Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“
Cronos
Group” or the “
Company”), today announced
financial results and business highlights for the three- and
nine-months ending September 30, 2019.
“As demonstrated by our progress in the third
quarter, we are making great strides to advance the development and
diversity of our portfolio and to expand our manufacturing
capabilities,” said Mike Gorenstein, CEO of Cronos Group. “We are
confident that our platform strategy and focus on consumer driven
innovation will continue to differentiate Cronos Group and drive
growth and value creation over the long-term.”
Financial Results Third Quarter
2019
($ in 000s, except where noted
otherwise) |
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
|
|
September 30, |
|
Change |
|
September 30, |
|
Change |
|
|
2019 |
|
2018 |
|
$ |
|
% |
|
2019 |
|
2018 |
|
$ |
|
% |
|
Financial Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue |
$ |
12,700 |
|
$ |
3,760 |
|
$ |
8,940 |
|
|
238 |
% |
$ |
29,407 |
|
$ |
10,099 |
|
$ |
19,308 |
|
191 |
% |
Gross Margin before Fair Value Adjustments |
|
41 |
% |
|
55 |
% |
-- |
|
-- |
|
|
48 |
% |
|
55 |
% |
-- |
|
-- |
|
Adjusted EBITDA(1) |
$ |
(23,932 |
) |
$ |
(3,201 |
) |
$ |
(20,731 |
) |
|
648 |
% |
$ |
(50,651 |
) |
$ |
(7,097 |
) |
$ |
(43,554 |
) |
614 |
% |
Canadian Extract Sales (% of Net Product Revenue) |
|
9 |
% |
|
29 |
% |
-- |
|
-- |
|
|
16 |
% |
|
19 |
% |
-- |
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Results for
Non-U.S. Markets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kilograms Sold |
|
3,142 |
|
|
514 |
|
|
2,628 |
|
|
511 |
% |
|
5,837 |
|
|
1,472 |
|
|
4,365 |
|
297 |
% |
Net Product Revenue / Gram Sold |
$ |
3.75 |
|
$ |
7.18 |
|
$ |
(3.43 |
) |
|
(48 |
%) |
$ |
4.86 |
|
$ |
6.74 |
|
$ |
(1.88 |
) |
(28 |
%) |
Cost of Sales before Fair Value Adj. / Gram Sold |
|
2.27 |
|
|
3.28 |
|
|
(1.01 |
) |
|
(31 |
%) |
|
2.55 |
|
|
3.06 |
|
|
(0.51 |
) |
(17 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
$ |
1,475,459 |
|
$ |
41,482 |
|
$ |
1,433,977 |
|
|
3,457 |
% |
|
|
|
|
|
|
|
|
|
|
|
Short-Term Investments |
|
517,064 |
|
|
— |
|
|
517,064 |
|
NA |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities |
|
545,514 |
|
|
— |
|
|
545,514 |
|
NA |
|
|
|
|
|
|
|
|
|
|
|
|
(1) See
“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 $12.7 million in Q3 2019, representing a 238%
increase from $3.8 million in Q3 2018, primarily driven by the
launch of the adult-use market in Canada and the inclusion of
Redwood from the date of closing on September 5, 2019 to the end of
the quarter. Net revenue increased 24% quarter-over-quarter from
$10.2 million in Q2 2019, primarily driven by increased sales in
domestic dried cannabis and the inclusion of Redwood.
- 3,142 kilograms were sold in Canada in Q3 2019, representing a
511% increase from 514 kilograms sold in Q3 2018, primarily driven
by increased cannabis production and the launch of the adult-use
market in Canada. Kilograms sold increased 98% quarter-over-quarter
from 1,584 kilograms sold in Q2 2019, primarily driven by increased
domestic wholesale sales.
- Cost of sales before fair value adjustments per gram sold for
the non-U.S. market was $2.27 in Q3 2019, representing a 31%
decrease from $3.28 in Q3 2018 and a 25% decrease from $3.01 in Q2
2019. The decrease quarter-over-quarter was driven by lower
production cost on a per gram basis.
