Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“Cronos” or the
“Company”), today announces its 2023 first quarter business
results.
“I am encouraged by our results across
categories in Canada as we are defending our leading position in
edibles and climbing market share ranks in other critical product
categories,” said Mike Gorenstein, Chairman, President and CEO,
Cronos. “We intend to build off the strength of our number one
position in edibles and utilize our borderless gummy platform for
new innovative introductions, including additional rare
cannabinoids and flavor profiles throughout 2023. The pre-roll
category is a top focus for our team this year, and we are pleased
by the early results of our infused pre-rolls and the encouraging
progression of our base business. What you see on the market today
from us in pre-rolls is just the beginning.”
“Optimizing the returns of our industry-leading
cash balance has also been a priority for us as we are in a great
position to take advantage of the higher rate environment,
especially given we have no debt,” continued Mr. Gorenstein. “You
are now starting to see the higher interest income flow through our
income statement, which is an underappreciated component of our
company. Additionally, looking forward to the balance of 2023, we
are on track to achieve the high end of the projected $10 to $20
million in cash operating expense savings we announced in February
and are committed to further improvements as we target to be cash
flow positive in 2024.”
Financial Results
(in thousands of USD) |
|
Three months ended March 31, |
|
Change |
|
|
|
2023 |
|
|
|
2022 |
|
|
$ |
|
% |
Net revenue |
|
|
|
|
|
|
|
|
United States |
|
$ |
649 |
|
|
$ |
2,328 |
|
|
$ |
(1,679 |
) |
|
(72 |
)% |
Rest of World |
|
|
19,495 |
|
|
|
22,705 |
|
|
|
(3,210 |
) |
|
(14 |
)% |
Consolidated net revenue |
|
|
20,144 |
|
|
|
25,033 |
|
|
|
(4,889 |
) |
|
(20 |
)% |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
17,764 |
|
|
|
18,107 |
|
|
|
(343 |
) |
|
(2 |
)% |
Gross profit |
|
$ |
2,380 |
|
|
$ |
6,926 |
|
|
$ |
(4,546 |
) |
|
(66 |
)% |
Gross margin(i) |
|
|
12 |
% |
|
|
28 |
% |
|
N/A |
|
(16) pp |
|
|
|
|
|
|
|
|
|
Net income (loss)(ii) |
|
$ |
(19,257 |
) |
|
$ |
(32,653 |
) |
|
$ |
13,396 |
|
|
41 |
% |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(iii) |
|
$ |
(16,764 |
) |
|
$ |
(18,900 |
) |
|
$ |
2,136 |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
Other
Data |
|
|
|
|
|
|
|
|
Cash and cash
equivalents(iv) |
|
$ |
413,667 |
|
|
$ |
861,535 |
|
|
$ |
(447,868 |
) |
|
(52 |
)% |
Short-term
investments(iv) |
|
|
422,763 |
|
|
|
119,933 |
|
|
|
302,830 |
|
|
252 |
% |
Capital expenditures(v) |
|
|
804 |
|
|
|
734 |
|
|
|
70 |
|
|
10 |
% |
(i) Gross margin is defined as gross profit
divided by net revenue.(ii) Net income (loss) of $(19.3) million in
Q1 2023 improved by $13.4 million from Q1 2022. The improvement
year-over-year was primarily driven by the reduction in operating
expenses.(iii) See “Non-GAAP Measures” for more information,
including a reconciliation of adjusted earnings (loss) before
interest, taxes, depreciation and amortization (“Adjusted EBITDA”)
to net income (loss).(iv) Dollar amounts are as of the last
day of the period indicated.(v) Capital expenditures represent
component information of investing activities and is defined as the
sum of purchase of property, plant and equipment, and purchase of
intangible assets.
First Quarter 2023
- Net revenue of $20.1 million in Q1
2023 decreased by $4.9 million from Q1 2022. The decrease was
primarily due to lower cannabis flower sales in the Rest of World
("ROW") segment and a decline in revenue in the U.S. segment. ROW
segment net revenue was also impacted by the weakened Canadian
dollar and Israeli Shekel against the U.S. dollar. Higher cannabis
extract sales in Canada partially offset these results.
- Gross profit of $2.4 million in Q1
2023 decreased by $4.5 million from Q1 2022. The decrease was
primarily driven by reduced gross profit in the ROW segment due to
lower cannabis flower sales in Israel, an adverse price/mix shift
in cannabis flower sales in Canada, increased returns, and a
reduction in gross profit in the U.S. segment. Higher cannabis
extract sales in Canada with a higher margin profile than other
product categories and lower cannabis biomass costs partially
offset these results.
- Adjusted EBITDA of $(16.8) million
in Q1 2023 improved by $2.1 million from Q1 2022. The improvement
year-over-year was primarily driven by decreases in general and
administrative expenses and research and development expenses due
to the Company's cost savings initiatives.
Business Updates
Guidance and Outlook
Net revenue for full-year 2023 is expected to be
between $100 to $110 million. Additionally, the Company is on track
to achieve the high-end of the previously identified $10 to $20
million in operating expense savings for 2023, primarily driven by
savings in sales and marketing, general and administrative, and
research and development.
Cronos anticipates that cash flow, defined as
the net change in cash and cash equivalents, excluding the impact
of the purchase or proceeds of short-term investments, for the last
nine months of fiscal year 2023 will decline less than $25 million.
The Company also expects that cash flow will be positive in
2024.
This guidance assumes: (i) the Company will
experience relatively consistent foreign exchange and interest
rates; (ii) the general economic conditions and regulatory
environment in the markets in which Cronos participates will not
materially change; (iii) timely receipt of interest and principal
payments on the GrowCo senior secured credit facility; (iv)
anticipated interest income of approximately $30 million for the
last nine months of fiscal year 2023; (v) continued gross margin
improvement; and (vi) continued reductions in operating
expenses.
These statements are forward-looking and actual
results may differ materially. Refer to “Forward-Looking
Statements” below for information on the factors that could cause
our actual results to differ materially from these forward-looking
statements.
Brand and Product Portfolio
The Spinach® brand continued to hold its number
one market share position in the edibles category in Canada in Q1
2023. According to Hifyre data, Spinach® products held an
approximate 15.3% market share in the edibles category expanding to
approximately 21.9% within the gummy category alone across the
SOURZ by Spinach® and Spinach FEELZ™ sub-brands.
Cronos bolstered its infused pre-roll portfolio
under the Spinach FEELZ™ sub-brand with two new rare cannabinoid
infused pre-rolls: (i) the Spinach FEELZ™ Mango Kiwi Haze THC:CBC
pre-roll infused with high potency cold filtered extract with 32%
THC and 5% CBC for a clean and uplifting high; and (ii) the Spinach
FEELZ™ Blackberry Kush THC:CBN (Deep Dreamz) pre-roll, infused with
high potency cold filtered extract with 32% THC and 5% CBN for a
mellow and dreamy high.
