earnings Archives - Green Market Report

StaffStaffSeptember 16, 2020
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5min1540

High Tide Inc. (OTCQB: HITIF)  reported revenue for its third quarter of fiscal 2020 of $23.20 million an increase of 180% from $8.29 million for the same quarter last year. High Tide also delivered income from operations of $2.11 million versus a loss from operations of $4.04 million for the same period of 2019. The adjusted EBITDA for the quarter was $3.96 million compared to an adjusted EBITDA loss of $3.37 million for the same quarter last year.

“This exceptional combination of quarterly financial metrics, specifically the record levels and continued growth trends in revenue, gross profit margin, operating income, positive adjusted EBITDA and net income, reinforces our conviction that High Tide is one of the top-performing cannabis companies in Canada today. High Tide’s diversified and integrated businesses, including its best-in-class e-commerce platform, were strategically positioned to generate the Company’s strongest results since inception,” said Raj Grover, President, and Chief Executive Officer.

The company broke down its results as follows:

  • Segment-wise for the three months ended July 31, 2020, revenue was earned 89% ($20.54 million) by Retail, 11% ($2.63 million) by Wholesale, and an immaterial percentage ($0.04 million) by Corporate, which compares to 80% ($6.64 million), 17% ($1.42 million) and 3% ($0.23 million), respectively, for the same period of 2019.
  • Geographically for the three months ended July 31, 2020, revenue was earned 75% ($17.41 million) in Canada, 23% ($5.32 million) in the United States, and 2% ($0.48 million) internationally, which compares to 79% ($6.51 million), 20% ($1.63 million) and 1% ($0.15 million), respectively, for the same quarter last year.

Store Update

Despite the COVID-19 pandemic, existing Canna Cabana and KushBar locations remained operational. The company opened four new Canna Cabana retail locations in OntarioNiagara FallsToronto – Parliament, Burlington, and Toronto – Bayview, bringing the current total to 7 branded stores in the province. The company opened a KushBar store in Medicine Hat, Alberta. It also opened a Canna Cabana store in the year-around tourist destination of Banff, Alberta.

The portfolio includes a total of 37 branded retail cannabis locations in OntarioAlberta, and Saskatchewan. Currently, there are approximately 57,000 members of the Cabana Club, which has resulted in over 50% of the Company’s average daily retail cannabis transactions being conducted by Club members.

Looking Ahead

High Tide said it believes that by achieving positive cash flow from operations, the restructuring of $10.8 million of debt into an interest-free debenture due in 2025 and the pending acquisition of META Growth has strongly positioned it to execute on its strategic growth objectives for the remainder of fiscal 2020 and beyond. The company said it is well funded and operationally prepared to further its expansion in Ontario, as Canada’s largest and most underserved market.  Key industry investors in High Tide include Aphria Inc. (TSX: APHA) (NYSE: APHA) and Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB).


Debra BorchardtDebra BorchardtSeptember 15, 2020
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3min1110

Fire & Flower Holdings Corp. (OTCQX: FFLWF) stock jumped over 6% on news of the company’s rising revenue in the second quarter. The company delivered revenue of $28.6 million including sales of $23.4 million in the retail channel, $4.3 million in the distribution channel, and sales of $0.9 million in the digital retail and analytics channel.

Still, the company reported a net comprehensive loss of $29.1 million, or net loss per share, and on a fully diluted basis of $0.18. the company attributed the loss on expenses of $12.5 million and other expenses of $26.5 million. Other expenses included losses on the revaluation of derivative liabilities of $18.3 million and finance costs of $8.2 million.

“Fire & Flower continues to drive towards delivering positive adjusted  EBITDA and during our second quarter of fiscal 2020, we have made meaningful progress towards this critical goal,” shared Trevor Fencott, Chief Executive Officer of Fire & Flower. “We believe the company is well-positioned to expand its footprint in the Ontario market and expects to have access to the necessary capital to support our growth plans. As the cannabis and retail industry continue to adapt to the COVID-19 public health crisis, we will remain on the leading edge of driving consumer engagement in this dynamic environment.”

