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Tuesday, Jun 15, 2021
Mugglehead Magazine
Cannabis & psychedelics industry news based in Vancouver, B.C.
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Canada

Canopy celebrates rising Canadian sales and Biden win

The Ontario-based super-producer saw Q2 sales grow 23% while it adjusted its US expansion strategy for a Democrat in the White House

Canopy celebrates rising Canadian sales, Biden win
Canopy celebrates rising Canadian sales, Biden win

While Canopy Growth Corp. (TSX: WEED) celebrated a surge in Canadian recreational sales, the weed titan joined cheers for Joe Biden’s win in the presidential race, believing it could open the door for federal legalization in the U.S.

On Monday, the Ontario-based company said it made $135.5 million in the second quarter ended Sept. 30, an increase of 23 per cent from net revenues of $110.4 million in the previous three months.

Canopy’s share of Canadian adult-use sales grew to 15.5 per cent in the second quarter, compared to less than 13 per cent in first quarter, according to a statement. Adult-use sales for dried bud rose sequentially to $63.9 million from $40.1 million.

Its stock rose 4.5 per cent Monday to $31.95 on the Toronto Stock Exchange.

“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,” Canopy CEO David Klein said in the statement.

Before Klein discussed his company’s progress in Canada on an earnings call with analysts, he highlighted how U.S. election results alter Canopy’s strategy entering the country’s THC market.

“We believe the Biden win is an important step on the path to federal permissibility of cannabis in the U.S. market through decriminalization and descheduling,” he said.

Biden and running mate Kamala Harris have voiced support for the Safe Banking Act, which would allow banks to service weed firms without penalty. The pair have also committed to decriminalizing pot and expunging criminal records for minor possession.

Read more: Bi-partisan cannabis ballot sweep could trigger green wave in neighbour states

Canopy noted that several of its businesses operating in the U.S. saw increased sales, specifically its vaporizer subsidiary Storz & Bickel, CBD skincare company This Works and its BioSteel sports energy brand.

Canopy is beefing up those consumer packaged goods brands to help establish routes to sell THC-based products if the country legalizes, Klein said. Reported revenues from those businesses climbed to $43 million in the quarter.

Another key part of its U.S. strategy is to close a pending deal to acquire multi-state operator Acreage Holdings Inc. (CSE: ACRG.U) as soon as it’s federally permissible.

Read more: Canopy’s recreational cannabis sales continue to decline

Canopy celebrates rising Canadian sales, Biden win

Canopy said it’s shipped 2 million cannabis-infused drinks across Canada since March. Press photo

Canopy to focus on Canadian efficiency as US legalization faces hurdles

But Cowen analyst Vivien Azer noted that those efforts stateside may be stalled due to Republicans likely retaining control the Senate.

“It seems like your focus needs to continue to be market share for the adult-use market in Canada,” she said.

Azer asked Klein how he plans to keep driving market share in Canada, considering some of the firm’s retail competitors haven’t taken kindly to its growing presence in Alberta and Ontario.

“There’s a way that we can really make sure that we’re a value-added partner,” Klein responded. “I understand that there’s the risk of channel conflict, but we believe that we’re going to be open and helpful to our retail partners.”

Canopy says it’s grown its Twd and Simple Stash flower brands in the key value segment, which it estimates will make up around one-third of overall legal flower sales in Canada.

Since the company cut two large greenhouses in B.C. and hundreds of workers earlier this year, CFO Mike Lee said it’s restructured its other facilities to focus on either volume for the value segment, or quality for the top-shelf segment.

It was able to save $150 million to $200 million in the quarter, Canopy says, tied to various general and administrative expenses as well as inventory it plans to cut in the future.

But its operating expenses ballooned to $310 million, compared to $178.9 million in the previous quarter. The company reported a $94.7 million credit loss on certain financial assets, while writing down $46.3 million in asset impairments.

Adjusted earnings before interest, taxes, depreciation, and amortization improved to a $85.7 million loss, compared to an adjusted EBITDA loss of $92 million in the last quarter.

Cannabis 2.0 sales rose to $8 million, from $2 million in the first quarter. Canopy says it’s shipped over 2 million weed drinks across Canada since March.

A net loss of $96.6 million improved quarter-over-quarter from $128.3 million.

Cash and short-term investments was a reported $1.72 billion as of Sept. 30, representing a decrease of $254 million from $1.98 billion on March 31.

Top image via Canopy

 

jared@mugglehead.com

@JaredGnam

1 Comment

1 Comment

  1. Steven

    November 10, 2020 at 9:06 am

    Biden did not win yet. Several states have not certified nor has the electoral college voted. There are legal challenges to the vote tally in some states.

    Remember, the media do not call elections.

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