Cronos Group Inc (CRON) 2023 Q2 法說會逐字稿

Good morning. My name is Victor, and I'll be your conference operator today. I would like to welcome everyone to Cronos' 2023 Second Quarter Earnings Conference Call. Today's call is being recorded.

早上好。我叫維克多，今天我將擔任你們的會議操作員。我歡迎大家參加 Cronos 2023 年第二季度收益電話會議。今天的通話正在錄音。

At this time, I would like to turn the call over to Shayne Laidlaw, Investor Relations. Please go ahead.

現在，我想將電話轉給投資者關係部的 Shayne Laidlaw。請繼續。

Thank you, Victor, and thank you for joining us today to review Cronos' 2023 second quarter financial and business performance. Today, I'm joined by our Chairman, President and CEO, Mike Gorenstein; and our CFO, James Holm. Cronos issued a news release announcing our financial results this morning, which is filed on our EDGAR and SEDAR profiles. This information as well as the prepared remarks will also be posted on our website under Investor Relations.

謝謝 Victor，感謝您今天加入我們回顧 Cronos 2023 年第二季度的財務和業務表現。今天，我們的董事長、總裁兼首席執行官邁克·戈倫斯坦 (Mike Gorenstein) 也加入了我的行列。和我們的首席財務官詹姆斯·霍爾姆。 Cronos 今天早上發布了一份新聞稿，宣布了我們的財務業績，該業績已存檔在我們的 EDGAR 和 SEDAR 資料中。該信息以及準備好的評論也將發佈在我們網站的投資者關係欄目下。

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.

在我將電話轉給邁克之前，請允許我提醒您，我們可能會在本次電話會議中做出前瞻性陳述並參考非公認會計準則財務指標。這些前瞻性陳述基於管理層當前的預期和假設，這些預期和假設受到風險和不確定性的影響，可能導致實際結果與前瞻性陳述中的預測存在重大差異。

Factors that could 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.

可能導致實際結果與預期存在重大差異的因素已在我們網站上提供的收益材料和美國證券交易委員會文件中詳細說明，在本次電話會議期間做出的任何前瞻性陳述均完全合格。有關非公認會計原則財務指標的信息，包括與美國公認會計原則的調節，也可以在我們網站上提供的收益材料中找到。

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 will move to a question-and-answer session.

最後，我們將在整個電話會議中就市場份額信息發表聲明，除非另有說明，所有市場份額數據均由 Hifyre 提供。我們現在將發表準備好的發言，然後進入問答環節。

With that, I'll pass it over to Cronos' Chairman, President and CEO, Mike Gorenstein.

接下來，我會將其交給 Cronos 董事長、總裁兼首席執行官 Mike Gorenstein。

Thank you, Shayne, and good morning, everyone. Our core focus areas in 2023 are continuing to launch innovative borderless products, improving our gross margin and driving efficiencies in operating expenses, culminating in a common goal of consistent cash flow generation. We initiated several measures to pursue greater efficiency and to realign our business and strategic priorities.

謝謝你，謝恩，大家早上好。 2023 年我們的核心重點領域是繼續推出創新的無邊界產品，提高毛利率並提高運營費用效率，最終實現持續產生現金流的共同目標。我們採取了多項措施來追求更高的效率並重新調整我們的業務和戰略重點。

In the second quarter of 2023, we exited our U.S. CBD operations, which allowed us to reduce costs and focus on adult-use and medical cannabis markets. Today, we announced plans to exit our Winnipeg, Manitoba facility by the end of this year, which we anticipate will drive additional OpEx savings and improvements in COGS in 2024. As we previously announced, in 2023, we anticipate saving $20 million to $25 million in operating expenses, and we anticipate capturing incremental savings of $10 million to $15 million in 2024 as a result of our announcements today to exit our Winnipeg facility and implement additional operating expense reductions.

2023 年第二季度，我們退出了美國 CBD 業務，這使我們能夠降低成本並專注於成人使用和醫用大麻市場。今天，我們宣布計劃在今年年底前退出馬尼托巴省溫尼伯工廠，我們預計這將在2024 年節省更多運營支出並改善COGS。正如我們之前宣布的那樣，我們預計到2023 年將節省2000 萬至2500 萬美元由於我們今天宣布退出溫尼伯工廠並實施額外的運營費用削減，我們預計到 2024 年將節省 1000 萬至 1500 萬美元。

While we execute these efficiency-focused initiatives, we are laser-focused on winning in market. Our Spinach edibles remain the #1 rank edible in Canada as of June. Spinach is the only brand that is top 10 in market share in Canada in all categories it participates in, which includes edibles, vapes, pre-rolls and flower. In Israel, Peace Naturals continue to be a top brand driven by our powerful genetics program and cultivation capabilities. And lastly, with the U.S. exit, our teams are working on the relaunch of the Lord Jones brand into adult-use categories in Canada, with its anticipated introduction in Q4 of this year.

