Cronos Group Inc. Announces Second Quarter and First Half Toronto Stock Exchange Results: CRON
Opened Cronos Device Labs, New Global R&D Center in Israel
Appointed Dr. Todd Abraham as Chief Innovation Officer
Announced an Agreement to Acquire the Newest Fermentation Plant
Established New Growth Opportunity to Acquire Product Acquisition
TORONTO, August 8, 2019 (GLOBE NEWSWIRE) – Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (" Cronos Group " or " Company ") today announced financial results and highlights for the second quarter and first half of June 30, 2019.
“During the second quarter, Cronos Group expanded its R&D capabilities, innovation expertise and global infrastructure network in what has been a year of tremendous growth,” says Mike Gorenstein, CEO of Cronos Group. "We opened Cronos Device Labs, our new global R&D center in Israel, announced the acquisition of our new state-of-the-art fermentation plant, and added Dr. Todd Abraham as Head of Innovation Manager to our leading team."
"We also took steps to enter the US market with our recent acquisition of Redwood Holdings hemp-based CBD platform. Looking ahead, we will continue to leverage this momentum by building on our partnership with Altria and Gingko Bioworks and leverage our collective resources and expertise to realize the significant potential of the growing cannabis industry. ”
Financial results second quarter 201[ads1]9
| ($ 000,000, unless otherwise stated) [19659010] Three Months Ended | Six Ended Months | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30 | Change | [19659024] June 30 | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | $ | % | 201 9 | 2018 | $ | % | [19659035] Financial Results | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Revenue | $ | 10,237 | [19659036] $ | 3394 | [19659058] $ | 6843 | 202 | % | $ | 16707 | [19659036] $ | 6339 | $ | 10368 | [19659058] | 164 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Margin before Fair Value Adjustment | 53 | % | 63 | % | – | – | [19659010] | 54 | % | 55 [19659000]% | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA (1 ) [19659036] | $ | (17,772 | ) [1965903619659036] [] [$] 19659096 (2,396 | ) [1965903619659036] [] $ | (15,376 [19659036]) | 642 | % | $ | (26,719 | ) | [19659036] $ | (3,896 | ) | $ | (22,823 | ) | 586 | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Extract Sales (% of Net Product Revenue ) | 20 | % | 19 | % | – | – [19659010] | 21 | % | 14 | % | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| [1 9659033] | [19659010] | [19659033] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating results | [19659036] | [19659036] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Kilogram sold | [19659096] 1584 | 477 | 1107 | 232 | % | 2,695 | 978 | 17 17 | 176 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Product Revenue / Gram Sold | $ | 6.44 | [19659036] $ [19659027] 7.03 | $ | (0.59 | ) | (8 | %) | $ | 6.15 | $ [19659096] 6.37 | $ | (0.22 | ) | (3- | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sale before fair value Adj. / Grams Sold | 3.01 | 2.63 | 0.38 | 14 [19659033]% | 2.87 | 2.88 | (0.01 | ) | (0 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| [19659036] | [19659033] | [19659010] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance (2) | [19659010] | [19659026] | [19659010] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and Cash Equivalents | $ | 1, 579,231 | $ | 89,609 | [19659036] $ | 1489622 | 1662 | % [19659026] $ | 1579231 | $ | 89609 | $ | 1489622 | 1662 [19659033]% | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Short-term investments [19659036] | 744 936 | – | 744 936 | NA | 744 936 | – | 744 936 | NA | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Obligations | 1,399,594 | – | 1.399.594 | NA | 1399594 | [19659027] – | 1399594 | [19659036] | NA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) See “General Matters – Non -IFRS Measures ” for information related to Adjusted EBITDA.
(2) The dollar amounts are from the last day of the specified period.
- Net revenues were $ 10.2 million in Q2 2019, representing a 202% increase from $ 3.4 million in Q2 2018, primarily driven by the launch of the Adult Use Market in Canada. Net revenues increased 58% quarter-on-quarter from $ 6.5 million in the first quarter of 2019, driven primarily by increased sales of CBD oil, which did not lead to any special discounts and increased sales of dry flowers.
- 1,584 kilos were sold in Q2 2019, representing a 232% increase from 477 kilos sold in Q2 2018, primarily driven by increased cannabis production and the launch of the adult use market in Canada. The kilos sold increased by 43% quarter over quarter from 1111 kilos sold in the first quarter of 2019, mainly driven by increased cannabis production.
