Cronos Group Archives - Green Market Report

Debra BorchardtMay 10, 2022
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Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) delivered its 2022 first-quarter business results as revenue jumped by 99% to $25 million versus last year’s $12 million for the same time period. Cronos attributed the increase to its segment in the Israeli medical market and the Canadian adult-use market. Cronos beat the Yahoo Finance average analyst estimate for revenue of $23 million.

Cronos also trimmed its net loss by 80% to $32.7 million from last year’s net loss of $161 million. The improvement year-over-year was primarily driven by the fluctuation in the non-cash gain (loss) on the revaluation of derivative liabilities. The earnings per share were ($0.09), which missed the analyst expectations for earnings per share of ($0.08).

Chairman, President, and CEO Mike Gorenstein said, “The strategic realignment we announced in the first quarter of 2022 reset the organization to this mindset and we are seeing the benefits show through in our performance. Our execution in product development, manufacturing, and go to market strategy resulted in strong growth in both net revenue and gross profit in the first quarter of 2022, proving that we are headed in the right direction. Our Spinach brand is one of the most sought-after brands in the Canadian adult-use market, known for bringing high quality and differentiated products to the consumer. We are also winning with branded products in Israel, with Peace Naturals driving significant revenue growth in the first quarter of 2022. As we execute our strategic realignment, I am encouraged with the progress we are making by increasing our market share in both Canada and Israel and continuing to bring disruptive branded products to market. In combination with our industry-leading balance sheet, our borderless products, such as SOURZ by Spinach winning in Canada, is one of the best ways to be prepared for legalization in the U.S.”

The increase in year-over-year revenue was primarily driven by an increase in net revenue in the Israeli medical market largely attributable to the cannabis flower category and the Canadian adult-use market driven primarily by cannabis extracts used in edibles and vaporizers.

Realignment

In the first quarter of 2022, Cronos announced a strategic plan to realign the business around its brands, centralize functions and evaluate the company’s supply chain. The organizational and cost reduction initiatives undertaken are intended to better position Cronos Group to drive profitable and sustainable growth over time. These activities included the transfer of certain manufacturing equipment to Cronos GrowCo from the Peace Naturals Campus. In April 2022, the company began building dedicated space within Cronos GrowCo for various manufacturing and R&D activities. In the first quarter of 2022, Cronos GrowCo reported preliminary unaudited net revenue of approximately $7.0 million to licensed producers excluding sales to the company.

Analyst Comments

Stifel analyst W. Andrew Carter recently wrote, “We continue with our Hold rating for the shares of Cronos Group and our $4 target price. Our target price reflects an EV/Sales multiple of 3x EV/FY23E sales (a discount to high growth consumer/industrial companies), with the outlook including our estimate for $240 million in cash needs over the next two years. There are points of differentiation for Cronos Group – ROW revenue growth outpacing Canadian peers and the two key end markets (Canada adult use, Israeli medical). Headset data validates the Canadian strength with the early results from innovation suggesting the potential to capture future category growth. Cronos is the only Canadian producer with domestic Israeli operations suggesting the ability to consistently capture growth in the $350 million market while positioning for any favorable developments (expanded products in Israeli medical market, Israeli adult use). The optionality case remains robust here with Cronos touting nearly $1 billion in cash and the vested interest of Altria to capitalize on future category developments. But without clarity around the ongoing investment needs, it is very difficult to outline a constructive case for the shares or fully evaluate the investment case.”

Cronos was lately trading at $2.92 as the stock inches higher in early trading on the positive earnings report.


Debra BorchardtMarch 1, 2022
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Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) announced its 2021 fourth quarter and full-year business results. Cronos reported that in the fourth quarter it had net revenue of $25.8 million an increase of $8.7 million from the same time period last year. Cronos said the increase year-over-year was primarily driven by continued growth in the adult-use market in Canada and increased sales in the Israeli medical market. Once again though the company recorded an eye-popping net loss of $133 million in the quarter and earnings per share of ($0.36).  The stock was slipping 2% in early trading to lately sell at $3.50, down from its year high of $11.67.

For the full year, the net revenue was $74.4 million an increase of $27.7 million over 2020. The company attributed the increase year-over-year to continued growth in the adult-use market in Canada and increased sales in the Israeli medical market. The operating loss for the full year was a staggering $560 million, while the net loss was $389 million. This was even higher than 2020’s net loss of $321 million. The earnings per share for the year was ($1.07).

