Cresco Labs Inc.’s stock experienced a significant surge of 8.4% on Wednesday following the release of its third-quarter financial report. Despite a wider loss primarily attributed to a non-cash impairment, the U.S. cannabis multi-state operator surpassed FactSet’s consensus estimate for revenue.
Financial Performance
Cresco Labs reported a net loss of $113.5 million for the third quarter, compared to $43.5 million in the same period last year. While the company did not disclose a loss-per-share figure, with a total of 468.96 million shares outstanding as of September 30, the estimated loss per share in the latest quarter amounts to approximately 24 cents.
The third-quarter loss included a non-cash impairment totaling $129 million. In terms of revenue, there was a slight decline from $210.5 million in the year-ago quarter to $190.6 million in the latest period. This decrease can be attributed to the company’s strategic decision to scale back operations and control costs.
Exceeding Expectations
Despite the decline in revenue, Cresco Labs managed to surpass FactSet’s consensus revenue estimate of $183.6 million. This achievement highlights the company’s ability to navigate challenges while maintaining strong financial performance.
Operational Changes
Cresco Labs made several operational adjustments to optimize its business. In California, the company scaled back and restructured its operations to improve efficiency. Additionally, it divested its subscale processing operation in Maryland. Furthermore, Cresco Labs completed its exit from the Arizona market by selling assets for $7 million.
Looking forward, the company expects fourth-quarter revenue to experience a decrease in the mid-single digits compared to the third quarter. This projection is influenced by seasonal weakness and the strategic decision to withdraw from the Arizona market. On a positive note, Cresco Labs is planning to open new stores in Florida and Pennsylvania, expanding its presence in these key markets.
Stock Performance
Despite the wider loss reported in the third quarter, Cresco Labs’ stock has demonstrated resilience. In 2023, the stock experienced a decline of 6.4%, while the AdvisorShares Pure U.S. Cannabis ETF MSOS recorded a year-to-date loss of 2.4%.
In summary, Cresco Labs’ strong revenue performance during the third quarter showcases its ability to adapt and thrive in challenging market conditions. While the wider loss is a concern, the company’s strategic adjustments and expansion plans position it well for future growth.