Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON)
(“
Cronos Group” or the
“
Company”), today announced financial results and
business highlights for the second quarter and first-half ended
June 30, 2019.
“During the second quarter, Cronos Group
expanded its R&D capabilities, innovation expertise and global
infrastructure network in what has been a year of tremendous
growth,” said Mike Gorenstein, CEO of Cronos Group. “We opened
Cronos Device Labs, our new global R&D center in Israel,
announced the acquisition of our new state-of-the-art fermentation
facility and added Dr. Todd Abraham as Chief Innovation Officer to
our executive leadership team.”
“We also took steps to enter the U.S. market
with our recent acquisition of Redwood Holding’s hemp-based CBD
platform. As we look ahead, we will continue to capitalize on this
momentum by building on our partnerships with Altria and Gingko
Bioworks and leveraging our collective resources and expertise to
realize the significant potential in the growing cannabis
industry.”
Financial Results Second Quarter
2019
| ($ in 000s, except where
noted otherwise) |
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
| |
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
| |
|
2019 |
|
|
2018 |
|
|
$ |
|
|
% |
|
|
2019 |
|
|
2018 |
|
|
$ |
|
|
% |
|
| Financial
Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue |
|
$ |
10,237 |
|
|
$ |
3,394 |
|
|
$ |
6,843 |
|
|
|
202 |
% |
|
$ |
16,707 |
|
|
$ |
6,339 |
|
|
$ |
10,368 |
|
|
|
164 |
% |
|
Gross Margin before Fair Value Adjustments |
|
|
53 |
% |
|
|
63 |
% |
|
-- |
|
|
-- |
|
|
|
54 |
% |
|
|
55 |
% |
|
-- |
|
|
-- |
|
|
Adjusted EBITDA(1) |
|
$ |
(17,772 |
) |
|
$ |
(2,396 |
) |
|
$ |
(15,376 |
) |
|
|
642 |
% |
|
$ |
(26,719 |
) |
|
$ |
(3,896 |
) |
|
$ |
(22,823 |
) |
|
|
586 |
% |
|
Extract Sales (% of Net Product Revenue) |
|
|
20 |
% |
|
|
19 |
% |
|
-- |
|
|
-- |
|
|
|
21 |
% |
|
|
14 |
% |
|
-- |
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating
Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kilograms Sold |
|
|
1,584 |
|
|
|
477 |
|
|
|
1,107 |
|
|
|
232 |
% |
|
|
2,695 |
|
|
|
978 |
|
|
|
1,717 |
|
|
|
176 |
% |
|
Net Product Revenue / Gram Sold |
|
$ |
6.44 |
|
|
$ |
7.03 |
|
|
$ |
(0.59 |
) |
|
|
(8 |
%) |
|
$ |
6.15 |
|
|
$ |
6.37 |
|
|
$ |
(0.22 |
) |
|
|
(3 |
%) |
|
Cost of Sales before Fair Value Adj. / Gram Sold |
|
|
3.01 |
|
|
|
2.63 |
|
|
|
0.38 |
|
|
|
14 |
% |
|
|
2.87 |
|
|
|
2.88 |
|
|
|
(0.01 |
) |
|
|
(0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance
Sheet(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
$ |
1,579,231 |
|
|
$ |
89,609 |
|
|
$ |
1,489,622 |
|
|
|
1,662 |
% |
|
$ |
1,579,231 |
|
|
$ |
89,609 |
|
|
$ |
1,489,622 |
|
|
|
1,662 |
% |
|
Short-Term Investments |
|
|
744,936 |
|
|
|
— |
|
|
|
744,936 |
|
|
NA |
|
|
|
744,936 |
|
|
|
— |
|
|
|
744,936 |
|
|
NA |
|
|
Derivative Liabilities |
|
|
1,399,594 |
|
|
|
— |
|
|
|
1,399,594 |
|
|
NA |
|
|
|
1,399,594 |
|
|
|
— |
|
|
|
1,399,594 |
|
|
NA |
|
(1) See “General
Matters – Non-IFRS Measures” for information related to Adjusted
EBITDA. (2) Dollar amounts
are as of the last day of the period indicated.
- Net revenue was $10.2 million in Q2 2019, representing
a 202% increase from $3.4 million in Q2 2018, primarily
driven by the launch of the adult-use market in Canada. Net revenue
increased 58% quarter-over-quarter from $6.5 million in the first
quarter of 2019, primarily driven by increased sales in CBD oil,
which carries no excise tax reduction and increased sales of dry
flower.
- 1,584 kilograms were sold in Q2 2019, representing a 232%
increase from 477 kilograms sold in Q2 2018, primarily driven
by increased cannabis production and the launch of the adult-use
market in Canada. Kilograms sold increased 43% quarter-over-quarter
from 1,111 kilograms sold in the first quarter of 2019, primarily
driven by increased cannabis production.
- Cost of sales before fair value adjustments per gram sold was
$3.01 in Q2 2019, representing a 14% increase from $2.63
in Q2 2018 and a 12% increase from $2.69 in the first quarter
of 2019. The increase quarter-over-quarter was driven by higher
processing cost on a per gram basis.