|
|
|
|
|
|
|
($ in 000s, except where noted
otherwise) |
Third |
|
Second |
|
|
|
|
Quarter |
|
Quarter |
|
Change |
|
|
2019 |
|
2019 |
|
$ |
|
% |
|
Financial Results |
|
|
|
|
|
|
|
|
|
|
|
Net Revenue |
$ |
12,700 |
|
$ |
10,237 |
|
$ |
2,463 |
|
24 |
% |
Gross Margin before Fair Value Adjustments |
|
41 |
% |
|
53 |
% |
-- |
|
-- |
|
Adjusted EBITDA(1) |
$ |
(23,932 |
) |
$ |
(17,772 |
) |
$ |
(6,160 |
) |
35 |
% |
Canadian Extract Sales (% of Net Product Revenue) |
|
9 |
% |
|
20 |
% |
-- |
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Results for
Non-U.S. Markets |
|
|
|
|
|
|
|
|
|
|
|
Kilograms Sold |
|
3,142 |
|
|
1,584 |
|
|
1,558 |
|
98 |
% |
Net Product Revenue / Gram Sold |
$ |
3.75 |
|
$ |
6.44 |
|
$ |
(2.69 |
) |
(42 |
%) |
Cost of Sales before Fair Value Adj. / Gram Sold |
|
2.27 |
|
|
3.01 |
|
|
(0.74 |
) |
(25 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet(2) |
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
$ |
1,475,459 |
|
$ |
1,579,231 |
|
$ |
(103,772 |
) |
(7 |
%) |
Short-Term Investments |
|
517,064 |
|
|
744,936 |
|
|
(227,872 |
) |
(31 |
%) |
Derivative Liabilities |
|
545,514 |
|
|
1,399,594 |
|
|
(854,080 |
) |
(61 |
%) |
(1) See
“Non-IFRS Measures” for information related to Adjusted
EBITDA. |
(2) Dollar
amounts are as of the last day of the period indicated. |
|
Business Highlights
Brand Portfolio
In September 2019, Cronos Group completed the
acquisition of four operating subsidiaries of Redwood Holding
Group, LLC (collectively, “Redwood”). The
acquisition expands Cronos Group’s market reach in the U.S. with an
innovative hemp-derived cannabidiol (“CBD”)
consumer products portfolio sold under the premier Lord Jones™
brand.
Throughout the third quarter, Lord Jones™
launched several new products within the cosmetics and personal
care category. These new launches include: Lord Jones CBD Formula
Heavy Duty Chill Balm, a nourishing balm that melts on contact
leaving skin with a velveteen finish, Lord Jones CBD Formula Bath
Salts, small-batch bath salts made from pink Himalayan salt,
arnica, magnesium-rich Epsom salts, calendula petals, and a unique
blend of terpenes and essential oils to help support body
relaxation and the Lord Jones + Tamara Mellon CBD Formula Stiletto
Cream, a specially formulated CBD-infused Stiletto Cream for foot
application before and after wearing shoes, in collaboration with
luxury shoe brand Tamara Mellon.
Today, Cronos Group announced the introduction
of PEACE+™, a new hemp-derived CBD brand in the U.S. PEACE+™ is
about more than making a better, high-quality hemp-derived CBD
product; it stems from the belief that well-being can lead to a
better world, full of positivity and possibility. It’s a
belief that extends beyond the products and into everything the
brand seeks to do and stand for. PEACE+™ will sell hemp-derived CBD
tincture products through a test market of approximately 1,000
retail stores in the U.S. The Company intends to utilize Altria
Group, Inc.’s (“Altria”) sales and distribution
network to access the U.S. convenience store retail channel in
order to gain consumer insights prior to expanding distribution
more broadly.
Global Sales and
Distribution
Cronos Group recently added the province of
Alberta to its Canadian domestic distribution network for adult-use
products. The Company currently sells dried flower, pre-rolls and
cannabis oils through its adult-use brands, COVE™ and
Spinach™, to cannabis control authorities in Ontario, British
Columbia, Nova Scotia and Prince Edward Island, as well as to
private-sector retailers in Saskatchewan. These six provinces
together represent approximately 70% of the Canadian population. As
the Company’s distribution and supply chain grows, and as a result
of the implementation of new regulations on October 17, 2019, which
allows for the sale of additional cannabis derivative products and
format factors starting in December 2019, the Company intends to
increase penetration within existing markets and expand its
distribution into additional provinces and territories in Canada as
the industry’s infrastructure and retail channels develop.
On October 25, 2019, Cronos Australia completed
the previously announced Cronos Australia IPO. Under the Cronos
Australia IPO, Cronos Australia issued approximately 40 million new
shares at an offering price of AUD$0.50 per share. Following
completion of the Cronos Australia IPO, the Company holds
approximately 31% of the issued capital of Cronos Australia. Cronos
Australia started trading on the Australian Securities Exchange in
early November 2019. The Cronos Australia IPO enables Cronos Group
to continue to participate in Cronos Australia’s growth as they
work to become the market leader for medicinal cannabis in the
Asia-Pacific region.
