Cronos Group Reports 2024 Second Quarter Results
Cronos Group (NASDAQ: CRON) reported strong Q2 2024 results, with net revenue increasing 46% year-over-year to $27.8 million. The growth was driven by a 46% increase in Canada, 27% in Israel, and new sales in Germany and the UK. The company's gross profit rose 103% to $6.3 million, while Adjusted EBITDA improved by $4.9 million to -$11.1 million. Cronos maintains a strong balance sheet with $848 million in cash and cash equivalents.
Key highlights include the expansion of Cronos GrowCo, intended to fuel global growth, and the success of brands like Spinach®, which leads in Canada's edibles and flower categories. The company reiterated its operating expense savings target of $5-$10 million for 2024 but no longer anticipates a positive net change in cash due to the $51 million investment in Cronos GrowCo.
Cronos Group (NASDAQ: CRON) ha riportato risultati positivi per il secondo trimestre del 2024, con un aumento del fatturato netto del 46% anno su anno, portando a 27,8 milioni di dollari. La crescita è stata guidata da un incremento del 46% in Canada, 27% in Israele e nuove vendite in Germania e Regno Unito. Il profitto lordo dell'azienda è aumentato del 103%, raggiungendo i 6,3 milioni di dollari, mentre l'EBITDA rettificato è migliorato di 4,9 milioni di dollari, arrivando a -11,1 milioni di dollari. Cronos mantiene un solido bilancio con 848 milioni di dollari in contante e liquidità equivalente.
I punti salienti includono l'espansione di Cronos GrowCo, destinata a promuovere la crescita globale, e il successo di marchi come Spinach®, che è leader nelle categorie di prodotti commestibili e floreali in Canada. L'azienda ha ribadito il suo obiettivo di risparmio sui costi operativi di 5-10 milioni di dollari per il 2024, ma non prevede più un cambiamento netto positivo nella liquidità a causa dell'investimento di 51 milioni di dollari in Cronos GrowCo.
Cronos Group (NASDAQ: CRON) reportó resultados sólidos para el segundo trimestre de 2024, con un aumento del 46% en los ingresos netos interanuales, alcanzando los 27.8 millones de dólares. El crecimiento fue impulsado por un incremento del 46% en Canadá, 27% en Israel, y nuevas ventas en Alemania y el Reino Unido. La ganancia bruta de la empresa creció un 103%, alcanzando los 6.3 millones de dólares, mientras que el EBITDA ajustado mejoró en 4.9 millones de dólares, alcanzando -11.1 millones de dólares. Cronos mantiene un sólido balance con 848 millones de dólares en efectivo y equivalentes de efectivo.
Los aspectos más destacados incluyen la expansión de Cronos GrowCo, diseñada para impulsar el crecimiento global, y el éxito de marcas como Spinach®, que lidera en las categorías de comestibles y flores en Canadá. La compañía reiteró su objetivo de ahorro en gastos operativos de 5 a 10 millones de dólares para 2024, pero ya no anticipa un cambio neto positivo en efectivo debido a la inversión de 51 millones de dólares en Cronos GrowCo.
Cronos Group (NASDAQ: CRON)은 2024년 2분기에 전년 대비 46% 증가하여 2,780만 달러의 순수익을 기록하며 강력한 결과를 보고했습니다. 성장은 캐나다에서 46%, 이스라엘에서 27% 증가하였으며, 독일과 영국에서의 신규 판매로 이어졌습니다. 회사의 총수익은 103% 증가하여 630만 달러에 이르렀고, 조정 EBITDA는 490만 달러 개선되어 -1,110만 달러가 되었습니다. Cronos는 8억 4,800만 달러의 현금과 현금성 자산을 보유하며 강한 재무 구조를 유지하고 있습니다.
주요 하이라이트로는 글로벌 성장을 촉진하기 위한 Cronos GrowCo의 확장과 캐나다의 식용 및 꽃 범주에서 선두인 Spinach®와 같은 브랜드의 성공이 포함됩니다. 회사는 2024년을 위한 운영 비용 절감 목표를 500만 ~ 1,000만 달러로 재확인했지만, Cronos GrowCo에 대한 5,100만 달러의 투자로 인해 더 이상 현금의 긍정적인 순 변화를 예상하지 않습니다.
Cronos Group (NASDAQ: CRON) a annoncé de bons résultats pour le deuxième trimestre 2024, avec une augmentation de 46 % des revenus nets d'une année sur l'autre, atteignant 27,8 millions de dollars. La croissance a été alimentée par une augmentation de 46 % au Canada, de 27 % en Israël et de nouvelles ventes en Allemagne et au Royaume-Uni. Le bénéfice brut de l'entreprise a augmenté de 103 %, atteignant 6,3 millions de dollars, tandis que l'EBITDA ajusté s'est amélioré de 4,9 millions de dollars pour atteindre -11,1 millions de dollars. Cronos maintient un solide bilan avec 848 millions de dollars en liquidités et équivalents de liquidités.
Les faits saillants comprennent l'expansion de Cronos GrowCo, destinée à stimuler la croissance mondiale, et le succès de marques comme Spinach®, qui est en tête des catégories comestibles et fleurs au Canada. L'entreprise a réitéré son objectif d'économies sur les dépenses d'exploitation de 5 à 10 millions de dollars pour 2024, mais elle ne prévoit plus de changement net positif dans les liquidités en raison de l'investissement de 51 millions de dollars dans Cronos GrowCo.
Cronos Group (NASDAQ: CRON) berichtete über starke Ergebnisse im 2. Quartal 2024, mit einem Anstieg des Nettoumsatzes um 46% im Vergleich zum Vorjahr auf 27,8 Millionen Dollar. Das Wachstum wurde durch einen Anstieg von 46% in Kanada, 27% in Israel und neuen Verkäufen in Deutschland und im Vereinigten Königreich angetrieben. Der Bruttogewinn des Unternehmens stieg um 103% auf 6,3 Millionen Dollar, während das angepasste EBITDA um 4,9 Millionen Dollar auf -11,1 Millionen Dollar verbessert wurde. Cronos verfügt über eine solide Bilanz mit 848 Millionen Dollar in bar und in liquiden Mitteln.
Wichtige Höhepunkte sind die Expansion von Cronos GrowCo, die das globale Wachstum fördern soll, sowie der Erfolg von Marken wie Spinach®, die in Kanada in den Kategorien Esswaren und Blumen führend ist. Das Unternehmen bekräftigte sein Ziel zur Einsparung von Betriebskosten von 5–10 Millionen Dollar für 2024, erwartet jedoch keinen positiven Netto-Cash-Flow mehr aufgrund der Investition von 51 Millionen Dollar in Cronos GrowCo.
