The Cannabist Company Holdings Inc. is leaving Florida’s cannabis market – among other initiatives – to improve profitability, enhance its margin profile and enable cash flow generation.

These initiatives also include a corporate restructuring expected to generate approximately $10 million in annual cost-savings and closing or modifying the operations of other underperforming assets.

The business transformation has been supported by a special committee of The Cannabist Company’s board of directors considering strategic alternatives to position the company for profitable and sustainable long-term growth.

“As we have made clear since the beginning of 2024, under new leadership, The Cannabist Company will look very different by the end of this year in terms of our operational footprint, overhead expenses, and de-risked financial profile,” said David Hart, CEO of The Cannabist Company. “Our focus is on building a better business, positioned for profitability and long-term sustainable growth. We are decisively leaning into the markets that are best positioned for growth and strategic upside, while also monetizing underperforming and non-core assets. In Florida, for example, our asset base is not commercially optimized, with more cultivation capacity than our retail locations require. Our retail footprint and cultivation and manufacturing capacity are better suited to balance other operators’ portfolios, meanwhile we will eliminate loss-making operations and bring in non-dilutive capital.”

The company is divesting its entire asset portfolio and license in the Florida market, with LOIs for multiple transactions in place and $2.75 million of deposits in escrow. The divestitures include 14 retail locations, three cultivation and manufacturing facilities, and its license. The Cannabist Company’s business in Florida represented less than 5% of total revenue in the first quarter of 2024. ATB Securities, Inc. is acting as advisor for the Florida divestiture transactions.

While final terms of the transaction(s) will be announced at a later date, upon execution of definitive documentation, the expected impacts to the business are accretive to both margins and EBITDA.

In addition, The Cannabist Company has closed one underperforming retail location in Trinidad, Colorado, located near the New Mexico border. The company now operates 22 retail locations in Colorado.

As of June 1, the company reduced the operational hours for its New York medical dispensaries in Brooklyn and Riverhead. It has also closed both its Manhattan and Rochester locations permanently, due to lease expirations, and will continue its search for new locations. The company says it remains focused on growing the adult-use wholesale segment and will continue to evaluate market conditions that would enable fully restoring operating hours and contemplate adult use.

Meanwhile, The Cannabist Company opened its 11^th Virginia location in Richmond on June 11. The company has one additional retail location in development in the state.

The company also expects to open its third New Jersey retail location in the first quarter of 2024, located in Mays Landing.

Additionally, The Cannabist Company is preparing for the accelerated onset of adult-use sales in Ohio by the end of June with an expanded garden, now at 85% capacity with an expectation to enter the second half of 2024 at 100%, and upgrades to its five operational retail locations in anticipation of increased volume. The company also is in the process of developing three additional retail locations and has plans to convert its five existing retail locations to the Cannabist retail brand.

The Cannabist Company, as one of the leading medical providers in the Delaware market, expects to begin adult-use sales when approved at all three retail locations: Rehoboth Beach, Smyrna and Wilmington. In preparation for adult use, the company is working to increase cultivation and manufacturing capacity.

“We will continue to capitalize on our strong asset base in profitable markets such as Virginia and New Jersey, and we are actively preparing for upcoming adult use transitions in Ohio and Delaware,” Hart said. “The significant corporate restructuring we’ve undertaken will simplify our business, reduce overhead expenses and more appropriately align with our evolving operational footprint as we exit Florida and divest assets in other underperforming markets in the coming months. The steps we announced today are among the most critical in putting us firmly on the right path for success, representing potentially $20 million annualized improvement in Adjusted EBITDA. Our leadership team is committed to taking the necessary, and often difficult, actions to deliver a more sustainable business with better margins, and a clearer path to free cash flow generation.”