Green Thumb Industries Inc. (GTBIF – $11.00) · Green Thumb Industries Inc. (GTBIF – $11.00) Buy - Price Target: ... (MSOs) in the US cannabis industry. The company boasts one

Green Thumb Industries Inc. (GTBIF – $11.00)Buy - Price Target: $18.00

Growing Platform in Both Retail Distribution and Branded Products

June 10, 2019

Rommel [email protected]

Stock Data

Rating: BuyPrice: $11.00Price Target: $18.00Total Return to Price Target: 63.6%52-Week High: $25.0352-Week Low: $6.44Dividend Per Share: $0.00Dividend Yield: 0.0%Market Cap. (M): $2,024.0Avg. Daily Vol: 277,161Shares Out (M): 184.0

Compass Point Estimates

EPS (GAAP)

2018A 2019E 2020E

Q1 ($0.01) ($0.06)A $0.06Q2 $0.00 ($0.02) $0.07Q3 ($0.02) $0.02 $0.09Q4 ($0.02) $0.04 $0.11FY ($0.05) ($0.02) $0.34P/E (220.0)x (550.0)x 32.4x

Revenue (GAAP)

Q1 $11 $28A $84Q2 $14 $34 $92Q3 $17 $58 $103Q4 $21 $71 $112FY $63 $190 $390

Adjusted EBITDA (M) (GAAP)

FY $(25.2) $(1.6) $93.7

Other Metrics ($M)

Debt-to-capital: 2%

Sources: Bloomberg, Compass Point estimates

SummaryWe are initiating coverage on Green Thumb Industries with a Buy rating and price target of $18.Green Thumb Industries (GTI) has, through a combination of organic growth plus acquisitions,successfully built itself into one of the leading multi-state operators (MSOs) in the US cannabisindustry. The company boasts one of the largest chains of retail dispensaries in the country with itsRISE stores, and plans to more than triple its retail footprint in the next few quarters with additionalstore openings. In addition, with well known brands across the spectrum of price points and productcategories, GTI has also become an industry leader in producing and marketing branded productsfor sale in either its own dispensaries or in other retailers.

As the US cannabis industry, which still remains in an early stage of growth, rapidly matures andconsolidates, we believe investors will increasingly award higher valuation multiples to companieswho successfully establish prominence in either the retail dispensary or branded product segmentsof the business. Over the long term, we believe these two categories will represent higher value-added business segments compared to cultivation and processing, similar to what we see in othermajor consumer staple categories (i.e. food, beverage, etc.). With GTI poised as one of the earlyfront-runners to become an industry champion in both retailing and branded goods, we believeshares of GTBIF should trade at an Enterprise Value/2020 Revenue multiple of 8.5x, a premium tothe peer group average. This multiple generates our price target of $18.

HighlightsEmerging as an early leader in retail. With 20 dispensaries now open, most of which are brandedwith the RISE name, GTI has emerged as one of the early industry leaders in establishing a multi-state retail footprint. The company plans to more than triple this number of RISE dispensarylocations over the next few quarters with an aggressive rollout plan. In addition, the acquisition ofIntegral Associates will add the Essence line of dispensaries to the company.

Growing portfolio of branded products. Through both internal product and brand development aswell as through acquisition, GTI has built a portfolio of brands than span the spectrum of price pointsfrom value to luxury, as well as product categories from flower and pre-rolls to vapes, tinctures,edibles, topical lotions & creams, and essential oils. Key brands include rythm in vapes, the FeelCollection in essential and topical oils, Pax in premium vaporizers, and Beboe (which has an exclusivedistribution arrangement with Barneys New York) in luxury products.

Solid track record of acquisitions. Among the various publicly traded MSOs, GTI has built, inour opinion, one of the most impressive track records of acquisitions in recent quarters. Thesetransactions have enabled the company to expand its portfolio of brands, enter new states such asFlorida and Connecticut, and reinforce its presence in major states such as California and Nevada.

Rapid industry growth in the US. Despite the current restrictions on cannabis at the federal level,33 US states now allow medical use of cannabis, and 10 of those states allow use on the recreationallevel. The accelerating pace at which state legislatures have changed such laws in recent years hasenabled the US cannabis product industry to experience 20-25% annual growth, to approximately$13-14 billion in estimated sales for 2019. Such growth will likely establish the legal cannabisproducts market in the US as one of the most important growth sectors in consumer staples foryears to come. For a more detailed discussion of the accelerating pace of regulatory changes drivingsuch strong industry growth, we have published an accompanying industry piece: Accelerating Paceof Regulatory Changes Driving Strong Industry Growth in Cannabis.

