Canopy Growth Stock Drops On FY And Q4 Revenue Decline

Canopy Growth Corporation CGC WEED released its financial results for the fourth quarter and fiscal year ended March 31, 2022, revealing net revenue of CA$520 million ($408,15 million) in FY2022 declined 5% versus FY2021.

Fiscal 2022 Financial Highlights

• Reported gross margin in FY2022 was (37%) as compared to 12% in FY2021. Excluding non-cash restructuring costs recorded in cost of goods sold of CA$124 million and inventory step-up charges from acquisitions of CA$12 million, adjusted gross margin was approximately (11%). Gross margin in FY2022 was impacted by a year-over-year decrease in net revenue and continued price compression in the Canadian recreational business, inventory write-offs driven by lower than expected demand as well as higher third-party shipping, distribution and warehousing costs across North America. Gross margin in FY2022 benefited from payroll subsidies in the amount of CA$24 million received from the Canadian government, pursuant to a COVID-19 relief program, compared to CA$6 million in FY2021.

• Net loss in FY2022 was CA$320 million, which is a CA$1,350 million improvement versus FY2021, driven primarily by non-cash fair value changes, lower operating expenses, including lower non-cash asset impairment and restructuring charges, partially offset by lower gross margins.

• Adjusted EBITDA loss in FY2022 was CA$415 million, a CA$75 million increase in Adjusted EBITDA loss versus FY2021, driven primarily driven by lower sales and a decline in gross margins, partially offset by the reduction in our total SG&A expenses.

• Free cash flow in FY2022 was an outflow of CA$582 million, an 8% decrease in outflow versus FY2021. Relative to FY2021, the free cash flow outflow decrease is due to lower S&GA expenses and reduction in capital expenditures, partially offset by higher cash interest payments.

Q4 Fiscal 2022 Financial Highlights

• Net revenue of CA$112 million in Q4 FY2022 declined 25% versus Q4 FY2021.

• Reported gross margin in Q4 FY2022 was (142%) as compared to 7% in Q4 FY2021.

• Net loss in Q4 FY2022 was CA$579 million, which is a CA$38 million improvement versus Q4 FY2021.

• Adjusted EBITDA loss in Q4 FY2022 was CA$122 million, a CA$28 million increase in Adjusted EBITDA loss versus Q4 FY2021 primarily driven by lower sales and a decline in gross margins, partially offset by the reduction in our total SG&A expenses.

• Free cash flow in Q4 FY2022 was an outflow of CA$127 million, a 2% increase in outflow versus Q4 FY2021.

Cash and short-term investments amounted to CA$1.4 billion at March 31, 2022, representing a decrease of CA$0.9 billion from CA$2.3 billion at March 31, 2021 reflecting EBITDA losses, capital investments and the upfront payment made as consideration for the option to acquire Wana Brands upon federal permissibility of THC in the U.S.

"Canopy Growth is building the industry's leading portfolio of premium brands across North America. We've taken concrete steps to advance this ambition by strengthening our positioning in Canada, and further bolstering our U.S. THC ecosystem through the addition of two high performance brands in Wana Brands and Jetty Extracts. In the fiscal year ahead, we will remain focused on growing our market share in the key segments that will drive profitable growth and continuing to scale our premium brands across North America, " stated David Klein, CEO.

Price Action

Canopy Growth shares were trading 12.43% lower at $4.86 per share during Friday's pre-market session.

Photo: Courtesy of Esteban Lopez on Unsplash

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