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.
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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.
Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
