The Chicago-based marijuana chain
reported good sales for its December quarter, but disappointed some expectations for the period’s profits.
After the Thursday morning report, the stock (ticker: CRLBF) slipped 4% in over-the-counter trading to $15.85, in a flat market.
Cresco’s quarterly sales nearly tripled to $162 million, and its sales for the 2020 year grew the most of the big U.S. operators, to reach $476 million. The company has pushed to sell its cannabis brands through other companies’ stores, thereby getting a larger portion of revenue from wholesaling than its retail-focused rivals do.
“We are the #1 wholesaler of branded cannabis products, period,” Chief Executive
said on a conference call. For the year, $274 million in revenue came from wholesaling brands like Cresco and High Supply. Bachtell also talked about the company’s recent acquisition deals in Massachusetts and Florida.
Cresco is active in nine states, but most sales come from Illinois, Pennsylvania, and California. Licensed sellers in California saw a sequential sales drop in the December quarter, when that state’s illicit production generally comes to market. Cresco’s California sales also dipped, while still rising 20% year-over-year.
Compared with rivals like
Green Thumb Industries
(GTBIF), Cresco has fewer retail outlets, with 19 stores open through the quarter. Sales through those stores were strong, however, with the quarter seeing an average of $3.6 million in revenue per store.
Like most peers—and indeed most public companies these days—Cresco reports earnings numbers adjusted for expenses that are noncash or nonrecurring. For December’s quarter, Cresco reported adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $50 million. Adjusted Ebitda was $116 million for the full year. The net numbers were a quarterly loss of $23 million and annual loss of $37 million.
Parsing Cresco’s Ebitda adjustments, some analysts commented that its calculations added back expenditures that other companies seemed to debit. The excluded costs amounted to about $11 million in quarterly charges for expansion, relaunching, and rebranding. If counted against Cresco’s December earnings, wrote Stifel analyst Andrew Partheniou in a Thursday note, those costs would have left the quarter’s adjusted Ebitda at $39.2 million. While still amounting to 24% of sales, that number is less than the reported $50 million, or the $46.6 million expected by the analyst consensus—and represents a sequential decline. Perhaps that is why Cresco’s stock is selling off.
When asked by Needham analyst Matt McGinley about the expense exclusions, Cresco financial chief Dennis Olis told conference call listeners that the excluded items were all one-time expenses, including some incurred because of Covid-19. “Those costs will not carry into 2021,” Olis said.
Needham rates Cresco stock a Hold.
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