- Net revenue increased 46% year-over-year to $27.8 million
- Gross profit rose 103% to $6.3 million
- Adjusted EBITDA improved by $4.9 million to -$11.1 million
- Strong balance sheet with $848 million in cash and cash equivalents
- Spinach® brand leads in Canada's edibles (15.6% market share) and flower (6.2% market share) categories
- $51 million investment in Cronos GrowCo to expand production capacity
- Net loss increased by $3.1 million to $8.8 million in Q2 2024
- Company no longer anticipates a positive net change in cash for 2024
- Potential risks associated with the Middle East conflict impacting operations in Israel
Insights
Cronos Group's Q2 2024 results show significant progress, with net revenue increasing 46% year-over-year to
However, the company still reported a net loss of
The
Cronos Group's brand strategy is showing promising results. The Spinach® brand has become the number one flower brand in Canada with a
The company's focus on innovation is evident with new product launches like Spinach Grindz™ and SOURZ Fully Blasted gummies. The Lord Jones® brand is also gaining traction, with its Hash Fusions pre-rolls becoming the top-selling product in its category.
Internationally, the PEACE NATURALS® brand is performing well in Israel, Germany and the UK, leveraging Cronos's proprietary genetics. The expansion of Cronos GrowCo could further support this international growth strategy.
These brand successes and product innovations position Cronos well for continued market share gains and revenue growth in both domestic and international markets.
The expansion of Cronos GrowCo has significant legal and financial implications. By providing a
The new supply agreement, giving Cronos the option to purchase up to
Additionally, the ongoing Middle East conflict introduces potential legal risks for Cronos's operations in Israel. The company acknowledges that the recorded amounts of assets and liabilities related to its Israeli operations could change materially, which may have implications for financial reporting and disclosure requirements.
Net revenue in Q2 2024 increased by
Industry-leading balance sheet with
Announced expansion of Cronos GrowCo designed to fuel global growth
TORONTO, Aug. 08, 2024 (GLOBE NEWSWIRE) -- Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“Cronos” or the “Company”) today announced its 2024 second quarter business results.
“Cronos achieved its highest quarterly net revenue on record in Q2 2024 at
“Our recent investment in our joint venture, Cronos GrowCo, is intended to ensure consistent supply of high-quality cannabis biomass, fueling our global growth initiatives. Cronos will consolidate the results of Cronos GrowCo's operations in Q3 2024, which will show the value that Cronos GrowCo provides to our supply chain,” continued Mr. Gorenstein. “The Spinach® brand continues to lead in Canada, with new introductions like Spinach Grindz™ and SOURZ Fully Blasted 10mg THC gummies contributing to revenue growth in Q2. The Lord Jones® brand also enhanced its offerings with new vape and pre-roll products, strengthening our market presence. Internationally, our leading medical brand, PEACE NATURALS®, successfully expanded into the UK and continues to solidify top-tier positioning in the German market. In Israel, our team continues to focus on bringing new high-quality strains to market under the PEACE NATURALS® brand to complement our popular hero strains, GMO and Wedding Cake, which have driven significant volume growth. At Cronos we continue to focus on quality and innovation at every turn, all while maintaining a strong balance sheet, positioning the company for growth.”
Consolidated Financial Results
In the second quarter of 2023, the Company exited its U.S. hemp-derived CBD operations. The exit of the U.S. operations represented a strategic shift, and as such, qualifies for reporting as discontinued operations in our condensed consolidated statements of net loss and comprehensive income (loss). Prior period amounts have been reclassified to reflect the discontinued operations classification of the U.S. operations.
The tables below set forth our condensed consolidated results of continuing operations, expressed in thousands of U.S. dollars for the periods presented. Our condensed consolidated financial results for these periods are not necessarily indicative of the consolidated financial results that we will achieve in future periods.
| (in thousands of USD) | Three months ended June 30, | Change | Six months ended June 30, | Change | ||||||||||||||||||||||||||
| 2024 | 2023 | $ | % | 2024 | 2023 | $ | % | |||||||||||||||||||||||
| Consolidated net revenue | $ | 27,762 | $ | 19,021 | $ | 8,741 | 46 | % | $ | 53,050 | $ | 38,516 | $ | 14,534 | 38 | % | ||||||||||||||
| Cost of sales | 21,070 | 15,922 | 5,148 | 32 | % | 41,875 | 32,490 | 9,385 | 29 | % | ||||||||||||||||||||
| Inventory write-down | 395 | — | 395 | N/A | 395 | — | 395 | N/A | ||||||||||||||||||||||
| Gross profit | $ | 6,297 | $ | 3,099 | $ | 3,198 | 103 | % | $ | 10,780 | $ | 6,026 | $ | 4,754 | 79 | % | ||||||||||||||
| Gross margin(i) | 23 | % | 16 | % | N/A | 7 | pp | 20 | % | 16 | % | N/A | 4 | pp | ||||||||||||||||
| Net loss(ii) | $ | (8,759 | ) | $ | (5,663 | ) | $ | (3,096 | ) | (55 | )% | $ | (11,243 | ) | $ | (23,698 | ) | $ | 12,455 | 53 | % | |||||||||
| Adjusted EBITDA(iii) | $ | (11,051 | ) | $ | (15,905 | ) | $ | 4,854 | 31 | % | $ | (21,720 | ) | $ | (31,587 | ) | $ | 9,867 | 31 | % | ||||||||||
| Other Data | ||||||||||||||||||||||||||||||
| Cash and cash equivalents(iv) | $ | 848,189 | $ | 409,428 | $ | 438,761 | 107 | % | ||||||||||||||||||||||
| Short-term investments(iv) | — | 431,510 | (431,510 | ) | (100 | )% | ||||||||||||||||||||||||
| Capital expenditures(v) | 916 | 502 | 414 | 82 | % | 2,910 | 1,306 | 1,604 | 123 | % | ||||||||||||||||||||
(i) Gross margin is defined as gross profit divided by net revenue.
(ii) The increase year-over-year in quarterly net loss was primarily driven by an impairment loss on other investments in Q2 2024.
(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.
