Cronos Group Inc. (NASDAQ:CRON) Q2 2022 Earnings Conference Call August 9, 2022 8:30 AM ET Company Participants Shayne Laidlaw - Investor Relations Mike Gorenstein - Chairman, President & Chief Executive Officer Bob Madore - Chief Financial Officer Conference Call Participants John Zamparo - CIBC Capital Markets Michael Freeman - Raymond James Andrew Carter - Stifel Andrew Bond - Jefferies Vivien Azer - Cowen Shaun McGeough - Canaccord Genuity Operator Good morning. My name is Stacey, and I will be your con ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |--------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------- ...

Summary of Cronos Group Inc. Conference Call Company Overview - **Company**: Cronos Group Inc. (NASDAQ:CRON) - **Event**: 17th Annual BMO Capital Markets Global Farm to Market Conference - **Date**: May 19, 2022 Key Industry Insights - **Industry**: Cannabis - **Market Dynamics**: The cannabis industry is evolving with a focus on product differentiation and brand strength rather than merely expanding production capacity. The company aims to leverage its Canadian market experience to validate products for global markets [3][9][26]. Core Points and Arguments 1. **Company Structure and Management**: Cronos is transitioning towards a leaner, more flexible structure akin to a consumer packaged goods (CPG) company, emphasizing centralized decision-making and cost efficiency [1][3]. 2. **Innovation Focus**: The company is prioritizing product innovation and brand development, with a specific emphasis on creating globally transportable products [3][9]. 3. **Canadian Market Performance**: Cronos has adopted a measured investment strategy in the Canadian recreational market, which is now showing positive momentum. The company has focused on consumer insights and product development rather than heavy asset investment [4][6]. 4. **Product Portfolio Development**: The company is investing in superior product offerings, such as SOURZ by Spinach, which quickly gained market share due to its quality [8][9]. 5. **Biosynthesis and Rare Cannabinoids**: Cronos is exploring biosynthesis to produce rare cannabinoids more efficiently, aiming to create products with specific effects that can command premium pricing [11][12][16]. 6. **Market Strategy**: The company believes that value in the cannabis industry will primarily accrue to brands rather than multi-state operators. Cronos aims to specialize in branded products rather than attempting to control all aspects of production and distribution [25][26]. 7. **Partnership with Altria**: The relationship with Altria is characterized by collaboration on regulatory issues and long-term strategic alignment, focusing on building a strong brand presence in the cannabis market [29]. Additional Important Insights - **Consumer Education**: The company has found that consumer trial is easier in cannabis than repeat purchases, indicating a need for strong product differentiation to encourage repeat buying [20][21]. - **Regulatory Challenges**: The cannabis industry faces significant regulatory hurdles, which impact growth and investment strategies. Altria's experience in navigating regulations is seen as a valuable asset for Cronos [29]. - **Market Trends**: The company anticipates that as interstate commerce develops, the focus will shift to producing attractive products rather than merely competing on production costs [27]. This summary encapsulates the key points discussed during the conference call, highlighting Cronos Group's strategic direction, market positioning, and the evolving landscape of the cannabis industry.

Financial Data and Key Metrics Changes - The company reported consolidated net revenue of $25 million for Q1 2022, a 99% increase from Q1 2021, primarily driven by growth in the Rest of the World segment, particularly in Israel and Canada [47][50] - Consolidated gross profit for Q1 2022 was $6.9 million, representing a $9.9 million improvement from Q1 2021, with a gross margin of 28%, up from a negative 23% last year [48] - Adjusted EBITDA for Q1 2022 was a negative $18.9 million, an improvement of $17.7 million from Q1 2021, driven by increased gross profit and reduced expenses [49] Business Line Data and Key Metrics Changes - In the Rest of the World segment, net revenue was $22.7 million, a 123% increase from Q1 2021, with Israel's revenue up 263% year-over-year [50][51] - The US segment reported net revenue of $2.3 million, a 5% decrease from Q1 2021, primarily due to reduced volumes and promotional spending [54] Market Data and Key Metrics Changes - In Canada, Spinach held approximately 17% market share in the gummies category, with SOURZ by Spinach gummies ranking in the top 10 for market share [29][30] - The Israeli market saw revenue of $9.1 million in Q1 2022, up approximately 90% from Q4 2021 and 260% from Q1 2021, indicating strong growth potential [37] Company Strategy and Development Direction - The company aims to focus on being the best branded products company in the cannabis industry, differentiating through quality rather than competing on price [10][14] - Key priorities include delivering margin-accretive growth, increasing operational efficiencies, focusing investments on high-return opportunities, and positioning for success in the U.S. cannabis market [16][22][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential in Israel and the ability to launch more products, emphasizing a consistent sales model through pharmacies [70][71] - The company is focused on improving EBITDA through cost-saving initiatives and expects to see benefits from these efforts in the latter half of the year [98] Other Important Information - The company ended the quarter with approximately $1 billion in cash and short-term investments, down $23 million from the previous quarter [57] - The transition from Peace Naturals Campus to GrowCo is expected to enhance gross margins significantly [62] Q&A Session Summary Question: Transition from Peace Naturals Campus to GrowCo - The company purchased about $3 million of biomass from GrowCo in the quarter, with expectations for this amount to increase as demand warrants [61] Question: Update on rare cultured cannabinoid segments - CBG is performing well, with a 2.5% market share for the single SKU under SOURZ FEELZ, and new cannabinoids are expected to be introduced this year [64][66] Question: Repeatability of Israeli revenue results - Management believes the growth in Israel is consistent and driven by branded sales, not lumpiness in B2B transactions [70] Question: Shipments in Canada - Seasonal factors contributed to a 24% sequential decline in shipments, but market share gains were noted [76][78] Question: Evaluation of US CBD business with Altria - The company is focused on ensuring any product offerings are aligned with consumer demand before leveraging Altria's distribution capabilities [82] Question: International opportunities and adult use in Israel - Germany is highlighted as a key market for future opportunities, while the medical market in Israel is expected to continue growing without immediate adult use legalization [86][88]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |---------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------- ...

