Cresco Labs Announces Profitable First Quarter 2019 Financial Results with Revenue Growth of 313% Year-over-Year and 24% Quarter-over-Quarter
Conference Call with Investors and Analysts to be Held at 6:00 p.m. Eastern Time Today
CHICAGO, May 29, 2019–(BUSINESS WIRE)–Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) (“Cresco” or the “Company”) one of the largest vertically integrated multistate cannabis operators in the United States, today released its unaudited financial results for the first quarter ended March 31, 2019. All financial information presented in this release is in U.S. dollars, unless otherwise noted.
First Quarter 2019 Highlights and Subsequent Events
Revenue
- First quarter revenue of $21.1 million, up 313% year-over-year and 24% quarter-over-quarter.
- First quarter pro forma revenue1 of $33.9 million, which includes the impact of pending acquisitions in New York, Massachusetts, Florida, and in California with Origin House.
EBITDA
- First quarter adjusted EBITDA2 of $0.8 million, compared to $1.0 million in the prior-year period.
- First quarter 2019 financial results included $3.2 million related to share-based incentive compensation and acquisition and other non-recurring costs of $2.5 million.
Net Income
- First quarter net loss of $7.6 million, compared to net income of $0.6 million in the prior-year period.
Balance Sheet
- As of fiscal year-end, total assets of $364.0 million, including cash and cash equivalents of $106.1 million and a working capital position of $146.3 million with zero debt on the balance sheet.
Operations
- The Company is operational in seven U.S. states, with binding transactions pending in New York, Massachusetts and Florida, as well as approved expansion into Michigan.
- On April 1, 2019, the Company announced that it has entered into a definitive agreement with CannaRoyalty Corp. (d/b/a Origin House), a premier cannabis brand distributor, which at the time was the largest-ever public company acquisition in the U.S. cannabis sector.
Talent
- Continued hiring top talent through key appointments and acquisitions, total staff headcount to over 835 employees at the end of the first quarter of 2019.
Other
- Shareholders representing 205,172,192 common shares have entered into voluntary lock-up agreements representing 97% of the shares subject to the initial lock-up and 80% of the total issued subordinate voting shares (on an as-if converted basis).
Management Commentary
Since the beginning of the year, we have made significant progress on the vision we have laid out for building Cresco into the most important company in the cannabis industry. We have continued to execute well from an operational standpoint, generate higher levels of revenue in our existing markets, and deliver strong profit margins. Through our pending acquisitions of Origin House and VidaCann, we have also put a foundation in place that we believe will enable us to capture a leading share in the North American cannabis market.
Charles Bachtell, Co-founder and CEO of Cresco Labs
We believe we have built the most strategic geographic footprint of any cannabis company in the United States, and now with the acquisition of Origin House, we will have the distribution platform to enable us to take market share in the largest and most important markets in the cannabis industry. As we continue to effectively execute on our strategic plan, we expect to create significant additional value for our shareholders.
Financial Results for the First Quarter Ended March 31, 2019 (Unaudited)
Revenue for the first quarter of 2019 was $21.1 million, an increase of 313% compared to revenue of $5.1 million for the first quarter of 2018. The increase in revenue was driven by expansion into new markets and gains in market share in the states where the Company operates. First quarter 2019 revenue increased 24% compared to $17.0 million for the fourth quarter of 2018. On a pro forma basis, revenue for the first quarter of 2019 was $33.9 million, which includes the impact of Origin House and VidaCann.
First quarter 2019 operational gross profit2, before the impact of biological assets accounting, was $9.4 million, or 44.6% of revenues, compared to $2.2 million, or 43.6% of revenues, for the first quarter of 2018. The Company continued to see operational efficiencies in its established markets, slightly offset by the impact of new markets like Ohio, California and Arizona, where the Company expects margin expansion as these businesses scale.
Total expenses for the first quarter of 2019 were $17.7 million, compared to $2.1 million for the prior year period. Total expenses in the first quarter of 2019 included $3.2 million in expenses related to share-based incentive compensation, $2.5 million in acquisition and other non-recurring costs, and $1.0 million of depreciation and amortization. The balance of the increase represents significant investments in our team and operational infrastructure to drive strategic initiatives that better position the Company for future growth.
Net loss for the first quarter for 2019 was $7.6 million, compared to net income of $0.6 million for the prior-year period.
Adjusted EBITDA for the first quarter of 2019 was $0.8 million compared to $1.0 million for the prior-year period.
1 Pro forma revenue and adjusted EBITDA information reflect the results of acquisitions closed and with definitive agreements as of the beginning of the period in which the closing or definitive agreement occurred.
2 See “Non-IFRS Financial Measures” at the end of this press release for more information regarding Cresco Labs’ use of non-IFRS financial measures.
Balance Sheet and Liquidity
As of March 31, 2019, the Company had total assets of $364.0 million, including cash and cash equivalents of $106.1 million. At March 31, 2019, the Company had a working capital position of $146.3 million with zero debt on the balance sheet.
Conference Call and Webcast
The Company will hold a conference call and webcast to discuss its business and financial results on Wednesday, May 29, 2019 at 6 p.m. Eastern Time. The conference call may be accessed via Cresco’s investors website at investors.crescolabs.com or by dialing 866-688-4235 (409-216-0711 for international callers) and entering conference ID 5039798. Archived access to the webcast will be available for one year on the Cresco’s investors 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 March 31, 2019. The Company will file its condensed interim consolidated financial statements on SEDAR on May 30, 2019. 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, 2018, previously filed on SEDAR.
Cresco 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, based in Chicago, is a leading U.S. cannabis company with experienced management, access to capital and a demonstrated growth strategy. As a differentiated grower, processor and retailer of premium cannabis operating in seven states, the Company focuses on entering highly regulated markets with outsized demand potential and high barriers to entry. Its speed-to-market to date has given Cresco a distinct competitive advantage as it replicates its model to expand its national footprint. Cresco’s proven ability to execute is complemented by a cutting-edge brand strategy spearheaded by several of the brightest minds in consumer marketing in the nation. Cresco’s products are tailored to all major consumer segments: everyday cannabis, medicinally focused, connoisseur grade and chef inspired edibles by James Beard Award-winning pastry chef Mindy Segal. Learn more about Cresco at 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 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. The Company has also provided unaudited pro forma financial information, which assumes that closed and pending mergers and acquisitions in 2018 are included in the Company’s financial results as of the beginning of the quarterly and annual periods in 2018 and that closed and pending mergers and acquisitions in 2019 are included in the Company’s financial results as of the beginning of the quarterly and annual periods in 2019. 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.