See Important Disclosures on page 19 of this report.

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Company Description Based in Chicago, IL, Green Thumb Industries is one of the leading vertically integrated multi-state operators (MSOs) in the US cannabis industry. The company’s businesses include cultivation, processing, distributing, and retailing cannabis products for both the medical use and recreational/adult use markets.

On the production side, Green Thumb Industries currently has 11 manufacturing facilities where cannabis is cultivated, stored, and processed. In addition to flower and pre-rolls, the company also produces derivative products which require the extraction of cannabinoids into oils intended for use in vaporizers, tinctures, topical lotions and creams, extracts, and edible products.

On the product retailing side, GTI now operates 20 retail dispensaries, most of which are branded with the RISE name. The RISE chain of retail dispensaries is already one of the best known and fastest expanding in the country, and management already has licenses and near-term plans to open as many as 77 retail dispensary locations. Such rapid expansion could certainly entrench the RISE network of dispensaries as one of the nation’s leading chains of cannabis retailers.

rythm rythm Hits – premium glass chamber vape cartridges, use CCELL ceramic technology to ensure uniform heating

Source: Company website

Finally, on the branded product side, GTI has developed or acquired a broad portfolio of well-known brands of cannabis, including rythm in flower and vape products, Beboe in luxury vaporizing pens and edibles, the Feel Collection in tinctures and essential oils, Pax in premium priced vaporizers, and Dogwalkers in pre-rolls.

Management Team Ben Kovler – Founder, Chairman, and Chief Executive Officer

Ben Kovler founded GTI in 2014, and has grown the company into a national cannabis packaged goods producer and retailer. Mr. Kovler frequently appears as an industry expert and leader in major global media outlets. Mr. Kovler also serves as Chief Investment Officer for Kovpak II, LLC, a diversified investment fund. He received his MBA from The University of Chicago and his BA from Pomona College.

Compass Point Research & Trading, LLC 2

Rommel Dionisio | 646.448.3028 | [email protected]

Anthony Georgiadis – Chief Financial Officer and Director

Anthony Georgiadis joined GTI in 2015 as Chief Financial Officer, and has served as a Board Member since 2016. Mr. Georgiadis previously served as Chief Operating Officer of Wendover Art Group, a private manufacturer of wall décor. Prior to this, he worked as a principal investing associate for CIVC Partners, a private equity firm, and as a mergers and acquisitions analyst at Bowles Hollowell Conner & Co. Mr. Georgiadis graduated from Bucknell University.

Andy Grossman – Head of Capital Markets

Andy Grossman joined GTI in 2016 as Head of Capital Markets. Mr. Grossman previously served as Managing Partner and Head of Trading, Risk Management, and Operations for LG Capital Management, and investment fund he also co-founded in 2011. Previously, he was a senior trader for Chesapeake Partners, a Baltimore-based multi-billion dollar investment fund. Mr. Grossman received his BA in Finance from Syracuse University.

Jennifer Dooley – Chief Strategy Officer

Jennifer Dooley joined GTI in 2016 as VP of Marketing & Brand Development. She became Chief Marketing Officer in 2017, and head of corporate development and investor relations in 2018. Ms. Dooley previously led brand development and innovation at Storck USA, a top 10 global confectioner, where she worked from 2008-2016. She received her MBA from Northwestern University’s Kellogg School of Management and her BS from the College of Charleston.

RISE dispensaries Interior of Rise retail dispensary – York, PA


Matt Miller – General Counsel

Matt Miller joined GTI in early 2019 as General Counsel. Mr. Miller was previously VP and Deputy General Counsel for publicly traded Groupon, a worldwide e-commerce marketplace connecting subscribers with local merchants. Prior to this, Mr. Miller was an attorney in private practice. He received his JD from Loyola University Chicago School of Law and his BA from University of Wisconsin – Madison.



Kate Denton – Senior Vice President, Marketing

Kate Denton joined GTI in 2018 as SVP of Marketing. Ms. Denton previously served as Chief Marketing Officer of Loudpack, a California-based privately held cannabis company, before which she was SVP of Capitol Music Group. Before this, she was Sr. Director of Marketing at PepsiCo. Ms. Denton received her MBA from Northwestern University’s Kellogg School of Management, and her BA from the University of Michigan.

