CRON.TO - Earnings call transcript Q3 2024

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Operator

Good morning. My name is Brianna, and I will be your conference operator today. I would like to welcome everyone to Cronos Group's 2024 Third Quarter Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Anna Shlimak, Chief Strategy Officer. ahead. go Please

Anna Shlimak

Mike and review Brianna, performance. on news and filed the on will be for us and joining I'm EDGAR issued prepared Holm. CFO, Thank which XXXX thank a third results to CEO, our morning, President profile. Chairman, Cronos' posted by business and quarter today our joined James Investor announcing you, remarks our you Gorenstein; release Cronos and financial Today, Relations. website financial SEDAR our this is our information under This also and

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

data it remarks, With a we'll by We'll Cronos' session. we CEO, to that, throughout market unless Mike share President and stated, this to provided information will Gorenstein. question-and-answer I'll conference HIFiRE. regarding share and be prepared otherwise move and Chairman, pass market make Lastly, call, over all now then statements making is

Michael Gorenstein

morning, Anna, you, good and Thank everyone.

to our and Thanks this on sheet, operating exceptionally off. our our to our we're approach demonstrating operate current simultaneously our business. record to we this quarter strong paying to disciplined proved growth long-term we expenses, capitalize across quarter With and is results future this the grow are enhance that our ability positioned markets in in. to increase industry approach efficiency opportunities revenue balance and well position Our

on we details minute from supply-demand to perspective. a into like spend getting a quarter, on the I'd are Before where flower

Over rapid in market the for taking U.K. and flower after share particularly Israel. and the year, past We've in markets, we've Canada seen additional seen increase a demand also in products international Germany growth our

demand the GrowCo. $XX this from the state-of-the-art facility. With involved approximately GrowCo This additional credit of increasing is in the Board an of breeding at we this up announced the facility been we obtained picking to expansion into million quarter. Cronos this of As here. why began consolidating the majority increased a of and Canada, of shortage have growth only driver demand. We we high-quality a flower not is our able combination European And with control believe see cultivation to GrowCo's production a result, meet of the investment, genetic GrowCo. support capabilities our demand results fully flower and and program That investment expansion

before, mentioned As consolidated been complete our whole of more significant, GrowCo's I've strong demonstrate business. results underappreciated. yet a has These picture performance

X edibles edibles today market. XX to accounts market by In our and ranked supported and pre-rolls. The competitive the #X by Turning industry-leading share the in Spinach captured category, the Canadian top and in innovation share. cannabis In and rankings vapes in #X now adult-use the Canadian bringing of share to edibles, market #X best-selling market our differentiated represents commitment the outperformance X.X% QX, quality, became XX.X% for flower, market SOURZ to brand #X Spinach, brand's edibles products in updates. with of in brand relentless Canada. the in QX

in huge products selling Caramel and with been XX-milligram been strategies We a innovative instrumental developing in Apple Ontario, has consumers. our seasonal recently Green first has launch the this history. offering, which our has on gummy. been single hit also THC a launched SOURZ, in This category blasted SOURZ focus success. In our in Our we company fully launched QX, fastest

we also quarter, with rare cannabinoid. launched SOURZ flavors This new

program in Canada. become flower in gummy Our Spinach Lord the milled category cookies, flower spot with #X in Strawberry third in steadily. market of at GrowCo and in lift Watermelon We seeing Jones popular our and premium a the sizes. This during #X holiday in best-selling our and bolstered X% Peach cake further breeding GMO Grindz. exceptional to share. maintains doing variety well space and winter are Spinach growing Passionfruit market category cake success a vape our with are Spinach ensuring the to X:X from chocolate CBN, market and have the continued which position led continues look has by with as position and category, been genetics perform into segment category, tends THC The has CBG share, forward quickly The with the offerings, in also by brand our strengthened Canadian Chocolate wedding such of quality this its season our consistency. category. X.X% continues fusions now months, THC to chocolate also CBC heading the in and the to brand gummy a chocolate market. Edibles perform the performance

This well vapes vapes. for gram quarter, new mango we launched grape X.X and flavors, in Spinach and Pink as Rocket new a as a Icicle all-in-one Lemonade Hitz

is to innovate market. the cannabinoid combinations gram X.X and differentiated to are bring Our #X Pink Lemonade flavors products, This category, to is competitive vape vape. and committed a we now continuing and

infused infused to Lord hash-infused Canadian category up shaping market pre-roll growth, saw sales in recently The infused This pre-rolls, a be The pre-roll Spinach retail we launched the is growing. a blueberry ended XX% rank pre-roll in all pre-roll. hash-infused in share leader pre-roll pre-rolls dollar as Jones infused to the QX Sour is in clear a category. market. improvement top-selling brands. our an among In boosting brand saw quarter, an sixth

be pleased So particularly we're here. to winning

We numbers. the success on pre-roll signs offerings, and are are improving of seeing innovating roll laser-focused through and our we that

to have grow still focused in about expansion. we our room optimistic plans plenty space. We for and While remain this of

products Our regulations to as disruptive markets in and a markets strategy has globally. The launch validation bringing and capabilities, Spinach portfolio brand our started Canada can open borderless of winning cannabis portfolio of in the best-selling getting brand new products, branded develop to globally. is expanding our of always been strong in we we're and just becoming best-selling

