Cresco Labs (CL) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $184 million, with adjusted gross profit of $97 million and a 52% margin, reflecting significant year-over-year improvements and retail growth offsetting price compression.

• Adjusted EBITDA reached $54 million, up 33% year-over-year, with a 29% margin, driven by operational efficiencies and retail performance.

• Operating cash flow more than doubled year-to-date, supporting continued investment in core growth states and innovation.

• Net loss was $51 million, including a one-time $61 million tax charge due to a new tax position.

• Strategic focus remains on strengthening core markets, expanding retail, and preparing for adult-use legalization in Ohio, Pennsylvania, and Florida.

Financial highlights

• Net revenue for Q2 2024 was $184.4 million, down from $197.9 million in Q2 2023.

• Adjusted gross profit rose to $97 million (52.4% margin), up 4% year-over-year.

• Adjusted EBITDA increased to $54 million (29% margin), up from $40.5 million (20.5%) year-over-year.

• Free cash flow improved to $10.8 million from $0.7 million year-over-year.

• SG&A expenses reduced to $54 million; adjusted SG&A down 14% year-over-year to $53 million, or 29% of revenue.

Outlook and guidance

• Q3 revenue expected to be relatively flat due to the late start of Ohio adult-use and limited initial supply; growth anticipated in Q4.

• Significant year-over-year growth projected for 2025 and 2026 as adult-use markets ramp up.

• Gross margins targeted around 50%, with some quarterly variability expected.

• Estimated tax savings of $65–$70 million in 2024 from a new tax position, with similar impacts anticipated in future years.

• Upon cannabis rescheduling to Schedule III, expects further reduction in income tax expense and increase in deferred tax asset.