Consolidated net revenue increased 59% in Full Year 2021 compared to Full Year 2020
Announces the planned exit of its Peace Naturals Campus in Stayner, Ontario to streamline supply chain and improve profitability
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 Update
Following 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
