Cresco Labs Reports Third Quarter 2023 Financial Results
- Strong margin and operating cash flow gains
- Maintained No. 1 share position in key markets
- Positive operating cash flow of $41 million
- None.
Continued execution of Year-of-the-Core strategy delivers strong margin and operating cash flow gains, with elimination of over
Third Quarter 2023 Financial Highlights
-
Third quarter revenue of
, with retail growth and strong performance in core markets helping to offset purposeful attrition from divested assets.$191 million -
In comparison to Q1, when the Company initiated the Year-of-the-Core strategy, adjusted gross margin1 increased by over 480 bps, adjusted SG&A1 decreased by
on an annualized basis and adjusted EBITDA margin1 rose by over 1000 bps.$40 million -
Generated
in operating cash flow through the first nine months of the year.$62 million -
Gross profit of
,$94 million 49% of revenue. -
Adjusted gross profit1 of
and adjusted gross margin1 of$96 million 51% , up 373 bps from the second quarter. -
Adjusted SG&A1 of
, a reduction of$57 million sequentially to just under$4 million 30% of revenue. -
Adjusted EBITDA1 of
, and$49 million 26% of revenue, up21% sequentially as adjusted EBITDA margin1 improved 528 bps. -
Generated positive operating cash flow of
, inclusive of$41 million of one-time cash charges related to facility closures, divestiture activity and severance payments.$8 million -
One-time, non-cash impairment charges totaled
, resulting in a third quarter net loss of$129 million .$113 million
Third Quarter 2023 Operating Highlights
-
Retained the No. 1 share position in
Illinois ,Pennsylvania andMassachusetts 2. - Maintained the industry’s No. 1 bestselling portfolio of branded flower and branded concentrates and the No. 4 portfolio of branded vapes and branded edibles2.
-
Branded equivalized unit volume of 20 million, up
28% year-over-year2. -
Retail transactions of 1.4 million, a
17% increase year-over-year. -
Opened two Sunnyside stores in
Florida , bringing the nationwide store count to 70 as of September 30, 2023.
Management Commentary
“Our third quarter results demonstrate our ability to drive solid performance, with strong gains to our margin and operating cash flow, by continuing to execute on a strategy where we win in our core markets and with our core stores, core brands and core products.
Cresco Labs is leaner and more productive than ever. We generated
Our disciplined execution of the “Year-of-the-Core” strategy positions us to effectively compete today, execute the upcoming growth catalysts existing within our underlying business, and be opportunistic as new market opportunities continue to present themselves. This is essential to creating the strongest, most valuable Cresco Labs possible.
With
Balance Sheet, Liquidity and Other Financial Information
-
As of September 30, 2023, current assets were
, including cash, cash equivalents and restricted cash of$303 million . The Company had senior secured term loan debt, net of discount and issuance costs, of$113 million and a mortgage loan, net of discount and issuance costs of$385 million .$18 million - Total shares on a fully converted basis were 468,955,546 as of September 30, 2023.
Capital Markets and Divestiture Activity
-
On September 12, 2023, the Company signed a definitive agreement with an entity to be operated by Mint Cannabis to divest its remaining assets in the Encanto Green Cross Dispensary, LLC in
Arizona , and closed the transaction following required regulatory approval on October 18, 2023, yielding cash proceeds of .$7 million -
On September 26, 2023, the Company closed on a mortgage loan to borrow an undiscounted principal amount of
. The loan is secured by real estate in$25 million Ellenville, NY , and improvements thereto. was funded at close, net of discount and issuance costs, with the remaining principal held to fund future capital expenditures. The 10-year mortgage carries an interest rate calculated based on the FHLBank Boston 5-year rate plus 375 basis points, resulting in an initial rate at close of$18 million 8.4% .