- Cost of sales before adjustment of fair value per gram sold was $ 3.01 in Q2 2019, representing a 14% increase from $ 2.63 in Q2 2018 and a 12% increase from $ 2.69 in first quarter of 2019. The quarter-on-quarter increase was driven by higher processing costs per gram.
- The company saw continued growth in cannabis oil sales, which accounted for 20% of net product revenue in Q2 2019 compared to 19% in Q2 2018.
| ($ 000 in 000,000, unless otherwise stated) | Second | First [19659058] | ||||||||||||||||||||||||||||||
| [19659010] | Quarter | Quarter | Change | |||||||||||||||||||||||||||||
| 2019 | 2019 | $ | % | |||||||||||||||||||||||||||||
| Financial Performance | [19659026] | [19659026] | [19659063] | |||||||||||||||||||||||||||||
| Net Revenue | $ | 10,237 | $ | 6,470 | $ | 3767 | [19659036] | 58 | % | |||||||||||||||||||||||
| Gross margin before fair value adjustment | 53 | % | 54 | % | – [19659010] | – | ||||||||||||||||||||||||||
| Adjusted EBITDA (1) | $ | (17,772 | ) [19659036] | $ | (8,947 | ) | $ | (8,825 | ) | 99 | % | |||||||||||||||||||||
| Extract Sales (% of Net Product Revenue) | 20 | % [19659010] | 23 | % | – | – | ||||||||||||||||||||||||||
| [19659033] | [19659010] | |||||||||||||||||||||||||||||||
| Operating results | [19659036] | |||||||||||||||||||||||||||||||
| Kilogram sold | 1,584 [19659026] | 1,111 | 473 | 43 | % | |||||||||||||||||||||||||||
| Net Product Revenue / Gram sold | $ | 6.44 | $ | 5.73 | $ [19659027] 0.71 | 12 | % | |||||||||||||||||||||||||
| Cost of sale before fair value Adj. / Grams Sold | 3.01 | 2.69 | 0.32 | 12 [19659033]% | ||||||||||||||||||||||||||||
| [19659036] | ||||||||||||||||||||||||||||||||
| Balance (2) | ] | [19659093] Cash and Cash Equivalents | $ | 1,579,231 | $ | 2,418,277 | $ | (839,046 | ) | (35 | %) | |||||||||||||||||||||
| Short Term Investment | 744,936 | – | [19659036] | 744,936 | NA | |||||||||||||||||||||||||||
| Derivative Liabilities | 1,399,594 [19659026] | 1,664,275 [19659036] | (264681 | ) | (16 | %) | ||||||||||||||||||||||||||
( 1) See “General Issues – Non-IFRS Measures” for information related to Adjusted EBITDA.
(2) The dollar amounts are from the last day of the specified period.
Highlights of the business
Global Supply Chain
Cronos Group transfers its current production footprint to an efficient global supply chain model, which is expected to employ a combination of the entire production facilities, third-party suppliers and global production collaborations, all of which are expected to support the production of the company's adult consumer goods. The company remains focused on establishing industry-leading methods and best practices at Peace Naturals, the company's center of excellence, and leveraging expertise to create high-quality domestic and international products that resonate with consumers.
Pending the derivatives market launch in Canada this fall, the Cronos Group expanded its Canadian footprint with a cannabis concentrate supply agreement with MediPharm Labs Corp. (“ MediPharm Labs ”) in May 2019. MediPharm Labs will supply Cronos Group with approximately $ 30 million cannabis concentrate over 18 months, subject to certain renewal and purchase options, potentially up to $ 60 million over 24 months. In addition, Cronos Group and MediPharm Labs have signed a tolling agreement whereby Cronos Group can supply bulk cannabis for the extraction of MediPharm Labs to meet certain additional processing needs for the company.
In July 2019, after the end of the second quarter, the company signed a production agreement with Heritage Cannabis Holdings Corp. (“ Heritage ”), a cannabis manufacturer based in British Columbia. Heritage will provide cannabis extract and services related to the filling and packaging of evaporator units for the Canadian adult and medical cannabis market. The agreement has a two-year term with the option of extending by agreement between both parties, to an annual potential contract value of $ 35 million, based on current projections.
Global Sales and Distribution
Cronos Group remains committed to leading the industry forward responsibly as derivatives are introduced to the Canadian market this fall. Along with Cronos Group's in-house capabilities, the company has partnered with third-party manufacturers to support the company's entry into the evaporator category in Canada. Both of the aforementioned third-party suppliers are expected to use the company's proprietary formulations for production.
