Columbia Care Reports Third Quarter 2022 Results
- Quarterly Revenue of $133 Million, an Increase of 2.4% QoQ
- Gross Profit of $52 Million, an Increase of 2.5% QoQ
- Adjusted Gross Margin¹ of 43%, an increase of 33bps QoQ
- Adjusted EBITDA¹ of $21 Million, an Increase of 74.5% QoQ, and Adjusted EBITDA Margin¹ of 16%, an Increase of 653bps QoQ
NEW YORK, November 14, 2022–(BUSINESS WIRE)–Columbia Care Inc. (NEO: CCHW) (CSE: CCHW) (OTCQX: CCHWF) (FSE: 3LP) (“Columbia Care” or the “Company”) today reported financial and operating results for the third quarter ended September 30, 2022. All financial information presented in this release is in U.S. GAAP, unaudited and in thousands of U.S. dollars, unless otherwise noted, and comparisons to prior quarter and prior year are made on an as-converted basis under U.S. GAAP, unless otherwise noted.
“Our third quarter results are a testament to the embedded growth in our strategic footprint and the operational excellence we have developed over time,” said Nicholas Vita, CEO of Columbia Care.
We achieved solid sequential topline growth and standout profitability improvements in another challenging quarter, with revenue increasing 2.4% sequentially to $133 million in the quarter. Adjusted EBITDA improved 74% over Q2 to $21 million, with sixteen of our seventeen markets generating positive EBITDA in the quarter.
Nicholas Vita, CEO of Columbia Care
We continue to drive revenue and EBITDA growth in our emerging markets such as New Jersey, Virginia, and West Virginia, two of which are now among our top five markets by revenue and EBITDA. Based on the operational changes we’ve made, we’ve seen stabilization in our most mature markets – California and Colorado – materialize.
Vita continued, “We have made strategic operational decisions to prioritize quality production and efficiency, and redoubled efforts to manage costs as we face persistent macroeconomic headwinds that directly and materially impact the consumer wallet. Although we continue to anticipate a more challenging operating environment over the next 12-18 months, we are encouraged by the ongoing resilience we’ve seen throughout our markets and by the enthusiasm of the cannabis community. Furthermore, the difficult decisions we made 12-18 months ago are beginning to pay dividends as the efficiencies in cultivation and manufacturing positively impact our wholesale ramp while continued rationalization of SG&A amplifies the EBITDA improvements. The diversity of our footprint, including meaningful operations in the markets that are transitioning to adult use, is key to our growth. As we near the end of 2022, we are excited about the journey ahead where, together with Cresco Labs, we will create the leading company in cannabis.”
Top 5 Markets by Revenue in Q3[4]: California, Colorado, New Jersey, Ohio, Virginia
Top 5 Markets by Adjusted EBITDA in Q3[4]: Colorado, New Jersey, Ohio, Pennsylvania, Virginia
[4] Markets are listed alphabetically
Operational Highlights for Third Quarter 2022
Enhancing and implementing scale with continued retail and wholesale growth:
- Retail revenue increased modestly, 0.4% over Q2 2022, while wholesale revenue increased 14% sequentially – meaningful contributor to EBITDA
- New Jersey retail locations expanded to full adult use hours in June 2022, market revenue increased more than 75% sequentially, with growth in wholesale of nearly five times the prior quarter, driven by the ramping scale in the new Vineland facility
- No additional retail locations opened in Q3. Subsequent to quarter end, opened Carytown, Virginia Cannabist location, the Company’s fifth retail location in Virginia, bringing total dispensaries to 85
- Additional dispensaries in development include 7 in Virginia, 1 in West Virginia, and 1 in New Jersey
- Sixteen of seventeen markets produced positive EBITDA in the third quarter
Proven cultivation expertise and execution:
- In Q3, completed first harvest out of the second cultivation facility in Vineland, New Jersey, which added approximately 270,000 square feet of cultivation and production capacity to the New Jersey footprint, as well as post-harvest automation equipment to support retail and wholesale growth
- Cultivation efficiency and standardization across markets continued to improve, with focus on optimizing production planning, genetics selection, environmental controls, and plant management leading to improved potency and productivity; flower production costs declined approximately 5% sequentially across the national portfolio
- In Ohio, the Mt. Orab cultivation facility expansion contributed to sequential improvement in Gross Margin
- In Virginia, the expansion of Portsmouth facility led to a 4X increase in harvested plants; there is additional capacity to expand the current garden as demand increases in market
Sustained momentum on branding initiatives at retail and product levels:
- Owned brands made up over 60% of all flower sales at Columbia Care locations in Q3
- In Q3, launched a new loyalty program and mobile application, Stash Cash, in 14 markets
- In August, launched the first pre-rolls in the New York market, marking Seed & Strain’s 14th market
- Triple Seven, an award-winning premium brand, launched in Pennsylvania in August, bringing the footprint to ten markets
- In October, launched Hedy, a new cannabis-infused edibles brand in six markets and a variety of form factors and flavors; Hedy is now available in Arizona, Colorado, Delaware, Massachusetts, Missouri and Virginia
- With the opening of Carytown, Virginia Cannabist in October, there are now 32 Cannabist locations in the U.S.