- The Company experienced continued growth in cannabis oil sales,
which represented 20% of net product revenue in Q2 2019
compared to 19% in Q2 2018.
| ($ in 000s, except where
noted otherwise) |
|
Second |
|
|
First |
|
|
|
|
| |
|
Quarter |
|
|
Quarter |
|
|
Change |
|
| |
|
2019 |
|
|
2019 |
|
|
$ |
|
|
% |
|
| Financial
Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue |
|
$ |
10,237 |
|
|
$ |
6,470 |
|
|
$ |
3,767 |
|
|
|
58 |
% |
|
Gross Margin before Fair Value Adjustments |
|
|
53 |
% |
|
|
54 |
% |
|
-- |
|
|
-- |
|
|
Adjusted EBITDA(1) |
|
$ |
(17,772 |
) |
|
$ |
(8,947 |
) |
|
$ |
(8,825 |
) |
|
|
99 |
% |
|
Extract Sales (% of Net Product Revenue) |
|
|
20 |
% |
|
|
23 |
% |
|
-- |
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating
Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kilograms Sold |
|
|
1,584 |
|
|
|
1,111 |
|
|
|
473 |
|
|
|
43 |
% |
|
Net Product Revenue / Gram Sold |
|
$ |
6.44 |
|
|
$ |
5.73 |
|
|
$ |
0.71 |
|
|
|
12 |
% |
|
Cost of Sales before Fair Value Adj. / Gram Sold |
|
|
3.01 |
|
|
|
2.69 |
|
|
|
0.32 |
|
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance
Sheet(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
$ |
1,579,231 |
|
|
$ |
2,418,277 |
|
|
$ |
(839,046 |
) |
|
|
(35 |
%) |
|
Short-Term Investment |
|
|
744,936 |
|
|
|
— |
|
|
|
744,936 |
|
|
NA |
|
|
Derivative Liabilities |
|
|
1,399,594 |
|
|
|
1,664,275 |
|
|
|
(264,681 |
) |
|
|
(16 |
%) |
(1) See “General
Matters – Non-IFRS Measures” for information related to Adjusted
EBITDA. (2) Dollar amounts
are as of the last day of the period indicated.
Business Highlights
Global Supply Chain
Cronos Group is transitioning its current production footprint
towards an efficient global supply chain model, which is expected
to employ a combination of wholly-owned production facilities,
third-party suppliers and global production partnerships, all of
which is anticipated to support the manufacturing of the Company’s
adult consumer goods. The Company remains focused on establishing
industry-leading methodologies and best practices at Peace
Naturals, the Company’s center of excellence, and leveraging
expertise to create high quality domestic and international
products that resonate with consumers.
In anticipation of the derivative market launching in Canada
this fall, Cronos Group expanded its Canadian footprint with a
cannabis concentrate supply agreement with MediPharm Labs Corp.
(“MediPharm Labs”) in May 2019. MediPharm Labs
will supply Cronos Group with approximately $30 million of cannabis
concentrate over 18-months, and, subject to certain renewal and
purchase options, potentially up to $60 million over 24-months.
Additionally, Cronos Group and MediPharm Labs have entered into a
tolling agreement, where Cronos Group may supply bulk cannabis to
MediPharm Labs extraction facility to fulfill certain additional
processing needs of the Company.
In July 2019, subsequent to the end of the
second quarter, the Company entered into a contract manufacturing
agreement with Heritage Cannabis Holdings Corp.
(“Heritage”), a cannabis producer based in British
Columbia. Heritage will be providing cannabis extract and services
related to the filling and packaging of vaporizer devices for the
Canadian cannabis adult-use and medical markets. The agreement has
a two-year term with an option to extend upon agreement by both
parties, at an annual potential contract value of $35 million,
based on current projections.
Global Sales and Distribution
Cronos Group remains committed to leading the
industry forward responsibly as derivative products are introduced
to the Canadian marketplace this fall. Along with Cronos Group’s
internal capabilities, the Company has partnered with third-party
producers to support the Company’s entry into the vaporizer
category in Canada. Both aforementioned third-party suppliers are
expected to utilize the Company’s proprietary formulations for
production.
Intellectual Property
Initiatives
In May 2019, Cronos Group established Cronos Device Labs, a
global research and development (“R&D”) center
for vaporizer innovation. Cronos Device Labs’ advanced facility is
based in Israel, a leader in cannabis R&D, and supports Cronos
Group’s efforts to develop next-generation vaporizer products that
are designed specifically for cannabinoid applications.
Cronos Device Labs, which is equipped with an experienced team
of product development talent, advanced vaporizer technology and
analytical testing infrastructure, serves as the global center of
R&D for the Company’s vaporizer devices.
The 23-member team at Cronos Device Labs, which brings to Cronos
Group over 80 years of combined expertise in vaporizer development,
is comprised of product designers, mechanical, electrical and
software engineers, and analytical and formulation scientists.
Cronos Device Labs significantly enhances Cronos Group’s technology
and development capabilities and is expected to enable the Company
to deliver expanded product offerings to customers that are
specially tailored to cannabinoid use.
