Cronos Group Closes
NatuEra Receives License to Cultivate Psychoactive Cannabis in
Spinach™ Partners with Arrive Alive DRIVE SOBER®
“In the first quarter of 2019, the business performed in line with our expectations. We continue to stay laser-focused on our strategy of building our supply chain, distribution, intellectual property and brand portfolios,” said
“Additionally, the launch of
Financial Results First Quarter 2019
- Net revenue was
$6.5 million in first quarter 2019, representing a 120% increase from$2.9 million in first quarter 2018, primarily driven by the launch of the adult-use market inCanada . Net revenue increased 15% quarter-over-quarter from$5.6 million in fourth quarter 2018, primarily driven by increased sales in CBD oil, which carries no excise tax reduction and increased sales of dry flower. - 1,111 kilograms were sold in first quarter 2019, representing a 122% increase from 501 kilograms sold in first quarter 2018, primarily driven by increased cannabis production and the launch of the adult-use market in
Canada . Kilograms sold increased 7% quarter-over-quarter from 1,040 kilograms sold in fourth quarter 2018, primarily driven by increased cannabis production. - Cost of sales before fair value adjustments per gram sold was
$2.69 in first quarter 2019, representing a 14% decrease from$3.13 in first quarter 2018, and an 11% decrease from$3.02 in fourth quarter 2018. The decrease year-over-year and quarter-over-quarter was driven by increased productivity in our cultivation operations. - The Company experienced continued growth in cannabis oil sales, which represented 23% of net product revenue in first quarter 2019 compared to 9% in first quarter 2018.
| ($ in 000s, except where noted otherwise) | First | First | First | Fourth | |||||||||||||||||||||||||||
| Quarter | Quarter | Change | Quarter | Quarter | Change | ||||||||||||||||||||||||||
| 2019 | 2018 | $ | % | 2019 | 2018 | $ | % | ||||||||||||||||||||||||
| Financial Results | |||||||||||||||||||||||||||||||
| Net Revenue | $ | 6,470 | $ | 2,945 | $ | 3,525 | 120 | % | $ | 6,470 | $ | 5,604 | $ | 866 | 15 | % | |||||||||||||||
| Gross Margin before Fair Value Adjustments(1) | 54 | % | 47 | % | -- | -- | 54 | % | 44 | % | -- | -- | |||||||||||||||||||
| Adjusted EBITDA(2) | $ | (8,947 | ) | $ | (1,500 | ) | $ | (7,447 | ) | 496 | % | $ | (8,947 | ) | $ | (7,943 | ) | $ | (1,004 | ) | 13 | % | |||||||||
| Extract Sales (% of Net Product Revenue) | 23 | % | 9 | % | -- | -- | 23 | % | 24 | % | -- | -- | |||||||||||||||||||
| Operating Results | |||||||||||||||||||||||||||||||
| Kilograms Sold | 1,111 | 501 | 610 | 122 | % | 1,111 | 1,040 | 71 | 7 | % | |||||||||||||||||||||
| Net Product Revenue / Gram Sold | $ | 5.73 | $ | 5.67 | $ | 0.06 | 1 | % | $ | 5.73 | $ | 5.35 | $ | 0.38 | 7 | % | |||||||||||||||
| Cost of Sales before Fair Value Adj. / Gram Sold | 2.69 | 3.13 | (0.44 | ) | (14 | %) | 2.69 | 3.02 | (0.33 | ) | (11 | %) | |||||||||||||||||||
| Balance Sheet | |||||||||||||||||||||||||||||||
| Cash and Cash Equivalents | $ | 2,418,277 | $ | 32,368 | $ | 2,385,909 | 7,371 | % | $ | 2,418,277 | $ | 32,634 | $ | 2,385,643 | 7,310 | % | |||||||||||||||
| Derivative Liabilities | 1,664,275 | — | 1,664,275 | NA | 1,664,275 | — | 1,664,275 | NA | |||||||||||||||||||||||
| (1) See “Non-IFRS Measures” for information related to Adjusted EBITDA. | |||||||||||||||||||||||||||||||
Transactions
In
Altria also received certain pre-emptive rights and top-up rights (collectively “Anti-Dilution Rights”) to purchase
In the first quarter 2019,
Whistler Transaction
In
Business Highlights
Global Production
In
NatuEra intends to develop, cultivate, manufacture and export cannabis-based medical and consumer products for the Latin American and global markets. NatuEra is the cannabis industry’s first
Global Sales and Distribution
In
In
Intellectual Property Initiatives
Brand Portfolio
Cronos Group’s adult-use cannabis-brand Spinach™ partnered with foodora, Canada’s on-demand food delivery service, and arrive alive DRIVE SOBER® to encourage responsible, sober driving. Every dollar raised for arrive alive DRIVE SOBER® goes directly to the campaign’s road safety initiatives. The campaign works with police services, public health units, schools, community groups and businesses to help spread the message of safe and sober driving through resource sharing, public campaign and awareness events.
