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4Q23 Results Show Strong Progress

Gold Flora Corporation (Gold Flora) is a leading vertically integrated California cannabis company. The company has high-quality assets downstream and across the supply chain. Vertical integration enhances margins and is a necessary ingredient for competing in open-license environments like California. The integration also materially de-risks the platform, eliminating reliance on third parties. Importantly, it eliminates reliance on third parties and helps de-risk the consolidated enterprise. Gold Flora reported 4Q23 earnings, its second combined quarter of financial results since the July 7, 2023, business combination. 4Q revenue was $28.4 million, an 11.16% sequential decline. Lower revenue was driven by a strategic decision to close select, non-profitable delivery depots and sell one of its underperforming retail licenses. The dispositions had an immediate positive impact on profitability and contributed to the positive 4Q results. Retail revenue accounted for 89.30% of the 4Q total. Adjusted gross profit of $18.7 million climbed 11.60% Q/Q. This equates to 65.97% adjusted gross margins, a 13.45% sequential improvement. Adjusted gross profit excludes operating expenses (including depreciation and amortization) related to US tax code 280E adjustments and non-recurring inventory adjustments. Adjusted EBITDA (AEBITDA) of $105,000 was an improvement over the negative $459,000 in the prior quarter. A 26.28% decline in COGS and 19.76% drop in SG&A expenses drove the improved AEBITDA despite lower revenue and demonstrated success in implementing the planned cost savings resulting from merger synergies. Cost controls remain a high priority. In addition to lowering COGS and SG&A, the company successfully completed the business combination and integration, which resulted in approximately $30 million in annualized cost savings. Gold Flora restarted cultivation at Caliva and Airfield Supply Company in San Jose. We toured the new cultivation and were impressed with the operations and output. This brings total canopy up to 107k square feet versus 47k square feet in 4Q22. The canopy expansion should drive higher revenue beginning in 1Q24, augmented by additional capacity at the DHS campus. Gramlin is a new disruptive brand that launched in March 2024. It targets higher volume daily consumers by hitting an affordable price point with new genetics and trendy packaging. Gramlin offers flower, vape, and pre-roll products and is sold at Gold Flora-owned retail stores and wholesale through Stately Distribution. The brand is one technique the company is using to boost sales of in-house products from 22% to the target of 30%. Gold Flora is positioned to outperform in a difficult California climate. Having high-quality retail, expanded cultivation, strong brands, and tight cost controls are key ingredients to survive and advance in the world’s largest and most competitive cannabis market.