Cronos Group(CRON) - 2024 Q3 - Quarterly Report

Operational Changes - The company is undergoing a wind-down of operations at its Winnipeg facility, which is expected to yield cost savings and operational efficiencies [98]. - The company has exited its U.S. hemp-derived cannabinoid product operations, incurring associated costs and write-offs [98]. - The company is focusing on expanding Cronos GrowCo's purpose-built cannabis facility to enhance production capabilities [102]. - The company is exploring the potential success of joint ventures and strategic alliances to drive revenue growth [102]. - The company is assessing the impact of the ongoing Middle East Conflict on its operations and product demand in Israel [98]. - The company is evaluating the effects of the Anti-Dumping Investigation on its operations in Israel [102]. - The company is implementing cost-cutting measures as part of a broader realignment strategy to improve financial performance [98]. - The company is committed to differentiating its products through the utilization of rare cannabinoids [100]. - The company is monitoring regulatory developments that may affect its ability to operate in various markets, including potential changes in U.S. cannabis laws [100]. Financial Performance - For the three months ended September 30, 2024, consolidated net revenue was $34.3 million, an increase of$9.5 million (38%) from $24.8 million in the same period of 2023 [123]. - For the nine months ended September 30, 2024, consolidated net revenue reached$87.3 million, representing a $24.0 million (38$63.3 million in the same period of 2023 [123]. - The cost of sales for the three months ended September 30, 2024, was $30.3 million, an increase of$10.2 million (51%) from $20.1 million in the same period of 2023 [125]. - The gross profit for the three months ended September 30, 2024, was$3.6 million, a decrease of $0.4 million (9$4.0 million in the same period of 2023 [126]. - The company reported an operating loss of $33.7 million for the three months ended September 30, 2024, compared to a loss of$21.8 million in the same period of 2023 [120]. - The gross margin for the three months ended September 30, 2024, was 11%, down from 16% in the same period of 2023 [122]. - For the three months ended September 30, 2024, total operating expenses were $37.3 million, an increase of 45$25.7 million for the same period in 2023 [128]. - Sales and marketing expenses for the three months ended September 30, 2024, were $5.5 million, a 4$5.3 million in the same period last year [129]. - Research and development expenses remained stable at $1.2 million for the three months ended September 30, 2024, but decreased by 27$3.2 million for the nine months ended September 30, 2024, compared to $4.4 million in 2023 [130]. - General and administrative expenses decreased by 11$12.8 million for the three months ended September 30, 2024, and by 13% to $34.4 million for the nine months ended September 30, 2024, compared to the previous year [131]. - The company recognized an impairment loss on long-lived assets of$14.4 million for the three months ended September 30, 2024, primarily due to the impairment of exclusive licenses [135]. - Interest income, net for the three months ended September 30, 2024, was $12.5 million, a decrease of 7$13.4 million in the same period last year, while it increased by 8% to $40.2 million for the nine months ended September 30, 2024 [137]. - The company reported a net income of$7.3 million for the three months ended September 30, 2024, compared to a net loss of $1.8 million in the same period last year, marking a 513$32.5 million for both the three and nine months ended September 30, 2024, due to the remeasurement of the investment in Cronos GrowCo [141]. - The company recognized a loss of $10.4 million on held-for-sale assets for both the three and nine months ended September 30, 2024, with no such loss in the same periods of 2023 [145]. - Income tax benefit for the three months ended September 30, 2024, was$2.7 million, up from $1.3 million in the same period of 2023 [146]. - For the nine months ended September 30, 2024, income tax benefit was$5.4 million, compared to $2.9 million for the same period in 2023 [146]. - Adjusted EBITDA for the three months ended September 30, 2024, was$(6.0) million, reflecting ongoing business performance adjustments [149]. - The net loss for the nine months ended September 30, 2024, was $(3.9) million, with total losses including discontinued operations amounting to$(3.9) million [154]. - The company reported