The Cannabist Company Reports Third Quarter 2023 Results
Third Quarter 2023 U.S. GAAP Financial Highlights (in $ thousands, excl. margin items):
| Q3 2023 | Q2 2023 | Q3 2022 | % QoQ | % YoY | |||||||||
| Revenue |
$ |
129,183 |
$ |
129,244 |
$ |
132,733 |
0.0% |
-2.6% |
|||||
| Gross Profit |
$ |
37,142 |
$ |
52,122 |
$ |
52,135 |
-28.7% |
0.0% |
|||||
| Adj. Gross Profit[1,2] |
$ |
50,275 |
$ |
52,158 |
$ |
56,895 |
-3.6% |
-8.3% |
|||||
| Adj. Gross Margin[1,2] |
|
38.9% |
|
40.4% |
|
42.9% |
-144 bps |
-395 bps |
|||||
| Income (Loss) from Operations |
$ |
(19,330) |
$ |
49 |
$ |
(18,710) |
N/A |
N/A |
|||||
| Adj. EBITDA[1,2] |
$ |
20,493 |
$ |
20,316 |
$ |
20,993 |
0.9% |
-2.4% |
|||||
| Adj. EBITDA Margin[1,2] |
|
15.9% |
|
15.7% |
|
15.8% |
14 bps |
5 bps |
|||||
| Net Income (Loss) |
$ |
(36,180) |
$ |
(29,037) |
$ |
(38,303) |
N/A |
N/A |
|||||
|
[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, as well as Table 4 for reconciliation, where applicable. |
|
[2] Excludes |
“The third quarter results demonstrate consistent execution, with stable revenue of more than
He continued, “As we continue to optimize our footprint and prioritize markets that are driving profitability and growth, we are preparing to capitalize on the embedded growth in our portfolio, with additional retail locations expected to open in
Top 5 Markets by Revenue in Q3[3]:
Top 5 Markets by Adjusted EBITDA in Q3[3]:
|
[3] Markets are listed alphabetically |
Operational Highlights
Enhancing scale and optimizing strategic retail network:
-
Wholesale revenue increased 3.3% sequentially to
$15.7 million , as new wholesale program was established late in the quarter -
Retail revenue was flat sequentially, with outsize growth in
Maryland and an increase in overall transactions offset by a decline in average basket size across the portfolio -
Maryland revenue increased 55% sequentially, with the start of adult use sales onJuly 1, 2023 ; one additionalMaryland retail location is in development, one existing retail location will be relocated and expanded in 1H2024 -
New Jersey’s two active retail locations remain among the top dispensaries in the Company’s portfolio; a third
New Jersey retail location is in development for 1H2024 -
In Q3 2023, the Company opened one Cannabist location in
Suffolk, Virginia , bringing the total active store count to 86;Virginia remains a top market by revenue and adjusted EBITDA, with 10 retail locations in operation and 2 more in development for 1H2024
Driving cultivation expertise and continued improvements:
- The Company sees continued gains in operational efficiency and productivity, with the overall cultivated cost per gram continuing to show improvement, with a 9% reduction YoY; multiple markets also saw improved potency through strict adherence to standard operating procedures
- The Company now counts more than 70 high potency strains (25% THC or higher) throughout the portfolio, which affords our flower a premium price in the market as we continue to see a higher percentage of the portfolio in the high potency, branded category that commands premium pricing; has enabled the launch of higher potency brands like Triple Seven in new markets
- Cultivation improvements and standardization represent significant opportunity to improve gross margin further through continued reduction in cost per cultivated gram; the Company continues to optimize production planning, genetics selection, environmental controls and plant management across the cultivation portfolio to support market demand
- Improvement in cultivation efficiency and standardization supports introduction of upgraded brands, such as Triple Seven, Classix, Amber, Press, Hedy and Seed & Strain, to drive future pricing improvements and wholesale demand
Sustained momentum on branding initiatives at retail and product levels:
-
On
September 19 , the Company unveiled a new name and brand identity, evolving fromColumbia Care Inc. toThe Cannabist Company Holdings Inc. - In Q3 2023, launched various new form factors of award-winning brands across our national portfolio, including Amber, Press 2.0, and Triple Seven
-
In-house brands accounted for over 60% of all flower sold at
The Cannabist Company owned dispensaries in Q3 2023; owned brands made up 50% of sales in Q3 2023 -
There are 36 Cannabist locations in the
U.S. , with additional openings planned in 2024
Capital Markets & Liquidity Highlights
-
The Company ended the quarter with
$60.3 million in cash, compared to$37.0 million in Q2 2023, an increase of over 60% -
In Q3 2023, operating cash flow was
