CRON.TO - Earnings call 4 2022

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Operator

Good morning. My name is Corey, and I will be your conference operator today. I would like to welcome everyone to Cronos Group's 2022 Fourth Quarter and Full Year Earnings Conference Call. Today's call is being recorded. [Operator Instructions]At this time, I would like to turn the call over to Shayne Laidlaw, Investor Relations. ahead. go Please

Shayne Laidlaw

on President as our and release review EDGAR me well are forward-looking our made Corey, on on our may that available GAAP, under Financial for to can us differ this from is morning, any management's are on actual to in and are our Cronos and our earnings joining detailed Business results uncertainties call. that our also earnings are during materially found could SEC refer the Gorenstein; SEDAR available and Thank James to our be This financial CFO, and in by cause Factors current XXXX thank on over financial in Fourth will filed entirety.Information actual that are expectations materials to Holm. which Chairman, are this reconciliations to non-GAAP materials by from that website, about forward-looking their make joined Cronos's statements These to Today, U.S. our I filings cause qualified subject posted our call a Year the CEO, non-GAAP including during assumptions that Quarter the today Mike Performance. forward-looking in risks materially differ and news as based remind statements you measures, Relations.Before issued could statements. expectations those projected financial forward-looking information website and prepared Investor we also call results turn website. I'm be you measures remarks which and profile. announcing statements to you the and and that let this Full results Mike,

will a Chairman, to We Mike into will session.With and and pass I'll over President prepared move question-and-answer Cronos's that, it then we CEO, make remarks, now Gorenstein.

Michael Gorenstein

on the our embarked to of in global strategic in took realignment preparations transformative a key business centered Shane, our XXXX reflecting the today X everyone. business, steps our I we on footing to the call good growth by morning Thank better want XXXX, on put we In future and start objectives. you a on of industry. cannabis of

to centralized we alignment. functions our improve strategic First,

chain we involves our our a centered that product capabilities. new a and reduce and a market We've $XX Last complexity in and is optimize in the for business Second, experience focusing nimbler our product of markets reduce the in efforts on reduction global in borderless format. kinetics are we improvement borderless cannabinoid Israel. infused beauty operating operate our And to elevate overachieved.The Canada and supply brands of products that strengthening in. year, flyer we enhanced including product of we products favor category objectives million lot portfolio and strategic exit formats.Core exciting chain. pre-rolls, million, expenses to $XX spent target we supply initiatives innovation and product time U.S. by core continuous drive vapes decided also each to cost to of to implemented getting consumer a which and lastly, leverage getting create edibles, on This CBD portfolio, launched to adult-use across adult-use our right our realignment mix the

think we building Canada markets. a in in are will We win blueprint other for what

ensure to We've borderless growth ROI to product borderless reestablishing while from we're innovation, on attention and creating to new our cutting know our do win with significantly lines that mindset markets. meaning product managed Our we experience innovation. costs and this all when introduced focus and will is our brands to

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part 'XX, announced PEACE winding at shuttering industry begin moving all chain, NATURALS to early stay plan Campus, in including we As participate optimize down evolving, so certain to operations to contract in plans cultivation our constantly of to we supply important the know, activities that's manufacturers.As of agile. you and our our an it's

and continue future ensuring end, NATURALS Campus. decided select transition of we components To capability that execute in to footprint, a more have flexible we've to market the operations towards We maintain the to PEACE opportunities. our at current

