Saturday, May 31, 2025

Latest

Lord Jones! Cronos Group Generates Positive Net Income Thanks to Declining Share Price

This morning Cronos Group (TSX: CRON, NASDAQ: CRON) reported their third quarter results. We organized the numbers into quarter over quarter results for the reader:

  Q3 ‘ 19Q2 ’19% change
Gross Revenue$13.3M$10.8M24%
Gross Profit (Before Bio Adjustments)$7.4M$5.5M36%
Fair Value of Bio Adjustments$24.6M-$0.5M 
Gross Profit (After Bio Adjustments)-$19.4M$5.9M 
G&A Expense$21.3M$15.2M40%
Comprehensive Income$786.9M$250.9M214%
Operating Cash Flow-$26.4M-$57.4M-54%
Cash Balance$1,475.5M$1,579.2M-7%
Receivables$12.7M$12.0M6%
Payables$57.7M$30.7M88%
Kilograms Sold         3,142          1,584 98%
Adjusted EBITDA-$23.9M-$17.8M35%

The quarter saw a 24% gain in top line revenue. As the company saw cannabis sales by weight increase by 98%, but average net selling price of dried cannabis decrease 42.6% from $6.19 to $3.55 per gram. In the MD&A the company highlights the reasoning for the decline in selling price of dried cannabis, as growth in the adult use market, increased wholesale, and lower priced hemp sales.

A Large Gain From their Share Price Going Down: Re-evaluation of Derivative Liabilities

The company saw a non-crystallized gain as a result of the reevaluation of the warrants, pre-preemptive rights, and top up rights from the Altria investment. Effectively resulting in a paper gain for Cronos from their share price declining.

Cronos Share price fell approximately 43% over the quarter largely representing the re-evaluation of the financial derivative, which made up more than the comprehensive income figure.

Cronos Share Price during CYQ3/2019

The Lord Jones Acquisition : 98.7% Goodwill Intangible Assets and “Right of Use Assets”

We finally got to see the details from the $375M transaction where Cronos Group took out CBD “giant” Lord Jones. The acquisition consisted of mainly intangible assets including Goodwill, Intangible Assets and Right of Use Assets. Hilariously, they somehow decided the brand name “Lord Jones” is worth $84.9M.

Somehow as Full Rec Keep Rolling, Cronos Keep Losing More in EBITDA

We have completed the third full quarter of recreational cannabis in Canada and somehow Cronos only seems to lose more money each quarter. On an Adjusted EBITDA basis, the company has gone from losing $3.2M per quarter to $23.9M per quarter.

Image

SmallCapSteve’s Final Thoughts

Overall, the quarter looks to me more like financial engineering with no real cash flow to justify the valuation. The argument behind Cronos has always been that the value in the company lies in the investment in Ginkgo Bioworks, a company focused on genetic engineering which could prove to be game changing for cannabis.

From a morning glance at these earnings, it’s hard to justify the current valuation and if I we’re an Altria shareholder I wouldn’t be happy with this investment to date.


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.

Video Articles

Alamos Gold Q1 Earnings: The Inside Scoop

Cerrado Gold Q4 Earnings: The Turnaround is Working

B2GOLD Q1 Earnings: Revenue Up, Production & Cash Flow Decline

Recommended

Canadian Copper: The $172M Combined Strategy PEA

ESGold Begins Concentration Tests Ahead Of First Production

Related News

Cronos Group Delays Financials Due To At Least $220 Million In Goodwill, Intangible Asset Impairments

While some people are currently speculating that Cronos Group (TSX: CRON) hasn’t announced a filing...

Tuesday, November 9, 2021, 07:50:35 AM

Cronos Group Sees Revenues Stay Flat In First Quarter Versus Q4, Margins Improve

Cronos Group (TSX: CRON) this morning posted its first quarter financial results for 2022. Surprisingly,...

Tuesday, May 10, 2022, 07:53:11 AM

Cronos Group Sees CEO Retire, Gorenstein Returns To Helm

After less than two years on the job, Kurt Schmidt has retired as the chief...

Monday, March 21, 2022, 08:32:05 AM

Cronos Group: Canaccord Reiterates Sell Rating Follow Q4 2021 Results

Yesterday, Cronos Group (TSX: CRON) reported their fourth-quarter and full-year financial results. The company reported...

Wednesday, March 2, 2022, 03:42:00 PM

Cronos Group Licenses IP From Aurora Cannabis, 22nd Century Group Related To Biosynthesis

Aurora Cannabis (TSX:ACB) has reportedly entered into a licensing arrangement with 22nd Century Group (NASDAQ:...

Wednesday, December 15, 2021, 09:21:00 AM