Image source: The Motley Fool.

DATE

Thursday, Aug. 6, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chairman, President, and Chief Executive Officer - Michael Gorenstein
• Chief Financial Officer - Anna Shlimak
• Senior Director of Investor Relations and Corporate Development - Harrison Aaron

TAKEAWAYS

• Net Revenue -- $53 million, up 58% year over year primarily driven by higher sales in Israel, Germany, and Canada.
• Gross Profit -- $28.5 million, up 96% year over year reflecting higher average sales prices and efficiencies from overhead cost absorption.
• Adjusted EBITDA -- $13.1 million, a record for the company driven by gross profit expansion.
• Net Income -- $35.7 million, compared to a net loss of $38.5 million in the prior year period.
• Total Cash and Investments -- $827 million, including cash, short-term investments, and interest-bearing deposits as of June 30, 2026.
• Canada Revenue -- $28.7 million, up 50% year over year led by flower and extract sales.
• Israel Revenue -- $15 million, up 60% year over year or 32% on a constant currency basis.
• International Revenue (Excluding Israel) -- $9.3 million, up 88% year over year driven by demand for flower products in Germany.
• Vape Market Share -- 10.6% in Canada, with the Spinach brand holding the top position for the second consecutive quarter.
• Edible Market Share -- 20.8% in Canada, maintaining the top brand position for the eighth consecutive quarter.
• Flower Market Share -- 5.4% in Canada, ranking as the third-largest brand nationally.
• Pre-roll Market Share -- 3.1% in Canada, with Spinach rising to the seventh rank in the market.
• Operating Expenses -- $21 million, up $1.2 million year over year due to increased marketing, R&D, and administrative costs.
• Adjusted Gross Margin -- 54%, representing a 11 percentage point improvement year over year.
• Share Repurchases (H1) -- 12.3 million shares, repurchased in the first half of 2026.
• Q2 Share Repurchases -- $60 million, representing a significant return of capital to shareholders in the second quarter.
• Capital Expenditures -- $1.8 million, used for property, plant, and equipment.
• Interest Income -- $8.8 million, reflecting the company's significant cash balance.
• Foreign Currency Gain -- $20.2 million, primarily driven by fluctuations in the New Israeli Shekel.
• Transaction Costs -- $581,000, primarily related to the pending acquisition of CanAdelaar.
• Inventory Net -- $52.7 million, up from $46.8 million at the end of 2025.
• Inventory Write-down -- $388,000, compared to $86,000 in the prior year period.
• Gummies Market Share -- 22.5% in Canada, where Spinach remains a leader in the category.
• Vape Cartridge Share -- 11.8% in Canada, ranking as the top brand for the third consecutive quarter.

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

• Gorenstein stated, "The Trade Levies Commissioner of the Israeli Ministry of Economy and Industry announced that it had opened a new investigation into alleged dumping of medical cannabis imports from Canada," noting that a new complaint was filed following a previous investigation that resulted in no duties.
• Gorenstein noted that "there have been a number of geopolitical and regulatory issues that have made operating in Israel uniquely difficult," though the company remains committed to the region.

SUMMARY

Management at Cronos Group Inc. (CRON +3.31%) reported record financial performance for the second quarter, driven by significant growth in the Canadian retail market and expansion in international medical channels. The company achieved record net revenue, gross profit, and adjusted EBITDA while maintaining a total cash and investment balance of $827 million. Strategic priorities included the continued expansion of the Spinach brand in Canada, the development of a medical presence in Germany, and the integration of supply chain facilities. Management confirmed it is progressing toward the acquisition of CanAdelaar in the Netherlands to enter the European adult-use market. The company also returned capital to shareholders through the repurchase of 12.3 million shares during the first half of the year.

• Gorenstein confirmed the acquisition of CanAdelaar is expected to close in the second half of 2026, stating that the "timing appears to reflect the ordinary course of the Dutch regulatory review process."
• CFO Shlimak attributed gross margin favorability to "seasonally better growing conditions," which improved yields and the quality of Grade A flower.
• Management reported that the German market is currently less competitive than established markets in Canada and Israel, allowing for strong growth through a focused value proposition.
• Gorenstein stated that "genetics is probably where you'll see the most efficiency gain," as the company continues to refine its breeding program and facility operations.
• The company is prioritizing "borderless products" such as IP for edibles and vapes for its long-term United States entry strategy, rather than building state-by-state infrastructure.
• In Canada, the SOURZ by Spinach Fully Blasted offerings secured five of the top 10 edible SKU positions nationwide during the quarter.

