Cresco Labs Announces Second Quarter 2022 Results

Company reports 4% year-over-year revenue growth and 11% year-over-year adjusted EBITDA growth; continues industry leadership with branded product performance and retail productivity

Company provides positive update on Columbia Care divestiture process, regulatory approvals and closing timeline

CHICAGO–(BUSINESS WIRE)– 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 ended June 30, 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.

Second Quarter 2022 Financial Highlights

  • Second quarter revenue of $218 million, up 4% year-over-year.
  • Adjusted gross profit1 of $116 million, or 53% of revenue, an increase of 8% year-over-year, excluding fair value mark-up for acquired inventory and cost of goods sold adjustments for acquisitions and other non-core costs.
  • Second quarter adjusted EBITDA1 of $51 million, or 23% of revenue, an increase of 11% year-over-year.
  • Wholesale revenue of $95 million, which maintained the Company’s position as no. 1 U.S. seller of branded cannabis products with leading share positions in the flower, concentrates and vape categories2.
  • Achieved the leading branded share position in Massachusetts and maintained no. 1 share position in both Illinois and Pennsylvania2.
  • Retail revenue increased 22% year-over-year, to $123 million, or $2.5 million per average store open in the quarter; same-store-sales increased 6% year-over-year.
  • Ended the quarter with $90 million of cash on hand.
  • On July 8, the Columbia Care shareholders approved the previously announced, all stock acquisition by Cresco Labs and the Company continues to work toward closing the transaction around year-end.

Management Commentary

“We reported solid results in the face of an unprecedented macro environment. We generated $218 million in revenue, representing 4% year-over-year growth, and maintained our industry position as the no. 1 wholesaler of branded cannabis2, the no. 1 branded product portfolio chosen by consumers2, and the no. 1 most productive per-store national retailer. Importantly, we accomplished these results while maintaining our Adjusted Gross Margin1 at 53% and Adjusted EBITDA1 margin of 23%, in a market where prices fell between 10-30% depending on the state. The Columbia Care transaction is proceeding as expected — we’re checking off milestone after milestone, the divestiture and regulatory processes are on track and we continue to anticipate a closing around year end,” said Charles Bachtell, CEO and Co-Founder of Cresco Labs.

“We recognize the challenges currently facing the cannabis industry and the tough macro backdrop we are operating against. In this environment, we are managing through today while remaining focused on the long-game — we’re holding and growing market share, driving efficiencies across the business to maintain margins, and preparing for the integration of Columbia Care to drive future growth. Over the next three years, growth will come from the transition to adult use in seven large markets: New Jersey, New York, Pennsylvania, Ohio, Virginia, Florida and Maryland. Our combined footprint with Columbia Care, gives us exposure to all of these markets and leading positions in several. This is arguably the highest value footprint in cannabis – 180 million Americans and all 10 of the 10 highest projected 2025 revenue states. The acquisition more than doubles our retail footprint, gives us a number one branded or retail share position in five markets, and optimizes our operational footprint. It gives us the breadth and depth that we believe ensures growth, diversifies our revenue mix and creates an industry leader,” Mr. Bachtell concluded.

Balance Sheet, Liquidity, and Other Financial Information

  • As of June 30, 2022, current assets were $314 million, including cash and cash equivalents of $90 million. The Company had working capital of $86 million and senior secured term loan debt, net of discount and issuance costs, of $379 million.
  • The Company paid a total of $89 million in taxes during the quarter, including tax distributions to non-controlling unit holders and other out-of-period payments of $67 million.
  • Total shares on a fully converted basis were 443,671,426 as of June 30, 2022.

Social Equity and Education Development Program

  • 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 for over 4,500 individuals nationwide.
  • Parkway Dispensary, LLC and Navada Labs, LLC, both social equity groups supported by SEEDTM, received conditional adult-use dispensary licenses as part of the 185 new licenses recently issued by the state of Illinois. The SEED team continues to conduct outreach and build relationships with all new licensees in Illinois. Phase 2 of the SEED community business incubator will commence next month.
  • The Illinois Cannabis Education Center (“ICEC”) officially opened to colleges as well as community, and business organizations. To date, eight colleges and eight entrepreneurship training organizations have utilized the ICEC and served over 200 individuals and 40 ancillary cannabis businesses. Through the ICEC, students, entrepreneurs and working individuals receive hands-on trainings focused on compliance, security, technology and daily operations in a mock dispensary to understand all aspects of cannabis retail. The Company looks forward to welcoming Illinois’ new adult-use dispensary licensees to the space.

Capital Markets and M&A Activity

  • On March 23, 2022, the Company announced a definitive arrangement agreement whereby Cresco Labs will acquire Columbia Care in an all-stock transaction. Please click here for additional details.
  • The transaction received federal Hart Scott Rodino3 approval in May 2022. In July 2022, Columbia Care shareholders approved the transaction, followed by the approval from the Supreme Court of British Columbia.
  • The asset divestiture process is proceeding as planned in terms of both timelines and gross proceeds, as is the state regulatory approval process. The Company targets closing the transaction around year-end 2022.

Conference Call and Webcast

The Company will host a conference call and webcast to discuss its financial results on Wednesday, August 17, 2022, at 8:30am Eastern Time (7:30am Central Time). The conference call may be accessed via webcast or by dialing 1-844-200-6205 (US Toll Free), 1-833-950-0062 (CDN Toll Free), 1-646-904-5544 (US Local), +1 929-526-1599 (Other) providing access code 035060. Archived access to the webcast will be available for one year on the 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 quarter ended June 30, 2022. These financial statements have been prepared in accordance with U.S. GAAP. This release contains certain preliminary financial results for the second quarter, including Cost of goods sold; Gross profit; Other income, net; Income tax expense; Net loss; Inventory, net; Right-of-use assets; Current portion of lease liabilities; Lease liabilities; and Non-controlling interests. The Company expects to file its unaudited interim condensed consolidated financial statements for the quarter ended June 30, 2022, on SEDAR by August 18, 2022. 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, 2021, 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, and should be considered preliminary based on the potential for change in the financial statement line items indicated above. Please see the “Non-GAAP Financial Measures” section below for more detailed information.

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