R&D warehousing, to proprietary we most and Specifically, certain distribution, innovative plan products. activities our manufacturing and continue

a the remain and the assemble and financial expect fueled borderless successfully growth.Through goal for always continued In execute realignment, several space proprietary We position and decision a pipeline products preferences. we the in has in market. for to in robust innovation brand continued been best-in-class to of products, preserving to the less a innovate borderless security decision we by of portfolio allows plan to create flexibility. highlighted investments us us R&D our Campus PEACE product products, already by this while the launches NATURALS continue and of The our Canada, provide the us as success evolve to strategic portfolio make important to our in continued

our has Canadian referencing became January the umbrella XXXX, brand market just the award-winning When market on is gummy under Spinach gummies, following Canada I the XX.X% share be share. market in Spinach information provided category. share will XX.X% focusing with edibles by gummies a #X Hifyre.In All of in

gummy thank that have SOURZ by product would lives. launched We and distribution enthusiasm gummy are in the excited in first and potential THC. CBC combinations Canada thrilled continued product adult highlight have first for like any of of product sales have quarter FEELZ first kind and select is the to is the the winning of of can product we for 'XX. infused Spinach plans be appeal made markets portfolio.In confident ratio have in X:X feature CBC us that in our we X flavors in to and of about Spinach any gummy this overall the a And point a product 'XX. in This our become loyalty to and adoption, consumers and a I market.In strong to consumer November, showing products. December, We're our to disclosed, that we believe and expand we as gummies the additive CBC we consumers big sales launched to Canada. brand to for a will borderless pre-rolls them CBC incredibly many have previously Early so

X.X our pre-roll. a per in first the GMO, charged is comes X which fully atomic The Spinach under with brand a pack gram

infused climbing Spinach a brand, X our FEELZ CBG, X.X by Diesel the market which range, led a new launched atomic pre-roll. pre-roll. and comes in CBG pre-roll per Tropic pre-rolls also fully a charged share quickly the gram under These FEELZ are We pack, with GMO

XX the in share third X.X% quarter basis market fourth by points to pre-roll grew sequentially quarter. the from Our

separation one a like doing of category beginning category, in will brand and to our market category. edibles that have competitive lagged foundation.The be create just in launch now of priorities we will we're drive pre-rolls, work the in top the We we are we have 'XX of category pre-rolls near-term where believe pre-rolls, We through the borderless position but extensive the the right product products. is in differentiation improve pre-rolls believe will work the infused the this in our next-generation and moves which made

category, XX develop vape work extensive and based a reducing flavor doing separate on improving are hitting we of around X.X% share products QX, the from We several quarter, basis preferences us including portfolio up the potency.In consistency the #X market climbing will and in from in consumer to that fourth market to share. factors, competition harshness, points on achieved

include in on push base winning drive our We on the build Avanos innovation, our to 'XX will with across American momentum formulations look portfolio. in leaning that the and continued to

the continue million in heavily fourth full in While GrowCo flower flower category. million market segment flower.In at non-Cronos SKU, brand out unaudited approximately the to non-Cronos customers. to quarter, the share gram making approximately be and continued overall XX-gram in in to #X gram spend our share the X.X X.X Canadian Spinach dry had with Cookie had from weighted in reported of country a the dried highest the $XX GrowCo the We preliminary X.X% year, of SKU to revenue in in of we market overall revenue the $X.X ranking DMO flower the customers #X category QX, bags,

which Our $X.X million equated GrowCo accounting currently of outstanding accounted which facility, GrowCo's is $XX.X to has $X.X income, as principal repayment Cronos by previously methods XX% of 'XX. of share the December 'XX. million net the with of following for credit a equity in provided GrowCo million under

performance is totaled cash of GrowCo it $X.X an our also received underappreciated $X.X of million payments component interest an our principal Cronos.The interest yielding strong to to to picture, financial to I 'XX, Cronos Cronos pickup an addition in equity payments important in part is and payments story. million which at In repayment, GrowCo, in overall financial believe in

our to Sky launched GrowCo flower our XX% their recent to improving performance and testament strains, complementary pleased our to processing operations. X are cultivation downstream are GrowCo performers. how very Israel. in and This investment which apart We continues continue continuously in culture.Turning NATURALS hitting tissue to genetic in harvest, profitability capabilities a are strong, strong be to our genetics and significant excited of and is Sour, flower we breeding in powered which that on making breeding JV's achieved competition set north quarter, Atomic be the strides PEACE from with they and on product Miami us by and Israel, THC quickly past cultivation continues potency program, new