Established in February 2018 as a joint venture
between Cronos Group and NewSouthern Capital Pty Ltd., the launch
of Cronos Australia reinforces Cronos Group’s commitment to
advancing cannabis research and producing and distributing products
and brands on a global scale. Cronos Australia plans to import and
distribute PEACE NATURALS™ products to the Australian medical
cannabis market while also developing its own branded products,
subject to obtaining applicable licenses, permits and other
regulatory approvals.
Global Supply Chain
The Cronos Israel facility continues to move
closer to operational readiness. Construction of Cronos Israel’s
greenhouse was completed in the first half of 2019 and its
manufacturing facility was completed in the third quarter of 2019.
Cronos Israel is now beginning the GMP certification process for
the facility, which is expected to occur in phases throughout 2020
in relation to the manufacturing processes for bottled flower,
pre-rolls, and oil.
In August 2019, the Company entered into a
credit agreement (the “Credit Agreement”), as
administrative agent and lender, with Cronos Growing Company Inc.
(“Cronos GrowCo”), as borrower, in respect of a
$100 million secured non-revolving term loan credit facility (the
“Credit Facility”). Cronos GrowCo, a 50/50 joint
venture owned by Cronos Group and a group of investors led by Bert
Mucci, intends to use the funds available under the Credit Facility
to fund the construction of the previously announced custom-built
greenhouse (the “Facility”) and for general
operations.
Construction of the Facility has commenced.
Cronos Group expects to complete the structure of the Facility in
the fourth quarter of 2019 and expects the Facility to become
operational in phases in the second half of 2020. The Facility’s
construction completion is subject to obtaining the relevant
building and occupancy permits along with other customary
approvals. Commencement of operations at the Facility will be
subject to obtaining the appropriate licenses under applicable
law.
Subsequent to the third quarter of 2019, Cronos
Group has undertaken certain initiatives to better align with its
evolving business and strategic pillars, which aim to create
sustainable long-term value in the areas of research and
development and marketing innovative branded products. This
realignment also comes in consideration of the new Cannabis
Regulations, which were announced on October 17, 2019 and amend the
Cannabis Act and Cannabis Regulations to, among other things, allow
for the production and sale of extracts (including concentrates),
edibles and topicals. Certain facilities at the Peace Naturals
Campus will be partially repurposed from cultivation to provide for
additional R&D activities, production and manufacturing of
derivative products, and will allow for increased vault and
warehousing capabilities. In addition, certain facilities at
the Peace Naturals Campus will transition to R&D areas
focused on new technologies for value-added product
manufacturing.
Intellectual Property
Initiatives
This quarter Cronos Group closed the previously
announced acquisition of a GMP compliant fermentation and
manufacturing facility in Winnipeg, operating as “Cronos
Fermentation”. Cronos Fermentation’s facilities include
fully equipped laboratories covering microbiology, organic and
analytical chemistry, quality control and method development as
well as two large scale microbial fermentation production areas.
The Company is in the process of aligning specifications for the
equipment and manufacturing required for the production and
downstream processing of cannabinoids. To support this work, a team
of engineers, scientists, production and quality assurance
personnel that previously worked at the facility joined the Company
in November 2019.
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 for the production of cultured cannabinoids under the
Cannabis Act and the achievement of milestones under the Ginkgo
Bioworks Inc. partnership, which aims to bring innovation and
biological manufacturing to the cannabis industry and allow for
cannabinoid production at large scale and with greater efficiency
compared to traditional cultivation and extraction.
Appointments
With the completion of the Redwood acquisition,
Robert Rosenheck, the co-founder and CEO of Redwood and the Lord
Jones™ brand, will also assume responsibility for Cronos Group’s
operations, marketing, and brand strategy in the U.S. hemp-derived
CBD market. In addition, Cronos Group has appointed Jeff Jacobson,
most recently Head of Sales and Business Development of Cronos
Group, as General Manager of Canada and Europe. In this role, Mr.
Jacobson will be responsible for the Company’s operations, sales
and manufacturing in Canada and Europe. With this shift in
resources, David Hsu, Chief Operating Officer, and William Hilson,
Chief Commercial Officer, will be transitioning from the Company at
the end of the year. The Cronos Group team extends their gratitude
to Mr. Hsu and Mr. Hilson for their service and contributions to
the Company.
