Unrivaled Brands Posts Operating Profit, Reduces Liabilities 40% Following Restructure

Company shaved liabilities, renegotiated debt, and improved working capital.

On the heels of a turbulent year of restructuring, Unrivaled Brands (OTCQB: UNRV) posted positive preliminary financial results for the fourth quarter of 2022, with operating profit for the period reaching $8.8 million.

The figure is a significant improvement versus the same quarter in 2021, when the California-based MSO reported a net loss of $13.3 million. Unrivaled attributed the rise in operating profit to its successful efforts to shave liabilities, renegotiate debt, and improve working capital.

In a statement, Sabas Carrillo, the newly minted CEO of Unrivaled, emphasized the company’s focus on improving its balance sheet while optimizing cash flow and liquidity.

Carillo, who was also the CFO for Cookies Creative Consulting & Promotions Inc. — an arm of lifestyle brand Cookies — also mentioned Unrivaled’s efforts to develop a positive and collaborative data-driven culture within the organization, which he believes is key to its success.

Interim CFO Patty Chan expressed gratitude to partners, investors, and creditors that have signaled support for the company during its restructuring and turnaround efforts. “Restructuring is never easy especially when so many other operators in the industry are undergoing their own restructuring efforts in the face of so many regulatory and economic headwinds,” Chan said.

In addition to its successful financial results, Unrivaled also made several strategic moves in recent months to beef up its operations and cut costs:

  • A management services agreement with Brick City Productions to reopen and manage the Blüm San Leandro dispensary.
  • Two binding letters of intent to operate Cookies-branded dispensaries.

At the same time, the company also commenced a $2 million executive-led capital raise from a Series V offering, which closed in the first quarter of 2023.

While the company has made substantial progress in its financial position, interim Chief Legal Officer Robert Baca cautioned that there still remain significant risk factors, such as remaining litigation and completion of its settlement with People’s California LLC. Baca also mentioned outstanding debt and unfavorable market conditions.

Unrivaled closed down some of its retail locations in Los Angeles, San Leandro, and Sacramento that were not performing well and reduced its workforce by more than 40%, primarily by shuttering sites and cutting corporate staff.

The company made more money from selling its products in stores, but it also made less money on wholesale, partly because Unrivaled changed its brands, so it had fewer products available to put on the market. The company also had to reduce the number of employees who sell its products internally.

Bring in the Cavalry

Adnant Consulting, Carillo’s cannabis accountancy firm, has played a crucial role in Unrivaled’s restructuring efforts.

The firm originally worked with the company, known then as Terra Tech, in 2015, and helped with its initial public offering.

By 2021, the new company – formed by a merger between Terra Tech and Umbrla – planned to expand its business in the west region and expected to have revenue of more than $70 million in 2021.

Frank Knuettel II, the CEO at the time, told Bloomberg that the company was looking to add more brands and dispensaries in the states where it already operated and had a “healthy pipeline of opportunities and discussions” for expansion.

However, the bright mood subsided once the slow-drip of volatile market conditions began unraveling across the industry, including changes in management and other challenges.

The company reported only $47.7 million in revenue for the year, far from its original projections, due to only half a year of contributions from Umbrla.

As a result, the company went back to Adnant in August 2022 to help reposition the business and brand amid an increasingly competitive environment.

One of Adnant’s main goals has been to optimize cash flow by getting rid of noncore assets and streamlining ongoing operations to improve efficiency. The team has also focused on improving key vendor relationships and reducing short- and long-term debt.

Adnant said the efforts have led to a reduction in Unrivaled’s total liabilities by $50.2 million to $75.2 million, down from $125.4 million at the end of the prior year, a reduction of 40%.

Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.

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