在我們執行這些以效率為中心的舉措的同時，我們專注於贏得市場。截至六月，我們的菠菜食品仍然是加拿大排名第一的食品。 Spinach 是唯一在其參與的所有類別（包括食品、電子煙、預捲菸和鮮花）中在加拿大市場份額排名前十的品牌。在以色列，Peace Naturals 憑藉強大的遺傳學計劃和種植能力繼續成為頂級品牌。最後，隨著退出美國市場，我們的團隊正在努力將 Lord Jones 品牌重新推向加拿大的成人用品類別，預計將於今年第四季度推出。

Now I'll dive into each of these elements of our business in more detail. Following our overachievement of savings in 2022, we increased our operating expense savings target this year to $20 million to $25 million, driven partly by the exit of the U.S. business. The additional cost reductions announced today will have some in-year benefit, will primarily hit full year 2024, given the timing of the decisions, with anticipated incremental savings of $10 million to $15 million. The continued improvement in free cash flow this quarter improves our hard work in driving OpEx reductions and putting our industry-leading balance sheet to work to achieve greater ROI paying off.

現在我將更詳細地深入探討我們業務的每個要素。繼 2022 年超額實現節省後，我們將今年的運營費用節省目標提高至 2000 萬至 2500 萬美元，部分原因是美國業務的退出。今天宣布的額外成本削減將帶來一些年內效益，考慮到決策的時間安排，預計將在 2024 年全年帶來一些效益，預計將節省 1000 萬至 1500 萬美元。本季度自由現金流的持續改善改善了我們在推動運營支出削減方面的努力，並利用我們行業領先的資產負債表來實現更高的投資回報率。

Today, we also announced the planned exit of our Winnipeg, Manitoba facility. We originally purchased this fermentation facility to scale up the development of our highly specialized cultured cannabinoid IP. While we'll continue to utilize this IP and rare cannabinoids, we can now do so with an asset-light approach. We were the first and still the only company to ferment cannabinoids and commercialize them in Canada. As part of our winning branded portfolio strategy, we will continue to focus on developing products utilizing rare cannabinoids to drive differentiated effects for our consumers. This change is anticipated to drive material COGS and OpEx savings in 2024.

今天，我們還宣布計劃退出馬尼托巴省溫尼伯工廠。我們最初購買該發酵設施是為了擴大我們高度專業化的培養大麻素 IP 的開發。雖然我們將繼續利用該知識產權和稀有大麻素，但我們現在可以通過輕資產方法來實現這一目標。我們是第一家也是唯一一家在加拿大發酵大麻素並將其商業化的公司。作為我們致勝品牌組合戰略的一部分，我們將繼續專注於開發利用稀有大麻素的產品，為消費者帶來差異化效果。這一變化預計將在 2024 年推動材料 COGS 和運營支出的節省。

We are also preparing the facility for sale, which is intended to yield additional cash for our already industry-leading cash balance. The exit of our U.S. CBD business enables us to focus on adult-use products while preserving cash for our eventual U.S. entry. We believe that one day, the U.S. will be one of the most important cannabis markets in the world, but maintaining a CBD business is no longer part of our plan. Our resources are best spent staying laser-focused on the borderless adult-use products that we can sell in legal markets and by driving cost savings and process efficiencies to be cash flow positive.

我們還準備出售該設施，旨在為我們已經處於行業領先的現金餘額帶來額外的現金。我們美國 CBD 業務的退出使我們能夠專注於成人用產品，同時為我們最終進入美國保留現金。我們相信有一天，美國將成為世界上最重要的大麻市場之一，但維持 CBD 業務已不再是我們計劃的一部分。我們的資源最好集中在我們可以在合法市場上銷售的無國界成人用品上，並通過推動成本節約和流程效率來實現正現金流。

We know that there's value in the Lord Jones brand, and we're excited to bring Lord Jones back to its adult-use roots by launching new THC-focused products in the Canadian adult-use market later this year. Along with the refreshed visual identity for Lord Jones, our ultimate goal is to create a borderless suite of products under this brand. We are excited to share this product portfolio with you in the future as it will be highly complementary to our Spinach offerings and differentiated from other brands in the market today.

我們知道 Lord Jones 品牌的價值，我們很高興今年晚些時候在加拿大成人使用市場推出新的以 THC 為重點的產品，讓 Lord Jones 回歸其成人使用根源。除了為 Lord Jones 帶來煥然一新的視覺形像外，我們的最終目標是在該品牌下打造一套無邊界的產品。我們很高興將來與您分享該產品組合，因為它將與我們的菠菜產品高度互補，並與當今市場上的其他品牌區分開來。

James will go into more detail on the financial results during his remarks, but I want to comment on the wins this quarter. We further improved our industry-leading balance sheet, increasing our cash and short-term investment balance by approximately $5 million from Q1 2023. This achievement was driven by improved gross margin, lower OpEx and robust interest income and improved working capital management.