INDUSTRY GLOSSARY

• Hifyre: A cannabis retail analytics platform providing market share and ranking data for the Canadian industry.
• SEDAR: The System for Electronic Document Analysis and Retrieval, used by Canadian public companies to file disclosure documents.
• EDGAR: The Electronic Data Gathering, Analysis, and Retrieval system used by the U.S. Securities and Exchange Commission.
• Constant Currency: A reporting method that eliminates the effects of foreign exchange rate fluctuations to assess underlying performance.
• SKU: Stock Keeping Unit, a unique identifier for a specific product version used for inventory management.
• New Israeli Shekel (ILS): The official currency of Israel.
• Non-GAAP: Financial measures that are not defined by standard accounting principles and are used to provide additional performance context.

Full Conference Call Transcript

Operator: Good morning. My name is Hailey, and I will be your conference operator today. I would like to welcome everyone to Cronos' 2026 Second Quarter Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Harrison Aaron, Senior Director of Investor Relations and Corporate Development. Please go ahead.

Harrison Aaron: Thank you, Hailey, and thank you for joining us today to review Cronos' 2026 Q2 financial and business performance. Today, I'm joined by our Chairman, President, and CEO, Mike Gorenstein, and our CFO, Anna Shlimak. Cronos issued a news release announcing our financial results this morning, which is filed on our EDGAR and SEDAR profiles. This information and the prepared remarks will also be posted on our website under Investor Relations. Before I turn the call over to Mike, let me remind you that we may make forward-looking statements and refer to non-GAAP financial measures during this call.

These forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Factors that cause actual results to differ materially from expectations are detailed in our earnings materials and our SEC filings that are available on our website, by which any forward-looking statements made during this call are qualified in their entirety. Information about non-GAAP financial measures, including reconciliations to U.S. GAAP, can also be found in the earnings materials that are available on our website.

Lastly, we will be making statements regarding market share information throughout this conference call, and unless otherwise stated, all market share data is provided by Hifyre. We will now make prepared remarks, and then we'll move to a question-and-answer session. With that, I'll pass it over to Cronos' Chairman, President, and CEO, Mike Gorenstein.

Michael Gorenstein: Thanks, Harrison. Cronos delivered a stellar second quarter, organically achieving records across net revenue, gross profit, and adjusted EBITDA, as our borderless product strategy continues to gain momentum across each region in which we operate. Yesterday, the Trade Levies Commissioner of the Israeli Ministry of Economy and Industry announced that it had opened a new investigation into alleged dumping of medical cannabis imports from Canada. This announcement follows the previous investigation by the Commissioner, which did not result in the imposition of an anti-dumping duty. We dispute the allegations underlying the investigation. We will cooperate fully with the ministry and are confident the facts support us. Our position has not changed. Cronos does not engage in dumping.

During the last investigation of these same allegations, we provided the Trade Commissioner with comprehensive pricing and cost data that demonstrated that our pricing in the Israeli market was not below our pricing in Canada. We stand behind that evidence fully. Over the last few years, there have been a number of geopolitical and regulatory issues that have made operating in Israel uniquely difficult. However, we will stay committed to Cronos Israel, as we have been since 2017 when we obtained our medical cannabis license.

We have built strong infrastructure in Israel, investing over ILS 100 million in building a greenhouse manufacturing facility and a cannabinoid R&D lab, and we are one of the largest cannabis manufacturers in Israel with a team of approximately 80 people. And that team has been incredibly resilient, consistently delivering record results despite the aforementioned challenges. And this quarter was no different, with Cronos Israel delivering our 10th consecutive quarter of record net revenue, growing 60% year-over-year or 32% growth on a constant currency basis. The PEACE NATURALS brand continues to expand its lead in the Israeli medical cannabis market, based on pharmacy data collected by Cronos.

