Image Source: Unsplash
Cronos Group Inc. (Nasdaq: CRON) (TSX: CRON) announced its Q3 2023 business results today for the period ending September 30th, 2023. All financial information is provided in U.S. dollars in comparison to the preceding quarter.
Q3 Financial Highlights
Net Revenue: UP 30.5% to $24.8M
-
Canada: UP 37.5% to $18.7M
-
Israel: UP 5.6% to $5.7M
-
Other: $399M (new)
Cost of Sales: UP 26.4% to $20.1M
Gross Profit: UP 29.0% to $4M
Gross Margin: Unchanged @ 16%
Net Loss: Reduced 71.9% to $(1.6)M
Adj. EBITDA: Increased 4.4% to $(15.2)M
Cash on Hand: UP 39.6% to $571.7M
-
Short-term Investments: $267.9M
Q3 Operational Highlights
Brand and Product Portfolio
The Spinach® brand continued to hold its number one market share position in the edibles category in Canada in Q3 2023, with an approximate 17.9% market share across the SOURZ by Spinach® and Spinach FEELZ™ sub-brands, according to Hifyre.
In August, the Company launched the Spinach FEELZ™ Full Tilt THC+THCV, an edible designed to provide a boosted and elevated high.
In Q3 2023, Spinach® pre-rolls rose to the number seven ranking in the category, according to Hifyre. and the Company stated that it plans to continue to flex its robust product development capabilities to formulate differentiated products with flavors and rare cannabinoids to win with consumers.
Cronos’ strong breeding program and portfolio of genetics continued to drive growth, propelling the Spinach® brand to become the number two flower brand in Canada, with a 5.8% market share in Q3 2023, according to Hifyre (which rose to the number one flower brand in Canada as of the end of October).
The Spinach® brand was ranked the number five vape brand in September 2023, holding a 6.4% market share, which is up from Q2 2023 where it had a 4.5% market share, according to Hifyre.
Spinach® is the number one rare cannabinoid vape brand, with cannabinol (CBN), cannabigerol (CBG), and cannabichromene (CBC), holding three spots in the top five market share.
In Israel, Cronos launched four new flower offerings under the Peace Naturals®, Sticky Ape, Raphael Gems, Purple Punch and Tangerine Twist brands.
Global Supply Chain
Cronos GrowCo had a net revenue of $6.2M in Q3; made a principal repayment of $1.1M on its $70.5M senior secured credit loan from Cronos in Q3 and paid Cronos $2.3M in interest payments on said loan in Q3 2023,
commenced medical cannabis shipments to our German distribution partner, Cansativa GmbH, this past September, and
plan to ship medical cannabis to Vitura Health Limited (Cronos owns approximately 10% of Vitura), the market-leading online prescriber, patient, pharmacy and supplier of medicinal cannabis products in Australia, in the coming weeks.
Management Commentary
Mike Gorenstein, Chairman, President, and CEO, said:
“…We achieved our highest net revenue for continuing operations on record in Q3 2023…[with] robust success in Canada driven primarily by innovations in our Spinach® brand, and with the Lord Jones® brand…
We re-launched in Germany with the Peace Naturals® medical cannabis brand in Q3…and just last month, we signed an agreement to ship to Australia…
We have reduced costs across the Company and improved the gross margin profile of the business, which yielded significant improvements in cash flow….“
Guidance and Outlook
The Company reiterates its previously announced operating expense savings target of $20 to $25 million in 2023 and planned incremental operating expense savings of $10 to $15 million in 2024 primarily driven by savings in sales and marketing, general and administrative, and research and development. The organizational and cost savings initiatives are intended to position the Company to drive profitable and sustainable growth over time.
Cronos anticipates that the net change in cash, defined as the sum of cash and cash equivalents and short-term investments, will decline by less than $5 to $10 million in the last three months of fiscal year 2023. The Company maintains its expectation that the net change in cash will be positive in 2024.
The fiscal year 2023 guidance assumes:
- The company will experience relatively consistent 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 $15 million for the last three months of fiscal year 2023;
- steady gross margin profile; and
- meeting our target for reducing our operating expenses by $20 to $25 million.
Cronos continues to monitor the conflict in Israel and 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 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.
Stock Performance
Cronos Group’s stock price declined 3.6%% from the end of Q2 (June 30th) until yesterday but it is up 7% in early trading today on the reporting of its impressive Q3 financials.More By This Author:Largest Cannabis Sector Stocks On A Roller Coaster
NVIDIA’s Long-Term Prospects Are Mediocre At Best – Here’s Why
Conservative “Cannabis” Stocks Rallied 6%, On Average, Last Week
