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Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) reported its 2022 second-quarter earnings with net revenue of $23.1 million which jumped from last year’s $7.4 million for the same time period. However, total revenue before taxes was $28 million which just beat the Yahoo Finance average analyst estimates for revenues of $27 million. It was also better than the first quarter‘s revenue of $25 million. The stock was dropping by roughly 8% in early trading to lately sell at $3.26.
Cronos attributed the improvement to an increase in net revenue in its Rest of World segment driven by growth in the Israeli medical market and the Canadian adult-use market. The company also reported a net loss of $20 million, a significant drop from last year’s net loss of $179 million for the same time period. The earnings were ($0.05) per share in line with analyst estimates.
“I am encouraged by the progress we are making to realign our business around our brands to become more efficient in our decision making and agile throughout our supply chain,” said Mike Gorenstein, Chairman, President, and CEO, of Cronos. “Our supply chain transformation in Canada is going very well, with GrowCo achieving profitability in the year-to-date period, and the operational efficiencies we envisioned when we embarked on this initiative are starting to be realized. We are also refocusing the U.S. business to prioritize hero SKUs while leaning into adult-use product formats and concentrating on the direct-to-consumer channel. Although early in the repositioning of our U.S. business, we are confident the new strategy will improve our bottom-line while maintaining brand equity that we can leverage into cannabinoids beyond CBD, and in the U.S. THC market once regulations permit.”
Retail Breakdown
Cronos broke out its revenue results for investors. The bulk of the company’s sales or $21.6 million was driven by an increase in net revenue in the Israeli medical market largely attributable to the cannabis flower category and the Canadian adult-use market driven primarily by cannabis extract products. The U.S. only contributed $1.5 million in the quarter, which dropped from the previous year. The decrease year-over-year was primarily driven by a reduction in volume as a result of a decrease in promotional spending and SKU rationalization efforts as the company goes through its reorganization.
Reorg Update
As Gorenstein mentioned, the company has been reorganizing its focus. In the U.S., Cronos began a phased exit of the wholesale beauty category to focus the portfolio on adult-use product formats within the direct-to-consumer channel. “As a result, the company reduced sales and marketing headcount in the U.S. to better align the business structure with the new strategy. Due to the restructuring of the U.S. business and other newly identified cost savings opportunities, the company now expects to incur approximately $6.4 million in expenses in connection with the Realignment, an increase from the previously stated $5.8 million.” The expenses are attributed to the costs needed to modernize information technology systems and build distribution capabilities.
“As we realign our business, we remain focused on what we know will drive differentiation: product development and long-term focused innovation. We continue to expand our borderless cannabinoid product portfolio with the recent launch of a CBN vape and gummy in select markets in Canada, and we achieved the THCV equity milestone in partnership with Ginkgo. Continuing to hit these productivity milestones fuels our innovation pipeline focused on creating borderless products with rare cannabinoids that amplify and differentiate the consumer experience. With a focus on utilizing rare cannabinoids, you have seen the success of our approach in the gummy category in Canada. We intend to apply this same strategy to win in other categories such as vapes and pre-rolls.”
The post Cronos Makes Gains In Second Quarter appeared first on Green Market Report.
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Debra Borchardt, KahliBuds, 420GrowLife
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