“I am proud of the dedication and resilience our team has shown throughout the past year as we navigated through a dynamic market environment,” said Kurt Schmidt, President, and CEO, Cronos Group. “Our fourth quarter 2021 results indicate positive momentum, which we will look to carry forward as we begin to implement our strategic and operational realignment initiatives. As we look to 2022, we will continue to realign Cronos Group’s organizational structure to match our strategy, with a primary focus on adult-use products and elevating our brands through rare cannabinoids. We also remain intensely focused on positioning ourselves for long-term opportunities by continuing to invest in our brands, creating and supporting an efficient manufacturing strategy, investing in rare cannabinoids and innovation, and readying Cronos Group for entry into the U.S. cannabis market once federally permitted. We are optimistic about the future of the Company and the year ahead.”

Peace Out To Peace Naturals

Cronos announced in its earnings report that it plans to exit its Peace Naturals Campus in Stayner, Ontario, Canada. Cronos Group said it will continue to operate the Peace Naturals Campus with a phased reduction and transition of activities with a planned exit by the end of 2022. The company did say that various research and development initiatives, inclusive of cannabinoid formulation, product development, tissue culture and micropropagation will continue across multiple facilities available to Cronos Group.

“In addition to the results we are announcing today and in line with our focus on enhancing agility and fostering long-term growth, we have made the decision to exit our Peace Naturals Campus in Stayner, Ontario. As we continue to execute our asset-light approach and focus on brands and R&D, we will continue to leverage our joint venture with Cronos GrowCo and other contract manufacturing partnerships moving forward. We are grateful to our Stayner associates for their hard work and the contributions they have made to Cronos Group, and appreciate their ongoing support in helping to provide a seamless transition out of the facility throughout 2022.”

As a result of the company’s planned exit from the Peace Naturals Campus, the company has incurred a $119.9 million non-cash impairment charge on long-lived assets in the fourth quarter of 2021. In addition, the company expects to incur charges of approximately $4.5 million in connection with the planned exit, all of which impact the ROW segment. These charges include employee-related costs, such as severance, relocation, and other termination benefits, as well as contract termination and other related costs, which are expected to be incurred primarily in the second half of 2022. In addition, the company said it expects capital expenditures of approximately $2.5 million to modernize information technology systems and build distribution capabilities.


Debra BorchardtFebruary 18, 2022
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 Cronos Group Inc. (NASDAQ: CRON) reported that its 2021 third quarter jumped by 80%  over last year to $20.4 million. However, the strong increase in earnings was overshadowed by the company’s restatement of earnings from the second quarter and a whopping charge of $235 million. In addition to that, Cronos said it was restructuring the company to cut costs.

First up, the net revenue rose year-over-year and it also rose sequentially from the second quarter’s revenue of $15.6 million. The company attributed the increase year-over-year to continued growth in the adult-use market in Canada, increased sales in the Israeli medical cannabis market, and increased sales in the U.S. segment.

Next, those expenses. The operating expenses for the quarter were $55 .6 million with an operating loss of $56 million. The bulk of the expenses were in general and administrative, but $10 million alone was spent on sales and marketing. The cost of sales in the quarter was $21 million vs. revenue of $20 million. The company also reported a net income of $77 million, but this was mostly achieved through a gain on the revaluation of derivatives.

Impairment Charge

The Audit Committee and KPMG LLP, and the company’s Board decided that Cronos Group should restate its unaudited interim financial statements for the second quarter of 2021. Cronos also said it was recording “an impairment charge of $236.1 million on goodwill and indefinite-lived intangible assets and on long-lived assets in its U.S. reporting unit for the three and six months ended June 30, 2021.” The impairment charges are to have no impact on cash and cash equivalents or revenues.

“We are pleased that the Audit Committee has completed its evaluation and that Cronos Group is now current with the filing of our financial reports. As we move forward, we are committed to improving our internal controls and financial reporting practices, maintaining the highest standards of transparency and accountability, and enhancing our capabilities and resources across functions to support our strategy,” said Kurt Schmidt, President, and CEO, Cronos Group.