Conference Call
The Company will host a conference call and live audio webcast on
- Live audio webcast: https://ir.thecronosgroup.com/events/event-details/first-quarter-2019-earnings-conference-call
- Toll Free from the
U.S. andCanada dial-in: (866) 795-2258 - International dial-in: (409) 937-8902
- Conference ID: 8599026
An audio replay of the call will be archived on the Company’s website for replay.
About
Forward-looking statements
This news release contains "forward-looking information" and "forward-looking statements" within the meaning of applicable securities laws (collectively, "forward-looking statements"), which are based on the Company’s current internal expectations, estimates, projections, assumptions and beliefs. All information contained herein that is not clearly historical in nature may constitute forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “likely”, “should”, “would”, “plan”, “anticipate”, “intend”, “potential”, “proposed”, “estimate”, “believe”, or other similar words, expressions, phrases, including negative and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen, or by discussions of strategy. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of historical fact. Forward-looking statements are provided for the purposes of assisting the reader in understanding our financial performance, financial position and cash flows as at and for periods ended on certain dates and to present information about management's current expectations and plans relating to the future and the reader is cautioned that such information may not be appropriate for any other purpose. Some of the forward-looking statements contained in this press release, include, but are not limited to, statements with respect to: the anticipated benefits of the
All references in this news release to “dollars”, “C$” or “$” are to Canadian dollars and all references to “US$” are to
Unaudited Condensed Interim Consolidated Statements of Financial Position As at (in thousands of CDN $) |
||||||||||
| Notes | As at 2019 |
As at 2018 |
||||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | 22(a) | $ | 2,418,277 | $ | 32,634 | |||||
| Interest receivable | 22(a) | 3,130 | - | |||||||
| Accounts receivable | 22(a) | 5,559 | 4,163 | |||||||
| Sales taxes receivable | 5,594 | 3,419 | ||||||||
| Prepaid expenses and other assets | 5,092 | 4,190 | ||||||||
| Biological assets | 5 | 11,506 | 9,074 | |||||||
| Inventory | 5 | 25,150 | 11,584 | |||||||
| Total current assets | 2,474,308 | 65,064 | ||||||||
| Advances to joint ventures | 6(a) | 21,920 | 6,395 | |||||||
| Net investments in equity accounted investees | 6(b) | 2,185 | 4,038 | |||||||
| Other investments | 7,22(c) | 300 | 705 | |||||||
| Property, plant and equipment | 8 | 184,570 | 171,720 | |||||||
| Right-of-use assets | 3(a),11(a) | 1,875 | 171 | |||||||
| Intangible assets | 9(a) | 11,087 | 11,234 | |||||||
| 9(b) | 1,792 | 1,792 | ||||||||
| Total assets | $ | 2,698,037 | $ | 261,119 | ||||||
| Liabilities | ||||||||||
| Current liabilities | ||||||||||
| Bank indebtedness | 22(b) | $ | 422 | $ | - | |||||
| Accounts payable and other liabilities | 22(b) | 45,016 | 15,372 | |||||||
| Holdbacks payable | 22(b) | 8,482 | 7,887 | |||||||
| Government remittances payable | 22(b) | 1,313 | 1,123 | |||||||
| Current portion of lease obligations | 11,22(b) | 134 | 41 | |||||||
| Derivative liabilities | 13,22(b) | 1,664,275 | - | |||||||
| Construction loan payable | 12,22(b) | - | 20,951 | |||||||
| Total current liabilities | 1,719,642 | 45,374 | ||||||||
| Lease obligations | 11,22(b) | 1,827 | 119 | |||||||
| Due to non-controlling interests | 10,22(b) | 2,247 | 2,136 | |||||||
| Deferred income tax liability | 20 | 4,371 | 1,850 | |||||||
| Total liabilities | 1,728,087 | 49,479 | ||||||||
| Shareholders' equity | ||||||||||
| Share capital | 14(a) | 556,930 | 225,500 | |||||||