詹姆斯將在講話中更詳細地介紹財務業績，但我想評論一下本季度的勝利。我們進一步改善了行業領先的資產負債表，從2023 年第一季度開始，我們的現金和短期投資餘額增加了約500 萬美元。這一成就是由毛利率提高、運營支出降低、利息收入強勁以及營運資本管理改善推動的。

Gross margins expanded by an impressive 130 basis points sequentially to 16.3%, a big win given the macro driven headwinds on the top line, and our investment strategy continues to pay dividends, resulting in $12.5 million in interest income in the second quarter. We intend to build on this momentum in the back half as we realize further P&L efficiencies and additional interest income from our cash and short-term investments.

毛利率環比大幅增長 130 個基點，達到 16.3%，考慮到宏觀驅動的營收逆風，這是一個巨大的勝利，而且我們的投資策略繼續帶來紅利，第二季度利息收入達到 1,250 萬美元。我們打算在下半年繼續保持這一勢頭，因為我們將進一步提高損益效率，並從現金和短期投資中獲得額外的利息收入。

Turning to the business. In Canada, during the second quarter, we continued to execute our plan to create a robust offering of borderless products, highlighted by new launches. As of June 2023, Spinach is the #3 ranked cannabis brand in Canada and is currently the only cannabis brand that is top 10 in all categories it participates in, which includes the #1 ranking in the edibles category during the second quarter of '23.

轉向業務。在加拿大，第二季度，我們繼續執行計劃，打造強大的無國界產品，新產品的推出凸顯了這一點。截至 2023 年 6 月，Spinach 是加拿大排名第三的大麻品牌，也是目前唯一在其參與的所有類別中排名前 10 的大麻品牌，其中包括 2023 年第二季度在食用類別中排名第一的大麻品牌。

Spinach edibles products accounted for 14.8% of the market in June, remaining the market leader in edibles. We have an incredible product that continues to launch in new flavor profiles in cannabinoid blends, a perfect example of a borderless scalable product. The edibles category continues to feel the residual impact of the now banned chewable cannabis extracts. As these banned products continue to be removed from the market, we anticipate a recovery in our overall market share and are already seeing an improvement with weekly retail sales up 15% since June.

6月份菠菜食用品佔市場份額14.8%，繼續保持食用品市場領先地位。我們擁有一款令人難以置信的產品，該產品繼續以大麻素混合物的新口味推出，這是無國界可擴展產品的完美範例。食品類別繼續受到現已禁止的咀嚼大麻提取物的殘餘影響。隨著這些被禁止的產品繼續從市場上撤出，我們預計我們的整體市場份額將會復蘇，並且自 6 月份以來每週零售額已經增長了 15%。

This quarter, we launched a new SOURZ by Spinach flavor, our take on the timeless summer drink pink lemonade, infused with raspberry and refreshing lemonade flavors. Having just launched in late May, this product has quickly gained market share. Pink Lemonade is already #4 in our portfolio and keeps rising. We're excited for adult consumers to try this new flavor this summer.

本季度，我們推出了新的 SOURZ by Spinach 口味，這是我們對永恆的夏季飲料粉紅檸檬水的詮釋，融入了覆盆子和清爽的檸檬水口味。該產品自5月下旬剛推出以來，迅速贏得了市場份額。粉紅檸檬水已經在我們的產品組合中排名第四，並且還在不斷上升。我們很高興成年消費者今年夏天能夠嘗試這種新口味。

In the vape category, we held a 4.1% market share in June, maintaining a #7 market share position. We will build on that momentum in the back half of 2023 with the continued push to include flavor forward profile and rare cannabinoids in our base, driving innovation while leaning on our winning formulation that consumers know and love across the portfolio.

在電子菸類別中，我們 6 月份的市場份額為 4.1%，保持第七位的市場份額。我們將在 2023 年下半年鞏固這一勢頭，繼續推動在我們的基礎中納入風味前沿特徵和稀有大麻素，推動創新，同時依靠我們在整個產品組合中消費者了解和喜愛的獲勝配方。

In July, we launched 3 new vapes under the Spinach brand. These new vapes come in a 1.2 gram format in the flavoring offerings of Pink Lemonade, Peach Punch and Strawberry Slurricane. In Q2, we launched several new offerings to bolster the Spinach pre-roll portfolio. including Sonic Lemon Fuel pre-rolls and 3 new infused pre-roll offerings. In Q2, we were the #8 brand in market share in pre-rolls, a significant improvement from #14 in Q4.

