Over 800 basis point year over year improvement
in Adjusted EBITDA Margin1
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, 2024. 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 2024 Highlights
- Second quarter revenue of $184 million.
- Gross profit of $95 million. Adjusted gross profit1 of $97
million up 4% year-over-year; and an Adjusted gross margin1 of 52%
of revenue, a 570 bps improvement.
- SG&A of $54 million. Reduced Adjusted SG&A1 by 14%
year-over-year to $53 million, or 29% of revenue.
- Net loss of $51 million which includes a one-time $61 million
charge in the quarter related to the Company’s new tax position, as
further described below.
- Second quarter Adjusted EBITDA1 of $54 million, up 33%
year-over-year; and Adjusted EBITDA margin1 of 29%, an 880 bps
improvement.
- Second quarter operating cash flow of $17 million and Free Cash
Flow1 of $11 million.
- Retained the No. 1 share position in Illinois, Pennsylvania and
Massachusetts2.
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 Q2 results demonstrate the sustainability of the
improvements we’ve made to the business over the past year with
$184 million in revenue at a 29% Adjusted EBITDA margin1. It is
clear our strategy is working; we are creating the brands consumers
love and delivering best-in-class retail operations through
Sunnyside. So far this year we’ve generated over twice as much
operating cash flow than the first half of last year and we are
putting it to work strengthening our balance sheet, investing in
our core growth states with adult-use optionality, and exploring
accretive, incremental M&A and other business
opportunities.
We are seeing growing momentum in the industry. The DEA’s
comment period on rescheduling recently closed, with 92% of over
40,000 comments submitted in overwhelming support for reclassifying
cannabis as a Schedule III substance or declassifying cannabis
entirely. Recent polls also show energy swelling around Florida’s
Amendment 3 initiative to legalize adult-use.
As the pace of reform challenges even the most patient of us,
it’s important for all stakeholders to remember that cannabis
reform consistently polls higher than any candidate in any
election, and the public has made it clear that it’s time for
change. Reform is imminent and we are ready,” said Charles
Bachtell, CEO of Cresco Labs.
Balance Sheet, Liquidity and Other Financial
Information
- As of June 30, 2024, current assets were $273 million,
including cash, cash equivalents and restricted cash of $116
million. The Company had senior secured term loan debt, net of
discount and issuance costs, of $388 million and a mortgage loan,
net of discount and issuance costs of $18 million.
- Total shares on a fully converted basis to Subordinate Voting
Shares were 476,491,770 as of June 30, 2024.
- The Company, in consultation with its tax advisors, has
determined that IRS Section 280E is not applicable to its business
and intends to update its tax position going forward to file as a
normal business. As a result of the revised tax position:
- the Company expects to recognize an estimated cash savings of
$65 million in 2024 with similar impacts on a percentage basis
anticipated in future years. A corresponding uncertain tax
position will be booked to reflect the risk of a challenge to the
tax savings generated by the change in filing position;
- the Company should recognize cash tax benefits over time,
thereby reducing its tax liability and offsetting the $61 million
charge. The Company expects the cash savings to mirror the cash
outlay for a net neutral impact in every period; and
- upon the approval of cannabis being moved to a
Schedule III substance, the Company expects a reduction in income
tax expense and an increase in deferred tax asset, effectively
offsetting the $61 million charge and tax receivable agreement
liability.
Conference Call and Webcast
The Company will host a conference call and webcast to discuss
its financial results on Thursday, August 8, 2024, at 8:30am
Eastern Time (7:30am Central Time). The conference call may be
accessed via webcast or by dialing 1-800-715-9871 (US Toll Free) or
1-646-307-1963 (US Local), providing access code 9627744. 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, 2024. These financial statements have been
prepared in accordance with U.S. GAAP. The Company expects to file
its unaudited condensed interim consolidated financial statements
for the quarter ended June 30, 2024, on SEDAR+ and EDGAR on or
about August 8, 2024. 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+ and EDGAR, 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, 2023, previously filed on SEDAR+ and EDGAR.
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
This release reports its financial results in accordance with
U.S. GAAP and includes certain non-GAAP financial measures that do
not have standardized definitions under U.S. GAAP. The non-GAAP
measures include: Earnings before interest, taxes, depreciation and
amortization (“EBITDA”); Adjusted EBITDA; Adjusted EBITDA margin;
Adjusted gross profit; Adjusted gross profit margin; Adjusted
selling, general and administrative expenses (“Adjusted SG&A”),
Adjusted SG&A margin; and Free Cash Flow are non-GAAP financial
measures and do not have standardized definitions under U.S. GAAP.
The Company defines these non-GAAP financial measures as follows:
EBITDA as net loss (income) before interest, taxes, depreciation
and amortization; Adjusted EBITDA as EBITDA less other income, net,
adjustments for acquisition and non-core costs, impairment and
share-based compensation; Adjusted EBITDA Margin as Adjusted EBITDA
divided by revenues, net; Adjusted gross profit as gross profit
less adjustments for acquisition and non-core costs; Adjusted gross
profit margin as Adjusted gross profit divided by revenues, net;
Adjusted SG&A as SG&A less adjustments for acquisition and
non-core costs; Adjusted SG&A margin as Adjusted SG&A
divided by revenues, net; and Free Cash Flow as Net cash (used in)
provided by operating activities less purchases of property and
equipment and proceeds from tenant improvement allowances. 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.