Cronos' strong breeding program and portfolio of
genetics continued to drive growth. In April 2023, Cronos built on
the early success of its Sonic Lemon Fuel strain by expanding it
into the pre-roll category with a 3x0.5g 20-26% THC offering under
the Spinach® brand. In addition to the pre-rolls, Sonic Lemon Fuel
is available in 28g and 3.5g flower formats. The Spinach® brand
rose to 8th place in the pre-roll category, capturing a 2.5% market
share in Q1 2023, up from 16th place and a 1.4% market share in Q4
2022.
Expanding on the success with CBC in edibles and
the recent launch in pre-rolls, the Spinach FEELZ™ sub-brand added
CBC to its vape portfolio with the introduction of Spinach FEELZ™
Mango Kiwi Haze 7:1 THC:CBC 1-gram vape.
The Israeli medical market has recently been
challenged by competitive activity, a slowdown in patient permit
authorizations, and geopolitical unrest. Despite these near-term
challenges, Cronos remains committed and optimistic about the
future in this important cannabis market. While patient permit
authorization growth has been relatively stagnant for the last
quarter, the Company believes there is a high likelihood for
regulatory change that can accelerate the growth of the patient
count in Israel. Cronos continues to invest in its operation,
distribution, and marketing efforts to deliver the best-in-class
genetics and products under the PEACE NATURALS® brand.
Global Supply Chain
In April 2023, Cronos released its first
cannabinoid life cycle study highlighting sustainable fermentation
practices. The third-party reviewed results showed that the
environmental footprint of growing plants indoors is high, and
using innovative fermentation processes is a solution that
dramatically lowers the environmental impact of cannabinoid
production. On average, the carbon footprint savings of using
Cronos’ fermentation method is 99.8% compared to traditional
extraction methods.
Cronos Growing Company Inc. (“Cronos GrowCo”)
reported to the Company preliminary unaudited net revenue to
licensed producers, excluding sales to the Company, of
approximately $3.2 million in the first quarter of 2023. Cronos
previously provided GrowCo with a senior secured credit facility,
which currently has approximately $73.2 million outstanding
following a principal repayment of $0.7 million by GrowCo in Q1
2023. In addition to principal repayment, Cronos also received $5.5
million in interest payments from GrowCo in Q1 2023, totaling
approximately $6.2 million in cash payments to Cronos in Q1
2023.
Rest of World Results
Cronos’ ROW reporting segment includes results
of the Company’s operations for all markets outside of the U.S.
(in thousands of USD) |
|
Three months ended March 31, |
|
Change |
|
|
|
2023 |
|
|
|
2022 |
|
|
$ |
|
% |
Cannabis flower |
|
$ |
13,128 |
|
|
$ |
18,625 |
|
|
$ |
(5,497 |
) |
|
(30 |
)% |
Cannabis extracts |
|
|
6,301 |
|
|
|
3,988 |
|
|
|
2,313 |
|
|
58 |
% |
Other |
|
|
66 |
|
|
|
92 |
|
|
|
(26 |
) |
|
(28 |
)% |
Net revenue |
|
|
19,495 |
|
|
|
22,705 |
|
|
|
(3,210 |
) |
|
(14 |
)% |
|
|
|
|
|
Cost of sales |
|
|
16,568 |
|
|
|
15,995 |
|
|
|
573 |
|
|
4 |
% |
Gross profit |
|
$ |
2,927 |
|
|
$ |
6,710 |
|
|
$ |
(3,783 |
) |
|
(56 |
)% |
Gross margin |
|
|
15 |
% |
|
|
30 |
% |
|
N/A |
|
|
(15)pp |
First Quarter 2023
- Net revenue of $19.5 million in Q1
2023 decreased by $3.2 million from Q1 2022. The decrease was
primarily due to lower cannabis flower sales in Israel due to
competitive activity, the slowdown in patient permit
authorizations, and geopolitical unrest. Net revenue in Canada was
impacted by adverse price/mix in the flower category driving
increased excise tax payments as a percent of revenue, and
increased returns. The weakened Canadian dollar and Israeli Shekel
against the U.S. dollar also impacted ROW net revenue. Higher
cannabis extract sales in Canada partially offset these
results.
- Gross profit of $2.9 million in Q1
2023 decreased by $3.8 million from Q1 2022. The decrease was
primarily due to lower cannabis flower sales in Israel, an adverse
price/mix shift in cannabis flower sales in Canada due to the
higher mix of 28-gram offerings and increased returns. Increased
cannabis extract sales in Canada with a higher margin profile than
other product categories and lower cannabis biomass costs partially
offset these results.
United States Results
Cronos’ U.S. reporting segment includes results of the Company’s
operations for all brands and products in the U.S.
(in thousands of USD) |
|
|
Three months ended March 31, |
|
Change |
|
|
|
|
|
2023 |
|
|
|
2022 |
|
|
$ |
|
% |
|
Net revenue |
|
|
$ |
649 |
|
|
$ |
2,328 |
|
|
$ |
(1,679 |
) |
|
(72 |
)% |
Cost of sales |
|
|
|
1,196 |
|
|
|
2,112 |
|
|
|
(916 |
) |
|
(43 |
)% |
Gross profit |
|
|
$ |
(547 |
) |
|
$ |
216 |
|
|
$ |
(763 |
) |
|
(353 |
)% |
Gross margin |
|
|
(84 |
)% |
|
|
9 |
% |
|
N/A |
|
|
(93)pp |
First Quarter 2023
- Net revenue of $0.6 million in Q1
2023 decreased by $1.7 million from Q1 2022. The decrease was
primarily driven by a reduction in sales as a result of a decrease
in promotional spending and SKU rationalization efforts as the
Company implemented the Realignment in the U.S. segment.
- Gross profit of $(0.5) million in
Q1 2023 decreased by $0.8 million from Q1 2022. The decrease was
primarily due to lower sales volumes and higher inventory
reserves.
Conference Call
The Company will host a conference call and live
audio webcast on Tuesday, May 9, 2023, at 8:30 a.m. ET to discuss
2023 First Quarter business results. An audio replay of the call
will be archived on the Company’s website for replay. Instructions
for the live audio webcast are provided on the Company's website at
https://ir.thecronosgroup.com/events-presentations.
About Cronos
Cronos is an innovative global cannabinoid
company committed to building disruptive intellectual property by
advancing cannabis research, technology and product development.
With a passion to responsibly elevate the consumer experience,
Cronos is building an iconic brand portfolio. Cronos’ diverse
international brand portfolio includes Spinach®, PEACE NATURALS®
and Lord Jones®. For more information about Cronos and its brands,
please visit: thecronosgroup.com.
