Cresco Labs Announces Third Quarter 2022 Results
Cresco Labs reported $210 million in revenue for Q3 2022, representing a 2% year-over-year decline, attributed to price compression and strategic exits from third-party distribution in California. Adjusted gross profit stood at $100 million, equating to 47% of revenue. The company generated $42 million in adjusted EBITDA, or 20% of revenue, impacted by cost-reduction measures. Retail revenue rose by 11%, and operating cash flow totaled $26 million. Cresco Labs plans divestitures of assets for up to $185 million to facilitate the integration of Columbia Care by Q1 2023.
- Retail revenue increased 11% year-over-year to $118 million.
- Maintained position as No. 1 U.S. seller of branded cannabis products.
- Generated $26 million in operating cash flow.
- Ended Q3 with $130 million in cash on hand.
- Revenue decreased 2% year-over-year.
- Adjusted gross profit margin fell to 47% due to cost-reduction actions.
- Closure of underperforming facilities impacted margins by approximately 340 bps.
Company reports
Company took actions to improve long-term profitability and prepare for the integration of Columbia Care in 2023
Third Quarter 2022 Financial Highlights
-
Third quarter revenue of
, down$210 million 2% year-over-year. Growth in emerging markets was offset by price compression, increased verticality by retailers, and the Company’s strategic exit of 3rd party distribution inCalifornia in Q4 of 2021. Adjusted for change in the Company’sCalifornia business, non-GAAP third quarter revenue would have been up over2% year-over-year. -
Adjusted gross profit1 of
or$100 million 47% of revenue. Third quarter adjusted EBITDA1 of , or$42 million 20% of revenue. -
Adjusted gross margin1 and adjusted EBITDA margin1 were impacted by actions taken in the quarter to improve long-term profitability, including the closing of under-performing facilities and associated inventory adjustments, causing an approximate 340 bps drag on margins in the quarter. Normalized for these non-cash, non recurring adjustments, adjusted gross margin1 would have been
51% and adjusted EBITDA margin1 would have been23% . -
Wholesale revenue of
, which maintained the Company's position as the No. 1 U.S. seller of branded cannabis products in the industry with leading share positions in the flower, concentrates, and vapes categories2.$93 million -
Maintained market leadership in
Illinois ,Pennsylvania , andMassachusetts 2. -
Retail revenue increased
11% year-over-year, to , or an average$118 million per store open for the entire quarter.$2.35 million -
Generated
in operating cash flow and ended the quarter with$26 million of cash on hand.$130 million -
On
November 4, 2022 ,Cresco Labs announced planned divestitures of Cresco and Columbia Care assets inNew York ,Illinois andMassachusetts to entities controlled bySean Combs for a total purchase price of up to ; closing is expected to occur concurrently with the closing of the Columbia Care acquisition around the end of the first quarter of 2023.$185 million
Management Commentary
"It’s an exciting time for the cannabis industry as we get closer to a clear inflection point. In the face of multiple industry headwinds and an unprecedented macro environment, our team did an incredible job of taking everything that the quarter had to give and maintained our industry position as the No. 1 wholesaler of branded cannabis2 and the No. 1 branded product portfolio chosen by consumers2. In the quarter, we took actions to reduce costs to position ourselves for long-term improvement. This included the closing of underperforming facilities and the sell through of related inventory. While this had a short-term negative impact on gross margin in Q3, it was the right thing to do to align our cost structure and optimize our operations ahead of closing the Columbia Care transaction and in furtherance of our commitment to improved margin growth in the coming quarters,” said
“We made significant progress toward closing the Columbia Care transaction with the signing of definitive agreements to divest assets in
Balance Sheet, Liquidity, and Other Financial Information
-
As of
September 30, 2022 , current assets were , including cash and cash equivalents of$355 million . The Company had working capital of$130 million and senior secured term loan debt, net of discount and issuance costs, of$85 million .$380 million -
Total shares on a fully converted basis were 437,484,245 as of
September 30, 2022 .
Social Equity and Education Development Program
-
Secured support of the
National Black Chamber of Commerce ,National Hispanic Cannabis Council ,New York New Jersey Minority Development Council ,NAACP ofNew Jersey ,New York Urban League and other advocacy organizations urging for critical federal legislation that would enable banking and lending access for cannabis businesses. -
The Sentence of
Michael Thompson , a documentary produced byCresco Labs , premiered onMSNBC and will be available on XTR's Streaming Service DOCUMENTARY+. Through theMSNBC and DOCUMENTARY+ agreement, the film will reach over 3 million viewers nationwide. - This year's "Summer of Social Justice" campaign has far surpassed last year's impact, with the Company's SEEDTM initiative supporting the record sealing, expungement process and restorative journey recently achieving a milestone of assisting 5,000 individuals nationwide.
