Canopy Growth (CGC) shares tanked more than 15% Thursday following another disappointing quarter during which the company missed expectations on both the top and bottom lines.
During Canopy’s fiscal 2020 first quarter, the company reported revenue of C$90.5 million ($67.95 million) with a net loss of C$1.28 billion ($961 million) largely driven by a C$1.2 billion non-cash charge reflecting the “extinguishment of warrants held by Constellation Brands.”
Analysts had been expecting a net loss of C$172 million on C$111 million in revenue for the quarter, according to Bloomberg estimates.
“The company has two primary objectives as we complete Q1 2020 and look to the remainder of the fiscal year,” CEO Mark Zekulin said in the earnings press release.
“First, the company remains focused on laying the foundation for dominance in an emerging global opportunity. This means investments in developing intellectual property, building brands, building international reach, and ensuring scaled production capability for current and future products. Second, we are fixated on the process of evolving from builders to operators over the remainder of this fiscal year, meaning that as our expansion program comes to a close in Canada, and as new value-add products come to market in Canada, we demonstrate a sustainable, high margin, profitable Canadian business.”
Margins for the first quarter fell precipitously to just 15%, compared to the 43% gross margin over the same period last year. The company pointed to continued investments in both research efforts in Canada and CBD cultivation efforts in the U.S. as well as facilities not yet producing cannabis as reasons for worsening margins.
“We expect our gross margins to improve in the coming quarters when all of the cultivation & processing are in use and approaching planned capacity,” the company said.
Wednesday’s first quarter earnings report marks the first update Canopy Growth has given investors since the company parted ways with its co-founder and former CEO Bruce Linton in July.
As the company highlighted on its earnings call Thursday morning, expanded harvesting offered a bright spot in the quarter as the company prepares to roll out more derivative products like beverages and vape products. Canopy’s first-quarter harvest totaled a record 40,960 kilograms to mark a 183% increase over last quarter.
International medical cannabis revenue also expanded by 209% versus the same quarter last year in large part due to sales from German company C3, which Canopy acquired earlier this year.