Cresco Labs Reports Q2 2026 Results: Full Earnings Call Transcript

Cresco Labs (OTC: CRLBF ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This content is powered APIs. For comprehensive financial data and transcripts, visit Access the full call at Summary Cresco Labs reported Q2 2026 revenue of $173 million, a 15% sequential increase, with $89 million in adjusted gross profit and a 52% margin.

The company's growth strategy includes deepening market presence where leading and finding new market inroads, highlighted by strategic M&A in Pennsylvania, resulting in an 11% increase in gross profit dollars for acquired stores. Cresco Labs is preparing for federal cannabis reform, which includes potential uplisting and improved access to capital, aiming to unlock equity value through these regulatory changes. Operational highlights include successful integration of new dispensaries in Pennsylvania and Ohio, with Sunnyside stores outperforming state averages in revenue.

Management expressed optimism about future market opportunities, including anticipated regulatory changes and market expansions in states like Texas and international markets. CFO Sharon Schuller announced her decision to step down, with a transition plan in place as the company searches for a new CFO. Full Transcript OPERATOR Good day and welcome to Cresco Labs second quarter 2026 earnings conference call. All participants will be in listen-only mode.

Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then one on your touchtone phone. To withdraw your question, please press the star key, then one again.

Please note this event is being recorded. I would now like to turn the call over to TJ Cole, Senior Vice President, Corporate Development and Investor Relations for Cresco Labs. Please go ahead. TJ Cole — Senior Vice President, Corporate Development and Investor Relations Thank you.

Good morning and welcome to Cresco Labs second quarter 2026 earnings conference call. On the call today we have Chief Executive Officer and Co-Founder Charles Bachtell, Chief Financial Officer Sharon Schuller, and President Greg Butler, who will be available for the Q&A. Prior to this call, we issued our second quarter earnings press release which has been filed on SEDAR and is available on our investor relations website. These preliminary results for the second quarter are provided prior to completion of all internal and external reviews and therefore are subject to adjustment until the filing of the Company's quarterly financial statements.

We filed our corresponding financial statements and MD&A for the quarter ended June 30, 2026 on SEDAR and EDGAR earlier this morning. Before we begin, I want to remind you that statements made on today's call may contain forward-looking information. Actual results may differ materially. The risks, uncertainties and other factors that could influence actual results are described in our earnings press release and in the most recent annual information form and MD&A filed with the securities regulators.

This call also contains non-GAAP measures, also outlined in our earnings press release and in the MD&A filed with the securities regulators. S. dollars and all interim financial information is unaudited. With that, I'll turn the call over to Charlie.

Charlie Bachtell — Founder and CEO Good morning everyone and thank you for joining Cresco Labs second quarter 2026 earnings call. Last quarter we said that Q1 was the baseline for our 2026 growth and we would build from there. Q2 delivered ahead of those expectations. We generated $173 million in revenue, up 15% sequentially.

We produced $89 million in adjusted gross profit at a 52% margin, $40 million in adjusted EBITDA at a 23% margin, up 20% sequentially showing operating leverage, and we generated $15 million in operating cash flow. These results reflect new dispensaries, market stabilizations, and our continued operating discipline that converts growth into profitability and cash. Before I go further, I want to thank the Cresco team. Quarters like this don't happen by accident.

They're the result of a highly focused team that's executing remarkably across wholesale and retail while knocking every new store opening and integration out of the park. This morning I'll walk through the quarter by touching on three themes. First, executing on our multi-pronged growth strategy. Second, winning where we operate.

And third, unlocking equity value through federal reform. First, our growth strategy. Our growth strategy runs along two planes. Where we already lead, we go deeper.

Where we're not operating yet, we find compelling inroads. And in both cases we have organic execution and disciplined M&A in our toolbox. Pennsylvania is a clear example of reinforcing our position as the industry's consolidator of choice through strategic M&A. In Q2, we completed our first quarter operating nine acquired dispensaries under a managed service agreement that allowed us to begin establishing our operating standards and capture revenue ahead of close, which is pending state approval.

The transaction has been immediately accretive. Without rebranding a single dispensary, we've increased the stores' gross profit dollars by 11% compared to pre-acquisition baselines. This means the largest value unlock is still ahead of us as we introduce the Sunnyside brand and deploy our complete operating playbook after we close and take ownership. The Pennsylvania story is replicable because integration and operating capabilities are at the center of our consolidation approach.