Looking Ahead

Fire & Flower said that the development of retail stores in the province of Ontario has been affected by the slowdown in the issuance of licenses and store construction due to the COVID-19 public health crisis. The company is currently waiting for licensing at a number of locations in the province and intends to open these stores once final licensing is complete.

Following the end of the quarter, Fire & Flower acquired a flagship downtown Toronto store at 378 Yonge Street. This store is currently open and will be transitioned to the Fire & Flower brand in the coming weeks.

During the onset of the COVID-19 public health crisis, Fire & Flower saw meaningful sales with basket sizes increasing as consumers purchased larger volumes of product. The company said it is now seeing consumer behavior return to normal seasonal levels and increased popularity in large format cannabis products, vapes, beverages, and edibles.


Debra BorchardtDebra BorchardtSeptember 14, 2020
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5min1760

 Charlotte’s Web Holdings, Inc. (OTCQX: CWBHF) reported that revenue fell from revenue $25 million in the 2019 second quarter to $21.6 million for the second quarter ending June 30, 2020. The company missed the average estimate for revenues, which was $25.9 million according to Yahoo Finance. The company also missed the earnings estimate of -$0.04 with an reported earnings of -$0.13.

The company blamed the drop on the pandemic saying, “COVID-19 has impacted the Company’s retail and health practitioner channels due to lower foot traffic and temporary location closures under the pandemic. Limited disruption has occurred within production and manufacturing operations, however, the company‎’‎s back office and reporting functions have been impacted and additional time was required for the consolidated second-quarter filing.”

The company also delivered a net loss of $14 million for the quarter versus last year’s net income of $2.2 million for the same time period. On a positive note, Charlotte’s Web did report that strong DTC (direct to consumer) sales largely offset a 54.5% decrease in B2B retail sales which accounted for 28.2% of total revenue in the quarter. DTC net sales grew by 33.6% year-over-year as online traffic and high conversion rates increased through ongoing marketing and social media programs.

“Second-quarter revenue was below expectations due to the impact of COVID-19 on retail sales,” stated Deanie Elsner, CEO of Charlotte’s Web. “However, our DTC sales increased by 33.6%, largely offsetting declines in B2B retail sales.  We made excellent progress building out our infrastructure and expanding our product portfolio with the closing of the Abacus acquisition.  Abacus CBD Medic™ products are now being sold through our online store and we look forward to realizing more cross-selling revenue synergies with Abacus through our FDM partners.”

Rising Expenses

Expansion has cost the company in terms of rising expenses. Operating expenses jumped 82% to $29.5 million over last year’s $16.2 million. The company said that the increase reflected its investments in capacity expansion and transition to a consumer-packaged goods (“CPG”) operating company capable of supporting mass retail channel growth. The increase included approximately $6 million of extraordinary expenses related to the Abacus acquisition and legal fees associated with the brand and intellectual property protection. Subsequent to Q2-2019, operating expenses increased as the company relocated into larger office facilities in Boulder, Colorado, and added senior CPG management to the leadership team along with related personnel. The company said that it is targeting a 10% reduction in expenses to match the falling revenue.

Charlotte’s Web completed the acquisition of Abacus Health Products, Inc. in June with an all-stock transaction. Abacus is a leading provider of over-the-counter topical products for pain relief and skincare containing CBD hemp extracts. In the third quarter, Charlotte’s Web began implementing operating cost synergies with Abacus and will continue through the remainder of the year. Further cost synergies are targeted in 2021 through integration into the Company’s new production and fulfillment center.

The company has been fighting a legal battle over the use of the name Charlotte’s Web. The company does not want any other brands to use the name Charlotte’s Web, while others believe it is just a strain name and that no company should be allowed to own a strain name.

Looking Ahead

Russ Hammer, Chief Financial Officer said, “We are seeing improvements and a stronger back half in our DTC channel, but without a meaningful opening up of the economy and health practitioner channel we expect only flat to modest consolidated net revenue growth for 2020. Our long view market opportunity remains intact and we continue to add new customers, doors, and products. Our Q3 revenues are trending ahead of Q2 sales levels and we anticipate reopening of retail locations in the U.S. will support a positive growth trend. As we see resolutions in COVID-19 and hemp CBD regulations or legislation we can see the category build towards its full potential.”


