Cronos Reports First Quarter Revenues of $8.4 Million, Writes Off $8.0 Million In Inventory

Cronos Group (TSX: CRON) (NASDAQ: CRON) reported its first quarter 2020 financial results early this morning, with revenues of US$8.4 million on a consolidated basis, however the firm reported a loss on a gross basis due to inventory writedowns, and an overall operating loss of US$45.0 million.

While top line revenue was up on a quarter over quarter basis from the firms fourth quarter 2019 revenues of $7.3 million, this is about where the positive aspects of the quarter end. The company generated $8.4 million in sales during the quarter, however they then had to write off $8.0 million in cannabis and cannabis extract inventory due to previously entered supply contracts at prices higher than the market can bare. This write down follows a $24.0 million write down that the company took last quarter.

Cronos as a result ended the quarter without even making a gross profit, with a gross loss of $6.5 million.

The long term viability of the company is also in question, given that Cronos generated $38.5 million in expenses while recording that $8.4 million in sales. The largest expense was that of general and administrative at $23.7 million, up from $7.2 million in the comparable period. Sales and marketing came in at $7.1 million as well, while research and development amounted to $4.6 million. The firm managed to post a positive net income of $75.7 million due to a gain on a derivative liability of $113.4 million.

Looking at the firms balance sheet, cash and cash equivalents decreased over the quarter from $1.2 billion to $1.1 billion, while short term investments declined to $206.2 million from $306.3 million. Inventory climbed from $38.1 million to $43.1 million, representing numerous quarters worth of inventory still sitting in storage. Current liabilities decreased to $1.4 billion from $1.6 billion during the quarter.

In terms of liabilities, Cronos saw its accounts payables decrease marginally, from $35.3 million to that of $34.2 million. The largest change is associated with the aforementioned derivative liability, which declined from $297.2 million to $166.2. Total current liabilities as a result fell from $332.9 million to $201.5 million.

Cronos Group last traded at $5.59 on the Nasdaq.

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Information for this analysis was found via Sedar and Cronos Group. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.