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Canadian marijuana firm Canopy Growth Corp. ($WEED TSX - $CGC NYSE) reported worse than expected third quarter earnings before the open Wednesday. $CGC  was down over 11% by lunchtime as higher expenses and a miss on revenue despite the legalisation of recreation pot in Canada.

Canopy Growth

Canopy Growth Corp. NYSE: CGC · Reported Earnings Before Open Wednesday

(C$1.52) EPS and C$23.3M Missed C$60 Million forecast in revenue 

Earnings

Canopy Growth reported a net loss of CAD330.6 million or CAD1.52 per share compared to a loss of CAD1.6 million or CAD0.01 per share last year. The 2019 results included expenses of CAD115.7 million or CAD0.52 per share. Canopy’s losses included non-cash charges of C$115.7 million, or 52 cents a share, due to share-compensation expenses and fair value changes on financial assets, among other things.

Revenue declined sequentially from the prior quarter to C$23.3 million from C$25.9 million and missed the FactSet average of C$60 million.  

Canopy Growth Corp. NYSE: CGC ·

Market Reaction  > Lunch $34.43 -$4.049 -10.52%

Highlights

  • Sales of oils, including softgels made up 34% of product revenue, compared with 18% a year ago.
  • Kilograms of cannabis harvested jumped 265% to 15,127,  kilograms sold increased 9% to 2,197
  • Average selling price per gram grew 24% to C$9.87.
  • Canopy said that its various pot products represent about 30% of the current available recreational inventory across the country.
  • Sales and marketing costs ballooned 167% to C$39 million
  • General and administrative costs shot up 159% to C$37.1 million for the quarter.
  • Costs in both categories rose because the company was spending cash on things like creating packaging and marketing campaigns for the recreational market and on technology related to the company’s data-gathering efforts
  • The average price increase was driven by changes in the mix of product sold, mainly a higher percentage of Softgel sales and sales to Germany. Oils, including Softgel capsules are value-added products that require lower active ingredient inputs and provide higher margins.
  • The company saw an increase of 34% year-over-year in active registered patients to 84,400.
  • CEO Linton said the sequential decline in revenue was due to issues with its German business and issues with medical marijuana patients in Canada, who now number 84,400, a 34% increase.

“I’d attribute half of the decline to just not normal course Germany and a little bit of a pause with the medical people,” Linton said on the conference call.

Beverage giant Constellation Brands Inc. made a $4 billion investment in Canopy, in part to develop marijuana-infused drinks and other edibles. The deal was completed on Nov. 1, the cash did not appear in the financial statements for the quarter/

Canopy completed the acquisition of HIKU during the quarter, adding the Tokyo Smoke retail network to its Tweed stores. Tokyo Smoke currently has three retail cannabis stores in Winnipeg and plans to add 12 additional stores in provinces that support private retail by September 2019. Tweed also plans to add 20 brick and mortar shops in provinces with private retail models by September 2019.

Inventory at September 30, 2018 amounted to CAD150.4 million and biological assets amounted to CAD20.7 million, together totaling CAD171.1 million.

Canada Based Marijuana Companies

Canopy is the last of the major bellwether Canada-based marijuana companies to report this week.

  • Aurora Cannabis Inc. ACB, -8.15% ACB, -8.12% reported Monday,
  • Cronos Group Inc. CRON, -3.73% CRON, -4.20% reported Tuesday
  • Tilray Inc. TLRY, -6.10% reported Tuesday.

Canopy stock was up 44% over the past three months before the report.  The ETFMG Alternative Harvest ETF MJ, -4.16% has risen 19.5%.

About Canopy Growth

Canopy Growth Snapshot

 

Source: Canopy Growth

From the TradersCommunity News Desk

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