Investment Highlights

Sharply increasing market for legal cannabis in the US

Driven by a rapidly changing regulatory environment on a state by state basis, the US is seeing sharply rising consumer demand for legal cannabis products, in both the recreational use and medical use markets. As many as 33 states plus the District of Columbia now allow regulated medical use of cannabis, with 10 of those states now also allowing recreational use as well. Illinois just passed legislation last week to become the 11

th state to allow recreational use, and

this legislation will take effect in January 2020. Most of these states have adopted such regulations in just the past two years, driving a considerable rise in demand in the US overall, even in spite of cannabis still being a controlled substance on the federal level.

US State-by-State Guide State map of cannabis programs

Source: National Conference of State Legislatures website

Within the 33 US states which now allow cannabis products for medical use, we are seeing rapid acceleration in demand from sharply increasing number of patients eligible to purchase such products.

For example, in the state of Florida, which voted to allow access to medical cannabis for patients with severe medical conditions in November 2016, today over 210,000 patients have been issued medical marijuana cards, up from just 95,000 a year ago.

In the state of Illinois, the recently signed Alternative to Opioids Act reduced what was formerly an approximate 90-day wait period for patients to receive a medical cannabis card, to a wait time of approximately 1-2 days to have access to cannabis products.

We also believe certain states that currently allow cannabis for medical use only may soon enact legislation allowing for the legalization of cannabis products for adult recreational use in the



relatively near future, perhaps before year end. States such as New York and New Jersey have governors who have already recently outlined plans and proposed legislation that would enable the recreational use of cannabis.

Though such potential legislation remains pending, we continue to view the US regulatory environment on a state-by-state basis as continuing to fuel increased demand and accessibility for cannabis products for years to come.

We note that only 26% of the current US population reside in states where both recreational and medical use of cannabis is legal, with another 42% residing in states where only medical use is legal. Thus, there remains significant additional opportunity for the addressable market to increase substantially.

Addressable market in the US Broken down by state populations

Source: US Census data, Compass Point

We estimate the current market size for the US legal cannabis product market, including both recreational and medical use cannabis, to be approximately $13-14 billion for 2019, growing at about 20-25% annually. Naturally, further changes in the regulatory environment on a state-by-state basis could certainly accelerate this growth trajectory in future periods.

Developing portfolio of consumer brands

GTI has developed and acquired a growing portfolio of consumer brands to target different segments of the fast-growing US cannabis market. The company’s rythm brand is a line of flower, vape, and concentrate products distributed through GTI’s RISE dispensaries. The recently acquired Beboe brand of vaporizing pens and edible pastillers are premium-priced products targeted towards the luxury end of the market.

The Feel Collection brand of ingestibles include tinctures infused with essential oils, capsules, and topical oils. The company also offers a line of premium priced vaporizers under the Pax brand, as well as a line of pre-rolled packs under the Dogwalker brand.



rythm rythm high intensity extract pods


Growing track record of acquisitions

Over just the past few quarters, GTI has already built an impressive track record of strategic acquisitions in the US cannabis space, enabling the company to not only expand its portfolio of brands, retail locations, and production facilities, but also to enter key new geographic regions. Key recent acquisitions have included:

Beboe. GTI acquired Beboe, a brand of luxury cannabis products, in February 2019. Beboe is perhaps best known for offering a line of vaporizing pens and edible pastilles, which dispense a blend of THC and CBD. Last year, Beboe also launched a direct-to-consumer line of hemp derived CBD products, including infused drinks. Beboe signed an exclusive partnership earlier this year with luxury retailer Barneys New York, through which Beboe will sell luxury cannabis lifestyle products with exclusive special packaging.

Beboe Beboe line of luxury cannabis products




Advanced Grow Labs. GTI closed its acquisition of Advanced Grow Labs in February 2019. Based in Connecticut, Advanced Grow Labs is one of only four companies licensed to grow and process cannabis in the state. The company produces and distributes cannabis products throughout the state, and operates a 41,000 square foot production facility, with potential to expand. In addition, AGL has an ownership stake in a dispensary located in Westport, CT. The Connecticut medical marijuana program currently has more than 30,000 patients and 1,000 registered physicians.

