The adult-use dispensary is located in one of the busiest shopping areas in Naperville, the third largest city in Illinois with approximately 150,000 residents.
CHICAGO – September 22, 2020 — PRESS RELEASE — Cresco Labs, one of the largest vertically integrated multistate cannabis operators in the United States, has announced the approval and the location of its tenth Illinois dispensary in Naperville. The adult-use dispensary is located in one of the busiest shopping areas in Naperville, the third largest city in Illinois with approximately 150,000 residents.
“We have been consistent in choosing locations for our dispensaries in Illinois, focusing on high traffic areas in traditional retail enivronments. Sunnyside* Schaumburg, which is adjacent to Illinois’ busiest mall and our new Naperville dispensary, which shares a block with Costco, Walmart and Starbucks, are great examples of this strategy,” said Charlie Bachtell, Cresco Labs’ CEO and co-founder. “Our approach of meeting the consumer where they are and providing a normalized cannabis shopping experience is allowing our dispensaries in Illinois and all Sunnyside stores nationwide to outperform industry averages.”
Upon final approval from the State of Illinois for the Naperville location, Cresco will operate the maximum allowed ten dispensaries in Illinois. Cresco’s dispensaries are located in some of Illinois’ biggest cities, busiest shopping areas and most strategic locations to introduce new customers to normalized and professionalized cannabis and take an outsized share of the Illinois market. Total Illinois cannabis retail sales were $95 million in August, while total sales through the first eight months of 2020 were $600 million in the state.
Colorado cannabis sales set a record yet again in July, eclipsing $200 million in a single month for the first time.
Dispensaries sold $183,106,003 in recreational marijuana and $43,268,565 in medical marijuana in July, for a combined $226,374,568 in revenue, according to data from the Colorado Department of Revenue. That’s up 13.8% from June, another record-setting month when the industry raked in nearly $199 million.
So far in 2020, consumers have purchased more than $1.2 billion worth of cannabis products and the state has collected $203 million in taxes.
Colorado’s cannabis industry is poised to shatter 2019’s record of $1.75 billion in annual sales, especially since August is typically the state’s highest-grossing month. Those figures are due out in early October.
An early freeze and snow in September may have jeopardized millions of dollars worth of marijuana grown outdoors and slated for harvest in October. That may also affect flower and extract prices this fall.
David Gacom, Melissa Wagamon and Sean McAlister, who move into Regional President roles, will lead the business across the platform while strengthening the company’s geographic footprint
CHICAGO–(BUSINESS WIRE)– Cresco Labs (CSE:CL) (OTCQX:CRLBF) (“Cresco” or “the Company”), one of the largest vertically integrated multistate cannabis operators in the United States, announced today it has expanded its leadership team with the promotions of David Gacom, Melissa Wagamon and Sean McAlister to regionally focused president positions. These dynamic individuals, who bring a depth of experience in operations, marketing and sales through previous leadership roles at top CPG companies like MillerCoors, PepsiCo and The Kraft Heinz Company, will be focused on accelerating growth across the Company’s geographic footprint. As the organization continues to scale, they will be accountable for driving the Company’s strategic agenda across its nine states, delivering top-line growth and finding new ways to drive cost synergies in regional operations. In addition, these individuals will serve as the face of Cresco Labs amongst key state and local community leaders to ensure the Company is investing in what matters most to its stakeholders.
Cresco Labs promotes David Gacom, Melissa Wagamon and Sean McAlister to Regional President positions. (Photo: Business Wire)
“Coming off of a record-setting second quarter of growth and seeing the massive growth potential across all of our markets, we are excited to have these exceptionally talented individuals help lead our efforts at a regional level and identify opportunities to further accelerate and diversify our growth,” said Charlie Bachtell, CEO & Co-founder of Cresco Labs. “In continuation of our stated organizational redesign developed to drive growth and scalable operations across the platform, we continue to enhance and strengthen our leadership team and put the right people, with the right experience, in the right roles to drive results and long-term value for our stakeholders. David, Melissa and Sean have the knowledge, skills and expertise to be our leaders on the ground in markets, constantly focusing on operational execution, creating efficiencies, solving the needs of our customers and launching our brands in markets the right way.”