Intellectual Property Initiatives
In May 2019, the Cronos Group established Cronos Device Labs, a global research and development center (“ R&D ”) for vaporizer innovation. Cronos Device Lab's advanced facility is based in Israel, a leader in cannabis R&D, and supports Cronos Group's efforts to develop the next generation of evaporator products designed specifically for cannabinoid applications.
Cronos Device Labs, equipped with an experienced team of product development talents, advanced vaporizer technology and analytical testing infrastructure, serves as the global R&D center for the company's vaporizer units.
The 23-member team at Cronos Device Labs, which brings to the Cronos Group over 80 years of combined expertise in evaporator development, consists of product designers, mechanical, electrical and software engineers, and analytical and formulation researchers. Cronos Device Labs significantly improves Cronos Group's technology and development capability, and is expected to enable the company to deliver expanded product offerings to customers who are specially tailored to cannabinoid use.
After the end of the second quarter, Cronos Group closed the previously announced acquisition of an 84,000-square-foot GMP-compliant fermentation and production facility in Winnipeg, Manitoba from Apotex Fermentation Inc. (“ AFI ”) 31 July 2019. The modern facility, which will serve as "Cronos Fermentation", includes fully equipped laboratories covering microbiology, organic and analytical chemistry, quality control and method development, as well as two large-scale microbial fermentation production areas with a combined production capacity of 102,000L, three downstream processing plants, and bulk product and packaging features.
The acquisition was funded with existing cash on hand and is expected to provide the fermentation and production capability the company needs to leverage the progress that is underway with Ginkgo Bioworks, Inc. (" Ginkgo Bioworks "). The Ginkgo Bioworks partnership aims to bring innovation and biological production to the cannabis industry, which will allow for large-scale cannabinoid production and greater efficiency compared to traditional cultivation and recovery. Commercial on-site production is subject to completion of the cannabinoid-based production facility, receiving appropriate licenses from Health Canada to produce cultivated cannabinoids under Cannabis Act (Canada), and achieving certain milestones under the Ginkgo Bioworks strategic partnership.
Brand Portfolio
After the end of the second quarter, Cronos Group entered into a final agreement to acquire four of Redwood Holding Group, LLC's operating companies (collectively, " Redwood "). Redwood manufactures, markets and distributes hemp-derived CBD-infused skincare and other consumer products online and through US retail and hospitality partner channels under the Lord Jones ™ brand. Redwood's products use pure hemp oil containing natural phytocannabinoids and terpenes found in the plant.
Under the agreement, Cronos Group will acquire Redwood for approximately $ 300 million, net of Redwood's estimated cash and debt, and subject to a customary adjustment of working capital. $ 225 million of the total consideration (subject to the above adjustments) will be paid in cash with the balance paid in newly issued common shares in the Cronos Group. Cronos Group will finance the cash portion of the transaction with cash on hand. The acquisition is expected to close in the third quarter of 2019, subject to normal closing conditions and regulatory approvals.
Conference Call
The company will host a conference call live audio webcast on Thursday, August 8, 2019 at 8:30 am EST to discuss the results for the second quarter of 2019. The call will last about an hour. Instructions for the conference call are provided below:
An audio playback of the call will be filed on the company's replay website.
About Cronos Group
Cronos Group is an innovative global cannabinoid company with international production and distribution across five continents. Cronos Group is committed to building disruptive intellectual property by promoting cannabis research, technology and product development. Cronos Group builds an iconic brand portfolio with a passion for lifting the consumer experience responsibly. Cronos Group's portfolio includes PEACE NATURALS ™, a global health and wellness platform, and two adult brands COVE ™ and Spinach ™. To learn more about the Cronos Group and its brands, visit: www.thecronosgroup.com ; www.peacenaturals.com ; www.covecannabis.ca ; www.spinachcannabis.com .