Subsequent to the end of the second quarter,
Cronos Group closed the previously announced acquisition of an
84,000 square foot GMP compliant fermentation and manufacturing
facility in Winnipeg, Manitoba from Apotex Fermentation Inc.
(“AFI”) on July 31, 2019. The state-of-the-art
facility, which will operate as “Cronos Fermentation”, includes
fully equipped laboratories covering microbiology, organic and
analytical chemistry, quality control and method development as
well as two large scale microbial fermentation production areas
with a combined production capacity of 102,000L, three downstream
processing plants, and bulk product and packaging capabilities.
The acquisition was funded using existing cash
on hand and is expected to provide the fermentation and
manufacturing capabilities the Company needs in order to capitalize
on the progress underway with Ginkgo Bioworks, Inc.
(“Ginkgo Bioworks”). The Ginkgo Bioworks
partnership aims to bring innovation and biological manufacturing
to the cannabis industry, which would allow for cannabinoid
production at large scale and with greater efficiency compared to
traditional cultivation and extraction. Commercial production at
the facility is subject to completion of the equipment alignment
for cannabinoid-based production, the receipt of the appropriate
licenses from Health Canada to produce cultured cannabinoids under
the Cannabis Act (Canada) and the achievement of
certain milestones under the strategic partnership with Ginkgo
Bioworks.
Brand Portfolio
Subsequent to the end of the second quarter,
Cronos Group entered into a definitive agreement to acquire four of
Redwood Holding Group, LLC’s operating subsidiaries (collectively,
“Redwood”). Redwood manufactures, markets and
distributes hemp-derived CBD infused skincare and other consumer
products online and through retail and hospitality partner channels
in the United States under the Lord Jones™ brand. Redwood’s
products use pure hemp oil that contains natural phytocannabinoids
and terpenes found in the plant.
Under the terms of the agreement, Cronos Group
will acquire Redwood for approximately US$300 million, net of
Redwood’s estimated cash and debt and subject to a customary
working capital adjustment. US$225 million of the total
consideration (subject to the foregoing adjustments) will be paid
in cash with the balance paid in newly issued Cronos Group common
shares. Cronos Group will fund the cash portion of the transaction
with cash on hand. The acquisition is expected to close in the
third quarter of 2019, subject to customary closing conditions and
regulatory approvals.
Conference Call
The Company will host a conference call and live
audio webcast on Thursday, August 8, 2019 at 8:30 a.m. EST to
discuss second quarter 2019 results. The call will last
approximately one hour. Instructions for the conference call are
provided below:
- Live audio webcast:
https://ir.thecronosgroup.com/events/event-details/second-quarter-2019-earnings-conference-call
- Toll Free from the U.S. and Canada dial-in: (866) 795-2258
- International dial-in: (409) 937-8902
- Conference ID: 3164005
An audio replay of the call will be archived on the Company’s
website for replay.
About Cronos Group
Cronos Group is an innovative global cannabinoid
company with international production and distribution across five
continents. Cronos Group is committed to building disruptive
intellectual property by advancing cannabis
research, technology and product development. With a
passion to responsibly elevate the consumer experience, Cronos
Group is building an iconic brand portfolio. Cronos Group’s
portfolio includes PEACE NATURALS™, a global health and
wellness platform, and two adult-use brands COVE™ and
Spinach™. To learn more about Cronos Group and its brands,
please visit: www.thecronosgroup.com; www.peacenaturals.com;
www.covecannabis.ca; www.spinachcannabis.com.
Forward-looking statementsThis
press release contains "forward-looking information" and
"forward-looking statements" within the meaning of applicable
securities laws (collectively, "forward-looking statements"), which
are based on the Company’s current internal expectations,
estimates, projections, assumptions and beliefs. All information
contained herein that is not clearly historical in nature may
constitute forward-looking statements. In some cases,
forward-looking statements can be identified by the use of
forward-looking terminology such as “may”, “will”, “expect”,
“likely”, “should”, “would”, “plan”, “anticipate”, “intend”,
“potential”, “proposed”, “estimate”, “believe”, or other similar
words, expressions, phrases, including negative and grammatical
variations thereof, or statements that certain events or conditions
“may” or “will” happen, or by discussions of strategy.
Forward-looking statements include estimates, plans, expectations,
opinions, forecasts, projections, targets, guidance or other
statements that are not statements of historical fact.