Second Quarter 2024
- Net revenue of
$27.8 million in Q2 2024 increased by$8.7 million from Q2 2023. The increase was primarily due to higher cannabis flower and cannabis extract sales in Canada, higher cannabis flower sales in Israel, and sales to other international markets consisting of Germany and the United Kingdom (the "UK"). - Gross profit of
$6.3 million in Q2 2024 increased by$3.2 million from Q2 2023. The increase was primarily due to higher cannabis flower and extract sales in Canada, higher cannabis flower sales in Israel and sales in other international markets consisting of Germany and the UK. - Adjusted EBITDA of
$(11.1) million in Q2 2024 improved by$4.9 million from Q2 2023. The improvement year-over-year was driven by an increase in gross profit and decreases in sales and marketing and general and administrative expenses.
Business Updates
Transaction with Cronos GrowCo
On June 20, 2024, Cronos announced an expansion of Cronos Growing Company Inc. ("Cronos GrowCo"). The investment will be funded by an additional credit facility provided by Cronos and is intended to assist GrowCo’s expansion of its purpose-built cannabis facility to address the increased global market demand for high-quality cannabis flower.
Key highlights of the investment:
- Investment in Expansion: Cronos provided an approximately
$51 million ($70 million CAD) secured non-revolving credit facility to Cronos GrowCo to fund facility expansion, enabling growth opportunities in the markets Cronos operates in today as well as potentially enabling future growth into new markets that open. - Enhanced Governance: As of July 1, 2024, the Cronos GrowCo board of directors expanded to five members, three of whom were appointed by Cronos.
- New Supply Agreement: Prior to the commencement of sales from the expanded facility, Cronos will have the option to purchase up to
80% of Cronos GrowCo’s total production. Thereafter, Cronos will have the option to purchase up to70% of the total production from the expanded facility. - Financial Consolidation: Cronos will consolidate Cronos GrowCo’s results in its financial statements beginning in the third quarter of 2024.
The Canadian cannabis market has a shortage of high-quality biomass and we anticipate the expansion will aid our ability to supply markets we operate in, while also supporting the potential for additional expansion.
Brand and Product Portfolio
Spinach®
Spinach® has solidified itself as the go-to brand for a wide array of products featuring different cannabinoid combinations, potency ranges and flavor profiles. In the edibles category, the Spinach® brand held a
Cronos' strong cannabis cultivar breeding program and portfolio of genetics continued to drive growth, propelling the Spinach® brand to become the number one flower brand in Canada, with a
The Spinach® brand was ranked fourth in the vape category in Q2 2024, holding a
In Q2 2024, Spinach® was ranked ninth in the pre-roll category with
Lord Jones®
Following a successful launch late last year, our Lord Jones® Hash Fusions pre-rolls rose to be the number one hash infused pre-roll in Q2 2024, according to Hifyre. To build on that lead, in April we expanded the offering by launching Sour Blueberry and Snow Lotus strains within our infused pre-roll lineup. These infused pre-rolls were designed with an optimized ratio of ice water hash to flower, meticulously researched and sensory-tested to drive a smoother consumption experience and preserve the flowers' terpene-rich, bold flavors.
In April 2024, Cronos expanded the Lord Jones® live resin vape portfolio with the introduction of Gorilla Z. The Lord Jones® vapes feature sought-after cultivars that deliver a true-to-plant flavorful full-spectrum live resin experience. Crafted with the discerning cannabis consumer in mind, these products embody a commitment to excellence, offering a combination of curated strains, pure live resin, and elegant, high-quality hardware.
Our Lord Jones® products across pre-rolls, vapes, and edibles continue to gain traction in their respective categories, and we are excited about the growth we are seeing from this brand.
PEACE NATURALS®
In Israel, we continue to drive strong performance powered by our advanced genetic breeding program and high-quality cultivation capabilities. Global genetics such as Wedding Cake and GMO lead our portfolio in Israel and have helped to maintain and grow share for the PEACE NATURALS® brand. In Q2 the team continued to bring new and exciting strains to market launching four new cultivars, GG4, Key Limez Punch, Pink Sherb and GMO Lite, providing consumers with additional variety and excitement as part of the PEACE NATURALS® flower portfolio.
In Germany and the UK, we are experiencing strong traction with our proprietary genetics, such as GMO and Wedding Cake, under the PEACE NATURALS® brand. The expansion of Cronos GrowCo will help enable Cronos to execute on these growth opportunities and others as they become available.
Global Supply Chain
Cronos GrowCo reported to the Company preliminary unaudited net revenue to third parties, excluding sales to the Company, of approximately
Guidance and Outlook
The Company reiterates its previously announced operating expense savings target of
Due to the additional
Cronos continues to monitor the conflict involving Israel, Hamas, Iran and other stakeholders in the region (the "Middle East Conflict") and the potential impacts the conflict could have on the Company’s personnel and business in Israel and the recorded amounts of assets and liabilities related to the Company’s operations in Israel. The extent to which the Middle East Conflict may impact the Company’s personnel, business and activities will depend on future developments which remain highly uncertain and cannot be predicted. It is possible that the recorded amounts of assets and liabilities related to the Company’s operations in Israel could change materially in the near term.
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.
