The Cannabist Co. Reports Second Quarter 2024 Financial Results

NEW YORK, Aug. 8, 2024 – PRESS RELEASE – The Cannabist Co. Holdings Inc., one of the most experienced cultivators, manufacturers and retailers of cannabis products in the U.S., 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. generally accepted accounting principles (GAAP) and in thousands of U.S. dollars, unless otherwise noted.

Second Quarter 2024 Financial Highlights (in $ thousands, excl. margin items):

“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,” The Cannabist Co. CEO David Hart said. “We saw sequential improvement in revenue, gross profit, adjusted EBITDA and adjusted 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, derisk the balance sheet, and progress towards free cash flow generation.

“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

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, Va.; as part of corporate restructuring implemented in June, the company closed two retail locations in New York, one in Colorado and one in Washington, D.C. 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 seven 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 million to $3 million per quarter over the medium-term, largely for new store openings and manufacturing upgrades.
• Subsequent to quarter close, the company announced agreements to divest assets and operations in Eastern Virginia and Arizona for total consideration of $105 million.

Non-GAAP Financial Measures

In this press release, the company refers to certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit and adjusted gross margin. 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. 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 are contained in our annual report on Form 10-K and in our quarterly report on Form 10-Q.