Cresco Labs (CL) Q2 2025 earnings summary

Executive summary

• Q2 2025 revenue reached $164 million, with strong brand and retail performance offsetting price compression and maintaining leading market share in key states.

• Adjusted EBITDA was $41 million (25.0% margin), and adjusted gross profit was $83 million, reflecting operational efficiency and disciplined capital allocation.

• Net loss for Q2 2025 was $14 million, including $9 million in non-cash impairment charges related to California assets held for sale.

• Strategic actions included exiting the California market, streamlining operations, and prioritizing high-return organic growth and disciplined M&A.

• Signed a commitment letter to refinance $325 million of debt, extending maturity to 2030 and enhancing financial flexibility.

Financial highlights

• Q2 2025 net revenue was $163.6 million, down 1.3% sequentially, mainly due to price compression in Illinois retail.

• Adjusted gross margin was 50.6%, up from Q1 2025 but down from Q2 2024, aided by lower cost of goods sold in Illinois.

• Adjusted SG&A was $50 million, with a margin of 30.3%, supported by a $1 million recovery in previously reserved bad debt.

• Operating cash flow was $9 million, with free cash flow for Q2 2025 at negative $3.8 million due to capital investments.

• Ended the quarter with $153 million in cash and equivalents and $466.9 million in net debt.

Outlook and guidance

• Q3 revenue expected to remain roughly in line with Q2, with increased cultivation capacity in Illinois and new dispensary openings in Ohio and Pennsylvania driving future growth.

• Some margin drag expected in Q3 and Q4 as initial harvests from new capacity are sold, but operational efficiencies are expected to help offset this.

• Management expects to pursue M&A opportunities in productive states, focusing on sustainable growth and redeploying capital for higher returns.