| Warrants | 15(a) | 845 | 1,548 | |||||||
| Stock options | 15(b) | 6,631 | 6,241 | |||||||
| Retained earnings (accumulated deficit) | 404,499 | (22,715 | ) | |||||||
| Accumulated other comprehensive income | 1,049 | 930 | ||||||||
| Total equity attributable to shareholders of |
969,954 | 211,504 | ||||||||
| Non-controlling interests | 10 | (4 | ) | 136 | ||||||
| Total shareholders' equity | 969,950 | 211,640 | ||||||||
| Total liabilities and shareholders' equity | $ | 2,698,037 | $ | 261,119 | ||||||
| Commitments and contingencies | 19 | |||||||||
| Subsequent events | 25 | |||||||||
| The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements | ||||||||||
Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Income (Loss) For the three months ended (in thousands of CDN $, except share and per share amounts) |
|||||||||
| Three Months Ended |
|||||||||
| Notes | 2019 | 2018 | |||||||
| Gross revenue | 16 | $ | 6,985 | $ | 2,945 | ||||
| Excise taxes | (515 | ) | - | ||||||
| Net revenue | 6,470 | 2,945 | |||||||
| Cost of sales | |||||||||
| Cost of sales before fair value adjustments | 4(b) | 2,984 | 1,567 | ||||||
| Gross profit before fair value adjustments | 3,486 | 1,378 | |||||||
| Fair value adjustments | |||||||||
| Unrealized change in fair value of biological assets | 4(b) | (13,553 | ) | (2,744 | ) | ||||
| Realized fair value adjustments on inventory sold in the period | 4(b) | 3,722 | 2,194 | ||||||
| Total fair value adjustments | (9,831 | ) | (550 | ) | |||||
| Gross profit | 13,317 | 1,928 | |||||||
| Operating expenses | |||||||||
| Sales and marketing | 1,500 | 586 | |||||||
| Research and development | 1,557 | - | |||||||
| General and administrative | 9,611 | 2,461 | |||||||
| Share-based payments | 15(b),18 | 737 | 774 | ||||||
| Depreciation and amortization | 8,9(a),11(a) | 470 | 285 | ||||||
| Total operating expenses | 13,875 | 4,106 | |||||||
| Operating loss | (558 | ) | (2,178 | ) | |||||
| Other income (expense) | |||||||||
| Interest income (expense) | 2,720 | (22 | ) | ||||||
| Financing costs | 12,13 | (29,561 | ) | - | |||||
| Gain on revaluation of derivative liabilities | 13 | 436,383 | - | ||||||
| Share of income (loss) from investments in equity accounted investees | 6 | (264 | ) | 41 | |||||
| Gain on disposal of Whistler | 6 | 20,606 | - | ||||||
| Gain on other investments | 7 | 924 | 221 | ||||||
| Total other income | 430,808 | 240 | |||||||
| Income (loss) before income taxes | 430,250 | (1,938 | ) | ||||||
| Deferred income tax expense (recovery) | 20 | 2,557 | (888 | ) | |||||
| Net income (loss) | $ | 427,693 | $ | (1,050 | ) | ||||
| Net income (loss) attributable to: | |||||||||
| $ | 427,829 | $ | (1,050 | ) | |||||
| Non-controlling interests | 10 | (136 | ) | - | |||||
| $ | 427,693 | $ | (1,050 | ) | |||||
| Other comprehensive income (loss) | |||||||||
| Gain (loss) on revaluation and disposal of other investments, net of tax | 7,20 | $ | 103 | $ | (35 | ) | |||
| Foreign exchange gain on translation of foreign operations | 2(d),10 | 16 | - | ||||||
| Total other comprehensive income (loss) | 119 | (35 | ) | ||||||
| Comprehensive income (loss) | $ | 427,812 | $ | (1,085 | ) | ||||
| Comprehensive income (loss) attributable to: | |||||||||
| $ | 427,948 | $ | (1,085 | ) | |||||
| Non-controlling interests | 10 | (136 | ) | - | |||||
| $ | 427,812 | $ | (1,085 | ) | |||||
| Earnings (loss) per share | |||||||||
| Basic | 17 | $ | 1.95 | $ | (0.01 | ) | |||
| Diluted | 17 | $ | 0.48 | $ | (0.01 | ) | |||
| Weighted average number of outstanding shares | |||||||||
| Basic | 17 | 218,949,590 | 157,054,891 | ||||||
| Diluted | 17 | 271,086,575 | 157,054,891 | ||||||
| The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements | |||||||||
Unaudited Condensed Interim Consolidated Statements of Cash Flows For the three months ended (in thousands of CDN $) |
