Cronos stock slumps as Q2 revenue misses estimates amid US business restructuring

Cronos (NASDAQ:CRON) stock fell ~9% premarket Aug. 9 after the company’s revenue came below estimates.

Net revenue grew +47.62% Y/Y to $23.06M. The company said the increase was mainly due to growth in net revenue in the Rest of World (ROW) segment driven by growth in the Israeli medical market and the Canadian adult-use market.

Israel net revenue grew +212% Y/Y to $7.2M.

“We are also refocusing the U.S. business to prioritize hero SKUs while leaning into adult-use product formats and concentrating on the direct-to-consumer channel. Although early in the repositioning of our U.S. business, we are confident the new strategy will improve our bottom-line while maintaining brand equity that we can leverage into cannabinoids beyond CBD, and in the U.S. THC market once regulations permit,” said Chairman, President and CEO Mike Gorenstein.

Q2 net loss narrowed to -$20.34M, compared to -$179.35M. The improvement was mainly driven by the reduction in non-cash impairment loss on goodwill and indefinite-lived intangible assets and fluctuation in non-cash gain on revaluation of derivative liabilities, according to the company.

As part of a restructuring, during Q2 Cronos began a phased exit of wholesale beauty category to focus the portfolio on adult-use product formats within the direct-to-consumer channel. Due to this, the company reduced sales and marketing headcount in the U.S.

Adjusted EBITDA for Q2 was -$18.8M, compared to -$49.76M.Meanwhile, Gross profit was $4.12M, compared to -$15.78M in Q2 2021.

Outlook:

Due to the restructuring and other cost-cutting measures, the company now expects to incur ~$6.4M in expenses in connection with the Realignment, an increase from the previously stated $5.8M.

In addition, Cronos expects capital expenditures of ~$2.2M to modernize information technology systems and build distribution capabilities.

As of June 30, related capital expenditures were $0.3M. The company added that as it continues with its transition through H2, it expects it will begin to incur the majority of the expected capital expenditures.

CRON -8.94% to $3.26 premarket Aug. 9