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Canopy Growth Inc. (CGC), a constituent in the munKNEE Pure-Play Pot Stock Index, has reported improved financial results for the three-month period ending June 30th, 2022.

Q1 Financial Highlights

In their press release regarding Q1 Canopy management compared the results with those of the same quarter a year ago instead of comparing the results with those of the previous quarter. The true nature of Canopy's performance is presented below to provide investors and potential investors with an accurate understanding of the recent progression of the health of its business. (All figures are in Canadian dollars and compared to the previous quarter)

• Net Revenue: decreased 2% to $110M
  • Other Revenue: decreased 4% to $44M
  • Cannabis Revenue: unchanged at $66M
• Adj. Gross Margin: improved to (1)% from (32)%
• Net Loss: declined to $(2)M from $(579)M 
• Adj. EBITDA: improved 38.5% to $(75)M
• Cash on Hand: declined 14% to $1.2B

Q1 Operational Highlights

• Increased brand share of Doja in the premium flower and PRJ segment by 13 bps to 2.1% with the launch of 11 new products thereby maintaining their #1 share.
• Increased brand share in the combined mainstream flower and PRJ segment by 35 bps to 4.0% with the introduction of 6 new offerings.
• Increased brand share in the Ready-To-Drink beverage category by 33 bps to 23% with flavor extensions under the Deep Space and Tweed brand banners. The Deep Space brand maintained its #2 rank in the over 5 mg THC beverage category and the Tweed brand maintained its #1 market share rank in the under 5 mg THC beverage category increasing its market share by 136 bps to 10.4%.
• Increased international medical cannabis net revenue driven primarily by strong sales in Israel and Australia. 
• Increased its Canadian medical cannabis business by increasing veteran registrations through the Spectrum Veteran Care program.
• Increased BioSteel revenue with BioSteel RTDs achieving 21% ACV.  
• Secured agreement secured with Walmart for the listing of the BioSteel product to 2,200 stores across 39 states.
• Entered into a partnership with the NHL and NHLPA to become their Official Hydration Partner with the BioSteel product which will provide the brand with league-wide rink-side marketing and product supply rights, retail activation rights, community engagement platforms, player marketing and activation rights.
• Expanded distribution of the Wana brand into Puerto Rico and Arkansas in addition to opening three additional states and added a variety of new SKUs to a range of markets. 

Management Commentary

David Klein, Chief Executive Officer, said: 

• "Through advancements in our North American brand-led strategy we delivered a record quarter from BioSteel and maintained #1 share in the premium flower and pre-rolled joint-segment while driving growth of our premium Doja and mainstream Tweed brands.
• As our U.S. THC ecosystem continues to strengthen with Acreage operating in the recreational cannabis market in New Jersey, along with the expansion of Wana across North America, we remain focused on delivering a robust pipeline of innovation aligned to what consumers are looking for – premium, infused, and ready to enjoy."

Judy Hong, Interim Chief Financial Officer, stated:

• "The cost-saving program announced earlier in the quarter combined with sound expense discipline contributed to a meaningful decline in operating expenses during the quarter.
• We expect cost savings to ramp in the second half of the year, enabling us to execute on our path to profitability even as we continue to invest in strategic growth initiatives including in BioSteel and our U.S. THC ecosystem."  

Stock Performance

Canopy's stock price continues to plummet. It declined 7.7% in July and is now DOWN 69.9% YTD and DOWN 95% from its 2021 high.

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