Debra BorchardtDebra BorchardtAugust 31, 2020
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3min1350

CLS Holdings USA, Inc. (OTCQB:CLSH)(CSE:CLSH) reported that its fiscal year-end 2020 total revenues were $11,917,629 an increase over fiscal year 2019’s total revenue of $8,459,048. The company also reported a net loss $30 million versus last year’s net loss of $27 million. The loss was attributed to a large non-cash impairment charge on goodwill as a result of the decline in the company’s stock price.

“Because our stock price provides a basis for our enterprise value, this decline meant that we were required to write-down the value of this intangible asset by $25,185,003, a one-time write-down that has not occurred in prior fiscal years. This devaluation is not reflective of any tangible loss of assets, and our working capital remains sound.”

CEO Jeff Binder said, “In spite of the competitive landscape in Nevada we were able to grow revenue and increase our gross profit margins. Our “People Power Profits” mantra is paying dividends and I am proud that all our employees have been provided a safe working environment during these challenging times. We are a local company who will continue to provide our community with a robust menu of safe cannabis products at fair price points.”

CLS did point out that excluding the charge, its net loss would have been $5,472,970, an improvement of $22,146,087, or 80.18% compared to the fiscal year 2019 net loss.

The company said that it has seen a growth in sales at the Oasis dispensary despite a brief downturn in sales at the beginning of the COVID-19 pandemic. The company shifted to expanded delivery and curbside sales which contributed to the ability to achieve net revenue growth in an otherwise uncertain environment. The statement read, “Our continued improvements in inventory purchasing and implementation of new processes also led to a 16% expansion in gross margin to 50% in the fiscal year 2020 from 43% in the prior fiscal year. Improvements to our manufacturing division have also been successfully implemented, marked by the completion of an expansive innovation and extraction lab at City Trees in April 2020.”

Expenses dropped from $26 million in 2019 to $8.7 million in 2020. The company said it cut professional fees and trimmed parent company costs. Gross margins expanded 16% to 50% as compared to 43% in fiscal year 2019. The total number of customers served increased 70.48% from 134,009 in fiscal year 2019 to 228,458.

 

 


Debra BorchardtDebra BorchardtAugust 28, 2020
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4min4350

Auxly Cannabis Group Inc. (OTCQX: CBWTF) reported total net revenues of $8.6 million for the second quarter ending June 30, 2020. This was a 200% increase over the same period last year and attributed to $6.8 million of cannabis net revenues and research revenues from KGK of $1.8 million.

The net loss at Auxly grew to $27 million from last year’s net loss of $8 million. The increase in net losses was primarily attributable to total other losses recorded during the second quarter, increased depreciation, interest expense, partially offset by gross margins net of selling, general and administrative expenses.

“We are excited to have another successful quarter of cannabis sales behind us, with Q2 bringing in $6.8 million of cannabis net revenues and $8.6 million in total net revenues,” said Hugo Alves, CEO of Auxly. “Despite a decline in sales as compared to Q1 2020, due in part to temporary store closures as a result of COVID-19 and new competitor value brands entering the market, we have taken immediate and deliberate steps to align our Company to reflect current consumer demands and market conditions.  We have already seen improved velocity of sales for our key brands from the pricing adjustments we made earlier this quarter, and are adding new product profiles that appeal to the fast-growing value segment, such as our Foray and Kolab Project’s 1g vape cartridge.  Additionally, we have seen a tremendous consumer response to the recent launch of our Robinsons and Kolab dried flower offerings.  As we move forward in executing our business strategy, we are committed to doing so with the highest degree of fiscal discipline.”

Impairment Loss

Auxly reported that it took an impairment loss on long-term assets of $4.5 million in the second quarter. “The Company’s LATAM cash generating unit Inverell represents its operations dedicated to the cultivation and sale of cannabis products within LATAM. Management determined that a liquidation approach was most appropriate in determination of the recoverable amount of the CGU due to regulatory delays causing uncertainty in the timing of sales and lack of cannabis product sales data in the industry.”

