PRESS RELEASE CHICAGO–(BUSINESS WIRE)–Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) (“Cresco” or the “Company”) one of the largest vertically integrated multistate cannabis operators in... Cresco Labs Announces Profitable Fourth Quarter 2018 Financial Results with Revenue Growth of 411% Year-over-Year and 33% Quarter-over-Quarter

PRESS RELEASE

CHICAGO–(BUSINESS WIRE)–Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) (“Cresco” or the “Company”) one of the largest vertically integrated multistate cannabis operators in the United States, today released its unaudited financial results for the fourth quarter and full year ended December 31, 2018. All financial information presented in this release is in U.S. dollars, unless otherwise noted.

Management Commentary

“We completed 2018 with another quarter of positive pre-tax income that reflected continued strong execution across all areas of our operations,” said Charles Bachtell, Co-founder and CEO of Cresco Labs. “We continue to successfully enter new markets with beneficial regulatory structures, increase our production and processing capacity, and expand the distribution for our unique and sophisticated ‘house of brands.’ Our ability to offer compelling products to all major segments of the cannabis market and achieve high levels of market penetration is generating strong growth in revenue and significant improvement in our gross margin.”

“Building on our momentum from 2018, we have already made incredible progress this year in building Cresco Labs’ leadership position in the cannabis industry,” continued Bachtell. “The definitive agreement signed with Origin House earlier this month is a transformational deal for Cresco that creates a cannabis industry powerhouse with the premier distribution platform in the United States serving the greatest number of dispensaries in the country. Combined with our recent entrance into the Florida market, Cresco has built the largest and most strategic footprint of any cannabis company in the United States. We anticipate that 2019 will be a highly productive year in establishing Cresco as the first national brand in the cannabis industry, capitalizing on the strong growth we are seeing in large markets across the country, and creating additional value for our shareholders.”

Financial Results for the Fourth Quarter Ended December 31, 2018 (Unaudited)

Revenue for the fourth quarter of 2018 was $17.0 million, an increase of 411% compared to revenue of $3.3 million for the fourth quarter of 2017. The increase in revenue was driven by expansion into new markets and gains in market share in the states where the Company operates. Fourth quarter revenue increased 33% compared to $12.7 million for the third quarter of 2018. On a pro forma basis, revenue for the fourth quarter of 2018 was $22.5 million.

Fourth quarter 2018 operational gross profit3, before the impact of biological assets accounting, was $7.3 million, or 42.8% of revenues, compared to a gross loss of $0.1 million for the fourth quarter of 2017. The year-over-year improvement in gross margin is primarily attributable to a gain in operational efficiencies as the Company scales the business, expands its production capabilities and lowers its operating costs on a per gram basis.

Total expenses for the fourth quarter of 2018 were $25.4 million, compared to $2.3 million for the prior year period. Total expenses in the fourth quarter of 2018 included nearly $16.1 million in expenses related to share-based incentive compensation and one-time expenses associated with the public listing on the Canadian Securities Exchange, acquisitions and financing activities. The balance of the increase represents significant investments in our team and operational infrastructure to drive strategic initiatives that better position the Company for future growth.

Net loss for the fourth quarter was $2.6 million, compared to net loss of $3.0 million for the prior-year period.

Adjusted EBITDA for the fourth quarter was $13.7 million, compared to a loss of $3.1 million for the fourth quarter of 2017 and $5.3 million for the third quarter of 2018.

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Balance Sheet and Liquidity

As of December 31, 2018, the Company had total assets of $318.4 million, including cash and cash equivalents of $131.3 million. At December 31, 2018, the Company had a working capital position of $172.7 million with zero debt on the balance sheet.

Consolidated Financial Statements

The financial information reported in this news release is based on unaudited management prepared financial statements for the year ended December 31, 2018. Accordingly, such financial information may be subject to change. The audit process is nearly complete and fully audited financial statements for the period will be released and filed under the Company’s profiles on SEDAR at www.SEDAR.com by April 30, 2019. All financial information contained in this news release is qualified in its entirety with reference to such audited financial statements. While the Company does not expect there to be any material changes, to the extent that the financial information contained in this news release is inconsistent with the information contained in the Company’s audited financial statements, the financial information contained in this news release shall be deemed to be modified or superseded by the Company’s audited financial statements. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation for purposes of applicable securities laws.

Cresco references certain non-IFRS financial measures throughout this press release, which may not be comparable to similar measures presented by other issuers. Please see the “Non-IFRS Financial Measures” section at the end of this press release for more detailed information.

About Cresco Labs Inc.

Cresco, based in Chicago, is a leading U.S. cannabis company with experienced management, access to capital and a demonstrated growth strategy. As a differentiated grower, processor and retailer of premium cannabis operating in seven states, the Company focuses on entering highly regulated markets with outsized demand potential and high barriers to entry. Its speed-to-market to date has given Cresco a distinct competitive advantage as it replicates its model to expand its national footprint. Cresco’s proven ability to execute is complemented by a cutting-edge brand strategy spearheaded by several of the brightest minds in consumer marketing in the nation. Cresco’s products are tailored to all major consumer segments: everyday cannabis, medicinally focused, connoisseur grade and chef inspired edibles by James Beard Award-winning pastry chef Mindy Segal. Learn more about Cresco at crescolabs.com.

Non-IFRS Financial Measures

Operational gross profit, EBITDA and Adjusted EBITDA are non-IFRS measures and do not have standardized definitions under IFRS. The following information provides reconciliations of the supplemental non-IFRS financial measures, presented herein to the most directly comparable financial measures calculated and presented in accordance with IFRS. The Company has also provided unaudited pro forma financial information, which assumes that closed and pending mergers and acquisitions in 2018 are included in the Company’s financial results as of the beginning of the quarterly and annual periods in 2018. The Company has provided the non-IFRS financial measures, which are not calculated or presented in accordance with IFRS, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with IFRS. These supplemental non-IFRS financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-IFRS financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-IFRS financial measures should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with, the IFRS financial measures presented herein.

Forward Looking Statements

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as, ‘may,’ ‘will,’ ‘should,’ ‘could,’ ‘would,’ ‘expects,’ ‘plans,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘projects,’ ‘predicts,’ ‘potential’ or ‘continue’ or the negative of those forms or other comparable terms. The Company’s forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including but not limited to those risks discussed under “Risk Factors” in the company’s CSE Listing Statement filed with SEDAR; and other factors, many of which are beyond the control of the Company. Readers are cautioned that the foregoing list of factors is not exhaustive. Because of these uncertainties, you should not place undue reliance on the Company’s forward-looking statements. No assurances are given as to the future trading price or trading volumes of Cresco’s shares, nor as to the Company’s financial performance in future financial periods. The Company does not intend to update any of these factors or to publicly announce the result of any revisions to any of the Company’s forward-looking statements contained herein, whether as a result of new information, any future event or otherwise. Except as otherwise indicated, this press release speaks as of the date hereof. The distribution of this press release does not imply that there has been no change in the affairs of the Company after the date hereof or create any duty or commitment to update or supplement any information provided in this press release or otherwise.

Contacts

Media
Jason Erkes, Cresco Labs
Chief Communications Officer
[email protected]
312-953-2767

Investors
Aaron Miles, Cresco Labs
Vice President, Investor Relations
310-622-8255

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