This is the second quarter of Lord Jones sales in Israel, with the brand gaining momentum in the premium flower space. Turning to Canada, we delivered record net revenue with our brands generating 25% year-over-year retail sales growth relative to industry-wide sales growth of 1% according to Hifyre. The Spinach brand had another excellent quarter, with our product portfolio continuing to demonstrate the success of our innovation efforts through significant share gains. In Canada, Spinach held its #1 position in vapes for the second consecutive quarter, with total vape market share expanding to 10.6%. And within the vape cartridge category specifically, Spinach remained #1 for the third consecutive quarter, with market share expanding to 11.8%.

In the disposable vape category, Spinach ranked #2 in Q2, with share expanding to 8.2%, driven by our PUFFERZ all-in-one innovation, which launched in late Q4 of 2025. We launched 3 new PUFFERZ flavors in the second quarter: Strawberry Burst, Peach Iced Tea, and Grape Gas. We also introduced the Spinach Orange Vanilla Twist 1-gram cartridge, the brand's first limited-time vape cartridge offering for the summer season. In edibles, Spinach remained Canada's #1 brand for the eighth consecutive quarter, with market share steady at 20.8% and share within gummies of 22.5%.

In Q2, SOURZ by Spinach Fully Blasted offerings were 5 of the top 10 edible SKUs in Canada, including the #1 edible nationwide, the Fully Blasted Blue Raspberry Watermelon 10-pack. In flower, Spinach ranked #3 in Canada, with market share expanding to 5.4%. Two Spinach flower strains: GMO Cookies and OG Kush were among the top 6 selling flower products nationally in the quarter. In pre-rolls, Spinach rose to #7 in Canada, with market share rising at 3.1%. Within infused pre-rolls, Spinach climbed to #6, with market share increasing to 3.5%. In traditional pre-rolls, Spinach also rose to #6, with market share increasing to 2.9%.

This quarter, Spinach 6, the brand's first cylindrical style pre-roll, became more widely available across additional provinces in Canada. Turning to our other international markets outside Israel, we delivered record net revenue, which increased 88% year-over-year, led by strong demand in Germany. The breadth of our international footprint continues to provide meaningful growth as we execute our borderless product strategy. Building on our international momentum, this week I had the opportunity to meet with the CanAdelaar team in the Netherlands, and the business is performing in line with our expectations. We are prepared to close the acquisition of CanAdelaar upon receipt of regulatory clearance in the Netherlands and satisfaction or waiver of the remaining closing conditions.

We expect the acquisition to close in the second half of 2026. We have not been informed of any specific issues with our regulatory clearance submission, and while it has taken longer to close than we had hoped, based on the information available to us, the timing appears to reflect the ordinary course of the Dutch regulatory review process for a transaction of this nature. As a reminder, CanAdelaar is the largest company operating within the Netherlands' legal adult-use cannabis program. We're excited and eager for CanAdelaar to join the Cronos family. We continue to execute on our capital allocation priorities and remain active under our share repurchase program, which we believe represents an attractive use of capital.

Backed by an industry-leading balance sheet and positive cash flow from operations, we are well-positioned to invest in our growth strategy while returning capital to shareholders and maintaining optionality to be opportunistic as attractive opportunities arise. Now, I'll turn it over to Anna to walk you through our second quarter financials.

Anna Shlimak: Thanks, Mike, and good morning, everyone. I will now review our second quarter 2026 results. The company reported consolidated net revenue of $53 million, a 58% increase year-over-year. The net revenue increase was primarily driven by higher cannabis flower sales in Israel, Canada, and other countries, specifically Germany, and higher cannabis extract sales in the Canadian market. Gross profit in the second quarter was $28.5 million, representing 96% year-over-year growth from Q2 2025's gross profit. The year-over-year increase was primarily due to higher average sales prices, largely driven by a mix shift to Israel and other countries, which carry no excise taxes, and higher sales volumes.

