Columbia Care Reports First Quarter 2023 Results

Quarterly Revenue of $125 Million, an Increase of 1% YoY

Quarterly Gross Profit of Over $47 Million, an Increase of 13% QoQ

Quarterly Adjusted EBITDA¹ of Over $16 Million and Adjusted EBITDA Margin¹ of Over 13%

NEW YORK–(BUSINESS WIRE)–May 15, 2023– 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 reported its financial and operating results for the first quarter ended March 31, 2023. All financial information presented in this release is in U.S. GAAP and in thousands of U.S. dollars, unless otherwise noted.

“As we continue our efforts to move the Cresco Labs transaction forward, we were pleased with the operational progress we made during the first quarter of 2023. Columbia Care continued to optimize our portfolio of assets, and reduce costs to improve profitability as we move towards free cash flow generation later this year. We took steps to proactively manage our capital structure to meet our upcoming maturities and allow for flexibility to reduce leverage going forward. As we’ve seen in recent quarters, the drivers of growth for the Company continue to be east coast markets, especially New Jersey, Virginia and West Virginia, helping us grow our topline revenue 1% over Q1 2022 in spite of economic headwinds. The sequential topline trend reflected the impact of a reduction in the total number of retail locations early in the quarter, the accounting impact from the successful launch of our Stash Cash loyalty program, and expected seasonality, demonstrating the strength of the remaining portfolio,” said Nicholas Vita, CEO of Columbia Care.

Vita continued, “Our decision to prioritize markets that are driving profitability and growth was reflected by two store openings in Virginia and one in West Virginia towards the end of the quarter. Our decision to reduce exposure to unprofitable markets and assets accelerated in the first quarter, with the sale of our Missouri operations and the closure of unprofitable retail locations in Colorado. Investors should expect to see the effects of our operational and financial reprioritization including targeted cost-reduction measures, non-core asset divestitures, improvements in cultivation and manufacturing utilization rates, and related efforts to improve leverage ratios while we reduce our cost of capital. Although the restructuring initiatives that have been implemented did not have a material impact on the first quarter, they will have an impact on the business and our profitability going forward. The final phase of the roll out of our improved organizational and operational structure is expected to take effect in the coming months, which will also culminate with several other internally facing efficiency initiatives. We look forward to continued growth in our strategic portfolio, including the transitions to adult use in Maryland and Delaware later this year.”

Top 5 Markets by Revenue in Q1^[3]: Colorado, New Jersey, Ohio, Pennsylvania, Virginia

Top 5 Markets by Adjusted EBITDA in Q1^[3]: Maryland, New Jersey, Ohio, Pennsylvania, Virginia

Operational Highlights

Enhancing scale and optimizing strategic retail network:

• In Q1 2023, the Company opened two locations in Virginia (Hampton & Colonial Heights) and one in West Virginia; Virginia remains a top market by revenue and Adjusted EBITDA
• Around the beginning of Q1 2023, as part of the ongoing efficiency initiatives to enhance profitability that were announced in January, the Company closed two unprofitable locations in Colorado and subsequently signed a definitive agreement to divest unprofitable assets (dispensary and manufacturing) in Missouri
• Subsequent to quarter-end, the Company opened one additional location in Norfolk, Virginia, bringing total active store count to 85
• Wholesale revenue held constant at $15.2 million in Q1 2023 compared to Q4 2022, driven by price stability and increasing volume
• Retail revenue declined 1.5% sequentially, primarily due to anticipated seasonality and the closure of three retail locations at the beginning of the quarter, in addition to the accounting impact of Stash Cash rewards program
• New Jersey revenue increased more than 7% sequentially, and the two active retail locations in the state remain among the top dispensaries in the Company’s portfolio; the third New Jersey retail location is in development
• Virginia market revenue grew more than 9% sequentially, with two new retail locations added and continued growth of the patient population
• The Company saw sequential revenue growth of approximately 7% in both Ohio and Pennsylvania
• Five additional dispensaries in development during 2023 include three in Virginia, one in New Jersey, and one in Maryland

