Canopy Growth Delivers Staggering Billion Dollar Net Loss In Fourth Quarter

Canopy Growth Corporation (NYSE: CGC) announced declining revenues and massive losses for the fourth quarter ending March 31, 2020. The net revenue in the quarter dropped by 13% sequentially to $107 million as the company blamed lower Canadian recreational revenue. Canopy Growth also delivered a staggering net loss of $1.3 billion in the quarter which was attributed to impairment and restructuring charges. All numbers are in Canadian dollars.

The stock was falling over 22% in early trading as the company’s GAAP EPS came in at -$3.72 and missed analyst estimates by $3.31.

“Through the COVID-19 pandemic, we have worked hard to ensure the health and well-being of our teams and customers and the continuity of our business.  During this time, our team has rolled out our exciting new cannabis-infused beverages and vape products in Canada and a portfolio of CBD products in the US,” shared CEO David Klein. “True to key priorities that I have outlined for Canopy, we have taken steps to align our capacity with the current market demand and focus our resources against the core markets with the largest and most tangible near-term profit opportunity.”

Guidance Pulled As Company Reboots

Canopy said it will no longer strive to be the first to every market, but strives to the best and become a leading consumer insight and product development company in select priority markets, that matches products and consumer preferences in the cannabis space. The company also said that it expects Fiscal 2021 to be a transition year as it resets its strategic focus, rolls out a new organizational design, and implements a comprehensive operational and supply chain productivity program. Canopy has withdrawn its previously communicated milestones for achieving positive Adjusted EBITDA and Net Income.

Fiscal 2020 Results

The company reported revenue of $398 million for the fiscal year 2020, an increase of 76% over 2019. Unfortunately, the total operating expenses for 2020 were $1.6 billion and the total operating loss for the year was $1.6 billion. The net loss for the year was $1.3 billion.

The basic and diluted loss per share was -$3.80 which was much higher than 2019’s net loss per share of -$2.76.

The company began the year with $2.4 billion in cash and cash equivalents. By the end of 2020, the cash was run down to $1.3 billion. During the last quarter, the company’s free cash flow was a negative $304,725.

New Strategy

The company outlined its new strategy in an earnings statement as follows:

  • Becoming a relentlessly consumer-centric organization by building world-class consumer insights and analytics, coupled with focused, leading-edge R&D and innovation to produce a differentiated product portfolio that will delight consumers. The Company will bring these products to the hands of consumers through best-in-class sales execution;
  • Markets and product categories with the highest and most tangible profit opportunities in the near term. Core markets will be Canada, the US, and Germany with a focus on recreational and medical. To capture future opportunities in emerging markets and categories outside the core, Canopy Growth will deploy an asset-light approach;
  • Driving quality in all aspects of our operation and be positioned to deliver the right product at the right time at the right price from the right facility; and
  • Continuing to lead the industry and set industry standards. This includes spearheading the next phase of the cannabis industry evolution and shaping how the industry evolves. The Company will continue to give back to neighbors and communities through its Grow Good Together initiatives.

Klein added, “I am excited to implement our strategy reset and organization redesign over the course of fiscal 2021.  We have a renewed strategic focus and a clear change agenda that is already underway. We are building what we believe is the best cannabis company in the world by putting the consumer at the heart of everything we do and are re-aligning our organization to be faster and more agile.”

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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