CRON.TO - Earnings call 4 2023

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Operator

Good morning. My name is Josh, and I will be your conference operator today. I would like to welcome everyone to Cronos' 2023 Fourth Quarter and Full Year Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Shayne Laidlaw, Investor Relations. ahead. go Please

Shayne Laidlaw

President posted and remarks on profiles. SEDAR and information well release review will This are Josh, Financial Relations. for also which the us morning, prepared information Cronos company's call be filed our change filed website joining business our our is during EDGAR and SEC, Gorenstein; statements Thank the James we which This our our CFO, XXXX as thank financial Fourth as consolidated Investor to Holm. subject Chairman, under by joined this Cronos' Today, the a occurring financial Year CEO, Quarter anticipate until today. with today audited presented is Mike to performance. and news preliminary later you, issued I'm you and announcing and on and this Full results

I from Before are call also cause that may are earnings Mike, website. earnings for U.S. subject GAAP, me website, which are expectations on materials are that that qualified to that differ in reconciliations based financial available be to measures actual our we remind expectations results their available results made found and our call and in measures, in about on our that financial forward-looking non-GAAP non-GAAP any statements our forward-looking Factors this differ detailed and during during filings you the in statements to assumptions are to materially turn can cause entirety. materially materials management's that from including to actual statements the are projected our current on Information could refer These to uncertainties call. this forward-looking those could let make statements. over risks and SEC forward-looking

be market making share information will market by data statements otherwise all is share this stated, conference Hifyre. and call, regarding unless Lastly, provided throughout we

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

Michael Gorenstein

good everyone. and Shayne, you, Thank morning,

reflect as we have incredibly transformational on of variety As company everyone of XXXX, proud changes. we I'm successfully our a through steered at Cronos

our to Cronos winning target million $XX opportunities which savings stated market, We million. in on to to XXXX. in in positioned we well exceeded $XX capitalize our have captured operating addition million In the of products expense in XXXX, $XX previously

Following receiving in Israel. savings Peace in we that We Jones we the sale in by XXXX, to Germany rankings million anticipate and in in in Campus flower opened to a business market and facility, our overachievement stayed and agreement #X flow culminated the currently the launched markets, Canada, our the brand and $X changes Winnipeg be We products, is $X in to and improvement, at X our CBD grew international an focus navigate share on Stayner exited million to edible through the our continue Canada, by into leaseback We we saving we adult-use in incremental for, Naturals U.S. we operations $XX for million XXXX. down which for entered anticipate $XX wound listed million brand on cash growth. Lord and the in organic significant Australia, Spinach categories. sale. These war laser-focused #X brand operations propelled

innovative ability improvements has Cronos expense up. to we to and to launch in as income our by borderless while blueprint $XXX the into and roughly selling manage open cannabis responsibly, cannabis maintaining industry, in Our QX capital. working the reductions, markets cash and for creating our a continue products other capital strongest they sheet balance $XX from interest increased driven and equivalents increased balance million operating million, approximately by

Starting growing with our international business.

X,XXX approximately Germany. German up our Cansativa medical leading in supply pharmacies Germany's distributor cannabis Cansativa, ramping currently a of XXX,XXX patients network distribution partner, continued with has that market. medical in of We around a

Peace to leading have elevated in-house flower which loyalty, Peace market, breeding Cookies has attention Wedding products as quickly a Our from winning GMO and patient program, brand be gained such led in Cake. our by and Naturals genetics Naturals the German

in launching cannabis our GMO flower opens of the leading up significant On awareness by our Friday, market a legislative cannabis a and German significant We is to Reentering and approved as in and narcotic. the market with in achieved genetics position Germany. market growth and Chief share weeks to with forward was best-in-class to Within Cookies Germany's runway market. potential Cansativa. a This leading to expanding of effectively capitalize allows unlock help bill SKU of no growth reach fueled Cronos a on changes. cannabis Germany, positioned that for classifying legislative body the patients Cronos, milestone a the distributor more the the well brand look longer by change market including us we believe

Turning Australia. to

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in in the which consumers globally. broader patients pipeline of and We have market, subset a to a leading and innovation bring flower breeding Canadian eager were winning program an of

