Quarterly Revenues increased 41% over Q2 FY 2016; increased 5‑fold year over year
SMITH FALLS, ON, Feb. 25, 2016 /Weed Wire/ — Canopy Growth Corporation (“Canopy Growth” or “the Company”) (TSXV: CGC) today released its financial results for the third quarter of fiscal year 2016 ended December 31, 2015. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.
Third Quarter Fiscal 2016 Highlights
- Revenues of $3.5 million, representing a 41% increase over Q2 2016 and a greater than 400% increase over the three-month period ended December 31, 2014
- 462,000 grams sold, representing an increase of 45% over Q2 2016 and a greater than 430% increase over the three-month period ended December 31, 2014
- Adjusted Product Contribution1 of $2.4 million or 70% of sales
- Over 8,200 registered patients at December 31, 2015 compared to 6200 at the end of Q2 2016 and 1,800 at the end of December 31, 2014
- Cash position of $19.7 million
- Completed acquisition of MedCannAccess, providing the Company three physical community engagement centres in the highly populous Southern Ontario region
Subsequent to Third Quarter Fiscal 2016
- Tweed Inc. (“Tweed”) granted license by Health Canada to produce and sell Cannabis Oil Extracts
- Tweed launched sale of 10:1 Cannabis OilsTM
“Our diversified client acquisition and best-in-class customer service helped drive significant growth in active registered customers and revenue,” said Bruce Linton, Chairman & CEO, Canopy Growth. “Our revenues reached an important milestone, exceeded one million dollars per month in the third quarter.”
Added Linton, “The intent from day one has been to build a scale of production and brands that would be of value in medical and possibly non-medical markets, for when the time came. We are increasing our focus on brand clarity and market segmentation for Bedrocan and Tweed.”
Revenue for the third quarter ended December 31, 2015 was $3.5 million, representing a sequential increase of 41% over the second quarter ended September 30, 2015. Third quarter 2016 revenues were over 400% higher than the revenues reported in the three months ended December 31, 2014.
Revenues for the nine months ended December 31, 2015 were $7.7 million.
Product Sales Review
Total product sold in third quarter Fiscal 2016 was approximately 462,000 grams at an average price of $7.34 per gram. In comparison, approximately 319,000 grams at an average price of $7.54 per gram were sold in the second quarter Fiscal 2016 and approximately 216,000 grams at an average price of $7.74 per gram were sold in the first quarter of 2016. In the three months ended December 31, 2014, the Company sold approximately 87,000 grams at an average price of $7.04 per gram.
Over the nine months of fiscal 2016 ended December 31, 2015, Canopy Growth has sold almost 1 million grams of Cannabis product.
Gross Margin Review
The gross margin, including the unrealized gain on changes in fair value of biological assets, in accordance with IFRS, was $2.8 million, or 79% of sales, for the three-month period ended December 31, 2015. In the three months ended December 31, 2014, the reported gross margin on the same basis was 36% of sales. Year to date, the gross margin, inclusive of the unrealized gain on changes in fair value of biological assets was $16.3 million or 213% of sales, as compared to $1.1 million, or 45% of sales, last year for the same period.
Adjusted Product Contribution Review
The Company’s “Adjusted Product Contribution”1 is a Non-GAAP metric used by management which adjusts the reported gross margin by excluding the fair value measurements as required by IFRS and measures the cost of sales for the grams actually sold in the period. Management believes this measure provides useful information as it reflects the gross margin based on the Company’s weighted average cost per gram from seed to sale against the grams sold. The resulting Adjusted Product Contribution is $2.4 million, or 70% of sales, in the third quarter endedDecember 31, 2015 and $5.0 million, or 65% of sales, on a year to date basis toDecember 31, 2015.
Third Quarter Fiscal 2016 Operating Expense Review
For the three-month period ended December 31, 2015, Sales, branding and medical outreach and education costs were $1.4 million (three months ended December 31, 2014 – $729,000). General and Administrative (“G&A”) expenses were $2.0 million in the three-month period ended December 31, 2015 compared to $1.0 million in the comparison period ended December 31, 2014. The increase in G&A reflects the Company’s growth from the early start-up of last year, building commercial capacity and capability as a public company and meeting all compliance requirements with Health Canada.
Third Quarter Fiscal 2016 Earnings Review
The Company reported a net loss of $3.3 million or $0.04 per basic share for the three months ended December 31, 2015, compared to a net loss of $2.6 million or $0.07 per basic share in the comparison quarter last year.
For the nine months ended December 31, 2015, net income was $1.6 million or $0.02per basic share, compared to a net loss of $6.2 million or $0.15 per basic share in the nine months ended December 31, 2014. The net income or loss was inclusive of the non-cash unrealized gain on changes in fair value of biological assets described above.
Third Quarter Fiscal 2016 Balance Sheet and Cash Flow Review
At December 31, 2015, the Company’s cash, comprised of cash and cash equivalents totaled $19.7 million, representing a decrease of $1.7 million from March 31, 2015. The decrease is attributable to net proceeds from financings, including the “bought deal” common share offering in Q3 and the exercise of warrants and options, together totaling $20.6 million, primarily offset by $2.1 million used to repay a loan, $11.1 millionused to fund operations, and investments in facility enhancements totaling $10 million. Investments in facility enhancements include the build out of our Tweed Farms facility and the installation of equipment in our Tweed facility, in part required for the production of cannabis oil extracts.
