Cresco Labs Reports Second Quarter 2023 Results
- Revenue increased by 2% sequentially to $198 million.
- Gross profit of $87 million, representing 44% of revenue.
- Adjusted EBITDA increased by 38% to $40 million, with a margin improvement of 540 basis points to 20%.
- Positive operating cash flow of $18 million.
- Branded equivalized unit volume increased by 19% year-over-year.
- Maintained leadership position in key markets and saw growth in branded products.
- None.
Year-of-the-Core initiatives delivered strong improvements in gross margin, adjusted EBITDA and operating cash flow
Second Quarter 2023 Financial Highlights
-
Second quarter revenue of
, up$198 million 2% sequentially, driven by retail growth of4% and flat wholesale revenue. -
Gross profit of
,$87 million 44% of revenue. -
Adjusted gross profit1 of
and Adjusted gross margin of$93 million 47% , up 100 bps from the first quarter. -
Adjusted SG&A1 reduction of
sequentially.$7 million -
Adjusted EBITDA1 of
, up$40 million 38% sequentially as margin improved 540 bps to20% . -
Generated positive operating cash flow of
, inclusive of$18 million of one-time cash charges related to facility closures, severance payments and M&A related fees.$14 million -
Second quarter net loss of
, which includes$43 million of impairment charges.$22 million
Operating Highlights
-
Retained the No. 1 share position in
Illinois ,Pennsylvania andMassachusetts . - 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 andPennsylvania , 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
Balance Sheet, Liquidity and Other Financial Information
-
As of June 30, 2023, current assets were
, including cash, cash equivalents and restricted cash of$265 million . The Company had senior secured term loan debt, net of discount and issuance costs, of$75 million .$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
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
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. |
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Financial Information and Non-GAAP Reconciliations |
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(All amounts expressed in thousands of |
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|
|
|
|
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|
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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 |
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($ in thousands) |
|
June 30,
|
|
March 31,
|
|
June 30,
|
||||||
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) |
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For the Three Months Ended June 30, 2023, March 31, 2023 and June 30, 2022 |
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|
|
|
|
|
|
|
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|
|
For the Three Months Ended |
||||||||||
($ in thousands) |
|
June 30,
|
|
March 31,
|
|
June 30,
|
||||||
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. |
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Unaudited Reconciliation of SG&A to Adjusted SG&A (Non-GAAP) |
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For the Three Months Ended June 30, 2023, March 31, 2023 and June 30, 2022 |
|||||||||
|
|
|
|
|
|
|
|||
|
|
For the Three Months Ended |
|||||||
($ in thousands) |
|
June 30,
|
|
March 31,
|
|
June 30,
|
|||
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. |
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Summarized Unaudited Consolidated Statements of Financial Position |
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As of June 30, 2023 and December 31, 2022 |
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|
|
|
|
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||
($ 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) |
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For the Three Months Ended June 30, 2023, March 31, 2023 and June 30, 2022 |
||||||||||||
|
|
|
|
|
|
|
||||||
|
|
For the Three Months Ended |
||||||||||
($ in thousands) |
|
June 30,
|
|
March 31,
|
|
June 30,
|
||||||
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. |
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Unaudited Summarized Consolidated Statements of Cash Flows |
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For the Three Months Ended June 30, 2023, March 31, 2023 and June 30, 2022 |
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|
|
|
|
|
|
|
||||||
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For the Three Months Ended |
|||||||||||
($ in thousands) |
|
June 30,
|
|
March 31,
|
|
June 30,
|
||||||
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 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20230816510098/en/
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
Source: Cresco Labs
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