Columbia Care Announces Corporate Actions to Accelerate Operational Efficiencies and Cash Flow Generation
NEW YORK, July 31, 2023--(BUSINESS WIRE)--Columbia Care Inc. (NEO: CCHW) (CSE: CCHW) (OTCQX: CCHWF) (FSE: 3LP) ("Columbia Care" or the "Company"), one of the largest and most experienced cultivators, manufacturers and retailers of cannabis products in the U.S., today provided additional corporate updates following on the separate announcement earlier today.
"Over the past 16 months, we have implemented important changes to Columbia Care that have resulted in a stronger and more efficient company. We have an outstanding portfolio of scaled markets – one of the best in the industry – with key states like New York and Maryland having recently transitioned to adult use, Delaware poised to transition to adult use, and additional retail locations in growth markets such as New Jersey and Virginia under development, all of which should fuel continued topline growth opportunities and facilitate the rollout of our national retail brand, Cannabist, as well as our portfolio of category-leading product brands. In addition, we have taken steps to enhance our liquidity position, reduce interest expense, extend debt maturities, and have continued to reduce costs at the corporate level to enhance profitability. Including the impact of the organizational changes announced today and the recent integration of Green Leaf Medical, LLC, since December 2022, we have eliminated over $38 million, net, in annual expense, while also improving our organizational design to accelerate decision-making and leverage our scale in markets more effectively. This also sets the stage for the execution of our capital markets strategy and enables us to proactively manage our balance sheet. Over the next 12 months, we intend to launch a number of initiatives to further our goals of ongoing margin improvement, free cash flow generation, driving shareholder value and profitably capturing additional market share across the country," said Nicholas Vita, CEO of Columbia Care.
Vita continued, "With the uncertainty of the past 16 months behind us, along with the enthusiasm and energy that accompanies moments of renewal, our team welcomes the next stage of Columbia Care’s growth and expansion. In spite of the challenges we have faced, the team has remained committed to the success of our Company and, as is obvious from the pace of activity, has been engaged at all levels, actively preparing for the future. We are excited to show our stakeholders, communities and one another what we are capable of, and I am grateful to all of my colleagues for keeping our mission and values at the forefront of everything we do."
Business Update
The following capital markets and operational initiatives are intended to drive shareholder value, improve profitability, accelerate the reduction of debt and interest expense, and improve free cash flow:
The Company has received commitments from several of its largest holders of its 13% senior secured notes due May 2024 (the "2024 notes") 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 more 2024 notes under the same structure. These private exchange agreements will meaningfully 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. More details will be provided upon closing of the exchange which will be in the third quarter. The Company intends to pursue additional alternatives to reduce debt, reduce interest expense and extend maturities. In that vein, Columbia Care has been contacted by several of the largest debtholders in addition to those holders of the 2024 notes that have already committed to the ongoing exchange, in order to facilitate the Company’s balance sheet enhancement efforts.
Columbia Care has completed the final phase of its previously announced corporate restructuring plan and expects to realize an additional net benefit to EBITDA of approximately $950,000 in 2023 and approximately $3.8 million in 2024. The primary source of the additional savings is a 52-person headcount reduction, primarily from gLeaf corporate redundancy, as well as facility rightsizing and dispositions. These operational improvements are expected to be cash flow positive in 2023 and 2024.
Following the announcement of the first stage of non-core/underperforming asset sales in Missouri, the Company announced today that it has closed on the sale of its Downtown Los Angeles facility, consisting of a single dispensary and approximately 36,000 square feet of cultivation capacity. Gross proceeds are approximately $9 million, and the Company expects to net $3 million after taxes and the repayment of the outstanding mortgage. This sale will not only add to the Company’s cash balance but will also reduce overall debt and make permanent a net reduction in annual operating costs of more than $8.5 million for Columbia Care operations in California. All asset sale proceeds are being prioritized for debt reduction.
Based on advanced discussions the Company is having with a U.S. senior exchange, Columbia Care is announcing that it will consolidate its equity trading activity onto the Cboe Canada, the new business name of the NEO Exchange. In connection with this corporate action, Columbia Care is submitting a request to voluntarily delist its securities from its secondary, venture exchange, the Canadian Securities Exchange (the "CSE"). The effective date of the CSE delisting will be made public when confirmed and is subject to the CSE’s approval. Cboe Canada will remain the Company’s primary exchange, as it has been since the Company’s initial public listing. As one of two U.S. multistate cannabis operators listed on a senior exchange, the Company remains committed to maintaining its unique access to institutional investors, including inclusion in MSCI1 equity index benchmarks and their corresponding investors. Focusing trading activity on a single, senior exchange will allow for a more orderly closing price formation and greater transparency for the company and investors. As part of the process to complete an uplisting to a senior U.S. exchange and enhance investor flexibility, based on several factors including uplisting timing, market conditions and normalized trading dynamics, the company intends to pursue a share consolidation, to satisfy margin eligibility or initial listing requirements. The Company already reports in U.S. GAAP and is an SEC registrant in good standing.
Finally, the Company also announced two senior leadership changes. Effective today, Columbia Care has named David Hart as President & Chief Operating Officer and Jesse Channon as Chief Commercial Officer. Mr. Hart will continue to oversee all revenue-driving functions and Mr. Channon, formerly Chief Growth Officer, will oversee retail, wholesale, technology innovation, marketing, and communications.
Over the next several quarters, Columbia Care looks forward to sharing additional updates to highlight the impact of operational improvements as well as those changes we intend to implement to enhance profitability, beginning with our second quarter earnings release on August 14.
Conference Call and Webcast Details
The Company will host a conference call today, July 31, 2023 at 9:00 a.m. ET to discuss the announcement.
To access the live conference call via telephone, participants must pre-register at https://register.vevent.com/register/BId3571a1adc1d4132bae86dd53b2ae85c. 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/poyxfkhh.
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.
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