Canopy Growth Corp (TSX: WEED) (NASDAQ: CGC) this morning met the expectations of every cannabis sector pessimist and posted poor financial results for the second fiscal quarter. Revenues were down on both a quarter over quarter and year over year basis, with the firm posting Q2 sales of $131.4 million on a net basis.
Revenues for the quarter were down 4% on a quarter over quarter basis from $136.2 million, and 3% on a year over year basis to $131.4 million. The company commented that “In new industries where the potential is immense, progress is rarely a straight line,” and provided little excuse for why results failed to meet expectations. Analysts had anticipated revenues of $142.5 million.
On a segmented basis, recreational business to business cannabis sales declined 1% on a year over year basis, while business to consumer declined by 11%. The latter was blamed on the increase in retail locations across Canada from its competitors. Medical net revenue meanwhile declined 6%, and international revenue decreased 13%. Other revenue, however, climbed 98% due to CBD sales stateside.
Things got no better from here for Canopy.
In terms of gross margins, the company posted cost of goods sold of $202.5 million, the result of $87 million in inventory writedowns. Total gross margin as a result was negative $71.1 million.
Operating expenses meanwhile came in at $144.2 million, with selling, general administrative expenses coming in at $125.8 million, just shy of being equal to net revenue, resulting in an operating loss of $215.4 million.
However, the quarter was saved by other income of $195.8 million, resulting in the firm posting a net loss of only $16.3 million. Adjusted EBITDA meanwhile amounted to negative $162.6 million.
Looking to the balance sheet, the firms cash position improved from $559.8 million to $807.6 million, while short term investments declined from $1,491.3 million to $1,150.3 million, resulting in cash and equivalents dropping from $2,051.1 million to $1,957.9 million. Total current assets overall declined from 2,675.2 million to $2,503.0 million.
Accounts payable meanwhile increased marginally from $91.3 million to $91.4 million, while other accrued expenses and liabilities moved from $79.9 million to $86.1 million. Total current liabilities overall increased slightly from $256.1 million to $259.9 million.
In terms of outlook, the company pushed out its target for positive adjusted EBITDA, with a firm timeline not provided. The push is a function of Canadian challenges as well as delays of “revenue ramp” in the US. CapEx has also been reduced, from $150 million to $100 million as the company looks for areas in which it can cut costs.
Canopy Growth last traded at $16.53 on the TSX.
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As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.