Fermented target cannabinoid, CBGA, using cannabinoid strains at Cronos Fermentation R&D labs
Successfully completed first dried flower shipment to
Natuera completes key operational milestones and begins test exports to the
“Cronos Group started 2020 energized and determined to continue to see through our core strategic initiatives to drive long-term and sustainable growth. This quarter, we moved closer to officially entering the Israeli medical cannabis market with our Cronos Israel operations preparing to sell PEACE NATURALS™ branded dried flower products to medical patients. The Israeli medical market is a growing channel, and we look forward to serving this market in 2020 and beyond,” said
“Despite the challenges and uncertainty posed by the COVID-19 pandemic, we remain agile and focused as a business. Our brand portfolio continues to launch innovative products to consumers as we adapt to an online-first distribution model in both the
Financial Results
| (in thousands of |
First Quarter | First Quarter | YoY Change | ||||||||||||
| 2020 | 2019 | $ | % | ||||||||||||
| Net revenue | |||||||||||||||
| $ | 2,176 | $ | — | $ | 2,176 | N/A | |||||||||
| Rest of World | 6,256 | 3,004 | 3,252 | 108 | % | ||||||||||
| Consolidated net revenue | 8,432 | 3,004 | 5,428 | 181 | % | ||||||||||
| Gross profit (loss) | $ | (6,476 | ) | $ | 1,555 | $ | (8,031 | ) | (516 | )% | |||||
| Gross margin | (77 | )% | 52 | % | N/A | (129 | )pp | ||||||||
| Reported operating loss | $ | (45,060 | ) | $ | (10,126 | ) | $ | (34,934 | ) | 345 | % | ||||
| Adjusted operating loss (i) | (40,653 | ) | (10,126 | ) | (30,527 | ) | 301 | % | |||||||
| Other Data | |||||||||||||||
| Cash and cash equivalents (ii) | 1,128,396 | 1,811,531 | (683,135 | ) | (38 | )% | |||||||||
| Short-term investments (ii) | 206,230 | — | 206,230 | N/A | |||||||||||
| Capital expenditures | 7,516 | 10,157 | (2,641 | ) | (26 | )% | |||||||||
(i) See “Non-GAAP Measures” for more information, including a reconciliation of adjusted operating loss
(ii) Dollar amounts are as of the last day of the period indicated
First Quarter 2020
- Net revenue of
$8.4 million in Q1 2020 increased by$5.4 million from Q1 2019. 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 to the Canadian market, including both adult-use and direct-to-consumer, and the inclusion of the Redwood acquisition in our financial results. - Gross profit (loss) of
$(6.5) million in Q1 2020 decreased by$8 .0 million from Q1 2019. The decrease year-over-year was primarily driven by an inventory write-down of$8.0 million on dried cannabis and cannabis extracts, as well as an increase in the marginal production cost at our Peace Naturals Campus, as we continue working towards operating at full capacity after the repurposing of the facility in the fourth quarter of 2019. - The Company incurred an inventory write-down of
$8.0 million , on dried cannabis and cannabis extracts, primarily driven by fixed-price contracts negotiated prior to cannabis product price compression due to broader trends of oversupply in the Canadian market. If we were to adjust for the effects of the inventory write-downs, gross profit in Q1 2020, would have been$1.5 million , representing a gross margin of 18%. We anticipate further inventory write-downs in the short-term due to pricing pressures in the marketplace and the impact of the Company's operational repurposing of the Peace Naturals Campus. - Reported operating loss of
$45.1 million in Q1 2020 increased by$34.9 million from Q1 2019. The reduction year-over-year was primarily driven by an increase in general and administrative expenses as a result of increased headcount, internal review costs of$4.4 million related to the restatement of our 2019 interim financial statements, higher sales and marketing costs related to brand development, and research and development costs related to our Ginkgo partnership, activities at Cronos Fermentation, and spending on vaporizer innovation at theCronos Device Labs research and development center.
Business Updates
Brand Portfolio
Throughout the first quarter of 2020,
In the first quarter, the Lord Jones™ brand continued to launch innovative products with the introduction of
Global Sales and Distribution
Subsequent to this quarter in
Global Supply Chain
During the first quarter of 2020, Natuera, Cronos Group’s contract manufacturing joint venture in
With its extraction and processing facility also coming online, Natuera’s R&D department has developed its first commercially available, hemp-derived CBD distillate, which was granted a non-controlled substance ruling by Colombia’s
The Cronos Israel facility continues to move closer to operational readiness and is expected to become a growth driver for the Company in the back half of 2020 and onward. The Company has received the necessary regulatory approvals to produce, manufacture and sell dried cannabis flower products and is awaiting approvals for pre-rolls and oil products, which are expected to be received throughout 2020.
