UPDATE: Canopy Growth (CGC) Reports Q2 Loss of $1.08 on Net Revenues of $76.6M

(Updated - November 14, 2019 6:35 AM EST)

Canopy Growth (NYSE: CGC) reported Q2 EPS of ($1.08), versus ($3.70) reported last year. Revenue for the quarter came in at $76.6 million, versus $23.3 million reported last year.

Key highlights include:

• The company has established leading market share across the country including a noteworthy share of over 35% in Alberta, Canada's most developed provincial recreational market.
• Consumer demand for cannabis continues to increase versus Q1 2020 with Company-owned recreational same-store sales growth of 17% and global medical organic growth of 23%.
• More than 30 SKUs submitted to Health Canada for Cannabis 2.0 products across chocolate, vapes, and beverage formats.
• As part of a management-initiated portfolio review, the Company has taken a restructuring charge of $32.7 million for returns, return provisions, and pricing allowances primarily related to its softgel & oil portfolio. Additionally, management has recorded an inventory charge of $15.9 million to align the portfolio with the new strategy. This new strategy includes new retail pricing architecture, a rationalized package assortment, and a focused marketing/educational strategy to further develop this category. The Q2 2020 gross margin impact of the portfolio restructuring costs is $40.4 million. With this acute restructuring charge, management believes that current inventory levels both internally and externally are in-line with demand forecasts.
• Consolidated Q2 2020 gross revenue, excluding the portfolio restructuring costs, was up 6% to $118.3 million including increases from full-quarter benefits of the C3 and ThisWorks acquisitions (flat excluding incremental revenue from acquisitions). Net of the portfolio restructuring costs, revenue was $76.6 million, a decrease of 15% over Q1 2020.
• Cannabis gross revenues for Q2 2020, excluding the portfolio restructuring costs, was $94.7 million, an increase of 2% over Q1 2020.
• The Company ended Q2 2020 with $2.7 billion in cash and cash equivalents and marketable securities available for sale, with its Canadian Infrastructure and global M&A programs substantially completed.

Management Commentary

"The last two quarters have been challenging for the Canadian cannabis sector as provinces have reduced purchases to lower inventory levels, retail store openings have fallen short of expectations, and Cannabis 2.0 products are yet to come to market," said Mark Zekulin, CEO, Canopy Growth. "However, we believe these conditions are a short-term headwind in what is a brand-new industry, and Canopy continues to be best positioned with cash-on-hand, a world-class infrastructure, and a portfolio of intellectual property to deliver sustained, long-term market leadership."

Added Zekulin: "We took the necessary steps to address inventory levels on our oils and softgels; looking beyond this, the fundamentals are strong: our retail store sales are growing on an overall and same-store basis, our Canadian medical revenues are up, and international medical sales are growing on both an organic and inorganic basis. And, even though revenue is muted during the quarter due to the restructuring charge, actual cannabis shipments grew quarter-over-quarter, which is a great accomplishment in light of the inventory reset that's occurring at the provinces. We believe our fundamentals are strong and are confident we're moving in the right direction."

"After five years of investment in market research, product development, product marketing, production engineering, as well as production facility design, construction and qualification, we are ready to bring our Cannabis 2.0 product offerings to market," said Zekulin. "This marks the end of significant expansion investments in Canada and we are confident that the high quality, differentiated beverage, vape and edible products that we are bringing to market combined with a retail channel that we expect to grow significantly next fiscal year, will drive the next leg of growth for our business."

For earnings history and earnings-related data on Canopy Growth (CGC) click here.

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