💸 The Tape

Cresco Labs entered 2026 with a clear plan: strengthen core markets, expand the retail footprint, and position the company to capture the benefits of federal rescheduling. The Q1 results suggest that plan is working.

The branded cannabis CPG leader and operator of Sunnyside dispensaries reported Q1 2026 revenue of $151 million, with adjusted gross margin of 50.7%, adjusted EBITDA of $33 million at a 21.7% margin, and retained the No. 1 market share position in multiple billion-dollar markets. CEO Charlie Bachtell described the quarter as "continued progress against a clear plan and the strengthening of our growth platform."

The Financial Picture

Adjusted gross profit was $77 million at a 50.7% margin — a strong result for a company that balances significant wholesale branded CPG revenue alongside its retail operations. That margin profile reflects the value of Cresco's brand portfolio — Cresco, High Supply, FloraCal, Good News, Mindy's, and others — which continues to command shelf space and consumer loyalty across multiple states.

SG&A came in at $54 million, or 36% of revenue, with adjusted SG&A at $51 million and 33.7% — a cost structure that leaves room for improvement but reflects the overhead required to maintain brand leadership and multi-state retail operations simultaneously.

Net loss was $17 million, driven largely by the punitive effects of Section 280E — a tax burden that, for the medical portion of Cresco's business, has now been eliminated following the Schedule III rescheduling of state-licensed medical cannabis. That single policy change should produce measurable improvement in after-tax profitability in coming quarters without requiring any operational adjustment.

Adjusted EBITDA of $33 million at 21.7% represents a business generating real operating profitability, even as the net loss line continues to reflect the structural tax disadvantage that has weighed on every U.S. cannabis operator for over a decade. With 280E relief now flowing through the medical business, that gap between adjusted EBITDA and the bottom line should begin to narrow.

On the balance sheet, Cresco ended the quarter with $67 million in cash, a $310 million senior secured term loan, and a $19 million mortgage loan. It's a manageable but meaningful debt load that underscores why rescheduling-driven tax relief matters — every dollar freed from 280E can be redirected toward debt service, reinvestment, or operational expansion.

Multi-State Expansion Accelerating

The most tangible progress in Q1 came from Cresco's aggressive retail buildout across several strategic markets.

In Ohio, the company opened two new Sunnyside dispensaries — Bridgeport on April 10 and Aberdeen on May 5 — deepening its presence in one of the country's most promising newer adult-use markets. Ohio has been posting impressive growth numbers, and Cresco is building retail density to capture share during the market's acceleration phase.

In Pennsylvania, Cresco began supporting operations of nine dispensaries under a management services agreement — a significant expansion of its retail presence in one of the nation's largest medical cannabis markets. Pennsylvania's adult-use legalization remains stalled by Senate Republican leadership, but the medical market alone supports substantial revenue, and any future conversion to adult-use would dramatically expand the addressable opportunity for operators already embedded in the state.

In Kentucky, the company transitioned from the investment phase into active revenue generation, completing its first harvest in April. Kentucky's medical program is in its earliest innings, but Cresco's operational head start positions it to establish brand presence and cultivate patient relationships as enrollment grows.

Across these three states, Cresco added 11 dispensaries to its platform subsequent to quarter end — a burst of retail expansion that meaningfully strengthens the company's national footprint.

Texas: Optionality With a Caveat

Cresco was conditionally awarded a Texas Compassionate Use Program license in early April — a potentially significant entry into the nation's second-most-populous state. However, that conditional status was subsequently affected when the Texas Department of Public Safety announced a corrected scoring tabulation on May 8, revealing that the original methodology didn't match the published weighting criteria. As a result of the re-tabulation, Cresco was moved to the TCUP eligibility list, where it remains positioned for potential future licensure if openings arise. Texas remains a long-term opportunity for the company, but the timeline is now less certain.

The Rescheduling Catalyst

Bachtell was unequivocal about the significance of federal rescheduling, calling the move of state-licensed medical cannabis to Schedule III "the most consequential reform this industry has seen."

