Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) has announced financial results for the first quarter fiscal 2021 ended June 30, 2020, which saw adjusted EBITDA losses narrow to $92 million versus Q1 FY20 and net revenue increase by 22%, over Q1 FY20, to $110 million.
The announcement also highlighted Canopy Growth’s position in the cannabis-infused beverage segment, with the company shipping over 1.2million cans in Canada, making it the number one brand in the country by market share.
“We’re proud of our strong first-quarter performance, despite unprecedented volatility and uncertainty in the market and across the globe,” said David Klein, CEO. “We grew our revenue year-over-year and are seeing market share improvement, notably achieving number one market share in cannabis-infused beverages in the Canadian market. We are implementing a renewed corporate strategy with the appointment of a new leadership team which will focus on delivering quality products to our consumers, positioning our business for continued growth. The proposed retooled Acreage announcement refocuses our entry for the evolving U.S. market, where we are seeing increased momentum.”
Net revenue in Q1 2021 increased by 22% versus Q1 2020 driven by higher medical cannabis sales in Canada and Germany, strong Storz & Bickel (“S&B”) vaporizer sales and the benefit of a full quarter of contribution from acquired businesses C3 (acquired in April 2019) and This Works (acquired in May 2019) that were reflected for a full quarter in Q1 2021. Excluding the impact from acquired businesses, net sales growth increased 9% versus Q1 2020. The growth was partially offset by a decline in Canadian Recreational cannabis revenue due to restricted retail operating environment in response to the COVID-19 pandemic and increased competition in dried flower-based products.
Adjusted gross margin, excluding inventory step-up costs, was 7%, down 1,300 bps versus Q1 2020. Gross margin was impacted by lower production output as well as manufacturing variances and inventory adjustments.
|in millions of Canadian dollars, unaudited)||Q1 2021||Q1 2020||vs. Q1 2020|
|Canadian recreational net revenue|
|– Business to business1||$34.9||$38.9||(10%)|
|– Business to consumer||$9.3||$10.6||(12%)|
|Canadian recreational net revenue||$44.2||$49.5||(11%)|
|Canadian medical net revenue2||$13.9||$11.7||19%|
|International medical revenue||$20.2||$10.5||92%|
|All other revenue||$32.1||$18.8||71%|
|1 Includes excise taxes of $7.2 million (Q1 2020 – $11.5 million).|
|2 Includes excise taxes of $1.4 million (Q1 2020 – $1.4 million).|
|(in millions of Canadian dollars, unaudited)||Q1 2021||Q1 2020||vs. Q1 2020|
|Canadian recreational revenue|
|– Dry bud1||$40.1||$60.8||(34%)|
|– Oils and softgels1||$7.7||$8.2||(6%)|
|– Cannabis 2.0 products2||$7.0||$-||NM|
|– Other revenue adjustments3||$(3.4)||$(8.0)||58%|
|– Excise taxes||$(7.2)||$(11.5)||37%|
|Global medical revenue|
|– Dry bud||$10.2||$7.2||42%|
|– Oils and softgels||$25.0||$16.4||52%|
|– Cannabis 2.0 products2||$0.3||$-||NM|
|– Excise taxes||$(1.4)||$(1.4)||0%|
|All other revenue||$32.1||$18.8||71%|
|1 Excludes the impact of other revenue adjustments.|
|2 Cannabis 2.0 products include cannabis-infused chocolates, cannabis-infused beverages, and cannabis vape products (including power sources such as rechargeable and compact batteries, ready-to-go vape pens, and cartridges/vape pods)|
|3 Other revenue adjustments represent the Company’s determination of returns and pricing adjustments, and relate to the Canadian recreational business-to-business channel.|
“Following our previously announced restructuring actions, we have substantially reduced our expense and cash burn in this quarter in addition to reducing headcount by over 18% since beginning of this calendar year. Our marketing and R&D investments are being re-allocated to programs with high-return potential in order to drive sales,” added Mike Lee, CFO, Canopy Growth.
“Our gross margins in the quarter came in below our expectations due to under-utilization of our large-scale infrastructure. We’ve already proven we can deliver 40%-plus gross margin and are confident that we can return to that level as we work toward higher capacity utilization across our facilities as demand for our cannabis products continue to grow. In the meantime, we are focused on further optimizing our operating footprint through a full end-to-end strategy that looks at people, process, technology, and infrastructure that we believe will lead to best in class margins over time.”
Source | Canopy Growth