Canopy Growth stock falls as global cannabis sales slump 29% Y/Y, net loss widens on market cap wipeout

Aug. 05, 2022 7:58 AM ETCanopy Growth Corporation (CGC)By: Ravikash, SA News Editor13 Comments

marijuana leaf

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  • Canopy Growth (NASDAQ:CGC) stock fell ~8% premarket Aug. 5 after FQ1 net revenue declined and net loss widened year over year.
  • FQ1 Net revenue fell~19% Y/Y to C$110M.
  • The company said total global cannabis net revenue declined 29% Y/Y to C$66M, driven in part by a decline in value flower sales in the Canadian recreational cannabis market due to a deliberate business transition to focus on higher margin, premium and mainstream products.
  • Other consumer products revenue grew 1% Y/Y to C$44M.
  • Net loss widened to -C$2.09B, compared to -C$389.96M in FQ1 2022. The company said the increased net loss was mainly due to non-cash C$1.725B impairment in goodwill, and non-cash fair value changes.
  • Canopy added that the impairment represents the full goodwill balance linked with the cannabis operations reporting unit and was triggered due to decrease in CGC market capitalization in FQ1 FY2023.
  • YTD, CGC has fallen ~69%, see chart here.
  • Reported gross margin in the quarter was -1%, compared to +20% in Q1 FY2022. Canopy noted that gross margin in FQ1 FY2023 was impacted by lower production output and price compression in the Canadian recreational business, a shift in business mix, and a decrease in the amount of payroll subsidies received from the Canadian government under a COVID-19 relief program.
  • Adjusted EBITDA loss also widened to C$74.8M, compared to C$63.64M in FQ1 FY22, mainly due to decline in gross margin, partially offset by the reduction in total SG&A expenses.
  • Canopy said Total SG&A expenses declined by 8% versus FQ1 FY2022, due to reductions in general and administrative and research and development expenses, offset by increases in sales and marketing.
  • At June 30, cash and short-term investments were C$1.2B, compared to C$1.4B at March 31. The decrease reflects mainly EBITDA losses, and the upfront payment made for the options to acquire Jetty Extracts.
  • CGC -8.30% premarket to $2.65 Aug. 5

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