The Canadian-based cannabis company reported net revenues of $5.6 million in the fourth quarter of 2018 versus $1.6 million for the fourth quarter of 2017, representing an increase of $4.0 million, or 248%. The increase in revenue was driven by shipments to the Canadian adult-use market and growth in cannabis oil revenue. The company did not report its net profit or loss for the quarter.
Cronos only reported the gross profit for the quarter, but the expenses grew over 300 percent, so since it didn’t make this figure available the only assumption is that the quarter delivered a net loss.
Cronos Group said that its total operating expenses were $12.4 million in the fourth quarter versus $2.9 million for the same time period in 2017, representing an increase of $9.5 million, or 328%. The company attributed the increase in operating expenses to an increase in research and development expenses, talent acquisition and an increase in professional and consulting fees associated with the Altria Investment.
The gross profits were $2.5 million in the fourth quarter versus $0.4 million for the same quarter last year, representing an increase of $2.0 million, or 449%. The increase in gross profit was attributed to an increase in kilograms sold over the comparable prior year period. Gross margin before fair value adjustments was 44% in the fourth quarter of 2018.
“We are proud of all we have accomplished in 2018 and in the fourth quarter. Over the past year, Cronos Group has diligently focused on our strategic objectives, which culminated in our transformative partnership with Altria Group, Inc.,” said Mike Gorenstein, CEO of Cronos Group. “We’ve expanded our production footprint domestically and internationally, developed our distribution with global partnerships, launched iconic brands for the Canadian adult-use market and grown our IP portfolio with landmark research and development initiatives.”
Full Year 2018 Results
For the full year 2018, Cronos delivered net revenue of $15.7 million versus $4.1 million for 2017, an increase of $11.6 million, or 285%. The increase in revenues was driven by increased production capacity, commencement of shipment into the Canadian adult-use market, the growth of Cronos’ medical client base and growth in cannabis oil revenues.
The company reported a net loss of $19.2 million for 2018. For 2018, Cronos had operating expenses of $29.4 million as compared to $9.3 million for 2017, representing an increase of $20.0 million, or 215%.
In March 2019, Cronos closed on the $2.4 billion equity investment in the company that had been announced with great fanfare in December 2018. Altria holds an approximately 45% ownership interest in the company.
In 2018, the company raised $100.0 million and $46.0 million through two separate bought deal offerings of common shares in April 2018 and January 2018. In January, the company borrowed money through a credit facility, which was used to pay off $40.0 million senior secured construction loan with Romspen Investment Corporation. It then paid off the credit facility once the Altria Investment closed.
Peace Naturals Project Inc. yielded its first harvest this past December in the newly completed Building 4, which is the company’s 286,000 sq. ft. indoor production facility, which was built to Good Manufacturing Practice standards. In addition to Peace Naturals, Cronos launched its two adult-use brands COVE and Spinach. Currently, these brands are distributed to the following provinces: Ontario, British Columbia, Nova Scotia, Prince Edward Island and Saskatchewan.
In March 2018, Cronos Group announced a joint venture with MedMen Enterprises USA, LLC., At this time, the venture is only in the process of reviewing and analyzing the evolving regulatory retail landscape in provinces where private retail is permitted under applicable law.