Cronos Group (TSX: CRON) (NASDAQ: CRON) this morning reported its third quarter financial results for the period ended September 30, 2020. The company reported net revenues of $11.4 million for the period, along with a net income of $68.5 million, primarily a result of a gain on derivative liabilities with the firm actually posting negative gross margins for the fourth quarter in a row.
Despite the climb in net revenues of 14.9%, the company saw its cost of sales rise even higher, resulting in a gross loss of $1.5 million for the quarter. Operating expenses did not fair much better, with the company reporting expenses of $39.6 million for the period, as compared to $31.8 million in the second quarter.
In terms of the breakdown of expenses, general and administrative made up the bulk of expenditures at $18.9 million, while share based payments amounted to $7.9 million and sales and marketing expenses totaled out at $7.2 million. The result, is that it appears the company needs to make some hard decisions as a means of getting its expenditures to manageable levels, and in line with the revenues that it is generating.
The quarter was essentially “saved” as a function of Cronos’ other income, which includes interest income of $3.8 million – roughly equivalent to 33% of the net revenues the company generated during the quarter. The big ticket item here however is the gain on revaluation of derivative liabilities, which amounted to $105.3 million. In layman terms, the company posted a net income due to its share price falling due to these derivative liabilities. Net income for the quarter overall as a result amount to $68.5 million.
Looking to the balance sheet, the firms cash position was relative unchanged, falling to $1,097 million from that of $1,109 million over the course of the quarter. Short term investments declined to $202.8 million from $213.6 million, while accounts receivables climbed to $6.1 million from $3.5 million. Inventory improved slightly as well to $56.4 million, from $53.2 million. Total current assets overall declined to $1,394.0 million from $1,401.9 million.
Liabilities meanwhile fell fairly significantly, a result again of the gain on derivative liabilities. Derivative liabilities fell to $102.7 million overall, down from $205.7 in the prior quarter. Accounts payable meanwhile rose to $39.0 million from $28.3 million. Overall, total current liabilities fell to $142.9 million, from that of $235.2 million over the course of the three month period.
Cronos Group last traded at $5.54 on the Nasdaq.
Information for this briefing was found via Sedar and Cronos Group. The author has no securities or affiliations related to these organizations. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.