$1.8 million as the Company continues to focus on cash flow generation – enabling us to reach our 2024 financial target of positive operating cash flow one quarter early -
Capital expenditure of
$2.5 million in the quarter for new store opening and manufacturing upgrades ahead of anticipated growth of wholesale program -
On
August 1 , the Company announced voluntary delisting of shares from the Canadian Securities Exchange “CSE”, which was effective as ofAugust 2 ; the Cboe Canada remains the Company’s primary exchange -
With the Company’s name change to
The Cannabist Company , shares began trading under new ticker symbols of CBST on the Cboe Canada and CBSTF on OTC Markets in September -
On
September 21 , the Company closed on a US$25 million unit offering at a price ofC$1.52 per share, the proceeds from which were used onOctober 23 to effect a partial redemption of$25 million of the$38.2 million outstanding 13% notes dueMay 2024 ; the reduction in principal represents an annualized reduction in interest expense of$3.25 million -
Including the impact of the organizational changes announced on
July 31, 2023 and the integration ofGreen Leaf Medical, LLC , sinceDecember 2022 , the Company has eliminated over$38 million , net, in annual operating expenses, while also improving organizational design to accelerate decision-making and leverage scale in markets more effectively -
The Company has signed definitive agreements, subject to closing conditions, to divest its
Utah license and retail location for$6.6 million -
As announced contemporaneously today, the Company's Board of Directors authorized a normal course issuer bid (the “NCIB”) to repurchase up to 15 million of its issued and outstanding Common Shares, but in no event to exceed
$5 million in total over the course of the NCIB. The NCIB is subject to the approval of the Cboe Canada Exchange (the “CBOE”) and will be in effect for up to the next 12 months - The Company intends to pursue additional alternatives to reduce debt, reduce interest expense and extend maturities on the remaining instruments due 2024, 2025, and 2026
Conference Call and Webcast Details
The Company will host a conference call on
To access the live conference call via telephone, participants must pre-register at https://register.vevent.com/register/BI0f19b43d1bda451cb50bdff776665b09. After registering, instructions will be shared on how to join the call for those who wish to dial in. A live audio webcast of the call will also be available in the Investor Relations section of the Company's website at https://investors.cannabistcompany.com/ or at https://edge.media-server.com/mmc/p/7ub538yd.
A replay of the audio webcast will be available in the Investor Relations section of the Company’s website approximately 2 hours after completion of the call and will be archived for 30 days.
About
Non-GAAP Financial Measures
In this press release,
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. Adjusted EBITDA is defined as EBITDA before (i) share-based compensation expense; (ii) goodwill and intangible impairment, (iii) adjustments for acquisition and other non-core costs; (iv) gain on remeasurement of contingent consideration, net, (v) fair value changes on derivative liabilities; and (vi) fair value mark-up for acquired inventory. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Revenue. Adjusted Gross Profit is defined as gross profit before the fair mark-up for acquired inventory. Adjusted Gross Margin is defined as gross margin before the fair mark-up for acquired inventory.
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.
Reconciliations of non-GAAP financial measures to their nearest comparable GAAP measures are included in this press release and a further discussion of some of these items will be contained in our quarterly report on Form 10-Q.
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 Cannabist 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: expectations related to growth, cost management and financial numbers including free cash flow; 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, reduce interest expense and extend maturities 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 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
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 Cannabist Company’s Form 10-K for the year ended
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.
| TABLE 1 - CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (in US $ thousands, except share and per share figures, unaudited) | ||||||||||||||||
| Three Months Ended | ||||||||||||||||
| Revenue |
$ |
129,183 |
|
$ |
129,244 |
|
$ |
124,535 |
|
$ |
129,571 |
|
$ |
132,733 |
|
|
| Cost of sales |
|
(92,041 |
) |
|
