John Schroyer
Even laying off a third of its workforce couldn’t make TPCO Holding Corp. (NEO: GRAM.U) (OTCQX: GRAMF) profitable in the third quarter this year, but the company is at least slowing its rate of losses.
TPCO, which does business as The Parent Company and has rapper Jay-Z in its C-suite, warned in its third-quarter report that it may have to dip into its cash reserves in January, depending on how inflation and the overall economy continue to affect operations.
TPCO lost $134.6 million in the three months ended Sept. 30, bringing losses for the year to $$196.6 million despite cost-saving moves that included laying off employees “throughout 2022,” for a cumulative 33% cut of staff by Oct. 27.
However much those losses may sound bad to investors, they’re better than they were in 2021, when TPCO lost $477 million in the third quarter.
CEO Troy Datcher said that’s evidence the company is turning things around, in large part by focusing on its retail footprint, which TPCO said it plans to continue doing.
To that end, TPCO recently divested its extraction division, began outsourcing cultivation operations, increased its own in-house brand presence on its retail shelves, and acquired Coastal Holding Company LLC in a $36.6 million deal, which gives TPCO another six cannabis shops in California. It also struck its first out-of-state licensing deal with Curio Wellness in Maryland.
“Our refocused strategy is delivering,” Datcher said in a press release, noting that gross margin for TPCO increased to 34% for the third quarter.
The continued pivot to a purely retail focus – instead of a vertically integrated model which included cultivation and manufacturing – “will further improve profitability,” the company asserted in its fourth quarter forecast.
But, TPCO warned, “inflation and consumer softness has negatively impacted the company’s ability to generate cash from operations.”
“As a result, the company may slightly deviate from its objective of maintaining a minimum of $100 million cash balance” at the end of the year, depending on acquisition opportunities, TPCO disclosed.
Still, due to the cost-saving moves and other adjustments, TPCO expressed optimism heading into 2023.
“While these choices have had a short-term impact on topline revenue, I am confident these actions have positioned us to become a leader in the California market,” Datcher said.
