Cronos Group Posts US$107.7 Million Loss, Negative Gross Profit For Q2 2020

Cronos Group (TSX: CRON) (NASDAQ: CRON) reported its second quarter financial results this morning, revealing revenues of US$9.9 million, combined with a net loss of US$107.7 million for the quarter, making us question yet again why exactly Altria Group (NYSE: MO) elected to take such a large position in the company.

Net revenues were up on a quarter over quarter basis, with the company demonstrating a 17% increase from its first quarter revenues of $8.4 million. However, costs of sales for the current quarter amounted to $9.8 million, which were then further impacted by inventory write downs of $3.1 million, resulting in a negative gross profit of $3.0 million. The bright side is that this is an improvement from the first quarters gross loss of $6.5 million – if an improvement in negative gross profit can be considered anything more than dismal.

Operating expenses during the quarter declined slightly as well, with the company only spending $31.8 million to generate its negative gross profit, as compared to $38.6 million being spent in the first quarter to do the same. General and administrative expenses alone were roughly double net revenues, at $18.4 million. This was followed by sales and marketing expenses of $6.5 million and R&D costs of $3.6 million.

The company was further negatively impacted during the quarter by a $35.9 million loss on the revaluation of derivative liabilities, as well as a $40.0 million writedown on goodwill and intangible assets. The bright side here, is that the company then took a foreign exchange gain on translation of $51.9 million, resulting in a net loss of $107.7 million falling to a $55.8 million comprehensive loss.

Looking to the balance sheet, Cronos continues to burn through its massive cash position, which appears to be the only reason for its current valuation. Cash declined from $1,128.4 million to $1,109.7 million over the quarter, while short term investments rose to $213.6 million from $206.2 million. Prepaids meanwhile fell to $7.8 million from $11.1 million, while inventory rose to $53.2 million from $43.1 million. Total current assets stayed relatively the same at $1,401.9 million, compared to $1,403.8 million in the first quarter.

Accounts payable declined during the quarter from $34.3 million to $28.3 million, while derivative liabilities rose to $205.7 million from that of $166.2 million. Overall, total current liabilities climbed to $235.2 million from $201.5 million.

Cronos Group last traded at $6.98 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.

One thought on “Cronos Group Posts US$107.7 Million Loss, Negative Gross Profit For Q2 2020

  • August 6, 2020 1:03 PM at 1:03 pm

    Best write up out there. The rest are lacking in the relative numbers you list at the end. Good work.


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