(77,122 |
) |
|
(77,454 |
) |
|
(78,723 |
) |
|
(80,462 |
) |
|
| Cost of sales related to business combination fair value adjustments to inventory |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(136 |
) |
|
| Gross profit |
|
37,142 |
|
|
52,122 |
|
|
47,081 |
|
|
50,848 |
|
|
52,135 |
|
|
| Selling, general and administrative expenses |
|
(56,472 |
) |
|
(52,073 |
) |
|
(55,350 |
) |
|
(72,956 |
) |
|
(70,845 |
) |
|
| Profit / (loss) from operations |
|
(19,330 |
) |
|
49 |
|
|
(8,269 |
) |
|
(22,108 |
) |
|
(18,710 |
) |
|
| Other income (expense), net |
|
(14,553 |
) |
|
(22,781 |
) |
|
(17,614 |
) |
|
(13,445 |
) |
|
(13,018 |
) |
|
| Income tax benefit (expense) |
|
(2,297 |
) |
|
(6,305 |
) |
|
(10,689 |
) |
|
(18,702 |
) |
|
(6,575 |
) |
|
| Net income (loss) |
|
(36,180 |
) |
|
(29,037 |
) |
|
(36,572 |
) |
|
(54,255 |
) |
|
(38,303 |
) |
|
| Net income (loss) attributable to non-controlling interests |
|
545 |
|
|
(174 |
) |
|
768 |
|
|
(427 |
) |
|
(2,872 |
) |
|
| Net income (loss) attributable to |
$ |
(36,725 |
) |
$ |
(28,863 |
) |
$ |
(37,340 |
) |
$ |
(53,828 |
) |
$ |
(35,431 |
) |
|
| Weighted average common shares outstanding - basic and diluted |
|
409,113,721 |
|
|
405,782,234 |
|
|
401,438,546 |
|
|
394,023,144 |
|
|
399,227,935 |
|
|
| Earnings per common share attributable to |
$ |
(0.09 |
) |
$ |
(0.07 |
) |
$ |
(0.09 |
) |
$ |
(0.14 |
) |
$ |
(0.09 |
) |
|
| TABLE 2 - CONDENSED CONSOLIDATED BALANCE SHEET (SELECT ITEMS) | ||||||||||||||||
| (in US $ thousands, unaudited) | ||||||||||||||||
| Three Months Ended | ||||||||||||||||
| Cash |
$ |
60,273 |
|
$ |
36,997 |
|
$ |
40,159 |
|
$ |
48,154 |
|
$ |
50,023 |
|
|
| Total current assets |
|
230,829 |
|
|
248,555 |
|
|
238,479 |
|
|
237,177 |
|
|
208,515 |
|
|
| Property and equipment, net |
|
326,725 |
|
|
328,026 |
|
|
348,581 |
|
|
357,993 |
|
|
370,820 |
|
|
| Right of use assets |
|
222,351 |
|
|
207,129 |
|
|
210,751 |
|
|
219,895 |
|
|
259,655 |
|
|
| Total assets |
|
948,394 |
|
|
951,990 |
|
|
973,021 |
|
|
994,726 |
|
|
1,371,578 |
|
|
| Total current liabilities |
|
197,268 |
|
|
227,471 |
|
|
172,363 |
|
|
203,118 |
|
|
178,015 |
|
|
| Total liabilities |
|
797,608 |
|
|
797,194 |
|
|
791,696 |
|
|
787,823 |
|
|
870,701 |
|
|
| Total equity |
|
150,786 |
|
|
154,796 |
|
|
181,325 |
|
|
206,903 |
|
|
500,877 |
|
|
| Total liabilities and equity |
$ |
948,394 |
|
$ |
951,990 |
|
$ |
973,021 |
|
$ |
994,726 |
|
$ |
1,371,578 |
|
|
| TABLE 3 - CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
| (in US $ thousands, unaudited) | ||||||||||||||||
| Three Months Ended | ||||||||||||||||
| Net cash provided by (used in) operating activities |
$ |
1,809 |
|
$ |
(313 |
) |
$ |
(3,405 |
) |
$ |
5,152 |
|
$ |
(16,770 |
) |
|
| Net cash provided by (used in) investing activities |
|
24,253 |
|
|
237 |
|
|
(2,552 |
) |
|
(3,369 |
) |
|
(14,276 |
) |
|
| Net cash provided by (used in) financing activities |
$ |
(804 |
) |
$ |
(3,086 |
) |
$ |
(2,037 |
) |
$ |
(3,652 |
) |
$ |
(371 |
) |
|
| TABLE 4 - RECONCILIATION OF US GAAP TO NON-GAAP MEASURES | ||||||||||||||||
| (in US $ thousands, unaudited) | ||||||||||||||||
| Three Months Ended | ||||||||||||||||
| Net income (loss) |
$ |
(36,180 |
) |
$ |
(29,037 |
) |
$ |
(36,572 |
) |
$ |
(54,255 |
) |
$ |
(38,303 |
) |
|
| Income tax (benefit) expense |
|
2,297 |
|
|
6,305 |
|
|
10,689 |
|
|
18,702 |
|
|
6,575 |
|
|
| Depreciation and amortization |
|
17,929 |
|
|
14,615 |
|
|
15,063 |
|
|
20,058 |
|
|
21,808 |
|
|
| Net interest and debt amortization |
|
14,500 |
|
|
13,785 |
|
|
13,671 |
|
|
11,499 |
|
|
14,339 |
|
|
| EBITDA (Non-GAAP) |
$ |
(1,454 |
) |
$ |
5,668 |
|
$ |
2,851 |
|
$ |
(3,996 |
) |
$ |
4,419 |
|
|
| Share-based compensation |
$ |
8,321 |
|
$ |
3,468 |
|
$ |
6,515 |
|
$ |
7,678 |
|
$ |
6,597 |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|||||
| Adjustments for other acquisition and non-core costs |
|
13,601 |
|
|
11,180 |
|
|
6,968 |
|
|
14,727 |
|
|
10,084 |
|
|
| Gain on remeasurement of contingent consideration, net |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
| Fair value changes on derivative liabilities |
|
25 |
|
|
- |
|
|
30 |
|
|
(6,380 |
) |
|
(243 |
) |
|
| Fair value mark-up for acquired inventory |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
136 |
|
|
| Adjusted EBITDA (Non-GAAP) |
$ |
20,493 |
|
$ |
20,316 |
|
$ |
16,364 |
|
$ |
12,029 |
|
$ |
20,993 |
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20231114612898/en/
Investor Contact
SVP, Capital Markets
investors@cannabistcompany.com
Media Contact
SVP, Communications
media@cannabistcompany.com
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