Restructuring

Cronos Group also decided that it would realign its businesses and that organizational and cost initiatives were being taken “to drive profitable and sustainable growth over time.”  The restructuring is expected to bring $20-$25 million in savings in 2022. The company outlined in a statement the following steps it planned to take:

  1. Centralizing functions under common leadership to increase efficient distribution of resources, improve strategic alignment and eliminate duplicative roles and costs;
  2. Evaluating the Company’s global supply chain and performing product reviews, and pricing and distribution optimization in order to reduce fixed expenses and reduce complexity; and
  3. Implementing an operating expense target to optimize cash deployment for activities such as margin accretive innovation and U.S. adult-use market entry.

“As Cronos Group advances its strategy to build disruptive intellectual property by advancing cannabis research, technology and product development, we have determined that now is the right time to realign the business around our brands by centralizing functions under common leadership, managing expenses and prioritizing our investments in innovation. Through this realignment, our goal is to position Cronos Group to be able to successfully assemble a portfolio of best-in-class brands, products and intellectual property, while preserving the financial flexibility to make additional strategic investments in our R&D and brand pipeline as we innovate and evolve with our consumers’ wants and needs,” said Kurt Schmidt, President and CEO, Cronos Group.


Debra BorchardtJune 14, 2021
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Canadian-based Cronos Group Inc. (NASDAQ: CRON) stock was rising over 2% on news that the company was buying an option to acquire 10.5% of U.S.-based PharmaCann for $110.4 million. The company said that the option exercise will be based upon various factors, including the status of U.S. federal cannabis legalization, as well as regulatory approvals, including in the states where PharmaCann operates that may be required upon exercise.

PharmaCann remains a privately-owned company that has a broad geographic footprint in the U.S. that includes six production facilities and 23 dispensaries operating under the Verilife brand across six limited license states: New York, Illinois, Ohio, Maryland, Pennsylvania, and Massachusetts. The New England states are particularly valuable. Pennsylvania and New York are only legal for sales of medical marijuana at this time, but New York adult-use sales will begin in 2022. The market is expected to be one of the largest in the country. Massachusetts continues to set records with its adult-use sales and Pennsylvania is expected to eventually follow suit. PharmaCann said it continues to invest in its manufacturing infrastructure and brand development to capitalize on the significant consumer retail and business-to-business wholesale opportunities.

Canadian companies are unable to trade on the Canadian securities exchanges if there is any U.S. company ownership since cannabis is still federally illegal in the U.S. This option will get triggered if the U.S. removes the illegality of cannabis sales at the federal level. It is a similar strategy that Canopy Growth (NASDAQ: CGC) took with its option with Acreage Holdings.

“Our U.S. growth strategy focuses on delivering long term shareholder value by assembling a best-in-class brand and intellectual property portfolio and positioning to deploy our products in the U.S. market through investments and opportunities with U.S. leaders who share our vision and commitment to responsibly distributing disruptive cannabinoid products that improve people’s lives,” said Kurt Schmidt, President and Chief Executive Officer of Cronos Group. “We were attracted to PharmaCann as an investment because of their disciplined capital allocation, strong track-record and compelling licensed manufacturing and retail footprint. Further, we are excited to partner with PharmaCann because of our shared commitment to elevating product quality and consistency through science and best in class operations and manufacturing.”

Once the option is exercised, Cronos Group and PharmaCann will enter into commercial agreements that would allow each other to sell products through either party’s distribution channels. In addition, Cronos Group and PharmaCann could enter into an investor rights agreement that would provide Cronos Group with certain governance rights, such as a board seat or board observer subject to certain conditions, and a registration rights agreement that would provide Cronos Group with customary registration rights of PharmaCann common stock.

“We are pleased to announce our strategic alliance with Cronos Group,” said Brett Novey, Chief Executive Officer of PharmaCann. “This investment validates our position as a leading vertically integrated U.S. cannabis company and highlights our ability to continue to expand and enhance our strong asset base. We are excited to work with Cronos Group as we advance PharmaCann’s mission to improve people’s lives through cannabis.”


Debra BorchardtMay 7, 2021
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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.

Brand Updates

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.


Debra BorchardtFebruary 26, 2021
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Cronos Group Inc. (NASDAQ: CRON) released its 2020 fourth quarter and full-year business results for the quarter ending in December. Cronos delivered net revenue increased 133% to $17.0 million in the fourth quarter versus $9.7 million for the same time period in 2019. The net loss for the quarter was a whopping $111 million versus last year’s net income of $61 million.  The stock was slipping by 2% in early trading as the fourth quarter GAAP EPS of -$0.31 missed by $0.23.