Intellectual Property Initiatives
Subsequent to this quarter in
Led by established cannabis researcher, Professor
In the first quarter of 2020, Cronos Fermentation received an R&D license from
Update on COVID-19
Cronos Group’s manufacturing sites have adjusted in order to comply with the current COVID-19 guidelines provided by local and federal governments. The Company has reduced the number of personnel working on-site at its production facilities in the
The Company currently has sufficient inventory and supply of materials to meet current demand, although closures or other restrictions may impact business operations for third-party manufacturers, suppliers or vendors, which may in turn disrupt the Company's supply chain.
Cronos Group’s distribution channels continue to see disruptions globally due to the COVID-19 pandemic. Many brick-and-mortar retailers in the
The slowdown and disruption faced by retail partners, in addition to quarantine measures and travel restrictions, impacts our customers' ability to access our products in the
Rest of World Results
Cronos Group’s Rest of World reporting segment includes results of the Company’s operations for all markets outside of
| (in thousands of USD) | First Quarter | First Quarter | YoY Change | ||||||||||||
| 2020 | 2019 | $ | % | ||||||||||||
| Cannabis flower | $ | 2,741 | $ | 1,825 | $ | 916 | 50 | % | |||||||
| Cannabis extracts | 3,400 | 1,103 | 2,297 | 208 | % | ||||||||||
| Other | 115 | 76 | 39 | 51 | % | ||||||||||
| Net revenue | 6,256 | 3,004 | 3,252 | 108 | % | ||||||||||
| Gross profit (loss) | $ | (7,558 | ) | $ | 1,555 | $ | (9,113 | ) | (586 | )% | |||||
| Gross margin | (121 | )% | 52 | % | N/A | (173 | )pp | ||||||||
| Reported and adjusted operating loss | $ | (31,867 | ) | $ | (10,126 | ) | $ | (21,741 | ) | 215 | % | ||||
(i) See “Non-GAAP Measures” for more information, including a reconciliation of adjusted operating loss
First Quarter 2020
- Net revenue of
$6.3 million in Q1 2020 increased by$3.3 million from Q1 2019. 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 to the Canadian market, including both adult-use and direct-to-consumer. - Gross profit (loss) of
$(7.6) million in Q1 2020 decreased by$9.1 million from Q1 2019. The decrease year-over-year was primarily driven by an inventory write-down of$8.0 million on dried cannabis and cannabis extracts, as well as increased marginal production costs at the Peace Naturals Campus as we continue towards operating at full capacity after the repurposing efforts in the fourth quarter of 2019. - The Company incurred an inventory write-down of
$8.0 million , on dried cannabis and cannabis extracts, primarily driven by fixed-price contracts negotiated prior to cannabis product price compression due to broader trends of oversupply in the Canadian market. If we were to adjust for the effects of the inventory write-downs, gross profit in Q1 2020, would have been$0.4 million , representing a gross margin of 6%. We anticipate further inventory write-downs in the short-term due to pricing pressures in the marketplace and the impact of the Company's operational repurposing of the Peace Naturals Campus. - Reported operating loss of
$31.9 million in Q1 2020 increased by$21.7 million from Q1 2019. The reduction year-over-year was primarily driven by increased general and administrative expenses as a result of increased headcount, higher sales and marketing expenses related to brand development, and research and development costs related to our Ginkgo partnership, activities at Cronos Fermentation, and spending on vaporizer innovation at theCronos Device Labs research and development center.
