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Columbia Care Inc. (CCHWF) reported its financial results today for the second quarter (Q2) that ended June 30, 2023.

Q2 Financial Highlights

Financial results are reported in U.S. dollars and are in comparison to those reported in Q3.

• Revenue: UP 3.8% to $129.2M
• Gross Profit: UP 10.6% to $52.1M
  • Adj. Gross Margin: UP to 40.3% from 37.8%
• Adj. EBITDA: UP 23.8% to $20.3M
  • Adj. EBITDA Margin: UP to 15.7% from 13.2%
• Net Income (Loss): Improved by 20.8% to $(29.0)M

Q2 Operational Highlights

1. Enhanced scale and optimization of strategic retail network:
   • opened one Cannabist location in Norfolk, Virginia
   • increased retail revenue by 4.5% sequentially
2. Continued improvements in cultivation expertise
   • reduced overall cultivated cost per gram by 7% YoY due to continued gains in operational efficiency and productivity
   • improved potency in multiple markets through strict adherence to standard operating procedures
   • increased the percentage of higher potency strains (25% THC or higher) throughout the portfolio which is accretive to higher gross margins
   • increased the share of concentrates within the wholesale revenue product mix by 4-percentage points
3. Sustained momentum on branding initiatives at retail and product levels:
   • launched various new varieties across their national portfolio
   • increased retail share of internal brand sales to 48%
   • increased sale of in-house flower brands to 58% of all flower sold at Columbia Care dispensaries
   • increased number of Cannabist locations to 36

Capital Markets & Liquidity Highlights

• cash on hand declined by 8% to $37.0M
• reduced corporate operating expense by 3% sequentially
• offset capital expenditure of $1.7 million in the quarter by Tenant Improvement funding in Florida and insurance reimbursement in New Jersey
• eliminated over $38 million, net, in annual expenses
• improved organizational design to accelerate decision-making and leverage their scale in markets more effectively
• received commitments from several of the largest holders of its 13% senior secured notes due May 2024, to exchange into the Company’s 9.5% senior secured notes due February 2026, on a one-for-one basis. The Company is in ongoing discussions with a limited group of additional bondholders to exchange into more 2024 notes under the same structure. These private exchange agreements will:
  • reduce the amount of the $38.2 million principal of notes due in May 2024,
  • reduce the cash interest cost for the exchanged notes by 350 basis points, and
  • extend the maturity of the converted notes to February 2026. 

Management Commentary

Nicholas Vita, the CEO, said:

• "...Growing markets on the east coast fueled our sequential topline growth, counterbalancing further price compression in certain markets such as Florida, Illinois, and Massachusetts.
• We continued to reduce costs in the quarter, having now eliminated over $38 million, net, in annual expense, as we prioritize cash flow generation.
• We have announced the initial steps to manage our balance sheet in collaboration with our bondholders and are actively reviewing and considering additional refinancing alternatives.
• We have continued divesting non-core assets and pursuing commercial mortgages on eligible properties to enhance liquidity and improve operating efficiency,.
• Our decision to prioritize markets that are driving profitability and growth, and continue our commitment to the diversification of our revenue base, was reflected by:
  • continued store openings in Virginia,
  • the launch of adult-use sales in our fully integrated Maryland market,
  • targeted retail expansion in New Jersey, and
  • the launch of enhanced manufacturing and cultivation capabilities in Ohio, Colorado, West Virginia and New York.
• We believe our best days are ahead of us. The team is energized, incentivized, and aligned with shareholder interests.
• ...In the next 12 months, the operational leverage created by the steps we have already initiated will continue in the second half of 2023..., namely:
  • to reduce corporate SG&A,
  • to reduce leverage,
  • to enhance cash flow from operations and
  • to drive innovation through technology and product/brand development."

Stock Performance

Columbia Care's stock price is DOWN 42.7%YTD but remains unchanged in early trading today despite the favorable Q2 financial results. 

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