Israel. to moving Now

year Our competitive patient market the brand in Israel throughout the Cronos products. and growth, strength is X team a a with shown with revenue QX, quarter testament has NATURALS and our has throughout despite which best very performance of declining the PEACE there years. significant remarkable momentum the and volumes sold quality record to built

made We penetrate this our markets Israel confidence we've are NATURALS market. geopolitical Internationally, growth the Germany, position the affecting we strides entered. factors year, PEACE in in about the at in despite region market the grow and in this brand have excited continues gives us to which great past clip. a our In strong

grow in a confident in same selling German in momentum while the are about share continue our are Canada. are in win our led our German early right U.K., Naturals flower take given to that potential. the days and it's excited market we well and We we are position to Peace market. Similarly, growth the We seeing have positioned starting the products believe are #X us we in to the we to brand to are

but to existing driven quarter's expand markets, of to us growing This opportunities in any balance only our portfolio and success by enter. industry-leading strong infrastructure choose our in new seize also we not products, borderless enabled market sheet to

I'll over Now to James turn the to walk financials. you it through

James Holm

representing Mike, prior Gross financials. now sales Israel was of The higher Cronos, year international the higher which stand-alone revenue the was recorded XX% year-over-year while sales $X.X morning, inventory revenue and third GrowCo, quarter the to Canada, of in company million. The of that our by in U.K. XX% quarter million, extract sales Australia, increase XX% to in third was of million, adjusted XX% flower GrowCo's a a include driven flower the adjusted for revenue margin. revenue from profit everyone. Thanks, review on our million, in and gross now was sales, the net equating step-up reported and countries, I $X.X Germany from from primarily an basis, consolidated good and in other impact excluding was the profit results, Cronos gross million, consolidation cannabis $XX.X a equating GrowCo transaction GrowCo growth cost a XXXX margin. Adjusting which increase gross $XX.X period. was Net include will net $XX net the

and for year third the improvement by $X.X expenses. in way is an in by accounting goal controls well incremental the million to higher sold million gross adjusted flower useful we and date driven $X.X XXXX employed XX $XX percentage We sales flower value a and to the in was ongoing and cannabis period. a stepped margin our million by OpEx markets. Consolidated an of adjustment was through stand-alone in performance. Year-over-year administrative through representing tracking and driven been extracts we sales range. Israel to will $X saving The end reviewing believe as gross Cronos primarily sales was in points. quarter in million on it approach up increase by cannabis Canada, the purchase that decrease high increase higher a disciplined profit has in international has The on toward revenue negative evaluating until adjustment improvement that and general to put and basis, other are us adjusted improved providing net EBITDA was adjusted continue from improved The achieving $X prior inventory million, to our market in fair of this the our

addition the next expected are offset However, savings year. financials GrowCo's our into to these consolidated of OpEx

were free negative $X a year improvement. million with by refund, $XX the year was and million and company income and $X.X flow compared negative positive Cash driven in an cash fluctuations. cash balance in $XXX and operations to Cash period, FX equivalents. The to flow. positive tax from was the QX, million cash improved to cash primarily a operations significant $XX.X the million cash from driven some by gross equivalents compared quarter an $X.X period, Turning a million in sheet profit the million flow up ended from prior adjusted in prior and flow increase cash and

on preparedness back we the share they brief as to into like for the new Mike our hand comment trajectory business With into available. for Looking markets and would in become entry Q&A. it a of Mike's back made, going I have confidence before progress that, I to our

Michael Gorenstein

quarter. we're we've record-breaking of In progress closing, made proud this the

our expand this are drive Cronos on and to the top line as results, success. we open international continue Our that, growth, for positioning We'll for I'll building momentum close presence, to strategies With delivering long-term remain out improve and the line committed we year. margins questions.

