Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“Cronos Group”
or the “Company”), today announces its 2021 fourth quarter and
full-year business results.
“I am proud of the dedication and resilience our
team has shown throughout the past year as we navigated through a
dynamic market environment,” said Kurt Schmidt, President and CEO,
Cronos Group. “Our fourth quarter 2021 results indicate positive
momentum, which we will look to carry forward as we begin to
implement our strategic and operational realignment initiatives. As
we look to 2022, we will continue to realign Cronos Group’s
organizational structure to match our strategy, with a primary
focus on adult-use products and elevating our brands through rare
cannabinoids. We also remain intensely focused on positioning
ourselves for long-term opportunities by continuing to invest in
our brands, creating and supporting an efficient manufacturing
strategy, investing in rare cannabinoids and innovation, and
readying Cronos Group for entry into the U.S. cannabis market once
federally permitted. We are optimistic about the future of the
Company and the year ahead.”
“In addition to the results we are announcing
today and in line with our focus on enhancing agility and fostering
long-term growth, we have made the decision to exit our Peace
Naturals Campus in Stayner, Ontario. As we continue to execute our
asset-light approach and focus on brands and R&D, we will
continue to leverage our joint venture with Cronos GrowCo and other
contract manufacturing partnerships moving forward. We are grateful
to our Stayner associates for their hard work and the contributions
they have made to Cronos Group, and appreciate their ongoing
support in helping to provide a seamless transition out of the
facility throughout 2022.”
Financial Results
(in thousands of USD) |
Three months ended December 31, |
|
Change |
|
Year ended December 31, |
|
Change |
|
|
2021 |
|
|
|
2020 |
|
|
$ |
|
% |
|
|
2021 |
|
|
|
2020 |
|
|
$ |
|
% |
Net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
$ |
3,106 |
|
|
$ |
3,506 |
|
|
$ |
(400 |
) |
|
(11 |
)% |
|
$ |
9,874 |
|
|
$ |
9,495 |
|
|
$ |
379 |
|
|
4 |
% |
Rest of World |
|
22,689 |
|
|
|
13,540 |
|
|
|
9,149 |
|
|
68 |
% |
|
|
64,561 |
|
|
|
37,224 |
|
|
|
27,337 |
|
|
73 |
% |
Consolidated net revenue |
|
25,795 |
|
|
|
17,046 |
|
|
|
8,749 |
|
|
51 |
% |
|
|
74,435 |
|
|
|
46,719 |
|
|
|
27,716 |
|
|
59 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
23,852 |
|
|
|
16,913 |
|
|
|
6,939 |
|
|
41 |
% |
|
|
80,008 |
|
|
|
46,497 |
|
|
|
33,511 |
|
|
72 |
% |
Inventory write-down |
|
— |
|
|
|
15,031 |
|
|
|
(15,031 |
) |
|
(100 |
)% |
|
|
11,961 |
|
|
|
26,055 |
|
|
|
(14,094 |
) |
|
(54 |
)% |
Gross profit |
$ |
1,943 |
|
|
$ |
(14,898 |
) |
|
$ |
16,841 |
|
|
113 |
% |
|
$ |
(17,534 |
) |
|
$ |
(25,833 |
) |
|
$ |
8,299 |
|
|
32 |
% |
Gross margin(i) |
|
8 |
% |
|
|
(87 |
)% |
|
|
N/A |
|
|
95 |
pp |
|
|
(24 |
)% |
|
|
(55 |
)% |
|
|
N/A |
|
|
31 |
pp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss(ii) |
$ |
(133,892 |
) |
|
$ |
(111,712 |
) |
|
$ |
(22,180 |
) |
|
(20 |
)% |
|
$ |
(397,204 |
) |
|
$ |
(75,270 |
) |
|
$ |
(321,934 |
) |
|
(428 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(iii) |
$ |
(27,357 |
) |
|
$ |
(53,133 |
) |
|
$ |
25,776 |
|
|
49 |
% |
|
$ |
(160,463 |
) |
|
$ |
(147,253 |
) |
|
$ |
(13,210 |
) |
|
(9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents(iv) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
886,973 |
|
|
$ |
1,078,023 |
|
|
$ |
(191,050 |
) |
|
(18 |
)% |
Short-term investments
(iv) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,684 |
|
|
|
211,766 |
|
|
|
(94,082 |
) |
|
(44 |
)% |
Capital expenditures(v) |
|
567 |
|
|
|
10,963 |
|
|
|
(10,396 |
) |
|
(95 |
)% |
|
|
12,262 |
|
|
|
35,391 |
|
|
|
(23,129 |
) |
|
(65 |
)% |
(i) Gross margin is defined as gross profit
divided by net revenue.(ii) Net loss of $133.9 million in Q4 2021
increased by $22.2 million from Q4 2020. The increase in losses
year-over-year was primarily driven by an increase in operating
loss that was primarily driven by a combined $123.9 million in
non-cash impairment charges. Net loss of $397.2 million in
Full-Year 2021 increased by $321.9 million from Full-Year 2020. The
increase in losses year-over-year was primarily driven by an
increase in operating loss that was primarily driven by a combined
$363.7 million in non-cash impairment charges.(iii) See “Non-GAAP
Measures” for more information, including a reconciliation
of adjusted earnings (loss) before interest, taxes,
depreciation and amortization (“Adjusted EBITDA”).(iv) Dollar
amounts are as of the last day of the period indicated.(v) Capital
expenditures represents component information of investing
activities and is defined as the sum of purchase of property, plant
and equipment, net of disposals, and purchase of intangible assets,
net of disposals.
Fourth Quarter 2021
- Net revenue of $25.8 million in Q4
2021 increased by $8.7 million from Q4 2020. The increase
year-over-year was primarily driven by continued growth in the
adult-use market in Canada and increased sales in the Israeli
medical market.
- Gross profit of $1.9 million in Q4
2021 improved by $16.8 million from Q4 2020. The improvement
year-over-year was primarily driven by increased gross profit in
the Rest of World (“ROW”) segment as well as a decline in inventory
write-downs.
- Adjusted EBITDA of $(27.4) million
in Q4 2021 improved by $25.8 million from Q4 2020. The improvement
year-over-year was primarily driven by the improvement in gross
profit and a decrease in sales and marketing and research and
development expenses.
- Capital expenditures of $0.6
million in Q4 2021 decreased by $10.4 million from Q4 2020. The
decrease year-over-year was primarily driven by a reduction in
construction costs in the ROW segment and a decrease in costs
related to the implementation of the Company’s enterprise resource
planning ("ERP") system.
Full-Year 2021
- Net revenue of $74.4 million in
Full-Year 2021 increased by $27.7 million from Full-Year 2020. The
increase year-over-year was primarily driven by continued growth in
the adult-use market in Canada and increased sales in the Israeli
medical market
- Gross profit of $(17.5) million in
Full-Year 2021 improved by $8.3 million from Full-Year 2020. The
improvement year-over-year was primarily driven by a reduction in
inventory write-downs and favorable sales mix of our cannabis
extract products in the ROW segment.
- Adjusted EBITDA of $(160.5) million
in Full-Year 2021 decreased by $13.2 million from Full-Year 2020.
The decrease year-over-year was primarily driven by an increase in
sales and marketing expenses, general and administrative expenses,
which were primarily due to an increase in the allowance for
expected credit losses of $12.0 million, and research and
development expenses.