Forward-looking statements
This press release contains "forward-looking information" and "forward-looking statements" within the meaning of applicable securities laws (aggregate "forward-looking statements"), which are based on the company's current internal expectations, estimates, estimates, assumptions and performances. Any information here that is not historically clear may constitute forward-looking statements. In some cases, forward-looking statements may be identified using forward-looking terminologies such as "can", "will", "expect", "likely", "should", "will", "plan", "anticipate", "think", " potential "," proposed "," estimate "," belief "or other similar words, expressions, expressions, including negative and grammatical variations thereof, or statements that certain events or conditions" may "or" will "occur, or in discussions about strategy. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, goals, guidance or other statements that are not statements of historical fact. Forward-looking statements are provided to help the reader understand our financial performance, financial position and cash flows on and for periods ended on specific dates and to present information on management's current expectations and plans related to the future and the reader. be warned that such information may not be suitable for any other purpose. Some of the forward-looking statements in this press release include, but are not limited to, statements regarding: the expected benefits of our joint ventures, strategic alliances, research and development initiatives, acquisitions and other commercial arrangements, including the ability to produce and distribute targets cannabinoids under our strategic partnership with Ginkgo Bioworks, Inc., the opportunity to build innovative evaporator products and expand product offerings through Cronos Device Labs, and the opportunity to further develop and scale hemp-derived consumer products through the company's acquisition of Redwood; expectations of the Company's acquisition of Redwood, including the expected date of closure of the acquisition and expected benefits thereof; our ability to execute our growth strategy, including construction of production facilities and commencement of the operation of our joint ventures and their timing; the ability of Cronos Group, our joint ventures, strategic partners and commercial counterparts to obtain all necessary licenses, permits and approvals; our ability to expand the distribution network and the global footprint; our business and operations; our strategy for future growth; our intention to build an international iconic brand portfolio and develop disruptive intellectual property; and the growth potential of the cannabis industry and our ability to realize such an opportunity. No forward-looking statements are guaranteed and the Cronos Group cannot guarantee the forward-looking statements here. Forward-looking statements are based on certain material assumptions used to draw a conclusion or make a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are considered appropriate in the circumstances. Although we consider these assumptions reasonable based on information now available to management, there is no assurance that such expectations will prove to be correct. In the future, forward-looking statements are subject to inherent risks and uncertainties that may be general or specific, giving rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove correct, that assumptions may not be correct, and that goals, strategic goals and priorities are not achieved. A number of factors, including known and unknown risks, many of which are beyond our control, may cause actual results to differ materially from the forward-looking statements in this press release. Such factors include, without limitation, those discussed in the Company's most recent management discussion and analysis and the Company's Annual Information Form for the year ended December 31, 2018, both of which have been posted on the Company's profile at SEDAR at www .sedar.com and at EDGAR at www.sec.gov . Readers are cautioned to carefully consider these and other factors, uncertainties and potential events and not to place undue reliance on forward-looking statements. Forward-looking statements contained herein are made from the date of this press release and are based on the beliefs, estimates, expectations and opinions of management at the date such forward-looking statements are made. The Company assumes 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 ,
