Restructured corporate operations to align with
focus on key growth markets and generate an expected net annual
savings of approximately $10 million once fully implemented
Optimizing operational footprint with planned
divestiture of asset portfolio and license in the Florida market;
preparing for adult use transitions in Ohio and Delaware
The Cannabist Company Holdings Inc. (Cboe CA: CBST) (OTCQX:
CBSTF) (FSE: 3LP) (“The Cannabist Company” or the “Company”), one
of the most experienced cultivators, manufacturers and retailers of
cannabis products in the U.S., today announced a series of
initiatives as part of its ongoing business transformation intended
to improve profitability, enhance margin profile and enable cash
flow generation. These initiatives include a corporate
restructuring expected to generate approximately $10 million in
annual cost-savings; the planned divestiture of its entire asset
portfolio and license in Florida; and closing or modifying the
operations of other underperforming assets.
The business transformation has been supported by a Special
Committee of the Company’s board of directors (the “Board”)
considering various strategic alternatives to position The
Cannabist Company for profitable and sustainable long-term
growth.
“As we have made clear since the beginning of 2024, under new
leadership, The Cannabist Company will look very different by the
end of this year in terms of our operational footprint, overhead
expenses, and de-risked financial profile. Our focus is on building
a better business, positioned for profitability and long-term
sustainable growth. We are decisively leaning into the markets that
are best positioned for growth and strategic upside, while also
monetizing underperforming and non-core assets. In Florida, for
example, our asset base is not commercially optimized, with more
cultivation capacity than our retail locations require. Our retail
footprint and cultivation and manufacturing capacity are better
suited to balance other operators’ portfolios, meanwhile we will
eliminate loss-making operations and bring in non-dilutive
capital,” said David Hart, CEO, The Cannabist Company.
He continued, “We will continue to capitalize on our strong
asset base in profitable markets such as Virginia and New Jersey,
and we are actively preparing for upcoming adult use transitions in
Ohio and Delaware. The significant corporate restructuring we’ve
undertaken will simplify our business, reduce overhead expenses,
and more appropriately align with our evolving operational
footprint as we exit Florida and divest assets in other
underperforming markets in the coming months. The steps we
announced today are among the most critical in putting us firmly on
the right path for success, representing potentially $20 million
annualized improvement in Adjusted EBITDA. Our leadership team is
committed to taking the necessary, and often difficult, actions to
deliver a more sustainable business with better margins, and a
clearer path to free cash flow generation.”
The Company is announcing the following initiatives:
Corporate Restructuring
- Commensurate with an increasingly smaller operational
footprint, largely as a result of the exit of the Florida market,
the Company implemented a corporate restructuring on June 13, which
entailed both labor and non-labor reductions.
- The corporate restructuring is expected to generate net annual
savings of approximately $10 million once fully implemented.
Rightsizing Footprint to Maximize Profitability
- The Company is in the process of divesting its entire asset
portfolio and license in the Florida market, with LOIs for multiple
transactions in place and $2.75M of deposits in escrow. Upon
divesting these assets, including 14 retail locations, three
cultivation and manufacturing facilities, and its license, the
Company will exit the Florida market, which represented less than
5% of total revenue in Q1 2024. ATB Securities, Inc. is acting as
advisor for the Florida divestiture transactions.
While final terms of the transaction(s) will be announced at a
later date, upon execution of definitive documentation, the
expected impacts to the business are accretive to both margins and
EBITDA(1).
For the year ended December 31, 2023 and for the three-month
period ended March 31, 2024, Florida incurred the following losses
for the Company:
$000s
Net Income/(Loss)
Adjusted EBITDA(1)
FY 2023
$(18,915)
$(7,087)
Q1 2024
$(4,843)
$(2,505)
(1) Denotes a Non-GAAP measure. See
“Non-GAAP Financial Measures” in this press release for more
information regarding the Company’s use of non-GAAP financial
measures.
- In addition, the Company has closed one underperforming retail
location in Trinidad, Colorado, located near the New Mexico border.
The Company now operates 22 retail locations in Colorado.
- As of June 1, the Company reduced the operational hours for its
New York medical dispensaries located in Brooklyn and Riverhead. It
has also closed both its Manhattan and Rochester locations
permanently, due to lease expirations, and will continue its search
for new locations. The Company remains focused on growing the adult
use wholesale segment in the immediate term and will continue to
evaluate market conditions that would enable fully restoring
operating hours and contemplate adult use.
