Cronos Group Reports 250% Revenue Growth In Q4

Cronos Group Inc. CRON's stock opened lower Tuesday in the wake of the company's fourth-quarter print. Although Cronos reported 250-percent revenue growth for the quarter, it also recorded a major net loss.

What Happened

The Canadian cannabis producer said its fourth-quarter revenue amounted to CA$5.6 million ($4.2 million), up by 248 percent on the year. At the same time, Cronos registered a net loss of CA$11.61 million, versus a net income of CA$2.06 million a year earlier.

The revenue growth was mainly fueled by more cannabis being sold following the legalization of recreational use in Canada, as well as higher prices per gram.

Cronos said it sold 1,040 kilograms of cannabis during the last three months of 2018, up by nearly 200 percent on the year. At the same time, the average net selling price per gram appreciated by 17 percent to CA$5.39, while the cost of sales before fair value adjustment declined by nine percent to CA$3.02.

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At the same time, Cronos recorded CA$2.35 million in R&D expenses, up from zero a year earlier. It also saw higher marketing and sales and general and administrative expenses amid higher sale volumes.

In addition, Cronos said earlier this month that it sold its stake of around 19 percent in Whistler Medical Marijuana Corporation to Aurora Cannabis Inc. ACB in an all-stock deal valued at CA$24.7 million. The company also expects to receive an additional CA$7.6 million in Aurora stock subject to the achievement of certain milestones.

Why It's Important

Following the legalization of recreational cannabis in Canada, producers have been heavily investing in R&D and ramping up production to meet the demand and differentiate themselves from competition.

Cronos entered the recreational market with two new brands — COVE and Spinach — that are currently available in a number of provinces.

The initiatives that Cronos undertook also resulted in higher expenses, which in turn resulted in a large negative bottom line. Cronos said the CA$2.4-billion investment it received from Altria Group Inc MO and closed earlier this month improved its liquidity position and provides it with financial resources, as well as product development and commercialization capabilities.

What's Next

Cronos Group did not provide an outlook, but said it expects to expand the presence of its adult market brands into new provinces and territories. It also plans to continue executing on the strategic initiatives and partnerships launched in the last couple of months both in Canada and internationally.

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