On September 30, 2019, in connection with its
investment in the Company, Altria nominated Jody Begley to the
Cronos Group board of directors. Mr. Begley is currently Senior
Vice President, Tobacco Products for Altria in which he oversees
more than $24 billion in net revenues. Altria’s nomination replaces
one of its previous director designees, K.C. Crosthwaite, who
resigned from the Cronos Group board of directors.
Conference Call
The Company will host a conference call and live
audio webcast on Tuesday November 12, 2019 at 8:30 a.m. EST to
discuss third 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/cronos-group-third-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: 1678761
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™, and Lord Jones™, a hemp-derived cannabidiol
(CBD) personal care brand. To learn more about Cronos Group and its
brands, please visit: www.thecronosgroup.com;
www.peacenaturals.com; www.covecannabis.ca;
www.spinachcannabis.com; www.lordjones.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, investees, 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. and the anticipated benefits of the Redwood and Cronos
Fermentation acquisitions; the ability to expand product offerings,
successfully create and launch brands and further create and scale
hemp-derived consumer products through the Company’s acquisition of
Redwood and derivative products in Canada; the ability to expand
the Company’s sales and distribution network and establish a global
supply chain, including the anticipated benefits therefrom; our
ability to execute on our growth strategy, including the
construction of production facilities and the commencement of
operations by us, our joint ventures and other investees and the
timing thereof; our ability to successfully repurpose certain
facilities to pursue R&D activities and the anticipated
benefits thereof; the ability of Cronos Group, our joint ventures,
investees, strategic partners and commercial counterparties to
obtain all necessary licenses, permits and approvals; 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
September 30, 2019 and
December 31,
2018 |
(in thousands of CDN $) |
|
Notes |
|
As
atSeptember 30,2019 |
|
As
atDecember 31,2018 |
|
Assets |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
23(a) |
|
$ |
1,475,459 |
|
$ |
32,634 |
|
Short-term investments |
23(a) |
|
|
517,064 |
|
|
- |
|
Interest receivable |
23(a) |
|
|
3,829 |
|
|
- |
|
Accounts receivable |
23(a) |
|
|
12,655 |
|
|
4,163 |
|
Sales taxes receivable |
|
|
|
4,624 |
|
|
3,419 |
|
Current portion of loans receivable |
7,23(a) |
|
|
6,083 |
|
|
314 |
|
Prepaid expenses and other assets |
|
|
|
11,742 |
|
|
3,876 |
|
Biological assets |
4 |
|
|
2,101 |
|
|
9,074 |
|
Inventory |
4 |
|
|
52,865 |
|
|
11,584 |
|
Total current assets |
|
|
|
2,086,422 |
|
|
65,064 |
|
Advances to joint
ventures |
5,23(a) |
|
|
26,367 |
|
|
6,395 |
|
Net investments in equity
accounted investees |
5 |
|
|
1,389 |
|
|
4,038 |
|
Other investments |
6 |
|
|
- |
|
|
705 |
|
Loans receivable |
7,23(a) |
|
|
44,082 |
|
|
- |
|
Property, plant and
equipment |
9 |
|
|
216,277 |
|
|
171,720 |
|
Right-of-use assets |
3,12 |
|
|
7,957 |
|
|
171 |
|
Intangible assets |
10 |
|
|
96,047 |
|
|
11,234 |
|