Enhancing Core Markets that Drive Growth
- The Company has opened its 11th location in Virginia, with
Cannabist Richmond opening on June 11, 2024. The Company has 1
additional retail location in development in Virginia.
- The Company expects to open its third New Jersey retail
location in Q4 2024, located in Mays Landing, New Jersey.
- The Company is preparing for the accelerated onset of adult use
sales in Ohio by the end of June with an expanded garden, now at
85% capacity with an expectation to enter 2H 2024 at 100%, and
upgrades to its five operational retail locations in anticipation
of increased volume. Additionally, the Company is in the process of
developing three additional retail locations and has plans to
convert its five existing retail locations to the Cannabist retail
brand.
- The Company, as one of the leading medical providers in the
Delaware market, expects to begin adult use sales when approved at
all three retail locations: Rehoboth Beach, Smyrna and Wilmington.
In preparation for adult use, the Company is working to increase
cultivation and manufacturing capacity.
About The Cannabist Company (f/k/a Columbia Care)
The Cannabist Company, formerly known as Columbia Care, is one
of the most experienced cultivators, manufacturers and providers of
cannabis products and related services, with licenses in 14 U.S.
jurisdictions. The Company operates 104 facilities1 including 81
dispensaries and 23 cultivation and manufacturing facilities,
including those under development. Columbia Care, now The Cannabist
Company, is one of the original multi-state providers of cannabis
in the U.S. and now delivers industry-leading products and services
to both the medical and adult-use markets. In 2021, the Company
launched Cannabist, its retail brand, creating a national
dispensary network that leverages proprietary technology platforms.
The company offers products spanning flower, edibles, oils and
tablets, and manufactures popular brands including Seed &
Strain, Triple Seven, Hedy, gLeaf, Classix, Press, and Amber. For
more information, please visit www.cannabistcompany.com.
Non-GAAP Financial Measures
In this press release, the Company refers to certain non-GAAP
financial measures, including EBITDA. The Company considers certain
non-GAAP measures to be meaningful indicators of the performance of
its business. These measures are not recognized measures under
GAAP, do not have a standardized meaning prescribed by GAAP and may
not be comparable to (and may be calculated differently by) other
companies that present similar measures. Accordingly, these
measures should not be considered in isolation from nor as a
substitute for our financial information reported under GAAP. These
non-GAAP measures are used to provide investors with supplemental
measures of our operating performance and thus highlight trends in
our business that may not otherwise be apparent when relying solely
on GAAP measures. These supplemental non-GAAP financial measures
should not be considered superior to, as a substitute for, or as an
alternative to, and should be considered in conjunction with, the
GAAP financial measures presented. We also recognize that
securities analysts, investors and other interested parties
frequently use non-GAAP measures in the evaluation of companies
within our industry.
With respect to non-GAAP financial measures, the Company defines
EBITDA as net income (loss) before (i) depreciation and
amortization; (ii) income taxes; and (iii) interest expense and
debt amortization.
The Company views these non-GAAP financial measures as a means
to facilitate management’s financial and operational
decision-making, including evaluation of the Company’s historical
operating results and comparison to competitors’ operating results.
These non-GAAP financial measures reflect an additional way of
viewing aspects of the Company’s operations that, when viewed with
GAAP results and the reconciliations to the corresponding GAAP
financial measure, may provide a more complete understanding of
factors and trends affecting the Company’s business. The
determination of the amounts that are excluded from these non-GAAP
financial measures are a matter of management judgment and depend
upon, among other factors, the nature of the underlying expense or
income amounts. Because non-GAAP financial measures exclude the
effect of items that will increase or decrease the Company’s
reported results of operations, management strongly encourages
investors to review the Company’s consolidated financial statements
and publicly filed reports in their entirety.
A further discussion of some of these items are contained in our
annual report on Form 10-K for the year ended December 31, 2023 and
in our quarterly report on Form 10-Q for the quarter ended March
31, 2024.
Caution Concerning Forward-Looking Statements
This press release contains certain statements that constitute
forward-looking information or forward looking statements within
the meaning of applicable securities laws and reflect the Company’s
current expectations regarding future events. Statements concerning
the Company’s objectives, goals, strategies, priorities,
intentions, plans, beliefs, expectations and estimates, and the
business, operations, financial performance and condition of the
Company are forward-looking statements. The words “believe”,
“expect”, “anticipate”, “estimate”, “intend”, “may”, “will”,
“would”, “could”, “should”, “continue”, “plan”, “goal”,
“objective”, and similar expressions and the negative of such
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. Forward looking statements in this press release
include, among others, statements related to: the Company’s
corporate restructuring and related expected savings; the
divestiture of the Company’s Florida asset portfolio and expected
impacts thereof; the expected adult use sales in Ohio and Delaware;
expectations related to growth, cost management and financial
numbers including free cash flow and capital expenditures; our
ability to continue to reduce corporate SG&A, reduce leverage,
enhance cash flow from operations and drive innovation through
technology and product/brand development; the planned opening of
additional Cannabist locations; the Company’s ability to reduce
debt and reduce interest expense of its outstanding debt; and
ongoing business expectations.
