After the market closed on Monday, TPCO Holding Corp. (OTCQX: GRAMF) posted results that missed expectations as the company restructures and recovers from record losses. The west-coast cannabis company delivered its financial results for the second quarter ending June 30, 2022.
The Parent Co. reported approximately $27.4 million in revenue during the period, a 27% loss versus the same period last year — missing the Yahoo Finance Average analyst estimate for revenues of $33.23 million.
The Parent Co. also reported a second-quarter net loss of $30 million versus a $33.5 million loss sequentially; and a net loss of $734,000 in the same period last year. The earnings were for a loss of $0.30 per share, versus a gain of six cents per share in the previous quarter, according to SEDAR filings.
“Our team remains focused on our business transformation, and this quarter’s results are an early indication that our profitability improvement plan is working,” said CEO Troy Datcher. “As anticipated, our efforts to maximize the contributions from our omni-channel retail opportunities and minimize our exposure to the California wholesale market have significantly shifted our revenue mix. While this decision compressed topline sales, it drove solid Q2 gross margin of 24% compared to 9% in the prior year period as our omni-channel retail revenue grew 60% to account for 69% of our net sales in the quarter.”
As the company restructures, it has eliminated positions and undertaken a reduction in force intended to optimize the organization, which resulted in the elimination of approximately 17% of its workforce since the beginning of 2022, representing over $7.6 million in annualized payroll reductions which are included in $9.3 million total expense savings. In addition to the layoffs, The Parent Co is rethinking its delivery depot operations, which includes the recent exit of the Company’s Sacramento delivery operations, and the complete examination and outsourcing of all non-strategic capabilities.
Datcher added, “I am also pleased to report that since implementing the first phase of our long-term profitability plan, we have achieved $9.3 million in annual expense savings. In the next phase of the profitability plan there are additional major initiatives underway that are expected to help us reduce cash operating expenses by $30 million by year end. A key factor to achieving this goal is our new wholesale distribution agreement with Nabis, which will lower our annual operating expenses and expand our already-wide reach by introducing our premier brands to a larger potential base of customers. Similarly, our first out-of-state expansion agreement with Curio Wellness in Maryland is an important first step to growing our presence outside of the California market and introducing new markets to our premier west coast brands.”
The Parent Co. posted an adjusted EBITDA loss of $18.4 million. In addition, the company had unrestricted cash and cash equivalents totaling $126 million as of June 30, 2022.
The company generated $7.6 million in cash through the sale-leaseback of property, the sale of underutilized equipment and the settlement of outstanding litigation.
“Looking across our peer landscape, based on the strength of our balance sheet, the quality of our brands, and the retail experience we offer, we are the strongest positioned operator in an incredibly competitive marketplace,” said Datcher. “We firmly believe that the significant shift to more profitable revenue and implementation of our cost-saving strategic initiatives will be a winning strategy in the California market that better serves our customers and drives value for our shareholders.”