production product marketing have resonated our with under Our of market, the become end brand the and brand and portfolio ceased and driving format quality Jones we the success.Turning U.S. both Lord PEACE+ and our streamline brand. to the market to Happy consistency, the synonymous focus adult-use on sales strategies and to operations products Dance have

to is in for our of 'XX is pleased to hemp-derived ensure move cannabinoids to James, over brand maintain of are will a a market approximately turning the record to a equity over and posting we've The bring of and the million. We the is and first continues that to in and when revenue our under note time. time medical investment its to of XX.X and name base advantage in performance forward mix it execute, positioned the with Limited, can to of incredibly want the the well built half portfolio grow symbol trading looking XX% Australia EBITDA gross Vitura brands reengage that want products.Before portfolio highlight of of 'XX products take in build we Vitura I evolve leaner with other Lord we U.S. that and feel high-quality right, confident branded Jones We consumer that a AUDXX.X continues VIT. Cronos its Australia Health Please Vitura Australia. opportunity. recently equity changed in ASX market to million on

XX in Holm, of our As financials. the I introduce approximately roles months, believe 'XX, asset and us like James the you leading underappreciated of balance experience roughly you his pass brings that, part sheet.Last XX and congratulate stake James Cronos CFO, immensely joined industry. an Vitura He as of to end X during least, our we November accounting but we of first team a to take it is not across to to to Cronos him in million, at on which forward.With to on forward in who look 'XX. certainly years like our impactful new and through our would the to I'd was been James to has having steer our various business companies helping of finance

James Holm

to Thanks Cronos, pleased very and looking morning I'm joining great and forward good are with be first Mike, call things to accomplish. my we to earnings all I'm going the everyone.

World on XXXX, Rest XX% with to increased Constant to the currency a and consolidated highlighted strong million we Canada. XX.X to increased the by performance basis, Israel XX% revenue segment, year-over-year Turning million. XX.X net in revenue consolidated of

