11 Key Takeaways From Canopy Growth Corps. Q2 Earnings Miss

Today, Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC) released second quarter financial results and the market initially responded slightly negative to the report, with the shares trading approx. 6% lower on the open. 

The quarter was highlighted by the planned acquisition of the leading edibles company in North America, Wana Brands. We are of the opinion that 11 of the most significant announcement from the earnings report include:

1. When compared to the same period last year, the company recorded a 3% decrease in net revenue. Net cannabis revenue was $95 million which was 1% higher than the same period last year
2. If you were to exclude the revenue generated from acquired businesses, net revenue declined by 13% and cannabis revenue declined by 14% when compared to the same period last year
3. Enhanced its leverage to the US market with the planned acquisition of Wana Brands and launched whisl (an innovative cannabidiol (CBD) vape designed for mood management) through an exclusive partnership with Circle K
4. Pushed out its expectation for positive adjusted EBITDA due to Canada supply challenges and a delayed revenue ramp in the US. Going forward, there a number of actions to improve Canadian performance and remain optimistic about the mid-to long-term outlook
5. During the quarter, Canopy Growth wrote down $87 million of inventory. The write down primarily related two factors: 1) excess Canadian cannabis inventory that is a result of sales coming in lower than forecasted; and 2) declines in expected near-term demand
6. Gross margin was negatively impacted by lower production output and price compression in the Canada’s recreational market as well as higher third-party shipping, distribution and warehousing expenses across North America
7. During the quarter, Canopy Growth recorded a $16 million net loss which was $80 million higher than the same period last year. The reason for increase was related to $196 million of other income that is mostly attributable to non-cash fair value changes of $233 million
8. As of September 30th, Canopy Growth reported to have $2 billion of cash and short-term investments 
9. During the second quarter, there was outflow of $101 million of free cash flow, which is a 47% decrease from the same period last year. The outflow reduction reflects the decrease in cash that is used for operating activities and the lower purchases of property, plant and equipment
10. Going forward, the management team expects revenue acceleration in the second half of fiscal year 2022. The magnitude and pace of improvement is expected to be more modest than previously anticipated
11. Canopy Growth is executing on the previously announced cost savings plan and realized $70 million of the $150 million to $200 million planned cost savings by the end of the first half of fiscal year 2023. During the quarter, the company recorded $32 million of cost savings 

Although we expect to see a mixed reaction to Canopy Growth’s earnings report, we remain favorable on the operation due to the strength of the balance sheet. If you are interested in learning more about Canopy Growth earnings report, please send an email to support@technical420.com with the subject “Canopy Growth Earnings Report” to be added to our distribution list. 

For the fastest access to data on Canopy Growth earnings report, sign up for our free newsletter!

Share

Tags

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

Top Stories