Cresco Labs Inc: Profitable 2018 With Revenue Growth of 294%
Cresco Labs Inc Emerges From Obscurity
In less than two months, Cresco Labs Inc (OTCMKTS:CRLBF, CNSX:CL) has gone from relative obscurity to being a major player in the U.S. cannabis industry.
In March, Cresco announced that it was acquiring VidaCann Ltd. for $120.0 million, giving it access to the lucrative Florida market. (Source: “Cresco Labs Enters Florida – Will Have Access to 65% of the Total Addressable U.S. Cannabis Market,” Cresco Labs Inc, March 18, 2019.)
In early April, the company announced its blockbuster acquisition of Origin House (OTCMKTS:ORHOF, CNSX:OH) for $815.7 million in stock. The deal gives Cresco Labs access to California and represents the largest acquisition of publicly traded U.S. marijuana firms.
Following the closure of the acquisition deal, Cresco’s products will be available in over 725 dispensaries, giving it the “the largest and most strategic footprint of any cannabis company in the United States.” (Source: “Cresco Labs to Acquire Origin House in Largest-Ever Public Company Acquisition in the U.S. Cannabis Sector,” Cresco Labs Inc, April 1, 2019.)
On April 24, the Chicago-based marijuana company announced that its fourth-quarter revenue soared 411%, its full-year revenue advanced 294%, and that it swung to profitability of $3.9 million in 2018. (Source: “Cresco Labs Announces Profitable Fourth Quarter 2018 Financial Results with Revenue Growth of 411% Year-over-Year and 33% Quarter-over-Quarter,” Cresco Labs Inc, April 24, 2019.)
All of this should help Cresco reach its 2021 revenue target of $1.0 billion, a number that dwarfs the $43.3 million in revenue that the company recorded in 2018. That target will rival larger Canadian licensed producers.
Cresco Labs Overview
Cresco Labs is one of the country’s leading multi-state cannabis companies that operates in both the medical and recreational markets.
Whereas some marijuana firms are only good at one thing, Cresco Labs operates in the entire seed-to-sales process. The company is involved in cultivating, manufacturing, branding, wholesale distribution, and retail. (Source: “Corporate Overview,” Cresco Labs Inc, last accessed April 26, 2019.)
Cresco is operational in seven U.S. states, with binding transactions pending in New York, Massachusetts, and Florida. On March 25, it received approval to enter Michigan.
The company currently has 21 dispensaries, 15 production facilities, 51 retail licenses, and a portfolio of roughly 350 products, and 5,000 stock keeping units (SKUs).
In just a short period, Cresco has established a huge presence in medical cannabis markets that have high barriers to entry and limited competition. The company successfully navigated the most regulated markets in the country (Illinois, Ohio, and Pennsylvania).
In the cases of Ohio and Pennsylvania, Cresco was the first cultivator to have its products hit the shelves, the first to have a dispensary be approved to open, and the first to legally sell products to patients.
Thanks to the company’s two recent acquisitions, Cresco’s already strong U.S. footprint will soar in the coming years.
Cresco Labs Inc Stock
| Cresco Labs Stock Information | |
| Market Cap | $1.8 billion |
| 52-Week High | $14.39 |
| 52-Week Low | $4.19 |
| Float | 211.9 million |
| 50-Day Moving Average | $10.88 |
| 200-Day Moving Average | $8.24 |
(Source: “Cresco Labs Inc. (CRLBF),” Yahoo! Finance, last accessed April 26, 2019.)
Cresco Labs stock began trading in Canada on December 3, 2018 and in the U.S. on March 6, 2019. Since December 2018, the stock has climbed 116%, and since March 6, the company’s share price has advanced a respectable 47%.
Despite its acquisition announcements, Cresco Labs’ share price didn’t pop like other big cannabis stocks have after making similar kinds of announcements. Instead, CRLBF stock continues to climb at a steady pace.
Chart courtesy of StockCharts.com
Q4 Revenue Up 411%, 2018 Revenue Increases 294%
On April 24, Cresco Labs announced its financial results for the fourth quarter and year ended December 31, 2018.
Fourth-quarter revenue soared 411% year-over-year and 33% sequentially to $17.0 million. (Source: “Cresco Labs Announces Profitable Fourth Quarter 2018 Financial Results with Revenue Growth of 411% Year-over-Year and 33% Quarter-over-Quarter,” Cresco Labs Inc, op cit.)
Cresco narrowed its fourth-quarter net loss to $2.6 million from $3.0 million in the same prior-year period. Fourth-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $13.7 million, versus a loss of $3.1 million in the fourth quarter of 2017.
Fourth-quarter 2018 results included $16.1 million in expenses related to share-based incentive compensation, the stock going public in Canada, acquisitions, and financing activities.
“We completed 2018 with another quarter of positive pre-tax income that reflected continued strong execution across all areas of our operations,” said Co-founder and CEO Charles Bachtell. (Source: Ibid)
“We continue to successfully enter new markets with beneficial regulatory structures, increase our production and processing capacity, and expand the distribution for our unique and sophisticated ‘house of brands.’”
As mentioned earlier, Cresco’s full-year revenue was up 294% and the company swung to full-year profitability of $3.9 million, compared to a 2017 net loss of $4.0 million.
Cresco Labs ended 2018 with total assets of $318.4 million, including cash and cash equivalents of $131.3 million. With no debt on the balance sheet, Cresco had a working capital position of $172.7 million.
Analyst Take
Cresco Labs stock is an excellent U.S. marijuana stock that is just getting started. The company recently reported very strong fourth-quarter and year-end results and announced two big acquisitions.
With its acquisition of VidaCann, Cresco Labs Inc gets access to the Florida market, while its acquisition of Origin House opens the doors to California. The two acquisitions will make Cresco Labs products available in more than 725 dispensaries.
Cresco is still a small company, with a market cap of just $1.8 billion, and CRLBF stock has been trading at valuations much lower than its larger-cap peers.
All of those dynamics will change in the coming months, however. Following its acquisitions, Cresco Labs will have a valuation in excess of $4.0 billion, putting it in the same league as Canada’s biggest marijuana companies.