7月，我們推出了Spinach品牌的3款新電子煙。這些新電子煙的容量為 1.2 克，口味包括粉紅檸檬水、Peach Punch 和 Strawberry Slurricane。在第二季度，我們推出了幾項新產品來增強菠菜前貼片產品組合。包括 Sonic Lemon Fuel 前貼片和 3 個新註入的前貼片產品。第二季度，我們在前貼片市場份額中排名第八，較第四季度的第 14 名顯著提高。

We expect that with these new launches and the additional ones coming down the pipe, we can further improve on this position. Our flower performance continues to be propelled by our robust genetics program and best-in-class cultivation capabilities at GrowCo, and as of June '23, we are the #2 flower brand. We had 3 SKUs in the top 10 in the second quarter: GMO Cookies in the 3.5 gram and 28 grams, and our Wedding Cake, 28 gram.

我們預計，隨著這些新產品的推出以及即將推出的其他產品，我們可以進一步改善這一地位。我們的花卉性能繼續受到 GrowCo 強大的遺傳學計劃和一流的栽培能力的推動，截至 23 年 6 月，我們是排名第二的花卉品牌。第二季度，我們有 3 個 SKU 進入前 10 名：3.5 克和 28 克的轉基因餅乾，以及 28 克的婚禮蛋糕。

GrowCo's performance in cultivation continues to be strong. GrowCo reported a preliminary unaudited revenue of approximately $3.6 million to 9 Cronos customers in the second quarter. Additionally, the credit facility that Cronos previously provided GrowCo currently has $72.4 million outstanding, following the principal repayment of $2.5 million by GrowCo in Q2. In addition, GrowCo made a $1.7 million interest payment in Q2. The solid financial performance of GrowCo yielding equity pickup, interest payments and loan payback to Cronos is a vital component of our overall financial picture.

GrowCo 在種植領域的業績繼續強勁。 GrowCo 報告第二季度向 9 個 Cronos 客戶提供的未經審計的初步收入約為 360 萬美元。此外，繼第二季度 GrowCo 償還 250 萬美元本金後，Cronos 之前向 GrowCo 提供的信貸額度目前尚未償還 7,240 萬美元。此外，GrowCo 在第二季度支付了 170 萬美元的利息。 GrowCo 穩健的財務業績為 Cronos 帶來股本回升、利息支付和貸款償還，是我們整體財務狀況的重要組成部分。

Turning to Israel. In June '23, the Knesset Health Committee changed the cannabis regulations to make it easier for some patients to obtain prescription. The new regulations are scheduled to begin in December 2023. For certain medical conditions, patients will no longer be required to obtain a license with approval from the health ministry. Now, doctors can directly prescribe cannabis to those patients. This change simplifies the process for patients and doctors, and is expected to increase access and patient count.

轉向以色列。 23 年 6 月，議會健康委員會更改了大麻法規，以使某些患者更容易獲得處方。新規定計劃於 2023 年 12 月開始實施。對於某些醫療狀況，患者將不再需要獲得衛生部批准的許可。現在，醫生可以直接給這些患者開大麻處方。這一變化簡化了患者和醫生的流程，預計會增加訪問和患者數量。

Shortly after the announcement, I met with regulators, customers and patients, and I'm happy that they share my excitement about the growth potential in the Israeli market and the progress this change should contribute towards realizing that potential. We've always had confidence in the long-term potential of our position in the Israeli market as it's still one of the world's largest medical programs.

公告發布後不久，我會見了監管機構、客戶和患者，我很高興他們分享了我對以色列市場增長潛力的興奮，以及這一變化應有助於實現這一潛力的進展。我們始終對我們在以色列市場的長期潛力充滿信心，因為它仍然是世界上最大的醫療項目之一。

Our Peace Naturals brand launched 2 new pre-roll products, Wedding Rolls and Cocoa Bomba, last quarter. Pre-rolls have become a substantial and growing part of the market in Canada, and we're excited to bring this innovation to the Israeli market, which is still primarily dominated by flower. In addition to the pre-roll launches, we also launched a Space Cake dried flower offering. In collaboration with Fighters for Life, an Israeli organization that works with veterans to reacclimate to civilian life after military service, Peace Naturals partnered to launch a fundraising campaign ad that appeared on local TV and social media in Israel. This issue is one that has resonated with our consumers in Israel, and we're proud to support this organization once again.