We do not merely tack acquired stores onto our platform. Our operating playbook lets us measurably improve them. We hold the number one branded share in markets like Pennsylvania, Illinois, and Massachusetts, and Sunnyside stores generate over 30% more revenue than state averages. So when we apply our brands and operating playbook, we're not only capturing internal margin, we're also selling more to more loyal customers at better economics.

That's why assets are worth more inside of our platform. We're also leaning into organic opportunities to build positions in tomorrow's markets at today's entry cost. In Kentucky, our operations have shifted from buildout into revenue generation. Our first branded products hit dispensary shelves in late June, and the first Sunnyside dispensary is on track to open in the fourth quarter.

Above all, our growth strategy remains disciplined. Every opportunity is evaluated against clear thresholds: accretive economics, low integration risk, and markets with structural advantages. Second, we win where we operate. For Cresco, winning means leading product categories where brands matter most and running the most productive retail in our markets, all while rising above competitive and pricing pressures.

In the second quarter, we are winning in core markets. Pennsylvania, another clear example with depth and execution compounding. We currently hold a record-setting lead over our competition with the number one branded share in the state at 16%. When our latest acquisition closes, Sunnyside will also be the number one retail banner in Pennsylvania.

While Pennsylvania demonstrates winning when we buy, Ohio demonstrates winning when we build. Sunnyside had the number two retail share position in the state and our newest dispensaries consistently perform better than our peers. This is by design. We followed a careful site selection process, we opened doors quickly, and we started scaling from day one.

On the cultivation side, our SOPs and innovative growing approach are enabling us to get more leverage out of the assets we already own—more supply at lower cost without sacrificing the quality that our brands are built on. In Illinois, competition intensified again this quarter as increasing vertical integration continues shifting the state's retail landscape. And still we hold the number one position in flower, concentrates, and edibles. And we've held our revenue per gram of flower roughly even as the broader market compresses.

Sunnyside remains the number one retailer in the state and our stores continue generating per-store revenues well above the state average. That same discipline is also paying off in Massachusetts, where a year focused on operational improvements is now showing in the numbers. Net wholesale revenue grew 27% year over year, and we hold the number one brand portfolio in the state, led by our position in flower. Execution is the through line that connects every one of those markets from the grow rooms to the dispensary shelves.

Our teams keep getting more out of the assets we already own—better yields, better products, more productive stores, stronger brands. This is what allows us to hold share in competitive markets and expand strategically, all while protecting margin. In closing, for the last part of my prepared remarks, I want to step back from the quarter and touch on how we are thinking about equity value creation as the federal landscape changes. For years, the cannabis industry has grappled with a significant disconnect between the quality of businesses it's built and the value the market assigns to them.

That gap is structural. Federal illegality, punitive taxation, and restricted access to capital and investors have all obscured the sophistication this industry has already achieved. Now, for the first time, those structures are finally changing. Rescheduling is the first true federal reform this industry has ever achieved.

Its significance for patients and cultural legitimacy cannot be overstated and it directly improves the underlying economics of this business. Removing 280E means eliminating the unfair tax burden that's weighed on this industry's income statements from the beginning. Net income improves, balance sheets strengthen, and operators can reinvest more of every dollar they earn. That is how the industry truly matures into America's next great growth sector.

S. S. exchanges. Rescheduling has changed the listing analysis; companies in our sector are starting to complete that process.

At Cresco, we're already executing on everything within our control and, when federal regulations allow, we will be ready to go. At the same time, we're also having conversations with leading banks and capital markets partners. As the broader cannabis environment normalizes, the opportunity set widens. Whether that's through an uplisting, improving our cost of capital, or funding growth through M&A, we're making sure we're ready to move on whichever approach creates the most value for shareholders.

Before handing it over to Sharon, I want to first share that she has decided to step down from her role as CFO. I want to personally thank her for building the financial infrastructure and discipline that positions us to pursue the opportunities I just described. We're grateful for her contributions and wish her well. We started our search for a new CFO for this next chapter and we're working closely with Sharon to ensure a smooth transition.

With that, I'll let Sharon walk you through the Q2 financial performance in more detail. Sharon Thank you, Charlie, and good morning, everyone. Before I go deeper on the numbers, I want to thank the Cresco team. I'm proud of what we've built together.

The company is more focused, more financially disciplined, and better positioned operationally and from a capital markets readiness standpoint than it was even a year ago. I'm looking forward to working together on a seamless transition that sets Cresco up for success in this next phase. And I'm excited about my own next chapter and the opportunities ahead. Turning to the numbers, as we outlined last quarter, Q1 established the baseline for the year and, as expected, our growth initiatives began showing up in our financials.

