Cannabis Central: Cronos' Q3 Financial Report Shows Impressive Increase In Revenue But Not Much Else

Cronos Group Inc. (CRON), a constituent in the munKNEE Pure-Play Pot Stock Index, reported its Q3 financials today, as follows:

Q3 Financial Highlights (All figures are in U.S. Dollars and compared to the previous quarter)

• Revenue: +14.9% to $11.4M
  • U.S.: -24.6%
  • Balance: +47.3%
• Gross Profit (Loss) ($): reduced by 48.0% to $(1.5M) 
• Gross Profit (%): improved to (14)% from (30)%
• Adj. Operating Profit (Loss): increased 28.5% to $(40.2M)
• Cash on Hand: declined by 1.1% to $1,097.8M 

Operational Highlights

• Cronos Israel has now received the IMC-GAP, IMC-GMP and IMC-GDP certifications required for the cultivation, production and marketing of dried flower, pre-rolls and oils in Israel.
• Natuera continued to successfully complete imports of hemp-derived CBD extract to the U.S. for business development and R&D purposes.
• Natuera also completed its first export of hemp-derived CBD distillate to the United Kingdom for R&D purposes.
• Natuera’s wholly-owned subsidiary in Colombia was awarded four quotas by the Colombian government for psychoactive cannabis R&D production.
• The company expanded its scope for cannabinoid research and renamed its R&D center as Cronos Research Labs. 
• The company has implemented a new enterprise resource planning (“ERP”) system across the Canadian business and plans to launch the system to the U.S. business in the first half of 2021 which will enable the company to realize efficiencies throughout their supply chain and operations.
• On September 9, 2020, Cronos Group expanded its leadership structure to drive its next phase of growth by appointing Kurt Schmidt as President and Chief Executive Officer replacing Mike Gorenstein who was appointed Executive Chairman. Mr. Schmidt brings to the job decades of leadership experience in the U.S. and overseas with companies such as Kraft Foods, Inc., Gerber Products Company (CEO), Nestlé S.A. (Exec. VP) and Blue Buffalo Inc. (CEO).

Management Commentary

Mike Gorenstein, Executive Chairman said:

 “We look forward to continuing to launch innovative cannabinoid products in Canada and to expand our portfolio of U.S. hemp-derived CBD brands. Internationally, we’re pleased with the progress we have made in Israel and as regulations continue to evolve, we will look to establish ourselves as a leader in the markets in which we operate."

Kurt Schmidt, President and CEO said:

"Cronos Group is well-positioned to continue to thrive. Joining as President and CEO is a unique opportunity for me to bring my expertise in building outstanding brands, high performance teams and results-driven organizations to Cronos Group. I look forward to helping this Company achieve many more exciting milestones.”

Stock Performance

While Cronos' stock price is down 22.0% YTD the stock held firm during Q3 and was UP 19.4% in October. The stock is showing surprising strength today on what are, at best, marginally improved Q3 financials.