Cronos Group Inc. Q4 FY2025 earnings call

• Kronos had a record year in 2025 with 25% organic net revenue growth, achieving record net revenue in the fourth quarter and full year, as well as record full-year gross profit and adjusted EBITDA. This was driven by strong consumer demand for leading brands and growth from Israel and the international platform.
• In Canada: Spinach showed stellar performance in vapes (became number 2 overall vape brand and number 1 in vape cartridges subcategory), edibles (Sours had strong growth with market share ~22%), and had supply constraints in flour but expected to ease in 2026. Unveiled Spinach Puffers in the all-in-one vape device category.
• Lord Jones: Remains market leader in Canada hash and live resin-infused pre-rolls and launched in Israel with curated premium flower offerings.
• International: Israel net revenue grew 52% year-over-year, Peace Naturals was top-selling brand there; outside Israel, net revenue up 68% year-over-year led by Germany. Entered into an agreement to acquire Cannadalar, a large company in the Netherlands legal adult use cannabis program.
• Fourth quarter gross profit was $16.2 million with a 36% margin, an improvement from Q4 2024. Operating expenses (excluding restructuring costs and impairments) in Q4 were $22.5 million, modestly up year over year. Adjusted EBITDA in Q4 was $0.5 million, improved year over year but lower than first three quarters due to gross margin pressures and expense timing.

In Canada, record quarterly net revenue up 42% year over year, with key contributions from flour, vapes, and edibles. Spinach was a standout in vapes (became number 2 overall vape brand in Canada, number 1 in vape cartridges subcategory in Q4) and edibles (Sours had strong growth with market share approaching 22% for the quarter). Flour had supply constraints. Lord Jones is market leader in Canada hash and live resin-infused pre-rolls and launched in Israel. Internationally, in Israel, net revenue grew 52% year-over-year, and outside Israel, Peace Naturals and Lit drove 68% year-over-year net revenue growth. In 2025, Kronos grew net revenue 25% organically, achieved record net revenue, gross profit, and adjusted EBITDA. Fourth quarter consolidated net revenue was $44.5 million, up 47% year over year. Full year adjusted gross margin was 43%.

• Committed to the share repurchase program. Will be opportunistic and disciplined in evaluating M&A opportunities, such as the Canadalar acquisition which advances the borderless product strategy and establishes a strong presence in an important market.
• Expect the closing of the Canadalar transaction, increased production capacity from GroCo's expansion, continued growth in branded products, and increased presence in international markets. Aim to deliver sustainable top-line growth at attractive gross margins while maintaining disciplined cost management.

Q: Talked about product allocation from new GroCo capacity, how decisions are made and considerations like permit timing.

A: Historically balanced between demand and margin. Now with more supply, can fill Canada and scale in Europe. Q4 had new product but starting to be more consistent with past with more product for Canada.

Q: Anna mentioned go-forward gross margins similar to 2025 full-year, what leads to improvement and potential further upside.

A: Q4 had expansion-related production quality mix and one-time expenses, which won't be issues going forward. Margin expansion in Europe possible with Canadalar, but standalone business expected to have 43% margin.

Q: Follow-up on gross margin expectations, factor in Canadalar and timing in quarter.

A: Comments on standalone business, Canadalar is profitable with good margins, some timing shifts in international revenue outside Israel, rest is business growth.

Q: Key initiatives in 2026 and spend levels.

A: Staying committed to buyback, looking at international opportunities, new markets, new products/brands. Expected closing of Canadalar, increased production from GroCo, growth in branded products, and international presence, spend levels appropriate.

Q: Domestic market drivers, especially Canada.

A: Canada up over 40% year over year due to additional supply allowing filling existing demand. Pipeline of potential opportunities, committed to buyback, looking at international and new products/brands, innovation in genetics, edibles, and vapes like Puffers.

Q: Why Holland was a priority over Germany, downstream opportunities, lessons from Pharmacan.

A: Germany has regulatory uncertainty and distribution challenges, Netherlands is on strategy with closed market and brand leverage. Downstream opportunities are market-specific, take long-term view. Lessons from Pharmacan include being disciplined, not moving ahead of regulations, and importance of operational pivot in U.S. as it reschedules cannabis