Forward-looking statements are provided for the purposes of
assisting the reader in understanding our financial performance,
financial position and cash flows as at and for periods ended on
certain dates and to present information about management's current
expectations and plans relating to the future and the reader is
cautioned that such information may not be appropriate for any
other purpose. Some of the forward-looking statements contained in
this press release, include, but are not limited to, statements
with respect to: the anticipated benefits of our joint ventures,
strategic alliances, research and development initiatives,
acquisitions and other commercial arrangements, including the
ability to produce and distribute the target cannabinoids under our
strategic partnership with Ginkgo Bioworks, Inc., the ability to
build innovative vaporizer products and expand product offerings
through Cronos Device Labs and the ability to further create and
scale hemp-derived consumer products through the Company’s
acquisition of Redwood; expectations regarding the Company’s
acquisition of Redwood, including anticipated timing of closing of
the acquisition and the anticipated benefits therefrom; our ability
to execute on our growth strategy, including the construction of
production facilities and the commencement of operations by our
joint ventures and the timing thereof; the ability of Cronos Group,
our joint ventures, strategic partners and commercial
counterparties to obtain all necessary licenses, permits and
approvals; our ability to expand our distribution network and
global footprint; our business and operations; our strategy for
future growth; our intention to build an international iconic brand
portfolio and develop disruptive intellectual property; and the
growth potential of the cannabis industry and our ability to
realize such opportunity. No forward-looking statement can be
guaranteed and Cronos Group cannot guarantee the forward-looking
statements contained herein. Forward-looking statements are based
upon certain material assumptions that were applied in drawing a
conclusion or making a forecast or projection, including
management's perceptions of historical trends, current conditions
and expected future developments, as well as other considerations
that are believed to be appropriate in the circumstances. While we
consider these assumptions to be reasonable based on information
currently available to management, there is no assurance that such
expectations will prove to be correct. By their nature,
forward-looking statements are subject to inherent risks and
uncertainties that may be general or specific and which give rise
to the possibility that expectations, forecasts, predictions,
projections or conclusions will not prove to be accurate, that
assumptions may not be correct and that objectives, strategic goals
and priorities will not be achieved. A variety of factors,
including known and unknown risks, many of which are beyond our
control, could cause actual results to differ materially from the
forward-looking statements in this press release. Such factors
include, without limitation, those discussed in the Company's most
recent management’s discussion and analysis and the Company’s
annual information form for the year ended December 31, 2018, both
of which have been filed on the Company’s profile on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov. Readers are cautioned to
consider these and other factors, uncertainties and potential
events carefully and not to put undue reliance on forward-looking
statements. Forward-looking statements contained herein are made as
of the date of this press release and are based on the beliefs,
estimates, expectations and opinions of management on the date such
forward-looking statements are made. The Company undertakes no
obligation to update or revise any forward-looking statements,
whether as a result of new information, estimates or opinions,
future events or results or otherwise or to explain any material
difference between subsequent actual events and such
forward-looking statements, except as required by applicable
law.
All references in this press release to
“dollars”, “C$” or “$” are to Canadian dollars and all references
