Debra Borchardt
Cronos Group Inc. (Nasdaq: CRON) (TSX: CRON) reported its 2022 third-quarter business results as revenue increased slightly to $20.9 million from last year’s $20.4 million. In total revenue numbers, sales came in at $26 million versus last year’s $24 million. This beat the Yahoo Finance average analyst estimates for sales of $24 million.
Cronos attributed the increase to segment growth in the Israeli medical market and higher extract sales in the Canadian adult-use market. Cronos added that this was partially offset by a reduction in revenue in the U.S. segment, lower cannabis flower sales in the Canadian adult-use market driven by an adverse price/mix shift, and the impact of the weakening Canadian dollar against the U.S. dollar during the current period.
The company delivered a net loss of $36 million versus last year’s net income of $77 million. The loss of earnings per share was ($0.07), and analysts had pegged the number to be ($0.06).
The adjusted EBITDA of $(21.7) million in the third quarter improved by $25.1 million from last year’s third quarter. The company said that the improvement was primarily driven by decreases in general and administrative expenses, sales and marketing expenses, and research and development expenses as a result of the company’s strategic realignment (the “Realignment”) and an improvement in gross profit.
“Market share gains through borderless innovation and cost rationalization were key drivers to this quarter’s success,” said Mike Gorenstein, chairman, president and CEO. “Our award-winning Spinach gummy lineup, such as our SOURZ by Spinach Blue-Raspberry Watermelon gummy and new additions to the portfolio including our Spinach FEELZ DEEP DREAMZ THC:CBN gummy, continue to win in the category. Beyond edibles, we achieved new product launches in the vape category powered by rare cannabinoids like CBG and CBN, and in Israel, we continued to grow the PEACE NATURALS brand with medical patients while expanding our leading position in the country. Looking further ahead, we expect pre-roll innovation to drive our recovery in the category in the fourth quarter and 2023.”
Cash Burn
The company’s cash and cash equivalents fell from last year’s $886 million to this year’s third-quarter balance of $633 million. Capital expenditures were $1.6 million in the quarter which decreased by $0.9 million from Q3 2021.
U.S. Departure
Sales fell in the U.S. from $2.1 million last year to just $500,000. This follows the decision to begin a phased exit of the wholesale beauty category in the U.S. business. The company said it continued to reduce operating expenses in the U.S. to better align the business structure with the new strategy to focus on adult-use product formats in the direct-to-consumer channel.
The company also said it remains on track to achieve the previously identified $20 million to $25 million in operating expense savings for 2022, primarily driven by savings in sales and marketing, general and administrative, and research and development.
“While executing on our innovation pipeline, we also remain on track for the previously announced $20 to $25 million in operating expense savings for 2022,” Gorenstein said. “Importantly, we will seek additional opportunities to deliver more efficiencies in 2023. I am proud and grateful for the efforts our global team has put in this year and believe our leaner and more nimble organization provides a strong foundation for us to capitalize on the many growth opportunities ahead.”