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Turning Canada. to

we and the fourth borderless market to of During strong new performance. products, robust by our execute plan quarter, continued launches in highlighted a creating offering

flower at genetic from Our GrowCo, of market for portfolio ranked closed growth strong best our all XXXX the and position as our in field. around XXXX. is breeding, with which year ranked the ranked share the up cultivation brand culmination years and of XXXX. brand brand our a growing has of the Canada which in innovation is fourth Spinach separated #X categories quarter, This scale R&D Cronos products investments the achievement best-in-class X.X% Spinach the in Xth product in cannabis Canada Caping JV as of flower in in across the brand second the leading with December

market's the edible fourth the category, XX.X% quarter, edible. sales the In Spinach accounted of the leader retail market for remaining edibles in in

that look deliver of and segment. consumers. We development. Chocolate product center, cannabinoid scalable the recently success shared culinary will Kiwi products rich multi-texture Canada Lord Chocolate have a of delivers example scientists and high-quality building bold, cannabis expect edible THC product. these was to The adult CBD layer a product launched brand the what dynamic chocolate our creamy The designed X designed expand In that is month, total, and Jones and for Fusions offers chefs, sweet a feature products an chance the the XX-pack and to to consumers team forward Chocolate rankings. by friends. Earlier believe on borderless in to SOURZ future leaders the consume other XX launch chocolate and These of in We innovation. cannabis bite are differentiated, flavor market Chocolate have Chocolate an cannabis. profile X:X incredible treat this with our CBD/THC Jones launched and a Spinach that experience Cronos' gummies a category-defining that soft and compete the market decorative an size adult introduce a Strawberry Lord developed experience its in product the food and to outer entry in Fusions products, seeing unexpected Fusions, into crunch also first an portfolio category. to newest gummy. forward edible in among brand from infusions a perfect be Fusions were continues share truly what top edibles in chewy premium blends, changes brand for new expert combining the exciting possible lower come of brands, We growing consistent new edibles have a ways that innovation we edible

them the Resin stock-up combination helping success really XXX-thread we're X.X convenience live as of in Turning X in see vapes XXXX. with and and catering providing QX. which combinations more to offering we'll the and flavor-forward a of X.X% of it's an in these vapes. to the category the to large high-quality strong In excited we of resin to we our in continue new all-in-one the launched gains new consumer mind, pure the an seeing market different products, the market this of the the such in market. strains, to cannabis done commitment hardware in quarter. portfolio and driver embody in vape by those trial see year, a new of the of with discerning Jones category. positioning, gram format, to curated the and and cannabinoid profiles incredibly our on a in lineup the Crafted rare vape Live enthusiasts gram efforts hardware. I'm evolve features In XXXX, category lot vape penetrate #X Lord work unmatched great and results climbed January us the was and products in our of The consumers gram cartridge, a category. share both sizes, past size the these XXXX, including options. I'm growing to half excellence, proud device versatile a size We about We've X

smoke. with THCV pre-roll THCV popular the several solventless in the a amongst premium Year-over-year, pre-rolls pink portfolio complements is infusion Gummy continue infused the and Feelz retail also infusion, In QX, can Kush and pre-rolls of ceramic crafted of our and ratio reusable punch featuring to pre-roll The products, flavors. a popularity blend Lord Fuse hash, high deliver with products fourth which ice Both the water ice most pit Lord infused natural sensory to the new a complementary solventless experience have potency smoother tested the bold Jones pre-rolls been and fitted White These Cosmic well Tahoe our this with of pre-rolls. we peach fusion high innovation Ice terpenes, water drive award-winning sales help flower selling in optimized strawberry THCV This extensively new Jones Spinach when quarter, products. more in buds' and and research premium is the cool our hash with increasing an THC including DC the pre-roll preserves are to strains both pre-roll quality the position in elevated popular Spinach our we through Full consumers. and launched XXX% our added and in boosted dry fourth to the strong by We're existing throughout product year. Tilt through vape water overall pre-rolls we know widely are slurricane. We products our to is Lord flower, adult see improve second In pre-roll Canada to under category growth the infused lineup. hash markets. that we a to category. These due pre-rolls this and grow Alberta excited and pre-roll continue and Jones hash With brands offerings. available Spinach our quarter. in additional in lemonade, innovations offers become grew and

the approximately Turning cultivation $X.X preliminary reported million non-Cronos and to our fourth of venture. be performance in Canadian to cultivation customers from joint quarter. strong. GrowCo's to revenue continues unaudited us GrowCo