The Unaudited Condensed Interim Consolidated Financial Statements and Management’s Discussion and Analysis documents have been filed with SEDAR and are available on www.sedar.com. The basis of financial reporting in the Unaudited Condensed Interim Consolidated Financial Statements and Management’s Discussion and Analysis documents has been revised to thousands of Canadian dollars, unless otherwise indicated.
Bedrocan True Compassionate Pricing
Bedrocan Canada (“Bedrocan”) took an important step to making medical cannabis more affordable for all Canadian patients with a new price structure called True Compassionate Pricing. Under True Compassionate Pricing, all six cannabis varieties produced by Bedrocan Canada are priced at $5 per gram, making it the most affordable product line in Canada. Many Canadians who medicate with cannabis are doing so because traditional pharmaceutical drugs have not been as effective at treating their symptoms or have undesirable side effects. The decision to consume medical cannabis is made more complex due to the cost of the medicine.
Bedrocan’s production methods have been refined over two decades to maximize yield and eliminate genetic variance from harvest to harvest. As a result, Bedrocan is able to produce standardized varieties efficiently. With Bedrocan’s facility operating at full capacity, Bedrocan is in a position to offer standardized varieties at a much lower price.
Tweed Cannabis Oil Extracts Supplemental License
On February 23, 2016, Tweed was granted a supplemental license by Health Canada to sell up to 350 kilograms of Cannabis Oil Extracts during the license period, which ends January 19, 2017.
Sales of 10:1 Cannabis OilsTM launched
On February 24, 2016, Tweed announced that the company had launched the sale of high‑quality 10:1 Cannabis Oils made with GMO-free, organic sunflower oil. Starting with oils made from single strains and slowly introducing high-quality oil products, Tweed’s product line will meet the needs of Canadians managing a variety of symptoms. Starting with popular offerings of Argyle, Princeton and Birds Eye, Tweed will introduce new strain-specific 10:1 Cannabis Oils on an ongoing basis. The new product line, 10:1 Cannabis Oils, will be sold in 100ml bottles equivalent to 10 dried grams of the same dried flower. Each 10 ml will contain the equivalent of 1 gram of the corresponding Tweed dried-flower variety. Creating a universal equivalency factor between flower and oil is a logical and simple way to ensure that Tweed customers can manage their dosing confidently. Tweed chose to balance 10:1 Cannabis Oils with organic, non-genetically modified sunflower oil because it is versatile enough to cook or bake with, hypoallergenic, and even good to ingest on its own.
Federal Court Ruling
On February 24, 2016, the Federal Court released its decision in the case of Allard et al v. Canada. This case began as a result of the government’s decision to repeal the Marihuana Medical Access Regulations (“MMAR”) and enact the Marihuana for Medical Purposes Regulations (“MMPR”). This change overhauled the way that the government provides access to medical cannabis for patients across the country. The plaintiffs in the Allard case argued that the MMPR violates their Charter rights and the court, in a lengthy and detailed judgment, agreed with the plaintiffs and gave the government six months to amend the MMPR. Canopy Growth’s preliminary interpretation of the decision is as follows: i) the decision reaffirms the right of Canadians to access marijuana for medical purposes; ii) the decision stipulates that the MMPR, under which Canopy Growth subsidiaries Tweed, Tweed Farms and Bedrocan Canada are licensed producers, does not provide sufficient access to cannabis; iii) the decision gives the Canadian Federal Government a period of six months to determine how existing regulations should be amended to ensure that patients have the access to medical marijuana that they need; and iv) the current MMPR regulations remain in force. Based on this preliminary interpretation, management does not believe the Allard decision will materially impact Canopy Growth.
Note 1: The Adjusted Product Contribution is a non-GAAP financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Adjusted Product Contribution is reconciled and explained in Management’s Discussion & Analysis under “Adjusted Product Contribution (Non-GAAP Measure)”, a copy of which has been filed today on www.sedar.com.
Conference Call Details
Canopy Growth will host a conference call with Bruce Linton, CEO and Tim Saunders, CFO at 8:30 AM Eastern Time on February 25, 2016.
Toll Free Dial-In Number: 1-888-231-8191
International Dial-In Number (647) 427-7450
Conference ID: 55227314
A replay of the call will be accessible by telephone until 11:59 PM ET on March 24, 2016.
Toll Free Dial-in Number: 1-855-859-2056
Replay Password: 55227314
About Canopy Growth Corporation
Canopy Growth is Canada’s first publicly traded medical marijuana company and the first geographically diversified producer with dual licenses under the Marihuana for Medical Purposes Regulations. Through its wholly owned subsidiaries, Tweed, Tweed Farms, and Bedrocan, the Company operates three state-of-the-art production facilities in Ontario and distributes marijuana across the country to Canadian patients managing a host of medical conditions. The Company is dedicated to educating healthcare practitioners, providing consistent access to high quality medication, conducting robust clinical research, and furthering the public’s understanding of how marijuana is used for medical purposes. www.canopygrowth.com
Notice Regarding Forward Looking Statements
This news release contains forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “estimates”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Canopy Growth Corporation, Tweed Inc., Tweed Farms Inc. or Bedrocan Canada Inc. to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Examples of such statements include future operational and production capacity, the impact of enhanced infrastructure and production capabilities, and forecasted available product selection. The forward-looking statements included in this news release are made as of the date of this news release and Canopy Growth Corp. does not undertake an obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless required by applicable securities legislation. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.