Integral Associates. Earlier this week, GTI closed the acquisition of Integral Associates, a vertically integrated producer and retailer of cannabis products, for approximately $290 million, which included $52 million in cash and 20.8 million subordinate voting shares of GTI. Integral Associates operates two cultivation and processing facilities in Nevada (one 54,000 square foot in size, the other 41,000 square foot). In addition, the company owns the retail brand Essence, which operates three high-traffic dispensaries in the Las Vegas area, including the first and only dispensary currently on the Las Vegas Strip.

KSGNF. GIT closed its acquisition of Florida-based KSGNF, LLC in November 2018. The acquisition of this vertically integrated license enables GTI to operate a cultivation and processing facility in the state, as well as open up to 35 dispensaries throughout the state. Florida’s medical marijuana market currently has over 210,000 qualified patients, with approximately 3,000 new patients signing up weekly.

Essence dispensaries Exterior of Essence retail dispensary – Las Vegas, NV


Development of national retail store concept

One major opportunity we perceive for GTI is the significant growth potential in their plan to develop the RISE retail store concept across the specific states where GTI is licensed to operate such stores. GTI is already operating 20 stores, most of which have already been branded with the RISE name, and has plans to operate as many as 88 high volume retail locations. We believe



GTI’s plans to develop a consistent, customer-centric store concept across multiple states can potentially create an early first-mover advantage in developing brand name recognition for a US retailer of cannabis products. We note that approximately 30-50% of sales in most of the company’s stores currently come from company-owned branded products, a figure likely to increase over time as brand name recognition improves and GTI expands its product lineup through either new product development or acquisition.

RISE dispensaries Interior of RISE retail dispensary – Joppa, MD


Investment Risks Federal regulatory risk

Under US federal law, cannabis is classified as a Schedule I controlled substance. As such, legal medical or recreational cannabis use is not permitted under US federal law. In states where the use of cannabis has been legalized, its use remains a violation of federal law. Though seemingly unlikely, there remains the possibility that federal authorities may enforce current federal law, and find the business of cultivating and dispensing cannabis products to be in violation of such law.

State regulatory risk

On a state by state basis, various state laws legalizing and regulating the use of cannabis products for medical and/or recreational use have been changing sharply in recent years. There are currently 33 states as well as Washington D.C., Puerto Rico, the US Virgin Islands and Guam that allow medical uses for cannabis as well as consumer use of cannabis in connection with medical treatment. There are currently 10 states (Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington) as well as Washington DC where recreational use of marijuana is now legal, and Illinois is scheduled to join this list next January.



Discussion has been ongoing the past several months in political circles in several high population states, such as New York and New Jersey for example, regarding the potential legalization of cannabis for future recreational use. However, the potential occurrence of such legislative changes in various states, and indeed even at the federal level, remains highly unpredictable.

Competitive risk

Though we believe the US cannabis industry is still at an early development stage, there already exist a number of well-funded players also competing to establish an early lead with regards to either cultivation, processing, brand and product development, and retailing. Other major competitors in the US include Curaleaf (CURLF – Buy, $13 PT), Acreage Holdings (ACRGF – Buy, $27 PT), Cresco Labs (CRLBF – Buy, $16 PT), Harvest Health (HRVSF – Not Rated), Trulieve (TCNNF – Not Rated), and Medmen (MMNFF – Not Rated).

Leading US dispensary chains By number of retail locations currently open

Source: Company websites

Lack of access to bankruptcy protections

Unlike many other industries, cannabis-related businesses have been denied bankruptcy protections by many courts in the US, given the use of cannabis remains illegal under federal law. Therefore, if the company were to experience a bankruptcy, there is no guarantee that US federal bankruptcy protections would be available.

Marketing constraints

The current US regulatory environment also limits the ability of cannabis producers to advertise and market their products and retailers. Should this regulatory environment not change over time, this could significantly hinder the ability of larger industry players such as Acreage Holdings to compete for market share with their branded products and retail dispensaries. On the flip side, as we have seen in the US tobacco industry, the restrictions on advertising and marketing

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Leading US Dispensary Chains (# of locations)



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does represent a significant barrier to entry once the industry is better established, giving the early sector entrants a meaningful advantage.

rythm rythm Singles – disposable, affordably priced vape pens


Valuation

Given such considerable discussion and market speculation regarding the North American cannabis industry over the past few quarters, as a result many of the stocks in the cannabis peer group are trading at extremely high valuations on an Enterprise Value to Revenue multiple basis, relative to other sectors in the more broadly defined Consumer packaged goods and Specialty Retail sectors.