to “US$” are to United States dollars.
| Cronos
Group Inc. |
| Unaudited
Condensed Interim Consolidated Statements of Financial
Position |
| As at
June 30, 2019 and December 31, 2018 |
| (in thousands of
CDN $) |
| |
|
Notes |
|
As
atJune 30,2019 |
|
|
As
atDecember 31,2018 |
| Assets |
|
|
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
22(a) |
|
$ |
1,579,231 |
|
|
$ |
32,634 |
|
Short-term investments |
|
22(a) |
|
|
744,936 |
|
|
|
- |
|
Interest receivable |
|
22(a) |
|
|
5,751 |
|
|
|
- |
|
Accounts receivable |
|
22(a) |
|
|
11,960 |
|
|
|
4,163 |
|
Sales taxes receivable |
|
|
|
|
7,936 |
|
|
|
3,419 |
|
Prepaid expenses and other assets |
|
|
|
|
7,079 |
|
|
|
3,876 |
|
Biological assets |
|
4 |
|
|
10,032 |
|
|
|
9,074 |
|
Inventory |
|
4 |
|
|
41,667 |
|
|
|
11,584 |
|
Total current assets |
|
|
|
|
2,408,592 |
|
|
|
64,750 |
| Advances to joint
ventures |
|
5,22(a) |
|
|
26,608 |
|
|
|
6,395 |
| Net investments in equity
accounted investees |
|
5 |
|
|
2,025 |
|
|
|
4,038 |
| Other investments |
|
6 |
|
|
300 |
|
|
|
705 |
| Loans receivable |
|
7,22(a) |
|
|
16,664 |
|
|
|
314 |
| Property, plant and
equipment |
|
8 |
|
|
196,718 |
|
|
|
171,720 |
| Right-of-use assets |
|
3,11 |
|
|
3,359 |
|
|
|
171 |
| Intangible assets |
|
9 |
|
|
11,461 |
|
|
|
11,234 |
| Goodwill |
|
9 |
|
|
1,792 |
|
|
|
1,792 |
|
Total assets |
|
|
|
$ |
2,667,519 |
|
|
$ |
261,119 |
| |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
22(b) |
|
|
30,747 |
|
|
|
15,372 |
|
Holdbacks payable |
|
22(b) |
|
|
2,274 |
|
|
|
7,887 |
|
Government remittances payable |
|
22(b) |
|
|
630 |
|
|
|
1,123 |
|
Current portion of lease obligations |
|
3,11,22(b) |
|
|
417 |
|
|
|
41 |
|
Construction loan payable |
|
12,22(b) |
|
|
- |
|
|
|
20,951 |
|
Derivative liabilities |
|
13,22(b) |
|
|
1,399,594 |
|
|
|
- |
|
Total current liabilities |
|
|
|
|
1,433,662 |
|
|
|
45,374 |
| Lease obligations |
|
3,11,22(b) |
|
|
3,109 |
|
|
|
119 |
| Due to non-controlling
interests |
|
10,22(b) |
|
|
2,249 |
|
|
|
2,136 |
| Deferred income tax
liability |
|
20 |
|
|
4,036 |
|
|
|
1,850 |
|
Total liabilities |
|
|
|
$ |
1,443,056 |
|
|
$ |
49,479 |
| Shareholders'
equity |
|
|
|
|
|
|
|
|
|
|
Share capital |
|
14(a) |
|
|
559,296 |
|
|
|
225,500 |
|
Warrants |
|
15(a) |
|
|
754 |
|
|
|
1,548 |
|
Stock options |
|
15(b) |
|
|
8,573 |
|
|
|
6,241 |
|
Retained earnings (accumulated deficit) |
|
|
|
|
655,047 |
|
|
|
(22,715 |
|
Accumulated other comprehensive income |
|
|
|
|
944 |
|
|
|
930 |
|
Total equity attributable to shareholders of Cronos Group |
|
|
|
|
1,224,614 |
|
|
|
211,504 |
|
Non-controlling interests |
|
3,10 |
|
|
(151 |
) |
|
|
136 |
|
Total shareholders' equity |
|
|
|
|
1,224,463 |
|
|
|
211,640 |
|
Total liabilities and shareholders' equity |
|
|
|
$ |
2,667,519 |
|
|
$ |
261,119 |
|
|
|
|
|
|
|
|
|
|
|
| Commitments and
contingencies |
|
19 |
|
|
|
|
|
|
|
| Subsequent events |
|
25 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| The accompanying
notes are an integral part of these unaudited condensed interim
consolidated financial statements |
| Cronos Group
Inc. Unaudited Condensed Interim Consolidated
Statements of Operations and Comprehensive Income
(Loss)For the three and six months ended
June 30, 2019 and
June 30, 2018(in
thousands of CDN $, except share and per share amounts) |
|
|
|
Three Months EndedJune 30, |
|
|
Six Months
EndedJune 30, |
|
| |
|
Notes |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
| Gross
revenue |
|
16 |
|
$ |
10,787 |
|
|
$ |
3,394 |
|
|
$ |
17,772 |
|
|
$ |
6,339 |
|
|
Excise taxes |
|
|
|
|
(550 |
) |
|
|
- |
|
|
|
(1,065 |
) |
|
|
- |
|
| Net
revenue |
|
|
|
|
10,237 |
|
|
|
3,394 |
|
|
|
16,707 |
|
|
|
6,339 |
|
| Cost of
sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of sales before fair
value adjustments |
|
|
|
|
4,762 |
|
|
|
1,254 |
|
|
|
7,746 |
|
|
|
2,821 |
|
| Gross profit before
fair value adjustments |
|
|
|
|
5,475 |
|
|
|
2,140 |
|
|
|
8,961 |
|
|
|
3,518 |
|
| Fair value
adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized change in fair value of biological assets |
|
4 |
|
|
(4,024 |
) |
|
|
(6,831 |
) |
|
|
(17,577 |
) |
|
|
(9,575 |
) |
|
Realized fair value adjustments on inventory sold in the
