NEWS BRIEF

Canopy reports record cannabis revenue, pledges profit next fiscal year

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(This story has been updated with comments from Canopy Growth’s conference call with analysts.)

Smiths Falls, Ontario-based Canopy Growth reported record net revenue of 135 million Canadian dollars ($104 million) in the second quarter ended Sept. 30, topping analyst expectations, as well as a net loss of about CA$97 million.

The revenue gain was led by dry bud sales in the Canadian recreational market, which grew 60% from the previous quarter to CA$64 million.

That helped drive market share in Canada to 15.5% in the quarter, Canopy said in a news release.

Ancillary revenues were another bright spot for the company.

The “all other revenue” category grew to CA$43 for the quarter, a substantial improvement from the previous period’s CA$32 million. The category captures sales of Storz & Bickel vaporizers globally as well as BioSteel – a sports drink – in North America.

Canopy said it expects to see Martha Stewart-branded CBD products “in thousands of stores as we launch additional SKUs in the coming weeks.”

In a conference call with analysts, CEO David Klein said the company is on track to be profitable.

“I’m confident we’re now firmly on a path to achieve positive adjusted EBITDA at some point next fiscal year,” he said.

However, sales of Cannabis 2.0 products, which Canopy has invested heavily in, rose marginally to CA$8 million.

That covers sales of cannabis-infused chocolates and beverages and marijuana vape products.

Canopy’s CEO has touted the important role beverages will play in the company’s future, even though those products have yet to prove themselves with consumers.

On growing the category, Klein said the biggest barrier is equivalency standards changing over time in Canada “so people can buy more than a couple of units at a time.”

“Then we think the entire category gets to grow,” Klein said.

Medical cannabis sales continued to stall.

International medical revenue fell 15% from the previous quarter to CA$17.5 million.

Sales of medical marijuana overseas – especially in Europe – are an important part of the value proposition for many publicly traded Canadian cannabis companies.

Canopy lost ground in the competitive Germany market.

Dried flower sales there fell 5% in the quarter compared to one year ago.

In Canada, Canopy sold CA$13.9 million of medical cannabis, the same amount as the previous quarter.

Canopy said it set in motion a plan to “capture savings” worth up to CA$200 million.

In the analyst call, Chief Financial Officer Mike Lee said Canopy is working to “make sure we’re growing the right product, for the right category, out of the right facility and hitting the right costs.”

“We’re working toward that balanced inventory, and for the most part, we achieved that this quarter,” Klein added.

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

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