The company said that the increase year-over-year was primarily driven by continued growth in the adult-use market in Canada, sales in the Israeli medical market, and growth in our U.S. segment. The adjusted EBITDA loss of $53.1 million in the quarter increased by $1.5 million from 2019. The increase in losses year-over-year was primarily driven by an increase in general and administrative expenses and an increase in R&D spending.

“Our fourth quarter 2020 results are the summation of the hard work and perseverance the company has put into this past year despite the challenges of 2020. As we look to 2021, I’m incredibly excited about the teams we have supporting our brands and the breakthrough research and development (“R&D”), innovation and exciting marketing campaigns Cronos Group plans to execute on. We are poised to build upon the growth we experienced in 2020 as we continue to push cannabinoid innovation and differentiated product offerings under our portfolio of brands,” said Kurt Schmidt, President and CEO of Cronos Group. “My goals this year will be to focus on building a winning team by fostering a collaborative, performance-driven culture; continue to focus on creating disruptive technology and innovation; grow and develop our brands and strengthen our ability to compete through R&D, strategic global infrastructure and engaging in the legislative process in key markets.”

Full Year Results

Cronos reported net revenue grew by 83% to $37.2 million for the full year of 2020 versus $16.8 million for 2019. The company attributed the increase year-over-year to continued growth in the adult-use market in Canada and sales in the Israeli medical market. It was partially offset by non-recurring wholesale revenue in the Canadian market in Full-Year 2019 and strategic price reductions on various adult-use cannabis products in Canada in Full-Year 2020. The net loss for the year was $75 million versus last year’s net income of $1.1 million.

Gross loss of $30.0 million in Full-Year 2020 increased by $10.5 million from Full-Year 2019. The increase in losses year-over-year was primarily driven by third party purchased flower associated with adult-use products in Canada and a decline in wholesale sales in Full-Year 2020 versus Full-Year 2019. The company said it expects that gross margin will continue to fluctuate as price and mix change from quarter-to-quarter. Adjusted EBITDA loss of $98.3 million in Full-Year 2020 increased by $13.5 million from Full-Year 2019. The increase in losses year-over-year was primarily driven by an increase in gross loss, increased R&D spending, increased general and administrative expenses, and higher sales and marketing costs related to brand development.

Write Downs

Still, Cronos wrote down an inventory of $26.1 million for the full year 2020 on dried cannabis and cannabis extracts, primarily driven by cannabis product price compression in the Canadian market. The company said it may incur further inventory write-downs due to pricing pressures in the marketplace.

The company incurred an inventory write-down in the fourth quarter of $15.0 million on dried cannabis and cannabis extracts, primarily driven by cannabis product price compression in the Canadian market.

 


Kaitlin DomangueFebruary 25, 2021
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It’s time for your Daily Hit of cannabis financial news for February 25th, 2021. 

On the Site

Should You Use CBD Gummies to Help Mental Health? 

There is plenty of evidence to show that CBD can have a profound impact on mental health. This article dives into some of the research and studies that exist include: 

  • Anti-inflammatory
  • Anxiety relief from CBD 
  • CBD’s interaction with serotonin receptors in the brain
  • And other additional pieces of research 

 

Innovative Industrial Stock Sells Off Despite Solid Earnings

Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) released results for the fourth quarter and year ending December 31, 2020, after the market closed on Wednesday. The stock was pulling back in pre-market trading by over 6% to sell near $206 as investors were disappointed with the earnings. Innovative Industrial delivered a fourth-quarter FFO of $1.36 missed by $0.07 and the revenue of $37.09 million missed by $1.41 million despite increasing by 110%.

 

Valens Reiterate Guidance Despite Slight Drop in Sales

The Valens Company Inc. (OTCQX: VLNCF) reported its fourth quarter and fiscal year financial results for the period ended November 30, 2020. Valens reported gross revenue for the fourth fiscal quarter fell to $17.9 million from $18.5 million in the third quarter of 2020. The net loss increased to $16.6 million sequentially over the third quarter’s net loss of $3 million.

 

PharmaDrug Files For DMT To Be Used for Kidney Transplants

PharmaDrug Inc. (CSE: BUZZ) (OTC Pink: LMLLF) has filed for an application with the U.S. Food and Drug Administration to receive Orphan Drug Designation (“ODD”) for N,N-Dimethyltryptamine or DMT in the prevention of ischemia-reperfusion injury in patients undergoing kidney transplantation.

