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Cresco Labs Announces Increased Profitability In Q2 2019 With Revenue Growth Of 253% Year-Over-Year and 42% Quarter-Over-Quarter

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ILLINOIS: Cresco Labs, 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, 2019. All financial information presented in this release is in U.S. dollars, unless otherwise noted.

Cresco-Logo_Blue

Second Quarter 2019 Highlights and Subsequent Events

Revenue

  • Second quarter revenue of $29.9 million, up 253% year-over-year and 42% quarter-over-quarter.
  • Second quarter pro forma revenue1 increased 55% quarter-over-quarter to $52.7 million, which includes the impact of pending acquisitions and investments.

EBITDA

  • Second quarter Adjusted EBITDA2 of $14.5 million, compared to $4.8 million in the prior-year period. Excluding the impact of biological assets, adjusted EBITDA for the second quarter was $2.3 million.
  • Second quarter 2019 financial results included $3.2 million related to share-based incentive compensation, acquisition and other non-recurring costs of $3.2 million and $0.7 million in one-time charges related to the Company’s expansion in California.

Net Income

  • Second quarter net loss of $3.9 million, compared to net income of $1.6 million in the prior-year period.

Balance Sheet

  • As of June 30, 2019, the Company had total assets of $355.0 million, including cash and cash equivalents of $61.1 million and a working capital position of $128.7 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.
  • The Company expects its acquisition of Origin House to close during the fourth quarter of 2019, which greatly expands its distribution network in California.
  • Cresco received regulatory approval for its acquisition of Valley Agriceuticals, LLC., providing the Company with one of 10 vertically integrated licenses granted in the State of New York.

Talent

  • Continued hiring top talent including a new Chief Information Officer and a new Chief People Officer, bringing total staff headcount to approximately 1,400 employees at the end of the second quarter of 2019, including pending acquisitions.

Management Commentary

“We delivered an outstanding quarter that reflects the leading positions we have established in some of the most attractive markets in the cannabis industry,” said Charles Bachtell, Co-founder and CEO of Cresco Labs. “We are seeing accelerating revenue growth driven primarily by market share gains and strong trends in registered patients in our established markets of Illinois and Pennsylvania, as well as our expanded presence and distribution in California. As we scale our operations in our established markets, we are seeing the positive impact on gross profit margin that we projected. The higher revenue and margins helped to drive a substantial increase in Adjusted EBITDA compared to the prior quarter.

“While our increasing profitability demonstrates our ability to effectively execute and leverage the attractive model we have developed, we continue to operate with a long-term perspective and make investments to position Cresco Labs to lead the cannabis industry in the years to come. We are transforming the retail cannabis experience with the national rollout of our Sunnyside* dispensaries, expanding into the CBD market with the launch of our WellBeings product line, and expanding our cultivation and retail operations in Illinois to capitalize on adult-use legalization beginning in 2020. As we continue to capitalize on the strong organic growth trends in our current markets and complete our pending acquisitions of Origin House and VidaCann, we expect to deliver continued improvement in revenue and profitability, resulting in further value being created for our shareholders,” said Mr. Bachtell.

Financial Results for the Second Quarter Ended June 30, 2019 (Unaudited)

Revenue for the second quarter of 2019 was $29.9 million, an increase of 253% compared to revenue of $8.5 million for the second quarter of 2018. The increase in revenue was driven by expansion into new markets and continued growth in the states where the Company operates. Second quarter 2019 revenue increased 42% compared to $21.1 million for the first quarter of 2019, primarily driven by higher revenue generated in Pennsylvania, Illinois and California. On a pro forma basis, revenue for the second quarter of 2019 increased 55% from the first quarter of 2019 to $52.7 million, which includes the impact of pending acquisitions and minority investments.

Second quarter 2019 operational gross profit2, before the impact of biological assets accounting, was $14.4 million, or 48.1% of revenues, compared to $9.4 million, or 44.6% of revenues, for the first quarter of 2019. The improvement in operational gross profit margin was driven by greater scale in the Company’s established markets, increasing efficiencies in cultivation, processing and packaging, partially offset by the impact of initial costs associated with expansion into newer markets like California, Ohio and Arizona, where the Company expects to see higher margins as these operations continue to scale.