Conference Call
The Company will host a conference call and live audio webcast on Thursday, August 8, 2024, at 8:30 a.m. ET to discuss 2024 Second 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:
- the ongoing impact of the public investigation into Canadian licensed producers of alleged dumping of medical cannabis imports from Canada into Israel by the Israel Trade Levies Commissioner of the Israel Ministry of Economy and Industry (the “Anti-Dumping Investigation”);
- expectations related to the Middle East Conflict and its impact on our operations in Israel, the supply of product in the market and the demand for product by medical patients in Israel, as well as any regional or global escalations and their impact to global commerce and stability;
- expectations related to the German, Australian and UK markets, including our strategic partnerships with Cansativa GmbH (“Cansativa”), Vitura Health Limited (“Vitura”) and GROW® Pharma, respectively, and our plans to distribute the PEACE NATURALS® brand in Germany and the UK;
- our ability to successfully and profitably sell our products in Germany and the UK;
- expectations related to our announcement of cost-cutting measures, including our decision to wind-down operations at our Winnipeg, Manitoba facility and list the facility for sale, the expected costs and benefits from the wind-down of production activities at the facility, challenges and effects related thereto as well as changes in strategy, metrics, investments, costs, operating expenses, employee turnover and other changes with respect thereto;
- expectations related to the impact of our decision to exit our U.S. hemp-derived cannabinoid product operations, including the costs, expenses and write-offs associated therewith, the impact on our operations and our financial statements and any future plans to re-enter the U.S. market;
- 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”);
- our ability to acquire raw materials from 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 with Ginkgo Bioworks Holdings, Inc. (“Ginkgo”);
- expectations related to the expansion of Cronos GrowCo’s purpose-built cannabis facility;
- 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 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, including the United States and Germany, 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 cannabis products;
- our ability to anticipate and meet market demand;
- expectations related to the differentiation of our products, including through the utilization of rare cannabinoids;
- 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 cannabis and 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 U.S. Drug Enforcement Administration, the U.S. Federal Trade Commission, the U.S. Patent and Trademark Office and any state equivalent regulatory agencies over cannabis and U.S. hemp (including CBD and other U.S. hemp-derived cannabinoids) products, including the possibility marijuana is moved from Schedule I to Schedule III under the U.S. Controlled Substances Act;
- 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;
- expectations of the amount or frequency of impairment losses, including as a result of the write-down of intangible assets, including goodwill;
- 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; 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, 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 inability to achieve our target cash and cash equivalents and short-term investment balances for 2024; (ii) our ability to effectively navigate developments related to the Anti-Dumping Investigation and its impact on our operations in Israel; (iii) our ability to effectively navigate developments related to the Middle East Conflict and its impact on our employees and operations in Israel, the supply of product in the market and demand for product by medical patients in Israel; (iv) our ability to efficiently and effectively distribute our PEACE NATURALS® brand in Germany with our strategic partner Cansativa and in the UK with our strategic partner GROW® Pharma and our ability to efficiently and effectively distribute products in Australia with our strategic partner Vitura; (v) our ability to realize the expected cost-savings and other benefits related to the wind-down of our operations at our Winnipeg, Manitoba facility, (vi) our ability to realize the expected cost-savings, efficiencies and other benefits of our Realignment and other announced cost-cutting measures and employee turnover related thereto; (vii) our ability to efficiently and effectively wind down certain production activities at the Peace Naturals Campus, receive the benefits of the change in the nature of our operations at our Peace Naturals Campus and acquire raw materials on a timely and cost-effective basis from third parties, including Cronos GrowCo; (viii) the timely completion of the expansion of Cronos GrowCo’s purpose-built cannabis facility and the ability of Cronos GrowCo to repay the Term Loan B; (ix) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our acquisitions and strategic investments; (x) the production and manufacturing capabilities and output from our facilities and our joint ventures, strategic alliances and equity investments; (xi) government regulation of our activities and products including, but not limited to, the areas of cannabis taxation and environmental protection; (xii) the timely receipt of any required regulatory authorizations, approvals, consents, permits and/or licenses; (xiii) consumer interest in our products and brands; (xiv) our ability to accurately forecast consumer demand and supply such demand; (xv) our ability to differentiate our products, including through the utilization of rare cannabinoids; (xvi) competition; (xvii) anticipated and unanticipated costs; (xviii) our ability to generate cash flow from operations; (xix) our ability to conduct operations in a safe, efficient and effective manner; (xx) our ability to hire and retain qualified staff, and acquire equipment and services in a timely and cost-efficient manner; (xxi) our ability to exercise the PharmaCann Option and realize the anticipated benefits of the transaction with PharmaCann; (xxii) our ability to complete planned dispositions, and, if completed, obtain our anticipated sales price; (xxiii) general economic, financial market, regulatory and political conditions in which we operate; (xxiv) management’s perceptions of historical trends, current conditions and expected future developments; and (xxv) 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 