The company reported that over the three and six months ending June 30, 2020, wages and benefits were $7.5 million and $14.0 million, respectively, or an increase of $3.4 million and $5.7 million over the same respective periods in 2019. The increase was driven by workforce increases to support Cannabis 2.0 Product sales, primarily related to the operations and commercial teams.

Looking Ahead

The company had the following outlook for the remainder of the year, With the launch of the Company’s Cannabis 2.0 Products in December 2019, Auxly has established the foundation it plans to build on in 2020 to increase revenues and move towards positive cash flows in 2021. The Company’s objectives for 2020, which may be impacted by the COVID-19 pandemic (see further discussion in the MD&A under “COVID-19 Pandemic”), continue to be concentrated on Canadian operations. Broadly, Auxly’s objectives for the balance of the year are as follows:

Be a leader in the Canadian Cannabis 2.0 Products market. Complete remaining construction and licensing of all Canadian operations to leverage existing assets and increase revenues. Work with the Sunens team to secure the supply of input materials for use in the Company’s product offerings in 2020. Collaborate with strategic partners to move towards commercialization of a small number of products for sale internationally. Continue to take measures to improve cash flows and finance the business.


StaffStaffAugust 27, 2020
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4min1700

SLANG Worldwide Inc. (OTC: SLGWF) reported that in Canadian dollars that its revenue decreased by 3% sequentially to $4.6 million in the second quarter from $4.6 million in the first quarter 2020. The drop was attributed to stores that were impacted by COVID lockdowns. Slang said in a statement, “The stay-at-home orders associated with the COVID-19 response also adversely affected certain retail locations that sell the company’s branded products.”

The company also noted that its previously announced decision to recalibrate supply chain relationships in California and other emerging markets had affected revenue. The company said that performance in its core markets of Colorado and Oregon helped offset decreased revenues in its emerging markets. “On a year-over-year basis, core market revenues were down 50% in the month of April, at the height of the pandemic, but recovered by June to deliver a 130% increase over June 2019.” Slang said that sales have continued to rise through July and August.

The company recorded net income of $2.7 million, which dropped from $16 million reported for the same time period last year. Slang said it expects solid growth in the second half of 2020 due to continued strength in core markets, new product launches and traction in newly-entered markets.

“We were encouraged to see our revenues and margins hold steady in the second quarter despite facing a full three months of the COVID-related challenges that first appeared in March,” said SLANG President & CEO Chris Driessen. “These results reflect improvements in June, which offset weak April and May activity driven by the COVID-19 crisis. Additionally, the decisive steps we have taken to adjust to the market environment have led to reduced operating expenses and more efficient use of our cash resources. The success we have experienced since the recovery in June is further proof that we are emerging from the challenges of the first half of the year even stronger, with revenues and momentum exceeding pre-COVID levels.”

Looking Ahead

The company has said it is focused on a path to profitability through a rebalancing its workforce and continued optimization of SLANG Network relationships, resulting in combined annualized savings expected to be approximately $10.5 million. “SLANG Network partner assets in Colorado and Oregon are demonstrating the capability for profitable cash flow from operations and we are optimistic for the future as those acquisitions are near completion.” The company listed the following reasons why it is so optimistic:

  • Licensing revenues from recently-signed strategic partners commencing and continuing to grow as those partners introduce products into their local markets;
  • Continued expansion into new emerging markets, such as California and Massachusetts, provided strategic partnerships can be successfully concluded;
  • Increased sales from the Company’s recent and ongoing expansion into new product categories and introduction of new brands;
  • The ongoing recovery from the effects of COVID-19 closures, as demonstrated by positive sales trends in July and August;
  • The consolidation of supply chain assets, and a corresponding increase in revenue and margins, resulting from the potential closing of the proposed acquisitions of LBA in Oregon, and Allied Concession Group (“ACG“), Peoria Partners LLC and Pleasant Valley Ranch, LLC in Colorado;
  • Reduced operating expense run-rate as a result of recent streamlining activities; and
  • Continued focus on prudent credit management and prioritization of near-term cash generation.