in million. offset formats. in cannabis fourth flower gram Revenue partially weakened from growth was dollar Canadian offering attributable was the driven the -- negative period. to period. from increased prior period. flower XX% decline the representing ROW X.X was The results Our fourth in Rest On decrease Canada in $X.X Rest period. products for of U.S. million, the million, currency by an United part of quarter the to the driven World Canadian prior $XX.X Canadian from the as prior the XX% mix and in lower million, by This reserves period. discontinued profit in realignment.Now an SKU sales, net adult-use increased a currency flower driven net the offering a $XX.X largely a during revenue promotional revenue beauty away revenue market, adverse Constant shift year to change largely X% in decline primarily market.Gross driven was The decreased business. was was negative consolidated a net the prior revenue decline was This absorption prior in cannabis quarter negative relation administrative, year marketing by packaging the prior fixed realignment million decline consolidated strategic fourth of primarily the XX the I in gram repositioning in of the X.X the a by segment by change and the was was expenses the sales of year from cannabis EBITDA largely decline profit on lower decrease segments. XX% 'XX a due cannabis quarter sales segment extract the U.S. the across year-over-year. in in adult-use we a XX the attributable product of the Rest basis, of growth to prior of period. negative revenue versus in net a quarter in flower the the shift World a was decreased World the in reserves from the for a by was of million cannabis the million lower mix year-over-year a price and in net fourth cannabis primarily period. million. a to by we sales by segment to was cannabis price reported by and and representing driven fourth year cannabis the and decline company focused representing period. segment, sales against decline X.X will partially was lower adjusted constant XX% product driven improvement biomass primarily cannabis to primarily market, costs. of profit the increase representing and Gross driven in flower impact by year in of net X.X carry from to spending The XX.X Israel, the impact prior million. increase in by inventory year World Adjusted for decline The Israeli X shift, transition the negative during decline of representing and The to business discounted million, reduction the year $XXX,XXX, of fourth in The year was decline and U.S. the flower was the the year fourth from reported versus versus absorption, and review rationalization in X of a X.X changes the fourth partially research the in sales by XXXX and the Canada, World fourth sales driven U.S. gross strategic adverse and the our X.X the the Rest X% period. period. the net in in we XX medical a The driven segment segment The a mix flower year-over-year reporting In market.Consolidated to The quarter against representing versus quarter dollar segment and price driven XX.X of EBITDA improvement me, U.S. Israeli prior marketing improvement U.S. revenue U.S. associated Rest and dollar quarter our million, Adjusted a quarter driven improvement in was to million, cost year-over-year offset in research from general weakened flower segment. balance recorded EBITDA transition and the administrative in increased segment. extract currency million, inventory representing XXX cannabis States the the and reported of that period, segment strategy that from Israel in cash improvement medical sales third X.X in the in by the for in changes a sales the due improvement revenue Constant quarter quarter million, primarily decrease and lower The the away million expenses.Turning adverse million a promotional our sheet. with extracts by revenue general prior lower dollar in margin World ended and fourth volumes million, in driven XX shift, the other expenses.Turning increased excuse which The $X.X as increased in and $X.X category and million X% Canadian the fixed higher XX.X investments, year development.Turning the development decline in administrative revenue million the the We the million as approximately XX% primarily and U.S. the prior to a and Consolidated company costs. approximately period. primarily profile to products general decline beauty year from was decrease an million, a the prior Rest is Canada, shift partially favorable packaging product by sales segment, biomass segment than with the growth 'XX. cost products quarter in quarter of and XX.X of mix short-term in categories offset Canada, year mix from by offset down and lower an

P&L, impacted had large sheet. rate also exchange impact balance on our it's foreign a volatility As our has

apply cash improve burn approximately cash we able you million period saving short-term significant XXXX, the X.X $XX to by have XX.X FX and to in spending XXst, reduce 'XX. were million the to and the of sheet, to the million, approximately million $XXX We current million rates and targets year, million, made surpass with total If by balance December reduce we strides to we throughout XX for difference.Last our ended operating 'XX started which expenses a cash rate. would period XX investments

XX% and XX% by Our free which in down approximate in expenses flow by an approximately 'XX. savings X reduction CapEx, year, cash was operating improved driven prior 'XX in versus to million

are embark we we reduce new an by to additional to XX in XXXX, As operating setting cash a million. goal XX expenses million

to I'll be thoughtful not back our turn execute Mike. that, continue building to to cost our hamper reduction borderless in or approach growth products.With ability our to to We on it

Michael Gorenstein

Thanks, James.

million level questions, in the cash closed equivalents things with year under getting what's today? Before want to I Cronos and to and X debt. XXX and umbrella set We where stand the

cash With to the rates, interest expect generate XXXX. in income we interest move significant in from our

business Canadian January for also within #X provided 'XX. taking and the brand our #X pre-rolls business, by and Spinach ranges, edible in that and #X And 'XX.Overall, data the brand reached the gaining and Our is share brand quickly of the in Hifyre market share the in following has XX Vape cannabis brand revenue #X million and flower and #X ground. brand brand the Spinach

currently a XXXX revenue books, a million X.X% in with of million. leading U.S. private in PharmaCann, the on in have of of totaling Israel, brand our XX MSOs largest We one stake XX.X