United States Results
Cronos Group’s
| (in thousands of USD) | First Quarter | First Quarter | YoY Change | ||||||||
| 2020 | 2019 | $ | % | ||||||||
| Net revenue | $ | 2,176 | $ | — | N/A | N/A | |||||
| Gross profit | $ | 1,082 | $ | — | N/A | N/A | |||||
| Gross margin | 50 | % | — | % | N/A | N/A | |||||
| Reported operating loss | $ | (6,523 | ) | $ | — | N/A | N/A | ||||
First Quarter 2020
- Net revenue was
$2.2 million in Q1 2020, of which the primary contributors to revenue in the quarter were the continued distribution of products in both e-commerce and physical retail channels and the introduction of Lord Jones™ Acid Mantle Repair CBD Moisturizer. - Gross profit was
$1.1 million in Q1 2020, representing a gross margin of 50%. - Reported operating loss was
$6.5 million in Q1 2020. The loss was driven by increased sales and marketing costs incurred in relation to the launch of new products and increased general and administrative expenses driven by increased headcount to support our growth strategy.
Conference Call
The Company will host a conference call and live audio webcast on
- Live audio webcast: https://ir.thecronosgroup.com/events-presentations
- Toll Free from the
U.S. andCanada dial-in: (866) 795-2258 - International dial-in: (409) 937-8902
- Conference ID: 9069454
About
Forward-looking Statements
This press release may contain information that may constitute forward-looking information and forward-looking statements within the meaning of applicable securities laws (collectively, “Forward-Looking Statements”), which are based upon our current internal expectations, estimates, projections, assumptions and beliefs. All information 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 “expect”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”, “potential”, “proposed”, “estimate” and other similar words, expressions and phrases, including negative and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen, or by discussion 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 include, but are not limited to, statements with respect to:
- the uncertainties associated with the Covid-19 pandemic, including our ability, and the abilities of our joint ventures and our suppliers and distributors, to effectively deal with the restrictions, limitations and health issues presented by the Covid-19 pandemic, the ability to continue our production, distribution and sale of our products, and the use of our products by consumers;
- laws and regulations and any amendments thereto applicable to our business and the impact thereof including uncertainty regarding the application of
U.S. state and federal law toU.S. hemp (including CBD) products and the scope of any regulations by theU.S. Federal Drug Administration , theU.S. Federal Trade Commission , theU.S. Patent and Trademark Office and any state equivalent regulatory agencies overU.S. hemp (including CBD) products; - expectations regarding the regulation of the
U.S. hemp industry in theU.S. , including the promulgation of regulations for theU.S. hemp industry by theU.S. Department of Agriculture (the “USDA”); - the grant, renewal and impact of any license or supplemental license to conduct activities with cannabis or any amendments thereof;
- our international activities and joint venture interests, including required regulatory approvals and licensing, anticipated costs and timing, and expected impact;
- the ability to successfully create and launch brands and further create, launch and scale
U.S. hemp-derived consumer products, including through the acquisition of fourRedwood Holding Group, LLC operating subsidiaries (the "Redwood Acquisition") and cannabis products in jurisdictions where such products are legal and that we currently operate in; - the benefits, viability, safety, efficacy, dosing and social acceptance of cannabis including CBD and other cannabinoids;
- the anticipated benefits and impact of the Altria Group Inc.’s ("Altria")
C$2.4 billion (approximately$1.8 billion ) investment in us (the “Altria Investment”); - the potential exercise of the warrant held by Altria, pre-emptive rights and/or top-up rights in connection with the
Altria Investment , including proceeds to us that may result therefrom; - expectations regarding the use of proceeds of equity financings, including the proceeds from the
Altria Investment ; - the legalization of the use of cannabis for medical or adult-use in jurisdictions outside of
Canada , the related timing and impact thereof and our intentions to participate in such markets, if and when such use is legalized; - expectations regarding the potential success of, and the costs and benefits associated with, our joint ventures, strategic alliances and equity investments, including the strategic partnership with
Ginkgo Bioworks, Inc. ; - our ability to execute on our strategy and the anticipated benefits of such strategy;
- the ongoing impact of the legalization of additional cannabis product types and forms for adult-use in
Canada , including federal, provincial, territorial and municipal regulations pertaining thereto, the related timing and impact thereof and our intentions to participate in such markets; - the future performance of our business and operations;
- our competitive advantages and business strategies;
- the competitive conditions of the industry;
- the expected growth in the number of customers using our products;
- our ability or plans to identify, develop, commercialize or expand our technology and research and development (“R&D”) initiatives in cannabinoids, or the success thereof;
- expectations regarding acquisitions and the anticipated benefits therefrom, including the Redwood Acquisition and the acquisition of certain assets from
Apotex Fermentation Inc. ; - expectations regarding revenues, expenses and anticipated cash needs;
- expectations regarding cash flow, liquidity and sources of funding;
- expectations regarding capital expenditures;
- the expansion of our production and manufacturing, the costs and timing associated therewith and the receipt of applicable production and sale licenses;
- the expected growth in our growing, production and supply chain capacities;
- expectations regarding the resolution of litigation and other legal and regulatory proceedings, reviews and investigations;
- expectations with respect to future production costs;
- expectations with respect to future sales and distribution channels;
- the expected methods to be used to distribute and sell our products;
- our future product offerings;
- the anticipated future gross margins of our operations;
- accounting standards and estimates;
- our ability to timely and effectively remediate material weaknesses in our internal control over financial reporting;
- expectations regarding our distribution network; and
- expectations regarding the costs and benefits associated with our contracts and agreements with third parties, including under our third-party supply and manufacturing agreements.