Debra BorchardtDebra BorchardtAugust 26, 2020
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6min1610

Vireo Health International, Inc. (OTCQX: VREOF) reported that it generated revenue including contributions from discontinued operations, of $12.2 million. This was an increase of 70% over $7.2 million in the second quarter of 2019. Vireo reported revenue, excluding discontinued operations, increased 59% to $10.8 million, over $6.7 million in the 2019 second-quarter. The second-quarter net loss grew to $8.9 million, versus a net loss of $1.8 million in the 2019 second-quarter.

“Our second-quarter results were in-line with our expectations both in terms of revenue growth and operating expenses,” said Founder & Chief Executive Officer, Kyle Kingsley, M.D. “Furthermore, with the recent closing of the sale of our Pennsylvania manufacturing and processing subsidiary, we are well-positioned with a strong balance sheet to execute a strategy that should begin to generate positive cash flow next year as we continue increasing scale in our core markets of ArizonaMarylandMinnesotaNew Mexico, and New York.”

Vireo said that retail revenue was approximately $9.2 million in the quarter, an increase of 46% compared to $6.3 million in 2019. The increase in retail revenue was attributed to greater patient enrollment and average revenue per patient in Minnesota and New Mexico, as well as contributions from new retail dispensaries in Pennsylvania. Wholesale revenue of $1.6 million increased by $1.1 million or 256%, as compared to $444,023 in 2019. The increase in wholesale revenue was primarily due to the growth of wholesale operations in MarylandNew York, and Ohio.

Rising Expenses

The company reported that its total operating expenses in the second quarter rose to $15.4 million, versus $5.4 million in the second quarter of 2019, with the increase primarily attributable to increased salaries and wages, as well as an adjustment to share-based compensation related to the vesting of out-of-the-money warrants issued to a former executive upon termination from the company. Excluding depreciation and share-based compensation, operating expenses in the second quarter of 2020 were $6.0 million, or 55 percent of sales, as compared to $5.0 million or 74 percent of sales in the second quarter of 2019, and $6.2 million or 59 percent of sales in the first quarter of 2020.

Total other expenses were $3.4 million during Q2 2020, compared to $1.8 million in Q2 2019. The increase in other expense was primarily attributable to the issuance of warrants in conjunction with the private placement completed in March of 2020, as well as increased interest expense.

On June 22, 2020, the company announced the planned divestiture of its Pennsylvania manufacturing and processing operations to a subsidiary of Jushi Holdings, Inc. for a total consideration of $37 million, including $13.8 million in cash upon closing. The transaction closed on August 11, 2020, and as a result, the company had total cash on hand of approximately $21.1 million.

Dr. Kingsley continued, “We believe there is significant potential for Vireo to improve revenue growth and profitability in our core markets, and we’ll be investing in each of these markets through the balance of fiscal year 2020 to increase production capacity and retail store count. We expect the benefits of these investments to begin materializing late this year, and continue to believe that each of these markets has the potential to enact adult-use legislation over the short- to medium-term future, which would present additional opportunity for revenue growth, margin expansion, and value creation for shareholders.”

Looking Ahead

Dr. Kingsley concluded, “As we enter the second half of fiscal year 2020, we plan to leverage the strength of our balance sheet to make several strategic growth investments in our markets in ArizonaMarylandMinnesota, and New Mexico. We expect to invest approximately $8.0 to $9.0 million in these projects and that they will be completed by the end of the first quarter of fiscal year 2021. Once complete, these investments should help drive stronger revenue growth and profitability, which gives confidence in our ability to begin producing positive cash flow around the mid-point of fiscal year 2021.”


Debra BorchardtDebra BorchardtAugust 24, 2020
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4min2680

Canadian-based Inner Spirit Holdings Ltd. (CSE: ISH) (OTC:INSHF)known for its national network of Spiritleaf retail cannabis stores reported system-wide retail sales of $20.5 million in the second quarter of 2020, an increase of 343% compared with $4.6 million in the second quarter of 2019. This was a 19% increase sequentially from the first quarter’s $17.1 million. Total revenue increased 575% to $5.4 million in the second quarter versus $0.8 million in the second quarter of 2019. This increased 31% sequentially from $4.1 million in the first quarter of 2020.

Inner Spirit delivered a total net loss of $1.2 million in the second quarter of 2020, or $0.01 per share, compared with $2.8 million, or $0.02 per share, in the second quarter of 2019.