 

Indus Holdings Buys Lowell Herb for $39 Million

California-based Indus Holdings, Inc. (OTCQX: INDXF) is buying Lowell Herb Co. and Lowell Smokes in a deal valued at $39 million. The acquisition includes trademark brands, product portfolio, and production assets of Lowell from The Hacienda Group effective immediately. The company will change its name to Lowell Farms Inc.

 

Acreage Holdings Sells Florida Property for $60 Million

Acreage Holdings, Inc. (OTCQX: ACRDF, ACRHF) announced its subsidiary, High Street Capital Partners was selling Acreage Florida, Inc. to Red White and Bloom Brands, Inc.  (OTCQX: RWBYF) for $60 million. The deal also includes the sale of property in Sanderson, Florida. The stock was dropping over 6% to lately sell at $7.39.

In Other News

MJ Holdings, Inc. to Acquire Medical and Recreational Cultivation Licenses 

MJ Holdings, Inc. (OTC PINK: MJNE) has reached a point of being ready to purchase two cultivation licenses (recreational and medical) and two production licenses (recreational and medical) and transfer the appropriate license to proprietary land. 

“In consideration of $1.250M and 200,000 shares of our common stock (Purchase Price), we will soon fully control our own destiny as we have applied to transfer the cultivation licenses to our proprietary land: The Farm. We have arranged an amicable separation under our existing management agreement with Curaleaf/Acres and are developing our cultivation facility on The Farm for our own use. With the enormous Las Vegas tourism industry soon to be on the rebound, we are well positioned to meet or exceed our fair share of demand,” said Paris Balaouras, Founder and Chief Cultivation Officer of MJ Holdings, Inc. 

 

Cronos Group Earnings Preview for Q4 2020 

Cronos Group (OTC:CRON), is set to announce their earnings for the fourth quarter of 2020. The consensus EPS estimate is -$0.08, and the revenue estimate at $13.23 million. The company has beat estimates 75% of the time over the last year, and has beaten revenue estimates 25% of the time. 

 

Kalamazoo Mayor to Attend Ribbon Cutting Ceremony of Cookies Store 

Kalamazoo’s mayor, David Anderson, has confirmed his participation in a ribbon cutting ceremony for a Cookies retail location on February 26th. The event was announced by the company in a press release. 

Cookies is owned by California rapper and entrepreneur, Berner. 

“The Midwest is an important part of Cookies’ overall expansion plan, and our partnership with Gage Cannabis has been integral,” Cookies CEO Berner said in a news release. “We’ve seen tremendous demand from cannabis consumers in Michigan and the surrounding areas and look forward to continuing to serve them as our partnership grows with this second location.”


Debra BorchardtNovember 5, 2020
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Cronos Group Inc. (NASDAQ: CRON) reported that its third-quarter net revenue of $11.4 million increased by $5.6 million from the third quarter in 2019. The stock was moving higher by over 7% in early trading as the earnings per share of $0.19 beat the analyst estimates by $0.25. In addition to the earnings, Kurt Schmidt was named President and Chief Executive Officer.

The company said the increase was due to continued growth in the adult-use Canadian cannabis market, the inclusion of the Redwood acquisition in its financial results and growth in the Israeli medical cannabis market. However, Cronos also said that the revenue increase was partially offset by non-recurring wholesale revenue in the Canadian market in the third quarter in 2019 and strategic price reductions on various adult-use cannabis products in certain Canadian provinces in the 2020 third quarter.

Despite the increased revenue, Cronos still delivered an operating loss of $41.2 million in the third quarter which was $10.5 million higher than the third quarter in 2019. The company attributed the increase in losses to higher share-based payments related to separation agreements with certain Redwood employees, increased general and administrative expenses inclusive of review costs and costs related to the previously disclosed restatement of the company’s 2019 interim financial statements, higher sales and marketing costs related to brand development, and R&D spending, partially offset by a decrease in gross loss. A gain on the revaluation of derivative liabilities resulted in $105 million, which led to a net income figure of $68 million. A currency translation boosted this to a comprehensive net income of $$94 million.

The company continues to lose money, albeit less than in 2019, as the gross loss of $1.5 million in the third quarter decreased by $1.6 million from last year’s $3.1 million. The company attributed the decrease in losses to an increase in net revenue and the gross profit contribution of the U.S. business segment. This was offset by an increase in the cost of sales primarily driven by a higher volume of adult-use sales and the associated third-party purchased flower and a decline in wholesale sales.