- Capital expenditures of $12.3
million in Full-Year 2021 decreased by $23.1 million from Full-Year
2020. The decrease year-over-year was primarily driven by a
reduction in construction costs in the ROW segment and a decrease
in costs related to the implementation of the Company's ERP
system.
Business Updates
Strategic and Organizational
UpdateFollowing a careful evaluation of the Company's
global supply chain, the Company has announced today the planned
exit of its Peace Naturals Campus in Stayner, Ontario, Canada.
Cronos Group will continue to operate the Peace
Naturals Campus with a phased reduction and transition of
activities with a planned exit by the end of 2022. Various research
and development initiatives, inclusive of cannabinoid formulation,
product development, tissue culture and micropropagation will
continue across multiple facilities available to Cronos Group.
Continuing to optimize and maintain an agile
supply chain is a core element of Cronos Group's strategy.
Importantly, Cronos Group has focused on building joint ventures
and partnerships around the world with best-in-class operators,
such as Cronos GrowCo ("GrowCo") the Company's joint venture with
leading Canadian large-scale greenhouse operators. As GrowCo has
developed its capabilities, it has become an important component of
the Company's biomass supply. Cronos Group looks forward to
leveraging GrowCo's capabilities in premium flower cultivation and
efficient downstream processing, with the intention to improve
profitability of the Company's Canadian operations. Cronos Group
intends to obtain a sales license from Health Canada at GrowCo's
facility to maintain the Company's customer relationships and
ability to continue supplying the Canadian market. In addition to
further leveraging its joint venture with GrowCo, Cronos Group will
continue to maintain a network of third-party licensed producers to
supplement its cultivation and manufacturing needs.
As a result of the Company's planned exit from
the Peace Naturals Campus, the Company has incurred a $119.9
million non-cash impairment charge on long-lived assets in the
fourth quarter of 2021. In addition, the Company expects to incur
charges of approximately $4.5 million in connection with the
planned exit, all of which impact the ROW segment. These charges
include employee-related costs, such as severance, relocation and
other termination benefits, as well as contract termination and
other related costs, which are expected to be incurred primarily in
the second half of 2022. In addition, the Company anticipates
capital expenditures of approximately $2.5 million to modernize
information technology systems and build distribution
capabilities.
Rest of World Results
Cronos Group’s ROW reporting segment includes
results of the Company’s operations for all markets outside of the
U.S.
(in thousands of USD) |
Three months ended December 31, |
|
Change |
|
Year ended December 31, |
|
Change |
|
|
2021 |
|
|
|
2020 |
|
|
$ |
|
% |
|
|
2021 |
|
|
|
2020 |
|
|
$ |
|
% |
Cannabis flower |
$ |
18,857 |
|
|
$ |
11,559 |
|
|
$ |
7,298 |
|
|
63 |
% |
|
$ |
55,194 |
|
|
$ |
27,932 |
|
|
$ |
27,262 |
|
|
98 |
% |
Cannabis extracts |
|
3,787 |
|
|
|
1,938 |
|
|
|
1,849 |
|
|
95 |
% |
|
|
8,807 |
|
|
|
8,759 |
|
|
|
48 |
|
|
1 |
% |
Other |
|
45 |
|
|
|
43 |
|
|
|
2 |
|
|
(5) |
% |
|
|
560 |
|
|
|
533 |
|
|
|
27 |
|
|
5 |
% |
Net revenue |
|
22,689 |
|
|
|
13,540 |
|
|
|
9,149 |
|
|
68 |
% |
|
|
64,561 |
|
|
|
37,224 |
|
|
|
27,337 |
|
|
73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
20,287 |
|
|
|
15,232 |
|
|
|
5,055 |
|
|
33 |
% |
|
|
70,193 |
|
|
|
41,162 |
|
|
|
29,031 |
|
|
71 |
% |
Inventory write-down |
|
— |
|
|
|
15,031 |
|
|
|
(15,031 |
) |
|
(100) |
% |
|
|
11,961 |
|
|
|
26,055 |
|
|
|
(14,094 |
) |
|
(54) |
% |
Gross profit |
$ |
2,402 |
|
|
$ |
(16,723) |
|
|
$ |
19,125 |
|
|
114 |
% |
|
$ |
(17,593) |
|
|
$ |
(29,993) |
|
|
$ |
12,400 |
|
|
41 |
% |
Gross margin |
|
11 |
% |
|
|
(124) |
% |
|
|
N/A |
|
|
135 |
pp |
|
|
(27) |
% |
|
|
(81) |
% |
|
|
N/A |
|
|
54 |
pp |
Fourth Quarter 2021
- Net revenue of $22.7 million in Q4
2021 increased by $9.1 million from Q4 2020. The increase
year-over-year was primarily driven by growth in the adult-use
extracts and flower categories in Canada and sales in the Israeli
medical market.
- Gross profit of $2.4 million in Q4
2021 improved by $19.1 million from Q4 2020. The improvement
year-over-year was primarily driven by a reduction in inventory
write-downs and increased sales of cannabis extracts, which carry
higher gross profit and gross margin than other product
categories.
Full-Year 2021
- Net revenue of $64.6 million in
Full-Year 2021 increased by $27.3 million from Full-Year 2020. The
increase year-over-year was primarily driven by growth in the
adult-use flower category in Canada and increased sales in the
Israeli medical market.
- Gross profit of $(17.6) million in
Full-Year 2021 improved by $12.4 million from Full-Year 2020. The
improvement year-over-year was primarily driven by a reduction in
inventory write-downs and favorable sales mix of cannabis extract
products.
United States Results
Cronos Group’s U.S. reporting segment includes
results of the Company’s operations for all brands and products in
the U.S.
(in thousands of USD) |
Three months ended December 31, |
|
Change |
|
Year ended December 31, |
|
Change |
|
|
2021 |
|
|
|
2020 |
|
|
$ |
|
% |
|
|
2021 |
|
|
|
2020 |
|
|
$ |
|
% |
Net revenue |
$ |
3,106 |
|
|
|
3,506 |
|
|
$ |
(400 |
) |
|
(11) |
% |
|
$ |
9,874 |
|
|
$ |
9,495 |
|
|
$ |
379 |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
3,565 |
|
|
|
1,681 |
|
|
|
1,884 |
|
|
112 |
% |
|
|
9,815 |
|
|
|
5,335 |
|
|
|
4,480 |
|
|
84 |
% |
Gross profit |
$ |
(459) |
|
|
$ |
1,825 |
|
|
$ |
(2,284 |
) |
|
(125) |
% |
|
$ |
59 |
|
|
$ |
4,160 |
|
|
$ |
(4,101 |
) |
|
(99) |
% |
Gross margin |
|
(15) |
% |
|
|
52 |
% |
|
|
N/A |
|
|
(67) |
pp |
|
|
1 |
% |
|
|
44 |
% |
|
|
N/A |
|
|
(43) |
pp |
Fourth Quarter 2021
- Net revenue of $3.1 million in Q4
2021 decreased by $0.4 million from Q4 2020. The decrease
year-over-year was primarily driven by a reduction in volume due to
competitive pressures.
- Gross profit of $(0.5) million in
Q4 2021 decreased by $2.3 million from Q4 2020. The decrease
year-over-year was primarily due to increased production costs and
inventory valuation adjustments to reflect net realizable
value.
Full-Year 2021
- Net revenue of $9.9 million in
Full-Year 2021 increased by $0.4 million from Full-Year 2020. The
increase year-over-year was primarily driven by the introduction of
new U.S. hemp-derived CBD products.