我們的 Peace Naturals 品牌上季度推出了 2 種新的捲前產品：Wedding Rolls 和 Cocoa Bomba。前貼片已成為加拿大市場的一個重要且不斷增長的部分，我們很高興將這一創新帶到以色列市場，該市場仍然主要以花卉為主。除了預捲髮布之外，我們還推出了太空蛋糕乾花產品。 Peace Naturals 與以色列組織“Fighters for Life”合作，幫助退伍軍人在服完兵役後重新適應平民生活。Peace Naturals 與以色列當地電視和社交媒體上出現的籌款活動廣告合作。這一問題引起了以色列消費者的共鳴，我們很自豪能夠再次支持該組織。

Moving to Germany. We are excited to announce that we signed a distribution agreement in July with one of the leading distributors of medical cannabis in Germany. We anticipate commencing shipments in the third quarter. Reentering Germany is a significant milestone for Cronos, and we look forward to expanding our reach and brand awareness. The recently proposed regulatory change to reschedule cannabis, no longer labeling medical cannabis as a narcotic, is expected to unlock significant growth in the market, and we intend to establish our Peace Naturals brand as a top brand, similar to our execution in Israel.

搬到德國。我們很高興地宣布，我們於 7 月與德國領先的醫用大麻分銷商之一簽署了分銷協議。我們預計第三季度開始發貨。重新進入德國對於 Cronos 來說是一個重要的里程碑，我們期待擴大我們的影響力和品牌知名度。最近提議的重新安排大麻的監管改革，不再將醫用大麻標記為麻醉品，預計將釋放市場的顯著增長，我們打算將我們的Peace Naturals 品牌打造成頂級品牌，類似於我們在以色列的執行情況。

This quarter's successes in pivots have resulted in cost savings and better positioned us to assemble a portfolio of borderless products with strategic infrastructure and global partnerships. The combination of these efforts and an industry-leading balance sheet sets us up well to execute in any market.

本季度在轉型方面的成功節省了成本，並使我們能夠更好地通過戰略基礎設施和全球合作夥伴關係來組裝無邊界產品組合。這些努力與行業領先的資產負債表相結合，使我們能夠在任何市場上順利執行。

With that, I'd like to pass it on to James to take you through our financials.

接下來，我想將其轉交給詹姆斯，讓他帶您了解一下我們的財務狀況。

Thanks, Mike, and good morning, everyone. I will now review our second quarter 2023 results for continuing operations in relation to the prior year period. The company reported consolidated net revenue in the second quarter of $19 million, a 12% decrease from the prior year. Constant currency consolidated net revenue decreased by 6% to $20.2 million. The revenue change was primarily driven by lower cannabis flower sales in Israel due to competitive activity, the slowdown in patient permit authorizations and political unrest; and in Canada due to adverse price mix shift in the cannabis flower category, driving increased excise tax payments as a percent of revenue.

謝謝邁克，大家早上好。我現在將回顧 2023 年第二季度持續經營業務與上年同期的業績。該公司公佈第二季度綜合淨收入為 1900 萬美元，比上年同期下降 12%。按固定匯率計算，合併淨收入下降 6%，至 2,020 萬美元。收入變化主要是由於競爭活動、患者許可證授權放緩和政治動盪導致以色列大麻花卉銷量下降；在加拿大，由於大麻花類別的價格組合發生不利變化，導致消費稅佔收入的百分比增加。

Consolidated results were additionally impacted by the weakened Canadian dollar and Israeli shekel against the U.S. dollar during the current period. Consolidated gross profit in the second quarter was $3.1 million, equating to a 16.3% gross margin representing a $1.2 million decline from the prior year. The decline was primarily due to lower cannabis flower sales in Israel and an adverse price mix shift in cannabis flower sales in Canada. These results were partially offset by lower biomass costs.

綜合業績還受到本期加元和以色列謝克爾兌美元匯率走弱的影響。第二季度綜合毛利潤為 310 萬美元，毛利率為 16.3%，比上年同期下降 120 萬美元。下降的主要原因是以色列大麻花銷量下降以及加拿大大麻花銷售價格組合的不利變化。這些結果被較低的生物質成本部分抵消。

Our quarterly results in 2022 were volatile quarter-to-quarter driven by the realignment of our business, which makes the comparison on the gross margin line difficult. With that in mind, looking at both the full year 2022, where we had a positive 17.8% gross margin and the sequential progression from Q4 2022 at 5.7% and Q1 2023 at 15% gross margin to Q2 2023, where we had a positive 16.3% gross margin, you can see encouraging signs of improvement and stability, and we intend to build off this momentum throughout 2023 and into 2024.

由於業務調整，我們 2022 年的季度業績出現季度波動，這使得毛利率線的比較變得困難。考慮到這一點，看看2022 年全年，我們的毛利率為17.8%，以及從2022 年第四季度的5.7% 和2023 年第一季度的15% 毛利率到2023 年第二季度的連續進展，毛利率為16.3% % 毛利率，您可以看到令人鼓舞的改善和穩定跡象，我們打算在 2023 年和 2024 年繼續保持這一勢頭。

Consolidated adjusted EBITDA in the second quarter was negative $15.9 million, representing a $0.7 million improvement from the prior year. The improvement was primarily driven by a decline in general and administrative and research and development expenses. As previously mentioned, we increased our expected cost savings target in 2023 from $10 million to $20 million to a new range of $20 million to $25 million. As a continuation of this savings program, we anticipate that the exit of the Cronos Fermentation facility and the additional operating expense reductions announced today will capture an incremental $10 million to $15 million in the full year savings in 2024.

