Cronos Group Inc. Q1 FY2026 earnings call

Strategic Execution & Market Milestones

• Kronos achieved record consolidated net revenue and gross profit in Q1 2026, with international markets also hitting record net revenue.
• Spinach brand in Canada captured the number one market share position across all vape formats, with the three top-selling vape SKUs in the country all being Spinach cartridges, and maintained its market-leading position in edibles.
• Kronos Israel extended its market share lead as the number one cannabis brand, driven by the performance of its Peace Naturals brand, and achieved 53% year-over-year net revenue growth.
• The newly launched Lord Jones premium flower brand received strong initial consumer reception in Israel, completing a tiered product portfolio across value, mainstream, and premium price points that broadens market reach.

Operational Updates

• The GroCo production expansion is now fully online, and prior supply constraints for flower in Canada have begun to ease, enabling improved product availability and share gains.
• The pending acquisition of Cannadalar, the largest operator in the Netherlands Legal Adult Use Cannabis Program and the only industrial-scale greenhouse cultivator in the market, remains on track to close in summer 2026, pending regulatory closing conditions.
• Kronos holds the strongest balance sheet in the cannabis industry, with no debt and $822 million in total cash, cash equivalents, and short-term investments, providing financial flexibility for organic growth, M&A, and shareholder returns.

Financial Highlights

• Consolidated gross margins remain strong, and adjusted EBITDA for the quarter was the second highest in Kronos' company history.
• The Board of Directors approved a new $50 million share repurchase program, reflecting management's confidence in the company's long-term value and commitment to returning capital to shareholders.

Consolidated Kronos reported net revenue of $45.2 million for Q1 2026, a 40% year-over-year increase. Gross profit and adjusted gross profit hit $19.2 million, growing 39% year-over-year, and adjusted EBITDA came in at $5.1 million, a $2.8 million year-over-year improvement.

1. Israel: Kronos Israel delivered its ninth consecutive quarter of record net revenue, growing 53% year-over-year, and extended its market share lead as the number one brand in the country. It contributes a large share of consolidated revenue growth and carries no excise tax, supporting margin expansion.

2. Canada: Canadian brands generated 18% year-over-year retail sales growth, compared to 2% industry-wide growth. Key segment performance includes: Vapes (Spinach holds 9.8% total market share, 11.1% share in vape cartridges, both number one; Spinach Puffers reached number two in all-in-one vapes 4 months post-launch), Edibles (Kronos maintains 20.8% market share, number one, with gummies at 22.7%), Flower (Kronos moved from number four to number three in market share following GroCo expansion, which eased prior supply constraints), Pre-rolls (new Spinach Sticks launch helped Spinach climb to number eight in non-infused pre-rolls).

3. Other International Markets: Other international markets delivered 97% year-over-year growth and achieved record net revenue, driven by sustained momentum in Germany.

No formal full-year financial guidance was issued on the call. Management provided the following forward-looking expectations:

• Supply constraints for cannabis flower will continue to ease through 2026 following the completion of the GroCo expansion.
• The Cannadalar acquisition is expected to close in summer 2026, with the extended long stop date to September representing an abundance of caution rather than a reflection of material issues with the transaction.
• Incremental efficiency gains and yield improvements will be realized at GroCo over the coming quarters, though large step-change capacity increases are not expected after the initial ramp is complete.
• Momentum for the Spinach Puffers all-in-one vape platform in Canada is expected to continue through 2026, with pre-rolls identified as the next key growth lever for the Canadian business.
• Kronos will continue monitoring U.S. cannabis rescheduling developments to identify and evaluate potential market entry opportunities as regulatory details are finalized.

• All forward-looking statements, including expectations for the Cannadalar acquisition, regulatory changes, and GroCo performance, are subject to inherent risks and uncertainties that could cause actual results to differ materially from projections, as detailed in Kronos' SEC filings.
• Regulatory approval for the Cannadalar acquisition is still pending from the Dutch regulator, and closing timing is dependent on regulator processing speed, even though no material issues have been identified to date.
• Capacity allocation tradeoffs exist between growing demand in Canada, Israel, and new European markets, requiring quarterly optimization to maximize overall company margins.
• U.S. cannabis rescheduling outcomes remain uncertain, with final regulatory details still pending that will determine the size and nature of any potential opportunities for Kronos.
• Competitive intensity could increase in the Dutch cannabis market as new market participants come online and existing operators scale and improve efficiency.

Q: Kenric Taiji asked two questions: first, where does GroCo stand on its expansion ramp, efficiency, and throughput relative to original expectations, and second, why was the Cannadalar long stop date extended to September, and is a third-quarter close more likely than the expected second-quarter close? / A: Management stated that GroCo is already fully planted and at target throughput, with most of the initial ramp work complete, though small incremental efficiency improvements will be dialed in over coming quarters. The extension of the long stop date is purely an abundance of caution to account for regulatory processing timelines; no material issues have delayed the transaction, and management remains confident in the approval process.

Q: Bill Kirk asked for management's perspective on recent U.S. cannabis rescheduling news, how it impacts Kronos' potential plans for the U.S. market, and how GroCo's capacity will mature over the next year. / A: Management called U.S. rescheduling one of the most significant positive regulatory milestones in the last decade, and remains optimistic while noting that final details will dictate market opportunities that Kronos will evaluate. For GroCo, the major ramp phase is complete, and only small incremental efficiency and yield gains are expected over the next year, with no large step-change in capacity.

Q: Derek Lessard asked what specific levers drove Kronos' recent Canadian share gains, what the go-forward strategy is, and how management is protecting margins amid current competitive dynamics. / A: Management explained that eased supply constraints from GroCo's expansion unlocked unmet demand for flower in Canada, and the successful launch of Spinach Puffers drove large share gains in the fast-growing all-in-one vape segment; pre-rolls are the next key growth lever. Competitive intensity is lower than prior deflationary periods, and scaling is improving fixed cost absorption to lower overall costs and maintain margin flexibility.

Q: Pablo Zunich asked for an update on Dutch cannabis market conditions ahead of the Cannadalar acquisition, and whether the upcoming summer regulatory review is expected to change market rules. / A: Management noted that competition has heated up slightly as a new licensed producer came online, but the market is growing and competitive intensity is far lower than in Canada or Israel. No major regulatory changes are expected from the summer review, which will just present data on the existing successful program to support future market expansion; net store count growth is expected over the next year.