a revaluation gain on loan receivable and equity method investment as a result of the Cronos GrowCo Transaction on July 1, 2024 [155]. - The total net loss for the three months ended September 30, 2023, was $(1.8) million, with a significant portion attributed to interest income and depreciation [152]. - Adjusted Gross Profit for the three months ended September 30, 2024, was$10,727,000, a significant increase of 170% compared to $3,970,000 in the prior year [159]. - Gross margin for the three months ended September 30, 2024, decreased to 11$37,266,000 from $25,745,000 in the prior year [161]. - Net income from continuing operations for the three months ended September 30, 2024, was$7,324,000, compared to a loss of $1,590,000 in the same period of 2023 [161]. - For the nine months ended September 30, 2024, net revenue was$87,314,000, reflecting a 38% increase from $63,326,000 in the same period of 2023 [163]. - Adjusted EBITDA for the nine months ended September 30, 2024, improved to$(27,739,000) from $(46,774,000) in the prior year, indicating a 41$7,116,000 related to the Cronos GrowCo Transaction for both the three and nine months ended September 30, 2024 [159]. - For the three months ended September 30, 2024, net revenue was $34.3 million, a 40$24.8 million in the same period of 2023 [169]. - For the nine months ended September 30, 2024, net revenue was $88.5 million, representing a 40$63.3 million in the same period of 2023 [169]. - Cannabis flower sales for the three months ended September 30, 2024, were $26.3 million, a 51$17.4 million in the same period of 2023 [167]. - Gross profit for the three months ended September 30, 2024, was $3.6 million, a 9$38.1 million, a 48% increase from the same period in 2023 [172]. - Net income from continuing operations for the three months ended September 30, 2024, was $8.2 million, an improvement of$9.8 million from the same period in 2023 [173]. - Adjusted EBITDA for the three months ended September 30, 2024, was $(6.5) million, a 57$862 million, sufficient to fund operations over the next twelve months [175]. - Cash generated from operating activities for the nine months ended September 30, 2024, was $11.1 million, compared to cash used of$59.7 million in the same period of 2023 [178]. - Cash generated from investing activities for the nine months ended September 30, 2024, was $180.2 million, a change of$321.6 million from cash used in the same period of 2023 [179]. - A 10% decrease in the interest rate would impact net interest income by $1.4 million for the three months and$4.5 million for the nine months ended September 30, 2024 [187]. - The company reported an Adjusted EBITDA loss of $6.0 million for the three months ended September 30, 2024, an improvement from a loss of$15.2 million in the same period of 2023 [162]. - Constant currency measures indicate a 40% increase in net revenue for the three months ended September 30, 2024, when adjusted for foreign currency fluctuations [161]. - For the nine months ended September 30, 2024, net revenue was $88.5 million, a 40$63.3 million in the same period of 2023 [169]. - Gross profit for the nine months ended September 30, 2024, was $14.6 million, representing a 46$10 million in the same period of 2023 [171]. - Operating expenses for the nine months ended September 30, 2024, were $80.4 million, a 10$73.1 million in the same period of 2023 [172]. - Net income from continuing operations for the three months ended September 30, 2024, was $8.2 million, an improvement of$9.8 million from a loss in the same period of 2023 [173]. - Adjusted EBITDA for the three months ended September 30, 2024, was $(6.5) million, a 57$(15.1) million in the same period of 2023 [174]. - Cash and cash equivalents as of September 30, 2024, were $862 million, sufficient to fund operations and capital expenditures for the next twelve months [175]. - Cash generated from operating activities for the nine months ended September 30, 2024, was$11.1 million, compared to cash used of $59.7 million in the same period of 2023 [178]. - Cash generated from investing activities for the nine months ended September 30, 2024, was$180.2 million, a change of $321.6 million from cash used in the same period of 2023 [179]. - The Cronos GrowCo Transaction contributed$4.3 million in cannabis flower sales for both the three and nine months ended September 30, 2024 [169]. - Foreign currency translation resulted in a gain of $12.4 million for the three months ended September 30, 2024, compared to a loss of$20.1 million in the same period of 2023 [186].