第二季度合併調整後 EBITDA 為負 1,590 萬美元，較上年同期增加 70 萬美元。這一改善主要是由於一般管理和研發費用的下降所致。如前所述，我們將 2023 年的預期成本節約目標從 1000 萬美元至 2000 萬美元提高到了 2000 萬美元至 2500 萬美元的新範圍。作為該節約計劃的延續，我們預計，今天宣布的 Cronos Fermentation 設施退出和額外運營費用削減將在 2024 年全年節省 1,000 萬至 1,500 萬美元。

Turning to the balance sheet. The company ended the quarter with approximately $841 million in cash and short-term investments, which is up approximately $4.5 million from the first quarter. In addition to maximizing the return on our cash, we received an interest payment on our GrowCo senior secured loan of $1.7 million, a principal payment of $2.5 million and $1.3 million in payments on the Mucci promissory note for total cash paid by GrowCo and our JV partners to Cronos of $5.5 million in Q2. Having the best balance sheet in the cannabis industry enables us to take calculated strategic bets while we remain steadfastly focused on reducing cash burn.

轉向資產負債表。該公司截至本季度末的現金和短期投資約為 8.41 億美元，較第一季度增加約 450 萬美元。除了最大化我們的現金回報之外，我們還收到了GrowCo 高級擔保貸款170 萬美元的利息、250 萬美元的本金支付以及GrowCo 和我們的合資企業支付的總現金中的130 萬美元的Mucci 期票付款。第二季度向 Cronos 合作夥伴提供了 550 萬美元的資金。擁有大麻行業最好的資產負債表使我們能夠進行經過深思熟慮的戰略押注，同時我們仍然堅定地致力於減少現金消耗。

Moving to free cash flow, defined as operating cash flow less CapEx, Q2 2023 was negative $12.3 million, representing a 36% improvement year-over-year. Backing out the income taxes payable associated with the onetime Altria warrant relinquishment in Q1, the sequential improvement in free cash flow was 22%. We anticipate recouping most of the tax payment associated with the onetime Altria warrant relinquishment over the next 3 years.

至於自由現金流（定義為運營現金流減去資本支出），2023 年第二季度為負 1,230 萬美元，同比增長 36%。剔除與第一季度奧馳亞一次性放棄認股權證相關的應付所得稅，自由現金流環比改善了 22%。我們預計在未來三年內收回與奧馳亞一次性認股權證放棄相關的大部分稅款。

Lastly, moving to outlook and guidance. We anticipate the net change in cash, defined as the sum of cash and cash equivalents and short-term investments, for the remainder of fiscal year 2023 will decline by less than $5 million to $10 million. This is an improvement to the previous guidance of declining less than $25 million in the remaining 9 months of fiscal year 2023. The company also still expects the net change in cash will be positive in 2024. The improved cash flow trajectory will be driven by, among other items, continued gross margin improvement, operating expense reduction efforts and anticipated interest income of $20 million to $25 million for the remainder of fiscal year 2023.

最後，轉向展望和指導。我們預計 2023 財年剩餘時間內的現金淨變化（定義為現金和現金等價物以及短期投資的總和）將減少不到 500 萬美元至 1000 萬美元。這比之前的指導有所改善，即 2023 財年剩餘 9 個月減少不到 2500 萬美元。該公司還預計 2024 年現金淨變化將為正值。改善的現金流軌跡將由以下因素推動：除其他外，毛利率持續改善、運營費用削減努力以及2023 財年剩餘時間預計利息收入為2000 萬至2500 萬美元。

While we continue to execute on operating expense reductions and cash flow management, we made the decision this quarter to discontinue providing revenue guidance and to withdraw our previously announced net revenue target of $100 million to $110 million for the full year 2023. The discontinuance of providing net revenue guidance reflects turbulent market conditions beyond previous expectations in the markets we operate in, specifically increasing political unrest and stagnant patient growth in Israel, the decision to exit the U.S. business and competitive activity in Canada, driven by the lingering effects of edible extracts. In addition, foreign exchange rates have had an unfavorable impact on our net revenue.