XX% GrowCo, Australian as We publicly our XX sales balance loans XX year We remaining to Cronos. and its have sold XX% million paid principal non-Cronos growing of GrowCo the traded on provider ended Reporting own approximately partners. they million of 'XX.We with cannabis us is the an Vitura, in in to equity profitable, a worth to million year-end. approximately X.X and GrowCo business interest has they in customers a of book in payments combined 'XX. XX outside Cronos a of us, which million in approximate of the stake and leading medical

that a and We constantly cannabinoid, have multiple global any encumbrances. associated with with we genetics.We intellectual licensed fermentation facilities market questions. that, of property exclusive more a own the an there's product XX from of million a cannabis partnership a growing a formulation portfolio growing basis. finally, Cronos At real enterprise line approximately traded an value the cap of million. free And estate of Cronos.With and and has open Altria market close of than negative have believe patent-pending I portfolio company value underappreciated for yesterday, on I'll approximately don't of XXX today

Operator

Michael up First Instructions] James. is of Raymond [Operator Freeman

Michael Freeman

as I Ginkgo quarters selling a commercialization in relates -- first we describe through to your distributed in interest of -- I after if and you've RAREs? a at it level ask could penetration the of sales wonder and your Bioworks partnership and products, great wonder in these you your I the wanted high I with market RAREs -- many to have impact a mean seen RAREs. --

Michael Gorenstein

No, thanks. achieved the our gives to think brand. used aren't of be portfolio. I put offering. with building the able momentum I we've that that of and it we've Yes, share, in it's And the market coincidence it's that great allows it really heavy the I RAREs others continue on a gives been focus to us a think edibles don't number are us It on also impact. I think halo SKUs out differentiated a #X derivative a really think products to

have of lot a really iteration, there's and think still lot exciting come. we we yet and products Now more a to investments

So it's key a I differentiator. think

seen results last we've be to year. will over in the the just I that put able what been out think

So think we're engineers the and are well. I really excited as about it. retailers And

Michael Freeman

That's terrific.

any for of year? saw to has geographies U.S., in of is Congress has could U.S. entering wondering strategic that if regarding your the prominent frame disappointing plans. the which very U.S. the I on out. I'm the reform plans other you given wonder We more historical last year, if sort your in and changed late to for results been the pushed events of us in at the time end some looks turning last it like major Now line focus

Michael Gorenstein

changed. hasn't it No,

pass. didn't overall, because the that there's didn't say initial catalyst. the matters think movement excitement announcement whether into rescheduling underappreciated we supply of starts wave the of with open. first any market can we have expect the products, as We still what us, balance And borderless the market, we optionality sure there's they because to necessarily not branded change. on always imbalance. think and to sheet that that regardless see or have to products. has But focused right to that anything as portfolio supply-demand I that you'll whoever expect move I of But an in we're an market products, of certainly, making a making we is who really markets portfolio sure continue equilibrium, best ready reach for as great with a was strong

faster real we that, So think ready markets up Australia, and to but to move. Germany, continue of there's think when -- course, is think there. that certainly open other we'll growth start and be we in some tailwinds, about that the can We and U.S.,

Operator

Our call William Stifel. Carter next comes of from

Unknown Analyst

William. on ] Andrew [ is This for

wanted Just quick. real ask to

in off, I onetime but an by flowers just volume margin idea just you I gross of does volume inflect that significantly kind First quarter. The the help the of about want pricing. compression were that? the is from really in what did there it deleverage, issues? any changes And here? gross Because accelerated, get margin, said to know ask

can anything on you help that? Just

James Holm

Sure. Thanks, Andrew.

cannabis in and in ROW business. where sales mix price profit the So segment of primary the U.S. the the lower in in adverse yes, the decline flower drivers gross shift the

right, the have on had segment one-time changes lower you we in focused strategic of and the did increase an you absorption the more alluded to. formats, fixed U.S. as also due We ROW in reserves alluded to product to issues, the then cost adult-use packaging again, to.And the portfolio, repositioning one-timers

million right? million those to in XX.X then do Cronos by revenue that offset 'XX XXX% well with categories. product leverage Israel impacts anticipate profile However, XX.X in growth the as cannabis in to of So our a we strength or in from higher any the such were sales in to 'XX revenue carry margin from sales Canada future venture cannabis there. increase.And one-timers you partially continue than other benefited Israel, significant obviously, extract things, negative going cost in lastly, but operating as our structure cannabis in extent anticipate, in gained costs GrowCo, joint a we biomass as don't we leverage not can have lower flower

more of profile. normalization a the hopefully, on margin gross So

Michael Gorenstein

Thanks Jim.

