Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) (FSE: 6CQ) (“Cresco Labs” or the “Company”), the industry leader in branded cannabis products with a portfolio of America’s most popular brands and the operator of Sunnyside dispensaries, today released its financial and operating results for the second quarter ended June 30, 2023. All financial information presented in this release is reported in accordance with U.S. GAAP and in U.S. dollars, unless otherwise indicated, and is available on the Company’s investor website, Here.
Second Quarter 2023 Financial Highlights
- Second quarter revenue of $198 million, up 2% sequentially, driven by retail growth of 4% and flat wholesale revenue.
- Gross profit of $87 million, 44% of revenue.
- Adjusted gross profit1 of $93 million and Adjusted gross margin of 47%, up 100 bps from the first quarter.
- Adjusted SG&A1 reduction of $7 million sequentially.
- Adjusted EBITDA1 of $40 million, up 38% sequentially as margin improved 540 bps to 20%.
- Generated positive operating cash flow of $18 million, inclusive of $14 million of one-time cash charges related to facility closures, severance payments and M&A related fees.
- Second quarter net loss of $43 million, which includes $22 million of impairment charges.
Operating Highlights
- Retained the No. 1 share position in Illinois, Pennsylvania and Massachusetts.
- 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 and Pennsylvania, 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 38% sequential improvement in Adjusted EBITDA. We maintained our industry leadership with the #1 portfolio of both branded flower and branded concentrates, #3 portfolio of branded vapes and #4 portfolio of branded edibles2. We’re pleased to see improved profitability and cash flow in our core markets, which positions us well for the capital-efficient growth and expansion opportunities that lie ahead. Our results are just starting to reflect the decisions we made earlier this year to support our Year-of-the-Core priorities, with much more to come,” said Charles Bachtell, CEO of Cresco Labs.
Balance Sheet, Liquidity and Other Financial Information
- As of June 30, 2023, current assets were $265 million, including cash, cash equivalents and restricted cash of $75 million. The Company had senior secured term loan debt, net of discount and issuance costs, of $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.
