Cresco reports record revenue CHICAGO, March 16, 2023--Cresco Labs Inc, a vertically integrated, multi-state operator and the No. 1 producer of branded cannabis products in the industry, today released its financial results for the quarter and year ended December 31, 2022. All financial information presented in this release is reported in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") and in U.S. dollars, unless as otherwise indicated.
Fiscal Year 2022 Financial Highlights
Record revenue of $843 million, an increase of 3% year-over-year; excluding California distribution operations exited in 2021, adjusted revenues grew 6% year-over-year.
Record branded unit volume of 61 million, up 37% year-over-year2.
Record retail transactions of 4.6 million, up 15% year-over-year.
Adjusted gross profit1 of $418 million, or 50% of revenue.
Adjusted EBITDA1 of $174 million, or 21% of revenue.
Net loss of $215 million for the full year included $141 million of one-time impairment charges.
Generated positive operating cash flow of $19 million for the full year and ended the year with $122 million of cash, cash equivalents and restricted cash.
Retained the #1 market share position in Illinois and Pennsylvania and achieved #1 share in Massachusetts. The Company had the #1 best-selling branded portfolio of cannabis products in the industry, the #1 portfolio of branded flower and branded concentrates, and the #3 portfolio of branded vapes2.
Fourth Quarter 2022 Financial Highlights
Fourth quarter revenue of $200 million, down 8% year-over-year.
Branded unit volume of 17 million, up 24% year-over-year2.
Retail transactions of 1.2 million, up 4% year-over-over.
Growth from increased unit sales and retail transactions was offset by price compression across the industry.
Adjusted gross profit1 of $90 million, or 45% of revenue.
Fourth quarter adjusted EBITDA1 of $31 million, or 15% of revenue.
Adjusted gross profit margin and adjusted EBITDA margin were impacted by approximately $10 million of non-cash, non-recurring items, including charges related to revaluation of inventories to the net realizable value, causing an approximate 500 bps drag on margins in the quarter. Normalized for these adjustments, adjusted gross margin would have been 50% and adjusted EBITDA margin would have been 20%.
Fourth quarter net loss of $180 million included $141 million of impairment charges.
Generated positive operating cash flow of $4 million.
Management Commentary
"I want to congratulate the Cresco Labs team on how well they tackled the challenges of 2022. Despite the headwinds, the Cresco team generated a record $843 million of sales, a record 61 million branded units sold (+37% year-over-year), and a record 4.6 million retail transactions (+15% year-over-year). Our relentless focus on providing the highest perceived value to the consumer led Cresco Labs to have the number one most sold branded product portfolio in the U.S. for the second straight year. Cannabis made progress on its path to becoming one of the largest consumer product categories in the country. The limited legal cannabis industry reached over $25 billion2 in revenue and produced almost $4 billion in state tax revenue. The current estimated regulated-plus-illicit cannabis market in the U.S. is nearly the size of the U.S. beer industry. From our front-line position, we were disappointed that federal reform did not pass late last year, but last year's efforts have led to strong momentum for change with the new Congress. None of the challenges of 2022 change the long-term thesis and opportunity that is cannabis," said Charles Bachtell, CEO and Co-founder of Cresco Labs.
"As we look toward the months ahead, we don't expect the operating environment to get any easier, but our priorities are clear. We're laser-focused on our profitable Core—core capabilities, core products, and core brands. What you can expect from us is continued leadership in branded cannabis, rationalization and optimization of our footprint, expansion in the reach and efficiencies of our retail business, generation of more free cash flow, and the strengthening of our balance sheet, while we continue to lead on federal reform," added Bachtell.
Balance Sheet, Liquidity and Other Financial Information
As of December 31, 2022, current assets were $327 million, including cash, cash equivalents and restricted cash of $122 million. The Company had working capital of $46 million and senior secured term loan debt, net of discount and issuance costs, of $381 million.
Total shares on a fully converted basis were 437,468,399 as of December 31, 2022.
During the fourth quarter, the Company took an impairment charge totaling $141 million, primarily related to its plan to exit certain California operations.
Social Equity and Education Development Program
In the fourth quarter, the Illinois Cannabis Education Center ("ICEC") continued programming in partnership with local colleges, community, and business organizations. At the close of the fourth quarter, eight colleges and eight entrepreneurship training organizations have continued to utilize the space and have served over 500 individuals and 50 ancillary cannabis businesses. Through the ICEC, students, entrepreneurs, and working individuals receive hands-on training focused on compliance, security, technology, and daily operations in a dispensary to understand all aspects of cannabis retail.
Throughout 2022, SEED hosted more than 25 workshops and educational seminars which have served over 2,500 attendees nationwide.
The Company provided more than 1,000 hours of one-on-one pro bono business consulting to social equity licensees and ancillary business owners.
Capital Markets and M&A Activity
The Company and Columbia Care mutually agreed to extend the outside date to complete their previously announced transaction to June 30, 2023.
The regulatory approval process is on-going, and the Company is working toward final agreements to sell the remaining assets required to be divested.