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. Such factors include, without limitation, negative impacts on our business and operations in Israel due to the Anti-Dumping Investigation, including that we may not be able to produce, import or sell our products in Israel as a result thereof; negative impacts on our employees, business and operations in Israel due to the Middle East Conflict, including that we may not be able to produce, import or sell our products or protect our people or facilities in Israel during the Middle East Conflict, the supply of product in the market and the demand for product by medical patients in Israel; that we may not be able to successfully continue to distribute our products in Germany, Australia and the UK or generate material revenue from sales in those markets; that we may not be able to achieve the anticipated benefits of the wind-down of our operations at our Winnipeg, Manitoba facility or be able to access raw materials on a timely and cost-effective basis from third-parties; that we may be unable to further streamline our operations and reduce expenses; that we may not be able to effectively and efficiently re-enter the U.S. market in the future; that we may not be able to access raw materials on a timely and cost-effective basis from third-parties, including Cronos GrowCo; that Cronos GrowCo may not be able to complete the expansion of its purpose-built cannabis facility within a reasonable time or repay its borrowings under Term Loan B; 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 products; our inability to accurately forecast consumer demand; our inability to reduce expenses at the level needed to meet our projections; our inability to manage disruptions in credit markets; 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 realize 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; our failure to improve our internal 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, 2023 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, unaudited) |
| As of June 30, 2024 | As of December 31, 2023 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 848,189 | $ | 669,291 | |||
| Short-term investments | — | 192,237 | |||||
| Accounts receivable, net | 16,179 | 13,984 | |||||
| Interest receivable | 5,183 | 10,012 | |||||
| Other receivables | 7,227 | 6,341 | |||||
| Current portion of loans receivable, net | 4,875 | 5,541 | |||||
| Inventory, net | 29,182 | 30,495 | |||||
| Prepaids and other current assets | 5,246 | 5,405 | |||||
| Held-for-sale assets | 19,197 | — | |||||
| Total current assets | 935,278 | 933,306 | |||||
| Equity method investments, net | 21,226 | 19,488 | |||||
| Other investments | 3,168 | 35,251 | |||||
| Non-current portion of loans receivable, net | 73,165 | 69,036 | |||||
| Property, plant and equipment, net | 36,964 | 59,468 | |||||
| Right-of-use assets | 1,079 | 1,356 | |||||
| Goodwill | 1,024 | 1,057 | |||||
| Intangible assets, net | 19,103 | 21,078 | |||||
| Other assets | 41 | 45 | |||||
| Total assets | $ | 1,091,048 | $ | 1,140,085 | |||
| Liabilities | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 7,840 | $ | 12,130 | |||
| Income taxes payable | 61 | 64 | |||||
| Accrued liabilities | 23,846 | 27,736 | |||||
| Current portion of lease obligation | 931 | 994 | |||||
| Derivative liabilities | 21 | 102 | |||||
| Current portion due to non-controlling interests | 358 | 373 | |||||
| Total current liabilities | 33,057 | 41,399 | |||||
| Non-current portion due to non-controlling interests | 1,137 | 1,003 | |||||
| Non-current portion of lease obligation | 1,062 | 1,559 | |||||
| Total liabilities | 35,256 | 43,961 | |||||
| Shareholders’ equity | |||||||
| Share capital | 616,379 | 613,725 | |||||
| Additional paid-in capital | 49,298 | 48,449 | |||||
| Retained earnings | 405,650 | 416,719 | |||||
| Accumulated other comprehensive gain (loss) | (12,013 | ) | 20,678 | ||||
| Total equity attributable to shareholders of Cronos Group | 1,059,314 | 1,099,571 | |||||
| Non-controlling interests | (3,522 | ) | (3,447 | ) | |||
| Total shareholders’ equity | 1,055,792 | 1,096,124 | |||||
| Total liabilities and shareholders’ equity | $ | 1,091,048 | $ | 1,140,085 | |||
| Cronos Group Inc. | |||
| Condensed Consolidated Statements of Net Loss and Comprehensive Income (Loss) | |||
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||
| (In thousands of U.S. dollars, except share and per share amounts, unaudited) | 2024 | 2023 | 2024 | 2023 | |||||||||||
| Net revenue, before excise taxes | $ | 38,678 | $ | 25,798 | $ | 74,045 | $ | 52,352 | |||||||
| Excise taxes | (10,916 | ) | (6,777 | ) | (20,995 | ) | (13,836 | ) | |||||||
| Net revenue | 27,762 | 19,021 | 53,050 | 38,516 | |||||||||||
| Cost of sales | 21,070 | 15,922 | 41,875 | 32,490 | |||||||||||
| Inventory write-down | 395 | — | 395 | — | |||||||||||
| Gross profit | 6,297 | 3,099 | 10,780 | 6,026 | |||||||||||
| Operating expenses | |||||||||||||||
| Sales and marketing | 4,330 | 5,297 | 9,662 | 11,038 | |||||||||||
| Research and development | 962 | 1,107 | 1,959 | 3,146 | |||||||||||
| General and administrative | 12,767 | 13,451 | 21,674 | 25,307 | |||||||||||
| Restructuring costs | 547 | — | 630 | — | |||||||||||
| Share-based compensation | 2,236 | 2,331 | 4,251 | 4,866 | |||||||||||
| Depreciation and amortization | 1,016 | 1,533 | 2,139 | 3,058 | |||||||||||
| Impairment loss on long-lived assets | — | — | 1,974 | — | |||||||||||
| Total operating expenses | 21,858 | 23,719 | 42,289 | 47,415 | |||||||||||
| Operating loss | (15,561 | ) | (20,620 | ) | (31,509 | ) | (41,389 | ) | |||||||
| Other income | |||||||||||||||
| Interest income, net | 13,451 | 12,471 | 27,696 | 23,646 | |||||||||||
| Share of income (loss) from equity method investments | 917 | 270 | 2,365 | (226 | ) | ||||||||||
| Gain (loss) on revaluation of financial instruments | (3,615 | ) | 5,193 | (6,257 | ) | (2,565 | ) | ||||||||
| Impairment loss on other investments | (12,916 | ) | — | (25,650 | ) | — | |||||||||
| Foreign currency transaction gain (loss) | 6,543 | (3,174 | ) | 19,802 | (4,817 | ) | |||||||||
| Other, net | 248 | 17 | (422 | ) | 37 | ||||||||||
| Total other income | 4,628 | 14,777 | 17,534 | 16,075 | |||||||||||
| Loss before income taxes | (10,933 | ) | (5,843 | ) | (13,975 | ) | (25,314 | ) | |||||||
| Income tax benefit | (2,174 | ) | (180 | ) | (2,732 | ) | (1,616 | ) | |||||||
| Loss from continuing operations | (8,759 | ) | (5,663 | ) | (11,243 | ) | (23,698 | ) | |||||||
