Cronos Group Slides 3% on Q1 Results

Revenue came in under expectations, while there was a large asterisk next to the net profit line item.

Eric Volkman

Cronos Group (NASDAQ:CRON) traded lower on Friday in the wake of the Q1 of fiscal 2020 results it published early in the day.

For the quarter, the company posted revenue of $8.43 million, which was 15% higher on a quarter-over-quarter basis and nearly three times the Q1 2019 figure. On the bottom line, net income rose to $75.7 million ($0.20 per diluted share) from the previous quarter’s $61.6 million.

Cannabis flower in a bowl atop U.S. currency.

Image source: Getty Images.

On average, analysts estimated Cronos would earn $10.8 million on the top line and post a per-share net profit of only $0.07.

As in previous quarters, however, the company’s bottom line was influenced by a large adjustment — namely, the revaluation of derivative liabilities. This has to do with the value of warrants that Cronos’ strategic investor Altria holds in the company, and is essentially an accounting adjustment.

Without Q1’s $113 million revaluation, Cronos would have been well in the red on the bottom line. Perhaps a more revealing line item in this respect was the company’s operating loss, which came in at just over $45 million for the quarter. That was narrower than the nearly $64 million deficit of Q4 2019 but deeper than the $10.1 million posted in last-year’s Q1.

The marijuana company said its revenue got a boost from the rollout of new products, such as vaporizers for the recreational cannabis market in its native Canada. South of that border, Cronos signaled out a new cannabidiol (CBD)-infused moisturizer sold under its U.S. CBD brand, Lord Jones.

Cronos stock fell by 3% Friday on a day when the major stock market indexes all posted gains.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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