- Gross profit of $0.1 million in
Full-Year 2021 decreased by $4.1 million from Full-Year 2020. The
decrease year-over-year was primarily due to the costs associated
with the introduction of new products, inventory valuation
adjustments to reflect net realizable value, and increased
headcount.
Conference Call
The Company will host a conference call and live
audio webcast on Tuesday, March 1, 2022 at 8:30 a.m. EST to discuss
2021 Fourth Quarter and Full-Year business results. An audio replay
of the call will be archived on the Company’s website for replay.
Instructions for the conference call are provided below:
- Live audio webcast:
https://ir.thecronosgroup.com/events-presentations
- Toll Free from the U.S. and Canada
dial-in: (866) 795-2258
- International dial-in: (409)
937-8902
- Conference ID: 6599242
About Cronos Group
Cronos Group is an innovative global cannabinoid
company committed to building disruptive intellectual property by
advancing cannabis research, technology and product development.
With a passion to responsibly elevate the consumer experience,
Cronos Group is building an iconic brand portfolio. Cronos Group’s
diverse international brand portfolio includes Spinach®, PEACE
NATURALS®, Lord Jones®, Happy Dance® and PEACE+™. For more
information about Cronos Group and its brands, please visit:
thecronosgroup.com.
Forward-looking statements
This press release may contain information that
may constitute forward-looking information and forward-looking
statements within the meaning of applicable securities laws
(collectively, “Forward-Looking Statements”), which are based upon
our current internal expectations, estimates, projections,
assumptions and beliefs. All information that is not clearly
historical in nature may constitute Forward-Looking Statements. In
some cases, Forward-Looking Statements can be identified by the use
of forward-looking terminology such as “expect”, “likely”, “may”,
“will”, “should”, “intend”, “anticipate”, “potential”, “proposed”,
“estimate” and other similar words, expressions and phrases,
including negative and grammatical variations thereof, or
statements that certain events or conditions “may” or “will”
happen, or by discussion of strategy. Forward-Looking Statements
include estimates, plans, expectations, opinions, forecasts,
projections, targets, guidance or other statements that are not
statements of historical fact.
Forward-Looking Statements include, but are not
limited to, statements with respect to:
- the uncertainties associated with
the COVID-19 pandemic, including our ability, and the abilities of
our joint ventures and our suppliers and distributors, to
effectively deal with the restrictions, limitations and health
issues presented by the COVID-19 pandemic, the ability to continue
our production, distribution and sale of our products, and demand
for and the use of our products by consumers;
- laws and regulations and any
amendments thereto applicable to our business and the impact
thereof, including uncertainty regarding the application of United
States ("U.S.") state and federal law to U.S. hemp (including CBD
and other U.S. hemp derived cannabinoids) products and the scope of
any regulations by the U.S. Food and Drug Administration, the U.S.
Drug Enforcement Administration, the U.S. Federal Trade Commission,
the U.S. Patent and Trademark Office and any state equivalent
regulatory agencies over U.S. hemp (including CBD and other U.S.
hemp derived cannabinoids) products;
- the laws and regulations and any
amendments thereto relating to the U.S. hemp industry in the U.S.,
including the promulgation of regulations for the U.S. hemp
industry by the U.S. Department of Agriculture and relevant state
regulatory authorities;
- expectations related to our
announced realignment (the “Realignment”) and any progress,
challenges and effects related thereto as well as changes in
strategy, metrics, investments, reporting structure, costs,
operating expenses, employee turnover and other changes with
respect thereto;
- the timing of our exit from our
facility in Stayner, Ontario and the expected costs and benefits
from the wind-down of the Stayner facility;
- our ability to effectively
wind-down the Stayner facility in an organized fashion and acquire
raw materials from other suppliers, including GrowCo;
- the grant, renewal and impact of
any license or supplemental license to conduct activities with
cannabis or any amendments thereof;
- our international activities and
joint venture interests, including required regulatory approvals
and licensing, anticipated costs and timing, and expected
impact;
- our ability to successfully create
and launch brands and further create, launch and scale U.S.
hemp-derived consumer products and cannabis products;
- the benefits, viability, safety,
efficacy, dosing and social acceptance of cannabis including CBD
and other cannabinoids;
- expectations regarding the
implementation and effectiveness of key personnel changes;
- the anticipated benefits and impact
of the Altria Group' Inc.'s ("Altria") investment in us (the
“Altria Investment”), pursuant to a subscription agreement dated
December 7, 2018;
- the potential exercise of one
warrant of the Company included as part of the Altria Investment
held by Altria, pre-emptive rights and/or top-up rights in
connection with the Altria Investment, including proceeds to us
that may result therefrom;
- expectations regarding the use of
proceeds of equity financings, including the proceeds from the
Altria Investment;
- the legalization of the use of
cannabis for medical or adult-use in jurisdictions outside of
Canada, the related timing and impact thereof and our intentions to
participate in such markets, if and when such use is
legalized;
- expectations regarding the
potential success of, and the costs and benefits associated with,
our joint ventures, strategic alliances and equity investments,
including the strategic partnership with Ginkgo Bioworks Holdings,
Inc.;
- our ability to execute on our
strategy and the anticipated benefits of such strategy;
- expectations of the amount or
frequency of impairment losses, including as a result of the
write-down of intangible assets, including goodwill;
- the ongoing impact of the
legalization of additional cannabis product types and forms for
adult-use in Canada, including federal, provincial, territorial and
municipal regulations pertaining thereto, the related timing and
impact thereof and our intentions to participate in such
markets;
- the future performance of our
business and operations;
- our competitive advantages and
business strategies;
- the competitive conditions of the
industry;
- the expected growth in the number
of customers using our products;
- our ability or plans to identify,
develop, commercialize or expand our technology and research and
development ("R&D") initiatives in cannabinoids, or the success
thereof;
- expectations regarding acquisitions
and dispositions and the anticipated benefits therefrom;
- uncertainties as to our ability to
exercise an option to buy Class A shares of common stock of
PharmaCann Inc. (the "PharmaCann Option") in the near term or the
future, in full or in part, including the uncertainties as to the
status and future development of federal legalization of cannabis
in the U.S. and our ability to realize the anticipated benefits of
the transaction with PharmaCann, Inc. (“PharmaCann”);
- expectations regarding revenues,
expenses and anticipated cash needs;
- expectations regarding cash flow,
liquidity and sources of funding;
- expectations regarding capital
expenditures;
- the expansion of our production and
manufacturing, the costs and timing associated therewith and the
receipt of applicable production and sale licenses;
- expectations regarding our growing,
production and supply chain capacities;
- expectations regarding the
resolution of litigation and other legal and regulatory
proceedings, reviews and investigations;
- expectations with respect to future
production costs;
- expectations with respect to future
sales and distribution channels and networks;
- the expected methods to be used to
distribute and sell our products;
- the anticipated future gross
margins of our operations;
- accounting standards and
estimates;
- our ability to timely and
effectively remediate any material weaknesses in our internal
control over financial reporting; and
- expectations regarding the costs
and benefits associated with our contracts and agreements with
third parties, including under our third-party supply and
manufacturing agreements.
Certain of the Forward-Looking Statements
contained herein concerning the industries in which we conduct our
business are based on estimates prepared by us using data from
publicly available governmental sources, market research, industry
analysis and on assumptions based on data and knowledge of these
industries, which we believe to be reasonable. However, although
generally indicative of relative market positions, market shares
and performance characteristics, such data is inherently imprecise.
