US: Curaleaf shuts down operations in California, Colorado and Oregon

Curaleaf Holdings announced today on Press release the proactive closure of most of its operations in California, Colorado and Oregon, starting this month, as part of the “ongoing effort to simplify its business”. Additionally, in an effort to further streamline operations and reduce costs, the company plans to consolidate its Massachusetts growing and processing operations into a single facility in Webster, resulting in the closure of the Amesbury facility.

Curaleaf expects, in this way, to carry out non-cash restructurings and decrease charges, which will be detailed in a fourth quarter earnings conference call in March. Concurrent with these actions, the company has reduced payouts by 10%, which, along with other cost reduction initiatives, will contribute to achieving $60 million in gross execution expense savings in 2023, exceeding its initial savings target by 50%.

The company will leave production and cultivation facilities in California, Colorado and Oregon. While these states have contributed to the growth of Select and Curaleaf's other retail brands, the company recognizes the difficult operating environment in these investment states and will instead focus on cash generation in its key revenue-generating markets. in the future.

Curaleaf began aggressive cost-cutting measures in these states in 2022 through facility closures and workforce reductions. These adjustments were necessary for the future success and profitability of the business and were made as a result of recent legislative decisions, price compression and lack of oversight of the illicit market. For context, these markets contributed less than $50 million in revenue to Curaleaf last year. Curaleaf expects these market closes to be immediately positive for its adjusted EBITDA margins and position it for positive and robust free cash flow generation in excess of $125 million this year as management executes on its strategic priorities.

"Today's announcement reflects a decision we did not come to lightly and one that makes good business sense at this time," said Curaleaf CEO Matt Darin. “We have a fiduciary responsibility to our shareholders to improve margins and strengthen our balance sheet by controlling what we can in our businesses. We believe these states will represent opportunities in the future, but the current price compression caused by the lack of significant illicit market enforcement prevents us from generating an acceptable return on our investments. We are confident that these moves, made to improve our cash flow and margins, are the right ones to bolster Curaleaf's future success and profitability. Optimizing the existing portfolio in this way allows us to enter 2023 in a position of strength and further increases our visibility around continued margin expansion and highly profitable growth. We remain excited about our future growth prospects, both domestically and internationally, and can now dedicate more resources to tangible growth opportunities in emerging markets such as Europe.”