Certain of the Forward-Looking Statements contained herein concerning the industries in which we conduct our business are based on estimates prepared by us using data from publicly available governmental sources, market research, industry analysis and on assumptions based on data and knowledge of these industries, which we believe to be reasonable. However, although generally indicative of relative market positions, market shares and performance characteristics, such data is inherently imprecise. The industries in which we conduct our business involve risks and uncertainties that are subject to change based on various factors, which are described further below.
The Forward-Looking Statements contained herein are based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including: (i) our ability, and the abilities of our joint ventures and our suppliers and distributors, to effectively deal with the restrictions, limitations and health issues presented by the Covid-19 pandemic and the ability to continue our production, distribution and sale of our products; (ii) management’s perceptions of historical trends, current conditions and expected future developments; (iii) our ability to generate cash flow from operations; (iv) general economic, financial market, regulatory and political conditions in which we operate; (v) the production and manufacturing capabilities and output from our facilities and our joint ventures, strategic alliances and equity investments; (vi) consumer interest in our products; (vii) competition; (viii) anticipated and unanticipated costs; (ix) government regulation of our activities and products including but not limited to the areas of taxation and environmental protection; (x) the timely receipt of any required regulatory authorizations, approvals, consents, permits and/or licenses; (xi) our ability to obtain qualified staff, equipment and services in a timely and cost-efficient manner; (xii) our ability to conduct operations in a safe, efficient and effective manner; (xiii) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our recent acquisitions into our existing operations; and (xiv) other considerations that management believes to be appropriate in the circumstances. While our management considers these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct.
By their nature, Forward-Looking Statements are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the Forward-Looking Statements in this press release and other reports we file with, or furnish to, the
Forward-Looking Statements are provided for the purposes of assisting the reader in understanding our financial performance, financial position and cash flows as of 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 the Forward-Looking Statements may not be appropriate for any other purpose. While we believe that the assumptions and expectations reflected in the Forward-Looking Statements are reasonable based on information currently available to management, there is no assurance that such assumptions and expectations will prove to have been correct. Forward-Looking Statements are made as of the date they are made and are based on the beliefs, estimates, expectations and opinions of management on that date. We undertake no obligation to update or revise any Forward-Looking Statements, whether as a result of new information, estimates or opinions, future events or results or otherwise or to explain any material difference between subsequent actual events and such Forward-Looking Statements. The Forward-Looking Statements contained in this press release and other reports we file with, or furnish to, the
As used in this press release, “CBD” means cannabidiol and “U.S. hemp” has the meaning given to the term “hemp” in the
| Condensed Consolidated Balance Sheets |
| As of |
| (In thousands of |
| As of | |||||||||
| Assets | |||||||||
| Current assets | |||||||||
| Cash and cash equivalents | $ | 1,128,396 | $ | 1,199,693 | |||||