Forward-Looking Statements
This press release contains information that
constitutes forward-looking information and forward-looking
statements within the meaning of applicable securities laws and
court decisions (collectively, “Forward-Looking Statements”), which
are based upon our current internal expectations, estimates,
projections, assumptions and beliefs. All information that is not
clearly historical in nature may constitute Forward-Looking
Statements. In some cases, Forward-Looking Statements can be
identified by the use of forward-looking terminology such as
“expect”, “likely”, “may”, “will”, “should”, “intend”,
“anticipate”, “potential”, “proposed”, “estimate” and other similar
words, expressions and phrases, including negative and grammatical
variations thereof, or statements that certain events or conditions
“may” or “will” happen, or by discussion of strategy.
Forward-Looking Statements include estimates, plans, expectations,
opinions, forecasts, projections, targets, guidance or other
statements that are not statements of historical fact.
Forward-Looking Statements include, but are not
limited to, statements with respect to:
- expectations related to our
announced realignment (the “Realignment”) and any progress,
challenges and effects related thereto as well as changes in
strategy, metrics, investments, reporting structure, costs,
operating expenses, employee turnover and other changes with
respect thereto;
- the timing of the change in the
nature of operations at our facility in Stayner, Ontario (the
“Peace Naturals Campus”) and the expected costs and benefits from
the wind-down of cultivation and certain production activities at
the Peace Naturals Campus;
- our ability to effectively
wind-down cultivation and certain production activities at the
Peace Naturals Campus in an organized fashion and acquire raw
materials from other suppliers, including Cronos GrowCo, and the
costs and timing associated therewith;
- expectations regarding the
potential success of, and the costs and benefits associated with,
our joint ventures, strategic alliances and equity investments,
including the strategic partnership Ginkgo Bioworks Holdings,
Inc.;
- our ability or plans to identify,
develop, commercialize or expand our technology and research and
development initiatives in cannabinoids, or the success
thereof;
- expectations regarding revenues,
expenses, gross margins, cash flow and capital expenditures;
- expectations regarding our future
production and manufacturing strategy and operations, the costs and
timing associated therewith and the receipt of applicable
production and sale licenses;
- the ongoing impact of the
legalization of additional cannabis product types and forms for
adult-use in Canada, including federal, provincial, territorial and
municipal regulations pertaining thereto, the related timing and
impact thereof and our intentions to participate in such
markets;
- the legalization of the use of
cannabis for medical or adult-use in jurisdictions outside of
Canada, the related timing and impact thereof and our intentions to
participate in such markets, if and when such use is
legalized;
- the grant, renewal, withdrawal,
suspension, delay and impact of any license or supplemental license
to conduct activities with cannabis or any amendments thereof;
- our ability to successfully create
and launch brands and further create, launch and scale U.S.
hemp-derived cannabinoid consumer products and cannabis
products;
- the benefits, viability, safety,
efficacy, dosing and social acceptance of cannabis, including CBD
and other cannabinoids;
- laws and regulations and any
amendments thereto applicable to our business and the impact
thereof, including uncertainty regarding the application of United
States (“U.S.”) state and federal law to U.S. hemp (including CBD
and other U.S. hemp-derived cannabinoids) products and the scope of
any regulations by the U.S. Food and Drug Administration (the
“FDA”), the U.S. Drug Enforcement Administration (the “DEA”), the
U.S. Federal Trade Commission (the “FTC”), the U.S. Patent and
Trademark Office (the “PTO”) and any state equivalent regulatory
agencies over U.S. hemp (including CBD and other U.S. hemp-derived
cannabinoids) products;
- the laws and regulations and any
amendments thereto relating to the U.S. hemp industry in the U.S.,
including the promulgation of regulations for the U.S. hemp
industry by the U.S. Department of Agriculture (the “USDA”) and
relevant state regulatory authorities;
- the anticipated benefits and impact
of Altria Group Inc.’s investment in the Company (the “Altria
Investment”), pursuant to a subscription agreement dated December
7, 2018;
- uncertainties as to our ability to
exercise our option (the “PharmaCann Option”) in PharmaCann Inc.
(“PharmaCann”), in the near term or the future, in full or in part,
including the uncertainties as to the status and future development
of federal legalization of cannabis in the U.S. and our ability to
realize the anticipated benefits of the transaction with
PharmaCann;
- expectations regarding the
implementation and effectiveness of key personnel changes;
- expectations regarding acquisitions
and dispositions and the anticipated benefits therefrom;
- our ability to timely and
effectively remediate any material weaknesses in our internal
control over financial reporting;
- expectations of the amount or
frequency of impairment losses, including as a result of the
write-down of intangible assets, including goodwill;
- the uncertainties associated with
the COVID-19 pandemic, including our ability, and the abilities of
our joint ventures and our suppliers and distributors, to
effectively deal with the restrictions, limitations and health
issues presented by the COVID-19 pandemic, the ability to continue
our production, distribution and sale of our products, and demand
for and the use of our products by consumers;
- the impact of the ongoing military
conflict between Russia and Ukraine (and resulting sanctions) on
our business, financial condition and results of operations or cash
flows;
- our compliance with the terms of
the settlement with the SEC (the “Settlement Order”) and the
settlement agreement with the Ontario Securities Commission
(“Settlement Agreement”), including complying with any
recommendations made by the independent consultant appointed
pursuant to the Settlement Order and Settlement Agreement; and
- the impact of the loss of our
ability to rely on private offering exemptions under Regulation D
of the Securities Act of 1933, as amended (the “Securities Act”),
and the loss of our status as a well-known seasoned issuer, each as
a result of the Settlement Order.
Certain of the Forward-Looking Statements
contained herein concerning the industries in which we conduct our
business are based on estimates prepared by us using data from
publicly available governmental sources, market research, industry
analysis and on assumptions based on data and knowledge of these
industries, which we believe to be reasonable. However, although
generally indicative of relative market positions, market shares
and performance characteristics, such data is inherently imprecise.
The industries in which we conduct our business involve risks and
uncertainties that are subject to change based on various factors,
which are described further below.