|||||||||
| Three Months Ended |
|||||||||
| Notes | 2019 | 2018 | |||||||
| Operating activities | |||||||||
| Net income (loss) | $ | 427,693 | $ | (1,050 | ) | ||||
| Items not affecting cash and cash equivalents: | |||||||||
| Unrealized change in fair value of biological assets | 4(b) | (13,553 | ) | (2,744 | ) | ||||
| Realized fair value adjustments on inventory sold in the period | 4(b) | 3,722 | 2,194 | ||||||
| Share-based payments | 15(b),18 | 737 | 774 | ||||||
| Depreciation and amortization | 8,9(a),11(a) | 470 | 285 | ||||||
| Depreciation relieved on inventory sold | 235 | 169 | |||||||
| Share of loss (income) from investments in equity accounted investees | 6 | 264 | (41 | ) | |||||
| Gain on disposal of Whistler | 6 | (20,606 | ) | - | |||||
| Gain on other investments | 7 | (924 | ) | (221 | ) | ||||
| Gain on revaluation of derivative liabilities | 13 | (436,383 | ) | - | |||||
| Deferred income tax expense (recovery) | 20 | 2,557 | (888 | ) | |||||
| Foreign exchange loss (gain) | 67 | (16 | ) | ||||||
| Net changes in non-cash working capital | 21 | 17,320 | (12,212 | ) | |||||
| Cash and cash equivalents used in operating activities | (18,401 | ) | (13,750 | ) | |||||
| Investing activities | |||||||||
| Investments in equity accounted investees | 6 | (2,200 | ) | - | |||||
| Advances to joint ventures | 6 | (15,812 | ) | - | |||||
| Proceeds from sale of other investments | 7 | 26,078 | 687 | ||||||
| Payment to exercise ABcann warrants | 7 | - | (113 | ) | |||||
| Purchase of property, plant and equipment | 8 | (13,454 | ) | (7,642 | ) | ||||
| Purchase of intangible assets | 9(a) | (51 | ) | (131 | ) | ||||
| Advance to Cronos Israel | 2(a),10 | - | (926 | ) | |||||
| Cash and cash equivalents used in investing activities | (5,439 | ) | (8,125 | ) | |||||
| Financing activities | |||||||||
| Increase in bank indebtedness | 422 | - | |||||||
| Advance from non-controlling interests | 10 | 111 | - | ||||||
| Repayment of lease obligations | 11 | (32 | ) | (13 | ) | ||||
| Repayment of construction loan payable | 12 | (21,311 | ) | - | |||||
| Payment of accrued interest on construction loan payable | 12 | (121 | ) | (185 | ) | ||||
| Advance under Credit Facility | 12 | 65,000 | - | ||||||
| Repayment of Credit Facility | 12 | (65,000 | ) | - | |||||
| Proceeds from |
13,14(a) | 2,434,757 | - | ||||||
| Proceeds from share issuance | 14(a) | - | 46,000 | ||||||
| Share issuance costs | (4,901 | ) | (3,081 | ) | |||||
| Proceeds from shares to be issued | 14(b) | - | 961 | ||||||
| Proceeds from exercise of warrants and options | 15(a),(b) | 1,182 | 1,353 | ||||||
| Withholding taxes paid on share appreciation rights | 15(b) | (547 | ) | - | |||||
| Cash and cash equivalents provided by financing activities | 2,409,560 | 45,035 | |||||||
| Net change in cash and cash equivalents | 2,385,720 | 23,160 | |||||||
| Cash and cash equivalents - beginning of period | 32,634 | 9,208 | |||||||
| Effects of foreign exchange on cash | (77 | ) | - | ||||||
| Cash and cash equivalents - end of period | $ | 2,418,277 | $ | 32,368 | |||||
| Supplemental cash flow information | |||||||||
| Interest paid | $ | 675 | $ | 307 | |||||
| The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements | |||||||||
Non-IFRS measures
The Company uses certain measures that are not recognized under International Financial Reporting Standards (“IFRS”), do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. Rather, these measures are provided as a supplement to those IFRS measures to provide additional information regarding the Company’s results of operations from management’s perspective. Accordingly, non-IFRS measures should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with IFRS. Each non-IFRS measure is reconciled to its most directly comparable IFRS measure.