Total expenses for the second quarter of 2019 were $20.6 million, compared to $3.2 million for the prior year period. Total expenses in the second quarter of 2019 included $3.0 million in expenses related to share-based incentive compensation, $3.2 million in acquisition and other non-recurring costs and $0.9 million of depreciation and amortization. The balance of the increase represents investments made in talent and operational infrastructure to support the Company’s continued revenue growth.

Net loss for the second quarter for 2019 was $3.9 million, compared to net income of $1.6 million for the prior-year period. Current period net income included income tax expense of $5.6 million, primarily driven by discrete tax items related to the legal close of the acquisitions of MedMar Inc. and PDI Medical.

Adjusted EBITDA for the second quarter of 2019 was $14.5 million, compared to $4.8 million for the prior-year period. Excluding the net impact of the fair value of biological assets, Adjusted EBITDA for the second quarter of 2019 was $2.3 million.

Balance Sheet and Liquidity

As of June 30, 2019, the Company had total assets of $355.0 million, including cash and cash equivalents of $61.1 million and a working capital position of $128.7 million with zero debt on the balance sheet. Use of cash in the second quarter of 2019 included significant investments in the expansion of cultivation, processing and retail facilities in the Company’s existing markets, payments for the legal close of the MedMar Inc. and PDI Medical acquisitions, and funding provided to pending acquisitions to drive the continued development of facilities.

Conference Call and Webcast

The Company will hold a conference call and webcast to discuss its business and financial results on Wednesday, August 21, 2019 at 5 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 3385937. Archived access to the webcast will be available for one year on 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 and six months ended June 30, 2019. The Company will file its condensed interim consolidated financial statements on SEDAR by August 29th, 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.

 

Cresco Labs Announces Opening Of VidaCann Dispensaries In Pensacola And Jacksonville

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Cresco-Logo_BlueILLINOIS:  Cresco Labs, one of the largest vertically integrated multi-state cannabis operators in the United States, today announced the opening of new VidaCann medical cannabis dispensaries in the cities of Pensacola and Jacksonville, Florida. With the opening of the new dispensaries, VidaCann now has 12 operating dispensaries throughout the state of Florida. Cresco Labs has entered into an agreement to acquire the ownership interests of VidaCann, one of the largest and most advanced providers of medical cannabis in Florida. The acquisition of VidaCann is expected to close within the next 30 to 90 days, subject to the satisfaction of customary closing conditions including approval by the Florida Department of Health.
“Since announcing the acquisition in March, VidaCann has continued to execute on the expansion of its retail footprint,” said Cresco Labs CEO and Co-founder Charlie Bachtell. “The new dispensaries in Pensacola and Jacksonville provide a retail presence in two of the largest cities in Florida, which will improve our ability to capitalize on the very strong growth in the Florida market with more than 10,000 new patients being registered each week. Upon the closing of the acquisition, we project that Cresco Labs will have the fifth largest network of retail dispensaries in the state of Florida, which will provide us with an immediate meaningful presence in this market and an excellent platform for driving future growth. By the end of 2019, we expect to have up to 20 dispensaries operating in Florida, and that number will grow significantly in 2020 when our license converts to an unlimited number of dispensaries.”

New Dispensary Locations and Hours of Operation

Pensacola
2401 Langley Ave, Unit A
(850) 741-2895
Monday through Friday 10:00 a.m. – 7:00 p.m., Saturday 10:00 a.m. – 5:00 p.m., closed on Sunday

Jacksonville
5298 Sunbeam Road, Unit 6
(904) 337-0554
Monday through Friday 10:00 a.m. – 7:00 p.m., Saturday 10:00 a.m. – 5:00 p.m., closed on Sunday

In addition to Pensacola and Jacksonville, VidaCann operates dispensaries in Orlando, St. Petersburg, Port Charlotte, Bonita Springs, Tampa, Tallahassee, Daytona Beach, Deerfield Beach, Bradenton and Palm Bay.