Higher sales volumes led to both higher net revenue and efficiencies from overhead cost absorption. This quarter's gross margin demonstrates what our business looks like when it's firing on all cylinders, with Q2 also benefiting from seasonally better growing conditions. However, gross margins may vary from quarter to quarter due to factors including seasonality, product and geographic mix, production volumes, and potential price compression. Accordingly, we believe our gross margin performance over a trailing 12-month period provides more useful context than a single quarter. Total operating expenses were $21 million in the quarter, a year-over-year increase of $1.2 million, driven by increases in sales and marketing, R&D, and G&A expenses.

Note that $500,000 of the $1.2 million year-over-year OpEx increase was driven by transaction costs primarily related to our pending acquisition of CanAdelaar. Adjusted EBITDA in the second quarter was a record $13.1 million, an improvement of $11.4 million year-over-year, driven by higher gross profit partially offset by higher operating expenses. Turning to the balance sheet and cash flow statement. The company ended the quarter with $827 million in cash, cash equivalents, short-term investments, and non-current interest-bearing deposits, up $5 million from Q1 2026, driven primarily by $24 million of positive cash flow from operations, partially offset by $60 million of share repurchases and $2 million of CapEx spend.

In addition to this $827 million, we hold $17 million of loan receivable, a $15 million current income tax receivable, and $5 million of other investments. In summary, we delivered a record net revenue, gross profit, and adjusted EBITDA in 2Q, a testament to our focused strategy, the underlying momentum of our business, and the team's continued strong execution. With that, we'll now open the call for questions.

Operator: [Operator Instructions] Our first question comes from the line of Bill Kirk from ROTH Capital Partners.

William Kirk: I wanted to ask about the Spinach brand. The brand has shown strength that's allowed it, to kind of, transcend across product formats. And I was hoping if you could talk about how you envision the brand and its potential to maybe cross borders and transcend borders where an adult-use brand might eventually make sense.

Michael Gorenstein: Sure, thanks. That's a great question. I think part of what's made Spinach strong in different categories is we haven't really rested on the laurels of the brand. Category by category, we focus on each product as if we were launching it new and making sure it's a best-in-class product. And I think, in every single market, you still have to win consumers. And as long as we take the same approach, I think we'll be able to do that. I think we've shown the ability for the products to translate to other markets already. But it's certainly something that we're planning, and it's one of the reasons that we're so excited about the CanAdelaar acquisition.

It's an adult-use market where we think Spinach will have a great opportunity to be able to perform and see those products like SOURZ and PUFFERZ translate over.

William Kirk: And then if I can on Germany, the market has gotten a little tougher for some on some price compression, but you're showing strong growth there. So can you help us maybe understand your route to market into Germany? And was the unlock for Germany getting bigger for you, was that really the additional capacity at GrowCo, and you're just now satisfying demand that you had there? But can you talk about the German market, how your product gets into Germany, and how you're positioned there?

Michael Gorenstein: Sure, it's really not that different in terms of what we're succeeding based on versus Canada, Israel, where also you can, kind of, look at data and it's competitive. It's tough. I think it just comes down to having the right value proposition to patients or to consumers. And while we don't have boots on the ground like we do in Canada and Israel, I think ultimately if you have a great product, I think that it finds a way to have demand. We understand the backdrop and competitiveness, but from my perspective, it's actually not as competitive yet as some of the other markets we're in. And yes, I think that is the unlock.

We aren't really running from competition. We want to make sure that we win in whatever market we're in. I think having the discipline to keep adapting and making sure you win, sort of sharpens and improves the offering you have. And now that we have additional capacity, there's much more of a focus on Europe than there has been in the past.

William Kirk: Thanks, Mike. And Anna, can I round out a question on gross margin? It expanded more than we expected, which obviously is a great thing. And you broke it into some buckets, which included average selling price and mix. Could you help us maybe which bucket was the largest contributor behind the year-over-year gross margin expansion?

Anna Shlimak: Sure, happy to provide a bit more context. So like I said, we benefited from seasonally better growing conditions, and that translates to both higher yields and more high-quality Grade A flower to sell. So obviously, more flower contributes to efficiencies as fixed overhead costs are spread over greater volumes. I would say that's your -- probably your largest contributor. And then you have that geographic shift to higher ASPs, to Israel and international markets, so higher ASPs, no excise tax. And then, lastly, in Canada, we've experienced such tremendous growth in our vape portfolio, and that carries the best margin in the portfolio. So kind of all of those factors together was that perfect storm of favorability.