We believe such premium valuations in the cannabis sector are warranted to some degree, given recent landmark changes in the regulatory environment. Such groundbreaking recent events have included the legalization of cannabis for both medical and recreational use in Canada last year, while numerous states in the US over the past few years have adopted similar legislation allowing medical and/or recreational use of cannabis products within the state, although cannabis remains a controlled substance on the federal level.

Given the early stage growth trajectory of many of these publicly traded cannabis companies thus far, and the necessary cash burn to fuel such growth, traditional stock valuation metrics on near-term profitability such as P/E, EV/EBITDA, etc., are often not yet applicable on current year estimates. As we forecast out to 2020, these valuation metrics begin to come into focus somewhat. However, with triple-digit sales growth forecasted for many of the companies in the cannabis sector for both 2019 and 2020, we note there is significant variability and high standard deviation in the broad range of earnings estimates for 2020.

Moreover, the high degree of uncertainty regarding future legislative changes in the US regarding cannabis, as well as a lack of visibility on the potential timing of such changes especially on a federal level, render even a discounted cash flow analysis of these stocks to be rather irrelevant.



Valuation Comparables Calendarized calendar figures. Consensus estimates used for companies not covered.

Source: Company reports, Thomson Reuters and Compass Point estimates. Priced as of close on June 7, 2019.

Though we are quick to acknowledge that Enterprise Value to Revenue is far from our favorite valuation metric, it does appear, for now, to be the least questionable metric to value these cannabis stocks. Current EV/Revenue multiples in the peer group we specify above are 11.5x and 5.7x for 2019 and 2020, respectively.

Given Green Thumb Industries’ strong presence in retail with a leading and fast growing dispensary chain such as RISE, an expanding portfolio of well-known wholesale brands such as rythm, the Feel Collection, and Beboe, and a solid track record of acquisitions, we believe shares of GTBIF should trade at an Enterprise Value/2020 Revenue multiple of 8.5x, a premium to the peer group average. This multiple generates our price target of $18.

Enterprise Value/2020E Revenue multiples Calendarized calendar figures. Consensus estimates used for companies not covered.

Source: Company reports, Thomson Reuters and Compass Point estimates

Stock Price Market P/E PEG EV/EBITDA EV/Rev EV/Rev

Company Ticker Price Rating Target Cap ($M) C2020 C2020 C2020 C2019 C2020

Acreage Holdings ACRGF 18.01$ Buy 27.00$ 2,118$ NA NA NA 11.8 4.3

Aurora Cannabis ACB 7.64$ NR NA 7,716$ NA NA NA 23.0 11.5

Canopy Growth CGC 42.19$ Neutral 43.00$ 14,513$ NA NA NA 27.3 13.3

Charlotte's Web CWBHF 12.87$ NR NA 1,197$ 17.2 0.86 9.1 7.7 3.5

Cronos Group CRON 15.94$ NR NA 5,308$ NA NA NA 18.2 12.5

Cresco Labs CRLBF 10.21$ Buy 16.00$ 2,981$ 25.5 1.02 15.5 12.1 4.2

Curaleaf Holdings CURLF 8.22$ Buy 13.00$ 4,159$ NA NA 22.6 13.0 5.8

Green Thumb Industries GTBIF 11.34$ Buy 18.00$ 2,087$ 33.4 1.33 21.7 10.7 5.2

Harvest Health HRVSF 6.44$ NR NA 2,260$ 20.7 1.04 11.1 8.1 3.0

HEXO HEXO 6.43$ NR NA 1,530$ 24.1 0.96 11.7 7.7 3.4

KushCo Holdings KSHB 4.59$ Buy 8.00$ 404$ NA NA NA 2.2 1.6

MedMen Enterprises MMNFF 2.18$ NR NA 1,110$ 27.3 1.09 28.4 3.5 1.6

New Age Beverages NBEV 4.52$ Buy 9.00$ 344$ 25.1 1.14 13.8 1.1 0.9

Tilray TLRY 38.80$ Neutral 41.00$ 3,764$ NA NA NA 21.6 10.5

Trulieve Cannabis TCNNF 10.92$ NR NA 1,202$ 13.7 0.68 8.3 5.3 3.9

AVERAGE 23.4 1.02 15.8 11.5 5.7

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Financial Outlook

Top line forecasts

We expect Green Thumb Industries to generate significant top line growth acceleration over the next few quarters, driven by contribution from recently announced acquisitions such as Integral Associates and Beboe, continued significant growth in market demand in states where the company operates, and future market share expansion as RISE retail dispensaries along with the company’s branded products gain increased mind share of the industry.

