Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) on Tuesday reported its financial results for the first quarter of 2023 ending March 31, 2023, showing a fall in net revenue sequentially and versus the same period last year.
The Toronto-based company reported net revenue of $20.1 million for the first quarter of 2023, down $4.9 million from the first quarter of 2022. The main reason for the drop was fewer cannabis flower sales in markets outside the U.S. and also some loss in the American market.
Cronos made a total profit of $2.4 million in the first quarter, which was $4.5 million less than the first quarter of last year. The reasons were the same as the drop in revenue – fewer sales in markets outside the U.S. and in the U.S. The only silver lining was that they sold more cannabis extract in Canada.
The company reported an adjusted EBITDA (a measure of a company’s operating performance) loss of $16.8 million, showing an improvement of $2.1 million versus the first quarter of 2022. Its GAAP EPS was a loss of five cents, missing expectations by one cent.
“I am encouraged by our results across categories in Canada as we are defending our leading position in edibles and climbing market share ranks in other critical product categories,” said CEO Mike Gorenstein.
In a statement, Gorenstein added that the company plans to utilize its position in the edibles market for innovative introductions, including rare cannabinoids and flavor profiles. He also revealed the company’s focus on the pre-roll category and an intention to be cash flow positive by 2024.
“Optimizing the returns of our industry-leading cash balance has also been a priority for us as we are in a great position to take advantage of the higher rate environment, especially given we have no debt,” Gorenstein added. The company held a balance sheet worth $836 million in cash and short-term investments.
Revised full-year outlook
Cronos anticipates net revenue for the full year 2023 to be between $100 to $110 million. Additionally, the company expects to achieve the high end of the previously identified $10 to $20 million in operating expense savings for 2023. Cash flow for the last nine months of fiscal year 2023 is expected to drop less than $25 million, with the company expecting to be cash flow positive in 2024.
Despite challenges in the Israeli medical market due to competitive activity, a slowdown in patient permit authorizations, and “geopolitical unrest” — the company said it believes in the potential of that market and are investing in their operations, distribution, and marketing efforts there.
The company’s Spinach brand held the top market share position in the edibles category in Canada in the first quarter of 2023, according to Hifyre data. Cronos is also coming up with more pre-rolled products under their Spinach FEELZ sub-brand.
In April 2023, Cronos shared a study that highlighted their sustainable practices in producing cannabinoids, the active components in cannabis. The study showed that their method of producing cannabinoids through fermentation is much better for the environment than growing plants indoors.