Adam Jackson
Cronos Group Inc. (Nasdaq: CRON) (TSX: CRON) reported a surge in revenue for the third quarter, as the company eyes expansion and cost-control measures to underpin future profitability.
The Toronto-based cannabis company said net revenue climbed to $24.8 million, marking a 22% increase from the same period a year earlier. Cronos attributed the growth to a 40% jump in Canadian sales, fueled by strong demand for pre-rolled joints, dried flower, and edible products.
Despite the positive trend in revenue, the company is navigating a complex international landscape. CEO Mike Gorenstein acknowledged the toll that geopolitical unrest, particularly the situation in the Middle East, its second-largest market, is having on its operations.
“Opening new avenues for growth with operational discipline is our primary focus,” Gorenstein said in a statement. “Beyond top-line growth initiatives, our teams have done a great job reducing costs across the company and improving the gross margin profile of the business, which yielded significant improvements in cash flow.”
Higher excise taxes in Canada dented the company’s profitability, as did increased competitive pressure and a slowdown in the Israeli market. However, the company managed to increase its gross profit to $4 million, a signal that its strategy to trim costs and optimize operations is bearing fruit.
In a move that reflects a sharper focus on core markets, Cronos exited its U.S. hemp-derived CBD operations earlier this year, a departure that now manifests as discontinued operations in its financial reports.
Cronos also successfully reduced its general and administrative expenses, a key driver behind improved cash flow. The company maintains a cost-savings target of $20 million to $25 million for the year and aims to carve out further savings into 2024.
Looking forward, the company laid out a conservative cash outlook for the end of the fiscal year and expects positive cash flow in 2024, barring significant economic shifts. Cronos’s fiscal projections for the year assume steady interest rates, minimal impact from the conflict in the Middle East, and stable foreign exchange rates.
Cronos said it continues its expansion with a re-entry into the German medical market and a new agreement to supply products in Australia, signaling its ambition to grow its international footprint.