Financial Data and Key Metrics Changes - In 2021, consolidated revenue increased by 59% year-over-year to $74.4 million, driven by strong performance in the rest of the world segment, particularly in Canada and Israel [29] - Consolidated net revenue for Q4 2021 was $25.8 million, a 51% increase from the prior year period, primarily due to growth in the adult-use Canadian market and increased sales in the Israeli medical market [31] - Consolidated gross profit for Q4 2021 was $1.9 million, representing a $16.8 million improvement from Q4 2020, mainly due to a decrease in inventory write-downs [31] - Adjusted EBITDA for Q4 2021 was negative $27.4 million, showing a $25.8 million improvement from Q4 2020, driven by improved gross profit and reduced expenses [32] Business Line Data and Key Metrics Changes - The rest of the world segment reported net revenue of $22.7 million in Q4 2021, a 68% increase from the prior year, driven by growth in adult-use extracts and flower categories in Canada and sales in the Israeli medical market [33] - The U.S. segment reported net revenue of $3.1 million in Q4 2021, an 11% decrease from the prior year, attributed to reduced volume due to competitive pressures [35] Market Data and Key Metrics Changes - The total patient count in Israel increased to approximately 190,000, up 40% year-over-year, indicating strong growth potential in the Israeli medical cannabis market [21] - The Spinach brand continued to gain market share in Canada, with SOURZ by Spinach gummies achieving double-digit market share in the edibles category [15] Company Strategy and Development Direction - The company is undergoing a realignment to drive profitable and sustainable long-term growth, focusing on an asset-light model and exiting the Peace Naturals Campus [8][9] - The strategy includes leveraging joint ventures and partnerships for cultivation, emphasizing R&D and brand development, particularly in the adult-use market [10][24] - The company aims to maintain a disciplined approach to capital allocation while preparing for potential U.S. market entry [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to improve profitability through the exit from the Peace Naturals Campus and the focus on efficient cultivation partnerships [27][50] - The company anticipates continued growth in the Canadian market and is optimistic about the Israeli market's potential, citing strong brand recognition and demand [21][70] Other Important Information - The company incurred a $119.9 million noncash impairment charge related to the exit from the Peace Naturals Campus, along with additional expected charges of approximately $4.5 million [27] - The company ended the quarter with approximately $1 billion in cash and short-term investments, down $35 million from the previous quarter [37] Q&A Session Summary Question: How long has the exit from Stayner been contemplated? - Management indicated that the decision has been in consideration for a while, aligning with the belief that cultivation will shift towards agricultural specialists [42] Question: What are the implications of the exit on headcount and R&D facilities? - Management acknowledged that there will be changes in headcount but emphasized a commitment to treating employees well during the transition. R&D efforts will continue across multiple facilities without impact [48][49] Question: How is the FEELZ brand performing? - The FEELZ brand is performing well, with early success noted in the edibles category, and management is optimistic about continued growth [73] Question: What is the company's strategy regarding the U.S. market? - The company is focused on rightsizing the U.S. segment and is conducting a strategic review to improve profitability while maintaining brand strength [62][63] Question: How does the company view its position in the Israeli market? - Management believes the company is well-positioned in Israel, with strong brand recognition and a robust local team to support growth [70]