period |
|
|
|
|
3,557 |
|
|
|
2,625 |
|
|
|
7,279 |
|
|
|
4,819 |
|
|
Total fair value adjustments |
|
|
|
|
(467 |
) |
|
|
(4,206 |
) |
|
|
(10,298 |
) |
|
|
(4,756 |
) |
| Gross
profit |
|
|
|
|
5,942 |
|
|
|
6,346 |
|
|
|
19,259 |
|
|
|
8,274 |
|
| Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
|
5,358 |
|
|
|
364 |
|
|
|
6,858 |
|
|
|
950 |
|
|
Research and development |
|
|
|
|
3,076 |
|
|
|
- |
|
|
|
4,633 |
|
|
|
- |
|
|
General and administrative |
|
|
|
|
15,176 |
|
|
|
4,219 |
|
|
|
24,787 |
|
|
|
6,680 |
|
|
Share-based payments |
|
15(b) |
|
|
2,002 |
|
|
|
950 |
|
|
|
2,739 |
|
|
|
1,724 |
|
|
Depreciation and amortization |
|
8,9,11 |
|
|
675 |
|
|
|
323 |
|
|
|
1,145 |
|
|
|
608 |
|
|
Total operating expenses |
|
|
|
|
26,287 |
|
|
|
5,856 |
|
|
|
40,162 |
|
|
|
9,962 |
|
| Operating
loss |
|
|
|
|
(20,345 |
) |
|
|
490 |
|
|
|
(20,903 |
) |
|
|
(1,688 |
) |
| Other income
(expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense) |
|
|
|
|
12,531 |
|
|
|
(37 |
) |
|
|
15,251 |
|
|
|
(59 |
) |
|
Financing and transaction costs |
|
12,13,25 |
|
|
(4,505 |
) |
|
|
- |
|
|
|
(34,066 |
) |
|
|
- |
|
|
Gain on revaluation of derivative liabilities |
|
13 |
|
|
263,943 |
|
|
|
- |
|
|
|
700,326 |
|
|
|
- |
|
|
Share of (loss) income from investments in equity accounted
investees |
|
5 |
|
|
(991 |
) |
|
|
3 |
|
|
|
(1,255 |
) |
|
|
44 |
|
|
Gain on disposal of Whistler |
|
5 |
|
|
- |
|
|
|
- |
|
|
|
20,606 |
|
|
|
- |
|
|
Gain on other investments |
|
6 |
|
|
- |
|
|
|
- |
|
|
|
924 |
|
|
|
221 |
|
|
Total other income |
|
|
|
|
270,978 |
|
|
|
(34 |
) |
|
|
701,786 |
|
|
|
206 |
|
| Income (loss) before income
taxes |
|
|
|
|
250,633 |
|
|
|
456 |
|
|
|
680,883 |
|
|
|
(1,482 |
) |
| Deferred income tax (recovery)
expense |
|
20 |
|
|
(335 |
) |
|
|
(267 |
) |
|
|
2,222 |
|
|
|
(1,155 |
) |
|
Net income (loss) |
|
|
|
$ |
250,968 |
|
|
$ |
723 |
|
|
$ |
678,661 |
|
|
$ |
(327 |
) |
|
Net income (loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cronos Group |
|
|
|
$ |
251,117 |
|
|
$ |
723 |
|
|
$ |
678,946 |
|
|
$ |
(327 |
) |
|
Non-controlling interests |
|
10 |
|
|
(149 |
) |
|
|
- |
|
|
|
(285 |
) |
|
|
- |
|
|
|
|
|
|
$ |
250,968 |
|
|
$ |
723 |
|
|
$ |
678,661 |
|
|
$ |
(327 |
) |
| Other comprehensive
income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on revaluation and disposal of other investments, net of
tax |
|
6,20 |
|
$ |
- |
|
|
$ |
39 |
|
|
$ |
103 |
|
|
$ |
4 |
|
|
Foreign exchange loss on translation of foreign operations |
|
2(a),10 |
|
|
(104 |
) |
|
|
- |
|
|
|
(87 |
) |
|
|
- |
|
|
Total other comprehensive income (loss) |
|
|
|
|
(104 |
) |
|
|
39 |
|
|
|
16 |
|
|
|
4 |
|
| Comprehensive income
(loss) |
|
|
|
$ |
250,864 |
|
|
$ |
762 |
|
|
$ |
678,677 |
|
|
$ |
(323 |
) |
| Comprehensive income
(loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cronos Group |
|
|
|
$ |
251,011 |
|
|
$ |
762 |
|
|
$ |
678,960 |
|
|
$ |
(323 |
) |
|
Non-controlling interests |
|
10 |
|
|
(147 |
) |
|
|
- |
|
|
|
(283 |
) |
|
|
- |
|
| |
|
|
|
$ |
250,864 |
|
|
$ |
762 |
|
|
$ |
678,677 |
|
|
$ |
(323 |
) |
| Earnings (loss) per
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
17 |
|
$ |
0.75 |
|
|
$ |
0.00 |
|
|
$ |
2.14 |
|
|
$ |
(0.00 |
) |
|
Diluted |
|
17 |
|
$ |
0.22 |
|
|
$ |
0.00 |
|
|
$ |
0.58 |
|
|
$ |
(0.00 |
) |
| Weighted average
number of outstanding shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
17 |
|
|
334,665,873 |
|
|
|
175,529,196 |
|
|
|
317,940,749 |
|
|
|
166,343,078 |
|
|
Diluted |
|
17 |
|
|
374,676,595 |
|
|
|
211,524,230 |
|
|
|
364,872,093 |
|
|
|
166,343,078 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| The accompanying
notes are an integral part of these unaudited condensed interim
consolidated financial statements |
|
| Cronos Group
Inc.Unaudited Condensed Interim Consolidated Statements of Cash
FlowsFor the three and six months ended June 30, 2019 and
June 30, 2018(in thousands of CDN $) |
|
|
|
|
|
|
|
|
| |
|
|
|
Three Months EndedJune 30, |
|
|
Six Months
EndedJune 30, |
|
| |
|
Notes |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
| Operating
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
|
|
$ |
250,968 |
|
|
$ |
723 |
|
|
$ |
678,661 |
|
|
$ |
(327 |
) |