But as I mentioned in the prepared remarks, we believe that our gross margin performance over that trailing 12-month period provides better context than this one particular quarter.

Operator: Thank you. Our next question comes from Derek Lessard from TD Cowen.

Derek Lessard: Really strong results, guys. Congrats, Mike, to you and the team. Good color so far. Two-part question, I guess. Was this -- these results, were they better than you guys had expected internally? And then secondly, is there anything that you can point to that really went right for you guys in the quarter? And I think Anna answered some of that, but curious on your thoughts.

Michael Gorenstein: Thanks, appreciate it. And, look, I think we're generally optimistic, but we're always conservative, so we're all extremely pleased with the results. I think that you just saw things go well in pretty much every market and category, so I don't know if there's a single thing that I would point to. I think that in Canada, just -- we talked about it the last few quarters with PUFFERZ launching and starting to get momentum. That's certainly been a big driver. I think that, overall having more supply, that's been really helpful, just being able to satisfy a lot of the demand that we've been talking about has been out there but we haven't been able to fill.

I think that, you think about yield and you think about the weather and growing season, that was certainly positive. But things are just moving in the right direction in most of the markets, and a lot of the work we've put in the last few years, you're starting to see things click. And as we continue to dial in at GrowCo and with some of the manufacturing at Stayner and Israel, things are improving.

Derek Lessard: Absolutely. And just on Canada, I guess there's been some talk about a pressured consumer here and a move towards some value product -- more value-oriented product. It doesn't seem like it's the case or you guys have run into that problem, but maybe just comment on what you're seeing from a Canadian or consumer perspective would be helpful.

Michael Gorenstein: Yes, from our perspective, it's really about delivering value, and the value propositions is what matters. And for some, that might be the value category. And then for us, it's as long as we're providing more value. I think that there's still in our segments, there's a lot of opportunity. I think that you can also see some switching just based off of cost from other categories. So you can see someone that maybe was looking at a beer and they think of what's more cost-effective, and they moved to cannabis. But we haven't really seen a lot of issues in terms of the resiliency of the consumer. But I understand it's more broadly out there.

Operator: Our next question comes from the line of Indigo Baylis from Canaccord Genuity.

Indigo Baylis: I am on the line for Kenric Tyghe at Canaccord. Congratulations on the quarter. My question just relates to sort of your GrowCo integration. So it appears that GrowCo is moving along quite nicely. I was wondering if you had any commentary on how that increased supply supporting your market share gains, and then sort of your next strategic area of focus is through leveraging this facility. And then the second part of that is, I guess, your expectations on the fully ramped site, and then how it might contribute to that top line and gross margin contribution in the future?

Michael Gorenstein: Sure, thanks. So yes, I think it's coming along really well. It's fully online. I think that over time you'll see some more efficiency gains as we continue to dial it in, whether that's the facility or just improvements, the genetic breeding program we have been -- we've had for, I think every year you get to see new genetics come out, and there's a lot of improvements we're really excited about. I think that when you think about opportunity for efficiency, genetics is actually, it's hard to measure and put out as far as building a facility versus genetic breeding. But I still think genetics is probably where you'll see the most efficiency gain.

But I think GrowCo is going extremely well. I think that having that extra supply, the majority of the market globally is still flower. So the gains that we've had are a mix of having more flower, I think increased strength in pre-rolls, increased strength in vapes, and maintaining the lead we have in edibles. And so yes, I think they all sort of contribute. But the facility expansion, it's really adding more grow to what we already had. So it's fully integrated as far as processing. It's just figuring out scheduling, being able to get the increased product through, and I think it's something that we now have a full handle on.

Operator: Our next question comes from the line of Pablo Zuanic from Zuanic & Associates.

Pablo Zuanic: Mike, can you expand on your supply chain in Israel? I don't know if you can talk about what percent of what you sell is produced by Cronos in Israel. How much is it imported? I'm just trying to understand the flexibility to ramp up domestic production if there are restrictions on imports. And also when you report your total Israel sales, does that include product that you buy from other -- from third parties, whether in Israel or from outside Israel for that market?

