Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cannabist Company Holdings Inc (CBSTF, Financial) achieved $125.2 million in revenue for Q2 2024, marking a 2% increase from the previous quarter.
- The company successfully implemented a corporate restructuring that is expected to generate $10 million in annual cost savings.
- Wholesale revenue increased by 24% over the first quarter, now representing 15% of total revenue, with improved gross margin discipline.
- The company is strategically exiting non-core and underperforming markets, such as Florida and Arizona, to focus on more profitable regions.
- Cannabist Company Holdings Inc (CBSTF) is well-positioned for growth in key markets like Ohio, New Jersey, Delaware, and Virginia, with plans to expand retail locations and capitalize on adult-use transitions.
Negative Points
- The company experienced a slight decline in gross margin due to discounting and an increasing revenue mix from lower-margin wholesale business.
- There is an ongoing impact from unabsorbed overhead in underutilized production facilities, affecting gross margins.
- Cannabist Company Holdings Inc (CBSTF) reported negative cash flow from operations, although it showed improvement over the previous quarter.
- The company is still facing challenges in certain markets like New York, where the adult-use transition has not fully taken off.
- Cannabist Company Holdings Inc (CBSTF) is undergoing significant structural changes, which may lead to short-term disruptions as it rationalizes its geographic footprint.
Q & A Highlights
Q: Can you provide a better picture of how the P&L will look on a pro-forma basis after the announced divestitures in Florida, Arizona, and Virginia?
A: Derek Watson, CFO: We are not updating or providing guidance at this time due to the timing of the announced divestitures. We will provide an outlook probably as part of our Q3 earnings call, if not before.
Q: Can you provide insights into the early days of adult-use sales in Ohio and any potential supply-demand issues?
A: David Hart, CEO: We launched with all five locations and had a phenomenal day one, marking our best opening day as a company. Jesse Channon, President: The team was well-prepared, and customers were excited. We were well-prepared in terms of inventory and participated in the wholesale rush to ensure readiness.
Q: Which markets are the biggest culprits of unabsorbed overhead, and what will drive improvement?
A: Derek Watson, CFO: There is no single overweight market. We turned capacity back on in Ohio for adult use. Other markets include Pennsylvania, awaiting adult use, and New York, where adult use transition hasn't fully taken off.
Q: Why divest retail assets in New York when the market is starting to come back to life?
A: David Hart, CEO: We had lease expirations for two locations that were not commercially viable for adult use. We are looking for new locations and plan to be fully opened in all dispensaries over time. Jesse Channon, President: We are expanding our wholesale capacity in New York due to high inbound demand.
Q: Can you comment on the pricing environment and wholesale penetration in New Jersey?
A: Jesse Channon, President: New Jersey remains impactful for us. Pricing is favorable, with significant premiums on both bulk and finished goods trades. We continue to have large enterprise supply agreements and are moving the mix into finished goods for margin expansion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
