Cronos Group Q2 Net Revenue Loss Reduced By 38%

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Cronos Group Inc. (Nasdaq: CRON) (TSX: CRON) announced its Q2 2022 business results for the period ending June 30th, 2022, on Wednesday. All financial information is provided in U.S. dollars in comparison to the preceding quarter.

Q2 Financial Highlights

  • Net Revenue: -7.9% to $23.1M
    • U.S.: -37.3% to $1.5M
    • *RoW: -4.9% to $21.6M
  • Cost of Sales: +4.6% to $18.9M
  • Gross Profit (S): -40.5% to $4.1M
  • Gross Margin (%): decreased to 18% from 28%
  • Net Loss: reduced by 37.7% to $(20.3)M
  • Adj. **EBITDA: declined by 0.5% to $(18.8)M
  • Cash on Hand: -8.4% to $789,543

*RoWRest oWorld; **EBITDA - Earnings Before Interest Taxes Depreciation Amortization

Q2 Operational Highlights

  • Following an evaluation of the U.S. business as part of the Company’s Realignment, the Company began a phased exit of the wholesale beauty category to focus the portfolio on adult-use product formats within the direct-to-consumer channel which reduced sales and marketing headcount in the U.S. to better align the business structure with the new strategy. The Company now expects to incur approximately $6.4 million in expenses in connection with the Realignment, an increase from the previously stated $5.8 million.
  • The Company anticipates capital expenditures as a result of the Realignment of approximately $2.2 million to modernize information technology systems and build distribution capabilities. As of June 30, 2022, related capital expenditures were $0.3 million. As the Company continues with its transition through the second half of 2022, it anticipates that it will begin to incur the majority of the expected capital expenditures as part of the Realignment.
  • Spinach® continued to organically expand market share in the edibles category in Canada and now holds a 14.3% market share in the edibles category across Canada and 18.6% within the gummy category.
    • 3 out of 4 SOURZ by Spinach™ gummies ranked in the top-10 for market share in Canada
    • all five of our gummy products across SOURZ by Spinach™ and Spinach FEELZ™ were in the top-15 for the same period.
  • The strong growth and demand for the products in the second quarter culminated in the SOURZ by Spinach™ brand winning ‘Favorite Edible Product’, in the People’s Choice category at the O’Cannabiz Conference & Expo.
  • The Company announced the achievement of the final productivity target for tetrahydrocannabivarin (THCV) - hypothesized to reduce the appetite-enhancing property of THC - under its strategic partnership with Ginkgo Bioworks Holdings, Inc. (NYSE: DNA). 
  • Cronos GrowCo has achieved profitability contributing net revenue of approximately $5.2 million to licensed producers excluding sales to the Company, and continues to build its wholesale customer base and is becoming a meaningful contributor to the Canadian cannabis supply chain.

Management Commentary

Mike Gorenstein, Chairman, President, and CEO, said:

  • “...We are also refocusing the U.S. business to prioritize hero SKUs while leaning into adult-use product formats and concentrating on the direct-to-consumer channel. Although early in the repositioning of our U.S. business, we are confident the new strategy will improve our bottom-line while maintaining brand equity that we can leverage into cannabinoids beyond CBD, and in the U.S. THC market once regulations permit.
  • As we realign our business, we remain focused on what we know will drive differentiation: product development and long-term focused innovation. We continue to expand our borderless cannabinoid product portfolio with the recent launch of a CBN vape and gummy in select markets in Canada, and we achieved the THCV equity milestone in partnership with Ginkgo. Continuing to hit these productivity milestones fuels our innovation pipeline focused on creating borderless products with rare cannabinoids that amplify and differentiate the consumer experience. With a focus on utilizing rare cannabinoids, you have seen the success of our approach in the gummy category in Canada. We intend to apply this same strategy to win in other categories such as vapes and pre-rolls.”

Stock Performance

Cronos Group's stock price is beginning to advance, UP 20.9% since the end of June and is now only DOWN 13% YTD.

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