Second Quarter 2022 Financial Highlights
Second quarter revenue of $218 million, up 4% year-over-year.Adjusted gross profit1 of $116 million, or 53% of revenue, an increase of 8% year-over-year, excluding fair value mark-up for acquired inventory and cost of goods sold adjustments for acquisitions and other non-core costs.Second quarter adjusted EBITDA1 of $51 million, or 23% of revenue, an increase of 11% year-over-year.Wholesale revenue of $95 million, which maintained the company's position as No. 1 U.S. seller of branded cannabis products with leading share positions in the flower, concentrates and vape categories2.Achieved the leading branded share position in Massachusetts and maintained No. 1 share position in both Illinois and Pennsylvania2.Retail revenue increased 22% year-over-year, to $123 million, or $2.5 million per average store open in the quarter; same-store-sales increased 6% year-over-year.Ended the quarter with $90 million of cash on hand.On July 8, the Columbia Care shareholders approved the previously announced, all-stock acquisition by Cresco Labs and the company continues to work toward closing the transaction around year-end.Management Commentary
"We reported solid results in the face of an unprecedented macro environment. We generated $218 million in revenue, representing 4% year-over-year growth, and maintained our industry position as the No. 1 wholesaler of branded cannabis2, the No. 1 branded product portfolio chosen by consumers2, and the No. 1 most productive per-store national retailer. Importantly, we accomplished these results while maintaining our Adjusted Gross Margin1 at 53% and Adjusted EBITDA1 margin of 23%, in a market where prices fell between 10-30% depending on the state. The Columbia Care transaction is proceeding as expected—we're checking off milestone after milestone, the divestiture and regulatory processes are on track and we continue to anticipate a closing around year end,” said Charles Bachtell, CEO and co-founder of Cresco Labs.
“We recognize the challenges currently facing the cannabis industry and the tough macro backdrop we are operating against. In this environment, we are managing through today while remaining focused on the long-game— we're holding and growing market share, driving efficiencies across the business to maintain margins, and preparing for the integration of Columbia Care to drive future growth. Over the next three years, growth will come from the transition to adult use in seven large markets: New Jersey, New York, Pennsylvania, Ohio, Virginia, Florida and Maryland. Our combined footprint with Columbia Care, gives us exposure to all of these markets and leading positions in several. This is arguably the highest value footprint in cannabis—180 million Americans and all 10 of the 10 highest projected 2025 revenue states. The acquisition more than doubles our retail footprint, gives us a No. 1 branded or retail share position in five markets, and optimizes our operational footprint. It gives us the breadth and depth that we believe ensures growth, diversifies our revenue mix and creates an industry leader,” Bachtell said.
Balance Sheet, Liquidity, and Other Financial Information
As of June 30, 2022, current assets were $314 million, including cash and cash equivalents of $90 million. The company had working capital of $86 million and senior secured term loan debt, net of discount and issuance costs, of $379 million.The company paid a total of $89 million in taxes during the quarter, including tax distributions to non-controlling unit holders and other out-of-period payments of $67 million.Total shares on a fully converted basis were 443,671,426 as of June 30, 2022.Social Equity and Education Development Program
This year's "Summer of Social Justice" campaign has far surpassed last year's impact, with the company's SEED initiative supporting the record sealing, expungement process and restorative journey for over 4,500 individuals nationwide.Parkway Dispensary LLC and Navada Labs LLC, both social equity groups supported by SEED, received conditional adult-use dispensary licenses as part of the 185 new licenses recently issued by the state of Illinois. The SEED team continues to conduct outreach and build relationships with all new licensees in Illinois. Phase 2 of the SEED community business incubator will commence next month.The Illinois Cannabis Education Center (ICEC) officially opened to colleges as well as community, and business organizations. To date, eight colleges and eight entrepreneurship training organizations have utilized the ICEC and served over 200 individuals and 40 ancillary cannabis businesses. Through the ICEC, students, entrepreneurs and working individuals receive hands-on trainings focused on compliance, security, technology and daily operations in a mock dispensary to understand all aspects of cannabis retail. The company looks forward to welcoming Illinois’ new adult-use dispensary licensees to the space.Capital Markets and M&A Activity
On March 23, 2022, the company announced a definitive arrangement agreement whereby Cresco Labs will acquire Columbia Care in an all-stock transaction. Please click here for additional details.The transaction received federal Hart Scott Rodino3 approval in May 2022. In July 2022, Columbia Care shareholders approved the transaction, followed by the approval from the Supreme Court of British Columbia.The asset divestiture process is proceeding as planned in terms of both timelines and gross proceeds, as is the state regulatory approval process. The Company targets closing the transaction around year-end 2022.1 See “Non-GAAP Financial Measures” at the end of this press release for more information regarding the Company’s use of non-GAAP financial measures.
2 According to BDSA
3 Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR)
Non-GAAP Financial Measures
Earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA, and adjusted gross profit are non-GAAP financial measures and do not have standardized definitions under U.S. GAAP. The company has provided the non-GAAP financial measures, which are not calculated or presented in accordance with U.S. GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with U.S. GAAP and may not be comparable to similar measures presented by other issuers. These supplemental non-GAAP financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-GAAP 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 U.S. GAAP financial measures presented herein. Accordingly, the company has included below reconciliations of the supplemental non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.
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