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 |
Conference Call and Webcast
The Company will host a conference call and webcast to discuss its financial results on Wednesday, November 15, 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) or 1-646-904-5544 (US Local), providing access code 259018. 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 September 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 EBITDA margin, Adjusted gross profit, Adjusted gross margin and Adjusted Selling, general and administrative (“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. As a leader in cultivation, production and branded product distribution, the Company is leveraging its scale and agility to grow its portfolio of brands, including Cresco, High Supply, FloraCal, 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. 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, X 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 |
||||||||||||
|
|
|
|
|
|
|
||||||
Unaudited Consolidated Statements of Operations |
||||||||||||
For the Three Months Ended September 30, 2023, June 30, 2023 and September 30, 2022 |
||||||||||||
|
|
|
||||||||||
|
|
For the Three Months Ended |
||||||||||
($ in thousands) |
|
September 30,
|
|
June 30,
|
|
September 30,
|
||||||
Revenues, net |
|
$ |
190,559 |
|
|
$ |
197,887 |
|
|
$ |
210,484 |
|
Cost of goods sold |
|
|
96,919 |
|
|
|
111,187 |
|
|
|
111,372 |
|
Gross profit |
|
|
93,640 |
|
|
|
86,700 |
|
|
|
99,112 |
|
Gross profit % |
|
|
49.1 |
% |
|
|
43.8 |
% |
|
|
47.1 |
% |
Operating expenses: |
|
|
|
|
|
|
||||||
Selling, general and administrative |
|
|
62,484 |
|
|
|
70,562 |
|
|
|
76,200 |
|
Share-based compensation |
|
|
3,479 |
|
|
|
1,043 |
|
|
|
2,256 |
|
Depreciation and amortization |
|
|
5,942 |
|
|
|
4,345 |
|
|
|
4,416 |
|
Impairment loss |
|
|
129,491 |
|
|
|
21,502 |
|
|
|
— |
|
Total operating expenses |
|
|
201,396 |
|
|
|
97,452 |
|
|
|
82,872 |
|
(Loss) income from operations |
|
|
(107,756 |
) |
|
|
(10,752 |
) |
|
|
16,240 |
|
|
|
|
|
|
|
|
||||||
Other expense, net: |
|
|
|
|
|
|
||||||
Interest expense, net |
|
|
(11,764 |
) |
|
|
(19,176 |
) |
|
|
(15,554 |
) |
Other income, net |
|
|
329 |
|
|
|
402 |
|
|
|
14,797 |
|
Total other expense, net |
|
|
(11,435 |
) |
|
|
(18,774 |
) |
|
|
(757 |
) |
(Loss) income before income taxes |
|
|
(119,191 |
) |
|
|
(29,526 |
) |
|
|
15,483 |
|
Income tax recovery (expense) |
|
|
5,746 |
|
|
|
(13,937 |
) |
|
|
(18,732 |
) |
Net loss1 |
|
$ |
(113,445 |
) |
|
$ |
(43,463 |
) |
|
$ |
(3,249 |
) |
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 September 30, 2023, June 30, 2023 and September 30, 2022 |
||||||||||||
|
|
|
|
|
|
|
||||||
|
|
For the Three Months Ended |
||||||||||
($ in thousands) |
|
September 30,
|
|
June 30,
|
|
September 30,
|
||||||
Revenues, net |
|
$ |
190,559 |
|
|
$ |
197,887 |
|
|
$ |
210,484 |
|
Cost of goods sold1 |
|
|
96,919 |
|
|
|
111,187 |
|
|
|
111,372 |
|
Gross profit |
|
$ |
93,640 |
|
|
$ |
86,700 |
|
|
$ |
99,112 |
|
Fair value mark-up for acquired inventory |
|
|
— |
|
|
|
— |
|
|
|
21 |
|
Cost of goods sold adjustments for acquisition and other non-core costs |
|
|
2,602 |
|
|
|
5,870 |
|
|
|
593 |
|
Adjusted gross profit (Non-GAAP) |
|
$ |
96,242 |
|
|
$ |
92,570 |
|
|
$ |
99,726 |
|
Adjusted gross profit % (Non-GAAP) |
|
|
50.5 |
% |
|
|
46.8 |
% |
|
|
47.4 |
% |
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 September 30, 2023, June 30, 2023 and September 30, 2022 |
|||||||||
|
|
|
|
|
|
|
|||
|
|
For the Three Months Ended |
|||||||
