Charles Batchell Archives - Green Market Report

Adam JacksonAugust 17, 2022


Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) rose in early trading Wednesday morning with the company posting positive second-quarter results — reinforcing its position as the largest wholesale cannabis provider as it shores up its M&A moves. The Chicago-based cannabis operator released its financial results for the three months ended June 3o, 2022.

Cresco Labs reported approximately $218 million in revenue during the period, up 4% versus the same period last year; and a gain of 1.8% sequentially — in line with the Yahoo Finance Average analyst estimate for revenues of $218.44 million.

The company also reported a second-quarter net loss of $8.3 million, down from 64% sequentially; and a net income of $2.7 million in the same period last year. The company did not provide earning figures for loss per share, and the quarterly report could not be found on SEDAR.

“We reported solid results in the face of an unprecedented macro environment,” said CEO Charles Bachtell. “We generated $218 million in revenue, representing 4% year-over-year growth, and maintained our industry position as the no. 1 wholesaler of branded cannabis, the no. 1 branded product portfolio chosen by consumers, and the no. 1 most productive per-store national retailer. Importantly, we accomplished these results while maintaining our Adjusted Gross Margin at 53% and Adjusted EBITDA 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.”

Cresco Labs posted an adjusted gross profit 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.”

Adjusted EBITDA for the second quarter was $51 million, or 23% of revenue, an increase of 11% year-over-year.

Cresco Labs said that wholesale revenue of $95 million maintained the company’s position as the #1 U.S. seller of branded cannabis products with leading share positions in the flower, concentrates, and vape categories.

Additionally, the company said that it achieved the leading branded share position in Massachusetts and maintained #1 share position in both Illinois and Pennsylvania.

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.

The company said that it ended the quarter with $90 million of cash on hand, in addition to working capital of $86 million and senior secured term loan debt of $379 million. Cresco Labs said that it 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.

On July 8, the Columbia Care shareholders approved the $2 billion-dollar all-stock acquisition by Cresco Labs and the company said it will work toward closing the transaction around year-end.

Columbia Care is the largest of several recent acquisitions by Cresco. Toward the end of 2021, the company bought Laurel Harvest Labs and Bay for $80 million, which added dispensary and cultivation operations in Pennsylvania. Cresco also expanded in Massachusetts last year with the $158-million-dollar all-stock acquisition of Cultivate.

“We recognize the challenges currently facing the cannabis industry and the tough macro backdrop we are operating against,” Bachtell said. “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.”

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