Cresco posts record cash flow despite revenue miss; projects decline ahead
Chicago-based Cresco Labs (CSE: CL) (OTCQX: CRLBF) missed sales expectations but generated its highest-ever quarterly cash flow as it tries to clamp down on costs and make its operations more efficient these days.
The Sunnyside owner said Friday its third-quarter revenue ending Sept. 30 fell to $180 million from $190.6 million a year ago, below the $185.85 million analysts expected. However, operating cash flow reached a record $49 million.
“So far this year, we’ve generated $103 million in operating cashflow, enabling us to reinvest in our core, and to explore new markets and growth verticals, all while improving our balance sheet and paying down debt,” CEO Charlie Bachtell said in a statement ahead of the group’s .
Despite so, in his final earnings call before retirement, CFO Dennis Olis said fourth-quarter revenue is expected to drop “mid single digits” from the third quarter, citing softness in the Illinois market and a limited adult-use conversion in Ohio. Olis said Illinois saw a 46% increase in stores while total state revenue declined.
“Internally we stopped referring to Ohio’s adult-use launch because it really hasn’t launched yet,” Bachtell said on the call, explaining that the state is “still operating the medical program there with just the ability to allow non-patients to come in the door too.”
Chief Commercial Officer Greg Butler noted that Illinois surprised everyone with healthy growth until Labor Day weekend, when consumer spending began to tighten.
“Consumers are feeling the pinch; they have tighter wallets and are looking for ways to make their dollars go further,” Butler said, though he noted consumers are still purchasing more grams of cannabis than ever before.
Still, Olis said the company shipped more branded units and increased Sunnyside dispensary unit sales by 5% year-over-year while reducing cost of goods by 11%.
The company has also maintained its top market position in Illinois, Pennsylvania and Massachusetts, while climbing to a top-three spot in Ohio, according to BDSA data cited by the company.
Cresco significantly narrowed its quarterly loss to $8 million from $113.4 million in the same period last year. Adjusted EBITDA grew 5% to $51 million.
The improved cash position allowed Cresco to repurchase $40 million of its senior loan in October without penalties. The company reported $157 million in cash and equivalents at quarter’s end.
Speaking about Florida’s medical market, Bachtell cited its “forced vertically integrated structure” as an advantage for the company.
“The Florida medical market is still a strong growing market itself,” he said. “Florida rewards execution and differentiated products and that’s our strength.”
He said that the company’s measured approach to the state won’t change despite the ballot measure falling short of the required supermajority for adult-use legalization.
And like other execs in the space recently, Bachtell also pointed to growing bipartisan backing for federal cannabis reform, with both presidential candidates supporting policy changes.
“We look forward to working with the incoming administration to follow through on its commitment to developing a commonsense approach to cannabis laws,” he said.