The industries in which we conduct our business involve risks and
uncertainties that are subject to change based on various factors,
which are described further below.
The Forward-Looking Statements contained herein
are based upon certain material assumptions that were applied in
drawing a conclusion or making a forecast or projection, including:
(i) our ability to efficiently and effectively exit the Stayner
facility, receive the benefits of the Stayner exit and acquire raw
materials on a timely and cost-effective basis from third-parties,
including GrowCo; (ii) our ability, and the abilities of our joint
ventures and our suppliers and distributors, to effectively deal
with the restrictions, limitations and health issues presented by
the COVID-19 pandemic and the ability to continue our production,
distribution and sale of our products and customer demand for and
use of our products; (iii) management’s perceptions of historical
trends, current conditions and expected future developments; (iv)
our ability to generate cash flow from operations; (v) general
economic, financial market, regulatory and political conditions in
which we operate; (vi) the production and manufacturing
capabilities and output from our facilities and our joint ventures,
strategic alliances and equity investments; (vii) consumer interest
in our products; (viii) competition; (ix) anticipated and
unanticipated costs; (x) government regulation of our activities
and products including, but not limited, to the areas of taxation
and environmental protection; (xi) the timely receipt of any
required regulatory authorizations, approvals, consents, permits
and/or licenses; (xii) our ability to obtain qualified staff,
equipment and services in a timely and cost-efficient manner;
(xiii) our ability to conduct operations in a safe, efficient and
effective manner; (xiv) our ability to realize anticipated
benefits, synergies or generate revenue, profits or value from our
recent acquisitions into our existing operations; (xv) our ability
to realize the expected cost savings, efficiencies and other
benefits of our Realignment and employee turnover related thereto;
(xvi) our ability to complete planned dispositions, and, if
completed, obtain our anticipated sales price; (xvii) our ability
to exercise the PharmaCann Option and realize the anticipated
benefits of the transaction with PharmaCann; and (xviii) other
considerations that management believes to be appropriate in the
circumstances. While our management considers these assumptions to
be reasonable based on information currently available to
management, there is no assurance that such expectations will prove
to be correct.
By their nature, Forward-Looking Statements are
subject to inherent risks and uncertainties that may be general or
specific and which give rise to the possibility that expectations,
forecasts, predictions, projections or conclusions will not prove
to be accurate, that assumptions may not be correct and that
objectives, strategic goals and priorities will not be achieved. A
variety of factors, including known and unknown risks, many of
which are beyond our control, could cause actual results to differ
materially from the Forward-Looking Statements in this press
release and other reports we file with, or furnish to, the SEC and
other regulatory agencies and made by our directors, officers,
other employees and other persons authorized to speak on our
behalf. Such factors include, without limitation, the risk that we
may not be able to exit our Stayner facility in a disciplined
manner or achieve the anticipated benefits of the exit or be able
to access raw materials on a timely and cost-effective basis from
third-parties, including GrowCo; the COVID-19 pandemic may disrupt
our operations and those of our suppliers and distribution channels
and negatively impact the demand for and use of our products; the
risk that cost savings and any other synergies from the Altria
Investment may not be fully realized or may take longer to realize
than expected; the risk that we will not complete planned
dispositions, or, if completed, obtain our anticipated sales price;
the implementation and effectiveness of key personnel changes; the
risks that our Realignment, the closure of the Stayner facility and
our further leveraging of our strategic partnerships will not
result in the expected cost savings, efficiencies and other
benefits or will result in greater than anticipated turnover in
personnel; future levels of revenues; consumer demand for cannabis
and U.S. hemp products; our ability to manage disruptions in credit
markets or changes to our credit ratings; future levels of capital,
environmental or maintenance expenditures, general and
administrative and other expenses; the success or timing of
completion of ongoing or anticipated capital or maintenance
projects; business strategies, growth opportunities and expected
investment; the adequacy of our capital resources and liquidity,
including but not limited to, availability of sufficient cash flow
to execute our business plan (either within the expected timeframe
or at all); the potential effects of judicial, regulatory or other
proceedings, or threatened litigation or proceedings, on our
business, financial condition, results of operations and cash
flows; volatility in and/or degradation of general economic,
market, industry or business conditions; compliance with applicable
environmental, economic, health and safety, energy and other
policies and regulations and in particular health concerns with
respect to vaping and the use of cannabis and U.S. hemp products in
vaping devices; the anticipated effects of actions of third parties
such as competitors, activist investors or federal (including U.S.
federal), state, provincial, territorial or local regulatory
authorities or self-regulatory organizations; changes in regulatory
requirements in relation to our business and products; legal or
regulatory obstacles that could prevent us from being able to
exercise the PharmaCann Option and thereby realizing the
anticipated benefits of the transaction with PharmaCann; dilution
of our fully diluted ownership of PharmaCann and the loss of our
rights as a result of that dilution; our remediation of material
weaknesses in our internal control over financial reporting and the
improvement of our control environment and our systems, processes
and procedures; and the factors discussed under the heading “Risk
Factors” in the Company's Annual Report on Form 10-K for the year
ended December 31, 2021. Readers are cautioned to consider these
and other factors, uncertainties and potential events carefully and
not to put undue reliance on Forward-Looking Statements.
Forward-Looking Statements are provided for the
purposes of assisting the reader in understanding our financial
performance, financial position and cash flows as of and for
periods ended on certain dates and to present information about
management’s current expectations and plans relating to the future,
and the reader is cautioned not to place undue reliance on these
Forward-Looking Statements because of their inherent uncertainty
and to appreciate the limited purposes for which they are being
used by management. While we believe that the assumptions and
expectations reflected in the Forward-Looking Statements are
reasonable based on information currently available to management,
there is no assurance that such assumptions and expectations will
prove to have been correct. Forward-Looking Statements are made as
of the date they are made and are based on the beliefs, estimates,
expectations and opinions of management on that date. We undertake
no obligation to update or revise any Forward-Looking Statements,
whether as a result of new information, estimates or opinions,
future events or results or otherwise or to explain any material
difference between subsequent actual events and such
Forward-Looking Statements. The Forward-Looking Statements
contained in this press release and other reports we file with, or
furnish to, the SEC and other regulatory agencies and made by our
directors, officers, other employees and other persons authorized
to speak on our behalf are expressly qualified in their entirety by
these cautionary statements.
As used in this press release, “CBD” means
cannabidiol and “U.S. hemp” has the meaning given to the term
“hemp” in the U.S. Agricultural Improvement Act of 2018, including
hemp-derived CBD.