The Forward-Looking Statements contained herein
are based upon certain material assumptions that were applied in
drawing a conclusion or making a forecast or projection, including:
(i) our ability to realize the expected cost-savings, efficiencies
and other benefits of our Realignment and employee turnover related
thereto; (ii) our ability to efficiently and effectively wind-down
our cultivation and certain production activities at the Peace
Naturals Campus, receive the benefits of the change in the nature
of our operations at the Peace Naturals Campus and acquire raw
materials on a timely and cost-effective basis from third parties,
including Cronos GrowCo; (iii) our ability to realize anticipated
benefits, synergies or generate revenue, profits or value from our
acquisitions and strategic investments; (iv) the production and
manufacturing capabilities and output from our facilities and our
joint ventures, strategic alliances and equity investments; (v)
government regulation of our activities and products including, but
not limited to, the areas of cannabis taxation and environmental
protection; (vi) the timely receipt of any required regulatory
authorizations, approvals, consents, permits and/or licenses; (vii)
consumer interest in our products; (viii) competition; (ix)
anticipated and unanticipated costs; (x) our ability to generate
cash flow from operations; (xi) our ability to conduct operations
in a safe, efficient and effective manner; (xii) our ability to
hire and retain qualified staff, and acquire equipment and services
in a timely and cost-efficient manner; (xiii) our ability to
exercise the PharmaCann Option and realize the anticipated benefits
of the transaction with PharmaCann; (xiv) our ability to complete
planned dispositions, and, if completed, obtain our anticipated
sales price; (xv) our ability, and the abilities of our joint
ventures and our suppliers and distributors, to effectively deal
with the restrictions, limitations and health issues presented by
the COVID-19 pandemic and the ability to continue our production,
distribution and sale of our products and customer demand for and
use of our products; (xvi) general economic, financial market,
regulatory and political conditions in which we operate; (xvii)
management’s perceptions of historical trends, current conditions
and expected future developments; and (xviii) other considerations
that management believes to be appropriate in the circumstances.
While our management considers these assumptions to be reasonable
based on information currently available to management, there is no
assurance that such expectations will prove to be correct.
By their nature, Forward-Looking Statements are
subject to inherent risks and uncertainties that may be general or
specific and which give rise to the possibility that expectations,
forecasts, predictions, projections or conclusions will not prove
to be accurate, that assumptions may not be correct, and that
objectives, strategic goals and priorities will not be achieved. A
variety of factors, including known and unknown risks, many of
which are beyond our control, could cause actual results to differ
materially from the Forward-Looking Statements in this release and
other reports we file with, or furnish to, the SEC and other
regulatory agencies and made by our directors, officers, other
employees and other persons authorized to speak on our behalf. Such
factors include, without limitation, that we may not be able to
wind-down cultivation and certain production activities at the
Peace Naturals Campus in a disciplined manner or achieve the
anticipated benefits of the change in the nature of our operations
or be able to access raw materials on a timely and cost-effective
basis from third-parties, including Cronos GrowCo; the risk that
the COVID-19 pandemic and the military conflict between Russia and
Ukraine may disrupt our operations and those of our suppliers and
distribution channels and negatively impact the demand for and use
of our products; the risk that cost savings and any other synergies
from the Altria Investment may not be fully realized or may take
longer to realize than expected; failure to execute key personnel
changes; the risks that our Realignment, the change in the nature
of our operations at the Peace Naturals Campus and our further
leveraging of our strategic partnerships will not result in the
expected cost-savings, efficiencies and other benefits or will
result in greater than anticipated turnover in personnel; lower
levels of revenues; the lack of consumer demand for our cannabis
and U.S. hemp products; our inability to reduce expenses at the
level needed to meet our projected net change in cash and cash
equivalents; our inability to manage disruptions in credit markets
or changes to our credit ratings; unanticipated future levels of
capital, environmental or maintenance expenditures, general and
administrative and other expenses; growth opportunities not turning
out as expected; the lack of cash flow necessary to execute our
business plan (either within the expected timeframe or at all);
difficulty raising capital; the potential adverse effects of
judicial, regulatory or other proceedings, or threatened litigation
or proceedings, on our business, financial condition, results of
operations and cash flows; volatility in and/or degradation of
general economic, market, industry or business conditions;
compliance with applicable environmental, economic, health and
safety, energy and other policies and regulations and in particular
health concerns with respect to vaping and the use of cannabis and
U.S. hemp products in vaping devices; the unexpected effects of
actions of third parties such as competitors, activist investors or
federal (including U.S. federal), state, provincial, territorial or
local regulatory authorities or self-regulatory organizations;
adverse changes in regulatory requirements in relation to our
business and products; legal or regulatory obstacles that could
prevent us from being able to exercise the PharmaCann Option and
thereby realizing the anticipated benefits of the transaction with
PharmaCann; dilution of our fully diluted ownership of PharmaCann
and the loss of our rights as a result of that dilution; a delay in
our remediation of a material weakness in our internal control over
financial reporting and the improvement of our control environment
and our systems, processes and procedures; and the factors
discussed under Part I, Item 1A “Risk Factors” of the Annual Report
on Form 10-K for the year ended December 31, 2022 and under Part
II, Item 1A “Risk Factors” in our Quarterly Reports. Readers are
cautioned to consider these and other factors, uncertainties and
potential events carefully and not to put undue reliance on
Forward-Looking Statements.
Forward-Looking Statements are provided for the
purposes of assisting the reader in understanding our financial
performance, financial position and cash flows as of and for
periods ended on certain dates and to present information about
management’s current expectations and plans relating to the future,
and the reader is cautioned not to place undue reliance on these
Forward-Looking Statements because of their inherent uncertainty
and to appreciate the limited purposes for which they are being
used by management. While we believe that the assumptions and
expectations reflected in the Forward-Looking Statements are
reasonable based on information currently available to management,
there is no assurance that such assumptions and expectations will
prove to have been correct. Forward-Looking Statements are made as
of the date they are made and are based on the beliefs, estimates,
expectations and opinions of management on that date. We undertake
no obligation to update or revise any Forward-Looking Statements,
whether as a result of new information, estimates or opinions,
future events or results or otherwise or to explain any material
difference between subsequent actual events and such
Forward-Looking Statements. The Forward-Looking Statements
contained in this press release and other reports we file with, or
furnish to, the SEC and other regulatory agencies and made by our
directors, officers, other employees and other persons authorized
to speak on our behalf are expressly qualified in their entirety by
these cautionary statements.
As used in this press release, “CBD” means
cannabidiol and “U.S. hemp” has the meaning given to the term
“hemp” in the U.S. Agricultural Improvement Act of 2018, including
hemp-derived CBD.