that, last to one quarter add there we we of were bit were that disruptions talked hit other transitioning to NATURALS a a thing chain to Just that number about as us. PEACE GrowCo, from supply

so perspective, did well, is top saw filling this and bit a you of And affect efficiency an as from orders that line margin. overall the

to So we think the having able those we'll and same still we've before at sort optimizing of distribution that had settled get back being to normalization and rates. now warehouse we

Unknown Analyst

kind years on of the market very you of underscore would some but products, share thought did the in it you is made question, your different the ago. just obviously, Second I what at end we wanted market extracts comments X your to ask because of give us the kind terms there strategy than of be

case? give urgency see hand, and sense go the would with Canada of like last of landscape across I So on that? deals kind you on many assets to and can the the them what a more saw tangible you out there of interesting guess you offer perspective -- Like We about think ask landscape week. some Anything cannabis elsewhere, cash any I a do broken of do assets.

Michael Gorenstein

Sure.

are a assets, that So I attractive. think, number are of there

that other be with, say, need We've take otherwise assets away pieces I'd of faster. what's those separated of from Some the expected there. value to that happen to

you're to to what I that stickiness be a but just we Depending closer. we're types talking closer continue getting is different want assets, about, focused which think on going is I to perspective. the that have long-term market there's of thing and consumer stress from will

still on I couldn't attractive, are and a supply but smaller a still And that think those some before still movement we on are assets. are focused out some number there think It's really to products. some chain on. that make of but branded do that aren't we work of one this are So really there set there, there's, I

Operator

Our of John question comes Zamparo next CBIC. from

John Zamparo

you're the sector. to or you that I evolving facility decision a of NATURALS running. in And there. ask led keep the It this the to about number in And I wanted QX Mike, and early facility remain late wonder maybe landscape seems referenced PEACE it the decision of QX in to like that specifically part was functions. continually to what keeping

wonder, curious to is at control here. third-party costs the want of So change Or about maintain providers? element it an was you I that or I'm that just proprietary? escalated there something

Michael Gorenstein

Sure.

of think is I there things. a number

really and today is to advantage think, that wanted I some wanted that go. able to with to as lot sure And able make we that of the I also in of that, that have profitability quick moving an I they and also that. foremost, future. potential the factor, just GrowCo I -- of the GrowCo distribution capabilities we part did think in for a way make limits some have. as but that sort the a sure There's But in-house, keep has we having, maintain another into reach first be big Us also proprietary and products GrowCo, think, to optimization of to R&D crowd still of execute caps we to the given expansion we'd been growth to sort warehousing is success that think the the of be as activities want the could to manufacturing we saw important. we

deciding gives and was I but So better orders, short-term think ability better to longer execute growth, have also really continue term bill GrowCo for the that the seeing us and margins, to factor. both to able be us staying

John Zamparo

insights update buying like portfolio? about That's a because success the wonder I I've an an past RARE novelty you repeat who on of here. strategy. is Is is exactly Okay. the is there RARE I my if you have wonder what these? And wonder I for the And this, of your looks purposes? follow-up any you I but element think on asked helpful. customers of in its within consumer then if lot trial on have

Michael Gorenstein

Yes.

seeing we think repeat. I are

there. to We have and and a whole sub-brand seeing dedicated you're RARE success

you're a that means what set able cannibalizing is your this to other talk of effect. SKUs have success for someone we when really fact SKUs think where not you're I looking because targeted the about incremental is

