (NEO: GLAS.A.U) (NEO: GLAS.WT.U) (OTCQX: GLASF) (OTCQX: GHBWF) one of the fastest-growing, vertically-integrated cannabis companies in the U.S., today announced that all local regulatory approvals have been obtained for Glass House's acquisition of the Natural Healing Center ("NHC") dispensaries located in Grover Beach and Lemoore, California, and that the transactions have officially closed. Consolidation of the financial results of the Grover Beach and Lemoore stores into Glass House Brands financials will begin effective immediately.
On May 12, 2022, Glass House announced that it had executed definitive agreements (the "Agreements") to acquire 100% of the equity interests in three Natural Healing Center retail assets: two operating retail dispensaries (Lemoore and Morro Bay) and one retail dispensary (Turlock) scheduled to open in Q4 2022. For more details, please see here. This was followed by the announcement in our Q2 earnings release on August 11, 2022 that Glass House had agreed to acquire Natural Healing Center's flagship Grover Beach operating dispensary for US$15.9 million, with US$8.1 million of the purchase price in assumed debt, US$7.7 million in stock and US$0.1 million in cash net of working capital (please see here). The Grover Beach store is the crown jewel of NHC's dispensary portfolio and netted US$16 million in revenues in 2021.2 It is one of only four total dispensaries in Grover Beach and is the No. 1 taxpayer in the city, given its high sales volume and strong cash flow generation.
"It is with great pleasure and enthusiasm that I welcome the incredibly talented and hard-working staff at NHC Grover Beach and Lemoore into the Glass House Brands family" Said Kyle Kazan. "The Grover Beach and Lemoore dispensaries are the first two NHC dispensaries to be officially onboarded, and we expect to close the acquisition of the Morro Bay store in Q3 or Q4 2022, while Turlock3 is expected to close in Q4 2022 upon the store's opening. As we stated when announcing the execution of definitive agreements for the NHC transaction, this acquisition will advance us further in our goal of becoming one of the largest retailers in the State of California, adds further support to our recently acquired PLUS edibles business (please see here) and provides incremental outlets for CPG sales as the SoCal farm continues to expand its output. Given NHC's positioning in limited license markets and its strong consumer following, we are excited to be adding these 4 dispensaries to our retail portfolio. We are now poised to execute a dramatic transformation in the size of our retail dispensary business. Glass House has the potential to reach an annual revenue run rate in excess of US$200 million within the next 12 months,1 versus the Company's 2021 revenue of US$69 million. The NHC transaction is expected to be immediately accretive to Glass House on both a revenue and EBITDA2,4 basis, with all of NHC's open locations currently generating EBITDA margins in excess of 20%.2,4"
Valnette Garcia, the current CEO of NHC, commented, "I am excited to see the Grover Beach and Lemoore transactions finalized and look forward to sharing best practices between NHC, the Farmacy stores and The Pottery to drive operating efficiencies, amplify purchasing bargaining power and heighten profitability, while always providing our customers with a world-class experience and the highest quality cannabis at an affordable price."
Additional NHC Transaction Details:
At the close of each NHC dispensary acquisition, Glass House will be purchasing the businesses or assets of these dispensaries and will enter into a 5-year arm's length term lease at each location with three 5-year renewal options for a total term of up to 20 years.
Closing of the remaining two NHC dispensary transactions, Morro Bay and Turlock, are contingent upon the transfer of ownership being approved by local regulators and are further subject to certain customary closing conditions for transactions of this nature, including the approval of the NEO Exchange.
Glass House expects to issue on closing a total of approximately 2.35 million new equity shares in conjunction with the closing of the Grover Beach acquisition, and approximately 1.29 million equity shares in conjunction with the closing of the Lemoore acquisition. These shares will all be issued at $4.41 per equity share, the 25-day VWAP for Glass House Brands equity shares trading on the NEO Exchange calculated as of May 12, 2022, the date upon which definitive agreements were signed. A portion of the equity shares payable to the NHC sellers will be subject to certain contractual lock-ups and escrow holdbacks and generally will be paid out over two years if all equity shares are released after the lock-up and holdback periods expire. They are also subject to certain contractual early-release triggers.
Footnotes and Sources:
Company has the potential to achieve monthly revenues that annualize to $200 million. The statement assumes the following in potential incremental revenues from each source: 1) Annualized Camarillo (SoCal farm) Phase I wholesale biomass sales of $50-75 million; 2) The four NHC dispensaries generate annualized revenues of $40 million; 3) The Pottery generates annualized revenues of $3.9 million; 4) PLUS maintains its pre-acquisition annualized revenues of $14 million per year; 5) The Isla Vista, Santa Ynez, and Eureka dispensaries are opened in Q4 2022 and that they produce an average of $5 million in annual revenues each; 5) The Company's core business that existed prior to the addition of these new revenue sources is able to deliver $69 million in revenue.
