Canopy Growth (CGC) reported earnings on Thur 20 June 19 (a/h)

** charts before earnings **

 

** charts after earnings **

Canopy Growth misses by $0.66, reports revs in-line; Revenues increase 312% y/y; Expansion costs increase 426%; Stock trading 2% higher in light after hours trade

• Reports Q4 (Mar) loss of CC$0.98 per share, excluding non-recurring items, CC$0.66 worse than the S&P Capital IQ Consensus of (CC$0.32); revenues rose 312.7% year/year to CC$94.1 mln vs the CC$93.69 mln S&P Capital IQ Consensus.
  • Fourth quarter revenue growth of 13% versus third quarter with additional revenue being generated through value-added products, extraction services, and clinic partners.
  • Average Selling Price per gram (Recreational) $7.28 
  • Average Selling Price (Canadian Medical $8.17, +2% y/y
  • Average Selling Price (International Medical) $13.91, +4%
  • Kilogramd and kilogram equivalent sold $9.326, +269% y/y
• Canadian cannabis harvested expected to increase to approximately 34,000 kilograms in Q1 fiscal 2020, with further licensed capacity still to come; additional capacity is expected to increase finished inventory available for sale beginning in Q2 fiscal 2020. Rapid expansion into United States CBD market following passage of new Farm Bill; investments and partnerships related to extraction, advanced manufacturing, and warehousing/logistics are underway. Seeking to bring CBD products to market by the end of fiscal 2020.
• Gross margin (before the IFRS fair value impacts in cost of sales) for fiscal 2019 grew 35% to $51 million, driven by growth in our medical channel and the launch of the Canadian recreational channel. The gross margin percentage decreased during the year from 48% to 22%, largely driven by the continued expansion work on several of our large-scale greenhouse facilities throughout the year, resulting in under-utilization impact in cost of sales.

Canopy Growth On Call

• says patients in medical were down Y/Y, but decline was expected
• 'bottom of margin trough' this quarter
• waiting for regulation to say they can produce chocolates and vapes in Canada
  • notes important events in December
• expects reported gross margin to be above 40% by end of year as it produces full utilization