Q2 2025 Cronos Group Inc Earnings Call
Speaker #1: Good morning . My name is Steven and I will be your conference operator today . I would like to welcome everyone to Cronos Group Inc. 2025 second quarter Earnings conference call .
Speaker #1: Today's call is being recorded . At this time , I would like to turn the call over to Harrison Aaron , Senior Director , Investor Relations and Corporate Development .
Speaker #1: Please go ahead .
Speaker #2: Thank you , Steven , and thank you for joining us today to review Cronos 2025 second Quarter Financial and Business Performance . Today , I'm joined by our chairman , president and CEO , Mike Gorenstein and our CFO , Anna Shlimak .
Speaker #2: Cronos issued a news release announcing our financial results this morning , which is filed on our Edgar and Cedar profiles . This information and the prepared remarks will also be posted on our website under Investor Relations .
Speaker #2: Before I turn the call over to Mike , let me remind you that we may make forward looking statements and refer to non-GAAP financial measures during this call .
Speaker #2: These forward looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward looking statements .
Speaker #2: Factors that could cause actual results to differ materially from expectations are detailed in our earnings materials and our SEC filings that are available on our website .
Speaker #2: By which any forward looking statements made during this call are qualified in their entirety . Information about non-GAAP financial measures , including reconciliations to U.S.
Speaker #2: GAAP , can also be found in the earnings materials that are available on our website . Lastly , we will be making statements regarding market share information throughout this conference call , and unless otherwise stated , all market share data is provided by Hifyre .
Speaker #2: We will now make prepared remarks , and then we'll move to a question and answer session . With that , I'll pass it over to Cronos chairman , president and CEO Mike Gorenstein .
Speaker #3: Thank you , Harrison , and good morning , everyone . Cronos Group core business continues to perform well , driven by robust demand across key markets and product categories despite flower supply constraints .
Speaker #3: We grew net revenue by 21% year over year , including the consolidation of Growco , the strong demand we are seeing for our flower .
Speaker #3: As a testament to our focus on developing best in class borderless products , we are pleased with the continued improvement in operating fundamentals in the first half and remain focused on our key goals for the year , launching our expanded cultivation capacity at Growco , improving our share position in Canada once its additional supply comes online .
Speaker #3: Continuing to grow the business in higher margin international markets , and remaining disciplined on costs . Our spinach brand continues to be a standout performer , and in Q2 is the number two cannabis brand in Canada with a 4.7% market share across formats .
Speaker #3: In the flower category , spinach ranked number three with 4.9% market share . Despite ongoing supply constraints that have prevented us from fully meeting demand .
Speaker #3: This limited availability reflects the exceptional popularity of our flower products . Our team is strategically allocating inventory to ensure availability of top selling SKUs , while preparing to unlock significant additional capacity through the expansion of Growco .
Speaker #3: The initial sales of flower from the expansion are expected to begin this fall , and once fully online , this new capacity will help meet demand and reaccelerate growth in the vape category .
Speaker #3: Spinach achieved the number four position overall with 6.5% share , and within the vape cartridge category , spinach holds the number two ranking with 8.4% share with spinach .
Speaker #3: Pink Lemonade Vape , the best selling 1.2g vape cartridge in Canada . We're incredibly pleased with our strength in vapes and look forward to launching innovative products in this category .
Speaker #3: We continue to demonstrate strong consumer demand and brand strength in this edibles category , with five Spinach gummies ranking in the top ten of all edible products in Canada .
Speaker #3: Our industry leading gummies maintained an impressive 20% market share in Q2 , underscoring our continued leadership in innovative , high quality cannabis edibles and reflecting strong consumer loyalty to spinach branded products .
Speaker #3: Our Lord Jones brand has strengthened its premium positioning with the launch of concentrates . We recently launched Lord Jones Live Resin caviar with standout offerings like gorilla , Grape and Orange Velvet .