GrowCo the repayment following $X.X $XX.X by has previously provided in Additionally, credit facility that of principal XXXX. million GrowCo, outstanding Cronos currently the million

The interest pickup, $XX.X In overall performance Cronos paid loan back in picture. vital million of payments payments addition, GrowCo to XXXX. of equity financial our of and a made component yielding interest financial GrowCo solid is

Turning to the U.S. market.

to in continued to momentum This pleased expense products portfolio increased partnerships. for infrastructure hear a better how has strategic the of federal borderless momentum a an we of significant and see direction hope would to evolve, in U.S. resulted success with products of XXXX. substantial cannabis assemble global rescheduling flow, positions improvement and of are step specifics year's operating cash savings us regulation reclassify cannabis, We right in cannabis. in to and Regardless which be the commercialization important and

started. and and of innovation balance that, market. through sets sheet financials. The getting you I'd is long-term Our in and industry-leading just stay it to an on pass any to invest asset-light execute With strategy brand we're up James efforts like our to take combination working to these in to well

James Holm

cash by million. results Constant to improved Thanks, X% increased million consolidated XXXX relation results Mike, high now in of EBITDA quarter. at million we fourth X% and the by $XX net $XX XXXX, million. to revenue I operating $XX performance increased of to with a Australia, XX% versus the commencement net slowdown currency our now good in prior year year-over-year quarter prior and $XX negative to Germany operating by declined in now flow million will to year. expenses the before Adjusted spite Israel. will into to I review negative $XX.X morning, million revenue fourth review getting details improved level the $XX.X Total a XXXX our everyone. year period. In and Canada and sales strong in full

equating revenue the excise increase the to mix margin, Australia, year driven currency sales primarily cannabis cannabis tax $XX.X a driven The competitive of an to to adverse an the a as from and by and flower shipments X% X% by due increase higher Canada category, Gross Canadian and $XX.X net quarter in by revenue offset and in to the higher company increase Germany improvement million, from war year. revenue prior million. consolidated net activity The reported flower Israel million, payments price Constant consolidated sales $X.X a in percentage The primarily cannabis XX% gross lower $X.X profit by representing revenue. increased and in in sales period. increased flower of was cannabis fourth prior continued driving is optimization. was million the Canada supply chain partially

Looking for at year. margin full the the

both quarter. competitive profile first in margin highlighted to We impacted. X negatively well through in performing have due Unfortunately, between months, a and XX% margins the been were steady the third by increased and the XX% Israel war activity,

chain year. in our quarter drive The performance XXXX. Consolidated EBITDA and primarily and X production processes XXXX, into from improvement representing general was million a our supply out million administrative which to throughout the improvement increase development in we gross and and and a working the look the driven year. optimize system, anticipate through upon improvement improve had and the an research fourth the months we in we $XX.X success automation costs we fourth As by profit. negative build that prior as We in $X.X of quarter first expenses move and was the add decline adjusted of throughput and will the margins we should operational more to recover a footprint, are from XXXX further with streamlined to

in XXXX, achieving operating million, $XX savings. savings the incremental range high $XX share in million surpassed pleased $X to we're expense projections $XX overachievement to XXXX deliver to increase our to to QX goal we to adjusting million the the that million. savings of million expense operating the are Due end in XXXX, we $XX an Following in million our by savings $X to

quarter. Turning up million $XXX The short-term cash the $XX with ended investments approximately quarter by is to million the and in the about sheet. from third balance which company

return repayment operational $XX.X GrowCo by of payment cash for calculated efficiencies we to while in Cronos on we strategic an million GrowCo we reducing in focused senior and our QX. maximizing $X.X industry addition on In interest in and received total, take in of a million our of steadfastly $X.X million $X.X XXXX, the remain delivering cash, interest and secured $X.X In to best million enables on payments balance payments. us cannabis principal Having total paid burn. for sheet received cash loan bets principal the million to on the

flow was cash $XX.X a cash substantial the flow operations defined cash from approximately million, great as Cash representing flow, to another positive improvement. achievement. statement. Moving less was CapEx million, And $XX flow free positive operating

to many cash we have operations cash the our wins equivalents in balance defined investments improving positive OpEx change and that reduction, as cash optimization to and gains, We in anticipate the cash market point share guidance are be cash, short-term and and of XXXX. net we sum flow reaffirming to from

these turn Mike's on confidence as entry become available. I into that, back share trajectory back preparedness With they for the it on to and of in the new improvements, Mike. our Looking I'll business markets