在我們繼續執行運營費用削減和現金流管理的同時，我們在本季度決定停止提供收入指導，並撤銷之前宣布的 2023 年全年 1 億至 1.1 億美元的淨收入目標。淨收入指引反映了我們經營所在市場的動盪市場狀況超出了之前的預期，特別是以色列的政治動盪加劇和患者增長停滯、退出美國業務的決定以及加拿大的競爭活動，這些都是由食用提取物的揮之不去的影響推動的。此外，外匯匯率對我們的淨收入產生了不利影響。

Despite the top line headwinds, we have a lot of wins to point to, and I share Mike's confidence in the trajectory of the business and our preparedness for entry into new markets as they become available.

儘管面臨著頂線阻力，我們還是有很多勝利可以藉鑑，我和邁克一樣對業務發展軌跡充滿信心，也對我們為進入新市場做好了準備。

With that, I'll turn it back to Mike.

有了這個，我會把它轉回給邁克。

Thank you, James. We are winning in Canada and Israel thanks to all the hard work from our employees to bring best-in-class borderless products to market. Our Spinach brand is the only brand that holds a top 10 market share position in all categories it participates in, which are flower, pre-rolled, base and edibles. We are confident that as regulations change, we will be among the best-positioned cannabis companies to capture additional market share in any market.

謝謝你，詹姆斯。由於我們員工的辛勤工作，我們在加拿大和以色列取得了勝利，將一流的無國界產品推向市場。我們的菠菜品牌是唯一在其參與的所有類別（花卉、預卷、基料和食用品）中佔據前十市場份額的品牌。我們相信，隨著法規的變化，我們將成為最有實力的大麻公司之一，在任何市場上獲得額外的市場份額。

Before getting into questions, I want to level set what is under the Cronos umbrella and where things stand today. We closed Q2 with $841 million in cash and equivalents and 0 debt, and we generated $12.5 million in interest income in Q2 with an anticipation to generate an additional $20 million to $25 million in interest income through the remainder of 2023. Our Spinach brand has the following market share range for June 2023: overall, Spinach is the #3 cannabis brand, #1 in edibles, #2 in flower, #8 in pre-rolled and quickly taking share; and #7 in vape and also gaining ground. We have a leading medical brand, Peace Naturals, in Israel, which posted $5.4 million in net revenue in Q2.

在提出問題之前，我想先介紹一下克洛諾斯的情況以及目前的情況。截至第二季度，我們的現金及等價物為8.41 億美元，債務為零，第二季度我們產生了1,250 萬美元的利息收入，預計到2023 年剩餘時間將額外產生2,000 萬至2,500 萬美元的利息收入。我們的菠菜品牌擁有以下是2023 年6 月的市場份額範圍：總體而言，菠菜是排名第三的大麻品牌，在食用大麻品牌中排名第一，在花中排名第二，在預卷大麻品牌中排名第八，並迅速佔據份額；電子煙領域排名第七，並且也取得了進展。我們在以色列擁有領先的醫療品牌 Peace Naturals，該品牌第二季度的淨收入為 540 萬美元。

We have a 6.3% stake in PharmaCann, one of the largest private U.S. MSOs currently on our books, for $49 million. We have an approximate 10% stake in Vitura, a leading publicly-traded Australian medical cannabis provider, worth approximately $18.9 million as of the end of Q2. We own 50% of the equity in Cronos GrowCo, which is profitable, and between GrowCo and our JV partner, they paid us $5.5 million in principal and interest payments in Q2. We ended the quarter with a remaining balance of approximately $84 million on our combined loans to GrowCo and its partners. We own real estate and multiple license facilities free from any encumbrances, and last and certainly not least, we have an exclusive partnership with Altria on a global basis.

我們以 4,900 萬美元的價格持有 PharmaCann 6.3% 的股份，PharmaCann 是目前我們賬上最大的美國私營 MSO 之一。我們擁有 Vitura 約 10% 的股份，Vitura 是一家領先的澳大利亞上市醫用大麻提供商，截至第二季度末價值約 1890 萬美元。我們擁有 Cronos GrowCo 50% 的股權，該公司是盈利的，GrowCo 和我們的合資夥伴在第二季度支付了 550 萬美元的本金和利息。本季度末，我們向 GrowCo 及其合作夥伴提供的合併貸款餘額約為 8400 萬美元。我們擁有房地產和多個許可設施，沒有任何負擔，最後也是同樣重要的一點是，我們與奧馳亞在全球範圍內建立了獨家合作夥伴關係。

At the close of the market yesterday, Cronos traded at a market cap of approximately $720 million and an enterprise value of approximately negative $120 million. While this quarter's top line fell short of what I believe Cronos is capable of achieving, we ended the quarter with more cash than we had last quarter. If there's one common theme from cannabis earnings calls the last few quarters, it's that cash is king. And given that we have more than 4x more net cash than the closest competitor, Cronos wears the crown.

