Canopy Growth Q1 2022 Financials Are Going In The Wrong Direction
Canopy Growth Inc. (CGC), a constituent in the munKNEE Pure-Play Pot Stock Index, reported its financial results for the first quarter fiscal 2022 ended June 30th, 2021, this previous Friday.
Q1 Financial Highlights
(All figures are in Canadian dollars and compared to the previous quarter - see here)
- Net Revenue: decreased 8.2% to $136.2M
- Other Revenue: decreased 25.2% to $8.0M
- Cannabis Revenue: decreased 8.1% to $92.9M
- Business-to-Business Recreational: decreased 1.2% to $42.7M
- Business-to-Consumer Recreational: decreased 2.8% to $17.3M
- Canadian Medical: decreased 1.5% to $13.5M
- International Medical: decreased 27.8% to $11.4M
- Gross Margin: increased to 21% from 14%
- Adj. EBITDA (Loss): loss decreased 32.3% to $(63.6)M
- Net Income (Loss): improved to $390M from a loss of $(616.7)M in the previous quarter
- Cash on Hand: decreased 43.8% to $2.3B
Q1 Operational Highlights
- Maintained #1 market share in tracked provinces, with total market share (including Ace Valley and Supreme) of 15.2% during Q1 2022.
- Maintained #1 market share in total the Flower category with 17.9% in Q1 2022.
- Continued to build momentum in the U.S. CBD business driven by Martha Steward CBD which is now the #3 brand among all CBD supplements in the food, drug and convenience-store channel, according to IRI data for the 12 weeks ended July 11, 2021.
- Ramped up distribution of Quatreau CBD beverages in the U.S.
- Delivered strong growth in other consumer products brands driven by Storz & Bickel and the BioSteel launch of its RTD beverages.
- Launched Doja nationally (ongoing) including Ontario-exclusive Doja Legendary Larry flower and 7 Acres Papaya flower in Q1 2022.
- Launched (ongoing) a line of Tweed strain products nationally.
- Launched Tweed Quickies and Ace Valley Pinners small size, single strain pre-rolled joints (0.35 g and 0.3g, respectively) to address consumer preference for sharing cannabis in a group setting without having to pass a single joint around.
- Captured the #3 market share for vapes in Canada.
- Added 1.0 ml 510 cartridges and Tweed Citrus C-land all-in-one vape pens during Q1 2022.
- Expanded its portfolio of THC beverages with the launch of Tweed Iced Tea beverages in Q1 2022 beverages.
- Captured #2 market share in the total gummies category in Canada with the launch of the company’s Twd. Strawberry gummies in Q4 2021.
- Expanded its portfolio of gummies with the launch of Ace Valley Dessert flavor gummies.
- Actively seeking legally permitted investments in THC businesses/brands to increase exposure to U.S. THC market in advance of federal permissibility.
- Implementation of supply chain optimization is well underway, with the Company having realized $38 million , including $32 million in Q1 2022, of the $150 million to $200 million in cost savings expected by the end of the first half of FY 2023.
- Improved Adjusted EBITDA performance driven by strong operating expense discipline and remains committed to achieving positive Adjusted EBITDA by the end of FY 2022 driven by accelerating top-line growth, cost savings initiatives and improved price/mix.
Management Commentary
David Klein, CEO, said:
- “With the right strategy and strong foundation in place we are confident in our ability to deliver long-term success as Canopy’s products and brands continue to demonstrate their appeal to consumers in our core markets.
- While we’re encouraged by regulatory advancement in the U.S., Canopy is not waiting as we continue to scale our business on both sides of the border with an exciting product pipeline planned for the coming quarters."
Mike Lee, CFO, added:
- "We look forward to scaling our new operating model in coming months as we push forward our profitability goals in fiscal year 2022.”
Stock Performance
Canopy's stock price declined 24.5% during Q1, as seen in the chart below, and has declined another 20.8% since then and is now -22.3% YTD
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