| Items not affecting cash and
cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized change in fair value of biological assets |
|
4 |
|
|
(4,024 |
) |
|
|
(6,831 |
) |
|
|
(17,577 |
) |
|
|
(9,575 |
) |
|
Realized fair value adjustments on inventory sold in the
period |
|
|
|
|
3,557 |
|
|
|
2,625 |
|
|
|
7,279 |
|
|
|
4,819 |
|
|
Share-based payments |
|
15(b) |
|
|
2,002 |
|
|
|
950 |
|
|
|
2,739 |
|
|
|
1,724 |
|
|
Depreciation and amortization |
|
8,9,11 |
|
|
675 |
|
|
|
323 |
|
|
|
1,145 |
|
|
|
608 |
|
|
Depreciation relieved on inventory sold |
|
21 |
|
|
363 |
|
|
|
47 |
|
|
|
598 |
|
|
|
216 |
|
|
Gain on revaluation of derivative liabilities |
|
13 |
|
|
(263,943 |
) |
|
|
- |
|
|
|
(700,326 |
) |
|
|
- |
|
|
Share of loss (income) from investments in equity accounted
investees |
|
5 |
|
|
991 |
|
|
|
(3 |
) |
|
|
1,255 |
|
|
|
(44 |
) |
|
Gain on disposal of Whistler |
|
5 |
|
|
- |
|
|
|
- |
|
|
|
(20,606 |
) |
|
|
- |
|
|
Gain on other investments |
|
6 |
|
|
- |
|
|
|
- |
|
|
|
(924 |
) |
|
|
(221 |
) |
|
Deferred income tax (recovery) expense |
|
20 |
|
|
(335 |
) |
|
|
(267 |
) |
|
|
2,222 |
|
|
|
(1,155 |
) |
|
Foreign exchange loss (gain) |
|
|
|
|
178 |
|
|
|
4 |
|
|
|
92 |
|
|
|
(12 |
) |
| Net changes in non-cash
working capital |
|
21 |
|
|
(47,860 |
) |
|
|
(4,437 |
) |
|
|
(30,541 |
) |
|
|
(16,662 |
) |
| Cash and cash equivalents used
in operating activities |
|
|
|
|
(57,428 |
) |
|
|
(6,866 |
) |
|
|
(75,983 |
) |
|
|
(20,629 |
) |
| Investing
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of short-term investments |
|
|
|
|
(744,936 |
) |
|
|
- |
|
|
|
(744,936 |
) |
|
|
- |
|
|
Advances to joint ventures |
|
5 |
|
|
(5,481 |
) |
|
|
- |
|
|
|
(21,293 |
) |
|
|
- |
|
|
Investments in equity accounted investees |
|
5 |
|
|
- |
|
|
|
- |
|
|
|
(2,200 |
) |
|
|
- |
|
|
Proceeds from sale of other investments |
|
6 |
|
|
- |
|
|
|
280 |
|
|
|
26,078 |
|
|
|
967 |
|
|
Payment to exercise ABcann warrants |
|
6 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(113 |
) |
|
Advances on loans receivable |
|
7 |
|
|
(16,350 |
) |
|
|
- |
|
|
|
(16,350 |
) |
|
|
- |
|
|
Purchase of property, plant and equipment |
|
8 |
|
|
(14,445 |
) |
|
|
(30,025 |
) |
|
|
(27,899 |
) |
|
|
(37,667 |
) |
|
Purchase of intangible assets |
|
9 |
|
|
(577 |
) |
|
|
(38 |
) |
|
|
(628 |
) |
|
|
(169 |
) |
|
Advance to Cronos Israel |
|
10 |
|
|
- |
|
|
|
(378 |
) |
|
|
- |
|
|
|
(1,304 |
) |
| Cash and cash equivalents used
in investing activities |
|
|
|
|
(781,789 |
) |
|
|
(30,161 |
) |
|
|
(787,228 |
) |
|
|
(38,286 |
) |
| Financing
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance from non-controlling interests |
|
10 |
|
|
2 |
|
|
|
- |
|
|
|
113 |
|
|
|
- |
|
|
Repayment of lease obligations |
|
11 |
|
|
(184 |
) |
|
|
- |
|
|
|
(216 |
) |
|
|
- |
|
|
Repayment of construction loan payable |
|
12 |
|
|
- |
|
|
|
- |
|
|
|
(21,311 |
) |
|
|
- |
|
|
Payment of accrued interest on construction loan payable |
|
12 |
|
|
- |
|
|
|
- |
|
|
|
(121 |
) |
|
|
(185 |
) |
|
Advance under Credit Facility |
|
12 |
|
|
- |
|
|
|
- |
|
|
|
65,000 |
|
|
|
- |
|
|
Repayment of Credit Facility |
|
12 |
|
|
- |
|
|
|
- |
|
|
|
(65,000 |
) |
|
|
- |
|
|
Proceeds from Altria Investment |
|
13,14(a) |
|
|
- |
|
|
|
- |
|
|
|
2,434,757 |
|
|
|
- |
|
|
Proceeds from share issuance |
|
14(a) |
|
|
- |
|
|
|
100,032 |
|
|
|
- |
|
|
|
146,032 |
|
|
Share issuance costs |
|
14(a) |
|
|
(101 |
) |
|
|
(6,363 |
) |
|
|
(5,002 |
) |
|
|
(9,444 |
) |
|
Proceeds from exercise of warrants and options |
|
15(a),(b) |
|
|
750 |
|
|
|
599 |
|
|
|
1,932 |
|
|
|
2,913 |
|
|
Withholding taxes paid on share appreciation rights |
|
15(b) |
|
|
(569 |
) |
|
|
- |
|
|
|
(1,116 |
) |
|
|
- |
|
|
Proceeds from exercise of Top-up Rights |
|
13(c),14(b) |
|
|
828 |
|
|
|
- |
|
|
|
828 |
|
|
|
- |
|
| Cash and cash equivalents
provided by financing activities |
|
|
|
|
726 |
|
|
|
94,268 |
|
|
|
2,409,864 |
|
|
|
139,316 |
|
| Net change in cash and cash
equivalents |
|
|
|
|
(838,491 |
) |
|
|
57,241 |
|
|
|
1,546,653 |
|
|
|
80,401 |
|
| Cash and cash equivalents -
beginning of period |
|
|
|
|
2,417,855 |
|
|
|
32,368 |
|
|
|
32,634 |
|
|
|
9,208 |
|
| Effects of foreign exchange on
