2023 Set Up Cresco Labs To Capitalized on ‘Monumental Opportunities’ Ahead, CEO Says

CHICAGO, March 13, 2024 – PRESS RELEASE – Cresco Labs Inc., an industry leader in branded cannabis products with a portfolio of America’s most popular brands and the operator of Sunnyside dispensaries, released its financial and operating results for the fourth quarter and year ended Dec. 31, 2023. All financial information presented in this release is reported in accordance with U.S. generally accepted accounting principles (GAAP) and in U.S. dollars, unless otherwise indicated, and is available on the company’s investor website here.

Fourth Quarter 2023 Highlights

• Fourth quarter revenue of $188 million, excluding the impact from strategic divestitures aimed to drive profitability, down 2% year-over-year.
• Gross profit of $96 million. Adjusted gross profit¹ up 12% year-over-year to $100 million, or 53% of revenue, an 850 basis points (bps) improvement.
• SG&A of $57 million. Removed $54 million in annualized Adjusted SG&A¹, reducing Adjusted SG&A¹ by 20% year-over-year to $55 million, or 29% of revenue.
• Fourth quarter net income of $5 million.
• Fourth quarter adjusted EBITDA¹ nearly doubled year-over-year to $55 million, or 29% of revenue, a 1,400 bps improvement.
• Retained the No. 1 share position in Illinois, Pennsylvania and Massachusetts².

Fiscal Year 2023 Highlights

• Revenue of $771 million.
• Adjusted gross profit¹ of $377 million, or 49% of revenue.
• Driven by the Year-of-the-Core strategy, adjusted SG&A¹ decreased by $35 million and adjusted EBITDA margin¹ rose by over 200 bps.
• Adjusted EBITDA¹ of $174 million, or 23% of revenue.
• Net loss of $180 million for the full year which included $151 million of impairment charges.
• Generated $59 million in operating cash flows for the full year, and ended the year with $109 million of cash, cash equivalents and restricted cash.

Management Commentary

“I’m proud to share that our Q4 results capped off the Year of the Core with strong bottom-line growth and margin expansion, nearly doubling our Adjusted EBITDA and achieving positive free cash flow for the year, Cresco Labs CEO Charles Bachtell said. “We’ve set a new standard for ourselves, making this focus on our core part of our DNA moving forward and we’re using these wins to fuel our business and capitalize on the many growth catalysts ahead.

“Everything we did in 2023 was designed to prepare us to take advantage of the monumental opportunities ahead, including; maximizing our upcoming adult-use catalysts, capitalizing on our brands and winning with independents, and expanding our retail to provide the consumer with the best cannabis experience possible.”

Balance Sheet, Liquidity and Other Financial Information

• As of Dec. 31, 2023, current assets were $278 million, including cash, cash equivalents and restricted cash of $109 million. The company had senior secured term loan debt, net of discount and issuance costs, of $386 million and a mortgage loan, net of discount and issuance costs of $18 million.
• Total shares on a fully converted basis to subordinate voting shares were 467,871,956 as of Dec. 31, 2023.

Consolidated Financial Statements

The financial information reported in this press release is based on unaudited management prepared financial statements for the three months and year ended Dec. 31, 2023. These financial statements have been prepared in accordance with U.S. GAAP. This release contains certain preliminary financial results for the three months and year ended Dec. 31, 2023. These preliminary results for the three months and year ended Dec. 31, 2023, are provided prior to completion of all internal reviews and external audit procedures, and are therefore subject to adjustment until the filing of the company's audited consolidated financial statements, which the company expects to file on SEDAR+ and EDGAR on or about March 14, 2024.

The audit of the consolidated financial statements for the year ended Dec. 31, 2023, is currently in process. All financial information contained in this press release is qualified in its entirety with reference to such financial statements. While the company does not expect there to be any material changes between the information contained in this press release and the consolidated financial statements it files on SEDAR+ and EDGAR, to the extent that the financial information contained in this press release is inconsistent with the information contained in the company’s financial statements, the financial information contained in this press release shall be deemed to be modified or superseded by the company’s filed 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 Dec. 31, 2023, filed on SEDAR+ and EDGAR.

Cresco Labs references certain non-GAAP financial measures throughout this press release, which may not be comparable to similar measures presented by other issuers. Please see the “Non-GAAP Financial Measures” section below for more detailed information.

Non-GAAP Financial Measures

Earnings before interest, taxes, depreciation and amortization (EBITDA), Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross profit, Adjusted gross margin, Adjusted Selling, general and administrative (Adjusted SG&A) and Free Cash Flow 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.

View the company’s complete Q4 2023 and full-year 2023 balance sheet here.