- The “Big 4” Canadian Cannabis Stocks Recently Reported Earnings and the Results Were Mixed, to Say the Least
- Here’s How Canada’s Leading Licensed Producers Canopy Growth, Aurora Cannabis, Cronos Group and Aphria Performed During the Last Quarter
The Canadian cannabis industry has been nothing short of a disaster for investors and companies alike. The two largest Canadian provinces, Ontario and Quebec, limited the rollout of retail outlets and severely curtailed the ability of cannabis companies to get its product into the hands of consumers. This has resulted in an oversupply of cannabis in the market, driving down prices and forcing companies to close facilities and halt construction of partially completed projects. Certain companies have felt this negative pressure more than others, and it’s been reflected in their earnings and share price.
Over the last month, the four largest Canadian licensed producers (LPs) reported their most recent quarterly financial results. Below are highlights from the financial statements and earnings calls of Canopy Growth (TSX: WEED) (NYSE: CGC) (FRA: 11L1), Aurora Cannabis (TSX: ACB) (NYSE: ACB) (FRA: 21P), Cronos Group (TSX: CRON) (NASDAQ: CRON) (FRA: 7CI) and Aphria (TSX: APHA) (NYSE: APHA) (FRA: 10E).
- FY 2020 net revenue of $399 million, up 76% over FY 2019
- FY 2020 net loss of $1.39 billion and an adjusted EBITDA loss of $442.8 million
- Q4 2020 net revenue of $107.9 million, down 13% from last quarter and up 15% from Q4 2019
- Q4 2020 net loss of $1.33 billion and an adjusted EBITDA loss of $102 million
- $743 million in restructuring costs and asset impairments; wrote off $132 million in obsolete inventory
- Closed two Canadian production facilities, reducing capacity by 40%; closed New York hemp facility; sold off African and Colombian assets
- Launched CBD cream in the U.S. under First & Free brand; released CBD Booster skincare line and hand sanitizer under This Works brand
- Reduced number of available SKUs by one third
“Through the COVID-19 pandemic, we have worked hard to ensure the health and well-being of our teams and customers and the continuity of our business. During this time, our team has rolled out our exciting new cannabis-infused beverages and vape products in Canada and a portfolio of CBD products in the US. True to key priorities that I have outlined for Canopy, we have taken steps to align our capacity with the current market demand and focus our resources against the core markets with the largest and most tangible near-term profit opportunity,” said Canopy Growth CEO David Klein.
- View Canopy’s Q4 & FY 2020 Earnings Press Release
- Read/Listen to Canopy’s Q4 & FY 2020 Earnings Call Transcript
- Net revenue of $78.4 million, excluding provisions of $2.9 million, up 18% over the prior quarter
- Consumer cannabis net revenue of $41.5 million, excluding provisions, up 24% increase over the previous quarter
- Reduced SG&A + R&D expenses by 24%; reduced SG&A + R&D expense run rate by 45%
- CapEx spending under $100 million for the second half of 2020
- Cash cost to produce per gram of dried cannabis sold at $0.85, down from $0.88 last quarter
- German sales resumed; international revenue more than doubled
- Cash position of $230 million; $155 million in cash outflow during the quarter
- Projecting positive EBITDA by Q1 2021
“I am incredibly proud of the Aurora team for working through these challenging times in order to maintain uninterrupted operations at all of our production facilities and ensure we continue to meet the needs of our patients and consumers. I am also pleased that our third quarter 2020 financial results were in-line with our expectations and that we remain firmly on track with the cost-savings and capex goals we detailed during our business transformation plan in February 2020,” Aurora Chairman and CEO Michael Singer.
- View Aurora’s Q3 2020 Earnings Press Release
- Read/Listen to Aurora’s Q3 2020 Earnings Call Transcript
- Q1 net revenue of $8.4 million, up by $5.4 million from Q1 2019
- Q1 gross profit (loss) of $(6.5) million, decreased by $8.0 million from Q1 2019
- Q1 operating loss of $45.1 million, increased by $34.9 million from Q1 2019
- Released Lord Jones branded facial moisturizer in the U.S.; released Peace Naturals vaporizers in Canada
- Wrote off $8 million in inventory
- Colombian JV extraction facility completed; CBD formulations in development for export to the U.S
- Completed first dried flower shipment to Israel
“Cronos Group started 2020 energized and determined to continue to see through our core strategic initiatives to drive long-term and sustainable growth. This quarter, we moved closer to officially entering the Israeli medical cannabis market with our Cronos Israel operations preparing to sell PEACE NATURALS™ branded dried flower products to medical patients. The Israeli medical market is a growing channel, and we look forward to serving this market in 2020 and beyond,” stated Mike Gorenstein, CEO of Cronos Group.
- View Cronos Group’s Q1 2020 Earnings Press Release
- Read/Listen to Cronos Group’s Q1 2020 Earnings Call Transcript
- Net revenue of $144.4 million, up 96% Q3 2019 and 20% from the prior quarter
- Net income of $5.7 million, or $0.02 per share
- Operating income of $8.7 million, compared to a loss of $9.6 million in the prior quarter
- Adjusted EBITDA of $5.7 million
- A fourth consecutive quarter of positive adjusted EBITDA
- Cannabis-related EBITDA increased by 78%
- German distribution subsidiary sales increased by 50%
- Raised $100 million in January
- Both Aphria One and Aphria Diamond growing facilities are in full operation
- Cultivation cost per gram fell below $1; the all-in cost of sales per gram fell 14.6%
- 77% vape market share in Ontario; three of the top five brands
- Edibles, beverages and topicals to be released in the coming months
“We are proud of our sustained growth in Canada and continued expansion of our international capabilities. During this unprecedented time, the well-being of our employees, patients, consumers, partners and the communities we operate in is our primary focus. Our facilities, offices and patient care teams remain open and operational to continue to provide our patients and consumers with what we believe is best-in-class care and service with appropriate measures in place to protect the health and safety of employees. As we face uncertain times, I am proud of how the Aphria team has come together to navigate these uncharted waters. Going forward, we believe Aphria continues to be differentiated in the cannabis industry through our brands, cultivation expertise, high-quality standards, cash position and balance sheet. We continue to focus on the highest return opportunities for growth and long-term value creation,” stated Aprhia Chairman and CEO Irwin D. Simon.
- View Aphria’s Q3 2020 Earnings Press Release
- Read/Listen to Aphria’s Q3 2020 Earnings Call Transcript
For most investors in Canadian cannabis stocks, it has been a rough year. The inept rollout of retail outlets in Canada’s most populous provinces has hamstrung the industry. After writing off a large amount of the extra capacity that was acquired over the last few years and rightsizing their operations, the largest Canadian cannabis companies are beginning to take meaningful steps to become leaner and more profitable. The next few quarters will tell if their efforts have been successful.
Disclosure: The Cannabis Investor does not hold a position in any of the stocks mentioned in this article.