Capital Markets and M&A Activity
-
On
November 4, 2022 , the Company announced a definitive agreement for the divestiture of Columbia Care and Cresco assets inNew York ,Illinois andMassachusetts for total proceeds of up to . Please click here for additional details.$185 million -
The asset divestiture process is proceeding as planned in terms of gross proceeds and the Company is working toward final agreements on the remaining assets required to be divested in
Florida, Ohio andMaryland . The Company targets closing the transaction around the end of the first quarter of 2023. -
On
September 6, 2022 , the Company closed on a sale-and-leaseback transaction with Aventine Property group for itsBrookville, PA facility for . Please click here for additional details.$45 million
Conference Call and Webcast
The Company will host a conference call and webcast to discuss its financial results on
Consolidated Financial Statements
The financial information reported in this press release is based on unaudited management prepared financial statements for the quarter ended
Non-GAAP Financial Measures
Earnings before interest, taxes, depreciation, and amortization (“EBITDA”), Adjusted EBITDA, and Adjusted gross profit are non-GAAP financial measures and do not have standardized definitions under
About
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
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.
2According to BDSA
|
||||||||||||
Financial Information and Non-GAAP Reconciliations |
||||||||||||
(All amounts expressed in thousands of |
||||||||||||
|
|
|
|
|
|
|
||||||
Unaudited Consolidated Statements of Operations |
||||||||||||
For the Three Months Ended |
||||||||||||
|
|
|
||||||||||
|
|
For the Three Months Ended |
||||||||||
($ in thousands) |
|
|
|
|
|
|
||||||
Revenue |
|
$ |
210,484 |
|
|
$ |
218,226 |
|
|
$ |
215,483 |
|
Cost of goods sold |
|
|
111,372 |
|
|
|
105,402 |
|
|
|
107,162 |
|
Gross profit |
|
|
99,112 |
|
|
|
112,824 |
|
|
|
108,321 |
|
Gross profit % |
|
|
47.1 |
% |
|
|
51.7 |
% |
|
|
50.3 |
% |
Operating expenses: |
|
|
|
|
|
|
||||||
Selling, general and administrative |
|
|
76,200 |
|
|
|
77,912 |
|
|
|
69,520 |
|
Share-based compensation |
|
|
2,256 |
|
|
|
6,583 |
|
|
|
6,083 |
|
Depreciation and amortization |
|
|
4,416 |
|
|
|
5,652 |
|
|
|
5,787 |
|
Impairment loss |
|
|
— |
|
|
|
— |
|
|
|
290,949 |
|
Total operating expenses |
|
|
82,872 |
|
|
|
90,147 |
|
|
|
372,339 |
|
Income (loss) from operations |
|
|
16,240 |
|
|
|
22,677 |
|
|
|
(264,018 |
) |
|
|
|
|
|
|
|
||||||
Other (expense) income: |
|
|
|
|
|
|
||||||
Interest expense, net |
|
|
(15,554 |
) |
|
|
(12,016 |
) |
|
|
(13,577 |
) |
Other income, net |
|
|
14,797 |
|
|
|
4,681 |
|
|
|
1,735 |
|
Total other expense, net |
|
|
(757 |
) |
|
|
(7,335 |
) |
|
|
(11,842 |
) |
Income (loss) before income taxes |
|
|
15,483 |
|
|
|
15,342 |
|
|
|
(275,860 |
) |
Income tax (expense) recovery |
|
|
(18,732 |
) |
|
|
(23,638 |
) |
|
|
12,408 |
|
Net loss1 |
|
$ |
(3,249 |
) |
|
$ |
(8,296 |
) |
|
$ |
(263,452 |
) |
1 Net loss includes amounts attributable to non-controlling interests. |
|
||||||||||||
Unaudited Reconciliation of Gross Profit to Adjusted Gross Profit (Non-GAAP) |
||||||||||||
For the Three Months Ended |
||||||||||||
|
|
|
|
|
|
|
||||||
|
|
For the Three Months Ended |
||||||||||
($ in thousands) |
|
|
|
2022 |
|
|
||||||
Revenue |
|
$ |
210,484 |
|
|
$ |
218,226 |
|
|
$ |
215,483 |
|
Cost of goods sold1 |
|
|
111,372 |
|
|
|
105,402 |
|
|
|
107,162 |
|
Gross profit |
|
$ |
99,112 |
|
|
$ |
112,824 |
|
|
$ |
108,321 |
|
Fair value mark-up for acquired inventory |
|
|
21 |
|
|
|
123 |
|
|
|
8,396 |
|
COGS adjustments for acquisition and other non-core costs |
|
|
593 |
|
|
|
2,657 |
|
|
|
— |
|
