Cresco Labs (CL) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue reached $180 million, with a 53% adjusted gross margin and 29% adjusted EBITDA margin, despite a sequential revenue decline due to Illinois market softness and price compression.

• Achieved record operating cash flow of $49 million for Q3 and $103 million year-to-date, up 66% from the prior year.

• Maintained leading branded market share in Illinois, Pennsylvania, Massachusetts, and top three in Ohio.

• Adjusted EBITDA margin expanded by up to 280 basis points year-over-year due to operational efficiencies.

• Focused on profitability, cash flow, and strategic reinvestment in core and growth markets.

Financial highlights

• Q3 2024 revenue was $179.8 million, down 6% year-over-year from $190.6 million.

• Adjusted gross profit for Q3 2024 was $95.3 million (53% margin), up 250 bps year-over-year.

• Adjusted EBITDA for Q3 2024 was $51.3 million (29% margin), up 5% year-over-year.

• Free cash flow for Q3 2024 was $43 million; YTD free cash flow was $87.3 million vs. $12.7 million prior year.

• Net loss for Q3 2024 was $7.7 million, a significant improvement from a $113.4 million loss in Q3 2023.

Outlook and guidance

• Q4 revenue expected to decline mid-single digits sequentially due to continued market pressure in Illinois and Ohio.

• Targeting gross margins around 50% and keeping SG&A flat in Q4.

• Revised tax strategy expected to generate $70 million+ in annual cash benefit starting 2024.

• Focus remains on maximizing adult-use conversions, expanding retail network, and driving operational efficiencies.

• Continued focus on generating strong, sustainable operating and free cash flow.