Global cannabinoid company, Cronos Group Inc (NASDAQ:CRON, TSX:CRON) has announced that it will be exiting its existing US hemp-derived CBD-focused operations by the end of the second quarter of 2023. The company is winding down this part of its business to improve its near-term cash flow and prepare for direct entry into the US THC market when the regulatory conditions change.
Cronos CEO, Mike Gorenstein, said: “We believe our resources are best spent on staying laser-focused on becoming cash flow positive by driving cost savings and process efficiencies for our borderless adult-use products. Achieving our goal to generate positive cash flow in 2024 will advance our industry-leading cash balance and put us in the best position to win in the US once regulatory conditions change.”
Cronos Group has $836 million in cash and short-term investments and zero debt as of March 31, 2023. The company is increasing its previously-announced 2023 operating expense savings target from a range of $10 million to $20 million to a new range of $20 million to $25 million, partially due to its decision to wind down and exit its existing US operations. Cronos Group expects to incur up to $1.8 million in expenses during the second quarter of 2023 due to inventory write-offs, severance and other employee costs, and asset impairment charges in connection to the business exit.
Cronos has plans to bring the Lord Jones brand back to its adult-use roots by launching it in the Canadian market in the fourth quarter of 2023. With the exit of its US CBD business, Cronos aims to invest and grow its business in global cannabis and THC markets in the near future.
Cronos Group stock has dropped nearly 32% year to date as of Thursday’s closing price.
Contact Sean at [email protected]