All references in this press release to "dollar", "C $" or "$" are to Canadian dollars, and all references to "US $" are to US dollars.
| Cronos Group Inc. | ||||||||||||||||||
| Unaudited Condensed Interim Financial Report | ||||||||||||||||||
| As of June 30, 2019 and December 31, 2018 | ||||||||||||||||||
| (in thousands of CDN $) | ||||||||||||||||||
| [19659870] Notes | Per June 30, 2019 |
As at [19659862] December 31, 2018 |
||||||||||||||||
| Assets | [19659058] | [19659036] | ||||||||||||||||
| Current assets | [19659058] | |||||||||||||||||
| Cash and cash equivalents | 22 (a) | $ | 1,579,231 | $ | 32,634 [19659323] Short-term investments | [1 9459095] 22 (a) | [19659036] | 744,936 | – | |||||||||
| Interest receivable | 22 (a) | 5,751 | – | |||||||||||||||
| Accounts receivable | 22 (a) | 11,960 | [19659058] | 4,163 | ||||||||||||||
| Sales taxes receivable | 7,936 | 3,419 | ||||||||||||||||
| Prepaid expenses and other assets [19659058] | 7,079 | 3,876 | ||||||||||||||||
| Biological assets | 4 | 10.032 [19659058] | 9074 | |||||||||||||||
| Inventory | 4 | 41 667 | 11 584 | |||||||||||||||
| Total current assets [1 9659058] | 2,408,592 | 64,750 | ||||||||||||||||
| Advances to joint ventures | 5.22 (a) | 26,608 | 6,395 | |||||||||||||||
| Net investments in equity accounted investments | 5 | 2,025 | [19659058] | 4,038 | ||||||||||||||
| Other investments | 6 | 300 | 705 | |||||||||||||||
| Loans receivable [19659058] | 7.22 (a) | 16,664 | 314 | |||||||||||||||
| Property, plant and equipment | 8 [19659058] | 196,718 | 171,720 | |||||||||||||||
| Right-of-use assets | 3.11 | 3,359 | [19659058] | 171 | ||||||||||||||
| In tangible assets | 9 | 11,461 | 11,234 | |||||||||||||||
| Goodwill | [19659315] 9 | 1,792 | 1,792 | |||||||||||||||
| Total assets | $ | 2667519 | $ | 261119 | ||||||||||||||
| [19659411] Derivative | ||||||||||||||||||
| Current liabilities | ||||||||||||||||||
| Accounts payable and other liabilities | 22 (b) | [19659328]30,747 | 15,372 | |||||||||||||||
| Holdbacks payabl e | 22(b) | 2,274 | 7,887 | |||||||||||||||
| Government remittances payable | 22(b) | 630 | 1,123 | |||||||||||||||
| Current portion of lease obligations | 3,11,22(b) | 417 | 41 | |||||||||||||||
| Construction loan payable | 12,22(b) | – | 20,951 | |||||||||||||||
| Derivative liabilities | 13,22(b) | 1,399,594 | – | |||||||||||||||
| Total current liabilities | 1,433,662 | 45,374 | ||||||||||||||||
| Le ase obligations | 3,11,22(b) | 3,109[19659036] | 119 | |||||||||||||||
| Due to non-controlling interests | 10,22(b) | 2,249 | 2,136 | |||||||||||||||
| Deferred income tax liability | 20 | 4,036 | 1,850 | |||||||||||||||
| Total liabilities | $ | 1,443,056 | $ | 49,479 | ||||||||||||||
| Shareholders' equity | ||||||||||||||||||
| Share capital | 14(a) | 559,296 | 225,500 | |||||||||||||||
| Warrants | 15(a) | 754 | 1,548 | |||||||||||||||
| Stock options | 15(b) | [19659096]8,573 | 6,241 | |||||||||||||||
| Retained earnings (accumulated deficit) | 655,047 | (22,715 | ||||||||||||||||
| Accumulated other comprehensive income | 944 | 930 | ||||||||||||||||
| Total equity attributable to shareholders of Cronos Group | [19659058] | 1,224,614 | 211,504 | |||||||||||||||
| Non-controlling interests | 3,10 | (151 | ) | 136 | ||||||||||||||
| Total shareholders' equity | 1,224,463 | 211,640 | ||||||||||||||||
| Total liabilities and shareholders' equity | $ | 2 ,667,519 | $ | 261,119 | ||||||||||||||
| Commitments and contingencies | 19 | |||||||||||||||||
| Subsequent events | 25 | |||||||||||||||||
| The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements | ||||||||||||||||||
| Cronos Group Inc. Unaudited Condensed Interim Consolidated Statements of Operations an d Comprehensive Income (Loss) For the three and six months ended June 30, 2019 and June 30, 20 18 (in thousands of CDN $, except share and per share amounts) |