With over 30 premium strains, each VidaCann dispensary offers a variety of products including flower, tinctures, capsules, vapes and concentrate syringes in a range of cannabinoid ratios from completely non-psychoactive to higher levels of THC.

 

Cresco Labs To Report First Quarter 2019 Financial Results On May 29, 2019

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ILLINOIS: Cresco Labs Inc., one of the largest vertically integrated multi-state cannabis operators in the United States, will report its financial results for the first quarter ended March 31, 2019 on Wednesday, May 29, 2019 after the market closes.

Cresco-Logo_BlueThe 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 (5 p.m. Central Time). The conference call may be accessed via Cresco Labs’ investor relations website at investors.crescolabs.com or by dialing 866-688-4235 (409-216-0711 for international callers) and providing conference ID 5478615.

Archived access to the webcast will be available for one year on the Cresco investor relations website.

 

Cresco Labs To Acquire Origin House In Largest-Ever Public Company Acquisition In The U.S. Cannabis Sector

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ILLINOIS: Cresco Labs Inc. and CannaRoyalty Corp. announced that they have entered into a definitive agreement pursuant to which Cresco Labs will acquire all of the issued and outstanding shares of Origin House. Under the terms of the Agreement, holders of common shares of Origin House will receive 0.8428 subordinate voting shares of Cresco Labs for each Origin House Share.

The Transaction represents a total consideration of approximately C$1.1 billion on a fully-diluted basis, or C$12.68 per Origin House Share (based on the Exchange Ratio and the closing price of Cresco Labs Shares on March 29, 2019, the last trading day prior to the announcement of the Transaction). The Transaction represents the largest public company acquisition in the history of the U.S. cannabis industry. The combined entity will be: one of the largest vertically-integrated multi-state cannabis operators in the United States; a leading North American cannabis company, by footprint; and one of the largest cannabis brand distributors.

Origin House has become a leading distributor and provider of brand support services in California, the world’s largest regulated cannabis market. Origin House’s proven strategy has been to build relationships with established dispensaries, build partnerships with established market-leading brands, develop promising cannabis product companies, and then leverage its full suite of support services to transform those products into strong California consumer brands. Origin House delivers over 50+ cannabis brands to more than 500 dispensaries in California, representing approximately 60% market penetration.

KEY TRANSACTION HIGHLIGHTS & BENEFITS:

  • Combination of Cresco Labs and Origin House will result in the premier distribution company serving California, the largest cannabis market in the world;
  • Accelerates Cresco Labs’ entrance into the California market with the addition of Origin House’s vast distribution platform;
  • Establishes the cannabis industry’s first national “house of brands” with a growing multi-state footprint that includes leading distribution market share in some of the largest states in the country including California, Pennsylvania and Illinois;
  • Combines the expertise of two industry leaders in branded product development and distribution;
  • Positions Cresco Labs as the preferred partner for additional premier cannabis brands seeking distribution on the industry’s most expansive platform;
  • Enhances Cresco Labs’ capital markets presence by significantly increasing its scale and the liquidity in the Company’s stock, resulting in improved ability to attract institutional investment and lower its cost of capital;
  • Continued participation by Origin House shareholders who will hold approximately 20% of the issued and outstanding Cresco Labs Shares on a pro forma, fully-diluted and as converted basis, enabling Origin House Shareholders the opportunity to participate in the expected value created through the Transaction; and
  • Immediate premium to Origin House shareholders of approximately 26% over the 30-day volume weighted average price of the Origin House Shares on the Canadian Stock Exchange ending March 29, 2019 (based on the Exchange Ratio and the closing price of Cresco Labs Shares on March 29, 2019).

 

Cresco Labs Continues Illinois Expansion With Acquisition Of Two Dispensaries

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ILLINOIS: Cresco Labs, one of the largest vertically integrated multi-state cannabis operators in the United States, today announced that it has signed dual definitive agreements to acquire licensed Illinois medical cannabis dispensaries MedMar Rockford and MedMar Lakeview, located in the popular Wrigleyville neighborhood of Chicago.

