Cresco continues expansion plan with $283 million purchase

• Tryke generated US$70.4 million in Revenue and US$24.6 million in EBITDA in fiscal 2018¹, making it one of the highest grossing and most profitable private cannabis companies in the U.S. market.
• Nevada is one of the largest and fastest growing cannabis markets in the U.S. with 2019 sales estimates of up to US$940 million²; Arizona is one of the largest and fastest growing medical-only markets with estimated 2019 sales of up to US$760 million².
• Tryke has established six of the best-positioned retail locations in Nevada and Arizona, including the iconic Reef Dispensary located adjacent to the Las Vegas Strip –  which has produced over US$65 million in revenue since 2015 – and five additional operating locations in North Las Vegas, Sparks and Phoenix, AZ. Tryke’s North Las Vegas location boasts the highest known daily ticket count in the state of Nevada at 2,300³.
• Adds 17,000 lb. per year in strategically-located cultivation capacity along with 1,320 lb. per year of processing capacity.Includes one of eight cultivation licenses recently awarded in Utah.
• Total consideration of US$282.5 million (subject to certain adjustments), which includes US$30M in real estate assets⁴.

Cresco is currently active in 11 states. It has previously announced that its “Phase II plan” is to “build meaningful leadership positions” in each of these locations and expand rapidly.

The acquisition of Tryke will give Cresco approximately 8.11% market share in Nevada while adding a portfolio of some of the most visible and successful retail locations in the U.S. and expanding their cultivation footprint.

With the purchase Cresco acquires:

• The Las Vegas Strip location covers a total of 165,000 square feet, which includes the flagship 4,800 square foot Reef Dispensary as well as 160,200 square feet of cultivation, processing and ancillary space (~20,000 sf under canopy)
• 27,000 square feet of cultivation and processing capacity in Phoenix, Arizona
• A cultivation license attached to a 12 acre parcel in Spanish Springs, Nevada

Cresco Labs CEO and Co-founder Charlie Bachtell commented, “We have been very clear with the market that we have entered the second chapter of the Cresco Labs story as we position the Company to lead in the middle two verticals of the value chain – brands and wholesale distribution. With significant in-state populations and tourist traffic, Nevada and Arizona were key near-term targets for expansion.  Creating the most strategic geographic footprint in the U.S. cannabis industry is not just about the number of states you operate in. Rather, our thesis for success in establishing a normalized and professionalized cannabis industry as well as providing the greatest ROIC for our shareholders calls for us to leverage our existing operations in states of significance to rapidly attain material and meaningful market-leading positions. This Transaction meets every point in our ROIC framework. It accelerates top-line growth, enables efficiencies across our network through the addition of one of the most impressive operating teams in the country and brings a pipeline of high return projects that we expect to execute on at a measured pace over the next several years.”

Bachtell continued, “This Transaction adds six strategically-placed retail locations serving both in-state and tourist traffic, as well as robust supporting cultivation and processing infrastructure and significant expansion opportunities. The Las Vegas Strip has immense value from a sales and brand development perspective. The Strip is home to some of the most iconic entertainment and recreational properties in the world – and is probably one of only two spots in the country where tens of millions of people per year congregate within a very concentrated footprint with recreation in mind. This inimitable exposure opens the opportunity to continue to generate above average revenue and sustainable margins for operators as well as brand visibility that resonates on a national level. We utilize a strategic retail presence to assist in the achievement of our corporate objective to win the middle two portions of the value chain – brands and distribution. At the industry’s current state of development, retail is a vital link between customers and brands in this emerging legal industry. We expect that this Transaction will both accelerate our near-term growth trajectory and further advance Cresco Labs towards our goal of being the most important company in the cannabis industry.”

“This Transaction is a perfect complement to our organic branded product portfolio and the distribution portfolio we are acquiring through Origin House, giving Cresco Labs positions in the key middle portion of the value chain in the most exciting consumer markets in the country. Tryke has proven itself to be one of the top operators in the U.S. and we look forward to welcoming Tryke’s seasoned team to Cresco Labs to work on growth and optimization initiatives together,” said Cresco Labs President and Co-founder Joe Caltabiano. “Tryke’s team has deep experience in and connection to the highly regulated Nevada and Arizona markets and is in the midst of bringing that experience to the new Utah medical cannabis market. They have also done an outstanding job of developing relationships with key social influencers such as Wiz Khalifa, which has enabled the company to become the sole distributor of Khalifa Kush products in Nevada and Arizona, and they have also developed strong brand loyalty for the Tryke suite of products. It also adds two exceptional cultivation and processing facilities and runway for significant expansion, which will provide us with the capacity necessary to increase production and distribution of the entire suite of Cresco branded products both for our own retail shelves as well as to ramp-up our wholesale operations. Having already gained best-selling status in Nevada dispensaries with our line of Mindy’s Edibles, we expect to further expand these relationships to include the full suite of Cresco branded products and steadily increase our wholesale revenue in this market, as well as in Arizona.”

“The announcement today is the result of several months of deep interactions between our two groups and I know I speak on behalf of the entire team when I say we are very excited to be joining Cresco and to start realizing significant synergies for both of our organizations,” said Adam Ryan, CEO of Tryke Companies. “We have been consistently impressed by Cresco’s strategic approach to building long-term value in this growth market and its history of delivering what it promises – something that is often lacking in this industry. As the cannabis space has gained national and international attention over the past four years, we have been approached by several operators both private and public, regarding a transaction, but the vision and execution that Charlie, Joe and the team have demonstrated made them the only choice for Tryke.”

With the closure of the purchase Cresco Labs will have 25 production facilities and 29 retail dispensaries in operation with licenses to operate a total of 62 retail dispensaries across 12 states – Illinois, Pennsylvania, Ohio, Nevada, California, Arizona, Florida, New York, and Utah with Michigan, Maryland and Massachusetts pending approval.

Cresco says that upon closing of all pending transactions, their products will be available for purchase at over 725 dispensaries with a geographic footprint providing access to more than 154 million potential consumers. That would equate to roughly which is 71% of the total addressable US cannabis market.