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||
| Notes | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| Gross revenue | 16 | $ | 10,787 | $ | 3,394 | $ | 17,772 | $ | 6,339 | |||||||||
| Exc ise taxes | (550 | ) | – | (1,065 | ) | – | ||||||||||||
| Net revenue | 10,237 | 3,394 | 16,707 | 6,339 | ||||||||||||||
| Cost of sales | ||||||||||||||||||
| Cost of sales before fair value adjustments | 4,762 | 1,254 | 7,746 | [19659979]2,821 | ||||||||||||||
| Gross profit before fair value adjustments | 5,475 | 2,140 | 8,961 | 3,518 | ||||||||||||||
| Fair value adjustments | ||||||||||||||||||
| Unrealized change in fair value of biological assets | 4 | (4,024 | ) | (6,831 | ) | (17,57 7 | ) | (9,575 | ) | |||||||||
| Realized fair value adjustments on inventory sold in the period | 3,557[19659978] | 2,625 | 7,279 | 4,819 | ||||||||||||||
| Total fair value adjustments | (467 | ) | (4,206 | ) | (10,298 | ) | (4,756 | ) | ||||||||||
| Gross profit | 5,942 | 6,346 | 19,259 | 8,274 | ||||||||||||||
| Operating expenses | [19659058] | |||||||||||||||||
| Sales and marketing | 5,358 | 364 | 6,858 | 950 | ||||||||||||||
| Research and development | 3,076 | – | 4,633 | – | ||||||||||||||
| General and administrative | 15,176 | 4,219 | 24,787 | 6,680 | ||||||||||||||
| Share-based payments | 15(b)[19659058] | 2,002 | 950 | 2,739 | 1,724 | |||||||||||||
| Depreciation and amor tization | 8,9,11 | 675 | 323 | 1,145 | 608 | |||||||||||||
| Total operating expenses | 26,287 | 5,856 | 40,162 | 9,962 | ||||||||||||||
| Operating loss | (20,345 | ) | 490 | [19659058] | (20,903 | ) | (1,688 | ) | ||||||||||
| Other income (expense) | [19659036] | |||||||||||||||||
| Interest income (expense) | 12,531 | (37 | ) | 15,251 | (59 | ) | ||||||||||||
| Financing and transaction costs | 12,13,25 | (4,505 | ) | – | (34,066 | ) | – | |||||||||||
| Gain on revaluation of derivative liabilities | 13 | 263,943 | – | 700,326 | – | |||||||||||||
| Share of (loss) income from investments in equity accounted investees | 5 | [1 9659036] | (991 | ) | 3 | (1,255 | ) | 44 | ||||||||||
| Gain on disposal of Whistler | 5 | – | – | 20,606 | – | |||||||||||||
| Gain on other investments | 6 | – | – | 924 | 22 1 | |||||||||||||
| Total other income | 270,978 | (34 | ) | 701,786 | 206 | |||||||||||||
| Income (loss) before income taxes | [19659896] | 250,633 | 456 | 680,883 | (1,482 | ) | ||||||||||||
| Deferred income tax (recovery) expense | 20 | (335 | ) | (267 | ) | 2,222 | (1,155 | ) | ||||||||||
| Net income (loss) | $ | 250,968 | $[19659496]723 | $ | 678,661 | $ | (327 | ) | ||||||||||
| Net income (loss) attributable to: | [19659016] | |||||||||||||||||
| Cronos Group | $ | 251,117 | $ | 723 | $ | 678,946 | $ | (327 | ) | |||||||||
| Non-controlling interests | 10 | (149 | ) | – | (285 | ) | [19659395] | – | ||||||||||
| $ | 250,968 | $ | 723 | $ | 678,661 | $ | (327 | ) | ||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||
| Gain on revaluation and disposal of other investments, net of tax | 6,20 | $ | – | $ | 39 | $ | 103 | $ | 4 | |||||||||
| Foreign exchange loss on translation of foreign operations | 2(a),10 | (104 | ) | – | (87 | ) | – | |||||||||||
| Total other comprehensive income (loss) | (104 | ) | 39 | 16 | 4 | |||||||||||||
| Comprehensive income (loss) | [1 9659896] | $ | 250,864 | $ | 762 | $ | 678,677 | $ | (323 | ) | ||||||||
| Comprehensive income (loss) attributable to: | ||||||||||||||||||
| Cronos Group | $ | 251,011 | $ | 762 | $ | 678,960 | $ | (323 | ) | |||||||||
| Non-controlling interests | 10 | (147 | ) | – | (283 | ) | – | |||||||||||
| $ | 250,864 | $ | 762 | $ | 678,677 | $ | (323 | ) | ||||||||||
| Earnings (loss) per share | [1 9659058] | |||||||||||||||||
| Basic | 17 | $ | 0.75 | $ | 0.00 | $ | 2.14 | $ | (0.00 | ) | ||||||||
| Diluted | 17 | $ | 0.22 | $ | 0.00 | $ | 0.58 | $ | (0.00 | ) | ||||||||
| Weighted avera ge number of outstanding shares | ||||||||||||||||||
| Basic | 17 | 334,665,873 | 175,529,196 | 317,940 ,749 | 166,343,078 | |||||||||||||
| Diluted | 17 | 374,676,595 | 211,524,230 | 364,872,093 | 166,343,078 | |||||||||||||
