Cronos Group Inc. (NASDAQ: CRON) released its 2021 first-quarter business results with net revenue of $12.6 million versus last year’s $4.2 million for the same time period. The revenue from Cronos missed estimates by $4.81 million. It also dropped sequentially from the fourth quarter’s consolidated net revenue of $17 million.
The company said that the increase was due to continued growth in the adult-use Canadian cannabis market, sales in the Israeli medical cannabis market. In addition to that, an increase in sales in the U.S. segment driven by new U.S. hemp-derived CBD products introductions, partially offset by strategic price reductions on various adult-use cannabis products in Canada in the second half of 2020.
The Cronos first-quarter GAAP EPS of -$0.44 missed by $0.35. Cronos shares were trading down by almost 5% in early trading and were lately selling at $7.24. Traders on social media were pointing out the company has reported six consecutive quarters of negative gross margin. Gross margins for the first quarter were (23%) versus last year’s (77%) for the same time period.
Cronos also reported an adjusted EBITDA loss of $37.1 million in the first quarter which was marginally higher than last year’s loss of $5.7 million. The company attributed the increase in losses to an increase in sales and marketing costs due to brand development in the U.S. segment, and an increase in research and development costs driven by increased spending on product development and developing cannabinoid intellectual property. It was partially offset by decreases in sales and marketing spend in the ROW segment, gross loss, and general and administrative expenses.
“In the first quarter of 2021, our results in Canada were impacted by market dynamics due to the COVID-19 pandemic and ensuing stay-at-home orders and various other restrictions. Despite this, we continued to push forward our innovation pipeline and execute on our strategy, which was a true testament to the strength of our team,” said Kurt Schmidt, President and CEO, Cronos Group.
It seems the marketing costs will probably remain elevated. In April 2021, Cronos Group announced that its Lord Jones brand launched a brand campaign entitled, “A Higher Order”. The campaign features new creative assets along with a mix of market activations including out-of-home advertising and television spots in select U.S. test markets. In April 2021, Lord Jones also launched a new product, the Lord Jones CBD Bump & Smooth Body Serum, which is designed to deliver non-abrasive chemical exfoliation that reduces bumpiness to reveal smoother, brighter-looking skin. The product is available on the Lord Jones website and is expected to be on Sephora’s website and in their retail outlets in the coming weeks.
In the coming weeks, Cronos said it intends to launch Spiniach edibles, a new product category in the Canadian adult-use market. The company is late to enter the edibles market in Canada but explained this by saying it aims to be the best, not necessarily the first.
In the first quarter of 2021, Cronos Israel successfully launched PEACE NATURALS branded pre-rolls into the Israeli medical cannabis market. This launch follows the successful launch of dried flower and oils to the Israeli medical cannabis market in 2020. Cronos Israel continues to execute in Israel’s rapidly growing market.