The Company has made assumptions with regard to its ability to
execute on initiatives, which although considered reasonable by the
Company, may prove to be incorrect and are subject to known and
unknown risks and uncertainties that may cause actual results,
performance or achievements of the Company to be materially
different from those expressed or implied by any forward-looking
information. Forward-looking information involves numerous
assumptions, including the closing of the Company’s divestiture
transactions; the completion of the Company’s corporate
restructuring; the fact that cannabis remains illegal under federal
law; the application of anti-money laundering laws and regulations
to the Company; legal, regulatory or political change to the
cannabis industry; access to the services of banks; access to
public and private capital for the Company; unfavorable publicity
or consumer perception of the cannabis industry; expansion into the
adult-use markets; the impact of laws, regulations and guidelines;
the impact of Section 280E of the Internal Revenue Code; the impact
of state laws pertaining to the cannabis industry; the Company’s
reliance on key inputs, suppliers and skilled labor; the difficulty
of forecasting the Company’s sales; constraints on marketing
products; potential cyber-attacks and security breaches; net
operating loss and other tax attribute limitations; the impact of
changes in tax laws; the volatility of the market price of the
common shares of the Company; reliance on management; litigation
including existing claims and those which may surface from time to
time; future results and financial projections; the impact of
global financial conditions and disease outbreaks; projected
revenue and expected gross margins, capital allocation, EBITDA
break even targets and other financial results; growth of the
Company’s operations via expansion; statements relating to the
business and future activities of, and developments related to, the
Company after the date of this press release, including such things
as future business strategy, competitive strengths, goals,
expansion and growth of the Company’s business, operations and
plans; expectations that planned transactions will be completed as
previously announced; expectations regarding cultivation and
manufacturing capacity; expectations regarding receipt of
regulatory approvals; expectations that licenses applied for will
be obtained; potential future legalization of adult-use and/or
medical cannabis under U.S. federal law; expectations of market
size and growth in the U.S. and the states in which the Company
operates; expectations for other economic, business, regulatory
and/or competitive factors related to the Company or the cannabis
industry generally; the impact of the Company’s plans to reduce
debt and interest expense of its outstanding debt; and other events
or conditions that may occur in the future.
Forward-looking statements may relate to future financial
conditions, results of operations, plans, objectives, performance
or business developments. These statements speak only as at the
date they are made and are based on information currently available
and on the then current expectations. Holders of securities of the
Company are cautioned that forward-looking statements are not based
on historical facts but instead are based on reasonable assumptions
and estimates of management of the Company at the time they were
provided or made and involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance
or achievements of the Company, as applicable, to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
Securityholders should review the risk factors discussed under
“Risk Factors” in the Company’s Form 10-K for the year ended
December 31, 2023, as filed with the applicable securities
regulatory authorities and as also described from time to time in
other documents filed by the Company with U.S. and Canadian
securities regulatory authorities.
The purpose of forward-looking statements is to provide the
reader with a description of management’s expectations, and such
forward-looking statements may not be appropriate for any other
purpose. In particular, but without limiting the foregoing,
disclosure in this press release as well as statements regarding
the Company’s objectives, plans and goals, including future
operating results and economic performance may make reference to or
involve forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such expectations
will prove to have been correct. A number of factors could cause
actual events, performance or results to differ materially from
what is projected in the forward-looking statements. No undue
reliance should be placed on forward-looking statements contained
in this press release. Such forward-looking statements are made as
of the date of this press release. The Company undertakes no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by applicable law. The Company’s forward-looking
statements are expressly qualified in their entirety by this
cautionary statement.
1 Pro forma facility and market count assuming the closure of
announced divesture transactions as of June 2024. Please refer to
the “Caution Concerning Forward-Looking Statements” for more
information; does not include 5 non-operational retail locations
and 4 non-operational cultivation and manufacturing facilities.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240617420337/en/
Investor Lee Ann Evans SVP, Capital Markets
investor@cannabistcompany.com
Media Lindsay Wilson SVP, Communications
media@cannabistcompany.com
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