Cronos
Group Inc.Condensed Consolidated Balance Sheets(In
thousands of U.S. dollars, except share amounts) |
|
As of March 31, 2023 |
|
As of December 31, 2022 |
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
413,667 |
|
|
$ |
764,644 |
|
Short-term investments |
|
422,763 |
|
|
|
113,077 |
|
Accounts receivable, net |
|
14,855 |
|
|
|
23,113 |
|
Other receivables |
|
7,049 |
|
|
|
5,767 |
|
Current portion of loans receivable, net |
|
5,570 |
|
|
|
8,890 |
|
Inventory, net |
|
44,268 |
|
|
|
37,559 |
|
Prepaids and other current assets |
|
7,967 |
|
|
|
7,106 |
|
Total current assets |
|
916,139 |
|
|
|
960,156 |
|
Equity method investments,
net |
|
18,313 |
|
|
|
18,755 |
|
Other investments |
|
62,833 |
|
|
|
70,993 |
|
Non-current portion of loans
receivable, net |
|
72,051 |
|
|
|
72,345 |
|
Property, plant and equipment,
net |
|
59,785 |
|
|
|
60,557 |
|
Right-of-use assets |
|
2,038 |
|
|
|
2,273 |
|
Goodwill |
|
1,036 |
|
|
|
1,033 |
|
Intangible assets, net |
|
25,897 |
|
|
|
26,704 |
|
Other |
|
1,483 |
|
|
|
193 |
|
Total
assets |
$ |
1,159,575 |
|
|
$ |
1,213,009 |
|
|
|
|
|
Liabilities |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
12,842 |
|
|
$ |
11,163 |
|
Income taxes payable |
|
266 |
|
|
|
32,956 |
|
Accrued liabilities |
|
14,332 |
|
|
|
22,268 |
|
Current portion of lease obligation |
|
1,236 |
|
|
|
1,330 |
|
Derivative liabilities |
|
80 |
|
|
|
15 |
|
Current portion due to non-controlling interests |
|
375 |
|
|
|
384 |
|
Total current liabilities |
|
29,131 |
|
|
|
68,116 |
|
Non-current portion due to
non-controlling interests |
|
1,370 |
|
|
|
1,383 |
|
Non-current portion of lease
obligation |
|
2,296 |
|
|
|
2,546 |
|
Deferred income tax
liability |
|
378 |
|
|
|
— |
|
Total
liabilities |
|
33,175 |
|
|
|
72,045 |
|
|
|
|
|
Shareholders’
equity |
|
|
|
Share capital |
|
612,235 |
|
|
|
611,318 |
|
Additional paid-in capital |
|
44,044 |
|
|
|
42,682 |
|
Retained earnings |
|
471,513 |
|
|
|
490,682 |
|
Accumulated other comprehensive income (loss) |
|
1,537 |
|
|
|
(797 |
) |
Total equity attributable to shareholders of Cronos Group |
|
1,129,329 |
|
|
|
1,143,885 |
|
Non-controlling interests |
|
(2,929 |
) |
|
|
(2,921 |
) |
Total shareholders’
equity |
|
1,126,400 |
|
|
|
1,140,964 |
|
Total liabilities and
shareholders’ equity |
$ |
1,159,575 |
|
|
$ |
1,213,009 |
|
Cronos
Group Inc.Condensed Consolidated Statements of Net Loss and
Comprehensive Loss(In thousands of U.S. dollars, except
share and per share amounts, unaudited) |
|
Three months ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Net revenue, before
excise taxes |
$ |
27,203 |
|
|
$ |
29,406 |
|
Excise taxes |
|
(7,059 |
) |
|
|
(4,373 |
) |
Net revenue |
|
20,144 |
|
|
|
25,033 |
|
Cost of sales |
|
17,764 |
|
|
|
18,107 |
|
Gross
profit |
|
2,380 |
|
|
|
6,926 |
|
Operating
expenses |
|
|
|
Sales and marketing |
|
5,872 |
|
|
|
5,012 |
|
Research and development |
|
2,041 |
|
|
|
4,039 |
|
General and administrative |
|
12,379 |
|
|
|
22,368 |
|
Restructuring costs |
|
— |
|
|
|
3,084 |
|
Share-based compensation |
|
2,551 |
|
|
|
3,686 |
|
Depreciation and amortization |
|
1,533 |
|
|
|
1,293 |
|
Impairment loss on long-lived assets |
|
— |
|
|
|
3,493 |
|
Total operating expenses |
|
24,376 |
|
|
|
42,975 |
|
Operating loss |
|
(21,996 |
) |
|
|
(36,049 |
) |
Other
income |
|
|
|
Interest income, net |
|
11,180 |
|
|
|
2,046 |
|
Gain (loss) on revaluation of derivative liabilities |
|
(65 |
) |
|
|
10,419 |
|
Share of loss from equity method investments |
|
(496 |
) |
|
|
— |
|
Gain (loss) on revaluation of financial instruments |
|
(7,758 |
) |
|
|
4,268 |
|
Impairment loss on other investments |
|
— |
|
|
|
(11,238 |
) |
Foreign currency transaction loss |
|
(1,643 |
) |
|
|
(1,872 |
) |
Other, net |
|
85 |
|
|
|
135 |
|
Total other income |
|
1,303 |
|
|
|
3,758 |
|
Loss before income taxes |
|
(20,693 |
) |
|
|
(32,291 |
) |
Income tax expense (benefit) |
|
(1,436 |
) |
|
|
362 |
|
Net loss |
|
(19,257 |
) |
|
|
(32,653 |
) |
Net loss attributable to
non-controlling interest |
|
(88 |
) |
|
|
(15 |
) |
Net loss attributable to Cronos Group |
$ |
(19,169 |
) |
|
$ |
(32,638 |
) |
Comprehensive
loss |
|
|
|
Net loss |
$ |
(19,257 |
) |
|
$ |
(32,653 |
) |
Other comprehensive income |
|
|
|
Foreign exchange gain on translation |
|
2,414 |
|
|
|
15,977 |
|
Comprehensive loss |
|
(16,843 |
) |
|
|
(16,676 |
) |
Comprehensive loss attributable to non-controlling interests |
|
(8 |
) |
|
|
(261 |
) |
Comprehensive loss
attributable to Cronos Group |
$ |
(16,835 |
) |
|
$ |
(16,415 |
) |
Net loss from continuing
operations per share |
|
|
|
Basic - continuing operations |
$ |
(0.05 |
) |
|
$ |
(0.09 |
) |
Diluted - continuing operations |
$ |
(0.05 |
) |
|
$ |
(0.09 |
) |
Weighted average number
of outstanding shares |
|
|
|
Basic |
|
380,634,208 |
|
|
|
375,022,724 |
|
Diluted |
|
380,634,208 |
|
|
|
375,022,724 |
|
Cronos
Group Inc. Condensed Consolidated Statements of Cash
Flows(In thousands of U.S. dollars, except share amounts,
unaudited) |
|
Three months ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Operating
activities |
|
|
|
Net loss |
$ |
(19,257 |
) |
|
$ |
(32,653 |
) |
Adjustments to reconcile net
loss to cash used in operating activities: |
|
|
|
Share-based compensation |
|
2,551 |
|
|
|
3,686 |
|
Depreciation and amortization |
|
2,405 |
|
|
|
2,824 |
|
Impairment loss on long-lived assets |
|
— |
|
|
|
3,493 |
|
Impairment loss on other investments |
|
— |
|
|
|
11,238 |
|
Loss (gain) from investments |
|
8,419 |
|
|
|
(4,196 |
) |
Loss (gain) on revaluation of derivative liabilities |
|
65 |
|
|
|
(10,419 |
) |
Changes in expected credit losses on long-term financial
assets |
|
(764 |
) |
|
|
— |
|
Foreign currency transaction loss |
|
1,643 |
|
|
|
1,872 |