| Short-term investments | 206,230 | 306,347 | |||||||
| Accounts receivable(1) | 3,404 | 4,638 | |||||||
| Other receivables | 7,642 | 7,232 | |||||||
| Current portion of loans receivable | 3,911 | 4,664 | |||||||
| Prepaids and other assets | 11,079 | 9,395 | |||||||
| Inventory | 43,118 | 38,043 | |||||||
| Total current assets | 1,403,780 | 1,570,012 | |||||||
| Investments in equity accounted investees | 1,089 | 557 | |||||||
| Advances to joint ventures | 17,079 | 19,437 | |||||||
| Loan receivable, net | 54,147 | 44,967 | |||||||
| Property, plant and equipment | 154,164 | 161,809 | |||||||
| Right-of-use assets | 10,379 | 6,546 | |||||||
| Intangible assets | 72,599 | 72,320 | |||||||
| 214,689 | 214,794 | ||||||||
| Total assets | $ | 1,927,926 | $ | 2,090,442 | |||||
| Liabilities | |||||||||
| Current liabilities | |||||||||
| Accounts payable and other liabilities | $ | 34,290 | $ | 35,301 | |||||
| Current portion of lease obligation | 1,057 | 427 | |||||||
| Derivative liabilities | 166,176 | 297,160 | |||||||
| Total current liabilities | 201,523 | 332,888 | |||||||
| Due to non-controlling interests | 1,681 | 1,844 | |||||||
| Lease obligation | 9,454 | 6,680 | |||||||
| Total liabilities | $ | 212,658 | $ | 341,412 | |||||
| Shareholders’ equity | |||||||||
| Share capital(2) | $ | 563,165 | $ | 561,165 | |||||
| Additional paid-in capital | 25,483 | 23,234 | |||||||
| Retained earnings (accumulated deficit) | 1,213,686 | 1,137,646 | |||||||
| Accumulated other comprehensive income (loss) | (85,877 | ) | 27,838 | ||||||
| Total equity attributable to shareholders of |
1,716,457 | 1,749,883 | |||||||
| Non-controlling interests | (1,189 | ) | (853 | ) | |||||
| Total shareholders’ equity | 1,715,268 | 1,749,030 | |||||||
| Total liabilities and shareholders’ equity | $ | 1,927,926 | $ | 2,090,442 | |||||
| (1) Net of current expected credit loss (“CECL”) of |
|||||||||
| (2) Authorized for issuance as of |
|||||||||
| Condensed Consolidated Statements of Net Income and Comprehensive Income (Loss) | |||
| For the three months ended |
|||
| (In thousands of |
|||
| Three months ended |
|||||||||
| 2020 | 2019 | ||||||||
| Net revenue, before excise taxes | $ | 9,344 | $ | 3,391 | |||||
| Excise taxes | (912 | ) | (387 | ) | |||||
| Net revenue | 8,432 | 3,004 | |||||||
| Cost of sales | 6,946 | 1,449 | |||||||
| Inventory write-down | 7,962 | — | |||||||
| Gross profit (loss) | (6,476 | ) | 1,555 | ||||||
| Operating expenses | |||||||||
| Sales and marketing | 7,112 | 1,128 | |||||||
| Research and development | 4,590 | 1,171 | |||||||
| General and administrative | 23,759 | 7,293 | |||||||
| Share-based payments | 2,436 | 1,771 | |||||||
| Depreciation and amortization | 687 | 318 | |||||||
| Total operating expenses | 38,584 | 11,681 | |||||||
| Operating loss | (45,060 | ) | (10,126 | ) | |||||
| Other income (expense) | |||||||||
| Interest income | 7,751 | 2,087 | |||||||
| Share of loss from investments in equity accounted investees | (1,172 | ) | (198 | ) | |||||
| Gain on revaluation of derivative liabilities | 113,368 | 328,216 | |||||||
| Financing and transaction costs | — | (22,233 | ) | ||||||
| Other income | 794 | 16,243 | |||||||
| Total other income | 120,741 | 324,115 | |||||||
| Income before income taxes | 75,681 | 313,989 | |||||||
| Income tax recovery (expense) | — | — | |||||||
| Net income | $ | 75,681 | $ | 313,989 | |||||
| Net income (loss) attributable to: | |||||||||
| $ | 76,040 | $ | 314,092 | ||||||
| Non-controlling interests | (359 | ) | (103 | ) | |||||
| $ | 75,681 | $ | 313,989 | ||||||
| Other comprehensive income (loss) | |||||||||
| Foreign exchange gain (loss) on translation | $ | (113,692 | ) | $ | 3,898 | ||||
| Total other comprehensive income (loss) | (113,692 | ) | 3,898 | ||||||
| Comprehensive income (loss) | $ | (38,011 | ) | $ | 317,887 | ||||
| Comprehensive income (loss) attributable to: | |||||||||
| $ | (37,675 | ) | $ | 317,987 | |||||
| Non-controlling interests | (336 | ) | (100 | ) | |||||
