Canopy Growth Reports Third Quarter Fiscal 2020 Financial Results
- Generated $124 million Net Revenue, up from $76 million in Q2 2020
- Excluding portfolio restructuring charges in Q2 2020, Net Revenue up 13%
- Achieved Gross Margin of 34%
- Total Operating Expenses down 14% versus the prior quarter
- Adjusted EBITDA loss decreases to $92 million
SMITHS FALLS, ON, Feb. 14, 2020 /PRNewswire/ – Canopy Growth Corporation (“Canopy Growth” or the “Company”) (TSX: WEED) (NYSE: CGC) today announced its financial results for the third quarter ended December 31, 2019. All financial information in this press release is reported in millions of Canadian dollars, unless otherwise indicated.
Third Quarter Fiscal 2020 Corporate Financial Highlights
- Revenues: Reported Net Revenues increased 62% over Q2 2020, or 13% excluding the impact of portfolio restructuring charges. Gross Recreational B2B revenue increased 8% over prior quarter due, in part, to over 140 stores becoming active in the quarter and higher sales of premium dried flower and pre-roll joints. Our acquired businesses including Storz & Bickel and This Works also performed well, contributing to organic growth this quarter.
- Gross margin: Gross margin before fair value impacts was 34%. Gross margin performance in quarter benefited from lower period costs due to higher facility utilization
- Operating expenses: Total operating expenses decreased 14% versus Q2 2020 primarily due to a $20 million reduction in G&A expenses and over $31 million lower stock-based compensation versus the prior quarter
- Adjusted EBITDA: Adjusted EBITDA loss of $92 million, a $64 million narrower loss versus Q2 2020 driven by higher sales, improved gross margins and lower operating expenses
- Cash Position: Gross cash balance was $2.3 billion, down from $2.7 billion in Q2 2020, reflecting the EBITDA loss, capital investments and M&A
Third Quarter Fiscal 2020 Business & Operational Highlights
- Maintained leading market share in retail, at an estimated 22%, of the Canadian recreation market as we saw a strong demand for both premium and value priced dried flower and pre-rolled joints
- Continued market share gains and increase in the number of patients, to over 76,700, in the Canadian medical cannabis market
- Named David Klein as new Chief Executive Officer
- Completed first shipments of cannabis-infused edible chocolates and JUJU Power 510 batteries in December 2019
- Storz & Bickel expanded product line with launch of Crafty+ vaporizer in November 2019
- Announced initial line of First & Free Hemp-derived CBD products and began sales online through www.firstandfree.com, one quarter ahead of Q4 2020 target
In Q3 we executed across Canada, in our international markets and in our strategic acquisitions to drive revenue growth. We have a lot of work to do. We are eager to capitalize on the opportunity to create an unassailable position through a tight focus on the consumer and on critical markets.
David Klein, CEO
“We delivered significant gross improvement in the third quarter driven by stronger revenues and higher capacity utilization. Actions taken earlier this year are expected to meaningfully reduce stock-based compensation in FY21, and we have started to implement tighter cost controls across the organization,” said Mike Lee, EVP & CFO. “We plan to take further steps to reduce our costs and right-size our business to ensure that we can generate a healthy margin profile and cash generation in the coming years.”
- Recreational B2B sales increased 8% over Q2 2020, due to over 140 stores becoming active in the quarter and higher sales of premium dried flower and pre-roll joints
- Recreational B2C sales increased 16% over prior quarter, due in part to an 11% increase in same store sales
- Medical sales increased 5% over the prior quarter primarily attributable to the broadening of our brand and product offerings, including the availability of products from additional CraftGrow partners, as well as an increase in number of customers to over 76,700.