| Loss from discontinued operations | — | (2,834 | ) | — | (4,056 | ) | |||||||||
| Net loss | (8,759 | ) | (8,497 | ) | (11,243 | ) | (27,754 | ) | |||||||
| Net loss attributable to non-controlling interest | (2 | ) | (137 | ) | (245 | ) | (225 | ) | |||||||
| Net loss attributable to Cronos Group | $ | (8,757 | ) | $ | (8,360 | ) | $ | (10,998 | ) | $ | (27,529 | ) | |||
| Comprehensive income (loss) | |||||||||||||||
| Net loss | $ | (8,759 | ) | $ | (8,497 | ) | $ | (11,243 | ) | $ | (27,754 | ) | |||
| Other comprehensive income (loss) | |||||||||||||||
| Foreign exchange gain (loss) on translation | (10,160 | ) | 16,580 | (32,521 | ) | 18,994 | |||||||||
| Comprehensive income (loss) | (18,919 | ) | 8,083 | (43,764 | ) | (8,760 | ) | ||||||||
| Comprehensive income (loss) attributable to non-controlling interests | 58 | (87 | ) | (75 | ) | (95 | ) | ||||||||
| Comprehensive income (loss) attributable to Cronos Group | $ | (18,977 | ) | $ | 8,170 | $ | (43,689 | ) | $ | (8,665 | ) | ||||
| Net loss per share | |||||||||||||||
| Basic and diluted - continuing operations | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.06 | ) | |||
| Basic and diluted - discontinued operations | — | (0.01 | ) | — | (0.01 | ) | |||||||||
| Basic and diluted - total | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.07 | ) | |||
| Cronos Group Inc. | |
| Condensed Consolidated Statements of Cash Flows | |
| (In thousands of U.S. dollars, except share amounts, unaudited) | |
| Six months ended June 30, | |||||||
| 2024 | 2023 | ||||||
| Operating activities | |||||||
| Net loss | $ | (11,243 | ) | $ | (27,754 | ) | |
| Adjustments to reconcile net loss to cash used in operating activities: | |||||||
| Share-based compensation | 4,251 | 4,887 | |||||
| Depreciation and amortization | 3,244 | 4,785 | |||||
| Impairment loss on long-lived assets | 1,974 | 205 | |||||
| Impairment loss on other investments | 25,650 | — | |||||
| Loss from investments | 3,732 | 2,955 | |||||
| Changes in expected credit losses on long-term financial assets | 1,021 | (1,146 | ) | ||||
| Foreign currency transaction (gain) loss | (19,802 | ) | 4,817 | ||||
| Other non-cash operating activities, net | 829 | (554 | ) | ||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable, net | (2,723 | ) | 10,623 | ||||
| Interest receivable | 1,174 | (10,243 | ) | ||||
| Other receivables | (1,009 | ) | (200 | ) | |||
| Prepaids and other current assets | (5 | ) | 480 | ||||
| Inventory | 292 | (7,259 | ) | ||||
| Accounts payable | (4,482 | ) | (2,478 | ) | |||
| Income taxes payable | (47 | ) | (32,801 | ) | |||
| Accrued liabilities | (3,316 | ) | (5,784 | ) | |||
| Cash flows used in operating activities | (460 | ) | (59,467 | ) | |||
| Investing activities | |||||||
| Purchase of short-term investments | — | (479,763 | ) | ||||
| Proceeds from short-term investments | 187,447 | 169,418 | |||||
| Dividends received from equity method investment | — | 1,299 | |||||
| Advances on loans receivable | (8,836 | ) | — | ||||
| Proceeds from repayment on loans receivable | 5,298 | 11,388 | |||||
| Purchase of property, plant and equipment | (2,453 | ) | (1,298 | ) | |||
| Purchase of intangible assets | (457 | ) | (8 | ) | |||
| Cash flows provided by (used in) investing activities | 180,999 | (298,964 | ) | ||||
| Financing activities | |||||||
| Withholding taxes paid on share-based awards | (905 | ) | (782 | ) | |||
| Cash flows used in financing activities | (905 | ) | (782 | ) | |||
| Effect of foreign currency translation on cash and cash equivalents | (736 | ) | 3,997 | ||||
| Net change in cash and cash equivalents | 178,898 | (355,216 | ) | ||||
| Cash and cash equivalents, beginning of period | 669,291 | 764,644 | |||||
| Cash and cash equivalents, end of period | $ | 848,189 | $ | 409,428 | |||
| Supplemental cash flow information | |||||||
| Interest paid | $ | — | $ | — | |||
| Interest received | $ | 28,291 | $ | 13,385 | |||
| Income taxes paid | $ | 614 | $ | 32,995 | |||
Non-GAAP Measures
Cronos Group 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. 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; restructuring costs; inventory write-downs resulting from restructuring actions; share-based compensation; and financial statement review costs and reserves related to the restatements of our 2019 and 2021 interim financial statements (the “Restatements”), including the costs related to the settlement of the Securities and Exchange Commission's ("SEC") and the Ontario Securities Commission's ("OSC") investigation of the Restatements and legal costs of defending shareholder class action complaints brought against us as a result of the 2019 restatement (see Part II, Item 1 “Legal Proceedings” of our Quarterly Report on Form 10-Q for the period ended June 30, 2024 for a discussion of the shareholder class action complaints relating to the restatement of the 2019 interim financial statements and the settlement of the SEC's and the OSC's investigations of the Restatements). Results are reported as total consolidated results, reflecting our reporting structure of one reportable segment.
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:
| Three months ended June 30, 2024 | |||||||||||
| Continuing Operations | Discontinued Operations | Total | |||||||||
| Net loss | $ | (8,759 | ) | $ | — | $ | (8,759 | ) | |||
| Interest income, net | (13,451 | ) | — | (13,451 | ) | ||||||
| Income tax benefit | (2,174 | ) | — | (2,174 | ) | ||||||
| Depreciation and amortization | 1,513 | – | 1,513 | ||||||||
| EBITDA | (22,871 | ) | — | (22,871 | ) | ||||||
| Share of income from equity method investments | (917 | ) | — | (917 | ) | ||||||
| Loss on revaluation of financial instruments(ii) | 3,615 | — | 3,615 | ||||||||
| Impairment loss on other investments(iii) | 12,916 | — | 12,916 | ||||||||
| Foreign currency transaction gain | (6,543 | ) | — | (6,543 | ) | ||||||
| Transaction costs(iv) | 196 | — | 196 | ||||||||
| Other, net(v) | (248 | ) | — | (248 | ) | ||||||
| Restructuring costs(vi) | 547 | — | 547 | ||||||||
| Share-based compensation(vii) | 2,236 | — | 2,236 | ||||||||
| Financial statement review costs(viii) | 18 | — | 18 | ||||||||
| Adjusted EBITDA | $ | (11,051 | ) | $ | — | $ | (11,051 | ) | |||
| Three months ended June 30, 2023 | |||||||||||
| Continuing Operations | Discontinued Operations | Total | |||||||||
| Net loss | $ | (5,663 | ) | $ | (2,834 | ) | $ | (8,497 | ) | ||
| Interest income, net | (12,471 | ) | (3 | ) | (12,474 | ) | |||||
| Income tax benefit | (180 | ) | — | (180 | ) | ||||||
