Cronos Group (NASDAQ: CRON) reported Q1 EPS of $0.20, versus $0.33 reported last year. Revenue for the quarter came in at $8.43 million, versus $3 million reported last year.

First Quarter 2020

• Net revenue of $8.4 million in Q1 2020 increased by $5.4 million from Q1 2019. The increase year-over-year was primarily driven by continued growth in the adult-use Canadian cannabis market, sales resulting from the launch of cannabis vaporizers to the Canadian market, including both adult-use and direct-to-consumer, and the inclusion of the Redwood acquisition in our financial results.
• Gross profit (loss) of $(6.5) million in Q1 2020 decreased by $8.0 million from Q1 2019. The decrease year-over-year was primarily driven by an inventory write-down of $8.0 million on dried cannabis and cannabis extracts, as well as an increase in the marginal production cost at our Peace Naturals Campus, as we continue working towards operating at full capacity after the repurposing of the facility in the fourth quarter of 2019.
• The Company incurred an inventory write-down of $8.0 million, on dried cannabis and cannabis extracts, primarily driven by fixed-price contracts negotiated prior to cannabis product price compression due to broader trends of oversupply in the Canadian market. If we were to adjust for the effects of the inventory write-downs, gross profit in Q1 2020, would have been $1.5 million, representing a gross margin of 18%. We anticipate further inventory write-downs in the short-term due to pricing pressures in the marketplace and the impact of the Company's operational repurposing of the Peace Naturals Campus.
• Reported operating loss of $45.1 million in Q1 2020 increased by $34.9 million from Q1 2019. The reduction year-over-year was primarily driven by an increase in general and administrative expenses as a result of increased headcount, internal review costs of $4.4 million related to the restatement of our 2019 interim financial statements, higher sales and marketing costs related to brand development, and research and development costs related to our Ginkgo partnership, activities at Cronos Fermentation, and spending on vaporizer innovation at the Cronos Device Labs research and development center.

“Cronos Group started 2020 energized and determined to continue to see through our core strategic initiatives to drive long-term and sustainable growth. This quarter, we moved closer to officially entering the Israeli medical cannabis market with our Cronos Israel operations preparing to sell PEACE NATURALS™ branded dried flower products to medical patients. The Israeli medical market is a growing channel, and we look forward to serving this market in 2020 and beyond,” said Mike Gorenstein, CEO of Cronos Group.

“Despite the challenges and uncertainty posed by the COVID-19 pandemic, we remain agile and focused as a business. Our brand portfolio continues to launch innovative products to consumers as we adapt to an online-first distribution model in both the U.S. and Canada. We continue to reach our stakeholders and consumers through creative digital marketing. And our product innovation and R&D projects continue to progress. We believe the mission of our Company, to improve lives through cannabinoid innovation, resonates especially well during these times. We remain well-positioned and committed to generating sustainable, long-term value for shareholders and are confident 2020 will be a successful building year for Cronos Group.”

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