Cresco Labs reports solid Q1 growth and strategic plans By Investing.com

Cresco Labs (OTC:), a leading player in the cannabis industry, conducted its First Quarter 2024 Earnings Conference Call, highlighting a strong financial performance and strategic initiatives. The company reported a 580 basis point improvement in gross profit margin year over year, $53 million in adjusted EBITDA, and $16 million in net income before taxes.

Cresco Labs generated $36 million in operating cash flow, bolstering its balance sheet and positioning itself for strategic growth in key markets such as Ohio, Pennsylvania, and Florida. The company’s focus on branded wholesale products and a productive retail portfolio, alongside the success of its e-commerce platform, were also underscored.

Executives expressed optimism regarding the potential reclassification of cannabis to a Schedule III substance and efforts to mitigate tax penalties on the industry.

Key Takeaways

• Cresco Labs reported a significant improvement in gross profit margin and solid financial metrics including $53 million in adjusted EBITDA.
• The company generated $36 million in operating cash flow, with a focus on strategic growth in Ohio, Pennsylvania, and Florida.
• Cresco is optimistic about the anticipated reclassification of cannabis and is working to alleviate tax penalties.
• $3.8 million was invested in CapEx for cultivation and manufacturing improvements in key states.
• Cresco expects flat revenue in Q2 and Q3, with growth in Q4 driven by new adult-use programs.

Company Outlook

• Cresco Labs plans to invest $50 to $70 million in facility upgrades across Ohio, Pennsylvania, and Florida.
• The company aims to maintain a gross margin of around 50% for the year 2024.
• Cresco is exploring options to amend their 2023 tax position, potentially impacting cash flow by $70 million.

Bearish Highlights

• The company anticipates relatively flat revenue in the second and third quarters of 2024.
• Price pressures and revenue composition fluctuations are expected to continue.

Bullish Highlights

• Cresco is preparing for growth in Q4 due to the launch of adult-use cannabis programs in three key states.
• Executives are confident in the company’s operational readiness and ability to leverage growth opportunities.

Misses

• The company did not provide specific details on revenue or earnings projections beyond maintaining gross margins.

Q&A Highlights

• Executives discussed their strategy for converting medical to recreational markets and…