Canopy had already seen its stock price dip more than 20 Percent since its last earnings report, and the subsequent ouster of Creator Bruce Linton as co-CEO
Canopy Growth Corp. on Wednesday reported a net loss of $1.28 billion for its first quarter, as the cannabis manufacturer faced lower net earnings on a quarter-over-quarter foundation and took a significant non-cash charge because of the extinguishment of warrants.
Despite an uptick in recreational cannabis sales, Canopy generated only $90.5 million in net revenue for its first financial quarter of 2020, versus $94.1 million in its previous quarter — one which analysts had considered weak.
The results were below analyst expectations of $110 million in net revenue, and sent the price of Canopy’s New-York-listed stocks down more 10 percent in after-hours trading.
Canopy had already seen its stock price dip more than 20 percent since its prior earnings report, and the subsequent ouster of creator Bruce Linton as co-CEO in early July.
The huge majority of the quarter’s loss — or $1.176 billion — has been attributed to some non-cash extinguishment of warrants held by Constellation Brands, the U.S. alcohol giant that’s an important investor in Canopy.
On June 27, 2019, the same day that Canopy completed a plan of arrangement giving it an option to acquire U.S.-based Acreage Holdings Inc., Canopy and Constellation restated the provisions of their investor rights agreement.
The restatement, which prolonged the lifetime of a few warrants held by Constellation and substituted others with new securities, triggered the weight reduction.
For the period ending June 30, Canopy sold 10,549 kilograms of cannabis to medical and recreational markets, in contrast to 9,326 kilograms in the first 3 months of 2019. Most of the sales came from dried cannabis sold in the national recreational market, which afforded the organization $60.8 million in earnings.
Canopy harvested 40,960 kilograms of cannabis this past year, an 183 percent increase from the first few months of 2019, along with a number that the company said exceeded its own expectations.
The business said 16 percent of its overall recreational cannabis earnings this quarter came from higher-margin pre-rolled cannabis products.
Adjusted EBITDA was a loss of $92 million, a small improvement from the $97.7 million loss the company posted in its previous quarter. Canopy attributed some of the loss to an investment that the growth of its hemp facility in New York.
Canopy’s cash position also declined this quarter due in part because of the Acreage deal. Canopy paid a premium of $395 million to Acreage within the trade and reserves the right to get the U.S. cannabis company altogether if national legalization occurs.
“Fiscal 2020 will be another exciting time for the cannabis industry as we close in on the launching of new product formats,” said interim CEO Mark Zekulin, who’s directing the business until a permanent replacement is found. “Our current harvests are evidence that our focus on operational excellence is functioning, and we look forward to demonstrating our Canadian and U.S. clients what we have been working on behind the scenes to get ready for another wave of products coming later this year,” he said.
Canopy posted a net loss of $670 million in its last financial year, a number that Constellation CEO Bill Newlands voiced his disappointment with. Canopy had posted a writedown of $24 million in its last quarter, because of problems getting its greenhouse facilities in Aldergrove, B.C. and Mirabel, Que.up to speed.
“We feel that falling recreational earnings could harm Canopy’s relative placement especially as Aurora’s pre-release for the June quarter indicates substantial increase in the recreational market,” composed Royal Bank of Canada analyst Douglas Miehm at a preview of Canopy’s earnings.