Glass House Brands Inc Warrant 2021-29.06.26 on Glass House Brd

Second-quarter revenue was $47 million, down from $47.6 million in the same period last year. Gross profit was $15.8 million and gross margin was 34%, versus a high-40s prior outlook that included retail; adjusted EBITDA was $5.7 million, down from $18.1 million a year ago. Revenue from retail through the date of deconsolidation was $10 million. Biomass production was 246,000 pounds, above the 240,000-pound guide and up from 231,000 pounds last year. Cost of production was $122 per pound, down from $175 in Q1 and $129 in the second half of 2025. Average wholesale selling price was $211 per pound, versus $206 last year. Looking ahead, management said it continues to plan for approximately 1 million pounds of biomass in 2026, expects to exit the year below $100 per pound, and reiterated a long-term $95 per pound cost target; it is not updating full-year revenue, gross profit, or adjusted EBITDA guidance after the retail spinout.

Kyle Kazan framed the quarter around regulatory change, saying medical cannabis rescheduling to Schedule III is the most important drug reform of his lifetime and could open interstate commerce, exports, and broader normalization of the industry. He stressed that Glass House has built optionality by registering with the DEA, converting cultivation and processing licenses to state medical licenses, and separating retail, so the company can pursue medical and possibly hemp opportunities without needing adult-use rescheduling first. His tone was strongly optimistic and policy-focused, with repeated emphasis on lower-cost California production, premium quality, and future supply agreements outside the state.

Mark Vendetti focused on the accounting and operating impact of the retail deconsolidation, noting that reported results now include retail only through June 11 and that prior full-year guidance should no longer be relied on. He said second-quarter gross profit was $15.8 million, gross margin was 34%, adjusted EBITDA was $5.7 million, and operating cash flow was $139,000; the company ended the quarter with $22 million in cash and restricted cash. He also cited $4.9 million raised through the ATM in the quarter, another $10 million from accelerated warrant conversions and $1.6 million from the ATM after quarter end, and said the company has $38 million of uncertain tax provisions on its balance sheet while no longer expecting future 280E recognition. On the operations side, he reiterated the target to exit 2026 below $100 per pound and keep the long-term $95 per pound goal intact.

Analysts focused on the gross margin shortfall, Greenhouse 2 ramp, SG&A leverage, hemp risk, interstate commerce timing, and whether Glass House could secure supply agreements by year-end. Management said the margin drag came from a higher trim mix and more trim ending up in inventory, while Graham Farrar called it a transient operational issue that should improve as the team gains experience and Greenhouse 2 ramps. On hemp, management said its work is centered on federally compliant CBD flower and that there is no downside if the intoxicating hemp ban proceeds; on interstate commerce, Kyle said the company is already talking with operators and regulators, and later told an analyst he believes Glass House will have more than one supply agreement before year-end and may see international shipping before interstate shipping.