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What's Behind Canopy Growth's Q4 Earnings Miss

By Keith Speights - Jun 1, 2021 at 9:53AM

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The company didn't hit analysts' estimates but continues to move in the right direction.

Canopy Growth's (CGC 4.76%) sizzling start to 2021 has fizzled out. The Canadian cannabis producer's share price more than doubled by early February only to give up nearly all of the early gains. Investors hoping for a big catalyst with Canopy's fiscal 2021 fourth-quarter results were disappointed.

The company announced those Q4 results before the market opened on Tuesday, with the marijuana stock falling around 2% in early trading. Here are the highlights from Canopy Growth's Q4 update.

Shadow of a dollar sign over marijuana leaves.

Image source: Getty Images.

By the numbers

Canopy Growth reported revenue in the fourth quarter of 148.4 million Canadian dollars, up 38% year over year. This result narrowly missed the consensus revenue estimate of CA$151.8 million.

The company announced a Q4 net loss of CA$616.7 million, or CA$1.85 per share. This reflected improvement from the net loss of CA$1.3 billion, or CA$3.72 per share, in the prior-year period. However, it was worse than the net loss of CA$0.26 per share analysts expected.

Canopy posted an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of CA$94 million. In the prior-year period, the company generated an adjusted EBITDA loss of CA$102 million.

The Canadian cannabis company ended the fourth quarter with cash, cash equivalents, and short-term investments of CA$2.3 billion. 

Behind the numbers

Canopy Growth's Canadian recreational cannabis net revenue jumped 39% year over year to CA$61.1 million. The company's strongest growth was in business-to-business sales, which soared 40% to CA$43.3 million. Business-to-consumer sales totaled CA$17.8 million, up 37% year over year.

The company maintained its No. 1 market share in the flower category of the Canadian recreational market in fiscal Q4 with more than 19% share of the market. It also held the top market share for all-in-one vapes and cannabis beverages.

Canopy didn't perform as well in the Canadian medical cannabis market, though. Net revenue rose by only 1% year over year to CA$13.7 million.

In cannabis sales outside of Canada, Canopy generated revenue of CA$15.8 million, down 2% year over year. Other international cannabis sales totaled CA$10.7 million, an 84% year-over-year jump.

Storz & Bickel vaporizer sales enjoyed strong momentum with revenue jumping 52% year over year to CA$17.9 million. Canopy also launched several new Martha Stewart health and wellness CBD products in the U.S. market. These products have moved into the top nine among all CBD supplements in the food, drug, and convenience-store channel. In May, the company brought Martha Stewart on board as a strategic advisor.

Canopy's net loss in Q4 was made worse by a non-cash fair value change of CA$292 million and impairment/restructuring charges of CA$75 million related to its streamlining of Canadian operations. However, the company continued to see bottom-line improvement thanks to higher sales and lower operating expenses.

Looking ahead

Canopy Growth CEO David Klein said, "We are starting to see strong momentum across all of our key businesses and remain firmly focused on capitalizing on U.S. opportunities in Fiscal 2022." Those U.S. opportunities include building out the Martha Stewart CBD brands and partnering with Southern Glazer's Wine & Spirit to distribute Quatreau CBD beverages in the U.S.

The company should also have more opportunities in the Canadian market with its acquisition of Supreme Cannabis. This deal will give Canopy a pro forma Canadian recreational market share of 13.6%.

Perhaps the best news for investors was that Canopy Growth remains on track to achieve positive adjusted EBITDA in the second half of fiscal 2022. The company's supply chain improvements and downsizing initiatives appear to be paying off.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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