Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) (FSE: 6CQ) (“Cresco Labs” or the “Company”), a vertically integrated, multi-state operator and the No. 1 producer of branded cannabis products in the industry, today released its financial results for the quarter and year ended December 31, 2022. All financial information presented in this release is reported in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and in U.S. dollars, unless as otherwise indicated.
Fiscal Year 2022 Financial Highlights
- Record revenue of $843 million, an increase of 3% year-over-year; excluding California distribution operations exited in 2021, adjusted revenues grew 6% year-over-year.
- Record branded unit volume of 61 million, up 37% year-over-year2.
- Record retail transactions of 4.6 million, up 15% year-over-year.
- Adjusted gross profit1 of $418 million, or 50% of revenue.
- Adjusted EBITDA1 of $174 million, or 21% of revenue.
- Net loss of $215 million for the full year included $141 million of one-time impairment charges.
- Generated positive operating cash flow of $19 million for the full year and ended the year with $122 million of cash, cash equivalents and restricted cash.
- Retained the #1 market share position in Illinois and Pennsylvania and achieved #1 share in Massachusetts. The Company had the #1 best-selling branded portfolio of cannabis products in the industry, the #1 portfolio of branded flower and branded concentrates, and the #3 portfolio of branded vapes2.
Fourth Quarter 2022 Financial Highlights
- Fourth quarter revenue of $200 million, down 8% year-over-year.
- Branded unit volume of 17 million, up 24% year-over-year2.
- Retail transactions of 1.2 million, up 4% year-over-over.
- Growth from increased unit sales and retail transactions was offset by price compression across the industry.
- Adjusted gross profit1 of $90 million, or 45% of revenue.
- Fourth quarter adjusted EBITDA1 of $31 million, or 15% of revenue.
- Adjusted gross profit margin and adjusted EBITDA margin were impacted by approximately $10 million of non-cash, non-recurring items, including charges related to revaluation of inventories to the net realizable value, causing an approximate 500 bps drag on margins in the quarter. Normalized for these adjustments, adjusted gross margin would have been 50% and adjusted EBITDA margin would have been 20%.
- Fourth quarter net loss of $180 million included $141 million of impairment charges.
- Generated positive operating cash flow of $4 million.
“I want to congratulate the Cresco Labs team on how well they tackled the challenges of 2022. Despite the headwinds, the Cresco team generated a record $843 million of sales, a record 61 million branded units sold (+37% year-over-year), and a record 4.6 million retail transactions (+15% year-over-year). Our relentless focus on providing the highest perceived value to the consumer led Cresco Labs to have the number one most sold branded product portfolio in the U.S. for the second straight year. Cannabis made progress on its path to becoming one of the largest consumer product categories in the country. The limited legal cannabis industry reached over $25 billion2 in revenue and produced almost $4 billion in state tax revenue. The current estimated regulated-plus-illicit cannabis market in the U.S. is nearly the size of the U.S. beer industry. From our front-line position, we were disappointed that federal reform did not pass late last year, but last year’s efforts have led to strong momentum for change with the new Congress. None of the challenges of 2022 change the long-term thesis and opportunity that is cannabis,” said Charles Bachtell, CEO and Co-founder of Cresco Labs.
“As we look toward the months ahead, we don’t expect the operating environment to get any easier, but our priorities are clear. We’re laser-focused on our profitable Core—core capabilities, core products, and core brands. What you can expect from us is continued leadership in branded cannabis, rationalization and optimization of our footprint, expansion in the reach and efficiencies of our retail business, generation of more free cash flow, and the strengthening of our balance sheet, while we continue to lead on federal reform,” added Bachtell.
Balance Sheet, Liquidity and Other Financial Information
- As of December 31, 2022, current assets were $327 million, including cash, cash equivalents and restricted cash of $122 million. The Company had working capital of $46 million and senior secured term loan debt, net of discount and issuance costs, of $381 million.
- Total shares on a fully converted basis were 437,468,399 as of December 31, 2022.
- During the fourth quarter, the Company took an impairment charge totaling $141 million, primarily related to its plan to exit certain California operations.
Social Equity and Education Development Program
- In the fourth quarter, the Illinois Cannabis Education Center (“ICEC”) continued programming in partnership with local colleges, community, and business organizations. At the close of the fourth quarter, eight colleges and eight entrepreneurship training organizations have continued to utilize the space and have served over 500 individuals and 50 ancillary cannabis businesses. Through the ICEC, students, entrepreneurs, and working individuals receive hands-on training focused on compliance, security, technology, and daily operations in a dispensary to understand all aspects of cannabis retail.
- Throughout 2022, SEED hosted more than 25 workshops and educational seminars which have served over 2,500 attendees nationwide.
- The Company provided more than 1,000 hours of one-on-one pro bono business consulting to social equity licensees and ancillary business owners.
Capital Markets and M&A Activity
- The Company and Columbia Care mutually agreed to extend the outside date to complete their previously announced transaction to June 30, 2023.
- The regulatory approval process is on-going, and the Company is working toward final agreements to sell the remaining assets required to be divested.
Conference Call and Webcast
The Company will host a conference call and webcast to discuss its financial results on Thursday, March 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), or +1 929-526-1599 (Other) providing access code 759131. Archived access to the webcast will be available for one year on Cresco Labs’ investor relations website.
Consolidated Financial Statements
The financial information reported in this press release is based on unaudited management prepared financial statements for the three months and year ended December 31, 2022. These financial statements have been prepared in accordance with U.S. GAAP. This release contains certain preliminary financial results for the three months and year ended December 31, 2022. These preliminary results for the three months and year ended December 31, 2022, are provided prior to completion of all internal reviews and external audit procedures and are therefore subject to adjustment until the filing of the Company’s audited consolidated financial statements, which the Company expects to file on SEDAR during the week of March 20, 2023. The audit of the consolidated financial statements for the year ended December 31, 2022, is currently in process. 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.
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 and Adjusted gross profit 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.