“The opportunities before Cronos Group are more exciting than ever and I am honored to have brought the company to this important inflection point as we bring on Kurt Schmidt to serve as our new President and CEO,” said Mike Gorenstein, Executive Chairman of Cronos Group. “We look forward to continuing to launch innovative cannabinoid products in Canada and to expand our portfolio of U.S. hemp-derived CBD brands. Internationally, we’re pleased with the progress we have made in Israel and as regulations continue to evolve, we will look to establish ourselves as a leader in the markets in which we operate.”

New Products

Cronos Group’s U.S. segment launched a new hemp-derived CBD skincare and personal care brand called Happy Dance, in partnership with actress Kristen Bell. Happy Dance products are made with CBD from premium full-spectrum hemp extract and provide consumers with high-quality skincare at an accessible price point. Happy Dance launched with three product offerings: All-Over Whipped Body Butter +CBD, Head-To-Toe Coconut Melt +CBD and Stress Away Bath Bomb +CBD, all of which are currently available online, with intentions to enter the brick and mortar channel in the future.

In October 2020, the U.S. segment also launched new full-spectrum tinctures under its hemp-derived CBD brand, Lord Jones. The full-spectrum tinctures are available in two flavors, peppermint, and orange. The U.S. segment anticipates launching a Lord Jones branded hemp-derived CBD infused Lip Balm in November 2020.

“In such a short period of time, Mike and the Cronos team have achieved several impressive milestones,” said Kurt Schmidt, President and CEO of Cronos Group. “From being the first pure-play cannabis company to list on the NASDAQ, to scaling operations worldwide, Cronos Group is well-positioned to continue to thrive.” Schmidt previously served as Director and Chief Executive Officer of Blue Buffalo Company, Ltd. from 2012 through 2016. Prior to joining Blue Buffalo, Mr. Schmidt was Deputy Executive Vice President at Nestlé S.A., where he was responsible for Nestlé Nutrition, including several science-oriented and heavily regulated businesses. He also served as a member of Nestlé’s Executive Committee.


Debra BorchardtOctober 30, 2020
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Altria Group (NYSE: MO) reported its third-quarter earnings as regular smokers seem to be holding steady, but its stake in the vape company Juul Labs and cannabis company Cronos Group (CRON) didn’t fare as well.

Altria took another massive writedown on its investment in Jull Labs. The original 38% stake in the e-cigarette company was $12.8 billion it has now been marked down to just $1.6 billion. That’s a drop of 88% devaluation. On top of all that, Altria wrote off another $2.6 billion and took $1.40 per share in charges to earnings.

With regards to Cronos, the company has this to say in its filing:

Altria has considered the impact of COVID-19 on the business of Cronos, including its sales, distribution, operations, supply chain and liquidity. Cronos continues to be impacted by COVID-19, due in part to government action requiring closures or limited occupancy of retail stores in the United States. During the second quarter of 2020, Cronos recorded an impairment charge on goodwill and intangible assets as a result of the impact of COVID-19 (which Altria recorded in the third quarter of 2020 due to its one-quarter lag in reporting Cronos’s results). In addition, the fair value of Altria’s investment in Cronos was approximately 20% less than its carrying value of $1.0 billion at September 30, 2020. While Altria believes that this decline in fair value is temporary, it will continue to monitor its investment in Cronos, including the impact of COVID-19 on Cronos’s business and market valuation.

 

The company reported the loss on the Cronos financial instruments for the quarter was $105 million, for the past nine months $202 million. For the last 12 months ending in September, Altria reported a loss on Cronos-related financial instruments of $317 million.

“Altria continued to demonstrate its resilience during the third quarter while navigating the challenges presented by the COVID-19 pandemic,” said Billy Gifford, Altria’s Chief Executive Officer. “In the third quarter, our tobacco businesses delivered strong financial performance once again and we continued to make progress against our 10-year Vision.”

Altria gave the following guidance:

Altria narrows its 2020 full-year adjusted diluted earnings guidance based on year-to-date performance and insight into an additional quarter of ABI earnings contributions. Altria now expects its 2020 full-year adjusted diluted EPS to be in a range of $4.30 to $4.38, representing a growth rate of 2% to 4% from an adjusted diluted EPS base of $4.21 in 2019. Altria also narrows its expectation for its 2020 full-year adjusted effective tax rate to be in a range of 24.5% to 25.5%.
 