“The company’s financial results for this year’s second quarter show impressive year over year growth with over $20 million recorded in system-wide retail sales for the Spiritleaf network. This performance comes at a time when the country is facing ongoing challenges related to the COVID-19 pandemic,” said Darren Bondar, President, and CEO of Inner Spirit. “The retail cannabis sector has been fortunate to be considered an essential service in our operating markets, and we have been able to continue advancing our business strategy this year. For the second quarter and for the first half-year of 2020, we achieved positive Adjusted EDITDA1 and positive cash flow from operations.”

New Spiritleaf stores opened recently brought the number of locations to 58 across the country – the most cannabis stores being operated under a single retail brand in Canada. Additionally, potential store locations have been conditionally secured in British ColumbiaAlbertaSaskatchewanManitobaOntario, and Newfoundland and Labrador.

Franchise Model

The company touts its revenue-generating business model with more than 100 Spiritleaf store locations planned in local markets across Canada – all supported by franchise agreements with local entrepreneurs entering the business and applying their capital to growing the network. The company charges a $25,000 upfront franchise fee, 5% royalty on gross sales, and 1% of gross sales allocated to Spiritleaf advertising fund.

“We are continuing to expand the Spiritleaf footprint with recent store openings in AlbertaOntario, and Newfoundland and Labrador. We are able to grow the Spiritleaf network of franchised and corporate-owned stores due to the excellent support and loyalty of our customers, franchise partners, employees, investors, and strategic partners. We have built a strong platform that we will further leverage as we expect to add some 20 additional store locations by the end of the year. We are focused on providing a premium and educational shopping experience to consumers and being the knowledgeable, authentic, and trusted voice for the cannabis experience in our communities,” added Bondar.


Debra BorchardtDebra BorchardtAugust 24, 2020
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4min2150

Hollister Biosciences Inc. (CSE: HOLL), (OTC: HSTRF)  reported that its revenue for the second quarter ending June 30th, 2020 was $8.47 million versus $0.2 million for the same time period last year. the company attributed the revenue growth to the sale of concentrates, pre-rolls, and contract manufacturing services. The company also delivered net income for $0.3 million compared to a net loss of $2.1 million in the first quarter of 2020.

“Our second-quarter results are encouraging and in line with our objective to increase revenue and profitability” shared Alex Somjen, President of Hollister Biosciences Inc.  “These financial results are a product of increased brand awareness, strategic M&A, and strategic partnerships put in place over the previous six months.”

The bulk of the company’s revenue comes from Arizona’s total revenue over the last six months of $8.7 million. The state is also turning in positive results with net income for the last six months of $709,239. California generated revenue of $651,862 for the last six months but had a net loss of $856,087.

Hollister Cannabis Company manufactures hash, tinctures, hash infused products, crumble infused products, pre-rolls, and other cannabis products under their brands HashBones, Purity Petibles, Hollister Cannabis Co., and as contract manufacturing white label products for other companies. The company acquired Venom Extracts in March and is including 100% of the revenues and expenses of Venom Extracts for the three and six months ended June 30, 2020, which equated to $8,102,862 and $8,773,238 of gross revenues, respectively, being generated by Venom Extracts.

HashBone

The company said in its MD&A that its most widely distributed product manufactured is the HashBone which is a 25% hash 75% flower pre-roll which is made in small batches with only premium flower and artisanal bubble hash. Hollister Cannabis Company Bubble Hash is made with purified water and ice in hash wash machines. The company said it is dried in state of the art freeze dryers and strained and grammed in concentrate jars. “There are several white label products manufactured at Hollister Cannabis Co including crumble infused pre-rolls, 1/8th and grammed flower, and pre-rolls. The company uses an automated process that fills vape cartridges, capsules, tincture bottles, and more. There are potential white label projects for this equipment. Most products are packaged, labeled, and prepared for distribution prior to leaving Hollister Cannabis Company.”

The company said its partnership with Tommy Chong’s Cannabis is progressing well, with Tommy Chong’s Full Spectrum Elixir now being distributed in 20 dispensaries throughout the state of California by Hollister’s distribution partner Indus Holdings Inc. (CSE: INDS).