Goodwill |
8,10 |
|
|
284,227 |
|
|
1,792 |
|
Total assets |
|
|
$ |
2,762,768 |
|
$ |
261,119 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
23(b) |
|
|
57,722 |
|
|
15,372 |
|
Holdbacks payable |
23(b) |
|
|
- |
|
|
7,887 |
|
Government remittances payable |
23(b) |
|
|
738 |
|
|
1,123 |
|
Current portion of lease obligations |
3,12,23(b) |
|
|
420 |
|
|
41 |
|
Construction loan payable |
13,23(b) |
|
|
- |
|
|
20,951 |
|
Derivative liabilities |
14,23(b) |
|
|
545,514 |
|
|
- |
|
Total current liabilities |
|
|
|
604,394 |
|
|
45,374 |
|
Lease obligations |
3,12,23(b) |
|
|
7,744 |
|
|
119 |
|
Due to non-controlling
interests |
11,23(b) |
|
|
2,378 |
|
|
2,136 |
|
Deferred income tax
liability |
21 |
|
|
77 |
|
|
1,850 |
|
Total liabilities |
|
|
$ |
614,593 |
|
$ |
49,479 |
|
Shareholders'
equity |
|
|
|
|
|
|
|
|
Share capital |
15(a) |
|
|
693,620 |
|
|
225,500 |
|
Share-based reserve |
16 |
|
|
11,808 |
|
|
7,789 |
|
Retained earnings (accumulated deficit) |
|
|
|
1,443,382 |
|
|
(22,715 |
) |
Accumulated other comprehensive (loss) income |
|
|
|
(98 |
) |
|
930 |
|
Total equity attributable to shareholders of Cronos Group |
|
|
|
2,148,712 |
|
|
211,504 |
|
Non-controlling interests |
3,11 |
|
|
(537 |
) |
|
136 |
|
Total shareholders' equity |
|
|
|
2,148,175 |
|
|
211,640 |
|
Total liabilities and shareholders' equity |
|
|
$ |
2,762,768 |
|
$ |
261,119 |
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
20 |
|
|
|
|
|
|
|
Subsequent events |
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 nine
months ended September 30,
2019 and September 30,
2018 |
(in thousands of CDN $, except
share and per share amounts) |
|
|
|
Three Months EndedSeptember 30, |
|
|
Nine Months EndedSeptember 30, |
|
|
Notes |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Gross revenue |
17 |
|
$ |
13,339 |
|
|
$ |
3,760 |
|
|
$ |
31,111 |
|
|
$ |
10,099 |
|
Excise taxes |
|
|
|
(639 |
) |
|
|
- |
|
|
|
(1,704 |
) |
|
|
- |
|
Net
revenue |
|
|
|
12,700 |
|
|
|
3,760 |
|
|
|
29,407 |
|
|
|
10,099 |
|
Cost of
sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales before fair
value adjustments |
|
|
|
7,432 |
|
|
|
1,688 |
|
|
|
15,178 |
|
|
|
4,509 |
|
Gross profit before
fair value adjustments |
|
|
|
5,268 |
|
|
|
2,072 |
|
|
|
14,229 |
|
|
|
5,590 |
|
Fair value
adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized change in fair value of biological assets |
4 |
|
|
10,015 |
|
|
|
(1,533 |
) |
|
|
(7,562 |
) |
|
|
(11,108 |
) |
Realized fair value adjustments on inventory sold in the
period |
|
|
|
14,617 |
|
|
|
1,511 |
|
|
|
21,896 |
|
|
|
6,330 |
|
Total fair value adjustments |
|
|
|
24,632 |
|
|
|
(22 |
) |
|
|
14,334 |
|
|
|
(4,778 |
) |
Gross profit
(loss) |
|
|
|
(19,364 |
) |
|
|
2,094 |
|
|
|
(105 |
) |
|
|
10,368 |
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
6,057 |
|
|
|
598 |
|
|
|
12,915 |
|
|
|
1,548 |
|
Research and development |
|
|
|
3,439 |
|
|
|
- |
|
|
|
8,072 |
|
|
|
- |
|
General and administrative |
|
|
|
21,270 |
|
|
|
4,820 |
|
|
|
46,057 |
|
|
|
11,500 |
|
Share-based payments |
16 |
|
|
3,125 |
|
|
|
1,223 |
|
|
|
5,864 |
|
|
|
2,947 |
|
Depreciation and amortization |
9,10,12 |
|
|
907 |
|
|
|
330 |
|
|
|
2,052 |
|
|
|
938 |
|
Total operating expenses |
|
|
|
