Please ensure Javascript is enabled for purposes of website accessibility

Cresco Labs Posts 144% Revenue Growth in Q4

By Keith Speights - Updated Apr 28, 2020 at 6:52AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The U.S.-based cannabis operator's bottom line, though, deteriorated significantly in the fourth quarter.

It's been pretty rough for Cresco Labs' (CRLBF -1.00%) shareholders so far in 2020. The stock has dropped 36% year to date after plunging more than 60% at one point in March. 

But investors had a reason for hope coming into this week. Cresco reported its 2019 fourth-quarter and full-year results after the market closed on Monday. And there was both good news and bad news. Here are the highlights from the cannabis operator's Q4 update.

Cannabis leaves on top of hundred dollar bills

Image source: Getty Images.

By the numbers

Cresco Labs announced fourth-quarter revenue of $41.4 million, a strong 144% year-over-year jump and a 14% quarter-over-quarter increase. The hitch, though, was that this result fell short of the average analysts' Q1 revenue estimate of $43.7 million.

The company posted a net loss in Q4 of $45.2 million, or close to $0.15 per share. This reflected significant deterioration from the net loss of $4.4 million in the prior-year period. It was also worse than the consensus analysts' estimate of a net loss of $0.06 per share.

Cresco ended the fourth quarter with cash, cash equivalents, and short-term investments of $49.1 million. This was a big drop from the $131.3 million on hand at the end of 2018.

Behind the numbers

The company said that its revenue increase in Q4 was driven by expansion into new markets as well as growth in states where it already operated. In particular, its operations in Arizona, Illinois, and Pennsylvania fueled revenue growth. The acquisitions of Valley Ag and HHH also boosted Cresco's Q4 revenue.

Cresco's bottom line was weighed down by $7.2 million in acquisition and other non-core costs. The company also recorded $4.1 million in share-based compensation, $3.4 million in expansion, relaunch, and rebranding costs, plus $1.3 million related to the fair value markup on acquired inventory.

The cannabis operator used cash during the fourth quarter on the expansion of its cultivation, processing, and retail facilities. It also deployed capital toward funding its current and pending acquisitions.

One development that didn't happen in the fourth quarter that investors eagerly anticipated was Cresco's acquisition of Origin House. However, the deal closed on Jan. 8, 2020. Cresco's revenue in the fourth quarter would have totaled $56 million with the inclusion of Origin House.

Looking ahead

Cresco expects to report revenue of $66.5 million in the first quarter of 2020, reflecting a 216% year-over-year jump and a 61% quarter-over-quarter increase. Much of this growth will stem from the Origin House transaction.

However, the company won't be moving forward with its acquisition of Tryke. Cresco said that it's had to adapt its capital allocation strategy "given several recent changing dynamics." This move could be viewed by investors as a positive for the marijuana stock, though, since it will enable the company to conserve its cash.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Cresco Labs Inc. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Cresco Labs Inc. Stock Quote
Cresco Labs Inc.
$3.49 (-1.00%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.