Cresco-Logo_BlueThese will be Cresco Labs’ fourth and fifth dispensary acquisitions, respectively, in Illinois. Cresco Labs will reach the maximum level of dispensaries any single company can own in the state, adding to the maximum three cultivation and processing facilities it currently operates. Cresco Labs is the only company in Illinois that has reached those limits, and it has the highest market share of any operator in the Illinois market.

“These acquisitions affirm our commitment to maintaining a strong retail presence in Illinois, which is one of the strongest and most quickly evolving cannabis markets in the United States,” said Cresco Labs CEO and Co-founder Charlie Bachtell. “The number of registered patients in Illinois has been increasing steadily, and the patient population is expected to drastically expand with the implementation of the Illinois Alternatives to Opioids Act, allowing for medical cannabis to be dispensed in place of pharmaceutical opioid medications. We will continue to emphasize compliance, control, efficiency and product performance as we position Cresco Labs for new opportunities presented in this dynamic industry.”

The owners of MedMar sought to give Illinois patients a true medical experience. Started by a group of pharmacists, a medical doctor and a former prosecutor, MedMar set out to ensure that Illinois medical cannabis patients received the best possible care in the safest possible environment. From the initial consultation to each return trip, MedMar wanted to make sure patients got superior treatment and superior service.

“We worked hard to create a facility that is welcoming and safe for our patients, follows all state regulations, and provides what I am confident to say is one of the best medical marijuana consultative experiences in the state of Illinois,” said MedMar Executive Vice President John Sullivan.

“Cresco’s focus on the patient experience, patient education, and patient results aligns well with our values and intertwines perfectly,” Sullivan added.. “We know our patients are in the best hands with Cresco.”

Under the terms of this non-material transaction, Cresco Labs will pay an undisclosed amount of stock and cash for the deal. The transaction is expected to close before year-end subject to customary closing conditions including approval from the Illinois Department of Financial and Professional Regulation (IDFPR).

 

Cresco Labs Acquires Assets In Massachusetts With First Cannabis Harvest Planned For Spring 2019

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ILLINOIS: Cresco Labs, one of the largest vertically integrated multi-state cannabis operators in the United States, announced a definitive agreement to acquire 100% of the shares and membership interests of Hope Heal Health, Inc. and an affiliated real estate entity.

The HHH assets include state registration and licensing that will allow for cultivation, manufacturing, processing, and the establishment and operation of a medical marijuana dispensary, with the ability to obtain up to three medical marijuana dispensary licenses and three adult-use dispensary licenses. HHH has entered into host community agreements with the Massachusetts municipalities of Rockland, North Attleborough and Fall River for medical cannabis dispensaries, subject to site approval, and is in the process of applying for adult-use licenses from the Massachusetts Cannabis Control Commission. This transaction is not a material transaction for the company and closing is expected to occur in the first quarter of 2019, subject to receipt of applicable regulatory approvals and other customary closing conditions.

“Massachusetts adds another attractive, high value market to our national footprint,” said Charles Bachtell, CEO of Cresco Labs. “Up until now, the medical patients of Massachusetts have had limited access to relief. We look forward to utilizing our strong capital resources, proven executional abilities, and our vertically integrated and streamlined growth-manufacturing-retail model to serve these patients and develop meaningful market share as we have in Illinois and Pennsylvania.”

HHH’s 150,0001 square foot cultivation facility in Fall River planted its first crop this week with an expected harvest in the first quarter of 2019. Cresco Labs has proven its execution efficiency with an unparalleled speed to market in the state of Pennsylvania, where it operates growing and processing facilities and three retail stores. Cresco hopes to achieve similar accomplishments in Massachusetts, subject to site approvals and barring any unforeseen delays.

 

Cannacuisine Comes To The National Restaurant Association Show

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ILLINOIS: Cooking with cannabis may be all the rage, but don’t expect infused food to be coming to your favorite bistro any time soon.   According to Robyn Griggs Lawrence, author of The Cannabis Kitchen Cookbook—the definitive guide for the newly minted “cannacuisine” movement, cannabis cuisine has gone gourmet, but for now you are going to have to learn to create your favorite pot dishes at home.