- C3 revenue increased 5% over Q2 2020
- Germany cannabis sales higher than expected due to opportunistic sales into the German market to fill a supply gap that resulted from a regulatory enforced sales halt of cannabis products offered by another vendor
- Storz & Bickel vaporizer revenue increased 46% over Q2 2020 due to solid organic growth and seasonal sales
- This Works revenue increased 42% over prior quarter due to strong organic growth
Gross margin percentage, before fair value impacts in cost of sales, a non-IFRS measure, is a key operational metric that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. This measure is calculated as net revenue less inventory production costs expensed to cost of sales, divided by net revenue, and may be computed from the consolidated statements of operations presented within this news release.
Adjusted EBITDA, a non-IFRS measure, is a key operational metric that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Adjusted EBITDA is calculated as earnings before interest, tax, depreciation and amortization, share-based compensation expense, fair value changes and other non-cash items, and further adjusted to remove acquisition-related costs. The Company attributes Adjusted EBITDA to its operations and corporate overhead, strategic investments and business developments, and non-operating or under-utilized facilities. The Adjusted EBITDA reconciliation is presented within this news release and explained in Management’s Discussion & Analysis under “Adjusted EBITDA (Non-IFRS Measure)”, a copy of which will be filed on SEDAR.
Free Cash Flow, a non-IFRS measure, is a key operational metric that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. This measure is calculated as net cash provided by (used in) operating activities less purchases and deposits of property, plant and equipment.
Transition to U.S. GAAP Reporting
As part of our U.S. financial reporting requirements, Canopy Growth confirmed that, as of September 30, 2019, it no longer met the criteria for qualification as a foreign private issuer because (1) more than 50% of the outstanding voting securities are held by residents of the United States, and (2) the majority of Canopy Growth’s directors are United States citizens.
Therefore, as of April 1, 2020 Canopy Growth will be considered a United States domestic issuer and a large accelerated filer. As a result of this change, as of April 1, 2020, Canopy Growth will be required to prepare its consolidated financial statements, including the Company’s March 31, 2020 audited annual consolidated financial statements, in conformity with United States generally accounting principles, with such change being applied retrospectively. The extent of the impact of this change in accounting framework has not yet been quantified. Canopy Growth will also be required to provide an auditor attestation report under Section 404(b) of the Sarbanes-Oxley Act.
This press release is intended to be read in conjunction with the Company’s Unaudited Condensed Interim Consolidated Financial Statements (“Financial Statements) and Management Discussion & Analysis (“MD&A) for the three and nine months ended December 31, 2019, which will be filed on SEDAR (www.sedar.com) and will be available at www.canopygrowth.com. The basis of financial reporting in the Financial Statements and MD&A is in thousands of Canadian dollars, unless otherwise indicated.
Webcast and Conference Call Information
The Company will host a conference call and audio webcast with David Klein, CEO and Mike Lee, CFO at 10:00 AM Eastern Time on February 14, 2020.
A live audio webcast will be available at:
A replay of the call will be accessible by webcast, until 11:59 PM ET on May 14, 2020, at
About Canopy Growth Corporation
Canopy Growth (TSX:WEED,NYSE:CGC) is a world-leading diversified cannabis, hemp and cannabis device company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms, as well as medical devices through the Company’s subsidiary, Storz & Bickel GMbH & Co. KG. From product and process innovation to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company one product, site and country at a time. The Company has operations in over a dozen countries across five continents.
The Company’s medical division, Spectrum Therapeutics is proudly dedicated to educating healthcare practitioners, conducting robust clinical research, and furthering the public’s understanding of cannabis, and has devoted millions of dollars toward cutting edge, commercializable research and IP development. Spectrum Therapeutics sells a range of full-spectrum products using its colour-coded classification Spectrum system as well as single cannabinoid Dronabinol under the brand Bionorica Ethics.
The Company operates retail stores across Canada under its award-winning Tweed and Tokyo Smoke banners. Tweed is a globally recognized cannabis brand which has built a large and loyal following by focusing on quality products and meaningful customer relationships.
