Canopy reports CA$128 million loss as recreational cannabis revenue falls

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Canadian cannabis producer Canopy Growth Corp. reported a net loss of more than 128 million Canadian dollars ($95.7 million) in the first quarter of its fiscal year, with total revenue improving slightly on a quarterly basis as the company continues its corporate transformation plan.

Net revenue for the quarter ended June 30 was CA$110.4 million, an increase of 2.3% from the previous quarter.

That includes net Canadian recreational marijuana revenue of CA$44.2 million – including CA$7.2 million in excise taxes – a decline of more than 11% from the CA$49.8 million worth of recreational revenue reported last quarter.

Canopy’s non-recreational cannabis revenue streams included net Canadian medical revenue of CA$13.9 million, including $1.4 million in excise taxes, and international medical revenue of CA$20.2 million.

“Other revenue” was CA$32.1 million, a figure that also accounts for returns and pricing adjustments.

On a Monday morning conference call with analysts and investors, Canopy Chief Financial Officer Mike Lee said the company was no longer disclosing the exact number of kilograms sold or the average selling price per gram, “as our business shifts to a more diversified product line, from flower.”

However, Lee said Canopy’s business-to-business flower sales declined 20% on a quarterly basis, “driven by a volume decline of 5% and an average selling price decline of 15%.”

Lee said Canopy’s Twd. value flower brand accounted for 40% of flower sales in the first quarter, up from 26% in the previous quarter.

Business-to-consumer sales through Canopy-operated retail stores decreased by 12% from the previous quarter, Lee said, attributing that drop to coronavirus-related store closures.

Canopy is in the midst of an effort to improve the quality of its cannabis flower, CEO David Klein said.

“We’ve initiated a consumer research initiative to better understand the flower consumer, including how they define overall product satisfaction and the critical elements that drive those perceptions,” he said.

Klein said other quality-improvement initiatives include an optimized drying process to improve moisture content, plus an attempt to refine “aroma and terpene profiles.”

Canopy’s cannabis-infused beverage portfolio accounted for 74% of all ready-to-drink cannabis beverages sold year-to-date in Canada, Klein said.

However, Canopy’s Canadian recreational revenue from “Cannabis 2.0” products, including those marijuana beverages plus other products such as vape cartridges, comprised just CA$7 million of the company’s CA$44.2 million net recreational revenue for the quarter.

Recreational dried bud sales were CA$40.1 million, or 73% of recreational sales, exclusive of excise taxes and other adjustments.

In the United States, Klein said Canopy’s Martha Stewart-branded CBD products will launch within the coming month.

Canopy said it has decreased its staff head count by more than 18% since the beginning of this year.

The Smiths Falls, Ontario-based firm had cash and short-term investments of CA$2 billion, boosted by a CA$245 million investment by Constellation Brands, Canopy’s largest shareholder.

Canopy’s shares trade as CGC on the New York Stock Exchange and WEED on the Toronto Stock Exchange.

Earnings details from some publicly traded companies in the cannabis industry are available here.