| [19659036] | ||||||||||||||||||
| The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements | ||||||||||||||||||
| Cronos Group Inc. Unaudited Condensed Interim Consolidated Statements of Cash Flows For the three and six months ended June 30, 2019 and June 30, 2018 (in thousands of CDN $) |
[19659058] | |||||||||||||||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||
| Notes | 2019 | 2018 | [19659037]2019 | 2018 | ||||||||||||||
| Operating activities | [1 9659328] | |||||||||||||||||
| Net income (loss) | $ | 250,968 | $ | 723 | $ | 678,661 | $ | (327 | ) | |||||||||
| Items not affecting cash and cash equivalents: | ||||||||||||||||||
| Unrealized change in fair value of biological assets | 4 | [19659096](4,024 | ) | (6,831 | ) | (17,577 | ) | (9,575 | ) | |||||||||
| Realized fair value adjustments on inventory sold in the period[19659058] | 3,557 | 2,625 | 7,279 | 4,819 | ||||||||||||||
| Share-based payments | 15(b) | 2,002 | 950 | 2,739 | 1,724 | |||||||||||||
| Depreciation and amortization | 8,9,11 | 675 | 323 | 1,145 | 608 | |||||||||||||
| Depreciation relieved on inventory sold | 21 | 363 | 47 | 598 | 216 | |||||||||||||
| Gain on revaluation of derivative liabilities | 13 | (263,943 | ) | – | (700,326 | ) | – | |||||||||||
| Share of loss (income) from investments in equity accounted investees | 5 | 991 | (3 | ) | 1,255 | (44 | ) | |||||||||||
| Gain on disposal of Whistler | 5 | [1 9659096]- | – | (20,606 | ) | – | ||||||||||||
| Gain on other investments | 6 | – | – | (924 | ) | (221 | ) | |||||||||||
| Deferred income tax (recovery) expense | 20 | (335 | ) | (267 | ) | 2,222 | (1,155 | ) | ||||||||||
| Foreign exchange loss (gain) | 178 | 4 | 92 | (12 | ) | |||||||||||||
| Net cha nges in non-cash working capital | 21 | (47,860 | ) | (4,437 | )[19659315] | (30,541 | ) | (16,662 | ) | |||||||||
| Cash and cash equivalents used in operating activities | (57,428 | ) | (6,866 | ) | (75,983 | ) | (20,629 | ) | ||||||||||
| Investing activities | ||||||||||||||||||
| Purchase of short-term investments | (744,936 | ) | [19659036] | – | (744,936[19659058]) | – | ||||||||||||
| Advances to joint ventures | 5 | (5,481 | ) | – | (21,293 | ) | – | |||||||||||
| Investments in equity accounted investees | 5 | – | – | (2,200 | ) | – | ||||||||||||
| Proceeds from sale of other investments | 6 | – | 280 | 26,078 | 967 | |||||||||||||
| Payment to exercise ABcann warrants | 6 | [19659328]- | – | – | (113 | ) | ||||||||||||
| Advances on loans receivable | 7 | (16,350 | ) | – | (16,350 | ) | – | |||||||||||
| Purchase of property, plant and equipment | 8 | (14,445 | ) | (30,025 | ) | (27,899 | ) | (37,667 | ) | |||||||||
| Purchase of intangible assets | 9 | (577 | ) | (38 | ) | (628[19659036]) | (169 | ) | ||||||||||
| Advance to Cronos Israel | 10 | – | (378 | ) | – | (1,304 | ) | |||||||||||
| Cash and cash equivalents used in investing activities | (781,789 | ) | (30,161 | ) | (787,228 | ) | (38,286 | ) | ||||||||||
| Financing activities | ||||||||||||||||||
| Advance from non-controlling intere sts | 10 | 2 | – | 113 | – | |||||||||||||
| Repayment of lease obligations | 11 | (184 | ) | – | (216 | ) | – | |||||||||||
| Repayment of construction loan payable | 12 | – | – | (21,311 | ) | – | ||||||||||||
| Payment of accrued interest on construction loan payable | 12 | – | – | (121 | ) | [19659036] | (185 | ) | ||||||||||
| Advance under Credit Facility | 12 | – | – | 65,000 | – | |||||||||||||
| Repayment of Credit Facility | 12 | – | – | (65,000 | ) | – | ||||||||||||
| Proceeds from Altria Investment | 13,14(a) | – | – | 2,434,757 | – | |||||||||||||
| Proceeds from share issuance[19659058] | 14(a) | – | 100,032[19659036] | – | 146,032 | |||||||||||||
| Share issuance costs | 14(a) | (101 | ) | (6,363 | ) | (5,002 | ) | (9,444 | ) | |||||||||
| Proceeds from exercise of warrants and options | 15(a),(b) | 750 | 599 | 1,932 | 2,913 | |||||||||||||
| Withholding taxes paid on share appreciation rights | 15(b) | (569 | ) | – | (1,116 | ) | – | |||||||||||
| Proceeds from exerc ise of Top-up Rights | 13(c),14(b) | 828 | – | 828 | – | |||||||||||||