Cronos Group Inc.Consolidated Balance
SheetsAs of December 31, 2021 and 2020(In
thousands of USD)
|
As of December 31, |
|
|
2021 |
|
|
|
2020 |
|
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
886,973 |
|
|
$ |
1,078,023 |
|
Short-term investments |
|
117,684 |
|
|
|
211,766 |
|
Accounts receivable, net |
|
22,067 |
|
|
|
8,928 |
|
Other receivables |
|
5,765 |
|
|
|
10,033 |
|
Current portion of loans receivable, net |
|
5,460 |
|
|
|
7,083 |
|
Prepaids and other current assets |
|
8,967 |
|
|
|
11,161 |
|
Inventory, net |
|
32,802 |
|
|
|
44,002 |
|
Held-for-sale assets |
|
— |
|
|
|
1,176 |
|
Total current assets |
|
1,079,718 |
|
|
|
1,372,172 |
|
Investments in equity accounted investees, net |
|
16,764 |
|
|
|
19,235 |
|
Other investments |
|
118,392 |
|
|
|
— |
|
Non-current portion of loans receivable, net |
|
80,635 |
|
|
|
87,191 |
|
Property, plant and equipment, net |
|
74,070 |
|
|
|
187,599 |
|
Right-of-use assets |
|
8,882 |
|
|
|
9,776 |
|
Goodwill |
|
1,098 |
|
|
|
179,522 |
|
Intangible assets, net |
|
18,079 |
|
|
|
69,720 |
|
Other assets |
|
100 |
|
|
|
467 |
|
Total
assets |
$ |
1,397,738 |
|
|
$ |
1,925,682 |
|
|
|
|
|
Liabilities |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
11,218 |
|
|
$ |
19,346 |
|
Accrued liabilities |
|
26,069 |
|
|
|
22,756 |
|
Current portion of lease obligation |
|
2,711 |
|
|
|
1,322 |
|
Derivative liabilities |
|
14,375 |
|
|
|
163,410 |
|
Total current liabilities |
|
54,373 |
|
|
|
206,834 |
|
Due to non-controlling interests |
|
1,913 |
|
|
|
2,188 |
|
Non-current portion of lease obligation |
|
7,095 |
|
|
|
8,492 |
|
Deferred income tax liability |
|
81 |
|
|
|
— |
|
Total
liabilities |
|
63,462 |
|
|
|
217,514 |
|
|
|
|
|
Shareholders’
equity |
|
|
|
Share capital |
|
595,497 |
|
|
|
569,260 |
|
Additional paid-in capital |
|
32,465 |
|
|
|
34,596 |
|
Retained earnings |
|
659,416 |
|
|
|
1,064,509 |
|
Accumulated other comprehensive income |
|
49,865 |
|
|
|
42,999 |
|
Total equity attributable to shareholders of Cronos Group |
|
1,337,243 |
|
|
|
1,711,364 |
|
Non-controlling interests |
|
(2,967 |
) |
|
|
(3,196 |
) |
Total shareholders'
equity |
|
1,334,276 |
|
|
|
1,708,168 |
|
Total liabilities and
shareholders' equity |
$ |
1,397,738 |
|
|
$ |
1,925,682 |
|
Cronos Group Inc.Consolidated
Statements of Net Income (Loss) and Comprehensive Income
(Loss)For the years ended December 31, 2021, 2020
and 2019(In thousands of USD, except share and per share
amounts)
|
Year ended December 31, |
|
|
2021 |
|
|
|
2020 |
|
|
|
2019 |
|
Net revenue, before
excise taxes |
$ |
89,486 |
|
|
$ |
54,353 |
|
|
$ |
25,639 |
|
Excise taxes |
|
(15,051 |
) |
|
|
(7,634 |
) |
|
|
(1,889 |
) |
Net
revenue |
|
74,435 |
|
|
|
46,719 |
|
|
|
23,750 |
|
Cost of sales |
|
80,008 |
|
|
|
46,497 |
|
|
|
12,174 |
|
Inventory write-down |
|
11,961 |
|
|
|
26,055 |
|
|
|
29,173 |
|
Gross
profit |
|
(17,534 |
) |
|
|
(25,833 |
) |
|
|
(17,597 |
) |
Operating
expenses |
|
|
|
|
|
Sales and marketing |
|
44,937 |
|
|
|
34,386 |
|
|
|
23,048 |
|
Research and development |
|
23,331 |
|
|
|
20,366 |
|
|
|
12,155 |
|
General and administrative |
|
96,482 |
|
|
|
80,569 |
|
|
|
81,479 |
|
Share-based payments |
|
10,151 |
|
|
|
15,361 |
|
|
|
11,619 |
|
Depreciation and amortization |
|
4,484 |
|
|
|
2,872 |
|
|
|
2,090 |
|
Impairment loss on goodwill and indefinite-lived intangible
assets |
|
236,056 |
|
|
|
40,000 |
|
|
|
— |
|
Impairment loss on long-lived assets |
|
127,619 |
|
|
|
— |
|
|
|
— |
|
Repurposing charges |
|
— |
|
|
|
— |
|
|
|
5,328 |
|
Total operating expenses |
|
543,060 |
|
|
|
193,554 |
|
|
|
135,719 |
|
Operating loss |
|
(560,594 |
) |
|
|
(219,387 |
) |
|
|
(153,316 |
) |
Other income
(expense) |
|
|
|
|
|
Interest income, net |
|
9,071 |
|
|
|
18,415 |
|
|
|
27,969 |
|
Gain on revaluation of derivative liabilities |
|
151,360 |
|
|
|
129,254 |
|
|
|
1,276,819 |
|
Gain on disposal of investments |
|
— |
|
|
|
4,789 |
|
|
|
16,277 |
|
Share of loss from equity accounted investments |
|
(6,313 |
) |
|
|
(4,510 |
) |
|
|
(2,009 |
) |
Gain (loss) on revaluation of financial instruments |
|
8,611 |
|
|
|
(9 |
) |
|
|
197 |
|
Other, net |
|
730 |
|
|
|
(1,825 |
) |
|
|
— |
|
Total other income |
|
163,459 |
|
|
|
146,114 |
|
|
|
1,319,253 |
|
Income (loss) before income
taxes |
|
(397,135 |
) |
|
|
(73,273 |
) |
|
|
1,165,937 |
|
Income tax expense
(benefit) |
|
(431 |
) |
|
|
1,347 |
|
|
|
— |
|
Income (loss) from continuing
operations |
|
(396,704 |
) |
|
|
(74,620 |
) |
|
|
1,165,937 |
|
Loss from discontinued operations |
|
(500 |
) |
|
|
(650 |
) |
|
|
(363 |
) |
Net income (loss) |
|
(397,204 |
) |
|
|
(75,270 |
) |
|
|
1,165,574 |
|
Net loss attributable to
non-controlling interest |
|
(1,097 |
) |
|
|
(2,133 |
) |
|
|
(932 |
) |
Net income (loss) attributable to Cronos
Group |
$ |
(396,107 |
) |
|
$ |
(73,137 |
) |
|
$ |
1,166,506 |
|
Comprehensive income
(loss) |
|
|
|
|
|
Net income (loss) |
$ |
(397,204 |
) |
|
$ |
(75,270 |
) |
|
$ |
1,165,574 |
|
Foreign exchange gain on translation |
|
8,192 |
|
|
|
14,951 |
|
|
|
37,687 |
|
Comprehensive income (loss) |
|
(389,012 |
) |
|
|
(60,319 |
) |
|
|
1,203,261 |
|
Comprehensive income (loss)
attributable to non-controlling interest |
|
229 |
|
|
|
(2,343 |
) |
|
|
(953 |
) |
Comprehensive income (loss) attributable to Cronos
Group |
$ |
(389,241 |
) |
|
$ |
(57,976 |
) |
|
$ |
1,204,214 |
|
Net income (loss) from
continuing operations per share |
|
|
|
|
|
Basic |
$ |
(1.07 |
) |
|
$ |
(0.21 |
) |
|
$ |
3.76 |
|
Diluted |
$ |
(1.07 |
) |
|
$ |
(0.21 |