截至昨天收盤，克羅諾斯的市值約為 7.2 億美元，企業價值約為負 1.2 億美元。雖然本季度的營收未能達到我認為克羅諾斯能夠實現的目標，但我們在本季度末的現金比上季度更多。如果說過去幾個季度的大麻收益電話會議有一個共同主題，那就是現金為王。鑑於我們的淨現金比最接近的競爭對手多 4 倍以上，克洛諾斯 (Cronos) 摘得桂冠。

With that, I'll open the line for questions.

接下來，我將開通提問熱線。

(Operator Instructions) Our first question will come from the line of Vivien Azer from Cowen.

（操作員說明）我們的第一個問題將來自 Cowen 的 Vivien Azer。

So Mike, I was wondering if we could talk a little bit more about the anticipated launch of Lord Jones in Canada, in particular, in light of your commentary around volatility in the Canadian marketplace. I'm just reflecting on the brand's legacy positioning in the U.S. and how you're thinking about positioning it in Canada, just given the challenges at the most premium end of the market.

邁克，我想知道我們是否可以更多地討論一下 Lord Jones 在加拿大的預期推出，特別是考慮到您對加拿大市場波動性的評論。我只是思考該品牌在美國的傳統定位，以及考慮到最高端市場面臨的挑戰，您如何考慮在加拿大的定位。

Sure. Thanks, Vivien. It's a great question. So when we think about Lord Jones, we've always liked its historical position at the premium end, specifically in edibles. I think that we've done a really good job of being able to differentiate, especially in that category. But we do still see that there are spaces overall in premium products when you're differentiating. Flower might be a little more difficult, but we do think that there's an opportunity, given a lot of the work we've done, on a completely incremental type of edible product that fits really well with Lord Jones brand to sort of tie those together for a launch.

當然。謝謝，薇薇安。這是一個很好的問題。因此，當我們想到瓊斯勳爵時，我們一直喜歡它在高端市場的歷史地位，特別是在食品領域。我認為我們在差異化方面做得非常好，尤其是在這個類別中。但我們仍然看到，當你進行差異化時，高端產品總體上還有空間。花可能有點困難，但我們確實認為，考慮到我們所做的大量工作，有機會開發一種完全增量類型的可食用產品，這種產品非常適合瓊斯勳爵品牌，可以將它們結合在一起發射。

And I also think when you look overall at the portfolio, if you look at our -- where we are sitting with distribution, the strength that we've had with Spinach, being able to leverage the relationships that we have with our trade partners, with the knowledge and the product development that we've had over the last few years, we do see the opportunity. We think it's incremental. We're generally very careful with what we do decide to launch. So I'm pretty excited about it.

我還認為，當你整體審視投資組合時，如果你看看我們的分銷情況，我們在菠菜方面的實力，能夠利用我們與貿易夥伴的關係，憑藉過去幾年我們所擁有的知識和產品開發，我們確實看到了機會。我們認為這是漸進的。一般來說，我們對決定推出的產品非常謹慎。所以我對此非常興奮。

Obviously, when you look at premium, your market size isn't going to be something like where Spinach would be, but we think from a margin and gross profit perspective, it's a really good idea to launch in a better place to really fine tune the products and trying to have products in the U.S. that don't necessarily fit the future state of what the brand looks like.

顯然，當你考慮溢價時，你的市場規模不會像菠菜那樣，但我們認為從利潤和毛利潤的角度來看，在一個更好的地方推出來真正進行微調是一個非常好的主意產品並試圖在美國推出不一定適合該品牌未來狀態的產品。

Sure. That makes good sense. And just to follow up on that. From a distribution standpoint, is there kind of any logic to taking a more discrete view of distribution to make sure that you're preserving that brand equity rather than going full national distribution?

當然。這很有道理。只是為了跟進。從分銷的角度來看，是否有任何邏輯可以採取更離散的分銷觀點來確保您保留品牌資產而不是進行全面的全國分銷？

It's a great question. I think that a lot of that, when you look at the different provinces, how deep maybe selling would be will depend on what the setup of the stores look like in each given province. Obviously, there are some that you would expect you would do better on the premium end. But of the major provinces by population, I think it makes sense still to put the same amount of focus. But I think that you'll still see a national launch. But we, as you know, tend to do a more phased rollout and make sure that we've got the demand and the right positioning.

這是一個很好的問題。我認為，當你觀察不同的省份時，銷售的深度可能取決於每個省份的商店設置。顯然，您希望在高端市場上能做得更好。但對於人口主要省份，我認為給予同樣的關注仍然是有意義的。但我認為您仍然會看到全國范圍內的發布。但如您所知，我們傾向於進行更分階段的推出，並確保我們有需求和正確的定位。

(Operator Instructions) All right. As there are no further questions in the queue. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.

（操作員指示）好的。因為隊列中沒有其他問題了。今天的電話會議到此結束。感謝您的參與。您現在可以斷開連接。大家，祝你有美好的一天。