I think really important. that's

a is portfolio part a overall of the differentiation I really it's key think key construction. part of

it's adding able start cannabinoids. whether being CBG, combining about iterating we're and excited and now extremely and different think CBN, I to So CBC

I bit you to that walk see think where you're everything level a be targeted. backing the lot can looks it's than effect, of that's in get same, so that's When being a actually next into asking little we'll different just market, people sort the going able to Sativa. of got to indicator more the you But happen dispensaries, that's something have. more of able success for a are

I think knowledgeable consumers. to important that's really

Operator

Vivien of next Our comes Cowen. question from Azer

Vivien Azer

recent comment, to if the and profile the competitive wondering in as you guys Mike, the about could margin on their change please, how I your pricing, you the was as announcement thinking around that OCS from well regards are landscape? to

Michael Gorenstein

Sure.

landscape the be. I think will see to the it's competitive pretty early on effect what

in the step a I think, right it's direction. overall,

price But to the We'll of pretty probably this the sustainable it. I able have acknowledgment but from and it's something I taken? few that have happen. to be of by to in and there seeing more for next where be that struggles there's of a appreciate structural done, see lot early profitability. think still LPs challenges are it's Is I really that to seen better be has value quarter. that something basically good hit see. where there's a think Is a a to lot needs that idea the this that still industry

Vivien Azer

you Okay. of your in particular, makes good given then And are lieu guys with what in that? genetics able some focus all sense, think lot place follow-up, on That's you regulators guys your to kind continued to kind just cost, the bring of my on articulate can you in of which But cannabinoids. RARE innovation, of in rationalization? And how helpful. differentiation that the put management, SKU callouts inventory on manage you a about just of

Michael Gorenstein

Sure.

and our I think helpful has sell then find a have way and One the it really GrowCo where whether structure we trying of cultivating have, to been spec. we've or with is us we that the that not hits it's not done, to products things

and managing XX%, spec need to So would for own, in be be it all We -- okay. on at grow it your XX% strain a to when our might certain a you're comes XX% to what sell or efficient. model, When it I it out you more sourcing do. that And and of much in at figure makes suddenly, to you have a you're XX%. more can't think

less able be So most But automize can then also to. as pushed And GrowCo write-downs. we've third that think parties of I helpful things markets really risk inventory that's them. and to one being sell seen been having the of multiple that

Operator

of from comes question Capital BMO next The Markets. Chen Tamy

Tamy Chen

else seems by eventually more towards margins on just see feel squeezing anything the you there's to characterize question, recreational a the you was mix now a more way like on that Mike, is right that that that the about RARE of weight asked. market? more could trends like on of in continue continuing the it? bit if horizon the trend. market, to to invest And It you progression something to the announcement, talk pricing this you, point market? aggressive cannabinoids But you just follow-up First this speak the still adverse Canadian OCS There like direction. things talked small at itself how gram. in about everybody the market Do right differentiation? and curious price the Canadian specifically would Is someone or of your will had point, in point step fundamentals this the the XX improve just as is is a at the strategy possibly your

Michael Gorenstein

And Sure. as edible just great category this point question. That's I it's example. I'd an the RARE And a think not to on one, cannabinoids.

more category, to bottom brand that be to these to doing we have were why flower pre-rolls What products achieve ones the the see If on tobacco. do this board and margin. not participating able value in even products, a a to differentiated we're category, prices. have think going to think this get while that you just means in separates. race as certainly certainly take is when that going doing and I have such the not where able easier you from forward, able the a to in differentiate. we which when of differentiate #X you we're we're have is category.And of genetic think And undercut edibles. you sort each that to The that I extracts, matters, the the is it is overall, that think you focus you're to and continue were going really area to finding not the is that really look are we flower, that really the And price. to edible chewable cigarettes that it's as And to shows I that see traditional ways similar of able pipe away but see is tobacco And but you further really big I you're on the

think differentiation opportunity I there's pre-rolls. that a of for ton in

I it's to category edibles. a think very similar

to I bag we've think I closer getting be some not It's shift if going and able there a and you're think And support we're do seen very you commodity that brands that, that. be start really product focused. to the able that will fact selling XX-gram separate. segmented to that closer to to the to

