Cronos Group Reports 2023 First Quarter Results
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.
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