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, 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, 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, 2023, filed on SEDAR+ and EDGAR, 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 U.S. Dollars)
Unaudited Consolidated
Statements of Operations
For the Three Months Ended
June 30, 2024, March 31, 2024 and June 30, 2023
For the Three Months
Ended
($ in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Revenues, net
$
184,356
$
184,295
$
197,887
Cost of goods sold
89,578
92,083
111,187
Gross profit
94,778
92,212
86,700
Gross profit %
51.4
%
50.0
%
43.8
%
Operating expenses:
Selling, general and administrative
54,355
54,013
70,562
Share-based compensation
2,854
3,614
1,043
Depreciation and amortization
5,189
5,422
4,345
Impairment loss
—
—
21,502
Total operating expenses
62,398
63,049
97,452
Income (loss) from operations
32,380
29,163
(10,752
)
Other (expense) income, net:
Interest expense, net
(13,813
)
(14,071
)
(19,176
)
Other (expense) income, net
(59,508
)
856
402
Total other expense, net
(73,321
)
(13,215
)
(18,774
)
(Loss) income before income
taxes
(40,941
)
15,948
(29,526
)
Income tax expense
(10,238
)
(18,003
)
(13,937
)
Net loss1
$
(51,179
)
$
(2,055
)
$
(43,463
)
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
June 30, 2024, March 31, 2024 and June 30, 2023
For the Three Months
Ended
($ in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Revenues, net
$
184,356
$
184,295
$
197,887
Cost of goods sold1
89,578
92,083
111,187
Gross profit
$
94,778
$
92,212
$
86,700
Cost of goods sold adjustments for
acquisition and other non-core costs
1,881
2,662
5,870
Adjusted gross profit
(Non-GAAP)
$
96,659
$
94,874
$
92,570
Adjusted gross profit %
(Non-GAAP)
52.4
%
51.5
%
46.8
%
1 Production (cultivation, manufacturing
and processing) costs related to products sold during the
period.
Cresco Labs Inc.
Summarized Consolidated
Statements of Financial Position
As of June 30, 2024 and
December 31, 2023
($ in thousands)
June 30, 2024
December 31, 2023
(unaudited)
Cash, cash equivalents and restricted
cash
$
115,950
$
108,520
Other current assets
157,418
169,567
Property and equipment, net
358,244
368,308
Intangible assets, net
299,994
296,966
Goodwill
283,334
279,697
Other non-current assets
143,106
135,409
Total assets
$
1,358,046
$
1,358,467
Total current liabilities
$
136,876
$
200,242
Total non-current liabilities
846,662
730,158
Total shareholders’ equity
374,508
428,067
Total liabilities and shareholders’
equity
$
1,358,046
$
1,358,467
Cresco Labs Inc.
Unaudited Reconciliation of
SG&A to Adjusted SG&A (Non-GAAP)
For the Three Months Ended
June 30, 2024, March 31, 2024 and June 30, 2023
For the Three Months
Ended
($ in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Selling, general and administrative
$
54,355
$
54,013
$
70,562
Adjustments for acquisition and other
non-core costs
1,633
2,297
9,433
Adjusted SG&A (Non-GAAP)
$
52,722
$
51,716
$
61,129
Adjusted SG&A % (Non-GAAP)
28.6
%
28.1
%
30.9
%
Cresco Labs Inc.
Unaudited Reconciliation of
Net Income to Adjusted EBITDA (Non-GAAP)
For the Three Months Ended
June 30, 2024, March 31, 2024 and June 30, 2023
For the Three Months
Ended
($ in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Net loss1
$
(51,179
)
$
(2,055
)
$
(43,463
)
Depreciation and amortization
14,930
15,331
14,002
Interest expense, net
13,813
14,071
19,176
Income tax expense
10,238
18,003
13,937
EBITDA (Non-GAAP)
$
(12,198
)
$
45,350
$
3,652
Other expense (income), net
59,508
(856
)
(402
)
Adjustments for acquisition and other
non-core costs
3,129
4,470
13,522
Impairment loss
—
—
21,502
Share-based compensation
3,471
4,197
2,204
Adjusted EBITDA (Non-GAAP)
$
53,910
$
53,161
$
40,478
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
June 30, 2024, March 31, 2024 and June 30, 2023
For the Three Months
Ended
($ in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Net cash provided by operating
activities
$
17,160
$
36,471
$
17,973
Net cash used in investing activities
(10,270
)
(5,677
)
(14,050
)
Net cash used in financing activities
(15,831
)
(11,149
)
(19,542
)
Effect of foreign currency exchange rate
changes on cash and cash equivalents
(10
)
(13
)
(22
)
Net change in cash and cash equivalents
and restricted cash
$
(8,951
)
$
19,632
$
(15,641
)
Cash and cash equivalents and restricted
cash, beginning of period
128,152
108,520
90,452
Cash and cash equivalents and
restricted cash, end of period
$
119,201
$
128,152
$
74,811
Cresco Labs Inc.
Unaudited Reconciliation of
Operating Cash Flow to Free Cash Flow (Non-GAAP)
For the Three Months Ended
June 30, 2024, March 31, 2024 and June 30, 2023
For the Three Months
Ended
($ in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Net cash provided by operating
activities
$
17,160
$
36,471
$
17,973
Purchases of property and equipment
(6,434
)
(3,782
)
(17,569
)
Proceeds from tenant improvement
allowances
106
478
277
Free Cash Flow (Non-GAAP)
$
10,832
$
33,167
$
681
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240808191323/en/
Media Jason Erkes, Cresco Labs Chief Communications
Officer press@crescolabs.com 312-953-2767 Investors TJ Cole,
Cresco Labs SVP, Corporate Development & Investor Relations
investors@crescolabs.com For general Cresco Labs inquiries:
312-929-0993 info@crescolabs.com
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