Glass House Brands Eyes 2026 Rebound After Tough 2025

Glass House Brands Inc (($TSE:GLAS.A.U)) has held its Q4 earnings call. Read on for the main highlights of the call.

Glass House Brands Inc.’s latest earnings call struck a cautious but optimistic tone. Management acknowledged a tough 2025 marked by price compression, quality issues, and fallout from federal farm raids, which weighed on revenue, margins, and cash flow. Yet the call emphasized brand strength, financing wins, expanded capacity, and bold 2026 targets as evidence that current pressures are temporary rather than structural.

Top-Selling Brand and Resilient Retail Performance

Allswell emerged as the top-selling flower brand in California by volume, underscoring Glass House’s pull with value-conscious consumers. Same-store retail sales rose about 10% in 2025, sharply outperforming a roughly 5% decline in the broader California market, helped by its Farm Fresh $9.99 everyday pricing strategy.

Financing Moves Ease Balance Sheet Risk

The company shored up its capital structure with a $50 million, five-year senior secured credit facility, boosting liquidity without issuing common equity. It also refinanced high-cost preferreds into a fully subscribed Series E at 12%, replacing paper that effectively cost around 22.5%, and raised about $22 million via its at-the-market program.

Operational Recovery and Record Planted Acreage

By year-end 2025, Glass House reported its largest planted footprint ever, with legacy greenhouses fully planted and the first third of Greenhouse 2 in production. Plant counts are roughly 20% above early July levels, and management expects another 40% increase once Greenhouse 2 is fully planted by the end of the second quarter of 2026.

Ambitious 2026 Growth and Scale Targets

For 2026, the company is targeting revenue of $235 million to $245 million versus $182 million in 2025, implying near 30% growth at the midpoint. It aims for gross margin around 48%, adjusted EBITDA in the high-$40 million range, and wholesale biomass production of about 1 million pounds, roughly 48% above 2025.

Hemp and International Expansion Pipeline

Greenhouse 4 has been planted for smokable CBD and hemp, with a first harvest expected in the second quarter and product sales targeted for summer. Management is also pursuing GACP certification and engaging international distributors to access European medical markets, noting that hemp pricing could exceed current California cannabis levels and sits outside 2026 guidance.

Research Initiatives and Strategic Partnerships

Glass House has begun collaborating with UC Berkeley on hemp-related research aimed at developing new medicinal products. The board also formed a special committee, including new director Alison Payne, to vet opportunities beyond California cannabis, signaling a more structured approach to diversification and innovation.

Production Base and Long-Term Cost Goals

Full-year 2025 production reached 666,000 pounds, which management noted is about 10% higher than 2024 sellable output, establishing a solid base for future scale. The company reiterated a long-term production cost goal of $95 per pound and expects to run below that level in the last three quarters of 2026 as new acreage and efficiency gains kick in.

Regulatory Tailwinds Support Long-Term Thesis

Management highlighted the December 18 order to reschedule cannabis to Schedule III and authorize pilot reimbursable CBD programs as a major potential catalyst. They believe these moves could eventually enable interstate and international medical sales, vastly expanding the company’s addressable market if federal implementation aligns with expectations.

Revenue Drop in 2025 and Fourth Quarter Weakness

Fourth-quarter 2025 revenue fell to $38.9 million from $53.0 million a year earlier, a decline of roughly 27%, driven mainly by wholesale softness. For the full year, revenue declined about 10% to $182.0 million from $200.9 million in 2024, underscoring how pricing and operational disruptions offset retail strength.

Steep Compression in Wholesale Selling Prices

Average wholesale biomass prices were under heavy pressure, dropping to $146 per pound in Q4 2025 from $220 a year earlier, a fall of roughly one third. For the full year, ASP slid to $177 per pound from $245 in 2024, hurt by product degradation, a heavier trim mix, and intense competition in the California market.

Higher Production Costs and Margin Squeeze

Cost of production climbed to $129 per pound in the fourth quarter versus $110 a year earlier, driving down profitability. Gross margin slipped to the mid-30s in Q4 versus about 43% last year, and full-year gross margin retreated to 42% from 48% in 2024, clearly missing the company’s cost target of $95 per pound.

EBITDA Deterioration and Weaker Cash Generation

Adjusted EBITDA swung to a loss of $3.3 million in the fourth quarter, compared with a $9 million profit in the prior-year period. For 2025, adjusted EBITDA was about $17 million, less than half of 2024 levels, while operating cash flow for Q4 turned negative and year-end cash and restricted cash fell to $23.4 million from $36.9 million.

Impact of July Farm Raids on Operations

Federal raids at two farms in July forced Glass House to adopt stricter hiring and staffing practices, which initially created labor shortages and curtailed planting. The resulting delays led to product deterioration and forced the company to clear older inventory in the fourth quarter, pushing down realized prices and further compressing margins.

Volume Mix Shift and Wholesale Headwinds

The company produced 159,000 pounds and sold 155,000 pounds in Q4, both below last year’s 165,000 pounds, highlighting some lingering disruption. Although full-year sell-through improved to about 643,000 pounds from 568,000 pounds, the share of higher-value flower fell to the high-20% range instead of the normal high-30%, weighing heavily on average prices.

Near-Term 1Q26 Margin Headwinds

Management signaled continued pressure in the first quarter of 2026, guiding to production of around 138,000 pounds with an ASP of about $167 per pound and production cost near $161 per pound. That translates into an expected gross margin of roughly 29%, markedly below the 45% margin posted in the prior-year quarter, before scale efficiencies arrive later in the year.

Operational and Commercial Disruptions Beyond Pricing

Switching consumer packaged goods distributors in December shaved an estimated $0.5 million to $1.0 million from quarterly sales, adding to wholesale weakness. A reset in loyalty program points cut another roughly $0.5 million from retail revenue, while the timing for receiving several million dollars of tax credits remains uncertain and is not factored as a near-term support.

Guidance and Outlook Emphasize a 2026 Rebound

For the first quarter of 2026, Glass House expects about $39 million of revenue and ending cash near $27 million, reflecting transitional margin pressure but stable liquidity. For the full year, management forecasts revenue of $235 million to $245 million, gross margin around 48%, adjusted EBITDA in the high-$40 million range, and about 1 million pounds of biomass at roughly $100 per pound in average costs.

The call painted a picture of a business navigating short-term turbulence while betting heavily on scale, cost discipline, and new markets to unlock value. For investors, 2025 marked a reset year plagued by external and operational setbacks, but management’s aggressive 2026 targets and capacity expansion outline a clear, if execution-heavy, path toward restored profitability and renewed growth.