Canopy Growth Financial Results Show its Marijuana Sector Might

Canopy Growth Corporation (TSX:WEED) reported a surprise profit in its third quarter along with a 123% revenue surge

SmallCapPower | February 15, 2018: Canopy Growth Corporation (TSX:WEED) Wednesday reported robust YoY revenue growth of 123% to $21.7 million for the third quarter ended December 31, 2017, driven by domestic sales across all products along with record Germany sales of $1 million in their medical market. The Company’s nine-month 2018 revenues more than doubled to $55.1 million compared to $25.2 million in the first nine months of 2017.

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Active registered patients climbed 138% YoY to 69,000 during Q3 2018, which drove volume sales to 2,330 kilograms at an average price of $8.30 per gram versus 1,245 kilograms at $7.36 per gram in Q3 2017. The 13% hike in average price was mainly on account of the improved mix of oil products, including oil-based Softgel capsules and a higher selling price of medical cannabis sold in Germany by its wholly-owned subsidiary Spektrum Cannabis GmbH.

Cost per gram to point of harvest fell by 32% to $0.59 in Q3 2018 and weighted average cost per gram dropped by 1.93% to $2.53, as Canopy Growth continues to improvise on production and post-harvest activities through scaling and investments to be a competitive cost leader within the industry.

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Strong revenue growth coupled with improving margins helped Canopy Growth to report Q3 2018 net earnings of $11.0 million, or $0.01 per basic and diluted share, as compared to net income of $3.0 million, or $0.03 per basic share and $0.02 per diluted share, in Q3 2017.

Canopy Growth is the only cannabis company to get multi-year supply agreements with four provincial entities totaling to 25,000 kilograms per year. Furthermore, Canopy Growth entered into a strategic relationship with a Fortune 500 global beverage leader, Constellation Brands, through which an affiliate of Constellation invested approximately $245 million in Canopy Growth in exchange for 9.9% equity and warrants in the Company and the parties have agreed to collaborate on new-product development.

Canopy Growth Corporation’s Chairman and CEO Bruce Linton said, “With the sector’s largest inventory of diversified, high quality cannabis products, demonstrated distribution capabilities, robust IT infrastructure, a vast production footprint, investments in seven provinces across the country and a proven record of leadership and execution, we are now excelling into the anticipated recreational sector with unparalleled opportunity. With millions of square feet of production expansion underway across the country and around the world, as well as capacity offtake from our expanding roster of CraftGrow partners and through Canopy Rivers Corporation, we will ensure a sufficient and timely flow of supply to serve our line-up of unparalleled premium brands.”

In another recent news, Canopy Growth announced the acquisition of certain intellectual property assets and know-how for total proceeds of $5.32 million. To fund its domestic and international expansion plans, Canopy Growth sold 5.8 million common shares at a price of $34.60 per share totaling to gross proceeds of $200.68 million. Also, Canopy Growth plans to utilize portion of the proceeds for general working capital purposes, such as brand augmentation, channel development, technology investments, research, and developing new product offerings.

Following the announcement of strong third-quarter results, Canopy’s stock gained 1.61% to close at $27.15 on Wednesday.

Disclosure: Neither the author nor his/her family own shares in the company mentioned above.

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