) |
|
$ |
3.33 |
|
Weighted average
number of outstanding shares |
|
|
|
|
|
Basic |
|
370,390,965 |
|
|
|
351,576,848 |
|
|
|
310,067,179 |
|
Diluted |
|
370,390,965 |
|
|
|
351,576,848 |
|
|
|
342,811,992 |
|
Cronos Group Inc.Consolidated
Statements of Net Income (Loss) and Comprehensive Income
(Loss)For the three months ended December 31, 2021
and 2020(In thousands of USD, except share and per share
amounts, unaudited)
|
Three months ended December 31, |
|
|
2021 |
|
|
|
2020 |
|
Net revenue, before
excise taxes |
$ |
31,394 |
|
|
$ |
19,956 |
|
Excise taxes |
|
(5,599 |
) |
|
|
(2,910 |
) |
Net
revenue |
|
25,795 |
|
|
|
17,046 |
|
Cost of sales |
|
23,852 |
|
|
|
16,913 |
|
Inventory write-down |
|
— |
|
|
|
15,031 |
|
Gross
profit |
|
1,943 |
|
|
|
(14,898 |
) |
Operating
expenses |
|
|
|
Sales and marketing |
|
10,653 |
|
|
|
13,537 |
|
Research and development |
|
6,557 |
|
|
|
7,411 |
|
General and administrative |
|
19,613 |
|
|
|
19,481 |
|
Share-based payments |
|
2,420 |
|
|
|
2,463 |
|
Depreciation and amortization |
|
1,455 |
|
|
|
620 |
|
Impairment loss on goodwill and indefinite-lived intangible
assets |
|
1,000 |
|
|
|
— |
|
Impairment loss on long-lived assets |
|
122,880 |
|
|
|
— |
|
Repurposing charges |
|
— |
|
|
|
— |
|
Total operating expenses |
|
164,578 |
|
|
|
43,512 |
|
Operating loss |
|
(162,635 |
) |
|
|
(58,410 |
) |
Other income
(expense) |
|
|
|
Interest income, net |
|
2,385 |
|
|
|
3,149 |
|
Gain (loss) on revaluation of derivative liabilities |
|
20,070 |
|
|
|
(53,541 |
) |
Gain on disposal of investments |
|
— |
|
|
|
46 |
|
Share of loss from equity accounted investments |
|
(2,141 |
) |
|
|
(1,217 |
) |
Gain (loss) on revaluation of financial instruments |
|
8,463 |
|
|
|
(302 |
) |
Other, net |
|
(306 |
) |
|
|
(947 |
) |
Total other income (expense) |
|
28,471 |
|
|
|
(52,812 |
) |
Income (loss) before income
taxes |
|
(134,164 |
) |
|
|
(111,222 |
) |
Income tax expense
(benefit) |
|
(272 |
) |
|
|
359 |
|
Income (loss) from continuing
operations |
|
(133,892 |
) |
|
|
(111,581 |
) |
Loss from discontinued operations |
|
— |
|
|
|
(131 |
) |
Net income (loss) |
|
(133,892 |
) |
|
|
(111,712 |
) |
Net income (loss) attributable
to non-controlling interests |
|
(255 |
) |
|
|
(479 |
) |
Net income (loss)
attributable to Cronos Group |
$ |
(133,637 |
) |
|
$ |
(111,233 |
) |
|
|
|
|
Comprehensive income
(loss) |
|
|
|
Net income (loss) |
$ |
(133,892 |
) |
|
$ |
(111,712 |
) |
Foreign exchange gain (loss) on translation |
|
1,256 |
|
|
|
50,605 |
|
Comprehensive income (loss) |
|
(132,636 |
) |
|
|
(61,107 |
) |
Comprehensive income (loss)
attributable to non-controlling interests |
|
62 |
|
|
|
(693 |
) |
Comprehensive income (loss) attributable to Cronos
Group |
$ |
(132,698 |
) |
|
$ |
(60,414 |
) |
Net income (loss) from
continuing operations per share |
|
|
|
Basic |
$ |
(0.36 |
) |
|
$ |
(0.31 |
) |
Diluted |
$ |
(0.36 |
) |
|
$ |
(0.31 |
) |
Weighted average
number of outstanding shares |
|
|
|
Basic |
|
374,227,930 |
|
|
|
358,068,549 |
|
Diluted |
|
374,227,930 |
|
|
|
358,068,549 |
|
Cronos Group Inc.Consolidated
Statements of Cash FlowsFor the years ended
December 31, 2021, 2020, and 2019(In thousands of USD)
|
Year ended December 31, |
|
|
2021 |
|
|
|
2020 |
|
|
|
2019 |
|
Operating
activities |
|
|
|
|
|
Net income (loss) |
$ |
(397,204 |
) |
|
$ |
(75,270 |
) |
|
$ |
1,165,574 |
|
Adjustments to reconcile net
income (loss) to net cash used in operating activities: |
|
|
|
|
|
Gain on revaluation of derivative liabilities |
|
(151,360 |
) |
|
|
(129,254 |
) |
|
|
(1,276,819 |
) |
Impairment loss on goodwill and indefinite-lived intangible
assets |
|
236,056 |
|
|
|
40,000 |
|
|
|
— |
|
Impairment loss on long-lived assets |
|
127,619 |
|
|
|
— |
|
|
|
— |
|
Expected credit losses on long-term financial assets |
|
12,202 |
|
|
|
2,437 |
|
|
|
— |
|
Share-based payments |
|
10,151 |
|
|
|
15,361 |
|
|
|
11,619 |
|
Depreciation and amortization |
|
15,402 |
|
|
|
11,176 |
|
|
|
4,271 |
|
Share of loss from investments in equity accounted investees |
|
6,313 |
|
|
|
4,510 |
|
|
|
2,009 |
|
Gain on disposal of investments |
|
— |
|
|
|
(4,789 |
) |
|
|
(16,277 |
) |
Loss (gain) on revaluation of financial instruments |
|
(8,611 |
) |
|
|
9 |
|
|
|
(197 |
) |
Non-cash sales and marketing |
|
1,383 |
|
|
|
2,863 |
|
|
|
410 |
|
Non-cash repurposing costs |
|
— |
|
|
|
— |
|
|
|
4,439 |
|
Other non-cash operating activity expense (income) |
|
(3,562 |
) |
|
|
1,215 |
|
|
|
(46 |
) |
Changes in operating assets
and liabilities: |
|
|
|
|
|
Accounts receivable, net |
|
(13,163 |
) |
|
|
(4,724 |
) |
|
|
(566 |
) |
Other receivables |
|
3,838 |
|
|
|
(5,300 |
) |
|
|
(10,509 |
) |
Prepaids and other current assets |
|
3,102 |
|
|
|
— |
|
|
|
(4,585 |
) |
Inventory, net |
|
11,565 |
|
|
|
(4,866 |
) |
|
|
(23,073 |
) |
Accounts payable |
|
(2,373 |
) |
|
|
(3,292 |
) |
|
|
(46 |
) |
Accrued liabilities |
|
(4,974 |
) |
|
|
5,053 |
|
|
|
12,603 |
|
Net cash used in operating activities |
|
(153,616 |
) |
|
|
(144,871 |
) |
|
|
(131,193 |
) |
|
|
|
|
|
|
Investing
activities |
|
|
|
|
|
Proceeds from short-term investments |
|
215,303 |
|
|
|
296,730 |
|
|
|
— |
|
Purchase of short-term investments |
|
(119,610 |
) |
|
|
(201,326 |
) |
|
|
(299,923 |
) |
Purchase of investments |
|
(110,392 |
) |
|
|
— |
|
|
|
(1,658 |
) |
Proceeds from sale of investments |
|
— |
|
|
|
4,789 |
|
|
|
19,614 |
|
Proceeds from held-for-sale assets |
|
2,770 |
|
|
|
— |
|
|
|
— |
|
Advances to joint ventures, net of repayments |
|
(4,707 |
) |