Adjusted gross profit (Non-GAAP) |
|
$ |
99,726 |
|
|
$ |
115,604 |
|
|
$ |
116,717 |
|
Adjusted gross profit % |
|
|
47.4 |
% |
|
|
53.0 |
% |
|
|
54.2 |
% |
1 Production (cultivation, manufacturing, and processing) costs related to products sold during the period. |
|
||||||
Summarized Unaudited Consolidated Statements of Financial Position |
||||||
As of |
||||||
|
|
|
|
|
||
($ in thousands) |
|
|
|
|
||
Cash and cash equivalents |
|
$ |
130,042 |
|
$ |
223,543 |
Other current assets |
|
|
225,159 |
|
|
198,212 |
Property and equipment, net |
|
|
377,941 |
|
|
369,092 |
Intangible assets, net |
|
|
431,446 |
|
|
437,644 |
|
|
|
448,376 |
|
|
446,767 |
Other non-current assets |
|
|
143,327 |
|
|
105,205 |
Total assets |
|
$ |
1,756,291 |
|
$ |
1,780,463 |
|
|
|
|
|
||
Total current liabilities |
|
|
270,560 |
|
|
288,394 |
Total long-term liabilities |
|
|
714,284 |
|
|
694,333 |
Total shareholders' equity |
|
|
771,447 |
|
|
797,736 |
Total liabilities and shareholders' equity |
|
$ |
1,756,291 |
|
$ |
1,780,463 |
|
||||||||||||
Unaudited Reconciliation of Net Income to Adjusted EBITDA (Non-GAAP) |
||||||||||||
For the Three Months Ended |
||||||||||||
|
|
|
|
|
|
|
||||||
|
|
For the Three Months Ended |
||||||||||
($ in thousands) |
|
|
|
2022 |
|
|
||||||
Net loss1 |
|
$ |
(3,249 |
) |
|
$ |
(8,296 |
) |
|
$ |
(263,452 |
) |
Depreciation and amortization |
|
|
13,395 |
|
|
|
13,113 |
|
|
|
10,486 |
|
Interest expense, net |
|
|
15,554 |
|
|
|
12,016 |
|
|
|
13,577 |
|
Income tax expense (recovery) |
|
|
18,732 |
|
|
|
23,638 |
|
|
|
(12,408 |
) |
Earnings before interest, taxes, depreciation, and amortization (EBITDA) (Non-GAAP) |
|
$ |
44,432 |
|
|
$ |
40,471 |
|
|
$ |
(251,797 |
) |
|
|
|
|
|
|
|
||||||
Other income, net |
|
|
(14,797 |
) |
|
|
(4,681 |
) |
|
|
(1,735 |
) |
Fair value mark-up for acquired inventory |
|
|
21 |
|
|
|
123 |
|
|
|
8,396 |
|
Adjustments for acquisition and other non-core costs |
|
|
9,093 |
|
|
|
7,231 |
|
|
|
3,830 |
|
Impairment loss |
|
|
— |
|
|
|
— |
|
|
|
290,949 |
|
Share-based compensation |
|
|
2,995 |
|
|
|
7,449 |
|
|
|
6,806 |
|
Adjusted EBITDA (Non-GAAP) |
|
$ |
41,744 |
|
|
$ |
50,593 |
|
|
$ |
56,449 |
|
1 Net loss includes amounts attributable to non-controlling interests. |
|
||||||||||||
Unaudited Summarized Consolidated Statements of Cash Flows |
||||||||||||
For the Three Months Ended |
||||||||||||
|
|
|
|
|
|
|
||||||
|
For the Three Months Ended |
|||||||||||
($ in thousands) |
|
|
|
2022 |
|
|
||||||
Net cash provided by (used in) operating activities |
|
$ |
25,604 |
|
|
$ |
(7,076 |
) |
|
$ |
7,075 |
|
Net cash provided by (used in) investing activities |
|
|
23,484 |
|
|
|
(13,388 |
) |
|
|
(43,449 |
) |
Net cash (used in) provided by financing activities |
|
|
(9,112 |
) |
|
|
(69,135 |
) |
|
|
155,864 |
|
Effect of foreign currency exchange rate changes on cash |
|
|
10 |
|
|
|
13 |
|
|
|
74 |
|
Net change in cash and cash equivalents and restricted cash |
|
$ |
39,986 |
|
|
$ |
(89,586 |
) |
|
$ |
119,564 |
|
Cash and cash equivalents and restricted cash, beginning of period |
|
|
92,334 |
|
|
|
181,920 |
|
|
|
135,233 |
|
Cash and cash equivalents and restricted cash, end of period |
|
$ |
132,320 |
|
|
$ |
92,334 |
|
|
$ |
254,797 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20221115005694/en/
Media
Chief Communications Officer
press@crescolabs.com
312-953-2767
Investors
SVP, Investor Relations
investors@crescolabs.com
For general
312-929-0993
info@crescolabs.com
Source:
FAQ
What were Cresco Labs' revenue figures for Q3 2022?
How did Cresco Labs' revenue change compared to the previous year?
What is the adjusted gross profit for Cresco Labs in Q3 2022?
What strategic actions is Cresco Labs taking for long-term profitability?