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Back

Cresco Labs Reports Second Quarter 2023 Results

Aug 16, 2023 • 10:19 AM EDT
11 MIN READ  •  By Michael Berger
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CHICAGO–(BUSINESS WIRE)–Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) (FSE: 6CQ) (“Cresco Labs” or the “Company”), the industry leader in branded cannabis products with a portfolio of America’s most popular brands and the operator of Sunnyside dispensaries, today released its financial and operating results for the second quarter ended June 30, 2023. All financial information presented in this release is reported in accordance with U.S. GAAP and in U.S. dollars, unless otherwise indicated, and is available on the Company’s investor website, here.

Second Quarter 2023 Financial Highlights

  • Second quarter revenue of $198 million, up 2% sequentially, driven by retail growth of 4% and flat wholesale revenue.
  • Gross profit of $87 million, 44% of revenue.
  • Adjusted gross profit1 of $93 million and Adjusted gross margin of 47%, up 100 bps from the first quarter.
  • Adjusted SG&A1 reduction of $7 million sequentially.
  • Adjusted EBITDA1 of $40 million, up 38% sequentially as margin improved 540 bps to 20%.
  • Generated positive operating cash flow of $18 million, inclusive of $14 million of one-time cash charges related to facility closures, severance payments and M&A related fees.
  • Second quarter net loss of $43 million, which includes $22 million of impairment charges.

Operating Highlights

  • Retained the No. 1 share position in Illinois, Pennsylvania and Massachusetts.
  • Maintained the industry’s No. 1 bestselling portfolio of branded flower and branded concentrates, No. 3 portfolio of branded vapes, and No. 4 portfolio of branded edibles2.
  • Branded equivalized unit volume of 18 million, up 19% year-over-year2.
  • Retail transactions of 1.3 million, an 11% increase year-over-year.
  • Opened five total Sunnyside stores in Florida and Pennsylvania, bringing the nationwide store count to 68 as of June 30, 2023.

1 See “Non-GAAP Financial Measures” at the end of this press release for more information regarding the Company’s use of non-GAAP financial measures.

2 According to BDSA

Management Commentary

“Our Year-of-the-Core commitment to rationalizing and optimizing our core markets, core stores, core brands and core products is reflected in our Q2 results with growth in our top line, gross margin, Adjusted EBITDA and operating cash flow. With our focus on driving scale and efficiencies across the entire organization, we’ve been accomplishing more with less – leading to a 38% sequential improvement in Adjusted EBITDA. We maintained our industry leadership with the #1 portfolio of both branded flower and branded concentrates, #3 portfolio of branded vapes and #4 portfolio of branded edibles2. We’re pleased to see improved profitability and cash flow in our core markets, which positions us well for the capital-efficient growth and expansion opportunities that lie ahead. Our results are just starting to reflect the decisions we made earlier this year to support our Year-of-the-Core priorities, with much more to come,” said Charles Bachtell, CEO of Cresco Labs.

Balance Sheet, Liquidity and Other Financial Information

  • As of June 30, 2023, current assets were $265 million, including cash, cash equivalents and restricted cash of $75 million. The Company had senior secured term loan debt, net of discount and issuance costs, of $384 million.
  • Total shares on a fully converted basis were 470,308,738 as of June 30, 2023.

Capital Markets and M&A Activity

  • On July 30, 2023, Cresco Labs and Columbia Care mutually agreed to terminate the definitive agreement dated March 23, 2022. Concurrently, the definitive agreement dated November 4, 2022, to divest certain assets to an entity owned and controlled by Sean “Diddy” Combs, also has been terminated.
  • The Company intends to file a short form base shelf prospectus replacing the former prospectus that recently expired. The Company has no plans to raise funds under the prospectus in the near term. The prospectus will be filed with the securities commissions or similar authorities in Canada, subsequent to the filing of the Company’s quarterly earnings, in reliance on the well-known seasoned issuer exemption. Additionally, a corresponding shelf registration statement on Form F-10 will be filed with the United States Securities and Exchange Commission.

Conference Call and Webcast

The Company will host a conference call and webcast to discuss its financial results on Wednesday, August 16, 2023, at 8:30am Eastern Time (7:30am Central Time). The conference call may be accessed via webcast or by dialing 1-833-470-1428 (US Toll Free), 1-404-975-4839 (US Local), +1 929-526-1599 (Other) providing access code 979042. Archived access to the webcast will be available for one year on Cresco Labs’ investor website.

