Canadian marijuana producer Canopy Growth reported its second quarter financial results on Monday with share prices soaring as a result.
The world’s largest pot producer posted a loss in the period of 9 cents a Canadian share vs. analysts’ forecasts that called for a loss of 37 cents.
The company achieved record quarterly net revenue of C$135.3 million in Q2 2021 driven by increase in Canadian recreational revenue, continued strength in Storz & Bickel (“S&B”) vaporizer sales and ThisWorks, and contribution from BioSteel, which was acquired in October 2019. This beat analysts’ estimates of C$118.1 million and was a growth of 77% from a year earlier.
Canopy Growth said growth versus the prior year period also benefited from favorable comparison, as Q2 2020 results included a C$32.7 million charge for returns, return provisions and pricing allowances primarily related to restructuring the Company’s recreational softgel & oil portfolio. Adjusting for Q2 2020 charge, net sales increased 24% versus Q2 2020.
For operating expenses, the company reported that Total SG&A expenses declined by 19% versus Q2 2020, driven by year-over-year reductions in Sales & Marketing and General & Administrative expenses, partially offset by higher Research & Development expenses.
Sales & Marketing expense decline of 30% reflects lower compensation expenses resulting from corporate restructuring actions taken earlier in the year, delayed or cancelled marketing activities and reduced travel-related expenses due to the COVID-19 pandemic.
G&A expenses decreased by 26%, while R&D expenses rose by 19% mainly driven by ongoing research studies that commenced after Q2 2020. Excluding Acquisition-related costs of C$3.5 million, SG&A expenses declined by 20% versus Q2 2020. Share-based Compensation expenses decreased 76% over Q2 2020.
Canopy Growth had a net loss of $96.6 million in Q2 2021, a $339.2 million wider loss versus Q2 2020, was driven by lower other income.
“Our renewed strategy of winning consumer mindshare, along with increased agility and execution, has resulted in record net revenue for the second quarter and momentum across key areas of business,” said David Klein, CEO. “Canopy Growth is positioned for continued growth as we establish a strong leadership position that is showcased through our vast portfolio of differentiated brands and products – including our industry leading cannabis-infused beverages.”
“We saw another quarter of improvement in our operating expense ratio while our marketing and R&D investments are being re-directed to drive sales,” added Mike Lee, CFO. “Importantly, our end-to-end review has identified cost savings opportunities in the range of $150-$200 million across cost of goods sold, general and administrative expenses, and inventory, and efforts are underway to quickly capture value. Leveraging ongoing improvements across our business, we are accelerating our path to profitability, notably in our largest market, Canada.”
Shares were rising 7.62% to $25.29 in premarket trading.
Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.