david klein Archives - Green Market Report

Adam JacksonNovember 9, 2022


Shares of Canopy Growth Corporation (TSX: WEED) (NASDAQ: CGC) were popping by over 9% in early Wednesday trading as the company posted results that show rising demand for its non-cannabis ventures, despite burdening debt and uncertainty around its consolidation plans. The stock was lately selling at $3.50. The company released its financial results for the second quarter ending September 30 with net revenue of C$118 million in the second quarter, down 12% versus C$135 million last year, but still a 7% improvement versus the previous quarter’s $110 million.

Total revenue earnings were not immediately available and could not be compared to Yahoo Finance’s average analysts’ estimate of C$83.7 million as of press time, though the posted net revenue is still higher than estimates.

Net loss widened to C$232 million, up C$200 million (625%) versus last year’s C$32 million, though down considerably from the previous quarter’s C$2 billion cash burn. The company said that net loss could be attributed to non-cash fair value changes and an increase in asset impairment and restructuring costs, with improved margins in the mix providing some cushion.

“We delivered solid sequential quarterly net revenue growth and improved margins, led by another record quarter for BioSteel, the stabilization of our Canadian cannabis business, and continued actions to reduce overall costs,” said CFO Judy Hong. “We are pressing forward on our path to profitability in Canada and expect Canopy USA will meaningfully enhance our growth and profitability over time once it closes the announced acquisitions of Acreage, Jetty, and Wana.”

Cash Burn

Canopy noted that the free cash flow in the fiscal second quarter was an outflow of C$135 million, a 34% increase in outflow versus last year’s second quarter. Canopy attributed this to the timing of certain payments in each period. The company said that the year-to-date free cash flow is in line with the prior year period. Investors can remain calm for now as the cash and short-term investments amounted to $1.1 billion on September 30, 2022. However, this does represent a decrease of $229 million from $1,372 million on March 31, 2022, reflecting primarily Adjusted EBITDA losses and interest costs.

BioSteel Boost

The company’s majority stake in hydration drink BioSteel proved to be fruitful, as revenue in the quarter rose 299% versus last year. BioSteel has secured distribution with large retailers and inked a multi-year partnership in July with the National Hockey League and the National Hockey League Players Association as an “official hydration partner.”

Under the accord, BioSteel is given league-wide rink-side marketing and product supply rights, retail activation rights as well as a community engagement platform.

Canopy said that it acquired a manufacturing facility on Tuesday, “which is expected to support ongoing rapid U.S. expansion for the brand and drive gross margin improvement.”

At the same time, the company also announced that it would divest from its vertical retail operations and sell off all of its stores, focusing on the core consumer packaged goods business instead.

Canopy also made headlines on the news that it would trigger hibernating deals to buy three U.S. plant-touching companies under separate holdings umbrella, though the plans face complications that could affect its listing status on the Nasdaq.

Stifel analyst Andrew Carter downgraded the company to a “Sell” rating after the announcement, citing Canopy’s debt versus the company’s valuations on its businesses.

“We weigh C$1.4 million of value against C$240 million of net debt as well as the $750 million term debt’s remaining interest expense included in the make-whole provision,” he wrote in the report.

Canopy reported a gross margin of 3% versus 54% in the same quarter last year.

Adjusted EBITDA loss was $78 million, an $85 million improvement versus the same time last year, due to the improvement in gross margin and reductions in G&A and R&D expenses.

“Our second quarter marks a key inflection-point for Canopy, demonstrating momentum across our key businesses and accelerating our entry into the U.S. cannabis market through the creation of Canopy USA,” said CEO David Klein. Canopy is ideally positioned to capitalize on this once-in-a-generation opportunity and accelerate our path to North American cannabis market leadership.”

Adam JacksonAugust 5, 2022


Canopy Growth Corporation (TSX: WEED) (NASDAQ: CGC) slid in early trading on Friday after the company said it lost over C$2 billion in the second quarter– as falling margins and weak sales continue to plague the industry. The company announced its financial results for the first quarter ending June 30, 2022

The Smiths Falls, Ontario-based cannabis company delivered total revenue expectations of approximately C$122.9 million during the period — eking out over the Stifel analyst estimate for revenues of C$112 million — yet, the company also said it lost C$2.08 billion, or $5.23 a share, versus a profit of C$392.42 million, or C$1.02 a share, in the same time the previous year. The loss was driven by a non-cash, C$1.73 billion goodwill impairment.

Cash Burn

Net revenue dropped 19% to C$110.12 million from C$136.21 million, the company reported. Analysts expected Canopy Growth to lose C$0.29 a share on revenue of C$112.7 million. The company said it held C$1.2 billion in cash and short-term investments at the end of the quarter. The company burned through C$200 million in one quarter as it ended March with $1.4 billion. The company attributed the spending to primarily EBITDA losses, and the upfront payment made as consideration for the options to acquire Jetty Extracts upon federal permissibility of THC in the U.S.

Diluted loss per share in the fourth quarter was C$5.23 versus diluted earnings per share of C$0.84 in the same period last year. Non-GAAP income before interest, taxes, depreciation, amortization, and share-based compensation (Adjusted EBITDA) was a loss of C$75 million in the second quarter of 2022, compared to losses of C$64 million in the same period last year.

“The cost-saving program announced earlier in the quarter combined with sound expense discipline contributed to a meaningful decline in operating expenses during the quarter,” said CEO David Klein. “We expect cost savings to ramp in the second half of the year, enabling us to execute on our path to profitability even as we continue to invest in strategic growth initiatives including in BioSteel and our U.S. THC ecosystem.”

What Went Wrong

The company blamed its poor showing on its decision to focus on higher margin, premium and mainstream products in the adult-use market. Canopy also noted that it was dealing with the continuing impacts of price compression resulting from increased competition and lower sales in the value-priced dried flower category.  Several regions in Canada were affected by a rapid increase in licenses resulting in a boom of dispensaries. Having said that, the company acknowledged the decrease in the volume of value-priced dried product sold while also enjoying a full quarter of net revenue contribution from Supreme Cannabis. On the medical side, Canopy said that while it did have higher average orders, it was offset by a fewer number of orders.

In the adult-use market, sales fell for all form factors including flower, concentrates and edibles. On the medical side, sales fell for oils and soft gels, but did grow for flower and edibles. In the company’s other consumable products, Bio Steel was the only category that did well and increased 169%. This Works and Storz & Bickel both fell.

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