Cronos Q4 Financials Are Disappointing: Net Loss Soars By 2725%!

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Cronos Group Inc. (Nasdaq: CRON) (TSX: CRON) announced its Q4 2023 business results last week for the period ending December 31st, 2023. All financial information is provided in U.S. dollars in comparison to the preceding quarter.

Q4 Financial Highlights

  • Net Revenue: DOWN 3.6% to $23.9M
    • Canada: DOWN 4.3% to $17.9M 
    • Israel: DOWN 12.3% to $5.0M 
    • Other: UP 350% to $1.0M
  • Cost of Sales: UP 4.0% to $20.9M
  • Gross Profit: DOWN 52.5% to $1.9M
  • Gross Margin: DOWN to 8% from 16%
  • Net Loss: UP 2725.0% to $(45.2)M
  • Adj. EBITDA: DOWN 2.6% to $(14.8)M
  • Cash on Hand: UP 17.1% to $669.3M
    • Short-term Investments: DOWN 28.3% to $192.2M

Q4 Operational Highlights

Brand and Product Portfolio

  • The Spinach® brand continued as the number one brand in the edibles category in Canada in Q4 2023, with an approximate 16.2% market share across the SOURZ by Spinach® and Spinach FEELZ™ sub-brands, according to Hifyre.
  • In the fourth quarter, SOURZ by Spinach® launched its first CBD forward gummy offering, the Strawberry Kiwi 5:1 CBD | THC gummy, featuring 10 pieces per pack.
  • The Spinach® brand became the number one flower brand in Canada in Q4 2023, with a 6.9% market share, according to Hifyre. 
  • The Spinach® brand was ranked the number three vape brand in Q4 2023, holding a 7.7% market share, up from Q3 2023, when it had a 6.4% market share, according to Hifyre
  • In Q4 2023, Spinach® was ranked eighth in the pre-roll category, according to Hifyre, launching Spinach Feelz™ Full Tilt Blue Razz Durban THCV pre-roll, which offers a boosted and elevated high due to its THC+THCV blend.
  • In November 2023, the Lord Jones® brand of bold THC-focused innovations, was launched in Canada initially with Hash Fusions pre-rolls, then a live resin vape product followed up by a line of Chocolate Fusions edibles.

Global Supply Chain

  • In Israel, Cronos launched three new flower offerings under the Peace Naturals® brand in the fourth quarter, Rockstar, Dancehall, and Sonic Fuel and a lower priced flower brand called Lit™.
  • In Germany, Cronos' launch of GMO Cookies and Wedding Cake, have quickly gained popularity with medical patients, rising to leading market share positions there.
  • In December 2023, Cronos commenced shipments of cannabis flower to Vitura Health Limited (of which Cronos owns approximately 10%) in Australia for sale to the medical market there. 

Management Commentary

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

  • “...We significantly improved our cash flow from operations driven primarily by operating expense savings which, combined with robust interest income and improved working capital management in the fourth quarter aided in increasing our cash balance by $22 million from the third quarter to a total cash and short-term investments balance of approximately $862 million.
  • ...The Spinach® brand became the number two overall brand in Canada, propelled by number one market share rankings in the flower and edibles categories, according to Hifyre and we also launched the Lord Jones® brand in the Canadian market.
  • ...Our teams have done excellent work over the last year to put Cronos in the best position possible to win in new markets as they become available in 2024 and beyond.”

Guidance and Outlook

  • The Company achieved $30 million in savings in 2023, overachieving its previously announced operating expense savings target of $20 to $25 million. Due to capturing operating expense savings earlier than anticipated, the Company now expects an incremental $5 to $10 million in operating expense savings in 2024, compared to the previous target of $10 to $15 million...primarily driven by savings in general and administrative, and research and development.
  • Cronos anticipates that the net change in cash, defined as the sum of cash and cash equivalents and short-term investments, will be positive in 2024.
  • The fiscal year 2024 guidance assumes:
    • slight moderation in interest rates;
    • limited impacts to our operations, facilities and business in Israel due to the Israel-Hamas War;
    • limited deterioration in foreign exchange rates due to the Israel-Hamas War;
    • the general economic conditions and regulatory environment in the markets in which Cronos participates will not materially change;
    • timely receipt of interest and principal payments on the senior secured credit facility with Cronos Growing Company Inc.;
    • anticipated interest income of approximately $40 to $50 million in fiscal year 2024;
    • year-over-year gross margin improvement;
    • and meeting our revised target for reducing our operating expenses by $5 to $10 million.

Stock Performance

Cronos Group's stock price was virtually unchanged in Q4 ending UP 0.45% at the end of 2023. It went UP 10% between then and the day before reporting its disappointing Q4 results on February 29th and is now DOWN 14% falling back to slightly below its Q3 close. 

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Disclosure: None

This article has been composed with the exclusive application of the human intelligence (HI) of the author. No artificial intelligence (AI) technology has been deployed. ...

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