Michael Gorenstein: Sure, thanks. So, yes, we do have a domestic grow. We do buy from third parties, Israel or otherwise, and also from GrowCo in Canada. But everything is included when you see sales in Israel. It's everything that goes through our facility, and we sell under our brand. So we have all the packaging and manufacturing is done there initially to the grow. I would just go back and say, we really think that there's not merit to the anti-dumping investigation. We've gone through it once already, and I think you can look at the results, and it's clear, this is not a market where we're like, oh, we need to get rid of excess product.

It's something we view as a strong and an important part of our business. We've increased supply with Israel in mind, and it's something we'll continue to do, and we're confident that we will prevail again.

Pablo Zuanic: Just regarding the U.S., in a recent podcast, I think you made a comment that you have a roadmap under various scenarios, right, a bit of a matrix. If this happens, you do this. If this happens, you do something else. But in a scenario where we continue to -- where we have this [ steady link ], but we continue to have this state silo system, [indiscernible] no exports, no federal oversight by the FDA, and everything regulated by the state, is that a scenario in which Cronos would want to participate and get more active in the U.S. or not really if things don't change from that perspective?

Michael Gorenstein: Yes, so if you're assuming it's sort of like -- I think you're asking you freeze sort of the system we have today where there's state medical markets that in theory could be accessed, but adult-use does not roll over, and we assume that there's no interstate commerce available. I think if you were to put aside the question of whether or not under Schedule III there's potential challenges about interstate commerce, I think we would look at entering with more of a focus on borderless products than on sort of a full production site.

I think because as much as we could assume that it gets locked like this forever, I still find it hard to believe that you're not going to eventually have interstate commerce and you won't have free trade, just given every other industry and the Dormant Commerce Clause being pretty strong. So we would look to enter in with a number of products. And I think that when you hear us talk about borderless products, that's the flexibility it affords us. So I still think that there are ways to enter in with genetics, with our edibles, with our vapes, with pre-rolls, but not necessarily building out really strong grow infrastructure. So more of an IP focus than full production.

And I think the reason for that to expand is I do believe eventually that it's going to be really tough to start building out infrastructure state by state when you're eventually going to have to compete with something that's centralized, absorbs much more fixed costs, and is producing at a national scale, similar to what you see any CPG company do.

Pablo Zuanic: Right. I want to add one more. It has to do more with the liquidity of your stock and in general, the liquidity of the NASDAQ-listed Canadian LPs, right? That has declined quite a bit over time. We have these U.S. MSOs that supposedly will have list in the NYSE or NASDAQ. And supposedly that's like a big catalyst, right? But I could make the argument that here we have these very sizable Canadian licensed producers like yourselves, which are already NASDAQ-listed and investor or stock liquidity is thin, right? So, I mean, from your perspective, why is that?

I mean, is it just because there's just too much focus on the U.S. and that's all investors want, and they're missing out on what's happening in the Canadian rec market and all these very large export potentials that the Canadian LPs have? What's your perspective there? I'm just -- again, I don't want to repeat the question, but it's like why, if we have these NASDAQ-listed vehicles right now where you have all this growth, the liquidity is so low for the stock in general?

Michael Gorenstein: Yes, it's like -- tough to answer. I'd say for the size of the market, you probably have a lot of companies. And I think that one of the challenges is that investors probably are -- sometimes the loudest companies and the most liquid ones are just making a lot of promises and have burned people. So it's much more of a show-me type industry now. But I don't really think of it as U.S. versus Canada. I think every company is different. It's no longer just -- there's two types of companies, an LP or MSO. I think that you're increasingly seeing those lines kind of change, and it's not necessarily just Canada, right?

You're looking at rest of world versus U.S., some are in both. But ultimately the way I see it is, people always ask us about capital deployment, and I think that we've been given a pretty good opportunity as far as having a buyback or as long as things are the way they are. So it's not something I really worry about. We don't really -- we don't need to use our stock as currency. We don't need to raise capital. So we really just focus on what the market opportunity is. And we still think there's plenty of opportunity within the markets we have today, even with the situation in the U.S.

Operator: This concludes the question-and-answer session and our conference call for today. Thank you for your participation in today's conference. This does conclude our program. You may now disconnect.