cash and cash equivalents |
|
|
|
|
(133 |
) |
|
|
- |
|
|
|
(56 |
) |
|
|
- |
|
| Cash and cash
equivalents - end of period |
|
|
|
$ |
1,579,231 |
|
|
$ |
89,609 |
|
|
$ |
1,579,231 |
|
|
$ |
89,609 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Supplemental cash flow
information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
|
$ |
77 |
|
|
$ |
189 |
|
|
$ |
752 |
|
|
$ |
496 |
|
|
Interest received |
|
|
|
|
10,054 |
|
|
|
- |
|
|
|
10,054 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| The accompanying
notes are an integral part of these unaudited condensed interim
consolidated financial statements |
|
Non-IFRS Measures
The Company uses certain measures that are not
recognized under International Financial Reporting Standards
(“IFRS”), do not have any standardized meaning
prescribed by IFRS and therefore may not be comparable to similar
measures presented by other companies. Rather, these measures are
provided as a supplement to those IFRS measures to provide
additional information regarding the Company’s results of
operations from management’s perspective. Accordingly, non-IFRS
measures should not be considered a substitute for, or superior to,
the financial information prepared and presented in accordance with
IFRS. Each non-IFRS measure is reconciled to its most directly
comparable IFRS measure.
Adjusted EBITAdjusted earnings before interest
and tax (“Adjusted EBIT”) is used by management as
a supplemental measure to review and assess operating performance
and trends on a comparable basis. Adjusted EBIT is defined as net
income or loss, excluding interest expense, interest income,
deferred income tax expense or recovery, share-based payments,
unrealized change in the fair value of biological assets, realized
fair value adjustments on inventory sold, financing costs, gain on
revaluation of derivative liabilities, share of income or loss from
investments in equity accounted investees and gain or loss on
investments. The Company believes that Adjusted EBIT is useful to
compare its operating profitability across periods.
Adjusted EBITDAAdjusted earnings before
interest, tax, depreciation and amortization (“Adjusted
EBITDA”) is used by management as a supplemental measure
to review and assess operating performance and trends on a
comparable basis. Adjusted EBITDA is defined as Adjusted EBIT
excluding depreciation and amortization. The Company believes that
Adjusted EBITDA is useful to compare its ability to generate cash
from operations across periods.
Reconciliation of non-IFRS measuresA
reconciliation of Adjusted EBIT and Adjusted EBITDA to net income,
the most directly comparable IFRS measure, is presented in the
following table.
| ($ in 000s) |
|
Second |
|
|
First |
|
|
Second |
|
| |
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
| Net Income (Loss) |
|
$ |
250,968 |
|
|
$ |
427,693 |
|
|
$ |
723 |
|
| Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (Income) Expense |
|
|
(12,531 |
) |
|
|
(2,720 |
) |
|
|
37 |
|
|
Deferred Income Tax Expense (Recovery) |
|
|
(335 |
) |
|
|
2,557 |
|
|
|
(267 |
) |
|
Share-Based Payments |
|
|
2,002 |
|
|
|
737 |
|
|
|
950 |
|
|
Unrealized Change in Fair Value of Biological Assets |
|
|
(4,024 |
) |
|
|
(13,553 |
) |
|
|
(6,831 |
) |
|
Realized Fair Value Adjustments on Inventory Sold |
|
|
3,557 |
|
|
|
3,722 |
|
|
|
2,625 |
|
|
Financing and Transaction Costs |
|
|
4,505 |
|
|
|
29,561 |
|
|
|
— |
|
|
Gain on Revaluation of Derivative Liabilities |
|
|
(263,943 |
) |
|
|
(436,383 |
) |
|
|
— |
|
|
Share of Loss (Income) from Investments in Equity Accounted
Investees |
|
|
991 |
|
|
|
264 |
|
|
|
(3 |
) |
|
Gain on Disposal of Whistler |
|
|
— |
|
|
|
(20,606 |
) |
|
|
— |
|
|
Gain on Other Investments |
|
|
— |
|
|
|
(924 |
) |
|
|
— |
|
|
Adjusted EBIT |
|
|
(18,810 |
) |
|
|
(9,652 |
) |
|
|
(2,766 |
) |
|
Depreciation and Amortization |
|
|
1,038 |
|
|
|
705 |
|
|
|
370 |
|
|
Adjusted EBITDA |
|
|
(17,772 |
) |
|
|
(8,947 |
) |
|
|
(2,396 |
) |
For further information, please
contact:Anna Shlimak Investor Relations Tel: (416)
504-0004 investor.relations@thecronosgroup.com
Cronos (TSX:CRON)
Historical Stock Chart
From Mar 2024 to Apr 2024
Cronos (TSX:CRON)
Historical Stock Chart
From Apr 2023 to Apr 2024
