Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) reported that its third-quarter net revenue increased 238% in Canadian dollars to $12.7 million versus last year’s $3.8 million for the same time period. Cronos attributed the gain to 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. Sequentially, net revenue rose 24% from $10.2 million in the second quarter as the company said that improvement was due to increased sales in domestic dried cannabis and the inclusion of Redwood.
“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.”
Another area that saw a large increase was the operating expenses which came in at a loss of $54 million. Had the company not reported a ‘Gain on revaluation of derivative liabilities’ of $835 million the company wouldn’t have turned in a net income of $787 million. Still, the company is sitting on a war chest of $1.4 billion in cash and cash equivalents.
KG Sold Jumps 511%
Cronos also reported that it sold 3,142 kilograms in Canada during the third quarter, representing a 511% increase from 514 kilograms sold in 2018 for the same quarter. Kilograms sold increased by 98% sequentially, driven by increased domestic wholesale sales. The 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 costs on a per gram basis.
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 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.
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.