Update on Cresco Transaction & Milestones Achieved
- Cleared federal Hart Scott Rodino antitrust review in May
- Received overwhelming approval from our shareholders, with over 98% of the votes cast in July in favor of the transaction
- Final order granted by the Supreme Court of British Columbia in July
- Announced execution of agreement relating to first asset divestiture on November 4, with Illinois, Massachusetts, and New York assets being sold to Sean “Diddy” Combs, via Combs Enterprises
- The remainder of the asset divestiture process is continuing to move forward with additional announcement expected soon
- Closing of Cresco transaction anticipated to be around the end of the first quarter of 2023
2022 Outlook
Columbia Care expects sequential topline performance to be flat to low-single digit growth in the fourth quarter. In addition, the Company expects an Adjusted EBITDA margin in the mid-to-high teens in the fourth quarter.
At this time, Columbia Care’s 2022 outlook does not assume any additional changes in the regulatory environment in markets where Columbia Care currently operates. This also excludes potential future market changes where a conversion from medical only to adult use is under consideration by a governor and/or legislature. The outlook does not assume any asset sales prior to Q1 2023. See “Caution Concerning Forward-Looking Statements” below for further discussion. This new revised outlook replaces all prior outlook and guidance provided by the Company.
Conference Call and Webcast Details
The Company will host a conference call on Monday, November 14, 2022 at 4:30 p.m. ET to discuss financial and operating results for the third quarter.
To access the live conference call via telephone, participants must pre-register at https://register.vevent.com/register/BIc703b752599546a7a28197c8bf33e7ad. 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.columbia.care/ or at https://edge.media-server.com/mmc/p/j9ac4cjf.
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 Columbia Care
Columbia Care is one of the largest and most experienced cultivators, manufacturers and providers of cannabis products and related services, with licenses in 18 U.S. jurisdictions. Columbia Care operates 132 facilities including 99 dispensaries and 33 cultivation and manufacturing facilities, including those under development. Columbia Care is one of the original multi-state providers of medical cannabis in the U.S. and now delivers industry-leading products and services to both the medical and adult-use markets. In 2021, the company launched Cannabist, its retail brand, creating a national dispensary network that leverages proprietary technology platforms. The company offers products spanning flower, edibles, oils and tablets, and manufactures popular brands including Seed & Strain, Triple Seven, gLeaf, Classix, Press, Amber, Hedy and Platinum Label CBD. For more information on Columbia Care, please visit www.columbia.care.
Non-GAAP Financial Measures
In this press release, Columbia Care refers to certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit and Adjusted Gross Margin. These measures do not have any standardized meaning in accordance with U.S. GAAP and may not be comparable to similar measures presented by other companies. Columbia Care 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) adjustments for acquisition and other non-core costs; (iii) fair value changes on derivative liabilities; (iv) fair value mark-up for acquired inventory; and (v) other one-time of non-recurring items. 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.