“Enormously proud of our teams in Arizona & California.  Our staff continues to overcome obstacles like global pandemic while posting record revenue numbers. We look forward to continuing to execute on our plans while increasing value for our shareholders.” Said Carl Saling CEO of Hollister Biosciences.


Debra BorchardtDebra BorchardtAugust 21, 2020
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6min10170

Cresco Labs Inc.  (OTCQX: CRLBF) stock dipped following the company’s solid results for the second quarter ending June 30, 2020. Despite beating analysts’ estimates on revenue and market share gains, traders focused on the company’s earnings miss and the stock slid by over 4% to trade at $6.82. The average price target is $8.59 and the stock has been on a huge run over the summer as it has moved from $2.05 in March to $7.70 on August 17.

After the market closed on Thursday, Cresco reported that its revenue rose sequentially by 42% to $94.3 million. The company also said on its earnings conference call that it achieved positive free cash flow in the month of June. Analysts at Yahoo Finance on average expected revenue of $76 million. So, this was a substantial beat.

The company missed the analyst average estimate for earnings be reporting  -$0.09, while the estimate was for -$0.06 per share. The company delivered a net loss of $4.7 million, which was less than last year’s net loss of $13.4 million for the same time period.

Cresco said that its revenue increased sequentially by more than 30% in every U.S. market, with the exception of Massachusetts. The company noted that its 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.

Charles Bachtell, Co-founder, and CEO of Cresco Labs said on the company’s earnings call, “In the two states where we have the leading market share, Illinois and Pennsylvania, both have reached a $1 billion in run-rate sales. Illinois is set to issue its next 75 retail licenses, a catalyst to more consumer demand, and increase opportunities for our wholesale business.”

The net losses included 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. However, the adjusted EBITDA was $16.5 million, an increase of 419% sequentially. Th e company said 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.

Illinois

Cresco Labs planted its flag in the state of Illinois and is now reaping the benefits of going hard in the state. Bachtell said on the call that state retail grew by 18% from Q1 to Q2. “Our existing Illinois stores grew sales by 37%. A testament to the effectiveness of our retail leaders and teams, nearly 75% of our retail revenue growth was driven by existing stores with the impact of recently announced store openings still to be seen in Q3 and Q4.”

He noted that the Sunnyside model is producing stronger same-store sales, attracting more customers, and achieving a disproportionate share of the market. “As we recently announced, we just opened our ninth retail location in Illinois, the most stores of any operator in the state. Sunnyside Schaumburg is located adjacent to the largest shopping mall in Illinois and at the heart of one of the densest areas of stores, hotels, and restaurants in the state,” he added.

Pennsylvania

The company pointed out that even though Pennsylvania is a medical-only state, it is still one of its largest markets. It is currently hitting a billion dollars in run-rate sales.  “We have room to grow in Pennsylvania from a retail footprint standpoint. We have currently licenses to open up six stores and you can have licenses to open up 15. So, there’s definitely still headroom there,” said Bachtell. Pennsylvania now has nearly 390,000 people registered in the medical program, roughly the same number as Florida, making it one of the most important medical markets in the country.

California

Bachtell also said the company was taking market share in California. “California retail sales grew 10% quarter-over-quarter while Cresco Labs total California revenue increased by 41%. We are taking share. Revenue from Continuum distribution was up 35% sequentially, driven by owned brands like Cresco, Mindy’s, Floracal, and High Supply, as well as continued strength from core partner brands,” he said on the company call.

“Wholesale penetration continued to grow in Q2 and we’re now distributing to nearly all of the states tier 1 dispensary’s. While we’re encouraged by the substantial increase in gross margin during the quarter, we’re even more excited about the immense gross profit opportunity offered by the state in 2020 and beyond. With a continued focus on increasing operating leverage, we’ve optimized the portfolio of brands in our platform, appointed new leadership in the state with extensive CPG and distribution experience, and completed a thorough value chain analysis to further improve the efficiency of our distribution business. California remains one of the most important cannabis markets in the world. And with improving regulations and state retail sales projected to reach $7 billion by 2025, California will continue to be a key driver of growth for Cresco Labs.”

 



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