Cronos Group (NASDAQ:CRON) had made great progress in recovering from the shellacking it took during the coronavirus-fueled market meltdown earlier this year. As of its close on Wednesday, Cronos stock was up more than 20% over the last three months.

But that momentum has now fizzled. Cronos announced its second-quarter results before the market opened on Thursday. Here are the highlights from the cannabis company's disappointing Q2 update.

Cannabis Vaporizer on table surrounded by cannabis.

Image Source: Getty Images.

By the numbers

Cronos Group reported revenue in the second quarter of $9.9 million, a 29% year-over-year increase. But that result fell well below the consensus analysts' estimate of $12.7 million.

And Cronos's bottom line looked downright ugly. The company posted a net loss of $107.7 million, or $0.31 per share, based on generally accepted accounting principles (GAAP). This reflected a significant decline from GAAP earnings of $185.9 million, or $0.16 per share, generated in the prior-year period. It also was worse than the average analysts' estimate of a net loss of $0.07 per share.

The one figure in Cronos's Q2 results that did look pretty good was its cash position of $1.3 billion as of June 30, 2020, including cash, cash equivalents, and short-term investments. However, the company continues to burn through its cash, with its cash stockpile falling by nearly $90 million in the second quarter.

Behind the numbers

Cronos's year-over-year revenue increase stemmed entirely from its acquisition of Redwood and its Lord Jones cannabidiol (CBD) brands last year. This acquisition boosted the company's revenue in Q2 by nearly $2.2 million compared to the prior-year period.

However, Cronos's U.S. revenue was flat compared to the first quarter of 2020. The COVID-19 pandemic caused temporary closures of many retail stores, which weighed on sales of the company's CBD brands. Cronos's gross margins were also negatively impacted by the pandemic as the company paid premiums to employees working during the midst of shelter-in-place orders.

The company's core cannabis sales in Canada and the rest of the world increased from the prior-year period and from Q1 2020 -- but only slightly. Cronos saw continued growth from sales of its cannabis vaporizers launched earlier this year. Sales of cannabis flowers also rose quarter over quarter. However, cannabis extract sales plunged from the previous quarter.

Cronos wrote down $3.1 million worth of inventory in Q2 for dried cannabis and cannabis extract products. The company said that the write-down was mainly due to lower prices in the Canadian cannabis market.

Looking ahead

What's next for the marijuana stock? Cronos faces continued headwinds. The company said that it expects to take more inventory write-downs in the future because of pricing pressures in the Canadian cannabis market. It also looks for higher marginal production costs at its Peace Naturals campus.

But there are also some potentially positive developments ahead. Cronos began selling products in the Israeli medical cannabis market in Q2. It hopes to receive final licensing in Israel for selling oils and pre-rolls later this year. The company's Natuera operation in Latin America is seeking to expand to new markets and completed three test exports of hemp-based CBD extract to the U.S. in recent months. Also, the Canadian cannabis derivatives market should also continue to pick up momentum.

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