Speaker #3: These high terpene , no compromise extracts pair premium strains with state of the art hardware , delivering a refined and flavorful experience for discerning consumers .
Speaker #3: The Lord Jones brand remains the category leader in the hash infused pre-roll segment , with 28.5% market share in Q2 . We'll be launching live resin caviar infused pre-rolls later this month , expanding the Lord Jones product line into new high end market segments and supporting our leadership in the premium pre-roll category .
Speaker #3: Moving to the international side of the business , our core medical brand , Peace Naturals and Value brand Lit continue to grow in Israel .
Speaker #3: Cronos Israel record quarter , growing revenue by 36% year over year . By continuing to gain share within a competitive and evolving market .
Speaker #3: Peace Naturals ended the quarter as the number one flour brand in Israel , with well over 20% market share , according to pharmacy data collected by Cronos .
Speaker #3: Cronos Israel launched several new flower strains in Q2 under both the Peace Naturals and Lit brand , bolstering its bestselling portfolio of products .
Speaker #3: Last quarter , we discussed proposed duty on Canadian medical cannabis imports in Israel , and I'd like to provide an update . Israel's finance minister rejected the proposed duty in April 2025 , leading to an attempted legal challenge .
Speaker #3: In the July 2025 decision , the Israel Ministry of Justice concluded that the Minister of Finance's veto of the proposed duty was valid .
Operating expenses, excluding restructuring costs were 19.1 million in the quarter. The year-over-year decline of 2.3 million driven by a 2.2 million year-over-year decline in GNA while operating expenses have have been down year-over-year in the first half, we expect Opex to be relatively flat on a year-over-year basis for the second half of 2025.
Adjusted. EBA on the second quarter was 1.7 million and Improvement of 12.7 million. Year-over-year driven by the revenue and margin enhancing consolidation of growco a revenue. Mix shift to higher price non-canadian markets with Israel and International Accounting for 43% of our revenue and reductions in operating expenses.
Turning to the balance sheet and cash flow statement. The company ended. The quarter was 834 million in cash, cash equivalents and short-term Investments down, 3.4 million from q1, 2025 driven by approximately 7 million, networking Capital outflow, as well. As by capex, Bend and share repurchase of approximately 4 million each. This was, partially offset by positive cash flow from operations before changes in working capital of approximately 10 million and its approximately 2 million of FX benefits.
In July, we invested 18 and 1.5 million in high tide through a 5-year convertible loan.
The loan has a face value of 22 million with a 16% original issue discount and there is interest at 4% of the face value of the loan per Anam. Payable quarterly. If the loan is not converted, our yield to maturity is expected to be approximately 8% upon mutual agreement of Kronos and high tide. The loan is convertible into high tide Equity at a price of 4.20 cents Canadians per share. Additionally, with this investment, we received a 5-year common share purchase for an exercisable for up to 3.84% of high tide at an exercise price of 3.91 CAD per warrant share.
In closing, we posted another strong quarter demonstrating sustained growth and continued improvement in our operating fundamentals. Despite the flower Supply constraints, we have been experiencing, we look forward to fall 2025 flower sales from growco expansion to relieve these Supply, constraints and drive further growth for our business.
That's, I'd like to hand it back to Mike for a brief comment before. Q&A
To wrap up our performance. This quarter demonstrates that chronosis Core Business is strong and resilient.
with leading Brands like spinach and Lord Jones accelerating International momentum with our medical Grand piece Naturals, and the growco capacity expansion,
Growth.
We're confident in our strategy and excited about what the head for the rest of 2025.
Thank you, and we'll now open the call for questions.
Thank you. At this time. We will conduct the question and answer session.
As a reminder, to ask a question, you will need to press star 1, 1 on your telephone and wait for your name to be announced.
To withdraw your question. Please press star 1 1 again.
Please stand by while we compile the Q&A roster.
1 moment, please.
1 moment.
Okay. I'm showing no questions at this time. I'd like to thank you for your participation in today's conference.
this does conclude the program, you may now disconnect