Cronos Group Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Cronos delivered a record quarter in Q3 2025, driven by robust demand across key markets.
• In Canada, flower supply constraints were offset by strong edibles and vape growth; GrowCo Phase 2 expansion completed, with flower sales starting in fall 2025.
• Spinach brand was a top performer in Canada: #2 cannabis brand, #4 in flower, #3 in vapes, #2 in vape cartridges.
• Lord Jones continued to elevate its premium positioning in Canada, with 10.7% market share in chocolates and 17.5% in hash/live resin pre-rolls.
• Israel saw record net revenue, with PEACE NATURALS and Lit brands growing, and patient count up nearly 5% year-to-date.
• Other international markets had shipment timing impacts, but Germany was strong and PEACE NATURALS expanded to more markets.
• Cronos maintained a strong balance sheet with $824 million in cash, cash equivalents, and short-term investments.

Segment Performance

• Canada: Flower revenue was softer year-over-year due to supply constraints, but offset by strong edibles and vape growth. Spinach brand was a standout: #2 cannabis brand in Canada with 4.5% overall market share, #4 in flower with 4.9% share, #3 in vapes with 7% share, #2 in vape cartridges with 9.5% share. Edibles: Spinach #1 with 19.7% market share, gummies #1 with 22.8% share. SOURZ launched multipacks and limited editions. Lord Jones: 10.7% market share in chocolates, 17.5% in hash/live resin-infused pre-rolls.
• Israel: Record net revenue, with PEACE NATURALS and Lit brands growing. Medical patient count up nearly 5% year-to-date.
• Other International Markets: Revenue recognition shifted to 4Q due to shipment timing, but Germany was strong, and PEACE NATURALS available in 7 markets (Canada, Israel, Germany, U.K., Australia, Switzerland, Malta). Consolidated net revenue was $36.3 million, a 6% year-over-year increase. Gross profit was $18.3 million, with a 50% gross margin, up from 31% in Q3 2024. Adjusted EBITDA was $5.7 million, an improvement of $11.7 million year-over-year.

Guidance

• Flower sales in Canada expected to improve in 2026 with resolution of supply constraints from the GrowCo expansion.
• Blended adjusted gross margins of Q2 and Q3 are indicative of current underlying margins, but GrowCo capacity may impact future margins.
• GrowCo expansion is a key growth driver, along with product launches in existing markets.

Risks

• Flower supply constraints in Canada initially impacted revenue.
• Potential regulatory changes in Germany could shape future market dynamics.
• Shipment timing issues in other international markets affected revenue recognition in Q3.

Q: Bill Kirk of ROTH Capital Partners asked if any GrowCo sales occurred in 3Q and about growth magnitude in 2026, and if underlying gross margins would improve with GrowCo capacity.

A: Michael Gorenstein said GrowCo sales started towards the end of 3Q and would gradually increase into 2026. Anna Shlimak mentioned blended Q2 and Q3 gross margins are indicative of current margins, but GrowCo capacity may impact future margins.

Q: Bill Kirk further asked about impact of Flower supply constraints in Canada and international shipment timing.

A: Michael Gorenstein said Flower supply constraints in Canada weighed on 3Q, but GrowCo expansion will help, and shipment timings in other international markets will normalize, with half looking like the first half.