Consolidated Financial Statements

The financial information reported in this press release is based on unaudited management prepared financial statements for the quarter ended June 30, 2023. These financial statements have been prepared in accordance with U.S. GAAP. The Company expects to file its unaudited condensed interim consolidated financial statements for the quarter ended June 30, 2023, on SEDAR+ on or about August 16, 2023. Accordingly, such financial information may be subject to change. All financial information contained in this press release is qualified in its entirety with reference to such financial statements. While the Company does not expect there to be any material changes between the information contained in this press release and the consolidated financial statements it files on SEDAR+, to the extent that the financial information contained in this press release is inconsistent with the information contained in the Company’s financial statements, the financial information contained in this press release shall be deemed to be modified or superseded by the Company’s filed financial statements. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation for purposes of applicable securities laws. Further, the reader should refer to the additional disclosures in the Company’s audited financial statements for the year ended December 31, 2022, previously filed on SEDAR+.

Cresco Labs references certain non-GAAP financial measures throughout this press release, which may not be comparable to similar measures presented by other issuers. Please see the “Non-GAAP Financial Measures” section below for more detailed information.

Non-GAAP Financial Measures

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA, Adjusted gross profit, Adjusted gross margin and Adjusted SG&A are non-GAAP financial measures and do not have standardized definitions under U.S. GAAP. The Company has provided the non-GAAP financial measures, which are not calculated or presented in accordance with U.S. GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with U.S. GAAP and may not be comparable to similar measures presented by other issuers. These supplemental non-GAAP financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with, the U.S. GAAP financial measures presented herein. Accordingly, the Company has included below reconciliations of the supplemental non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.

About Cresco Labs Inc.

Cresco Labs’ mission is to normalize and professionalize the cannabis industry through a CPG approach to building national brands and a customer-focused retail experience, while acting as a steward for the industry on legislative and regulatory-focused initiatives. As a leader in cultivation, production, and branded product distribution, the Company is leveraging its scale and agility to grow its portfolio of brands that include Cresco, High Supply, FloraCal Farms, Good News, Wonder Wellness Co., Mindy’s, and Remedi, on a national level. The Company also operates highly productive dispensaries nationally under the Sunnyside brand that focus on building patient and consumer trust and delivering ongoing education and convenience in a wonderfully traditional retail experience. Through year-round policy, community outreach, and SEED initiative efforts, Cresco Labs embraces the responsibility to support communities through authentic engagement, economic opportunity, investment, workforce development, and legislative initiatives designed to create the most responsible, respectable and robust cannabis industry possible. Learn more about Cresco Labs’ journey by visiting www.crescolabs.com or following the Company on Facebook, Twitter or LinkedIn.

Forward-Looking Statements

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995 (collectively, “forward-looking statements”). Such forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking statements can be identified by the use of forward-looking terminology such as, ‘may,’ ‘will,’ ‘should,’ ‘could,’ ‘would,’ ‘expects,’ ‘plans,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘projects,’ ‘predicts,’ ‘potential’ or ‘continue’ or the negative of those forms or other comparable terms. The Company’s forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including but not limited to those risks discussed under “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2022, filed on March 21, 2023, other documents filed by the Company with Canadian securities regulatory authorities; and other factors, many of which are beyond the control of the Company. Readers are cautioned that the foregoing list of factors is not exhaustive. Because of these uncertainties, you should not place undue reliance on the Company’s forward-looking statements. No assurances are given as to the future trading price or trading volumes of Cresco Labs’ shares, nor as to the Company’s financial performance in future financial periods. The Company does not intend to update any of these factors or to publicly announce the result of any revisions to any of the Company’s forward-looking statements contained herein, whether as a result of new information, any future event or otherwise. Except as otherwise indicated, this press release speaks as of the date hereof. The distribution of this press release does not imply that there has been no change in the affairs of the Company after the date hereof or create any duty or commitment to update or supplement any information provided in this press release or otherwise.

Cresco Labs Inc.

Financial Information and Non-GAAP Reconciliations

(All amounts expressed in thousands of U.S. Dollars)

Unaudited Consolidated Statements of Operations

For the Three Months Ended June 30, 2023, March 31, 2023 and June 30, 2022

For the Three Months Ended

($ in thousands)

June 30,
2023

March 31,
2023

June 30,
2022

Revenues, net

$

197,887

$

194,202

$

218,226

Cost of goods sold

111,187

108,322

105,402

Gross profit

86,700

85,880

112,824

Gross profit %

43.8

%

44.2

%

51.7

%

Operating expenses:

Selling, general and administrative

70,562

71,897

77,912

Share-based compensation

1,043

6,124

6,583

Depreciation and amortization

4,345

4,273

5,652

Impairment loss

21,502

Total operating expenses

97,452

82,294

90,147

(Loss) income from operations

(10,752

)

3,586

22,677

Other expense, net:

Interest expense, net

(19,176

)

(15,548

)

(12,016

)

Other income, net

402

959

4,681

Total other expense, net

(18,774

)

(14,589

)

(7,335

)

(Loss) income before income taxes

(29,526

)

(11,003

)

15,342

Income tax expense

(13,937

)

(16,809

)

(23,638

)

Net loss1

$

(43,463

)

$

(27,812

)

$

(8,296

)

1 Net loss includes amounts attributable to non-controlling interests.

Cresco Labs Inc.