|
Other non-cash operating activities, net |
|
(2,850 |
) |
|
|
(271 |
) |
Changes in operating assets
and liabilities: |
|
|
|
Accounts receivable, net |
|
8,201 |
|
|
|
(3,530 |
) |
Other receivables |
|
(1,282 |
) |
|
|
2,435 |
|
Prepaids and other current assets |
|
(848 |
) |
|
|
(1,195 |
) |
Inventory |
|
(6,824 |
) |
|
|
(3,867 |
) |
Accounts payable |
|
1,555 |
|
|
|
(178 |
) |
Income taxes payable |
|
(32,813 |
) |
|
|
— |
|
Accrued liabilities |
|
(7,894 |
) |
|
|
(3,150 |
) |
Cash flows used in operating
activities |
|
(47,693 |
) |
|
|
(33,911 |
) |
Investing
activities |
|
|
|
Purchase of short-term investments |
|
(422,612 |
) |
|
|
— |
|
Proceeds from short-term investments |
|
113,355 |
|
|
|
— |
|
Proceeds from repayment on loan receivables |
|
6,249 |
|
|
|
790 |
|
Purchase of property, plant and equipment |
|
(804 |
) |
|
|
(711 |
) |
Purchase of intangible assets |
|
— |
|
|
|
(23 |
) |
Other investing activities |
|
— |
|
|
|
44 |
|
Cash flows provided by (used in) investing activities |
|
(303,812 |
) |
|
|
100 |
|
Financing
activities |
|
|
|
Withholding taxes paid on share-based awards |
|
(743 |
) |
|
|
(534 |
) |
Other financing activities, net |
|
— |
|
|
|
70 |
|
Cash flows used in financing activities |
|
(743 |
) |
|
|
(464 |
) |
Effect of foreign currency
translation on cash and cash equivalents |
|
1,271 |
|
|
|
8,837 |
|
Net change in cash and cash equivalents |
|
(350,977 |
) |
|
|
(25,438 |
) |
Cash and cash equivalents,
beginning of period |
|
764,644 |
|
|
|
886,973 |
|
Cash and cash equivalents, end of period |
$ |
413,667 |
|
|
$ |
861,535 |
|
Supplemental cash flow
information |
|
|
|
Interest paid |
$ |
— |
|
|
$ |
— |
|
Interest received |
$ |
7,558 |
|
|
$ |
822 |
|
Income taxes paid |
$ |
32,932 |
|
|
$ |
66 |
|
Non-GAAP Measures
Cronos reports its financial results in
accordance with Generally Accepted Accounting Principles in the
United States (“U.S. GAAP”). This press release refers to measures
not recognized under U.S. GAAP (“non-GAAP measures”). These
non-GAAP measures do not have a standardized meaning prescribed by
U.S. GAAP and are therefore unlikely to be comparable to similar
measures presented by other companies. Rather, these non-GAAP
measures are provided as a supplement to corresponding U.S. GAAP
measures to provide additional information regarding the results of
operations from management’s perspective. Accordingly, non-GAAP
measures should not be considered a substitute for, or superior to,
the financial information prepared and presented in accordance with
U.S. GAAP. All non-GAAP measures presented in this press release
are reconciled to their closest reported U.S. GAAP measure.
Reconciliations of historical adjusted financial measures to
corresponding U.S. GAAP measures are provided below.
Adjusted EBITDA
Management reviews Adjusted EBITDA, a non-GAAP
measure, which excludes non-cash items and items that do not
reflect management’s assessment of ongoing business performance of
our operating segments. Management defines Adjusted EBITDA as net
income (loss) before interest, tax expense (benefit), depreciation
and amortization adjusted for: share of income (loss) from equity
method investments; impairment loss on goodwill and intangible
assets; impairment loss on long-lived assets; (gain) loss on
revaluation of derivative liabilities; (gain) loss on revaluation
of financial instruments; transaction costs related to strategic
projects; impairment loss on other investments; foreign currency
transaction loss; other, net; loss from discontinued operations;
restructuring costs; share-based compensation; and financial
statement review costs and reserves related to the restatements of
the Company's 2019 and 2021 interim financial statements (the
"Restatements"), including the costs related to the settlement of
the SEC's and the OSC's investigation of the Restatements and legal
costs defending shareholder class action complaints brought against
the Company as a result of the 2019 restatement.
Management believes that Adjusted EBITDA
provides the most useful insight into underlying business trends
and results and provides a more meaningful comparison of
period-over-period results. Management uses Adjusted EBITDA for
planning, forecasting and evaluating business and financial
performance, including allocating resources and evaluating results
relative to employee compensation targets.
The following tables set forth a reconciliation
of Net income (loss) as determined in accordance with U.S. GAAP to
Adjusted EBITDA for the periods indicated:
(In thousands of U.S.
dollars) |
Three months ended March 31, 2023 |
|
United States |
|
Rest of World |
|
Corporate |
|
Total |
Net income (loss) |
$ |
337 |
|
|
$ |
(15,439 |
) |
|
$ |
(4,155 |
) |
|
$ |
(19,257 |
) |
Interest income, net |
|
(3,399 |
) |
|
|
(7,781 |
) |
|
|
— |
|
|
|
(11,180 |
) |
Income tax benefit |
|
— |
|
|
|
(1,436 |
) |
|
|
— |
|
|
|
(1,436 |
) |
Depreciation and amortization |
|
200 |
|
|
|
2,205 |
|
|
|
— |
|
|
|
2,405 |
|
EBITDA |
|
(2,862 |
) |
|
|
(22,451 |
) |
|
|
(4,155 |
) |
|
|
(29,468 |
) |
Share of loss from equity method investments |
|
— |
|
|
|
496 |
|
|
|
— |
|
|
|
496 |
|
Loss on revaluation of derivative liabilities(ii) |
|
— |
|
|
|
65 |
|
|
|
— |
|
|
|
65 |
|
Loss on revaluation of financial instruments(iii) |
|
— |
|
|
|
7,758 |
|
|
|
— |
|
|
|
7,758 |
|
Foreign currency transaction loss |
|
— |
|
|
|
1,643 |
|
|
|
— |
|
|
|
1,643 |
|
Other, net(v) |
|
— |
|
|
|
(85 |
) |
|
|
— |
|
|
|
(85 |
) |
Share-based compensation(vii) |
|
5 |
|
|
|
2,546 |
|
|
|
— |
|
|
|
2,551 |
|
Financial statement review costs(viii) |
|
— |
|
|
|
— |
|
|
|
276 |
|
|
|
276 |
|
Adjusted EBITDA |
$ |
(2,857 |
) |
|
$ |
(10,028 |
) |
|
$ |
(3,879 |
) |
|
$ |
(16,764 |
) |
(In thousands of U.S.