| $ | (38,011 | ) | $ | 317,887 | |||||
| Net income per share | |||||||||
| Basic | $ | 0.22 | $ | 1.43 | |||||
| Diluted | 0.20 | 0.33 | |||||||
| Weighted average number of outstanding shares | |||||||||
| Basic | 348,817,472 | 218,949,590 | |||||||
| Diluted | 375,574,354 | 271,086,575 | |||||||
| Condensed Consolidated Statements of Cash Flows | |
| For the three months ended |
|
| (In thousands of |
|
| Three months ended |
|||||||||
| 2020 | 2019 | ||||||||
| Operating activities | |||||||||
| Net income (loss) | $ | 75,681 | $ | 313,989 | |||||
| Items not affecting cash: | |||||||||
| Inventory write-down | 7,962 | — | |||||||
| Share-based payments | 2,436 | 1,771 | |||||||
| Depreciation and amortization | 1,162 | 494 | |||||||
| Share of net loss from investments in equity accounted investees | 1,172 | 198 | |||||||
| Gain on revaluation of derivative liabilities | (113,368 | ) | (328,216 | ) | |||||
| Gain on disposal of other investments | (781 | ) | (15,498 | ) | |||||
| Loss (gain) on unrealized foreign exchange | (412 | ) | 51 | ||||||
| Provision for doubtful accounts | 2,068 | — | |||||||
| Non-cash sales and marketing | 1,821 | — | |||||||
| Other, net | (1,157 | ) | (745 | ) | |||||
| Net changes in non-cash working capital | (15,482 | ) | 14,118 | ||||||
| Cash flows used in operating activities | (38,898 | ) | (13,838 | ) | |||||
| Investing activities | |||||||||
| Purchase of short-term investments | (126,514 | ) | — | ||||||
| Proceeds from disposal of short-term investments | 206,847 | — | |||||||
| Investments in equity accounted investees | — | (1,658 | ) | ||||||
| Proceeds from sale of other investments | 781 | 19,614 | |||||||
| Advances to joint ventures | — | (11,893 | ) | ||||||
| Purchase of property, plant and equipment | (6,411 | ) | (10,119 | ) | |||||
| Payment of accrued interest on construction loan payable | — | (89 | ) | ||||||
| Purchase of intangible assets | (1,105 | ) | (38 | ) | |||||
| Advances on loans receivable | (14,512 | ) | — | ||||||
| Cash flows provided (used) in investing activities | 59,086 | (4,183 | ) | ||||||
| Financing activities | |||||||||
| Increase in bank indebtedness | — | 316 | |||||||
| Advance from non-controlling interests | — | 84 | |||||||
| Repayment of lease obligations | (448 | ) | (23 | ) | |||||
| Proceeds from |
— | 1,809,556 | |||||||
| Proceeds from exercise of warrants and options | — | 889 | |||||||
| Withholding taxes paid on share appreciation rights | — | (411 | ) | ||||||
| Share issuance costs | — | (3,642 | ) | ||||||
| Repayment of construction loan payable | — | (15,971 | ) | ||||||
| Advance under Credit Facility | — | 48,715 | |||||||
| Repayment of Credit Facility | — | (48,309 | ) | ||||||
| Cash flows provided (used) by financing activities | (448 | ) | 1,791,204 | ||||||
| Effect of foreign currency translation on cash and cash equivalents | (91,037 | ) | 14,421 | ||||||
| Increase (decrease) in cash and cash equivalents | (71,297 | ) | 1,787,604 | ||||||
| Cash and cash equivalents, beginning of period | 1,199,693 | 23,927 | |||||||
| Cash and cash equivalents, end of period | $ | 1,128,396 | $ | 1,811,531 | |||||
| Supplemental cash flow information | |||||||||
| Interest paid | 7 | 507 | |||||||
| Interest received | 7,758 | — | |||||||
Non-GAAP Measures
In addition to its financial results reported in accordance with accounting principles generally recognized in the
Adjusted operating loss
Management reviews operating loss on an adjusted basis, which excludes certain income and expense items that management believes are not part of underlying operations. These items typically include non-recurring charges such as our internal review costs related to the restatement of our 2019 interim financial statements. Management does not view these items to be part of underlying results as they may be highly variable, may be infrequent, are difficult to predict and can distort underlying business trends and results.