|
|
(44,652 |
) |
|
|
(58,472 |
) |
Purchase of property, plant and equipment, net of disposals |
|
(11,144 |
) |
|
|
(31,412 |
) |
|
|
(38,664 |
) |
Purchase of intangible assets, net of disposals |
|
(1,118 |
) |
|
|
(3,979 |
) |
|
|
(289 |
) |
Acquisition of Redwood |
|
— |
|
|
|
— |
|
|
|
(224,295 |
) |
Other non-cash investing activity expense |
|
— |
|
|
|
— |
|
|
|
415 |
|
Net cash provided by (used in) investing activities |
|
(28,898 |
) |
|
|
20,150 |
|
|
|
(603,272 |
) |
Cronos Group Inc.Consolidated
Statements of Cash FlowsFor the years ended
December 31, 2021, 2020, and 2019(In thousands of USD)
|
Year ended December 31, |
|
|
2021 |
|
|
|
2020 |
|
|
|
2019 |
|
Financing
activities |
|
|
|
|
|
|
Advance to non-controlling interests |
|
— |
|
|
|
(1,019 |
) |
|
|
— |
|
Withholding taxes paid on equity awards |
|
(13,458 |
) |
|
|
(2,148 |
) |
|
|
(915 |
) |
Proceeds from Altria Investment |
|
— |
|
|
|
— |
|
|
|
1,809,556 |
|
Proceeds from exercise of Top-up Rights |
|
— |
|
|
|
— |
|
|
|
67,051 |
|
Proceeds from exercise of warrants and options |
|
16 |
|
|
|
116 |
|
|
|
1,455 |
|
Share issuance costs |
|
— |
|
|
|
— |
|
|
|
(3,722 |
) |
Repayment of construction loan payable |
|
— |
|
|
|
— |
|
|
|
(15,971 |
) |
Advance under Credit Facility |
|
— |
|
|
|
— |
|
|
|
48,715 |
|
Repayment of Credit Facility |
|
— |
|
|
|
— |
|
|
|
(48,309 |
) |
Net cash provided by (used in) financing activities |
|
(13,442 |
) |
|
|
(3,051 |
) |
|
|
1,857,860 |
|
Effect of foreign currency
translation on cash and cash equivalents |
|
4,906 |
|
|
|
6,102 |
|
|
|
52,371 |
|
Net change in cash and cash
equivalents |
|
(191,050 |
) |
|
|
(121,670 |
) |
|
|
1,175,766 |
|
Cash and cash equivalents,
beginning of period |
|
1,078,023 |
|
|
|
1,199,693 |
|
|
|
23,927 |
|
Cash and cash equivalents, end of period |
$ |
886,973 |
|
|
$ |
1,078,023 |
|
|
$ |
1,199,693 |
|
|
|
|
|
|
|
|
Supplementary cash
flow information: |
|
|
|
|
|
|
Interest paid |
$ |
— |
|
|
$ |
— |
|
|
$ |
759 |
|
Interest received |
|
8,988 |
|
|
|
18,105 |
|
|
|
25,520 |
|
Taxes paid |
|
892 |
|
|
|
— |
|
|
|
— |
|
Non-GAAP Measures
Cronos Group reports its financial results in
accordance with Generally Accepted Accounting Principles in the
U.S. (“U.S. GAAP”). This press release refers to measures not
recognized under U.S. GAAP (“non-GAAP measures”). These non-GAAP
measures do not have a standardized meaning prescribed by U.S. GAAP
and are therefore unlikely to be comparable to similar measures
presented by other companies. Rather, these non-GAAP measures are
provided as a supplement to corresponding U.S. GAAP measures to
provide additional information regarding our results of operations
from management’s perspective. Accordingly, non-GAAP measures
should not be considered a substitute for, or superior to, the
financial information prepared and presented in accordance with
U.S. GAAP. All non-GAAP measures presented in this press release
are reconciled to their closest reported U.S. GAAP measure.
Adjusted EBITDA
Management reviews Adjusted EBITDA, a non-GAAP
measure which excludes non-cash items or items that do not reflect
management’s assessment of on-going business performance of our
operating segments. Management defines Adjusted EBITDA as net
income (loss) before interest, tax expense, depreciation and
amortization adjusted for: share of loss from equity accounted
investments; impairment loss on goodwill and intangible assets;
impairment loss on long-lived assets; gain on revaluation of
derivative liabilities; gain on revaluation of financial
instruments; transaction costs related to strategic projects;
other, net; loss from discontinued operations; share-based
payments; and review and investigation costs related to the
restatements of the Company’s 2019 and 2021 interim financial
statements, including costs related to the Company’s responses to
the reviews of such financial statements by various regulatory
authorities and legal costs defending shareholder class action
complaints brought against the Company as a result of the 2019
restatement.
Management believes that Adjusted EBITDA
provides the most useful insight into underlying business trends
and results and provides a more meaningful comparison of
year-over-year results. Management uses Adjusted EBITDA for
planning, forecasting and evaluating business and financial
performance, including allocating resources and evaluating results
relative to employee compensation targets.
Adjusted EBITDA is reconciled to net income
(loss) as follows for the years ended December 31, 2021 and
2020:
(in thousands of USD) |
Year ended December 31, 2021 |
|
US |
|
ROW |
|
Corporate |
|
Total |
Net income (loss) |
$ |
(283,883 |
) |
|
$ |
(81,811 |
) |
|
$ |
(31,510 |
) |
|
$ |
(397,204 |
) |
Interest income, net |
|
(40 |
) |
|
|
(9,031 |
) |
|
|
— |
|
|
|
(9,071 |
) |
Income tax benefit |
|
(89 |
) |
|
|
(342 |
) |
|
|
— |
|
|
|
(431 |
) |
Share of loss from equity accounted investees |
|
— |
|
|
|
6,313 |
|
|
|
— |
|
|
|
6,313 |
|
Impairment loss on goodwill and indefinite-lived intangible
assets |
|
236,019 |
|
|
|
37 |
|
|
|
— |
|
|
|
236,056 |
|
Impairment loss on long-lived assets |
|
2,955 |
|
|
|
124,664 |
|
|
|
— |
|
|
|
127,619 |
|
Gain on revaluation of derivative liabilities |
|
— |
|
|
|
(151,360 |
) |
|
|
— |
|
|
|
(151,360 |
) |
Gain on revaluation of financial instruments |
|
— |
|
|
|
(8,611 |
) |
|
|
— |
|
|
|
(8,611 |
) |
Transaction costs |
|
— |
|
|
|
— |
|
|
|
3,801 |
|
|
|
3,801 |
|
Other, net |
|
3 |
|
|
|
(733 |
) |
|
|
— |
|
|
|
(730 |
) |