| Depreciation and amortization | 2,265 | 115 | 2,380 | ||||||||
| EBITDA | (16,049 | ) | (2,722 | ) | (18,771 | ) | |||||
| Share of income from equity method investments | (270 | ) | — | (270 | ) | ||||||
| Impairment loss on long-lived assets(i) | — | 205 | 205 | ||||||||
| Gain on revaluation of financial instruments(ii) | (5,193 | ) | — | (5,193 | ) | ||||||
| Foreign currency transaction loss | 3,174 | — | 3,174 | ||||||||
| Other, net(v) | (17 | ) | 163 | 146 | |||||||
| Restructuring costs(vi) | — | 534 | 534 | ||||||||
| Share-based compensation(vii) | 2,331 | 5 | 2,336 | ||||||||
| Financial statement review costs(viii) | 119 | — | 119 | ||||||||
| Inventory write-down(ix) | — | 839 | 839 | ||||||||
| Adjusted EBITDA | $ | (15,905 | ) | $ | (976 | ) | $ | (16,881 | ) | ||
| Six months ended June 30, 2024 | |||||||||||
| Continuing Operations | Discontinued Operations | Total | |||||||||
| Net loss | $ | (11,243 | ) | $ | — | $ | (11,243 | ) | |||
| Interest income, net | (27,696 | ) | — | (27,696 | ) | ||||||
| Income tax benefit | (2,732 | ) | — | (2,732 | ) | ||||||
| Depreciation and amortization | 3,244 | — | 3,244 | ||||||||
| EBITDA | (38,427 | ) | — | (38,427 | ) | ||||||
| Share of income from equity method investments | (2,365 | ) | — | (2,365 | ) | ||||||
| Impairment loss on long-lived assets(i) | 1,974 | — | 1,974 | ||||||||
| Loss on revaluation of financial instruments(ii) | 6,257 | — | 6,257 | ||||||||
| Impairment loss on other investments(iii) | 25,650 | — | 25,650 | ||||||||
| Foreign currency transaction gain | (19,802 | ) | — | (19,802 | ) | ||||||
| Transaction costs(iv) | 196 | — | 196 | ||||||||
| Other, net(v) | 422 | — | 422 | ||||||||
| Restructuring costs(vi) | 630 | — | 630 | ||||||||
| Share-based compensation(vii) | 4,251 | — | 4,251 | ||||||||
| Financial statement review costs(viii) | (506 | ) | — | (506 | ) | ||||||
| Adjusted EBITDA | $ | (21,720 | ) | $ | — | $ | (21,720 | ) | |||
| Six months ended June 30, 2023 | |||||||||||
| Continuing Operations | Discontinued Operations | Total | |||||||||
| Net loss | $ | (23,698 | ) | $ | (4,056 | ) | $ | (27,754 | ) | ||
| Interest income, net | (23,646 | ) | (8 | ) | (23,654 | ) | |||||
| Income tax benefit | (1,616 | ) | — | (1,616 | ) | ||||||
| Depreciation and amortization | 4,541 | 244 | 4,785 | ||||||||
| EBITDA | (44,419 | ) | (3,820 | ) | (48,239 | ) | |||||
| Share of loss from equity method investments | 226 | — | 226 | ||||||||
| Impairment loss on long-lived assets(i) | — | 205 | 205 | ||||||||
| Loss on revaluation of financial instruments(ii) | 2,565 | — | 2,565 | ||||||||
| Foreign currency transaction loss | 4,817 | — | 4,817 | ||||||||
| Other, net(v) | (37 | ) | 163 | 126 | |||||||
| Restructuring costs(vi) | — | 534 | 534 | ||||||||
| Share-based compensation(vii) | 4,866 | 21 | 4,887 | ||||||||
| Financial statement review costs(viii) | 395 | — | 395 | ||||||||
| Inventory write-down(ix) | — | 839 | 839 | ||||||||
| Adjusted EBITDA | $ | (31,587 | ) | $ | (2,058 | ) | $ | (33,645 | ) | ||
(i) For the three and six months ended June 30, 2024, impairment loss on long-lived assets related to the winding down of operations at Cronos Fermentation. For the three and six months ended June 30, 2023, impairment loss on long-lived assets related to certain leased properties associated with the Company’s U.S. operations.
(ii) For the three and six months ended June 30, 2024 and 2023, (gain) loss on revaluation of financial instruments related primarily to the Company’s equity securities in Vitura.
(iii) For the three and six months ended June 30, 2024, impairment loss on other investments represents the fair value change on the PharmaCann Option.
(iv) For the three and six months ended June 30, 2024, transactions costs represent advisory fees associated with the Cronos GrowCo expansion transaction.
(v) For the three and six months ended June 30, 2024 and 2023, other, net related to (gain) loss on disposal of assets and (gain) loss on revaluation of derivative liabilities.
(vi) For the three and six months ended June 30, 2024, restructuring costs from continuing operations related to shutdown costs at the Cronos Fermentation facility as well as employee-related severance costs associated with the Realignment. For the three and six months ended June 30, 2023, restructuring costs related to employee-related severance costs and other restructuring costs associated with our U.S. operations.
(vii) For the three and six months ended June 30, 2024 and 2023, share-based compensation related to the non-cash expenses of share-based compensation awarded to employees under the Company’s share-based award plans.
(viii) For the three and six months ended June 30, 2024 and 2023, 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. For the six months ended June 30, 2024, a credit balance is presented due to an insurance recovery.
(ix) For the three and six months ended June 30, 2023, inventory write-downs relate to product destruction and obsolescence associated with the exit of our U.S. operations.
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 six months ended June 30, 2024, as well as cash and cash equivalents and short-term investment balances as of June 30, 2024 compared to December 31, 2023, 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 and six months and comparative periods in 2023 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 2023. We have provided this non-GAAP financial information to aid investors in better understanding the performance of our operations. 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 and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 as well as cash and cash equivalents and short-term investments as of June 30, 2024 and December 31, 2023, both on an as-reported and constant currency basis (in thousands):
| As Reported | As Adjusted for Constant Currency | ||||||||||||||||||||||||
| Three months ended June 30, | As Reported Change | Three months ended June 30, | Constant Currency Change | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | 2024 | $ | % | |||||||||||||||||||
| Net revenue | $ | 27,762 | $ | 19,021 | $ | 8,741 | 46 | % | $ | 28,290 | $ | 9,269 | 49 | % | |||||||||||
| Gross profit | 6,297 | 3,099 | 3,198 | 103 | % | 6,434 | 3,335 | 108 | % | ||||||||||||||||
| Gross margin | 23 | % | 16 | % | N/A | 7 | pp | 23 | % | N/A | 7 | pp | |||||||||||||
| Operating expenses | 21,858 | 23,719 | (1,861 | ) | (8 | )% | 21,861 | (1,858 | ) | (8 | )% | ||||||||||||||
| Net loss from continuing operations | (8,759 | ) | (5,663 | ) | (3,096 | ) | (55 | )% | (8,162 | ) | (2,499 | ) | (44 | )% | |||||||||||