David Gacom has been appointed Regional President, West Region (California and Arizona). His leadership of the California market to date resulted in 41% sequential growth in Q2 and Cresco Labs taking market share in the largest, most competitive cannabis market in the world. Mr. Gacom brings more than 20 years of experience in leadership roles across B2B and B2C channels to the Company, serving most recently as the Chief Commercial & Optimization Officer of Grecian Delight Foods after 13 years in various management positions at The Kraft Heinz Company.
Melissa Wagamon has been promoted from VP of Brand Marketing to Regional President, Great Lakes (Illinois and Michigan). Mrs. Wagamon previously managed the development of Cresco Labs’ wholesale brands, including Cresco, Remedi, Mindy’s, High Supply, Reserve and Good News. She joined Cresco Labs from MillerCoors where she oversaw the retail and recruitment strategy for the Coors Light brand and communications strategy as Director for the Miller Lite brand. She also worked in various marketing roles at The Kraft Heinz Company and PepsiCo and started her career in territory sales with Pfizer Inc.
Sean McAlister has been promoted from EVP Sales to Regional President of Sales, Emerging Markets (Massachusetts, New York, Pennsylvania, Ohio and Maryland) and National Accounts. With the Company for over four years, Mr. McAlister has led the wholesale sales organization with a proven track record of success, getting Cresco Labs’ House of Brands into over 800 dispensaries across nine states and overseeing $55M in wholesale revenue in Q2—making Cresco Labs the largest wholesaler of branded products in the cannabis industry. Mr. McAlister previously led sales for global gaming technology producer and operator, Novomatic Americas.
Greg Butler, Chief Commercial Officer at Cresco Labs, added, “These individuals were added to our leadership team based on their knowledge of the cannabis industry, their ability to bring a best-in-class CPG experience to our P&L management and proven ability to develop and lead teams. Looking ahead at our industry, we see many opportunities emerging from both a wholesale and retail perspective. Having regional leaders will not only help us ensure that we create a scalable foundation from which to capture every opportunity within our markets, but also help us drive a superior capital agenda across our footprint. They all have a history of success—both in terms of building brands, developing strategic plans and providing leadership to our teams—and they are people you generally enjoy working with.”
Effective immediately, Mrs. Wagamon and Mr. McAlister will be based in Illinois and Mr. Gacom will reside in California.
About Cresco Labs:
Cresco Labs is one of the largest vertically-integrated multi-state cannabis operators in the U.S. Cresco 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’s 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, High Supply, Reserve, Good News and Mindy’s Chef Led Artisanal Edibles created by James Beard Award-winning chef Mindy Segal. Sunnyside, Cresco’s 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 provides the industry’s first national comprehensive Social Equity and Educational Development (SEED) program 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.
Forward Looking Statements
This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as, ‘may,’ ‘will,’ ‘should,’ ‘could,’ ‘would,’ ‘expects,’ ‘plans,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘projects,’ ‘predicts,’ ‘potential’ or ‘continue’ or the negative of those forms or other comparable terms. The Company’s forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including but not limited to those risks discussed under “Risk Factors” in the company’s CSE Listing Statement filed with SEDAR; and other factors, many of which are beyond the control of the Company. Readers are cautioned that the foregoing list of factors is not exhaustive. Because of these uncertainties, you should not place undue reliance on the Company’s forward-looking statements. No assurances are given as to the future trading price or trading volumes of Cresco’s shares, nor as to the Company’s financial performance in future financial periods. The Company does not intend to update any of these factors or to publicly announce the result of any revisions to any of the Company’s forward-looking statements contained herein, whether as a result of new information, any future event or otherwise. Except as otherwise indicated, this press release speaks as of the date hereof. The distribution of this press release does not imply that there has been no change in the affairs of the Company after the date hereof or create any duty or commitment to update or supplement any information provided in this press release or otherwise.