Loss from discontinued operations |
|
— |
|
|
|
500 |
|
|
|
— |
|
|
|
500 |
|
Share-based payments |
|
3,401 |
|
|
|
6,750 |
|
|
|
— |
|
|
|
10,151 |
|
Financial statement review costs |
|
— |
|
|
|
— |
|
|
|
7,102 |
|
|
|
7,102 |
|
Depreciation and amortization |
|
917 |
|
|
|
14,485 |
|
|
|
— |
|
|
|
15,402 |
|
Adjusted EBITDA |
$ |
(40,717 |
) |
|
$ |
(99,139 |
) |
|
$ |
(20,607 |
) |
|
$ |
(160,463 |
) |
(in thousands of USD) |
Year ended December 31, 2020 |
|
US |
|
ROW |
|
Corporate |
|
Total |
Net income (loss) |
$ |
(77,368 |
) |
|
$ |
32,671 |
|
|
$ |
(30,573 |
) |
|
$ |
(75,270 |
) |
Interest expense (income), net |
|
18 |
|
|
|
(18,433 |
) |
|
|
— |
|
|
|
(18,415 |
) |
Income tax expense |
|
323 |
|
|
|
1,024 |
|
|
|
— |
|
|
|
1,347 |
|
Share of loss from equity accounted investees |
|
— |
|
|
|
4,510 |
|
|
|
— |
|
|
|
4,510 |
|
Impairment loss on goodwill and indefinite-lived intangible
assets |
|
40,000 |
|
|
|
— |
|
|
|
— |
|
|
|
40,000 |
|
Gain on revaluation of derivative liabilities |
|
— |
|
|
|
(129,254 |
) |
|
|
— |
|
|
|
(129,254 |
) |
Loss on revaluation of financial instruments |
|
— |
|
|
|
9 |
|
|
|
— |
|
|
|
9 |
|
Transaction costs |
|
40 |
|
|
|
— |
|
|
|
— |
|
|
|
40 |
|
Gain on disposal of investments |
|
— |
|
|
|
(4,789 |
) |
|
|
— |
|
|
|
(4,789 |
) |
Other, net |
|
20 |
|
|
|
1,805 |
|
|
|
— |
|
|
|
1,825 |
|
Loss from discontinued operations |
|
— |
|
|
|
650 |
|
|
|
— |
|
|
|
650 |
|
Share-based payments |
|
8,714 |
|
|
|
6,647 |
|
|
|
— |
|
|
|
15,361 |
|
Financial statement review costs |
|
— |
|
|
|
— |
|
|
|
9,688 |
|
|
|
9,688 |
|
Depreciation and amortization |
|
234 |
|
|
|
6,811 |
|
|
|
— |
|
|
|
7,045 |
|
Adjusted EBITDA |
$ |
(28,019 |
) |
|
$ |
(98,349 |
) |
|
$ |
(20,885 |
) |
|
$ |
(147,253 |
) |
Adjusted EBITDA is reconciled to net income
(loss) as follows for the three months ended December 31, 2021
and 2020:
(in thousands of USD) |
Three months ended December 31, 2021 |
|
US |
|
ROW |
|
Corporate |
|
Total |
Net income (loss) |
$ |
(10,445 |
) |
|
$ |
(116,489 |
) |
|
$ |
(6,958 |
) |
|
$ |
(133,892 |
) |
Interest income, net |
|
(13 |
) |
|
|
(2,372 |
) |
|
|
— |
|
|
|
(2,385 |
) |
Income tax benefit |
|
(89 |
) |
|
|
(183 |
) |
|
|
— |
|
|
|
(272 |
) |
Share of loss from equity accounted investees |
|
— |
|
|
|
2,141 |
|
|
|
— |
|
|
|
2,141 |
|
Impairment loss on goodwill and indefinite-lived intangible
assets |
|
1,000 |
|
|
|
— |
|
|
|
— |
|
|
|
1,000 |
|
Impairment loss on long-lived assets |
|
— |
|
|
|
122,880 |
|
|
|
— |
|
|
|
122,880 |
|
Gain on revaluation of derivative liabilities |
|
— |
|
|
|
(20,070 |
) |
|
|
— |
|
|
|
(20,070 |
) |
Gain on revaluation of financial instruments |
|
— |
|
|
|
(8,463 |
) |
|
|
— |
|
|
|
(8,463 |
) |
Other, net |
|
3 |
|
|
|
303 |
|
|
|
— |
|
|
|
306 |
|
Share-based payments |
|
867 |
|
|
|
1,553 |
|
|
|
— |
|
|
|
2,420 |
|
Financial statement review costs |
|
— |
|
|
|
— |
|
|
|
2,487 |
|
|
|
2,487 |
|
Depreciation and amortization |
|
381 |
|
|
|
6,110 |
|
|
|
— |
|
|
|
6,491 |
|
Adjusted EBITDA |
$ |
(8,296 |
) |
|
$ |
(14,590 |
) |
|
$ |
(4,471 |
) |
|
$ |
(27,357 |
) |
(in thousands of USD) |
Three months ended December 31, 2020 |
|
US |
|
ROW |
|
Corporate |
|
Total |
Net income (loss) |
$ |
(12,861 |
) |
|
$ |
(92,969 |
) |
|
$ |
(5,882 |
) |
|
$ |
(111,712 |
) |
Interest expense (income), net |
|
4 |
|
|
|
(3,153 |
) |
|
|
— |
|
|
|
(3,149 |
) |
Income tax expense |
|
180 |
|
|
|
179 |
|
|
|
— |
|
|
|
359 |
|
Share of loss from equity accounted investees |
|
— |
|
|
|
1,217 |
|
|
|
— |
|
|
|
1,217 |
|
Loss on revaluation of derivative liabilities |
|
— |
|
|
|
53,541 |
|
|
|
— |
|
|
|
53,541 |
|
Loss on revaluation of financial instruments |
|
— |
|
|
|
302 |
|
|
|
— |
|
|
|
302 |
|
Gain on disposal of investments |
|
— |
|
|
|
(46 |
) |
|
|
— |
|
|
|
(46 |
) |
Other, net |
|
(1 |
) |
|
|
948 |
|
|
|
— |
|
|
|
947 |
|
Loss from discontinued operations |
|
— |
|
|
|
131 |
|
|
|
— |
|
|
|
131 |
|
Share-based payments |
|
783 |
|
|
|
1,680 |
|
|
|
— |
|
|
|
2,463 |
|
Financial statement review costs |
|
— |
|
|
|
— |
|
|
|
864 |
|
|
|
864 |
|
Depreciation and amortization |
|
130 |
|
|
|
1,820 |
|
|
|
— |
|
|
|
1,950 |
|
Adjusted EBITDA |
$ |
(11,765 |
) |
|
$ |
(36,350 |
) |
|
$ |
(5,018 |
) |
|
$ |
(53,133 |
) |
Foreign currency exchange
rates
All currency amounts in this press release are
stated in U.S. dollars ("USD"), which is our reporting currency,
unless otherwise noted. All references to “dollars” or “$” are to
USD. The assets and liabilities of the Company’s foreign operations
are translated into USD at the exchange rate in effect as of
December 31, 2021, December 31, 2020 and
December 31, 2019 as reported using Bloomberg. Transactions
affecting shareholders' equity are translated at historical foreign
exchange rates. The consolidated statements of net income (loss)
and comprehensive income (loss) and the consolidated statements of
cash flows of the Company's foreign operations are translated into
USD by applying the average foreign exchange rate in effect for the
reporting period as reported using Bloomberg.
The exchange rates used to translate from USD to
Canadian dollars (“C$”) is shown below:
(Exchange rates are shown as
C$ per $) |
Year ended December 31, |
|
2021 |
|
2020 |
|
2019 |
Average rate |
1.2541 |
|
1.3411 |
|
1.3268 |
Spot rate |
1.2746 |
|
1.2751 |
|
1.2990 |
For further information, please
contact: Shayne Laidlaw Investor
Relations Tel: (416)
504-0004 investor.relations@thecronosgroup.com
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