Michael Gorenstein

an Thank Cronos. year impressive XXXX you, James. for was

transform industry business to adapt to is today. and it where our continue We our

to borderless products all work bring Our to the our employees to brands are thanks market. winning globally, hard from best-in-class

to with high-quality edibles. the by of to Lord can't is to we and and returning We continue wait Our and brand suite in Spanish Jones holds brand brand innovative in positions #X and roots its the a launched build. products, Canada overall #X both flower cannabis

where short-term million and $XX generated second We brand anticipate what popular $XX debt. the market income in million the and approximately closed is approximately set the under know $XXX brand. X We with cash interest stand XXXX. products I getting over income and investments Jones Before questions, to Spinach in in generating umbrella level can brand the interest most In the and We in $XX brought QX, year adult cannabis in we our into in today. to we use with things want million Canadian million is win. Canada, Lord Cronos

which Naturals XXXX. million we medical revenue reach. to fourth in and Peace our the In of XXXX, quarter We posted Israel, cannabis extending shipped leading Germany a net in in have global brand, Australia, $XX.X

largest stake XX% profitable, X.X% books a the interest equity on GrowCo $XX.X We GrowCo, in have XXXX. of one Cronos We in payments of the which in PharmaCann, and $XX in million. principal own MSOs for our us U.S. paid and currently is million

growth trajectory, We have the cannabis new global an drastically $X.X opportunities. us for flow new of a an Vitura, to cannabis heading exclusive questions. we books our making stabilized our fiscal cash line for company to the approximate chapter. that, open basis. best With We're XX% take the one million. and finally, and balance market year of cash ready to take into our next improved positioned in energized with company medical on stake Altria And We in leading on Australia have Cronos advantage I'll this its partnership

Operator

Instructions] Markets. Zamparo [Operator comes John Capital CIBC question Our from first with

John Zamparo

margin. start I gross wanted on to

'XX? order You in included reasons of other that a few if Is are for the items. I benefit target QX. some the lower automation for versus and would wonder Or that that could the mentioned in you identified initiatives incremental your be next rank cost that, was quarter savings of to the And year about then that it? those? you

James Holm

Thanks, John.

X XX%. showed between the steady margin gross the with we of in first year ranging XX% So and results months

from the X to performance right, steady as due of move the negatively Israel the we of write-downs, year, were Looking throughout beyond inventory anticipate success the war do margins in quarter recover we'll improvement showed increased competitive exception the months. affected. in we first activity, through and build those and with Unfortunately, QX. that XXXX, the we had upon fourth We the kind

to in with continue margin as lower cannabis grow leverage a carry GrowCo and joint to John, category into our also further COGS costs. our we're target from as be chain you venture and we cannabis as to our our our cost drive of absorption $X savings driving to business and extracts some to in benefit our supply for 'XX. Winnipeg that Canadian the continue fixed additional supply facility improved optimize quarter Further, And that exit biomass alluded, we chain the impacts will higher Positive million the to in savings $XX supply million contributing additional the profile there's margin costs continue chain. automation XXXX, the opportunity anticipated gross in to is then, announced

as some throughout in potential the year. of as is baked And additional that well upside so

John Zamparo

Got it.

parts, with Okay. there that is what get it the to legislation? in different entry Do X to I model That's recent helpful. each you joining? Germany, from relates and has in crowded. sustainability interesting you LPs your love that to would more barriers particular, then respect is think seemingly in Cronos. think a on used my terms second on -- upside it Australia And of the do of given I question. just its market to becoming And thoughts would has you lot Are distributor participants change Australia to of further growth? Germany, prevent how Cronos

Michael Gorenstein

Sure. Thanks, John.

of markets you and So terms specs. you the meet make market other of really being year, in similar kind border need I with larger supply and last across Australian the type German sure just little products the and when at sizes having and see get there international a look Australian chain what you similar tight barriers to in of were think you market, the pretty

other making For what's having to that sure markets, genetics and those to really us, matter very are grown genetics well. going great is similar

we will us succeed what us And Canada Germany there. to so expect allow what's Israel in propelled and and is lead to

And the Germany, we it to is but I it week be to having runway to growth expect cannabis think and degrowth, allowed way the opened the outpace narcotic. significant compassion think a Germany, talk bill is use classified a adult vote do of is change. I what to medical that what and to I may we cannabis. the for just really, that's because As there's significant a while might market to no as effectively as us, clubs that given this is about really to means cannabis treated, size, think now but that's people change longer relative a Germany, the continue market country kind ahead. are I ago, expected And mean, far already wouldn't still up there or

So what market a Germany. growth an I the think that's over I expect lot in perspective, of should And be story from international the next year.