Operator

Thank Bottomley you. comes a this question Matt Instructions]Our Genuity. conduct session. time, of Canaccord will question-and-answer we At [Operator first from

Matt Bottomley

know Mike, long-standing just your of I just not of have U.S. the to fundamental knowledge know business, thoughts I wanted it's And to coming a start. the really experience in sector. sort but and longstanding out -- some you curious election. the I'm

balance of And potentially south. the down guys based where very or You on U.S. potent year next these see takeaways opportunities how if in obviously one going sheet of any the your have day flip sort have end in so? on just reacted a administration, and curious you equities there are

Michael Gorenstein

a question. That's great Matt. Thanks,

come we regulatory still mean. and all a generally, think often some team that policy, think administration uncertainty rules. see as couple I weeks as matter the pending the and restarts the might transition incoming an But there's next of I back of together over pulled what

STATES the minimum, And Our understanding the clock. the Act. still the expect at But a rescheduling something efforts sort think that's would of that's is that for administration to I positive. supports Trump restart I

away, that are is picture, months on So But if we there be the to going some rescheduling. But is if forward. of I the Act believe existing Schedule that think, STATES hemp don't way all, at III, on about frameworks and need building the in what XX I think I'll very in position and rely a on where Europe good regulatory regulatory we're Canada, actually growth to seeing that and change we now there. given the growth say the we're in Israel is tailwinds

Matt Bottomley

Okay. just then on Interesting. Cronos side it. things. more the Got And of

that of So for space some I you're you but in very expanding have a just commentary own market, in the flower some a very, guys LPs long your of capacity. dynamic and on know yes, the made not time branded have genetics. of you the seeing heard we the interesting of differentiation

relative maybe to of is how of risk to for years, pretty and supply-demand Cronos dynamics the sort ugly So seen we've couple just kind the what the lower-grade flower. of of last it's that some rewards which model specific over

Michael Gorenstein

Yes.

on, of insights R&D fortunate flower our in on where So steadily more methods. focus a early I think was and we've consumer breeding seen position a increase. cultivation generally we're And on demand genetic lot on

SKUs So we've filling. that own. strong We're I momentum the we Cronos Israel. just we're on position top in pick And we're really think a its are to seeing in in that's got markets Canada Europe. and where which And have

I also in demand think from really supply, flower we that's markets. we more GrowCo, be performing across much there's had of lot feel from other and a like LPs if better but we would

should we the about, which focused to that think success. to the we continue I as continue model the in of have, having and genetics So genetics on have be really market that quality, we're of produce long excited GrowCo as drive we pipeline

Operator

from Kirk of comes ROTH. question next Bill Our

William Kirk

of Mike. answer related is to Mine kind there, your last

should then think that the profitability the what is now Like also you want, or consolidating For whether that to And How about sell resource determined going sure the and should you forward? the seasonality as top it of it's allocation third-party how determined customers between think but line we into well? the how need how your needs? about seasonality that GrowCo, is needs that? contribution get you're contribution business, make we

Michael Gorenstein

a It's great Thanks. Sure. question.

top there's we seasonality shortage on think the a I especially not lot today. where of given really the are and line,

which power deviations need for most versus You to do heating and for in have you the efficient pull much of are How lighting slight production. cooling. supplemental terms some seasons

then is hard that over the to in. But nature purchase smooth not to would is then the way not that high-tech capacity Sometimes an is of best structured a option you today given Until XX% current summer expand we up supply preset And overall, have just and we've once second but can greenhouse, at notice the the second to the still see season the cultivate the a the phase difference. And online, the phase an obligation. we deal, of relatively price. pretty XX%. that's by online,

at option purchase to an but up to obligation not preset have price. a We XX%

we good we're significant where but right today. we're is So that a upside to to feel like we balance it's demand we and filling really for is there think still able only make that sure brand, where are the

William Kirk

like the behind in What's should quarter remarks, I step-up use the then to CapEx already know kind prepared it spending had And change any missed And sort Okay. maybe levels what's of but it capital in relative in behind in was the does that but there intentions? a that? signify I of been. that? this, Maybe

James Holm

X so was by CapEx Matt, expansion. that really GrowCo Phase the driven

that QX. spent in levels roughly we in completion. increased So We would CapEx with along $X.X expect CapEx expansion until million

driver main the really that's So there.

William Kirk

like total it And level about the at that around same second if thinking phase? was we're what the XQ? kind quarterly, CapEx expectation for And of as

James Holm

Yes.

least I have south at the million, USD little be could over $XX that. something be maybe online bit would could kind that right? expect It evenly So a semi be but of granted we earlier, a Mike to few additional lumpy, that half. do had biomass next little bit right, quarters. of But highlighted approximately We of anticipate second kind them

of for kind CapEx if complete helps. the spend X, that is So would Phase midyear when hopefully

Operator

you today's Thank your This for at conclude conference. the does program. time. I'm no further questions showing this participation in

now disconnect. may You

Cronos (CRON) 12 Nov 242024 Q3 Earnings call transcript