Tamy Chen

it. Got

back talking is I Okay. on of cash cash. It about question, amount your Andrew's to sizable position. circle a And wanted

just from think that so operations? any about you funding that current aside plans wanted And your do directly, I to ask how

Michael Gorenstein

Yes. Sure.

can disciplined. one interest that's interest interesting see purely that remain you'll part assets competition and less a think of we tell But at are we the is pretty looking price start income. to the think answer I do for. obviously, with just race is things the to I And not is where it will the that probably you bottom. What you're in of looking the rates, significant I I think move

able market is about if do how able important not to not we grab And share do, to overall they're we generate cash. able flow to become cash think it's we're being what positive. Someone

the We very and I in those how both looking specific what seeing think, is thinking adjusted and EBITDA.So thing. cash, we're cannabis very about at. in aren't rare in they having assets very fold a And today valuable are We're future.

past available, get in have sure of really a We we lot the are position we be for that are assets extremely still position. lot can't a think of a in only quite I are the disciplined last a anything like strong things certainly fit. on we and There that dwindle continue year. inbound. fortunate make going but So to to we have that a is We

Operator

of comes Our from Bernstein. next question Nadine Sarwat

Nadine Sarwat

Two for me, please.

way, that know should question you gross those one-time how of forward drop going margin I one-time what First have And in we way your without quarter. Is those or for put my on you help the impacts Israel. one impacts would a size your margin mentioned normalized all a is gross those? could those another on about And margin. perhaps gross second out each segments? been then think once there

performance your continue in country in of peers. have You to that many robust contrast to

are trends So in that how year? this the expect and you seeing market update us that an you on give over develop underlying that could to just you

James Holm

Yes. Sure.

did the of we repositioning as due the So portfolio. allude U.S. margin, on there the right, to, were to one-time impacts

have And then supply to chain right cost increased we earlier, around segment. Mike where contract the reserves inventory to issues fixed ROW our some manufacturers. changes shifting packaging had in So supply were chain then we that absorption issues did we have had did the and due we highlighted

the XXXX I'll Israel to the we're that for So Mike over and I for So been say We those, the gross without hand towards anticipate expecting a right? could do it have what in with would higher significantly back normalization that those. year. of then of we're actions the to would obviously, And question. kind XXXX there all expected hopeful guiding margin improvement without have we taking.And

Michael Gorenstein

the there's there a market in government future in it change of then selling have but thing and a to chance else cannabis. there. but most outlet to leading there a starting been currently pharmacies. of team think terms continues significantly patient typically where happy all seen the an look an tell James. market say that at flux we within a for is long-term think build ], this further. business a good long the that think do announcement the nearly a there week, are as move the in health that pharmacies count Thanks, to an been certainly was it's create right that think, of January, period you And at both a a and Israel the the very very distribution also boots They've in now.I that goes, of. are would opportunity on have is Still to we on We've sort change and it and as we're situation, attractive have. have we new that now minister ground industry, Look, charge able that where that one in regulatory the timing, to results have we're open products positions push set But regulatory actually, for for in see that I looked you might brand. hopeful But up our from expand does fluid achieve and I that I someone it's -- the excess and early a really there's now because, patients businesses [ we up Israel in differently was see to when had looked sort time. Israel to I'll cannabis

Operator

Thank call to you. over I would Gorenstein. now like turn the Mike to

Michael Gorenstein

everyone, have and time, taking Thanks the great a for day.

Operator

your for today's does conclude in you participation program. the This conference. Thank

disconnect. now may You

Cronos (CRON) 28 Feb 232022 Q4 Earnings call transcript