Proven cultivation expertise and continued improvements:

• In Q1 2023, overall cultivated cost per gram was down more than 11% YoY due to continued gains in operational efficiency and productivity; multiple markets saw improved potency through strict adherence to standard operating procedures
• The Company now counts more than 70 high potency strains (25% THC or higher) throughout the portfolio, which is accretive to gross margin as we continue to see a higher percentage of the portfolio in the high potency category that commands premium pricing
• Enhanced production capabilities and prioritization of concentrates and edibles in the wholesale market contributed to a 4-percentage point increase in share of concentrates within wholesale revenue product mix
• Cultivation improvements and standardization represent significant opportunity to improve gross margin further; the Company continues to optimize production planning, genetics selection, environmental controls and plant management across the cultivation portfolio to support market demand
• Improvement in cultivation efficiency and standardization supports introduction of upgraded brands, such as Triple 7 and Seed & Strain, to drive future pricing improvements and wholesale demand

Sustained momentum on branding initiatives at retail and product levels:

• In Q1 2023, launched new line of formulated cannabis tablets, Press 2.0, in Delaware, Massachusetts, New Jersey, Virginia and West Virginia
• Retail share of internal brand sales increased to 46% in Q1 2023 compared to 45% in Q4 2022
• In-house brands accounted for 60% of all flower sold at Columbia Care dispensaries in Q1 2023
• There are now 35 Cannabist locations in the U.S. with additional openings planned in 2023

Capital Markets & Liquidity Highlights

• The Company ended the quarter with $40.2 million in cash
• Capital expenditures in Q1 were approximately $5.7 million, primarily for new store openings; Q1 is expected to be the highest quarterly capital expenditure for 2023
• On March 13, 2023, the Company signed definitive agreement to divest interests in the Missouri market for approximately $7 million (50% cash due at signing and 50% at close); Missouri market generated $1 million in EBITDA loss in 2022
• On March 28, 2023, the Company exercised its unilateral right to extend the maturity date of its 13% senior secured notes in the amount of $38.2 million, originally due May 14, 2023, to May 14, 2024; the Company has no debt maturities prior to that date other than a $5.6 millionconvertible note in December 2023
• The corporate restructuring initiatives announced in January 2023, which reduced or exited cultivation operations in six markets, closed four unprofitable retail stores in Colorado and Missouri (Q1 2023) and California (Q4 2022), and eliminated approximately 25% of corporate positions, are expected to generate a net $35 million in annualized savings
• The Company has exited several markets and assets that were not accretive to cash flow, including closing its CBD and European businesses and selling its assets in Puerto Rico, which, when combined with the recent exit of Missouri, will generate an incremental savings of approximately $3 million annually going forward

Status of Pending Cresco Labs Transaction

As previously disclosed, in March 2022, Columbia Care entered into an arrangement agreement (as amended, the “Arrangement Agreement,”) with Cresco Labs Inc. (“Cresco Labs”), pursuant to which, Cresco Labs agreed, subject to the terms and conditions thereof, to acquire all of the issued and outstanding common shares and proportionate voting shares of Columbia Care (the “Cresco Labs Transaction”), pursuant to a statutory plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia).

In furtherance of the Arrangement Agreement, Columbia Care continues to collaborate closely with Cresco Labs on the divestiture transactions required to obtain the regulatory approvals which are conditions of closing of the Arrangement. The Company has no updates to provide on the timing for execution of agreements relating to outstanding divestiture transactions.

Conference Call and Webcast Details

The Company will host a conference call on Monday, May 15, 2023 at 8:00 a.m. ET to discuss financial and operating results for the first quarter of 2023.

To access the live conference call via telephone, participants must pre-register at https://register.vevent.com/register/BI47e5e42a5c56427c8ea8b8ed2d3a4494. 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/kfcj9amv.

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.