In Q2 we reported 173 million in revenue, up 15% sequentially. That growth was driven by the contribution of the nine Pennsylvania dispensaries operating under our management service agreement, our new Sunnyside locations in Ohio, anticipated seasonal recovery, and stabilization in Michigan after the new state tax was implemented. Importantly, the business also grew organically, up 4% sequentially.

Retail revenue was 121 million, up 19 million or 18% sequentially, and net wholesale revenue was 52 million, up 3 million or 7% sequentially, and excluding California, we've been able to grow wholesale revenue organically year over year by 4%, a testament to our teams in what is an increasingly vertical and competitive environment. Adjusted gross profit was 89 million or 52% of revenue, above the high end of the range we guided to and up over 100 basis points year over year and sequentially.

The improvement was driven by wholesale products margin, led by the margin recovery in Massachusetts and Ohio where better yields and quality are translating into improved unit economics. We also saw favorable costs in the quarter and we would not expect to repeat to the same extent going forward. Partially offsetting that was a mix shift towards lower-margin volume in Michigan and a retail rate in Pennsylvania reflecting increased promotional activity in the nine stores pending acquisition. This sell-through of acquired inventory is a normal, temporary part of any integration as we position those stores to carry our standard assortment going forward.

Adjusted SG&A was 55 million or 32% of revenue compared to 51 million and 34% of revenue in Q1. The increase reflects the new Pennsylvania stores, our new Ohio locations, and continued investment in our Kentucky launch—exactly the growth spend we outlined. Productivity gains across the base business and corporate functions, including our continued deployment of AI and automation, offset a meaningful portion of growth-related costs. Adjusted EBITDA was 40 million or 23% of revenue, in line with the margin we guided to and up 7 million sequentially.

Importantly, adjusted EBITDA grew 20% faster than revenue growth sequentially as we saw some operating leverage. Turning to cash flow, we generated 15 million in operating cash flow in the quarter compared to a use of 6 million in Q1, consistent with the seasonal pattern we described. Last quarter we invested 9 million in capital expenditures, primarily cultivation upgrades in Ohio, Pennsylvania, and Massachusetts, and ended the quarter with 67 million in cash and restricted cash.

Looking ahead to the third quarter, we expect net revenue to be roughly in line with Q2 as we continue ramping the acquired store network and begin generating revenue from Kentucky, offsetting continued price compression and competition. We expect gross margin in the high 40s to 50% as we work through some higher-cost inventory in the second half. We expect adjusted SG&A to be essentially flat in dollar terms as productivity gains and cost discipline absorb the cost of continued expansion, and adjusted EBITDA margins of approximately 20%. With that, I'll turn it back to Charlie for closing remarks.

Charlie Bachtell — Founder and CEO Thank you, Sharon. Let me close by pulling the quarter together. In Q2, we delivered growth ahead of the expectations we set and converted that growth into profit and cash. We demonstrated in Pennsylvania and Ohio that we can buy, we can build, and we can integrate at scale.

And the federal landscape has moved further in the past 12 months than it has in history. The way we see it, our shareholders win with Cresco for two reasons. The first is the business itself: exceptional talent executing on a disciplined strategy, escalating growth initiatives, expanding operating leverage, and a cost structure that combines both to generate cash. The second is the environment around the business—reform that strengthens net income and balance sheets industry-wide and access to cheaper capital and new investors.

Each of these forces shores up the other. Stronger cash generation strengthens the balance sheet. A stronger balance sheet lowers our cost of capital. And a lower cost of capital funds more growth.

Cresco has the operating platform, the balance sheet, and now a federal backdrop moving in our favor. And we're converting all three into long-term value for shareholders. Again, thank you to the entire Cresco team for your execution this quarter and to our shareholders for your continued support. With that, we'll open the call for questions.

OPERATOR We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press Star one to raise your hand. To withdraw your question, press Star one again.

We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Erin Gray with Alliance Global Partners.

Your line is open. Please go ahead. Erin Gray, Analyst at Alliance Global Partners Hi, thank you for the questions, and first and foremost, Sharon, just want to say best of luck to your future endeavors. It's been great working with you.

You know, maybe in that line I'll have a first question for you on the gross margin—maybe some of the drivers that led to the expansion in 2Q. I know you've been kind of looking for kind of similar, kind of high 40s, 50 they just guided for 3Q.