Columbia Care Makes Drastic Cuts As Political And Regulatory Structures Allow The Illicit Market To Proliferate

Author: Vuk Zdinjak | January 19, 2023 01:01pm

Columbia Care Inc. (OTCQX:CCHWF) (NEO:CCHW) (CSE:CCHW) (FSE:3LP) has undertaken a number of initiatives to increase efficiency, decrease expenses and transition to cash flow positive in order to further strengthen its operations and financial performance.

The company closed four unprofitable dispensaries in California (1) and Colorado (3) and consolidated cultivation operations in California, Colorado and Pennsylvania to improve their adjusted EBITDA contribution. In addition, the company has decreased corporate headcount by approximately 25%. As a result, the company expects to show a sustained improvement in its long-term expense ratio as well as a decrease in its cash burn. Excluding the impact of the announced changes, Columbia Care ended 2022 with more than $48 million in cash on the balance sheet, highlighting a free cash flow burn rate of less than $2 million in the fourth quarter, a sequential improvement of approximately $30 million.

CEO Nicholas Vita stated, “As Columbia Care continues to grow and evolve, we constantly reassess our operations to objectively determine whether changes are required to drive the business forward. In light of unprecedented inflation and persistent economic headwinds, the current dislocation in the capital markets, and the political and regulatory structures that allow the illicit market to proliferate in some jurisdictions, we have made the decision to restructure targeted areas of our business. As a result, we have elected to proactively manage our operations to enhance profitability, competitiveness and overall success as a market leader in a hyper-dynamic environment.”

The company also recently announced that it will lay off 73 employees at its Saxton facility, and it seems these layoffs were part of this new initiatives.

A Growing Industry Trend

Many cannabis companies have recently laid off employees as part of cost-saving measures:

Tilray Brands (NASDAQ:TLRY), announced it will lay off 49 employees at medical cannabis cultivation and manufacturing facility in Cantanhede, Portugal.
LeafLink, an online wholesale cannabis platform, laid off 80 workers on December 15th.
Curaleaf Holdings (OTCQX:CURLF) laid off around 220 people in November.
WM Technology Inc. (NASDAQ:MAPS) recently cut 25% of its workforce, amounting to 175 employees.

Trulieve Inc. (OTCQX:TCNNF) laid off an unspecified number of workers at its McKeesport growing facility in Pennsylvania.

Leafly (NASDAQ:LFLY) laid off 21% of its workforce in October, claiming annual savings of $16 million.
The Flowr Corp (OTCEM:FLWPF) cut 40% of its workforce in an effort to save the company from bankruptcy.
Aurora Cannabis (NASDAQ:ACB) cut 12% of its global workforce in a scheme to save up to $69 million.