From our historic public listing on the Toronto Stock Exchange and New York Stock Exchange to our continued international expansion, pride in advancing shareholder value through leadership is engrained in all we do at Canopy Growth. Canopy Growth has established partnerships with leading sector names including cannabis icons Snoop Dogg and Seth Rogen, breeding legends DNA Genetics and Green House Seeds, and Fortune 500 alcohol leader Constellation Brands, to name but a few. Canopy Growth operates eleven licensed cannabis production sites with over 5.2 million square feet of production capacity, including over one million square feet of GMP certified production space. For more information visit www.canopygrowth.com
For fact-based information on Canopy Growth Corp, view the company’s sponsored Investor Dashboard.
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Pension giant Caisse to sell one-third of its malls in Canada amid e-commerce hit – Financial Post
Canada’s second-biggest pension manager is preparing to sell a third of the shopping centres it owns in its home market as e-commerce finally starts to bite the country’s brick-and-mortar retailers.
Caisse de dépôt et placement du Québec, says it will look for an array of solutions for its 25 Canadian malls after their problems contributed to a 2.7 per cent decline in the value of its real estate portfolio in 2019. Besides a sale, the Caisse’s real-estate unit, Ivanhoe Cambridge, will consider transforming malls with everything from residential housing to logistics space.
“Canada had been relatively protected but global trends are accelerating and are hitting us too,” Ivanhoe’s President Nathalie Palladitcheff told reporters Thursday. “When you have 25 shopping centres, it’s a big amount — even if it changes just a little bit, it has a great impact immediately in terms of figures.”
Ivanhoe Cambridge held $39.7-billion (US$29.9 bililion) worth of real estate at the end of 2019, about 12 per cent of the total funds under Caisse management. Its shopping centres include the Eaton Centrein Montreal and Metropolis at Metrotown I and II in Burnaby, a suburb of Vancouver.
“One can’t be satisfied with the 2019 returns,” Palladitcheff said. The division will reduce traditional assets, which she described as malls and offices.
The investment shift comes as real-estate funds in the U.S. and Europe struggle to meet a surge in investor requests to get their money back, driven by mounting concerns about the health of malls at a time of rapid growth e-commerce.
As store closures and bankruptcies pile up for retailers, malls are trying to find ways to draw foot traffic and keep their properties full of rent-paying tenants.
Metrotown illustrates the changing landscape, Palladitcheff said. Five years ago, a contract with Target Corp. was considered the best outcome, she said.
“As you well imagine, things have changed,” she said. “Today when we discuss a residential development for Metrotown, we see that is the best possible transaction.”
Target closed its Canadian stores in 2015 after losing billions.
Victoria is the only property market in Canada still flashing high vulnerability – Financial Post
Victoria is the only real estate market in the country still showing high vulnerability, but the overall risk of a housing crash in the country remains moderate, according to the Canada Mortgage and Housing Corporation.
“The evidence of overvaluation remains low as housing prices remain close to the levels supported by housing market fundamentals,” Bob Dugan, the CMHC’s chief economist told media as the agency released its latest quarterly report Thursday.
The Canadian Real Estate Association’s home price index rose 0.8 per cent in January compared to December, marking its eighth consecutive monthly gain. The benchmark index is now up 5.5 per cent from last year’s lowest point in May, CREA said in a report last week.
Victoria, capital of British Columbia, “continues to show a high degree of overall vulnerability,” but CMHC added that the imbalances are easing.
“Moderate evidence remains for overvaluation, however, declining inflation-adjusted home prices combined with growing personal disposable income and population have further narrowed the imbalances between observed and fundamental prices in the third quarter of 2019.”
Average Victoria home prices rose 1.4 per cent in January to $858,500, compared to the same period last year, according to the Victoria Real Estate Board.
Vancouver, another major real estate market that has seen sky-high prices in recent years, is also showing signs of easing, amid government tightening.
In Toronto price acceleration and overheating indicators are currently below their critical thresholds, but “market activity continues to rise, displayed by the sales-to-new listings ratio trending towards a sellers’ market and the accompanying stronger price growth,” the CMHC said.