Ms. Lawrence will lead a panel discussion on “The Art and Science of Cooking with Cannabis” at the National Restaurant Association® NRA Show 2016 in Chicago on Tuesday, May 24, at 1:00 p.m. Joining Robyn will be culinary cannabis superstar “The Herbal Chef” Chris Sayegh (www.theherbalchef.com) and Chicago native and cannabis cuisine pioneer Chef Herb Seidel (www.cookwithherb.com).

MJ News Network had the opportunity to ask Ms. Lawrence about her cannacuisine message to mainstream restauranteurs.

MJNN: Does your appearance at the NRA show signal that cannabis cuisine is going mainstream?

RGL: Yes, I believe it does. It shows that chefs from across the country—whether they are able to cook with cannabis yet or not—are preparing for a future in which they can freely explore cannabis as a culinary ingredient.

MJNN: Legal cannabis is the fastest growing industry in America. Will we soon start seeing a trend toward cannabis restaurants? Or will cannabis-infused food be strictly for the home chef? 

RGL: We will see cannabis restaurants down the road, but I predict it will be several years. Public consumption is a hotly debated subject, but for now, home cooking and private dinners are our only options.

MJNN:  What will your message be to the professional chefs and restauranteurs? 

RGL: Cannabis is a superfood and the hottest new ingredient to hit the culinary scene in ages. Chefs and foodies are discovering its remarkable taste profiles and health benefits, but education is key. Cooking with cannabis requires a keen understanding of its unique properties, so we will discuss how to select the finest organic cannabis in a largely unregulated marketplace and teach chefs how to unlock its many benefits while creating delicious gourmet cuisine.

 

Medical Marijuana Edibles Debut In Illinois

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ILLINOIS: Edible medical marijuana made its Illinois debut Saturday, ending a wait for patients who prefer eating to inhaling. To some, cannabis-infused foods seem milder than smoke or vapor, but the products carry their own risks.

It takes longer to feel the effects when marijuana is eaten, so it’s easy to eat too much with unpleasant — or even dangerous — results.

“As exciting as bringing edibles to market is, we want to make sure that every patient takes small portions, and wait at least an hour before taking more, until you understand and get comfortable with consuming medical cannabis in its edible forms,” said Ross Morreale, owner of Ataraxia, an Illinois company with marijuana chocolates hitting the market.

Under the state’s pilot program, edible products must be manufactured by licensed cultivation centers, the same businesses growing cannabis in locked indoor facilities. Ataraxia shipped marijuana chocolates to two dispensaries, which will start selling them Saturday, Morreale said.

Medical Marijuana Taxes To Illinois Total $57K In 1st Month

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ILLINOIS: Illinois officials say the state’s first medical marijuana patients have purchased nearly $801,000 worth of cannabis during the program’s first month.

Program director Joseph Wright announced the figures Wednesday. The numbers indicate Illinois has collected roughly $56,550 in taxes from wholesale sales of medical marijuana during the month. Marijuana wholesalers pay a 7 percent tax to the state.

Wright says licensed dispensaries have served 1,713 unique patients. That’s nearly half the 3,600 patients who have been approved for the program.

Legal marijuana sales began Nov. 9 in Illinois. There are now 16 licensed dispensaries operating in Illinois.

Chicago Chef To Make Marijuana-Infused Edibles For Medical Pot Patients

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ILLINOIS: A top chef may soon be causing the munchies even as she satisfies them.

Prominent Chicago chef Mindy Segal announced Tuesday she plans to create a line of cannabis-infused edible products for medical marijuana patients.

Segal, the owner of HotChocolate restaurant in Bucktown, has agreed to make a line of products for Cresco Labs, which plans to operate three cultivation centers in Illinois. Cresco maintains Segal is the first James Beard Award-winning celebrity chef to agree to bake for the cannabis industry.