34,798 |
|
|
|
6,971 |
|
|
|
74,960 |
|
|
|
16,933 |
|
Operating
loss |
|
|
|
(54,162 |
) |
|
|
(4,877 |
) |
|
|
(75,065 |
) |
|
|
(6,565 |
) |
Other income
(expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense) |
|
|
|
11,703 |
|
|
|
(62 |
) |
|
|
26,954 |
|
|
|
(121 |
) |
Financing and transaction costs |
|
|
|
(8,031 |
) |
|
|
- |
|
|
|
(42,097 |
) |
|
|
- |
|
Gain on revaluation of derivative liabilities |
14 |
|
|
835,079 |
|
|
|
- |
|
|
|
1,535,405 |
|
|
|
- |
|
Gain on revaluation of financial liabilities |
16(d) |
|
|
194 |
|
|
|
- |
|
|
|
194 |
|
|
|
- |
|
Share of (loss) income from equity accounted investees |
5 |
|
|
(746 |
) |
|
|
20 |
|
|
|
(2,001 |
) |
|
|
64 |
|
Gain on disposal of Whistler |
5 |
|
|
- |
|
|
|
- |
|
|
|
20,606 |
|
|
|
- |
|
Gain on other investments |
6 |
|
|
- |
|
|
|
- |
|
|
|
924 |
|
|
|
221 |
|
Total other income (expenses) |
|
|
|
838,199 |
|
|
|
(42 |
) |
|
|
1,539,985 |
|
|
|
164 |
|
Income (loss) before income
taxes |
|
|
|
784,037 |
|
|
|
(4,919 |
) |
|
|
1,464,920 |
|
|
|
(6,401 |
) |
Deferred income tax (recovery)
expense |
21 |
|
|
(3,959 |
) |
|
|
2,352 |
|
|
|
(1,737 |
) |
|
|
1,197 |
|
Net income (loss) |
|
|
$ |
787,996 |
|
|
$ |
(7,271 |
) |
|
$ |
1,466,657 |
|
|
$ |
(7,598 |
) |
Net income (loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cronos Group |
|
|
$ |
788,368 |
|
|
$ |
(7,210 |
) |
|
$ |
1,467,314 |
|
|
$ |
(7,537 |
) |
Non-controlling interests |
11 |
|
|
(372 |
) |
|
|
(61 |
) |
|
|
(657 |
) |
|
|
(61 |
) |
|
|
|
$ |
787,996 |
|
|
$ |
(7,271 |
) |
|
$ |
1,466,657 |
|
|
$ |
(7,598 |
) |
Other comprehensive
income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on revaluation or disposal of other investments |
6,21 |
|
$ |
(300 |
) |
|
$ |
233 |
|
|
$ |
(197 |
) |
|
$ |
237 |
|
Foreign exchange gain (loss) on translation of subsidiaries |
2(a),11 |
|
|
(755 |
) |
|
|
3 |
|
|
|
(843 |
) |
|
|
3 |
|
Total other comprehensive income (loss) |
|
|
|
(1,055 |
) |
|
|
236 |
|
|
|
(1,040 |
) |
|
|
240 |
|
Comprehensive income
(loss) |
|
|
$ |
786,941 |
|
|
$ |
(7,035 |
) |
|
$ |
1,465,617 |
|
|
$ |
(7,358 |
) |
Comprehensive income
(loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cronos Group |
|
|
$ |
786,327 |
|
|
$ |
(6,975 |
) |
|
$ |
1,466,286 |
|
|
$ |
(7,298 |
) |
Non-controlling interests |
11 |
|
|
(386 |
) |
|
|
(60 |
) |
|
|
(669 |
) |
|
|
(60 |
) |
|
|
|
$ |
786,941 |
|
|
$ |
(7,035 |
) |
|
$ |
1,465,617 |
|
|
$ |
(7,358 |
) |
Earnings (loss) per
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
18 |
|
$ |
2.33 |
|
|
$ |
(0.04 |
) |
|
$ |
4.92 |
|
|
$ |
(0.04 |
) |
Diluted |
18 |
|
$ |
0.53 |
|
|
$ |
(0.04 |
) |
|
$ |
1.22 |
|
|
$ |
(0.04 |
) |
Weighted average
number of outstanding shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
18 |
|
|
338,957,949 |
|
|
|
177,483,122 |
|
|
|
297,964,058 |
|
|
|
170,097,232 |
|
Diluted |
18 |
|
|
369,268,672 |
|
|
|
177,483,122 |
|
|
|
333,618,691 |
|
|
|
170,097,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Flows |
For the three and nine
months ended September 30,
2019 and September 30,
2018 |
(in thousands of CDN $) |
|
|
|
Three Months EndedSeptember 30, |
|
|
Nine Months EndedSeptember 30, |
|
|
Notes |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
$ |
787,996 |