For Cresco specifically, the immediate impact is the elimination of 280E on medical cannabis operations across every state where the company serves patients. That's a direct improvement to after-tax economics that requires no additional capital investment, no new product launches, and no operational restructuring — just the removal of a tax provision that was never intended to apply to legitimate, state-licensed businesses.

Looking ahead, the broader DEA hearing on general cannabis rescheduling begins June 29. If recreational cannabis also moves to Schedule III, the 280E relief would extend across Cresco's entire revenue base — a transformational shift in the company's financial profile.

Bachtell positioned the company accordingly: "We've built the operational foundation and balance sheet discipline to capture immediate benefits of rescheduling, while positioning Cresco to capitalize on the broader path to normalization."

Brand Leadership Holding

Cresco's core competitive advantage remains its branded product portfolio. According to Hoodie Analytics, the company retained the No. 1 market share position in multiple billion-dollar markets during Q1 — a testament to the staying power of brands like Cresco and High Supply in flower and concentrates, and Mindy's in edibles.

In an industry where brand loyalty is still being established, holding the top position across multiple large markets provides both pricing power and wholesale distribution leverage. It's the foundation on which every other element of Cresco's strategy — retail expansion, new state entries, rescheduling benefits — is built.

The Bottom Line

Cresco's Q1 2026 reflects a company doing the work: expanding retail, entering new markets, generating over $30 million in quarterly EBITDA, and holding No. 1 market share positions where it matters most. The rescheduling tailwind adds a financial catalyst that could meaningfully improve profitability without requiring a single operational change.

The growth platform is strengthening. The regulatory environment is shifting in the right direction. And the brand portfolio continues to lead. For Cresco, the story in 2026 is about converting years of disciplined execution into tangible financial results — and the pieces are falling into place.

📈 Dog Walkers

$RYM ( ▲ 0.5% ) Lands Major Venue

RYTHM just landed one of the most visible venue partnerships in the THC beverage space — and it's in their own backyard.

Navy Pier, the most visited destination in the Midwest with over 8 million annual guests, has named RYTHM as its official THC beverage partner in a multi-year deal launching May 22. The partnership centers on the RYTHM Stage in the Navy Pier Beer Garden, featuring events, pop-ups, sampling, and seasonal programming throughout what the Pier is calling its largest summer of programming ever.

Guests will be able to purchase RYTHM's full beverage lineup — including Sativa and Kush varieties — alongside Señorita THC Margaritas, all in 12oz cans with 5mg of hemp-derived THC. Products will be available at the beer garden and at select bars and points of sale across the Pier.

Chairman and Interim CEO Ben Kovler framed the deal as further validation of a shifting consumer landscape: "Consumers are choosing THC, and the venues they love are responding."

The Navy Pier partnership extends what's becoming an impressive Chicago footprint for RYTHM's beverage brands. Earlier this year, RYTHM and Señorita became the first THC beverages available at a major U.S. arena when the United Center named RYTHM its official THC sponsor. The brands are also available across 16" on Center venues — including The Salt Shed and Thalia Hall — and Jam Productions venues like the Riviera Theatre and Park West.

From arenas to iconic cultural landmarks to neighborhood music venues, RYTHM is systematically embedding itself into the places where people already gather — a distribution strategy that treats THC beverages not as a novelty but as a mainstream consumer choice.

Both brands are currently available at over 6,000 locations nationwide, with direct-to-consumer delivery through RYTHMDrinks.com and SenoritaDrinks.com.

🗞️ The News

📺 Trade To Black

"Big Moves in Cannabis: Earnings, Policy, and Lawsuits” recapped key sector developments. Cresco Labs CEO Charles Bachtell highlighted Q1 results of $151M revenue and 50.7% gross margins, plus strong operator trends and cannabis ETFs. Trent Woloveck, Jushi Holdings CSO, discussed Virginia operations and an Ohio hemp lawsuit involving Shopify, UPS, and FedEx. Policy segments covered the CLIMB Act and SAFER Act, emphasizing how federal clarity would unlock major investment. The show was X-exclusive.