Cresco Labs, one of the largest multi-state cannabis operators in the U.S., has seen continued growth but it’s still chasing added efficiencies in its manufacturing processes.
During his company’s most recent earnings call, Cresco Labs CEO Charles Bachtell said that, to maintain strong growth in the pre-roll category, Cresco Labs has been testing new processes and technology to increase productivity and margins.
“The early results are promising with a 10x increase in throughput. This is a good example of how we're leveraging our scale to test new processes in one state before rolling them out across our footprint to capture the benefits of large buying power,” said Bachtell, according to a Seeking Alpha transcript.
Cresco President Greg Butler said that before the company starts rolling out pre-roll manufacturing improvements across its entire production footprint, it focuses on getting to the best unit economics at the best quality.
“We will prioritize states where we think there's room for us to get in there and take share. So not every single state will turn all at once,” said Butler, who added it takes pretty minimal capital expenditure for the company to do that, “especially, as we think of a staged approach that goes market by market to find out where we have an opportunity to take share in that segment of the market.”
The comments arrive along with a second-quarter earnings report highlighted by $184 million in revenue, down slightly year over year but flat sequentially. The company’s net loss did grow $51 million, but it said that was due in part to a $61 million charge in the quarter related to its new tax position.
Cresco Labs said it has determined that IRS Section 280E is not applicable to its business, and a revision could result in an estimated cash savings of $65 million in 2024. The decision, which should eventually offset the $61 million charge, is being made as cannabis is expected to move to a Schedule III substance.