Driven by these aforementioned factors, we forecast net sales growth of 204% in 2019 and 105% in 2020. GTI currently has 20 retail stores open currently, up sharply from just 15 at the end of 2018. Anticipating further aggressive store expansion, we expect the company will have as many as 45 retail dispensaries open by the end of 2019, and over 75 by the end of 2020. We estimate these dispensaries can generate approximately $3.6 million in annual sales on average, which assumes 175 customer visits per location per day with an average customer ticket of $65. Such revenue contribution from retailing should be significantly supplemented by the expansion of distribution from the company’s branded products among independent retailers as well.

Should additional states in the US, perhaps New York, Illinois, New Jersey, or others, enact legislative changes in upcoming quarters paving the way for the legalization of recreational use cannabis products, such regulatory actions could potentially provide significant upside to our estimates.

However, we would point out that our quarterly revenue growth forecasts do carry a fair degree of timing risk. Naturally with expectations of triple-digit revenue growth for the next several quarters, should the opening of several dispensaries be shifted from one quarter to the next, or the timing of new product introductions be delayed or moved forward, this could certainly throw off the timing of recognition of revenue. Nonetheless, we anticipate robust sales growth in over the next two years for GTI.

Net Revenue Chart of historical and estimated Net Revenue

Source: Company reports and Compass Point estimates

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Operating margin

Given such significant top line growth expectations, we would expect the company to see meaningful operating leverage and greater economies of scale in upcoming quarters. We expect such operating leverage to drive the company to positive operating margin by 3Q:19, following a history of quarterly operating losses.

As such, we estimate operating margin to improve to -8.0% in 2019 from -44.1% in 2018. For 2020, we forecast full year operating margin to enter positive territory and reach 20.5% for the full year.

Naturally, quarterly operating margin expansion on a sequential basis could be somewhat lumpy, given that quarterly year-over-year revenue growth rates could be inconsistent given the timing of retail dispensary openings and new product introductions.

Operating margin Chart of historical and estimated Operating Margin


EPS

We believe an expected achievement of net profitability by the second half of 2019 could represent an important fundamental catalyst for the stock. Our EPS estimates are $(0.02) for 2019, rising to $0.34 in EPS for 2020.

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EPS Chart of historical and estimated EPS


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Income Statement


GREEN THUMB INDUSTRIES INC.

INCOME STATEMENT (in $ mils)

Mar Jun Sep Dec Mar Jun Sep Dec

FY December 2017 2018 1Q19 2Q19E 3Q19E 4Q19E 2019E 1Q20E 2Q20E 3Q20E 4Q20E 2020E

Net Revenue $16.5 $62.5 $27.9 $34.1 $57.5 $70.6 $190.1 $83.7 $92.0 $103.0 $111.6 $390.3

% Change yr-yr 278.1% 155.5% 150.0% 235.0% 240.0% 204.2% 200.0% 170.0% 79.0% 58.0% 105.3%

Cost of sales 10.4 34.0 14.8 18.0 30.2 36.7 99.7 42.9 46.5 51.8 56.0 197.2

% of revenue 63.2% 54.4% 53.1% 52.8% 52.5% 52.0% 52.5% 51.2% 50.6% 50.3% 50.2% 50.5%

Changes in fair value of biological assets 1.1 4.2 0.3 3.0 4.0 4.0 11.3 4.0 4.0 5.0 5.0 18.0

% of revenue 6.9% 6.7% 0.9% 8.8% 7.0% 5.7% 5.9% 4.8% 4.3% 4.9% 4.5% 4.6%

Gross Profit 7.2 32.7 13.4 19.1 31.3 37.9 101.7 44.8 49.4 56.2 60.6 211.0

Gross Margin 43.7% 52.3% 47.9% 56.0% 54.5% 53.7% 53.5% 53.5% 53.7% 54.6% 54.3% 54.1%

