Canopy Growth (NYSE: CGC) (TSX: WEED) reported a wider loss for the second quarter of 2020 due to higher costs and expenses. The bottom line was wider than the analysts’ expectations while the top line exceeded consensus estimates.
Net loss was CAD374.6 million or CAD1.08 per share, compared to a loss of CAD330.6 billion or CAD1.52 per share in the previous year quarter. Net revenues soared by 229% to CAD76.6 million helped by solid harvest while gross revenue excluding other revenue adjustments surged by 408% to CAD118.3 million.
During the quarter, the company harvested a record 40,570 kg of cannabis, up 167% from 15,217 in the prior-year quarter. The company has been facing a challenging period in the last two quarters as provinces have lowered purchases to reduce inventory levels, retail store openings have fallen short of expectations, and Cannabis 2.0 products are yet to come to market.
Consumer demand for cannabis continues to increase versus Q1 2020 with company-owned recreational same-store sales growth of 17% and global medical organic growth of 23%. More than 30 SKUs submitted to Health Canada for Cannabis 2.0 products across chocolate, vapes, and beverage formats.
As part of a management-initiated portfolio review, the company has taken a restructuring charge of $32.7 million for returns, return provisions, and pricing allowances primarily related to its softgel & oil portfolio. Additionally, the management has recorded an inventory charge of $15.9 million to align the portfolio with the new strategy.
Even though revenue is muted during the quarter due to restructuring charges, actual cannabis shipments grew quarter-over-quarter. The company experienced an increase in costs due to pre-revenue investments in brand awareness, product marketing, and consumer education initiatives focused on preparation for the launch of Cannabis 2.0 products in Canada, and the rollout of CBD products in the US and other international markets in the coming months.
The company continues to build high-quality, dried flower inventory that it believes will be necessary to meet the increased demand that will be generated by growth in the recreational cannabis retail platform across Canada over the next 12 to 18 months, particularly in the province of Ontario.