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–(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. 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 $45.2million, 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 EBITDA1was $16.5million, 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 Loss2was $4.7 million, whichincludes 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.
Forward Looking Statements
This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as, ‘may,’ ‘will,’ ‘should,’ ‘could,’ ‘would,’ ‘expects,’ ‘plans,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘projects,’ ‘predicts,’ ‘potential’ or ‘continue’ or the negative of those forms or other comparable terms. The Company’s forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including but not limited to those risks discussed under “Risk Factors” in the Company’s Annual Information Form dated April 28, 2020, and other documents filed by the Company with Canadian securities regulatory authorities; and other factors, many of which are beyond the control of the Company. Readers are cautioned that the foregoing list of factors is not exhaustive. Because of these uncertainties, you should not place undue reliance on the Company’s forward-looking statements. No assurances are given as to the future trading price or trading volumes of Cresco Labs’ shares, nor as to the Company’s financial performance in future financial periods. The Company does not intend to update any of these factors or to publicly announce the result of any revisions to any of the Company’s forward-looking statements contained herein, whether as a result of new information, any future event or otherwise. Except as otherwise indicated, this press release speaks as of the date hereof. The distribution of this press release does not imply that there has been no change in the affairs of the Company after the date hereof or create any duty or commitment to update or supplement any information provided in this press release or otherwise.
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.
Cresco Labs Inc.
Unaudited Financial Information and Non-IFRS Reconciliations
(All amounts expressed in thousands of U.S. Dollars)
Unaudited Consolidated Statements of Operations
For the Three Months Ended June 30, 2020, March 31, 2020 and June 30, 2019
For the Three Months Ended
($ in thousands)
6/30/2020
3/31/2020
6/30/2019
Revenue
$
94,256
$
66,380
$
29,890
Cost of sales – production costs
(60,835
)
(46,200
)
(17,145
)
Gross profit before fair value adjustments
33,421
20,180
12,745
Realized changes in fair value of inventory sold
(41,774
)
(24,584
)
(17,620
)
Unrealized gain on changes in fair value of biological assets
77,822
38,544
29,814
Gross profit
69,469
34,140
24,939
GP%
73.7
%
51.4
%
83.4
%
Expenses:
Selling, general and administrative
45,186
46,653
19,705
Depreciation and amortization
5,358
4,619
894
Total expenses
50,544
51,272
20,599
Gain (loss) from operations
18,925
(17,132
)
4,340
Other (expense) income:
Interest expense, net
(9,597
)
(8,216
)
(2,087
)
Other (expense) income, net
(740
)
15,523
(621
)
Income (loss) from investment in associate
24
(144
)
36
Total other expense, net
(10,313
)
7,163
(2,672
)
Income (loss) before income taxes
8,612
(9,969
)
1,668
Income tax expense
(13,312
)
(3,462
)
(5,586
)
Net loss 1
$
(4,700
)
$
(13,431
)
$
(3,918
)
1 Net loss includes amounts attributable to non-controlling interest.
Cresco Labs Inc.
Summarized Consolidated Statements of Financial Position
As of June 30, 2020 and December 31, 2019
June 30, 2020
December 31, 2019
($ in thousands)
(Unaudited)
(Audited)
Cash and cash equivalents
$
70,994
$
49,102
Other current assets
185,732
110,236
Property and equipment, net
175,281
155,839
Intangible assets, net
199,882
94,206
Goodwill
451,632
137,719
Other non-current assets
125,583
69,452
Total assets
$
1,209,104
$
616,554
Total current liabilities
163,396
150,169
Total long-term liabilities
308,890
143,762
Total shareholders’ equity
736,818
322,623
Total liabilities and shareholders’ equity
$
1,209,104
$
616,554
Cresco Labs Inc.