dollars) |
Three Months Ended March 31, 2022 |
|
United States |
|
Rest of World |
|
Corporate |
|
Total |
Net income (loss) |
$ |
(22,216 |
) |
|
$ |
2,014 |
|
|
$ |
(12,451 |
) |
|
$ |
(32,653 |
) |
Interest income, net |
|
(29 |
) |
|
|
(2,017 |
) |
|
|
— |
|
|
|
(2,046 |
) |
Income tax expense |
|
— |
|
|
|
362 |
|
|
|
— |
|
|
|
362 |
|
Depreciation and amortization |
|
432 |
|
|
|
2,392 |
|
|
|
— |
|
|
|
2,824 |
|
EBITDA |
|
(21,813 |
) |
|
|
2,751 |
|
|
|
(12,451 |
) |
|
|
(31,513 |
) |
Impairment loss on long-lived assets(i) |
|
— |
|
|
|
3,493 |
|
|
|
— |
|
|
|
3,493 |
|
Gain on revaluation of derivative liabilities(ii) |
|
— |
|
|
|
(10,419 |
) |
|
|
— |
|
|
|
(10,419 |
) |
Gain on revaluation of financial instruments(iii) |
|
— |
|
|
|
(4,268 |
) |
|
|
— |
|
|
|
(4,268 |
) |
Impairment loss on other investments(iv) |
|
11,238 |
|
|
|
— |
|
|
|
— |
|
|
|
11,238 |
|
Foreign currency transaction loss |
|
— |
|
|
|
1,872 |
|
|
|
— |
|
|
|
1,872 |
|
Other, net(v) |
|
— |
|
|
|
(135 |
) |
|
|
— |
|
|
|
(135 |
) |
Restructuring costs(vi) |
|
1,053 |
|
|
|
2,031 |
|
|
|
— |
|
|
|
3,084 |
|
Share-based compensation(vii) |
|
2,436 |
|
|
|
1,250 |
|
|
|
— |
|
|
|
3,686 |
|
Financial statement review costs(viii) |
|
— |
|
|
|
— |
|
|
|
4,062 |
|
|
|
4,062 |
|
Adjusted EBITDA |
$ |
(7,086 |
) |
|
$ |
(3,425 |
) |
|
$ |
(8,389 |
) |
|
$ |
(18,900 |
) |
(i) For the three months ended
March 31, 2022, impairment loss on long-lived assets related
to the Company’s decision to seek a sublease for leased office
space in Toronto, Ontario, Canada during the first quarter of
2022.
(ii) For the three months ended
March 31, 2023 and 2022, gain (loss) on revaluation of
derivative liabilities represents the fair value changes on the
derivative liabilities.
(iii) For the three months ended
March 31, 2023 and 2022, gain (loss) on revaluation of
financial instruments related primarily to the Company’s equity
securities in Vitura.
(iv) For the three months ended
March 31, 2022, impairment loss on other investments related
to the PharmaCann Option for the difference between its fair value
and carrying amount.
(v) For the three months ended
March 31, 2023 and 2022, other, net related to gain on
disposal of assets.
(vi) For the three months ended
March 31, 2022, restructuring costs related to the
employee-related severance costs and other restructuring costs
associated with the Realignment, including the change in nature of
operations at our Peace Naturals Campus.
(vii) For the three months ended
March 31, 2023 and 2022, share-based compensation related to
the vesting expenses of share-based compensation awarded to
employees under the Company’s share-based award plans.
(viii) For the three months ended
March 31, 2023 and 2022, financial statement review costs
include costs and reserves taken related to the Restatements, costs
related to the Company’s responses to requests for information from
various regulatory authorities relating to the Restatements and
legal costs incurred defending shareholder class action complaints
brought against the Company as a result of the 2019
restatement.
Constant Currency
To supplement the consolidated financial
statements presented in accordance with U.S. GAAP, we have
presented constant currency adjusted financial measures for net
revenues, gross profit, gross profit margin, operating expenses,
net income (loss) and adjusted EBITDA for the three ended March 31,
2023 as well as cash and cash equivalents and short-term investment
balances as of March 31, 2023 compared to December 31, 2022, which
are considered non-GAAP financial measures. We present constant
currency information to provide a framework for assessing how our
underlying operations performed excluding the effect of foreign
currency rate fluctuations. To present this information, current
and comparative prior period income statement results in currencies
other than U.S. dollars are converted into U.S. dollars using the
average exchange rates from the three-month comparative period in
2022 rather than the actual average exchange rates in effect during
the respective current periods; constant currency current and prior
comparative balance sheet information is translated at the prior
year-end spot rate rather than the current period spot rate. All
growth comparisons relate to the corresponding period in 2022. We
have provided this non-GAAP financial information to aid investors
in better understanding the performance of our segments. The
non-GAAP financial measures presented in this press release should
not be considered as a substitute for, or superior to, the measures
of financial performance prepared in accordance with U.S. GAAP.
The table below sets forth certain measures of
consolidated results from continuing operations on a constant
currency basis for the three months ended March 31, 2023
compared to the three months ended March 31, 2022 as well as
cash and cash equivalents and short-term investments as of
March 31, 2023 and December 31, 2022, both on an as-reported
and constant currency basis (in thousands):
|
As Reported |
|
As Adjusted for Constant Currency |
|
Three months ended March 31, |
|
As Reported Change |
|
Three months ended March 31, |
|
Constant Currency Change |
|
|
2023 |
|
|
|
2022 |
|
|
$ |
|
% |
|
|
2023 |
|
|
$ |
|
% |
Net revenue |
$ |
20,144 |
|
|
$ |
25,033 |
|
|
$ |
(4,889 |
) |
|
(20 |
)% |
|
$ |
21,653 |
|
|
$ |
(3,380 |
) |
|
(14 |
)% |
Gross profit |
|
2,380 |
|
|
|
6,926 |
|
|
|
(4,546 |
) |
|
(66 |
)% |
|
|
2,651 |
|
|
|
(4,275 |
) |
|
(62 |
)% |
Gross margin |
|
12 |
% |
|
|
28 |
% |
|
N/A |
|
|
(16)pp |
|
|
12 |
% |
|
N/A |
|
|
(16)pp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
24,376 |
|
|
|
42,975 |
|
|
|
(18,599 |
) |
|
(43 |
)% |
|
|
26,034 |
|
|
|
(16,941 |
) |
|
(39 |
)% |
Net loss |
|
(19,257 |
) |
|
|
(32,653 |
) |
|
|
13,396 |
|
|
41 |
% |
|
|
(23,383 |
) |
|
|
9,270 |
|
|
28 |
% |
Adjusted EBITDA |
|
(16,764 |
) |
|
|
(18,900 |
) |
|
|
2,136 |
|
|
11 |
% |
|
|
(17,951 |
) |
|
|
949 |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, |
