The Cannabist Co. Reports 1st Quarter 2024 Results

NEW YORK, May 9, 2024 – PRESS RELEASE – The Cannabist Co. Holdings Inc., one of the largest and most experienced cultivators, manufacturers and retailers of cannabis products in the U.S., reported its financial and operating results for the first quarter ended March 31, 2024. All financial information presented in this release is in U.S. generally accepted accounting principles (GAAP), unless otherwise noted.

The company ended the first quarter of 2024 with revenue of $122.6 million, gross profit of $42.5 million and a net income loss of $34.6 million. A line-by-line balance sheet for the three months ended March 31, 2024; Dec. 31, 2023; and March 31, 2024, is available here.

“Our first quarter results demonstrate an improvement over the prior quarter on a margin basis, and we are encouraged by the green shoots that are evident in several critical areas of the business. As we have emphasized, this year we are committed to building a better business, with a focus on improving our margins as we target free cash flow generation,” The Cannabist Co. CEO David Hart said.

“We have demonstrated early successes in better utilizing our footprint and existing cultivation and manufacturing facilities, evidenced by a decrease in the overhang on gross margin in the quarter,” Hart said. “We are transforming the wholesale business, including shifting the wholesale mix toward finished goods and building strategic brand partnerships that are helping to recapture margin across the portfolio. As we look ahead, we are preparing for the upcoming adult-use transition in Ohio and are continuing to capitalize on growth opportunities in markets like Virginia and New Jersey. Though we are encouraged by the results of the first quarter, we know there is more work to do. We look forward to enacting additional changes to the business so that we end 2024 having a materially improved financial position and are poised to compete more effectively.”

*Top 5 Markets by Revenue in Q1: Colorado, Maryland, New Jersey, Ohio, Virginia

*Top 5 Markets by Adjusted EBITDA in Q1: Colorado, Maryland, New Jersey, Ohio, Virginia
*Markets are listed alphabetically

Operational Highlights for First Quarter 2024

• First quarter adjusted gross margin improved 500 basis points over the fourth quarter of 2023, and adjusted EBITDA margin increased more than 250 basis points sequentially; improvements were driven by asset utilization, improved margins at the retail level, and early wins with brand partnerships.
• In Q1, gross margin for the wholesale segment improved approximately 1,000 basis points over the prior quarter, driven by mix shift towards finished goods.
• Retail revenue declined in line with seasonal expectations but saw over 200 basis points improvement in gross margin due to more disciplined discounting across markets.
• The quarter-end active retail count was 85 locations across 15 markets, as one location in Utah was divested.
• Strategic commercial partnerships with brands such as Old Pal, Airo Brands, ButACake, Revelry Herb Co., and Edie Parker Flower are helping to increase throughput in manufacturing facilities and utilization of cultivation footprint.
• New brand launches in the first quarter included Classix in Maryland and Delaware, Amber in Maryland, and Triple Seven and Amber in Florida.
• There are 35 Cannabist locations in the U.S., with up to four additional openings planned in 2024.
  

Financial Highlights for First Quarter 2024

• The company ended the first quarter with $44.5 million in cash. On March 19, the company announced the closing of a $25.75 million private placement offering of 9% convertible notes due 2027, for which the primary use of proceeds is to settle the remaining $13.2 million of the 13% notes due May 2024.
• During the first quarter, the company exchanged $10 million of 6% senior secured convertible notes due 2025 via an exchange agreement announced in January 2024. Another $5 million of the 6% notes due 2025 were exchanged into the 9% notes due 2027.
• In Q1 2024, cash from operations was negative $6.2 million, compared to $9.4 million in Q4 2023.
• Capital expenditures in the first quarter were $0.9 million; capital expenditures are expected to be in the range of $2 million to $3 million per quarter for the remainder of 2024, largely for new store openings and manufacturing upgrades.
• In Q1 2024, the company closed on the divestiture of its Utah license and retail location for $6.5 million in gross proceeds.