Cannabis Professional’s daily roundup of industry news. View archive here.
Canopy Growth revenue slips 15 per cent amid ‘restructuring charge’
Canopy Growth Corp.’s quarterly revenue declined 15 per cent sequentially, coming in far short of analyst expectations, after the company took a $32.7-million “restructuring charge” related to returns for oil and soft gel products. The company’s adjusted EBITDA loss was $155.7-million and its net loss was $374.6-million.
Canopy reported $76.6-million in sales, including charges. That’s down from $90.48-million the previous quarter and 32 per cent below consensus expectations, according to S&P Capital Markets.
Gross margins were negative 13 per cent. Canopy attributed the poor margin performance to a $15.9-million “inventory charge” that resulted from the company's “assessment of current and forecasted ‘sell-in’ rates of certain oil and softgel products.” It also said margins were impacted by operating costs related to facilities that were not producing cannabis or were under-utilized ($10.5-million), as well as by “portfolio restructuring costs” ($9.2-million).
"The last two quarters have been challenging for the Canadian cannabis sector as provinces have reduced purchases to lower inventory levels, retail store openings have fallen short of expectations, and Cannabis 2.0 products are yet to come to market," said CEO Mark Zekulin in a news release.
He added that he believed the poor market conditions are short-term, and that Canopy is the best positioned company over the long-term, given its “cash-on-hand, a world-class infrastructure, and a portfolio of intellectual property.”
Before adjustments, Canopy’s business-to-business wholesale revenues declined 15 per cent in the quarter, while recreational sales increased 24 per cent and Canadian medical sales were up 8 per cent. The biggest growth was in international medical sales, which increased 72 per cent to $18.1-million, driven largely by sales from its German subsidiary C3.
The company sold 7,497 kilos of dried cannabis in the B2B market, up 9 per cent from the preceding quarter. This was offset by an 80 per cent drop in B2B oil and gel cap sales. In the rec market, sales for dry cannabis increased 34 per cent sequentially, while oil sales remained flat.
"We took the necessary steps to address inventory levels on our oils and softgels; looking beyond this, the fundamentals are strong: our retail store sales are growing on an overall and same-store basis, our Canadian medical revenues are up, and international medical sales are growing on both an organic and inorganic basis. And, even though revenue is muted during the quarter due to the restructuring charge, actual cannabis shipments grew quarter-over-quarter, which is a great accomplishment in light of the inventory reset that's occurring at the provinces,” Mr. Zekulin said.
Canopy continues to burn through cash at an astonishing rate, spending $404.7-million in the quarter, including $228.3-million on capital expenditures, mostly on completing its manufacturing and beverage production facilities. The rest of the cash burn was most attributed to operations, as seen in the $155.7-million adjusted EBITDA loss.
– Mark Rendell
BevCanna announces LOI to acquire California juice maker
BevCanna Enterprises Inc. said Wednesday it has signed a non-binding letter of intent to acquire cold-pressed juice company Little West Holdings LLC.California-based Little West currently offers a wide range of juices, including a line of hemp-derived CBD cold-pressed drinks. Bevcanna says the the CBD-infused juices are made with nano-emulsified CBD with no THC. “Little West’s line of cold-pressed juices will be a fantastic addition to our portfolio of cannabis-infused beverages,” said Emma Andrews, chief commercialization officer at BevCanna.The company says the non-binding LOI contemplates that BevCanna US Operating Company Ltd., a wholly owned indirect subsidiary of the company, would acquire all of the issued and outstanding shares of LW and the business of LW from the security holders of LW through a share-purchase agreement. The LOI contemplates that the LW Shareholders would be paid by BevCanna an aggregate of US$1-million in cash and US$3-million in common shares of BevCanna. The company also said it expects to introduce its own water-based hemp-derived CBD infused product lines for sale through LW’s distribution network.
Delta 9 reports revenue gain in Q3
Delta 9 Cannabis Inc. reported operating revenues for the three months ended Sept. 30 of $6.7-million, an increase of 432 per cent from the same period last year, but down from $8.89-million in the second quarter of 2019.Adjusted EBITDA for the third quarter was a loss of $849,000, compared to a loss of $2.55-million in the same quarter a year ago. For the nine months ended Sept. 30, Delta 9 reported operating revenues of $21.2-million, compared to $2.3-million in the first nine months of 2018. The company says its retail division generated $4.4-million in revenue in the third quarter of 2019, which was up 24 per cent, or $840,208, sequentially. The wholesale division generated $2.2-million in revenue for the same period and was down 23 per cent or $684,138.
Cirque de Soleil founder released after detention for growing pot
FThe founder of Cirque de Soleil, Guy Laliberté, was released after being taken into police custody in French Polynesia for growing cannabis, Laliberté’s investment firm said on Wednesday. Montreal-based tech and innovation investment company Lune Rouge said Laliberté, 60, was questioned regarding cannabis cultivated for his personal use at his residence on Nukutepipi, a small island in the South Pacific cluster around Tahiti. The firm said in a statement that Laliberté, listed by Forbes as a billionaire in its 2019 list, had not been charged with drug trafficking and left the courtroom without any conditions on Wednesday evening. Laliberté “categorically denies and dissociates himself completely from any rumors implicating him in the sale or the traffic of controlled substances,” Anne Dongois, head of communications for Lune Rouge, said in an emailed statement, describing him as a medical cannabis user.
The company is collaborating with local authorities on the investigation, and Laliberté will continue to cooperate with the judicial authorities of French Polynesia, Lune Rouge said. Laliberté founded Cirque de Soleil in 1984 in Montreal, turning a passion for acrobatics and circus acts into a global entertainment empire.
Aleafia receives Health Canada approvals Emblem facility
Aleafia Health Inc. said Thursday its owned subsidiary Emblem Cannabis Corp. has secured two Health Canada licence amendments that expand processing capacity, allowing for the sale of new product formats at its Paris Processing facility. The amendments apply to the licensed and operational Paris location, which processes all of the Company’s extraction, packaging and order fulfilment for Canadian and international sales. “These licence amendments are well timed, increasing the versatility of our Paris facility, while ensuring we can move immediately to the production of new cannabis 2.0 formats,” said Aleafia Health CEO Geoffrey Benic. “The additional processing capacity will also allow us to accelerate the production of oil-based products derived from our recent outdoor harvest.”