The Cannabist Company Holdings Q2 Earnings Indicate Turnaround
NEW YORK–(BUSINESS WIRE)–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 reported its financial and operating results for the second quarter ended June 30, 2024. All financial information presented in this release is in U.S. GAAP and in thousands of U.S. dollars, unless otherwise noted.
Second Quarter 2024 Financial Highlights (in $ thousands, excl. margin items):
| For the Three Months Ended | |||||||||
| June 30, 2024 | March 31, 2024 | June 30, 2023 | |||||||
| Revenue | $ | 125,190 | $ | 122,611 | $ | 129,244 | |||
| Gross Profit | $ | 48,052 | $ | 42,537 | $ | 52,122 | |||
| Adj. Gross Profit[1,2] | $ | 48,214 | $ | 47,967 | $ | 52,158 | |||
| Adj. Gross Margin[1,2] | 38.5 | % | 39.1 | % | 40.4 | % | |||
| Income (Loss) from Operations | $ | 8,006 | $ | (10,736 | ) | $ | 49 | ||
| Adj. EBITDA[1,2] | $ | 17,537 | $ | 15,304 | $ | 20,316 | |||
| Adj. EBITDA Margin[1,2] | 14.0 | % | 12.5 | % | 15.7 | % | |||
| Net Income (Loss) | $ | (13,643 | ) | $ | (34,568 | ) | $ | (29,037 | ) |
| [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] Both Adj. Gross Profit and Adj. EBITDA exclude $0.16 million in Q2 2024, $5.4 million in Q1 2024, and $0.04 million in Q2 2023; see the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2024 for additional disclosure. |
“Our second quarter results show continued progress in our efforts to build a better business, as we transform our operations and reshape our footprint, all in the process of targeting enhanced profitability. We saw sequential improvement in revenue, gross profit, Adj. EBITDA and Adj. EBITDA margin, and the green shoots that we referenced last quarter continued to flourish. We’ve announced several transactions that will have a marked impact on the business in aggregate, enabling us to reduce costs, de-risk the balance sheet, and progress towards free cash flow generation,” said David Hart, CEO of The Cannabist Company.
He continued, “The expansion of successful brand partnerships, a growing wholesale business, and increased shift toward finished goods have all contributed to another sequential improvement in gross margin for the wholesale segment. As we look ahead for the second half of 2024, we are pleased with the pace of the transition to adult use in Ohio, and are encouraged by continued growth in our mid-Atlantic markets such as Maryland, New Jersey and Virginia. The first half of 2024 has proven to be transformative for The Cannabist Company, and we look forward to further progress as we strive to build a better business.”
Top 5 Markets by Revenue in Q2[3]: Colorado, Maryland, New Jersey, Ohio, Virginia
Top 5 Markets by Adjusted EBITDA in Q2[3]: Colorado, Maryland, New Jersey, Ohio, Virginia
| [3] Markets are listed alphabetically |
Operational Highlights for Second Quarter 2024
- Second quarter revenue increased 2% over the prior quarter, and Adjusted EBITDA margin improved more than 150 basis points sequentially.
- Wholesale revenue increased 24% over Q1 and represented 15% of total revenue; in Q2, gross margin for the wholesale segment improved approximately 300 basis points over the prior quarter, driven by mix shift towards finished goods and expansion of successful brand partnerships.
- In Q2, one retail location was opened in Richmond, Virginia; as part of corporate restructuring implemented in June, the Company closed 2 retail locations in New York, 1 in Colorado and 1 in Washington, DC. The quarter-end active retail count was 82.
- Strategic commercial partnerships were expanded, with Old Pal growing to New Jersey and Maryland, and Revelry expanding to Maryland; commercial partnerships with brands such as Old Pal, Airo Brands, ButACake, Revelry Herb Co., and Edie Parker Flower now span 7 markets.
Financial Highlights for Second Quarter 2024
- The Company ended the second quarter with $22 million in cash. In March, the Company closed a $25.75 million private placement offering of 9% convertible notes due 2027, for which the primary use of proceeds was to settle the remaining $13.2 million of the 13% notes that were settled at maturity in May 2024.
- In June, the Company implemented a corporate restructuring that entailed both labor and non-labor reductions, which is expected to generate net annual savings of approximately $10 million.
- In Q2 2024, cash from operations was negative $3 million, compared to negative $6.2 million in Q1.
- Capital expenditures in the second quarter were $1.7 million; capital expenditures are expected to average $2 to $3 million per quarter over the medium-term, largely for new store openings and manufacturing upgrades.
- Subsequent to quarter close, Company announced agreements to divest assets and operations in Eastern Virginia and Arizona for total consideration of $105 million.