| Adjusted EBITDA | (11,051 | ) | (15,905 | ) | 4,854 | 31 | % | (10,863 | ) | 5,042 | 32 | % | |||||||||||||
| Six months ended June 30, | As Reported Change | Six months ended June 30, | Constant Currency Change | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | 2024 | $ | % | |||||||||||||||||||
| Net revenue | $ | 53,050 | $ | 38,516 | $ | 14,534 | 38 | % | $ | 53,795 | $ | 15,279 | 40 | % | |||||||||||
| Gross profit | 10,780 | 6,026 | 4,754 | 79 | % | 10,983 | 4,957 | 82 | % | ||||||||||||||||
| Gross margin | 20 | % | 16 | % | N/A | 4 | pp | 20 | % | N/A | 4 | pp | |||||||||||||
| Operating expenses | 42,289 | 47,415 | (5,126 | ) | (11 | )% | 42,336 | (5,079 | ) | (11 | )% | ||||||||||||||
| Net loss from continuing operations | (11,243 | ) | (23,698 | ) | 12,455 | 53 | % | (10,643 | ) | 13,055 | 55 | % | |||||||||||||
| Adjusted EBITDA | (21,720 | ) | (31,587 | ) | 9,867 | 31 | % | (21,508 | ) | 10,079 | 32 | % | |||||||||||||
| As of March 31, | As of December 31, | As Reported Change | As of March 31, | Constant Currency Change | |||||||||||||||||||||
| 2024 | 2023 | $ | % | 2024 | $ | % | |||||||||||||||||||
| Cash and cash equivalents | $ | 848,189 | $ | 669,291 | $ | 178,898 | 27 | % | $ | 852,752 | $ | 183,461 | 27 | % | |||||||||||
| Short-term investments | — | 192,237 | (192,237 | ) | (100 | )% | — | (192,237 | ) | (100 | )% | ||||||||||||||
| Total cash and cash equivalents and short-term investments | $ | 848,189 | $ | 861,528 | $ | (13,339 | ) | (2 | )% | $ | 852,752 | $ | (8,776 | ) | (1 | )% | |||||||||
Net revenue
| As Reported | As Adjusted for Constant Currency | ||||||||||||||||||||||||
| Three months ended June 30, | As Reported Change | Three months ended June 30, | Constant Currency Change | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | 2024 | $ | % | |||||||||||||||||||
| Cannabis flower | $ | 20,661 | $ | 14,014 | $ | 6,647 | 47 | % | $ | 21,058 | $ | 7,044 | 50 | % | |||||||||||
| Cannabis extracts | 7,064 | 4,926 | 2,138 | 43 | % | 7,195 | 2,269 | 46 | % | ||||||||||||||||
| Other | 37 | 81 | (44 | ) | (54 | )% | 37 | (44 | ) | (54 | )% | ||||||||||||||
| Net revenue | $ | 27,762 | $ | 19,021 | $ | 8,741 | 46 | % | $ | 28,290 | $ | 9,269 | 49 | % | |||||||||||
| As Reported | As Adjusted for Constant Currency | ||||||||||||||||||||||||
| Six months ended June 30, | As Reported Change | Six months ended June 30, | Constant Currency Change | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | 2024 | $ | % | |||||||||||||||||||
| Cannabis flower | $ | 38,186 | $ | 27,142 | $ | 11,044 | 41 | % | $ | 38,812 | $ | 11,670 | 43 | % | |||||||||||
| Cannabis extracts | 14,791 | 11,227 | 3,564 | 32 | % | 14,909 | 3,682 | 33 | % | ||||||||||||||||
| Other | 73 | 147 | (74 | ) | (50 | )% | 74 | (73 | ) | (50 | )% | ||||||||||||||
| Net revenue | $ | 53,050 | $ | 38,516 | $ | 14,534 | 38 | % | $ | 53,795 | $ | 15,279 | 40 | % | |||||||||||
| As Reported | As Adjusted for Constant Currency | ||||||||||||||||||||||||
| Three months ended June 30, | As Reported Change | Three months ended June 30, | Constant Currency Change | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | 2024 | $ | % | |||||||||||||||||||
| Canada | $ | 19,844 | $ | 13,595 | $ | 6,249 | 46 | % | $ | 20,210 | $ | 6,615 | 49 | % | |||||||||||
| Israel | 6,889 | 5,426 | 1,463 | 27 | % | 7,036 | 1,610 | 30 | % | ||||||||||||||||
| Other countries | 1,029 | — | 1,029 | N/M | 1,044 | 1,044 | N/M | ||||||||||||||||||
| Net revenue | $ | 27,762 | $ | 19,021 | $ | 8,741 | 46 | % | $ | 28,290 | $ | 9,269 | 49 | % | |||||||||||
| As Reported | As Adjusted for Constant Currency | ||||||||||||||||||||||||
| Six months ended June 30, | As Reported Change | Six months ended June 30, | Constant Currency Change | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | 2024 | $ | % | |||||||||||||||||||
| Canada | $ | 38,715 | $ | 28,029 | $ | 10,686 | 38 | % | $ | 39,044 | $ | 11,015 | 39 | % | |||||||||||
| Israel | 13,306 | 10,487 | 2,819 | 27 | % | 13,707 | 3,220 | 31 | % | ||||||||||||||||
| Other countries | 1,029 | — | 1,029 | N/M | 1,044 | 1,044 | N/M | ||||||||||||||||||
| Net revenue | $ | 53,050 | $ | 38,516 | $ | 14,534 | 38 | % | $ | 53,795 | $ | 15,279 | 40 | % | |||||||||||
For the three months ended June 30, 2024, net revenue on a constant currency basis was
Gross profit
For the three months ended June 30, 2024, gross profit on a constant currency basis was
Operating expenses
For the three months ended June 30, 2024, operating expenses on a constant currency basis were
Net loss from continuing operations
For the three months ended June 30, 2024, net loss from continuing operations on a constant currency basis was
Adjusted EBITDA
For the three months ended June 30, 2024, Adjusted EBITDA on a constant currency basis was
Cash and cash equivalents & short-term investments
Cash and cash equivalents and short-term investments on a constant currency basis decreased
Foreign currency exchange rates
All currency amounts in this press release are stated in U.S. dollars, which is our reporting currency, unless otherwise noted. All references to “dollars” or “$” are to U.S. dollars. The assets and liabilities of our foreign operations are translated into dollars at the exchange rate in effect as of June 30, 2024, June 30, 2023, and December 31, 2023. Transactions affecting the shareholders’ equity (deficit) are translated at historical foreign exchange rates. The condensed consolidated statements of net loss and comprehensive income (loss) and condensed consolidated statements of cash flows of our foreign operations are translated into dollars by applying the average foreign exchange rate in effect for the reporting period as reported on Bloomberg. The exchange rates used to translate from USD to Canadian dollars (“C$”) and Israeli New Shekels ("ILS") are shown below:
| (Exchange rates are shown as C$ per $) | As of | ||||||||||
| June 30, 2024 | June 30, 2023 | December 31, 2023 | |||||||||
| Spot rate | 1.3674 | 1.3242 | 1.3243 | ||||||||
| Year-to-date average rate | 1.3581 | 1.3474 | N/A | ||||||||
| (Exchange rates are shown as ILS per $) | As of | ||||||||||
| June 30, 2024 | June 30, 2023 | December 31, 2023 | |||||||||
| Spot rate | 3.7742 | 3.7051 | 3.6163 | ||||||||
| Year-to-date average rate | 3.6950 | 3.5892 | N/A | ||||||||
For further information, please contact:
Shayne Laidlaw
Investor Relations
Tel: (416) 504-0004
investor.relations@thecronosgroup.com
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