The Cannabist Company Holdings Inc. executives said during their quarterly earnings call that they are about half way through the “turnaround” to turn the company into a profitable company. They did not mention a financial filing released this week, which revealed a net loss of $205 millions for the last business year.
During the call, CEO David Hart stated that we are at the halfway point of our 8-quarter restructuring program. We continue to face a difficult environment, with an uncertain schedule, pricing pressures on key markets and a lack of liquidity.
Hart said that the demand for marijuana continues to increase, and sales in this industry are up 9 percent year over year as more states have legalized medical or recreational cannabis.
Hart added, “Despite uncertainty on the federal level this industry will not disappear.”
Hart explained that the Cannabist deliberately pulled back its footprint on national markets to “rightsize” business. Hart said that the Cannabist has divested from Arizona, Florida, Utah, and some parts of Virginia, as well as closing down “underperforming assets” located in Colorado, Massachusetts, and Washington, D.C.
The Cannabist will have fewer dispensaries by the year 2024. It was 59 at that time, compared to 73 in the last quarter and 86 the year before. Hart reported that the Cannabist closed another three dispensaries this year.
The Cannabist is also busy trimming staff. Hart reported that The Cannabist reduced their headcount last year by about 20%, saving the business $23 million.
He said that “liquidity management is of paramount importance, and will be a focus in 2025.”
Derek Watson, CFO at The Cannabist noted that it filed an amended return with the Internal Revenue Service in order to request exemption from Section 280E. Through this, they expect to receive $5 million back from the IRS. He said that the company would likely be filing more amended returns over the next few years to receive additional tax refunds.
Trulieve Cannabis Corp. pioneered the tax strategy last year, and several multistate operators have since adopted it.
The only time anyone mentioned the net loss of nine figures from 2024 on the earnings conference call was Watson, who said that The Cannabist expected “continued noise” in its results up until the divestitures were completed and other markets had been fully functionalized. For example, recreational marijuana sales in Delaware have just begun and The Cannabist has received permission from the regulators in New Jersey to begin adult-use sale at their dispensary.
Hart’s company and the rest of Hart seemed to be in a good mood.
Hart stated at the beginning of the conference call that “while we have not finished the turnaround yet, (we are) a very different company.” As a result, the adjusted EBITDA for the remaining 12 markets, on an apples to apples basis, was basically flat, year over year, despite the difficult pricing environment.