It's been pretty rough for Cresco Labs' (CRLBF 1.51%) 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.
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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.