General & administrative 11.0 56.4 22.6 25.2 25.3 26.1 99.2 26.8 27.6 27.8 27.3 109.5

% of revenue 66.8% 90.2% 80.9% 74.0% 44.0% 37.0% 52.2% 32.0% 30.0% 27.0% 24.5% 28.1%

Sales & marketing 0.2 1.5 0.7 1.0 1.2 1.2 4.1 1.7 1.8 2.1 2.2 7.8

% of revenue 1.2% 2.4% 2.5% 3.0% 2.0% 1.7% 2.1% 2.0% 2.0% 2.0% 2.0% 2.0%

Depreciation & amortization 0.3 2.4 3.3 3.4 3.4 3.4 13.5 3.4 3.4 3.4 3.4 13.6

% of revenue 1.6% 3.9% 11.7% 10.0% 5.9% 4.8% 7.1% 4.1% 3.7% 3.3% 3.0% 3.5%

Operating Income (Loss) (4.3) (27.6) (13.2) (10.6) 1.5 7.2 (15.1) 13.0 16.6 22.9 27.6 80.1

Operating Margin -25.8% -44.1% -47.3% -31.0% 2.5% 10.1% -8.0% 15.5% 18.1% 22.3% 24.7% 20.5%

Other income (expense) 0.5 51.6 5.3 6.0 6.0 6.0 23.3 7.0 7.0 7.0 7.0 28.0

Interest income 2.0 0.4 0.6 0.6 0.6 2.2 0.6 0.6 0.6 0.6 2.4

Interest expense (0.4) (2.8) (0.9) (2.0) (3.2) (3.2) (9.3) (3.2) (3.2) (3.2) (3.2) (12.8)

Pretax income (4.2) 23.1 (8.5) (6.0) 4.9 10.6 1.0 17.4 21.0 27.3 32.0 97.7

Pretax margin -25.1% 37.0% -30.5% -17.5% 8.5% 15.0% 0.5% 20.7% 22.8% 26.5% 28.7% 25.0%

Tax provision (benefit) 0.2 5.2 1.3 (1.4) 1.1 2.4 3.5 4.0 4.8 6.3 7.4 22.5

Tax Rate -5.2% 22.7% -15.3% 23.0% 23.0% 23.0% 365.3% 23.0% 23.0% 23.0% 23.0% 23.0%

Net income before non-controlling interest (4.4) 17.9 (9.8) (4.6) 3.7 8.1 (2.5) 13.4 16.2 21.0 24.6 75.2

Net Margin -26.4% 28.6% -35.2% -13.5% 6.5% 11.5% -1.3% 16.0% 17.6% 20.4% 22.1% 19.3%

Net inc. attributable to non-controlling interest (0.6) 25.5 (0.1) (0.5) 0.4 1.0 0.7 1.6 1.9 2.1 2.5 8.1

Net income attributable to GTI (3.7) (7.7) (9.7) (4.0) 3.3 7.2 (3.3) 11.8 14.2 18.9 22.2 67.1

EPS ($0.03) ($0.05) ($0.06) ($0.02) $0.02 $0.04 ($0.02) $0.06 $0.07 $0.09 $0.11 $0.34

Adjusted EPS

Avg.diluted shares outstanding 139.5 148.3 170.9 173.0 200.0 200.0 186.0 200.0 200.0 200.0 200.0 200.0

. .

EBITDA ($4.0) ($25.2) ($9.9) ($7.2) $4.9 $10.6 ($1.6) $16.4 $20.0 $26.3 $31.0 $93.7

EBITDA Margin -24.2% -40.2% -35.5% -21.0% 8.5% 15.0% -0.9% 19.5% 21.7% 25.6% 27.8% 24.0%



Balance Sheet



CONSOLIDATED BALANCE SHEET (in $ mils)

