Cronos 4Q22 Earnings report.
Cronos Group (CRON) is a Hedgeye Cannabis Best Idea Long.
Cronos reported 4Q22 earnings results yesterday and put up net revenue of $22.9M in the quarter, which represents a YoY decrease of 11.27% but beat street estimates by 3.56%. Full-year revenue grew 23.5% YoY to $91.9M, which was primarily driven by an increase in net revenue in the ROW segment driven by growth in the Israeli medical market and higher extract sales in the Canadian adult-use market. In constant currency, net revenue in Israel was up 137% in 2022 compared to 2021. Gross profit of $(0.2)M in 4Q22 declined by $2.2M from 4Q21. The decline year-over-year was primarily driven by reduced gross profit in the Rest of World (“ROW”) segment. Adjusted EBITDA of $(21.2)M in 4Q22 improved by $6.1M from 4Q21. The improvement year-over-year was primarily driven by decreases in general and administrative expenses, sales and marketing expenses, and research and development expenses primarily as a result of the Company's strategic realignment. The company had $28.7M in operating expense savings in 2022 and has identified an additional $10 to $20 million in anticipate saving across operating expense categories in 2023.
“2022 was a transformative year for Cronos in which we executed a business realignment, including a cost savings program, while staying laser-focused on continuing to build our portfolio of borderless products,” said Mike Gorenstein, Chairman, President and CEO of Cronos. “We exceeded our originally stated goal by saving $28.7 million in operating expenses in 2022, to right-size our cost structure to be more adaptable to the changing landscape we face globally in the cannabis industry."
The company did miss street expectations for EPS, but the stock was up 3% on the print due to the continued execution of management's plan. This company is cutting costs while investing in its brands, waiting for the regulatory constraints to ease. They ended the year with $878M in cash, which puts them in a great position to be aggressive when the time comes. We are not saying 2023 will be a huge year for Cronos, but we do expect them to continue executing their cost-saving plan and believe that this name is positioned to thrive over the tail duration.
Is This Innovation?
Two Massachusetts entrepreneurs are looking to strip down their existing business model and reimagine it to provide what would be a unique offering in the state’s competitive cannabis industry. “The market is very saturated. There are a lot of operators, and everyone is offering the same experience,” owner Nick Spagnola. “This is definitely a way to stand out while also keeping the spirit of the existing business alive.” So how are they going to stand out in the cannabis space? These two entrepreneurs have plans to transform their strip club business into a topless cannabis dispensary. “We do have some experience on the cannabis side and some on the nudity side,” Spagnola “We want to replace this night club scene and alcohol with something that is harmless in comparison.” I am not sure what the laws are around this because, frankly, it has never been done beofre but, at the very least, you have to give these guys props for their creativity.
Curaleaf Expands In Connecticut.
Curaleaf Holdings (CURLF) announced that it will commence adult-use sales at its Hartford, Connecticut, today. This is the company's second dispensary to serve adult-use consumers in Connecticut and the first dispensary in the capital city to offer adult-use products. In January, Curaleaf began adult-use cannabis sales at its Stamford location. The Company currently serves medical patients at two of its other Connecticut dispensaries in Milford and Groton, and anticipates welcoming adult-use customers at additional locations in the future, pending regulatory approvals. "Curaleaf is well positioned to serve Connecticut's quickly expanding needs for both the adult-use and medical markets," said Matt Darin, CEO of Curaleaf. "We continue to expand our product offerings, and our knowledgeable team provides our patients and customers with guidance and education on how cannabis can meet their wellness and lifestyle needs."