| Cash and cash equivalents provided by financing activities | 726 | 94,268 | 2,409,864 | 139,316 | ||||||||||||||
| Net change in cash and cash equivalents | (838,491 | ) | 57,241 | 1,546,653 | 80,401 | |||||||||||||
| Cash and cash equivalents – beginning of period | 2,41 7,855 | 32,368 | 32,634 | 9,208 | ||||||||||||||
| Effects of foreign exchange on cash and cash equivalents | (133 | ) | – | (56 | ) | – | ||||||||||||
| Cash and cash equivalents – end of period | $ | 1,579,231 | $ | 89,609 | $ | 1,579,231 | [19659495]$ | 89,609 | ||||||||||
| [19659016] | ||||||||||||||||||
| Supplemental cash flow information | ||||||||||||||||||
| Interest paid | $ | 77 | $ | 189 | $ | 752 | $ | 496 | ||||||||||
| Interest received[19659058] | 10,054 | – | 10,054 | – | ||||||||||||||
| [19659036] | ||||||||||||||||||
| The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements | ||||||||||||||||||
Non-IFRS Measures
The Company uses certain measures that are not recognized under International Financial Reporting Standards (“IFRS”), do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. Rather, these measures are provided as a supplement to those IFRS measures to provide additional information regarding the Company’s results of operations from management’s perspective. Accordingly, non-IFRS measures should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with IFRS. Each non-IFRS measure is reconciled to its most directly comparable IFRS measure.
Adjusted EBIT
Adjusted earnings before interest and tax (“Adjusted EBIT”) is used by management as a supplemental measure to review and assess operating performance and trends on a comparable basis. Adjusted EBIT is defined as net income or loss, excluding interest expense, interest income, deferred income tax expense or recovery, share-based payments, unrealized change in the fair value of biological assets, realized fair value adjustments on inventory sold, financing costs, gain on revaluation of derivative liabilities, share of income or loss from investments in equity accounted investees and gain or loss on investments. The Company believes that Adjusted EBIT is useful to compare its operating profitability across periods.
Adjusted EBITDA
Adjusted earnings before interest, tax, depreciation and amortization (“Adjusted EBITDA”) is used by management as a supplemental measure to review and assess operating performance and trends on a comparable basis. Adjusted EBITDA is defined as Adjusted EBIT excluding depreciation and amortization. The Company believes that Adjusted EBITDA is useful to compare its ability to generate cash from operations across periods.
Reconciliation of non-IFRS measures
A reconciliation of Adjusted EBIT and Adjusted EBITDA to net income, the most directly comparable IFRS measure, is presented in the following table.
| ($ in 000s) | Second | First | Second | |||||||||
| Quarter | Quarter | Quarter | ||||||||||
| 2019 | [19659811]2019 | 2018 | ||||||||||
| Net Income (Loss) | $ | 250,968 | $ | 427,693 | $ | 723 | ||||||
| Adjustments | ||||||||||||
| Interest (Income) Expense | (12,531 | ) | [19659036] | (2,720 | ) | 37 | ||||||
| Deferred Income Tax Expense (Recovery) | (335 | ) | 2,557 | (267 | ) | |||||||
| Share-Based Payments | 2,002 | 737 | [19659058] | 950 | ||||||||
| Unrealized Change in Fair Value of Biological Assets | (4,024 | ) | (13,553 | ) | (6,831 | ) | ||||||
| Realized Fair Value Adjustments on Inventory Sold | 3,557 | 3,722 | 2,625 | |||||||||
| Financing and Transaction Costs | 4,505 | 29,561 | — | |||||||||
| Gain on Revaluation of Derivative Liabilities | (263,943 | ) | (436,383 | ) | — | |||||||
| Share of Loss (Income) from Investments in Equity Accounted Investees | 991 | [19659058] | 264 | (3 | ) | |||||||
| Gain on Disposal of Whistler | — | (20,606 | ) | — | ||||||||
| Gain on Other Investments | — | (924 | ) | — | ||||||||
| Adjusted EBIT | (18,810 | ) | (9,652[19659036]) | (2,766 | ) | |||||||
| Depreciation and Amortization | 1,038 | 705 | 370 | |||||||||
| Adjusted EBITDA | (17,772 | ) | (8,947 | ) | (2,396[19659058]) | |||||||
For further information, please contact:
Anna Shlimak
Investor Relations
Tel: (416) 504-0004
investor.relations@thecronosgroup.com