ASSETS 2017 2018

Current assets

Cash and cash equivalents 29.6 146.0

Accounts receivable 0.9 4.6

Members contribution receivable 2.8 -

Due from related parties 1.2 -

Inventory 2.7 11.4

Biological assets 2.1 6.3

Notes receivable 3.5

Prepaid expenses and other current assets 0.6 2.6

Total current assets $39.8 $174.4

PP&E 31.6 65.3

Intangible assets 14.2 91.6

Investments - 46.8

Notes receivable - 7.4

Goodwill 0.2 29.3

Deposits and other assets 1.5 2.2

Total assets $87.2 $417.0

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable 4.0 8.9

Accrued liabilities 1.2 7.0

Current portion of notes payable 8.9 1.5

Liability for acquisition of non-controlling interest 25.4

Derivative liability 4.2

Income tax payable 0.2 0.5

Total current liabilities $14.3 $47.6

Deferred rent 0.3 0.3

Notes payable 7.2 5.7

Contingent consideration payable - 9.0

Deferred income taxes - 5.5

Total liabilities $21.8 $68.1

Stockholders’ equity:

Equity of GTI 62.0 345.4

Non-controlling interests 3.4 3.5

Total liabilities and stockholders’ equity $87.2 $417.0



Cash Flow Statement



STATEMENT OF CASH FLOWS (in $ mils)

2017 2018

Net loss attributable to GTI (3.7) (7.9)

Net income (loss) attributable to non-controlling interest (0.6) 27.8

Depreciation & amortization 0.7 5.2

Loss on disposal of PP&E 0.0 0.7

Income from joint venture 0.0 0.1

Deferred rent 0.3 (0.0)

Deferred income taxes 0.0 5.5

Share based compensation 0.0 14.7

Increase in fair value of warrants 0.0 (41.4)

Equity conversion and listing expenses 0.0 (1.3)

Changes in value of liabilities related to put option 0.0 (2.5)

Reverse takeover transaction listing expense 0.0 3.0

Interest on convertible note payable 0.0 0.4

Interest on contingent consideration payable 0.0 0.2

Accounts receivable (0.6) (3.7)

Biological assets (1.1) (4.2)

Inventory (1.2) (7.6)

Prepaid expenses and other current assets (0.4) (2.1)

Deposits and other assets (0.9) (0.7)

Accounts payable 3.1 4.7

Accrued liabilities (0.0) 1.7

Income tax payable 0.2 0.3

Net Cash From Operations (4.3) (7.1)

Investing activities

Investments in debentures 0.0 (53.1)

Repayments from debentures 0.0 20.0

Investment in associates 0.0 (4.4)

Purchases of PP&E (14.2) (27.4)

Advances to related parties (1.2) (2.8)

Repayments from related parties 0.0 0.6

Issuance of notes receivable 0.0 (3.5)

Consolidation of variable interest entities 0.0 0.2

Purchases of licenses (0.2) (0.0)

Purchases of businesses (10.4) (51.5)

Net Cash from Investing Activities (26.0) (122.0)

Financing activities

Contributions from shareholders 66.2 21.7

Distributions to shareholders (34.0) (17.4)

Payment for change in ownership interests of subsidiary (0.7)

Proceeds from shares issued pursuant to private placement 66.8

Proceeds from exchangeable notes payable 45.0

Proceeds from fundraise transactions 140.3

Proceeds from exercise of options 0.0 0.9

Reverse takeover and bought deal financing costs 0.0 (10.6)

Proceeds from issuance of notes payable 15.0 0.8

Principal repayments of notes payable (0.2) (1.4)

Net Cash from Financing Activities 46.9 245.5

Effect of exchange rate changes

Net increase (decrease) in cash and cash equivalents 16.6 116.4

Cash and cash equivalents, beginning of the period 13.0 29.6

Cash and cash equivalents, end of the period 29.6 146.0



Important DisclosuresAnalyst CertificationI, Rommel Dionisio, hereby certify that the views expressed in this research report accurately reflect my personal views about thesubject securities or issues. I further certify that I have not received direct or indirect compensation in exchange for expressing specificrecommendations or views in this report.

Coverage Universe Investment Banking RelationshipsRating Number Percent Rating Number PercentBuy 65 55 Buy 12 18Neutral 47 40 Neutral 8 17Sell 6 5 Sell 1 17Total 118 100% Total 21 100%

*Percentage of Investment Banking Clients in Coverage Universe by Rating

Rating and Price Target History for: Green Thumb Industries Inc. (GTBIF) as of 06-07-2019

30

25

20

15

10

5

0Q2 Q3 2017 Q1 Q2 Q3 2018 Q1 Q2 Q3 2019 Q1

1.510.50

(millions)

Created by: BlueMatrix

Ownership and Material Conflicts of Interest

Ratings, Coverage Groups, and Views and Related Definitions

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