|
As of December 31, |
|
As Reported Change |
|
As of March 31, |
|
Constant Currency Change |
|
|
2023 |
|
|
|
2022 |
|
|
$ |
|
% |
|
|
2023 |
|
|
$ |
|
% |
Cash and cash equivalents |
$ |
413,667 |
|
|
$ |
764,644 |
|
|
$ |
(350,977 |
) |
|
(46 |
)% |
|
$ |
413,579 |
|
|
$ |
(351,065 |
) |
|
(46 |
)% |
Short-term investments |
|
422,763 |
|
|
|
113,077 |
|
|
|
309,686 |
|
|
274 |
% |
|
|
421,577 |
|
|
|
308,500 |
|
|
273 |
% |
Total cash and cash
equivalents and short-term investments |
$ |
836,430 |
|
|
$ |
877,721 |
|
|
$ |
(41,291 |
) |
|
(5 |
)% |
|
$ |
835,156 |
|
|
$ |
(42,565 |
) |
|
(5 |
)% |
Net revenue
|
As Reported |
|
As Adjusted for Constant Currency |
|
Three months ended March 31, |
|
As Reported Change |
|
Three months ended March 31, |
|
Constant Currency Change |
|
|
2023 |
|
|
2022 |
|
$ |
|
% |
|
|
2023 |
|
$ |
|
% |
Cannabis flower |
$ |
13,128 |
|
$ |
18,625 |
|
$ |
(5,497 |
) |
|
(30 |
)% |
|
$ |
14,203 |
|
$ |
(4,422 |
) |
|
(24 |
)% |
Cannabis extracts |
|
6,950 |
|
|
6,316 |
|
|
634 |
|
|
10 |
% |
|
|
7,380 |
|
|
1,064 |
|
|
17 |
% |
Other |
|
66 |
|
|
92 |
|
|
(26 |
) |
|
(28 |
)% |
|
|
70 |
|
|
(22 |
) |
|
(24 |
)% |
Net revenue |
$ |
20,144 |
|
$ |
25,033 |
|
$ |
(4,889 |
) |
|
(20 |
)% |
|
$ |
21,653 |
|
$ |
(3,380 |
) |
|
(14 |
)% |
|
As Reported |
|
As Adjusted for Constant Currency |
|
Three months ended March 31, |
|
As Reported Change |
|
Three months ended March 31, |
|
Constant Currency Change |
|
|
2023 |
|
|
2022 |
|
$ |
|
% |
|
|
2023 |
|
$ |
|
% |
Canada |
$ |
14,434 |
|
$ |
13,576 |
|
$ |
858 |
|
|
6 |
% |
|
$ |
15,409 |
|
$ |
1,833 |
|
|
14 |
% |
Israel |
|
5,061 |
|
|
9,128 |
|
|
(4,067 |
) |
|
(45 |
)% |
|
|
5,595 |
|
|
(3,533 |
) |
|
(39 |
)% |
United States |
|
649 |
|
|
2,329 |
|
|
(1,680 |
) |
|
(72 |
)% |
|
|
649 |
|
|
(1,680 |
) |
|
(72 |
)% |
Net revenue |
$ |
20,144 |
|
$ |
25,033 |
|
$ |
(4,889 |
) |
|
(20 |
)% |
|
$ |
21,653 |
|
$ |
(3,380 |
) |
|
(14 |
)% |
For the three months ended March 31, 2023,
net revenue on a constant currency basis was $21.7 million,
representing a 14% decrease from the three months ended
March 31, 2022. The change was primarily due to lower cannabis
flower sales in Israel due to competitive activity, the slowdown in
patient permit authorizations and political unrest, and a reduction
in the U.S. segment. Net revenue in Canada was impacted by an
adverse price/mix in the cannabis flower category driving increased
excise tax payments as a percent of revenue and increased returns,
partially offset by higher cannabis extract sales in the Canadian
adult-use market.
Gross profit
For the three months ended March 31, 2023,
gross profit on a constant currency basis was $2.7 million,
representing a 62% decrease from the three months ended
March 31, 2022. The change was primarily due to lower cannabis
flower sales in Israel, a reduction in revenue in the U.S. segment,
adverse price/mix shift in cannabis flower sales in Canada and
increased returns, partially offset by higher cannabis extract
sales in Canada that carry a higher margin profile than other
product categories and lower cannabis biomass costs.
Operating expenses
For the three months ended March 31, 2023,
operating expenses on a constant currency basis were $26.0 million,
representing a 39% decrease from the three months ended
March 31, 2022. The change was primarily due to decreases in
professional fees related to financial statement review costs,
restructuring costs associated with the Realignment, impairment
loss on long-lived assets and research and development costs.
Net loss
For the three months ended March 31, 2023,
net loss on a constant currency basis was $23.4 million,
representing a 28% improvement in net loss from the three months
ended March 31, 2022.
Adjusted EBITDA
For the three months ended March 31, 2023,
Adjusted EBITDA on a constant currency basis was $(18.0) million,
representing a 5% improvement from the three months ended
March 31, 2022. The change was primarily driven by decreases
in general and administrative expenses and research and development
expenses as a result of the Company's strategic Realignment,
partially offset by a decrease in gross profit.
Cash and cash equivalents & short-term
investments
Cash and cash equivalents and short-term
investments on a constant currency basis decreased 5% to $835.2
million as of March 31, 2023 from $877.7 million as of
December 31, 2022. The change in cash and cash equivalents and
short-term investments is primarily due to cash flows used in
operating activities in Q1 2023.
Foreign currency
exchange rates
All currency amounts in this press
release are stated in U.S. dollars (“USD”), which is
our reporting currency, unless otherwise noted. All references to
“dollars” or “$” are to USD. The assets and liabilities
of the Company's foreign operations are translated into USD at the
exchange rate in effect as of March 31, 2023, March 31,
2022 and December 31, 2022. Transactions affecting shareholders’
equity are translated at historical foreign exchange rates. The
consolidated statements of net income (loss) and comprehensive
income (loss) and the consolidated statements of cash flows of the
Company’s foreign operations are translated into USD by applying
the average foreign exchange rate in effect for the reporting
period using Bloomberg.
The exchange rates used to translate from USD to
Canadian dollars (“C$”) and Israeli New Shekels
("ILS") is shown below:
(Exchange rates are shown as
C$ per $) |
As of |
|
March 31, 2023 |
|
March 31, 2022 |
|
December 31, 2022 |
Spot rate |
1.3516 |
|
1.2507 |
|
1.3554 |
Year-to-date average rate |
1.3520 |
|
1.2665 |
|
N/A |
(Exchange rates are shown as
ILS per $) |
As of |
|
March 31, 2023 |
|
March 31, 2022 |
|
December 31, 2022 |
Spot rate |
3.5966 |
|
3.1906 |
|
3.5178 |
Year-to-date average rate |
3.5319 |
|
3.1942 |
|
N/A |
For further information, please
contact:Shayne LaidlawInvestor RelationsTel: (416)
504-0004investor.relations@thecronosgroup.com
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