In fact, the risks in the Toronto housing market remained moderate for the second quarter in a row, after being consistently classified as high risk for the previous three years. But Dugan cautioned that overheating and price increases remained a concern to watch for.
Earlier this week, the federal government said it is setting up a new benchmark interest rate for determining if people qualify for an insured mortgage using actual borrowing costs rather than advertised rates. Home buyers will need to qualify at the contract rate or a new benchmark based on 5-year fixed insured mortgage rates, plus 2 percentage points in both cases, the government said Tuesday. Those changes come into effect April 6.
Dugan said the corporation is aware of the possible impact of the federal government’s recent changes to mortgage stress tests and is watching the situation closely.
“It’s something that we’ll obviously monitor,” Dugan said. “The adjusted stress test for mortgages remains an important measure to ensure that Canadians, especially first-time home buyers, take on mortgages that they can afford.”
Markets in Quebec and Atlantic Canada were also considered low-risk, but the report said there was some froth on new construction in Montreal and Moncton.
The risk of a housing crash in the Prairies also remains low, CMHC said. Most markets in the three western provinces saw vacancy rates fall or stay flat, said Dugan, easing the regulator’s concerns about a possible oversupply of new construction.
“The rental market vacancy rates remain below critical thresholds,” Dugan said.
The only market in the west where CMHC kept its moderate risk assessment was Regina, where the vacancy rate for rental apartments is 7.8 per cent, a level which raised the CMHC’s concerns about oversupply.
Police deliver injunction to demonstrators blocking rail tracks in Saint-Lambert – CTV News
Police have served protesters blocking rail tracks south of Montreal, in St-Lambert, with an injunction demanding they dismantle their barricades.
CN police just before 7 p.m. on Thursday approached the barricades with a box full of paper, delivering copies of the injunction to the protesters. Officers said they would give the protesters time to read it. It was unclear as of Thursday evening if police would move in against them.
Longueuil Police had tweeted just before 7 p.m., warning motorists to stay away from the area to allow the demonstrators to leave.
The protesters, however, showed no signs of leaving.
Canadian National earlier had obtained the injunction to end the blockade of its railway line in Saint-Lambert that had snarled commuter rail traffic to Mont-St-Hilaire and Via Rail service to Quebec City.
Quebec Premier François Legault had said that the barricade would be dismantled by municipal police on the South Shore when the injunction was issued. Longueuil police had asked for the Surete du Quebec’s assistance to remove the barricades, should officers attempt to intervene.
Early Thursday afternoon the protesters were reluctant to speak to the media, though some locals had engaged with them. “I support you, but it’s enough,” St-Lambert resident David Skitt told the protesters, urging them to get off the tracks. After his conversation, where he expressed his frustration with their methods, he shook hands with one of the demonstrators and left.
Temperatures overnight Thursday were predicted to dip as low as -16 C with a windchill of -22 C, according to Environment Canada. The demonstrators had lit a fire inside of a tent and asked their supporters for wood, supplies and blankets.
The blockade of the railway line by supporters of Wet’suwet’en hereditary chiefs has delayed the planned resumption of Via Rail service between Montreal and Quebec City. Service on the busy corridor was set to resume Thursday, but Via Rail announced that the resumption has been postponed until at least the end of the day Friday. The new blockade gave Via Rail “no other option” to push back the resumption of service, the company said in a statement.
Service between Montreal and Ottawa is scheduled to resume Saturday. Service on the complete Windsor-Quebec City corridor is currently expected to resume Sunday.
On Wednesday, Via Rail announced that it was temporarily laying off some 1,000 employees due to the impact of blockades across the country.
Blockades of railway lines across the country have caused widespread passenger and cargo train delays and cancellations.
The blockades are being set up in solidarity with the hereditary chiefs of Wet’suwet’en First Nation of northern British Columbia, who are opposing the construction of a new pipeline through their territory.
– With reporting by The Canadian Press.
This is a developing story that will be updated.
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