Strategic Investments and Partnerships - Cronos Group made a strategic investment of approximately $110.4 million for a 10.5% stake in PharmaCann Inc., a leading U.S. cannabis company[241]. - Cronos Group's joint venture, Cronos GrowCo, began selling to Canadian license holders in the wholesale market in Q3 2021[243]. - The company appointed Jeff Jacobson as Senior Vice President, Head of Growth (North America), to enhance its market leadership[244]. Product Development and Launches - The company launched SOURZ by Spinach™, a new line of cannabis gummies, in June 2021, enhancing its product portfolio[241]. - In 2021, the company expanded its Spinach branded product portfolio with premium high-THC strains and launched its first cultured cannabinoid product, SPINACH FEELZ™[241]. Financial Performance - For FY 2021, the company reported consolidated net revenue of $74.4 million, an increase of 59% from $46.7 million in FY 2020[252]. - The consolidated cost of sales for FY 2021 was $80.0 million, representing a 72% increase from $46.5 million in FY 2020[253]. - The gross profit for FY 2021 was $(17.5) million, an improvement of $8.3 million compared to $(25.8) million in FY 2020[256]. - Operating expenses for FY 2021 totaled $543.1 million, a significant increase of 181% from $193.6 million in FY 2020[257]. - The net loss for FY 2021 was $(397.2) million, compared to a net loss of $(75.3) million in FY 2020, reflecting a 428% increase in losses[264]. - Adjusted EBITDA for the year ended December 31, 2021, was $(160.5) million, a decline from $(147.3) million in 2020, indicating a worsening operational performance[296]. Impairment Charges and Losses - Cronos Group reported a non-cash impairment charge of $119.9 million related to the planned exit from the Peace Naturals Campus in Ontario[245]. - The company reported an impairment loss on goodwill and indefinite-lived intangible assets of $236.1 million in FY 2021, a 490% increase from $40.0 million in FY 2020[262]. - The impairment loss on goodwill and indefinite-lived intangible assets for the year ended December 31, 2021, was $236.1 million, primarily related to the U.S. segment[300]. - The company recognized an impairment loss on long-lived assets of $127.6 million for the year ended December 31, 2021, reflecting significant asset write-downs[296]. Inventory and Sales - The company recorded consolidated inventory write-downs of $12.0 million in FY 2021, a decrease of 54% from $26.1 million in FY 2020[255]. - For FY 2021, the ROW segment reported net revenue of $64.6 million, an increase of 73% from FY 2020, primarily driven by growth in the adult-use market in Canada[275]. - The U.S. segment reported net revenue of $9.9 million in FY 2021, a 4% increase from FY 2020, primarily due to the introduction of new hemp-derived CBD products[281]. Cash Flow and Liquidity - The company has approximately $30.2 million in cash requirements related to R&D activities as of December 31, 2021, with $20.2 million payable within 12 months[293]. - As of December 31, 2021, the company had $887.0 million in cash and cash equivalents and $117.7 million in short-term investments, with no external financing[289]. - The company reported a net cash used in operating activities of $153.6 million for FY 2021, an increase of $8.7 million from FY 2020, primarily due to a rise in net loss[285]. Operational Challenges - The ongoing COVID-19 pandemic has caused supply chain challenges, but the company has not yet seen a significant impact on its operations[238]. Research and Development - Research and development expenses increased to $23.3 million in FY 2021, a 15% rise from $20.4 million in FY 2020[259]. Financial Instruments and Valuations - The company expects continued fluctuations in derivative valuations due to changes in share price, with a gain on revaluation of derivative liabilities of $151.4 million reported for FY 2021[266]. - The fair value of derivative liabilities is calculated using the Black-Scholes model, with significant assumptions impacting the valuation[309]. Shareholder and Transaction Costs - Share-based payments totaled $10.2 million for the year ended December 31, 2021, compared to $15.4 million in 2020[296]. - Transaction costs related to strategic projects amounted to $3.8 million for the year ended December 31, 2021[296].

Cronos Group Inc. (NASDAQ:CRON) Q3 2021 Earnings Conference Call February 18, 2022 8:30 AM ET Company Participants Shayne Laidlaw - Investor Relations Kurt Schmidt - President & Chief Executive Officer Bob Madore - Chief Financial Officer Conference Call Participants John Zamparo - CIBC Capital Markets Rahul Sarugaser - Raymond James Andrew Carter - Stifel Operator Good morning. My name is Catherine, and I will be your conference operator today. I would now like to welcome everyone to Cronos Group’s 2021 Th ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | |-------------------------------------------------------------------------------------------------------------|------------------------------------------------------ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |--------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------- ...