|
|
$ |
(7,271 |
) |
|
$ |
1,466,657 |
|
|
|
(7,598 |
) |
Items not affecting cash and
cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized change in fair value of biological assets |
4 |
|
|
10,015 |
|
|
|
(1,533 |
) |
|
|
(7,562 |
) |
|
|
(11,108 |
) |
Realized fair value adjustments on inventory sold in the
period |
|
|
|
14,617 |
|
|
|
1,511 |
|
|
|
21,896 |
|
|
|
6,330 |
|
Share-based payments |
16 |
|
|
3,125 |
|
|
|
1,223 |
|
|
|
5,864 |
|
|
|
2,947 |
|
Depreciation and amortization |
9,10,12 |
|
|
907 |
|
|
|
330 |
|
|
|
2,052 |
|
|
|
938 |
|
Depreciation relieved on inventory sold |
22 |
|
|
1,566 |
|
|
|
145 |
|
|
|
2,164 |
|
|
|
361 |
|
Gain on revaluation of derivative liabilities |
14 |
|
|
(835,079 |
) |
|
|
- |
|
|
|
(1,535,405 |
) |
|
|
- |
|
Gain on revaluation of financial liabilities |
16(d) |
|
|
(194 |
) |
|
|
- |
|
|
|
(194 |
) |
|
|
- |
|
Share of loss (income) from equity accounted investees |
5 |
|
|
746 |
|
|
|
(20 |
) |
|
|
2,001 |
|
|
|
(64 |
) |
Gain on disposal of Whistler |
5 |
|
|
- |
|
|
|
- |
|
|
|
(20,606 |
) |
|
|
- |
|
Gain on other investments |
6 |
|
|
- |
|
|
|
- |
|
|
|
(924 |
) |
|
|
(221 |
) |
Deferred income tax (recovery) expense |
21 |
|
|
(3,959 |
) |
|
|
2,352 |
|
|
|
(1,737 |
) |
|
|
1,197 |
|
Foreign exchange loss (gain) |
|
|
|
822 |
|
|
|
2 |
|
|
|
914 |
|
|
|
(10 |
) |
Net changes in non-cash
working capital |
22 |
|
|
(6,996 |
) |
|
|
(9,377 |
) |
|
|
(37,537 |
) |
|
|
(26,039 |
) |
Cash and cash equivalents used
in operating activities |
|
|
|
(26,434 |
) |
|
|
(12,638 |
) |
|
|
(102,417 |
) |
|
|
(33,267 |
) |
Investing
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity (purchase) of short-term investments, net |
|
|
|
227,872 |
|
|
|
- |
|
|
|
(517,064 |
) |
|
|
- |
|
Advances to joint ventures |
5 |
|
|
93 |
|
|
|
(2,674 |
) |
|
|
(21,200 |
) |
|
|
(2,674 |
) |
Investments in equity accounted investees |
5 |
|
|
- |
|
|
|
(201 |
) |
|
|
(2,200 |
) |
|
|
(201 |
) |
Proceeds from sale of other investments |
6 |
|
|
- |
|
|
|
- |
|
|
|
26,078 |
|
|
|
967 |
|
Payment to exercise ABcann warrants |
6 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(113 |
) |
Advances on loans receivable |
7 |
|
|
(27,450 |
) |
|
|
- |
|
|
|
(43,800 |
) |
|
|
- |
|
Proceeds from repayment of loans receivable |
7 |
|
|
314 |
|
|
|
- |
|
|
|
314 |
|
|
|
- |
|
Purchase of property, plant and equipment |
8 |
|
|
(22,055 |
) |
|
|
(34,229 |
) |
|
|
(49,954 |
) |
|
|
(71,896 |
) |
Purchase of intangible assets |
9 |
|
|
(137 |
) |
|
|
(125 |
) |
|
|
(765 |
) |
|
|
(294 |
) |
Acquisition of Redwood |
8 |
|
|
(301,368 |
) |
|
|
- |
|
|
|
(301,368 |
) |
|
|
- |
|
Cash assumed on acquisition |
8,11 |
|
|
3,922 |
|
|
|
1,304 |
|
|
|
3,922 |
|
|
|
- |
|
Cash and cash equivalents used
in investing activities |
|
|
|
(118,809 |
) |
|
|
(35,925 |
) |
|
|
(906,037 |
) |
|
|
(74,211 |
) |
Financing
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance from non-controlling interests |
11 |
|
|
129 |
|
|
|
- |
|
|
|
242 |
|
|
|
- |
|
Repayment of lease obligations |
12 |
|
|
(336 |
) |
|
|
- |
|
|
|
(552 |
) |
|
|
- |
|
Repayment of construction loan payable |
13 |
|
|
- |
|
|
|
- |
|
|
|
(21,311 |
) |
|
|
- |
|
Payment of accrued interest on construction loan payable |
13 |
|