Unaudited Reconciliation of Gross Profit to Adjusted Gross Profit (Non-GAAP)

For the Three Months Ended June 30, 2023, March 31, 2023 and June 30, 2022

For the Three Months Ended

($ in thousands)

June 30,
2023

March 31,
2023

June 30,
2022

Revenues, net

$

197,887

$

194,202

$

218,226

Cost of goods sold1

111,187

108,322

105,402

Gross profit

$

86,700

$

85,880

$

112,824

Fair value mark-up for acquired inventory

123

Cost of goods sold adjustments for acquisition and other non-core costs

5,870

2,819

2,657

Adjusted gross profit (Non-GAAP)

$

92,570

$

88,699

$

115,604

Adjusted gross profit % (Non-GAAP)

46.8

%

45.7

%

53.0

%

1 Production (cultivation, manufacturing and processing) costs related to products sold during the period.

Cresco Labs Inc.

Unaudited Reconciliation of SG&A to Adjusted SG&A (Non-GAAP)

For the Three Months Ended June 30, 2023, March 31, 2023 and June 30, 2022

For the Three Months Ended

($ in thousands)

June 30,
2023

March 31,
2023

June 30,
2022

Selling, general and administrative

$

70,562

$

71,897

$

77,912

Adjustments for acquisition and other non-core costs

9,433

4,041

7,230

Adjusted SG&A (Non-GAAP)

$

61,129

$

67,856

$

70,682

Cresco Labs Inc.

Summarized Unaudited Consolidated Statements of Financial Position

As of June 30, 2023 and December 31, 2022

($ in thousands)

June 30, 2023

December 31, 2022

Cash, cash equivalents and restricted cash

$

74,811

$

121,510

Other current assets

190,433

204,536

Property and equipment, net

388,276

379,722

Intangible assets, net

402,797

407,590

Goodwill

310,053

330,555

Other non-current assets

144,861

139,779

Total assets

$

1,511,231

$

1,583,692

Total current liabilities

$

237,646

$

280,866

Total non-current liabilities

726,605

715,143

Total shareholders’ equity

546,980

587,683

Total liabilities and shareholders’ equity

$

1,511,231

$

1,583,692

Cresco Labs Inc.

Unaudited Reconciliation of Net Income to Adjusted EBITDA (Non-GAAP)

For the Three Months Ended June 30, 2023, March 31, 2023 and June 30, 2022

For the Three Months Ended

($ in thousands)

June 30,
2023

March 31,
2023

June 30,
2022

Net loss1

$

(43,463

)

$

(27,812

)

$

(8,296

)

Depreciation and amortization

14,002

12,961

13,113

Interest expense, net

19,176

15,548

12,016

Income tax expense

13,937

16,809

23,638

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) (Non-GAAP)

$

3,652

$

17,506

$

40,471

Other income, net

(402

)

(959

)

(4,681

)

Fair value mark-up for acquired inventory

123

Adjustments for acquisition and other non-core costs

13,522

5,671

7,231

Impairment loss

21,502

Share-based compensation

2,204

7,062

7,449

Adjusted EBITDA (Non-GAAP)

$

40,478

$

29,280

$

50,593

1 Net loss includes amounts attributable to non-controlling interests.

Cresco Labs Inc.

Unaudited Summarized Consolidated Statements of Cash Flows

For the Three Months Ended June 30, 2023, March 31, 2023 and June 30, 2022

For the Three Months Ended

($ in thousands)

June 30,
2023

March 31,
2023

June 30,
2022

Net cash provided by (used in) operating activities

$

17,973

$

3,270

$

(7,076

)

Net cash used in investing activities

(14,050

)

(20,668

)

(13,388

)

Net cash used in financing activities

(19,542

)

(13,635

)

(69,135

)

Effect of foreign currency exchange rate changes on cash

(22

)

(25

)

13

Net change in cash and cash equivalents and restricted cash

$

(15,641

)

$

(31,058

)

$

(89,586

)

Cash and cash equivalents and restricted cash, beginning of period

90,452

121,510

181,920

Cash and cash equivalents and restricted cash, end of period

$

74,811

$

90,452

$

92,334

 

Contacts

Media
Jason Erkes, Cresco Labs
Chief Communications Officer
press@crescolabs.com
312-953-2767

Investors
Megan Kulick, Cresco Labs
SVP, Investor Relations
investors@crescolabs.com

For general Cresco Labs inquiries:
312-929-0993
info@crescolabs.com

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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