U.S. cannabis-dispensary operator Cresco Labs posts narrower loss as revenue dips

By Steve Gelsi

First-quarter net income totaled $16 million, after excluding taxes

Cresco Labs Inc.'s stock rose Wednesday after the U.S. cannabis-dispensary operator matched analyst estimates for first-quarter revenue, as its loss narrowed.

Cresco Labs (CRLBF) reported a loss of $2.06 million for the three months that ended March 31, down from $27.8 million in the year-ago quarter.

Excluding taxes, first-quarter net income totaled $16 million, the company said.

Cresco Labs does not provide earnings-per-share figures.

Revenue at the Chicago-based multistate cannabis-dispensary operator fell to $184.3 million from $194.2 million in the year-ago quarter.

Cresco Labs matched the FactSet consensus estimate of $184.3 million for first-quarter revenue. Excluding the impact from strategic divestitures, first-quarter revenue was about flat, the company said.

Cresco Labs' stock was up by 2.7% on Wednesday.

"The recently announced potential federal rescheduling will fundamentally change the future for cannabis and all of its stakeholders," Chief Executive Charles Bachtell said in a statement.

Cresco Labs has maintained a "very strong performance across our retail and branded product business resulting in a 10x increase in operating cash flow year-over-year," he said.

Looking ahead, Cresco Labs sees potential industry catalysts in the launch of the recreational cannabis market in Ohio as well as the planned November vote in Florida on a statewide adult-use ballot question. Efforts to legalize recreational marijuana in the Pennsylvania legislature are continuing.

Prior to Wednesday's moves, Cresco Labs' stock has risen by 49% so far in in 2024, ahead of the Nasdaq's gain of 10%.

Lowering the classification of cannabis to the less restrictive category of Schedule III from its historical Schedule I listing is expected to remove the costly 280E tax-code provision for legal cannabis operators.

Under 280E, cannabis companies are not allowed to claim standard business deductions, and they must pay millions of dollars more in taxes than other businesses.

Trulieve Cannabis Corp. (TCNNF) has already been challenging its 280E tax payments in a $148 million tax-refund filing based on its view of the situation.

Curaleaf Holdings Inc. (CURLF) has said it would save more than $150 million in 2024 taxes if 280E is eliminated.

Also read: Nasdaq finally 'warming up' to Canadian cannabis companies with U.S. exposure. Could American growers be next?

-Steve Gelsi

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05-15-24 1031ET

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