Based on seller's unaudited management prepared financials.
Calculation and payment of consideration for the acquisition of Turlock will occur at the end of its sixth full quarter of operations, at 6x its annualized EBITDA in that quarter. The consideration will be paid 80% in new equity shares priced at the 25-day volume-weighted average price (VWAP) of Glass House equity shares as of that quarter end and 20% in the form of an unsecured promissory note bearing interest of 8% annually and maturing after the four-year anniversary of the closing date.
EBITDA is a non-GAAP financial measure consisting of earnings before interest, taxes, depreciation and amortization. This non-GAAP measure is not a standardized financial measure used to prepare the financial statements of Glass House under U.S. GAAP and might not be comparable to similar financial measures disclosed by other companies. EBITDA margin is a non-GAAP ratio of which EBITDA is a component. For further information concerning the use of this non-GAAP financial measure, and a reconciliation to the closest GAAP measure, readers are referred to the section headed "Non-GAAP Financial Measures" in the Company's Q2 2022 Management's Discussion and Analysis available at www.sedar.com, which is incorporated by reference herein.
About Glass House Brands Inc.
Glass House Brands Inc. is one of the fastest-growing, vertically integrated cannabis companies in the U.S., 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 CEO, and Graham Farrar, Board Member and President, instilled at the outset. Through its portfolio of brands, which includes Glass House Farms, PLUS Products, Allswell, Forbidden Flowers, and Mama Sue Wellness, Glass House Brands Inc. is committed to realizing its vision of excellence: outstanding cannabis products, produced sustainably, for the benefit of all. For more information and company updates, visit www.glasshousebrands.com and https://ir.glasshousebrands.com/contact/email-alerts/.
Forward Looking Statements
Certain information in this press release contains "forward looking information" within the meaning of applicable securities laws. Such forward looking information includes, but is not limited to, information with respect to Glass House's objectives and the strategies to achieve these objectives, as well as information with respect to its beliefs, plans, expectations, anticipations, forecasts, estimates and intentions. This forward-looking information is identified by the use of terms and phrases such as "will", "may", "would", "should", "could", "expect", "intend", "estimate", "anticipate", "plan", "foresee", "believe", or "continue", the negative of these terms and similar terminology, including references to assumptions, although not all forward-looking information contains these terms and phrases. In particular, and without limiting the generality of the foregoing, forward looking information in this press release includes statements related to: the completion of the proposed acquisitions of Morro Bay and Turlock which are subject to satisfaction of certain closing conditions; Glass House reaching a revenue run rate of US$200M+ within the next 12 months; the acquisitions resulting in increased retail revenue; the financial and operating projections disclosed in connection with the acquisitions; Glass House nearly tripling its annual retail dispensary revenues to more than US$60 million; wholesale biomass annualized revenues from Phase I of the SoCal farm reaching US$50-75 million by early 2023; and the timing of the closing of the Morro Bay and Turlock acquisitions and the Turlock dispensary's opening. Forward looking information involves known and unknown risks and uncertainties, many of which are beyond the Company's control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward looking information. These risks and uncertainties include, but are not limited to, closing conditions to the proposed acquisitions of Morro Bay and Turlock not being met on the timeline expected or at all; Glass House not being able to achieve a revenue run rate of US$200M+ within the next 12 months or at all; the acquisitions not resulting in increased retail revenue following integration; the financial and operating projections disclosed in connection with the acquisitions not being achieved; Glass House not being able to nearly triple its annual retail dispensary revenues to more than US$60 million; wholesale biomass annualized revenues from Phase I of the SoCal Facility not reaching US$50-75 million by early 2023; and the timing of the Turlock dispensary's opening not being met, together with other risk of the business set out in the Company's Annual Information Form available at www.sedar.com. Although the Company has attempted to identify the main risk factors that could cause actual results to differ materially from those contained in forward looking information, there may be other risk factors not presently known to the Company or that they presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. Consequently, all of the forward-looking information contained in this press release is qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that the Company anticipates will be realized or, even if substantially realized, that they will have the expected consequences or effects on the Company's business, financial condition or results of operation.
SOURCE GH Group, Inc.
View original content to download multimedia: http://www.newswire.ca/en/releases/archive/September2022/07/c6871.html