Adjusted EBIT
Adjusted earnings before interest and tax (“Adjusted EBIT”) is used by management as a supplemental measure to review and assess operating performance and trends on a comparable basis. Adjusted EBIT is defined as net income or loss, excluding interest expense, interest income, deferred income tax expense or recovery, share-based payments, unrealized change in the fair value of biological assets, realized fair value adjustments on inventory sold, financing costs, gain on revaluation of derivative liabilities, share of income or loss from investments in equity accounted investees and gain or loss on investments. The Company believes that Adjusted EBIT is useful to compare its operating profitability across periods. A reconciliation of Adjusted EBIT to net income, the most directly comparable IFRS measure, is provided below.
Adjusted EBITDA
Adjusted earnings before interest, tax, depreciation and amortization (“Adjusted EBITDA”) is used by management as a supplemental measure to review and assess operating performance and trends on a comparable basis. Adjusted EBITDA is defined as Adjusted EBIT excluding depreciation and amortization. The Company believes that EBITDA is useful to compare its ability to generate cash from operations across periods. A reconciliation of Adjusted EBITDA to net income, the most directly comparable IFRS measure, is provided below.
Reconciliation of non-IFRS measures
A reconciliation of Adjusted EBIT and Adjusted EBITDA to net income, the most directly comparable IFRS measure, is presented in the following table.
| ($ in 000s) | First | Fourth | First | ||||||||
| Quarter | Quarter | Quarter | |||||||||
| 2019 | 2018 | 2018 | |||||||||
| Net Income (Loss) | $ | 427,693 | $ | (11,607 | ) | $ | (1,050 | ) | |||
| Adjustments | |||||||||||
| Interest (Income) Expense | (2,720 | ) | (228 | ) | 22 | ||||||
| Deferred Income Tax Expense (Recovery) | 2,557 | (708 | ) | (888 | ) | ||||||
| Share-Based Payments | 737 | 1,291 | 774 | ||||||||
| Unrealized Change in Fair Value of Biological Assets | (13,553 | ) | (460 | ) | (2,744 | ) | |||||
| Realized Fair Value Adjustments on Inventory Sold | 3,722 | 2,019 | 2,194 | ||||||||
| Financing Costs | 29,561 | — | — | ||||||||
| Gain on Revaluation of Derivative Liabilities | (436,383 | ) | — | — | |||||||
| Share of Loss (Income) from Investments in Equity Accounted Investees | 264 | 1,000 | (41 | ) | |||||||
| Gain on Disposal of Whistler | (20,606 | ) | — | — | |||||||
| Gain on Other Investments | (924 | ) | — | (221 | ) | ||||||
| Adjusted EBIT | (9,652 | ) | (8,693 | ) | (1,954 | ) | |||||
| Depreciation and Amortization | 705 | 750 | 454 | ||||||||
| Adjusted EBITDA | (8,947 | ) | (7,943 | ) | (1,500 | ) | |||||
For further information, please contact:
Investor Relations
Tel: (416) 504-0004
investor.relations@thecronosgroup.com
Source: Cronos Group Inc.