Cannabis Earnings Season Is Heating Up

Earnings season is kicking into high gear for the cannabis sector and we consider this to be a pivotal time for the industry.

Over the next month, several large-scale North American cannabis companies are expected to report earnings. Today, we have highlighted three companies that have already released quarterly financial results and have provided important takeaways from the reports.

Canopy Growth

Last week, Canopy Growth Corporation (TSX: WEED) (NASDAQ: CGC) reported third quarter financial results and the stock dropped more than 10% on the announcement.

During the last year, Canopy Growth has been under considerable pressure and the stock has been punished as a result. We believe the business faces near-term risks and want our readers to be aware of some of the most important takeaways from the earnings report:

1. During the quarter, Canopy Growth generated $101 million of revenue which represents a more than 25% decrease when compared to the same period in 2022. During this period, the company recorded a $267 million net loss which is $151 million higher than the same period in 2022
2. As of December 31^st, the company had $789 million of cash and short-term investments
3. Canopy Growth announced that it is transitioning to an asset-light model in Canada by exiting cannabis flower cultivation at its Smiths Falls, Ontario facility, ceasing the sourcing of cannabis flower from the Mirabel, Quebec facility, and moving to a third-party sourcing model for cannabis 2.0 products.
4. The company is reducing headcount across the business by approximately 60%, including 800 positions impacted by the changes announced today, of which 40% are impacted immediately.
5. Some of the changes to the Canadian business include the divestiture of Canopy Growth’s Canadian retail operations, the organizational restructuring of certain corporate functions, and the closure of the Scarborough, Ontario research facility.
6. Canopy Growth continues to advance its U.S. strategy through Canopy USA, LLC (“CUSA”) and is committed to remaining dual–listed on the TSX and on the Nasdaq.
7. Based on the current revenue run rate and the cost reduction initiatives, management reaffirms its expectation to achieve positive Adjusted EBITDA in FY2024, with the exception of its investment in BioSteel.

Organigram Holdings

A few weeks ago, Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI) released first quarter financial results and the market responded favorably to the report. Today, we want to provide more information on Organigram’s earnings report and have highlighted 5 key takeaways from the quarter:

1. During the quarter, Organigram generated $43.3 million of revenue. This is considerably higher than the $30.4 million of revenue generated in the same period last year and we are favorable on the increase
2. In the first quarter, the company recorded a large increase in the amount of revenue that was generated by international markets (Australia and Israel). Going forward, we will monitor how this aspect of the business advances
3. Organigram generated positive adjusted EBITDA for the fourth consecutive quarter and we find this trend to be significant.
4. When compared to the same quarter last year, Organigram recorded a 12% increase in its adjusted gross margin. The management team attributed the increase to improved efficiencies and higher sales volume
5. As of November 30^th, the Canadian cannabis producer reported to have more than C$95 million of cash and short term investments.

Tilray Brands

In early January, Tilray Brands Inc. (Nasdaq: TLRY) (TSX: TLRY) reported second quarter financial results and we believe the company has achieved several important milestones since its merger with Aphria in 2021. Some key takeaways from Tilray Brands’ earnings report include:

1. According to the earnings report, Tilray Brands has a leadership position in Canada with 8.3% cannabis market share.
2. Beverages was a major growth vertical for the cannabis company as sales increased 56% to $21.4 million (when compared to the same period last year). This amount included revenue from acquisitions
3. During the quarter, Tilray Brands generated $11.7 million of adjusted EBITDA. This marks the 15th consecutive quarter of positive adjusted EBITDA for the Canadian cannabis company.
4. So far, Tilray Brands has achieved $119.6 million in annualized cash cost-savings since the closing of the Aphria transaction in May 2021. This amount was approx. $108 million as of August 31, 2022.
5. As of November 30^th, Tilray Brands reported to have more than $430 million of cash, cash equivalents, and marketable securities.

If you are interested in learning more about upcoming earnings reports, please send an email to support@technical420.com with the subject “Cannabis Earnings” to be added to our distribution list.

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Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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