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Cresco Labs’ Q1 Earnings: Dazzling Growth amid COVID-19

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Cresco Labs (OTCMKTS:CRLBF) reported its results for the first quarter of fiscal 2020 on May 28. The stock declined 4.2% and closed at $4.8 on the OTC markets yesterday. Cresco Labs stock also fell by 4.9% and closed at 6.68 Canadian dollars on the Canadian Securities Exchange. Meanwhile, the Horizons Marijuana Life Sciences ETF rose 1.9% yesterday. The company reported another good quarter with growing revenues and positive EBITDA.

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Cresco Labs’ Q1 earnings

Cresco Labs reported a drastic YoY (year-over-year) increase of 215.1% in its revenue to $66.4 million in the first quarter. The revenue was almost in line with a consensus estimate of $66.9 million. Sequentially, the revenue also increased from $41.3 million in the fourth quarter of fiscal 2020. The revenue growth was the product of increased cultivation, rising sales in Illinois and Pennsylvania, and operational improvements in California.

The adjusted EBITDA came in higher than the estimates at $3.2 million compared to a loss of $6.1 million a year ago. Analysts expected Cresco Labs to report a positive EBITDA of $1.3 million in the first quarter. The EBITDA was also higher compared to $2.8 million in the fourth quarter of fiscal 2019. Management thinks that the first quarter of 2020 turned out to be the company’s most productive quarter.

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Expansion strategies to drive growth in 2020

Cresco Labs’ expansion strategies to strengthen its footprint in more US markets continued despite the COVID-19 pandemic. Illinois saw drastic cannabis sales in April, which was the first month of the complete lockdown. Illinois legalized recreational cannabis on January 1 and the sales have been surging. Cresco Labs’ management thinks the Illinois market could become a $1 billion industry in its first year. As a result, the company sees tremendous opportunities in the state.

While Pennsylvania sales took a hit this quarter due to lower demand, regulatory holdups led to the stagnant growth in Massachusetts and Nevada.

Prior to Cresco Labs’ first-quarter earnings, the company announced its expansion plans. As I discussed in Cresco Labs Announces Expansion in Ohio before Q1 Earnings, the company has a partnership with Verdant Creations to buy four additional Ohio dispensaries. On May 27, the company announced the opening of its sixth store in Illinois—Sunnyside Danville. Cresco Labs also announced the opening of the first adult-use dispensary in downtown Chicago—Sunnyside River North. The company ended the quarter with $68.6 million in cash and cash equivalents.

Cannabis companies’ earnings

US cannabis company MedMen (OTCMKTS:MMNFF) reported its results for the third quarter of fiscal 2020 on May 27. Surprisingly, the results were better than expected, which set its path to recovery in 2020. The company reported 41% YoY revenue growth to $45.9 million. The EBITDA losses were lower at $20.7 million. Read Did MedMen’s Q3 Earnings Start a Path to Recovery? to learn more.

Canopy Growth (NYSE:CGC)(TSE:WEED) will likely report its results for the fourth quarter of fiscal 2020 on May 29 before the market opens. On Thursday, Canopy Growth stock rose 9.1%, while MedMen stock fell 23.8%, respectively.

Stay with us to learn more about the marijuana sector.

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