Canopy Growth Reports 123% Revenue Growth for Third Quarter

Today Canopy Growth Corporation (TWMJF) released its financial results for the third quarter ending December 31, 2017. Quarterly revenue increased 123% to $21.7 million over last year’s $9.8 million and net earnings were $11.0 million, or $0.01 per basic and diluted share, compared to last year’s $10.7 million.

Gross margins fell to 58% of sales ($12.5 million) compared to 64% of sales in third quarter of last year. The margins would have been higher, but the cash operating costs associated with subsidiaries not yet cultivating or selling cannabis (totaling $2.9 million) drove that number down. Excluding those costs, the gross margin would have been 71% of sales ($15.5) million.

“The Company’s record revenues in the quarter were driven by a significant increase in domestic sales across all product formats as well as sales in the German medical market, which is beginning to show impressive growth,” said Bruce Linton, Canopy Chairman & CEO, in a statement. “Success in future global medical markets and the recreational cannabis market in Canada will depend not only on capacity but on strong execution and securing supply agreements with the provinces today. I believe our success on both these fronts is evident as you look at our accomplishments this past quarter.”

The company has approximately $400 million in cash on hand to fund domestic and global expansion.

In terms of cost, the weighted average cost per gram to point of harvest fell by 18% to $0.59 per gram, making it the sixth consecutive quarter under $1 per gram. Likewise, the weighted average cost per gram before shipping and fulfillment also fell by 18% to just $1.03 per gram.

The company sold a record 2,330 kilograms and kilogram equivalents, representing an 87% increase over the previous year’s 1,245 kilograms and kilogram equivalents. The average selling price per gram also rose by 13% to $8.30 per gram, compared to the previous year’s price of $7.36 per gram. The increased selling price was due in part to the improvement of oil products and a higher selling price of medical cannabis in Germany by the company’s wholly-owned subsidiary Spektrum Cannabis GmbH. Cannabis oil sales, which includes oil-based soft gel capsules, made up 23% of Canopy’s product revenue, accounting for 262-kilogram equivalents of the total kilograms sold.

“With the sector’s largest inventory of diversified, high quality cannabis products, demonstrated distribution capabilities, robust IT infrastructure, a vast production footprint, investments in seven provinces across the country and a proven record of leadership and execution, we are now excelling into the anticipated recreational sector with unparalleled opportunity,” added Linton.

Sean Stiefel of Navy Capital, the largest US Global Cannabis, L/S equity fund said, “It was a very clean quarter. The profitability was a huge win. Quebec announced their supply agreements which is a very big catalyst for the sector. Canopy is also showing improvement in their costs and was also successful in their JV and International ops.” he went on to say, “All in a very solid quarter and we except the entire sector to be up today on these earnings.”

William Sumner

William Sumner is a freelance writer specializing in the legal cannabis industry. You can follow William on Twitter @W_Sumner or on Medium.

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