Operator

Our MKM. from with Bill next comes question Kirk ROTH

William Kirk

So margin increased formats saw activity? Were competitive competitive activity provinces was noted headwind. specific or where that you there as a increased

James Holm

Yes.

competition the for Israel were overall, thanks So what by question. alluding the we say, mainly across was competition I'd the war. board, driven to right, there we experienced in

And that the with there we facility an lot was workforce the extremely problems supply are chain have not dealing same issues today, there. so of resilient competitors Thankfully, impacted, essentially our and there. are are a we directly

of saying #X #X in in well. vape we flower, and make the to and to We stabilize even in we're to do steadily #X competition lot continue little Canada of in Canada, sure I consumer. produce we've a think bit spite done But #X are in best-in-class edible, as providing and pre-roll competition, right, that in end and so And you're a our in products increasing. the experience

feel we the in market. we're innovation confident in So and products that portfolio and bringing our very to

William Kirk

share the use right? adult-use medical bit? little that adult the narcotic call Why current isn't of If would they you think take that if kind Germany. cannabis unstructured from help than a in And market -- a the why wouldn't Germany up figure grow if on me market it then could medical -- help you the rather changes could market, follow I about

Michael Gorenstein

a That's Sure. question. great

been cannabis U.S., superior pharmaceutical Europe having And to the When in think, game Changing with it benefits like that actually restrictive isn't system. about and think people North commercial I a like different. really extremely, you and through so cannabis treated allowing to has narcotic go adult-use America, been program. extremely versus truly If a how you of a you treated And in in communicate ours a completely product in changer. compare it's marketing of it's adult-use not going Germany, regime. has medical as that the really about patients, Germany talk a program the

type It's have not listed same think You're expect able not actual to see there's And really products products. of I use to or won't you of penalties with sales. markets. access Germany, improved just that, adult in infrastructure lessening legal the to coming quality have you Canada quality adult-use the out,

So top of sort with medical on think bifurcate layer the And market and it it's towards will a to advertise the market. market I premium of people you ability premium elicit that, funneling product.

Operator

[Operator Instructions] Genuity. with from Canaccord question Our comes Yewon next Kang

Yewon Kang

EBITDA perhaps Could that a kind and COGS margin expenses of the to gross you gross but I saw loss adjusted a Kang be This led question of expenses profile, Yewon drill drop on the EBITDA certain on guys relation margin loss to Bottomley. between little Wanted was is stable reclassification just it in behalf of to wanted off quarter. Matt operating quarter? the relatively that just down there adjusted a bit this some more. to this that in ask stable

James Holm

the for Thanks Yes. question.

was then by we there increased activity the due it as driven competitive really some So the predominantly mentioned, related and war to Israel to inventory that. and write-downs

the So driver. that's really main

Yewon Kang

and couple are Okay. Canada just launch, maybe the I from in bud And only peddlers know months a consumers on the reaction what the of brand? about launch the that terms ago, you're of Lord seeing the saying could initial but across Got was comment it. Jones you

Michael Gorenstein

Sure. very Thanks. Yes, been it's think positive. I

but launch reorders, at the it's category. far. we're we specifically cautious seeing and when so a strong As hash want been the of you of seeing infused of we're seeing we're take -- pre-rolls, top But approach mentioned, distribution, size it's the limited in the to very tailored at we terms look demand the

the think, about -- can the crowned excited that Chocolate chocolate overall I really of that. just expect something jewel and within we've we had push very lot portfolio can SOURZ we especially in be given anticipation, should the it sits success get not category, we're where a So a forward edible. be to -- define to And but category for Fusions, which

Operator

concludes Thank the this you. And you participation. for Thank your conference call.

You may now disconnect.

Cronos (CRON) 29 Feb 242023 Q4 Earnings call transcript