|
- |
|
|
|
- |
|
|
|
(121 |
) |
|
|
(185 |
) |
Proceeds from Altria Investment |
14,15(a) |
|
|
- |
|
|
|
- |
|
|
|
2,434,757 |
|
|
|
- |
|
Proceeds from share issuance |
15(a) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
146,993 |
|
Share issuance costs |
15(a) |
|
|
(5 |
) |
|
|
(35 |
) |
|
|
(5,007 |
) |
|
|
(9,479 |
) |
Proceeds from exercise of warrants and options |
16(a),16(b) |
|
|
7 |
|
|
|
471 |
|
|
|
1,939 |
|
|
|
2,423 |
|
Withholding taxes paid on share appreciation rights |
16(b) |
|
|
(33 |
) |
|
|
- |
|
|
|
(1,149 |
) |
|
|
- |
|
Proceeds from exercise of Top-up Rights |
14(c),15(a) |
|
|
40,860 |
|
|
|
- |
|
|
|
41,688 |
|
|
|
- |
|
Cash and cash equivalents
provided by financing activities |
|
|
|
40,622 |
|
|
|
436 |
|
|
|
2,450,486 |
|
|
|
139,752 |
|
Net change in cash and cash
equivalents |
|
|
|
(104,621 |
) |
|
|
(48,127 |
) |
|
|
1,442,032 |
|
|
|
32,274 |
|
Cash and cash equivalents -
beginning of period |
|
|
|
1,579,231 |
|
|
|
89,609 |
|
|
|
32,634 |
|
|
|
9,208 |
|
Effects of foreign exchange on
cash and cash equivalents |
|
|
|
849 |
|
|
|
- |
|
|
|
793 |
|
|
|
- |
|
Cash and cash
equivalents - end of period |
|
|
$ |
1,475,459 |
|
|
$ |
41,482 |
|
|
$ |
1,475,459 |
|
|
$ |
41,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow
information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
$ |
77 |
|
|
|
189 |
|
|
$ |
829 |
|
|
|
684 |
|
Interest received |
|
|
|
2,402 |
|
|
|
- |
|
|
|
12,456 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and transaction
costs, gain on revaluation of derivative liabilities, gain on
revaluation of financial liability, 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) |
Third |
|
|
Second |
|
|
Third |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
Net Income (Loss) |
$ |
787,996 |
|
|
$ |
250,968 |
|
|
$ |
(7,271 |
) |
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
Interest (Income) Expense |
|
(11,703 |
) |
|
|
(12,531 |
) |
|
|
62 |
|
Deferred Income Tax Expense (Recovery) |
|
(3,959 |
) |
|
|
(335 |
) |
|
|
2,352 |
|
Share-Based Payments |
|
3,125 |
|
|
|
2,002 |
|
|
|
1,223 |
|
Unrealized Change in Fair Value of Biological Assets |
|
10,015 |
|
|
|
(4,024 |
) |
|
|
(1,533 |
) |
Realized Fair Value Adjustments on Inventory Sold |
|
14,617 |
|
|
|
3,557 |
|
|
|
1,511 |
|
Financing and Transaction Costs |
|
8,031 |
|
|
|
4,505 |
|
|
|
— |
|
Gain on Revaluation of Derivative Liabilities |
|
(835,079 |
) |
|
|
(263,943 |
) |
|
|
— |
|
Gain on Revaluation of Financial Liabilities |
|
(194 |
) |
|
|
— |
|
|
|
— |
|
Share of Loss (Income) from Investments in Equity Accounted
Investees |
|
746 |
|
|
|
991 |
|
|
|
(20 |
) |
Gain on Disposal of Whistler |
|
— |
|
|
|
— |
|
|
|
— |
|
Gain on Other Investments |
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted EBIT |
|
(26,405 |
) |
|
|
(18,810 |
) |
|
|
(3,676 |
) |
Depreciation and Amortization |
|
2,473 |
|
|
|
1,038 |
|
|
|
475 |
|
Adjusted EBITDA |
|
(23,932 |
) |
|
|
(17,772 |
) |
|
|
(3,201 |
) |
For further information, please
contact:Anna Shlimak Investor Relations Tel: (416)
504-0004 investor.relations@thecronosgroup.com
Cronos (TSX:CRON)
Historical Stock Chart
From Jun 2024 to Jul 2024
Cronos (TSX:CRON)
Historical Stock Chart
From Jul 2023 to Jul 2024