Cresco Labs Inc.

Cresco reported Q1 2026 revenue of $151 million, adjusted gross profit of $77 million, adjusted EBITDA of $33 million, adjusted gross margin of 51%, adjusted SG&A of $51 million (34% of revenue), and adjusted EBITDA margin of 22%. Management said Q1 was the baseline quarter after exiting California and seeing disruption in Michigan. For Q2, the company expects revenue to increase approximately 10% sequentially, gross margin to be 48% to 50%, SG&A to rise modestly, and adjusted EBITDA margin to hold near 21%.

Charles Bachtell said the company is building for growth from a scaled base, with a focus on deeper positions in markets that have structural advantages and disciplined margins/costs. He emphasized Pennsylvania, Ohio, Kentucky, and Texas as key growth vectors, and said the Pennsylvania transaction fits Cresco’s strategy of strengthening leadership in priority markets ahead of a possible adult-use catalyst. On rescheduling, he framed it as the most consequential federal reform yet and said it should help medical cannabis, profitability, balance sheets, and access to capital over time, while acknowledging that many details remain unsettled.

Sharon Schuler said Q1 was intentionally the low point for the year, reflecting the California exit, Michigan excise-tax disruption, and the lag before growth initiatives show up in reported numbers. She cited $151 million of revenue, 51% adjusted gross margin, $51 million of adjusted SG&A, $33 million of adjusted EBITDA, and $67 million in cash and restricted cash. She also said operating cash flow used $6 million in the quarter and capital expenditures and acquisitions totaled $11 million, mostly for the Phase 1 build-out of the Kentucky facility. Looking ahead, she guided to roughly 10% sequential Q2 revenue growth, 48% to 50% gross margin, modest SG&A growth, and about 21% adjusted EBITDA margin.

Analysts focused heavily on Pennsylvania, asking why Cresco chose the asset and how much adult-use readiness and excess cultivation capacity it has there. Management said the deal deepens an already leading branded position, builds retail leadership, and positions Cresco well for a future adult-use catalyst, while acknowledging the company has additional cultivation capacity but not enough for full adult use at maturity. Questions also centered on rescheduling and 280E; management said it is still early, there is no final Treasury/IRS guidance yet, and the company is evaluating options while preserving flexibility. On Michigan, management said the issue is a market-wide tax pass-through problem that is causing inventory and margin pressure, but expects stabilization as the market works through the adjustment.