Cresco Labs Announces Accelerating Revenue and Increasing Operating Leverage in Record Second Quarter 2020 Results
- Record revenue of $94.3 million, 42% growth QoQ
- 30+% sequential revenue growth in all of the Company’s U.S. markets except Massachusetts
- Record adjusted EBITDA¹ of $16.5 million, 419% growth QoQ
- Reduced SG&A by $1.5 million QoQ
- Wholesale revenue growth of 44% QoQ to $55 million and retail revenue growth of 39% QoQ to $39 million
CHICAGO, August 20, 2020–(BUSINESS WIRE)–Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) (FSE: 6CQ) (“Cresco Labs” or the “Company”), one of the largest vertically integrated multi-state cannabis operators in the United States, today released its unaudited financial results for the second quarter ended June 30, 2020. All financial information presented in this release is in U.S. dollars, unless otherwise noted.
Management Commentary
“While Q2 continued to be about building, scaling and refining our operations in the largest and most important cannabis markets in the U.S., we are also beginning to see the fruits of our labor come to bear,” said Charles Bachtell, Co-founder and CEO of Cresco Labs.
We grew revenue in every single one of our U.S. markets sequentially by more than 30%, with the exception of Massachusetts, where adult use was halted for part of the quarter.
Charles Bachtell, Co-founder and CEO of Cresco Labs
Cresco Labs is the largest wholesaler of branded cannabis products with nearly $55 million in revenue and our Sunnyside* retail strategy is outperforming with $39 million generated from our 17 locations. We are accelerating growth and beginning to generate substantial leverage as we scale our operations and benefit from the investments we’ve made over the past 12 months.
Second Quarter 2020 Financial Highlights
Operating Results
- Revenue for the second quarter of 2020 was $94.3 million, an absolute increase of nearly $28 million or a 42% increase over Q1’20 revenue. Revenue increased sequentially by more than 30% in every U.S. market, with the exception of Massachusetts. Wholesale growth was driven by product popularity in California and first harvests from expanded capacity in Illinois and Pennsylvania. Retail growth was driven by strong sequential same-store growth of 31% and two new store openings in Illinois.
- Operational Gross Profit1 as a Percentage of Revenue was 47% in the quarter as compared to 48% in the prior quarter. Operating costs associated with the expansion of the Company’s cultivation centers in PA and IL in Q4’19 and Q1’20 were associated with Q2 products sales, impacting the Company’s cost of products sold for the quarter.
- SG&A was $45.2 million, a reduction of $1.5 million from Q1. SG&A included $5.2 million in non-core costs associated with the integration of Origin House and the termination of the Tryke transaction, $0.8 million in COVID-19 related expenses, and $6.7 million in share-based compensation. Excluding these non-core and non-cash items, SG&A would have been $32.5 million or 35% of revenue.
- Adjusted EBITDA1 was $16.5 million, an increase of 419% sequentially. This was achieved while integrating Origin House during the quarter, and was driven primarily from higher revenues and increased operational gross profit in Illinois and Pennsylvania.
- Net Loss2 was $4.7 million, which includes unrealized gains and losses on mark-to-market instruments that fluctuate until obligations are settled, changes in fair value of biological assets, interest expense and tax expense.
- Net Cash Used in Operating Activities was $9.9 million, compared to $40.1 million used in Q1. The improvement in cash used in operating activities was driven by increased operating leverage across the business as the Company scales.
Shares Outstanding
Total shares on a fully converted basis were 377,691,701 as of June 30, 2020.
Conference Call and Webcast
The Company will host a conference call and webcast to discuss its financial results and provide investors with key business highlights on Thursday, August 20, 2020, at 5pm Eastern Time (4pm Central Time). The conference call may be accessed via webcast or by dialing 866-688-4235 (409-216-0711 for international callers) and providing conference ID 2957578. 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 news release is based on unaudited management prepared financial statements for the three months ended June 30, 2020. The Company expects to file its unaudited interim consolidated financial statements on SEDAR by August 20, 2020. Accordingly, such financial information may be subject to change. All financial information contained in this news release is qualified in its entirety with reference to such financial statements. While the Company does not expect there to be any material changes, to the extent that the financial information contained in this news release is inconsistent with the information contained in the Company’s financial statements, the financial information contained in this news release shall be deemed to be modified or superseded by the Company’s 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, 2019, previously filed on SEDAR.
Cresco Labs references certain non-IFRS financial measures throughout this press release, which may not be comparable to similar measures presented by other issuers. Please see the “Non-IFRS Financial Measures” section at the end of this press release for more detailed information.
About Cresco Labs Inc.
Cresco Labs is one of the largest vertically-integrated multi-state cannabis operators in the United States. Cresco Labs is built to become the most important company in the cannabis industry by combining the most strategic geographic footprint with one of the leading distribution platforms in North America. Employing a consumer-packaged goods (“CPG”) approach to cannabis, Cresco Labs’ house of brands is designed to meet the needs of all consumer segments and includes some of the most recognized and trusted national brands including Cresco, Remedi and Mindy’s, a line of edibles created by James Beard Award-winning chef Mindy Segal. Sunnyside*, Cresco Labs’ national dispensary brand, is a wellness-focused retailer designed to build trust, education and convenience for both existing and new cannabis consumers. Recognizing that the cannabis industry is poised to become one of the leading job creators in the country, Cresco Labs has launched the industry’s first national comprehensive Social Equity and Educational Development (SEED) initiative designed to ensure that all members of society have the skills, knowledge and opportunity to work in and own businesses in the cannabis industry. Learn more about Cresco Labs at www.crescolabs.com.
Non-IFRS Financial Measures
Operational gross profit, EBITDA and Adjusted EBITDA are non-IFRS measures and do not have standardized definitions under IFRS. The Company has provided the non-IFRS financial measures, which are not calculated or presented in accordance with IFRS, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with IFRS. These supplemental non-IFRS financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-IFRS financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-IFRS 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 IFRS financial measures presented herein. Accordingly, the following information provides reconciliations of the supplemental non-IFRS financial measures, presented herein to the most directly comparable financial measures calculated and presented in accordance with IFRS.
1 See “Non-IFRS Financial Measures” at the end of this press release for more information regarding the Company’s use of non-IFRS financial measures.
2 Net loss includes amounts attributable to noncontrolling interests.