Management believes that adjusted operating loss provides useful insight into underlying business trends and results and provides a more meaningful comparison of year-over-year results. Management uses adjusted operating loss for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets.
| (In thousands of USD) | First Quarter | First Quarter | ||||||||
| 2020 | 2019 | |||||||||
| Reported operating loss | $ | (45,060 | ) | $ | (10,126 | ) | ||||
| Adjustments | ||||||||||
| Internal review costs related to restatement of 2019 interim financial statements | 4,407 | — | ||||||||
| Adjusted operating loss | $ | (40,653 | ) | $ | (10,126 | ) | ||||
Adjusted operating loss by business segment
Management reviews operating loss by business segment, which excludes corporate expenses, and adjusted operating loss by business segment, which further excludes certain income and expense items that management believes are not part of the underlying segment’s operations. Corporate expenses are expenses that relate to the consolidated business and not to an individual operating segment while the income and expense items typically include non-recurring charges such as our internal review costs related to the restatement of our 2019 interim financial statements. Management does not view the income and expense items above to be part of underlying results of the segment as they may be highly variable, may be unusual or infrequent, are difficult to predict and can distort underlying business trends and results.
Management believes that adjusted operating loss by business segment provides useful insight into underlying segment trends and results and will provide a more meaningful comparison of year-over-year results, going forward. Management uses adjusted operating loss by business segment for planning, forecasting and evaluating segment performance, including allocating resources and evaluating results relative to employee compensation.
| (In thousands of USD) | For the three months ended |
|||||||||||||||||||||||
| US | Rest of World |
Total Segments |
Corporate Expenses |
Total | ||||||||||||||||||||
| Reported operating loss | $ | (6,523 | ) | $ | (31,867 | ) | $ | (38,390 | ) | $ | (6,670 | ) | $ | (45,060 | ) | |||||||||
| Adjustments | ||||||||||||||||||||||||
| Internal review costs related to restatement of 2019 interim financial statements | — | — | — | 4,407 | 4,407 | |||||||||||||||||||
| Adjusted operating loss | $ | (6,523 | ) | $ | (31,867 | ) | $ | (38,390 | ) | $ | (2,263 | ) | $ | (40,653 | ) | |||||||||
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 with the rest of the industry, although our measure of Adjusted EBITDA may not be directly comparable to similar measures used by other companies.
Management reviews EBITDA on an adjusted basis, which excludes net income attributable to non-controlling interests, and special items. Special items consist of financing and transaction costs, other non-cash gains (losses) and other unforeseeable, non-recurring charges which management has described below.
| (in thousands of USD) | For the three months ended |
|||||||||
| 2020 | 2019 | |||||||||
| Net income (loss) | $ | 75,681 | $ | 313,989 | ||||||
| Adjustments | ||||||||||
| Interest income | (7,751 | ) | (2,087 | ) | ||||||
| Share of loss from investments in equity accounted investees | 1,172 | 198 | ||||||||
| Gain on revaluation of derivative liabilities | (113,368 | ) | (328,216 | ) | ||||||
| Financing and transaction costs | — | 22,233 | ||||||||
| Other income | (794 | ) | (16,243 | ) | ||||||
| Internal review costs related to restatement of 2019 interim financial statements | 4,407 | — | ||||||||
| Share-based payments | 2,436 | 1,771 | ||||||||
| Adjusted EBIT | (38,217 | ) | (8,355 | ) | ||||||
| Adjustments | ||||||||||
| Depreciation and amortization | 1,162 | 494 | ||||||||
| Adjusted EBITDA | $ | (37,055 | ) | $ | (7,861 | ) | ||||
Special Items
Management does not view any of the following special items to be part of the underlying results as they may be highly variable, may be infrequent, may be unpredictable and may distort underlying business results and trends.
Financing and transaction costs
1. During the three months ended
2. During the three months ended
Gain on revaluation of derivative liabilities
1. During the three months ended
2. During the three months ended
Internal Review Costs
1. During the three months ended
Foreign currency exchange rates
All currency amounts in this Press Release are stated in
The exchange rates used to translate from USD to Canadian dollars (“C$”) is shown below:
| (Exchange rates are shown as C$ per $) | As of | ||||
| Average rate | 1.3437 | 1.3268 | 1.3296 | ||
| Spot rate | 1.4062 | 1.2990 | 1.3349 | ||
For further information, please contact:
Investor Relations
Tel: (416) 504-0004
investor.relations@thecronosgroup.com
Source: Cronos Group Inc.