While the 2020 full-year adjusted diluted EPS guidance accounts for a range of scenarios, the external environment remains dynamic. Altria will continue to monitor conditions for ATCs, including unemployment rates, disposable income (which may be impacted by potential future changes in government stimulus and federal unemployment benefit payments), mobility and purchasing behaviors.
 
Altria revises its estimates for 2020 full-year domestic cigarette industry volumes to be in a range of unchanged versus the prior year to down 1.5% based on better year-to-date industry performance and expectations for continued category resilience. This range replaces Altria’s previous estimates of down 2% to 3.5% versus the prior year.

Debra BorchardtAugust 6, 2020
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Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) stock fell over 13% to lately trade at $6.03 after the company reported a net loss for the second quarter of $107 million versus last year’s earnings of $185 million for the same time period. The loss of $0.31 cents per share was worse than the FactSet estimate for a loss of $0.07 per share.

Cronos Group delivered net revenue of $9.9 million in the quarter for an increase of $2.2 million over last year’s $7.6 million. The company said that the increase year-over-year was primarily driven by continued growth in the adult-use Canadian cannabis market, sales resulting from the launch of cannabis vaporizers in the Canadian market, including both adult-use and direct-to-consumer, and the inclusion of the Redwood acquisition in its financial results, partially offset by non-recurring wholesale revenue in the Canadian market in Q2 2019.

“In the second quarter of 2020, we continued our progress despite unprecedented shifts in our industry and the global economy. We officially entered the Israeli medical cannabis market, with Cronos Israel commencing the sale of PEACE NATURALS branded dried flower products to medical patients. During these extraordinary times, it is very encouraging to see that we are making progress against our strategy across our global footprint,” said Mike Gorenstein, CEO of Cronos Group.

The company’s gross (loss) was $(3.0) million in the quarter versus $4.1 million for the same time period last year. The decrease year-over-year was primarily driven by an increase in cost of sales driven by a higher volume of adult-use sales and the lack of wholesale revenue, as well as an inventory write-down of $3.1 million on dried cannabis and cannabis extracts.

COVID Problems

Cronos Group said that the ongoing restrictions and closures experienced by retail stores in the U.S. as a result of the COVID-19 pandemic had negatively impacted sales and demand which has resulted in slower than expected. The company said it expects the revenue growth and operating results in the U.S. reporting unit to continue to be
negatively impacted as the decrease in customer demand and retail closures are expected to continue as a result of the pandemic.  The company reassessed the valuations on the U.S. and the Lord Jones brand and lowered those amounts. The company said it does not believe the declines in fair values are temporary. Cronos recorded $35.0 million of impairment charges on the U.S. reporting unit and $5.0 million on the Lord Jones brand for the three and six months ended June 30, 2020.

Litigation

On June 16, 2020, an alleged consumer filed a Statement of Claim on behalf of a class in the Court of Queen’s Bench of Alberta in Alberta, Canada, against the Company and other Canadian cannabis manufacturers and/or distributors. The Statement of Claim alleges claims related to the defendants’ advertised content of cannabinoids in cannabis products for medicinal use on or after June 16, 2010 and cannabis products for adult use on or after October 17, 2018. The Statement of Claim seeks a total of C$500 million for breach of contract, compensatory damages, and unjust enrichment or such other amount as may be proven in trial and C$5 million in punitive
damages against each defendant, including the Company. The Company has not responded to the Statement of the Claim.

A number of claims, including purported class actions, have been brought in the U.S. against companies engaged in the U.S. hemp business alleging, among other things, violations of state consumer protection, health and advertising laws. On April 8, 2020, a putative class action complaint was filed in the U.S. District Court for the Central District of California against Redwood, alleging violations of California’s Unfair Competition Law, False Advertising Law, Consumers Legal Remedies Act, and breaches of the California Commercial Code for breach of express warranties and implied warranty of merchantability with respect to Redwood’s marketing and sale of U.S. hemp products. The complaint does not quantify a damage request. On April 14, 2020, the class action complaint was dismissed for certain pleading deficiencies and the plaintiff was granted leave until April 24, 2020 to amend the complaint to establish federal subject matter jurisdiction. As of the date of this Quarterly Report, the plaintiff has not refiled the
complaint and the complaint has been dismissed without prejudice. The company said it expects litigation and regulatory proceedings relating to the marketing, distribution and sale of its products to increase.


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