($ in thousands) |
|
September 30,
|
|
June 30,
|
|
September 30,
|
|||
Selling, general and administrative |
|
$ |
62,484 |
|
$ |
70,562 |
|
$ |
76,200 |
Adjustments for acquisition and other non-core costs |
|
|
5,457 |
|
|
9,433 |
|
|
9,093 |
Adjusted SG&A (Non-GAAP) |
|
$ |
57,027 |
|
$ |
61,129 |
|
$ |
67,107 |
Cresco Labs Inc. |
||||||
Summarized Unaudited Consolidated Statements of Financial Position |
||||||
As of September 30, 2023 and December 31, 2022 |
||||||
|
|
|
|
|
||
($ in thousands) |
|
September 30,
|
|
December 31,
|
||
Cash, cash equivalents and restricted cash |
|
$ |
113,016 |
|
$ |
121,510 |
Other current assets |
|
|
190,151 |
|
|
204,536 |
Property and equipment, net |
|
|
382,783 |
|
|
379,722 |
Intangible assets, net |
|
|
298,008 |
|
|
407,590 |
Goodwill |
|
|
279,697 |
|
|
330,555 |
Other non-current assets |
|
|
135,498 |
|
|
139,779 |
Total assets |
|
$ |
1,399,153 |
|
$ |
1,583,692 |
|
|
|
|
|
||
Total current liabilities |
|
$ |
260,882 |
|
$ |
280,866 |
Total non-current liabilities |
|
|
712,409 |
|
|
715,143 |
Total shareholders’ equity |
|
|
425,862 |
|
|
587,683 |
Total liabilities and shareholders’ equity |
|
$ |
1,399,153 |
|
$ |
1,583,692 |
Cresco Labs Inc. |
||||||||||||
Unaudited Reconciliation of Net Income to Adjusted EBITDA (Non-GAAP) |
||||||||||||
For the Three Months Ended September 30, 2023, June 30, 2023 and September 30, 2022 |
||||||||||||
|
|
|
|
|
|
|
||||||
|
|
For the Three Months Ended |
||||||||||
($ in thousands) |
|
September 30,
|
|
June 30,
|
|
September 30,
|
||||||
Net loss1 |
|
$ |
(113,445 |
) |
|
$ |
(43,463 |
) |
|
$ |
(3,249 |
) |
Depreciation and amortization |
|
|
15,297 |
|
|
|
14,002 |
|
|
|
13,395 |
|
Interest expense, net |
|
|
11,764 |
|
|
|
19,176 |
|
|
|
15,554 |
|
Income tax (recovery) expense |
|
|
(5,746 |
) |
|
|
13,937 |
|
|
|
18,732 |
|
EBITDA (Non-GAAP) |
|
$ |
(92,130 |
) |
|
$ |
3,652 |
|
|
$ |
44,432 |
|
|
|
|
|
|
|
|
||||||
Other income, net |
|
|
(329 |
) |
|
|
(402 |
) |
|
|
(14,797 |
) |
Fair value mark-up for acquired inventory |
|
|
— |
|
|
|
— |
|
|
|
21 |
|
Adjustments for acquisition and other non-core costs |
|
|
7,942 |
|
|
|
13,522 |
|
|
|
9,093 |
|
Impairment loss |
|
|
129,491 |
|
|
|
21,502 |
|
|
|
— |
|
Share-based compensation |
|
|
4,072 |
|
|
|
2,204 |
|
|
|
2,995 |
|
Adjusted EBITDA (Non-GAAP) |
|
$ |
49,046 |
|
|
$ |
40,478 |
|
|
$ |
41,744 |
|
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 September 30, 2023, June 30, 2023 and September 30, 2022 |
||||||||||||
|
|
|
|
|
|
|
||||||
|
For the Three Months Ended |
|||||||||||
($ in thousands) |
|
September 30,
|
|
June 30,
|
|
September 30,
|
||||||
Net cash provided by operating activities |
|
$ |
40,622 |
|
|
$ |
17,973 |
|
|
$ |
25,604 |
|
Net cash (used in) provided by investing activities |
|
|
(12,476 |
) |
|
|
(14,050 |
) |
|
|
23,484 |
|
Net cash provided by (used in) financing activities |
|
|
10,052 |
|
|
|
(19,542 |
) |
|
|
(9,112 |
) |
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
7 |
|
|
|
(22 |
) |
|
|
10 |
|
Net change in cash and cash equivalents and restricted cash |
|
$ |
38,205 |
|
|
$ |
(15,641 |
) |
|
$ |
39,986 |
|
Cash and cash equivalents and restricted cash, beginning of period |
|
|
74,811 |
|
|
|
90,452 |
|
|
|
92,334 |
|
Cash and cash equivalents and restricted cash, end of period |
|
$ |
113,016 |
|
|
$ |
74,811 |
|
|
$ |
132,320 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20231115219215/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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