Unaudited Revenue and Gross Profit Metrics
For the Three Months Ended June 30, 2020, March 31, 2020 and June 30, 2019
For the Three Months Ended
($ in thousands)
6/30/2020
3/31/2020
6/30/2019
Revenue
$
94,256
$
66,380
$
29,890
Cost of sales – production costs1
(60,835
)
(46,200
)
(17,145
)
Realized changes in fair value of inventory sold
(41,774
)
(24,584
)
(17,620
)
Unrealized gain on changes in fair value of biological assets
77,822
38,544
29,814
Gross profit
$
69,469
$
34,140
$
24,939
Cultivation costs expensed under IAS 412
3,951
6,050
912
Net impact of fair value of biological assets
(36,048
)
(13,960
)
(12,194
)
Expansion, relaunch and rebranding costs3
4,616
3,881
722
COVID-19 related expenses
1,887
–
–
Fair value markup for acquired inventory
331
1,889
–
Operational gross profit (Non-IFRS)
$
44,206
$
32,000
$
14,379
Operational GP%
46.9
%
48.2
%
48.1
%
1 Production (cultivation, manufacturing, and processing) costs related to products sold during the period.
2 Costs would be capitalized under IAS 2 and do not reflect cost of inventory sold in the period.
3 Costs related to non-recurring third-party product costs, start-up costs, and samples/discounts to expand footprint and relaunch in certain markets.
Cresco Labs Inc.
Unaudited Reconciliation of Net Income to Adjusted EBITDA
For the Three Months Ended June 30, 2020, March 31, 2020 and June 30, 2019
For the Three Months Ended
($ in thousands)
6/30/2020
3/31/2020
6/30/2019
Net loss1
$
(4,700
)
$
(13,431
)
$
(3,918
)
Depreciation and amortization
9,626
8,368
2,075
Interest expense, net
9,597
8,216
2,087
Income tax expense
13,312
3,462
5,586
Earnings before interest, taxes, depreciation and amortization (EBITDA) (Non-IFRS)
$
27,835
$
6,615
$
5,830
Expansion, relaunch and rebranding costs2
4,616
3,881
722
COVID-19 related expenses
2,648
–
–
Other expense (income), net
740
(15,523
)
621
(Gain) loss from investment in associate
(24
)
144
(36
)
Fair value markup for acquired inventory
331
1,889
–
Cultivation costs expensed under IAS 413
3,951
6,050
912
Adjustments for acquisition and other non-core costs
5,205
11,843
3,203
Management incentive compensation (share-based)
7,207
2,235
3,210
Adjusted EBITDA (Non-IFRS)
$
52,509
$
17,134
$
14,462
Net impact of fair value of biological assets
(36,048
)
(13,960
)
(12,194
)
Adjusted EBITDA (non-IFRS), net of impact of biological assets
$
16,461
$
3,174
$
2,268
1 Net loss includes amounts attributable to non-controlling interest.
2 Costs related to non-recurring third-party product costs, start-up costs, and samples/discounts to expand footprint and relaunch in certain markets.
3 Costs would be capitalized under IAS 2 and do not reflect cost of inventory sold in the period.
Cresco Labs Inc.
Unaudited Summarized Consolidated Statements of Cash Flows
For the Three Months Ended June 30, 2020, March 31, 2020 and June 30, 2019
For the Three Months Ended
($ in thousands)
6/30/2020
3/31/2020
6/30/2019
Net cash used in operating activities
$
(9,881
)
$
(40,101
)
$
(5,797
)
Net cash provided by (used in) investing activities
14,888
(38,641
)
(34,863
)
Net cash (used in) provided by financing activities
(2,227
)
95,020
(4,047
)
Effect of foreign currency exchange rate changes on cash
(288
)
946
–
Net increase in cash and cash equivalents
2,492
17,224
(44,707
)
Cash and cash equivalents and restricted cash, beginning of period
71,376
54,152
113,401
Cash and cash equivalents and restricted cash, end of period
