Here Are 7 Key Takeaways That Investors Need To Know From Canopy Growths Latest Earnings Release

Earlier this week, Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC) reported third quarter financial results and received a favorable reaction from the market. 

Although the leading Canadian Licensed Producer (LP) reported lower revenue when compared to the same period last year, we believe the management team is executing on a multi-pronged growth strategy to become profitable and find this to be significant. 

After conducting analysis on Canopy Growth’s earnings report, we identified several important data points that provide insight on the direction the business is heading. Today, we have highlighted 7 data points that our readers should be aware of: 

1. During the quarter, Canopy Growth reported $141 million of revenue, a $67 million adjusted EBITDA loss, and a $115 million net loss. When compared to the same period last year, Canopy Growth generated less revenue but its adjusted EBITDA loss and net loss improved by $1 million and $714 million, respectively. The improvement is related to the management team’s cost cutting strategy as well as less non-cash asset impairment and restructuring charges
2. From a cash flow perspective, the Canadian LP reported $168 million of cash outflows which is 24% higher than the same period last year. As of December 31st, Canopy Growth reported to have $1.4 billion of cash and short-term investments. This amount is approx. $900 million lower than what was reported as of March 31, 2021. The management attributed the decline to EBITDA losses, capital investments, and the upfront payment for the option to acquire Wana Brands
3. From a geographic standpoint, Canopy Growth benefited from being levered to multiple markets. Although the company recorded higher consumer product sales, the increase was offset by lower Canadian cannabis sales. During the quarter, BioSteel and Storz & Bickel (S&B) achieved record quarterly revenue which was driven by expanded distribution of BioSteel and new product launches for S&B.
4. The opportunity for Canopy Growth to capitalize on the US cannabis industry (when federally legal) improved by acquiring an option to purchase Wana Brands and by Acreage acquiring a licensed cannabis operator in Ohio. We consider the US market to be the most significant long-term growth opportunity for Canopy Growth and will monitor how the management team continues to focus on improving its leverage to it
5. A major recent development for Canopy Growth was the divestiture of its entire ownership of C3 Cannabinoid Compound Company GmbH to a German pharmaceutical company. In return, the company was paid €89 million in cash and can earn up to €43 million if C3 hits certain milestones 
6. During the last year, Canopy Growth’s management team has been executing on a strategy to reduce operating expenses and capital investments. The leadership team is laser focused on becoming profitable in Canada by simplifying operations and optimizing expenses. The company remains committed to making strategic investments and capitalizing on emerging growth verticals. Going forward, we expect the management team to continue to find synergies between the assets it owns and believe this will play a key role in how the business achieves profitability
7. Canopy Growth has dedicated internal resources and human capital to find synergies between the assets it owns (both CBD and THC) and to establish a scalable footprint and national distribution networks to be positioned to capture market share in the US. We are favorable on the management team’s strategy to capitalize on the US and consider this to be the most significant long-term growth driver for the entire business

The market responded favorably to Canopy Growth’s earnings report and the stock rallied as high as 12% to the upside in premarket trading. During the last year, the Canadian LP has been under considerable pressure and we will monitor how the trend changes in the near-term. 

If you are interested in learning more about Canopy Growth’s earnings report, please send an email to support@technical420.com with the subject “Canopy Growth Reports Earnings” to be added to our distribution list. 

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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.

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