How Canopy Growth Makes Money

Canopy Growth's makes and sells recreational and medicinal cannabis

Canopy Growth Corp. (NYSE: CGC; TSX: WEED) is a Canada-based holding company that produces, distributes, and sells a variety of cannabis and hemp-based products for medical and recreational use. Its products include dried flower, oil, soft-gel capsules, edibles, vapes and beverages, and a broad range of cannabis accessories.

Canopy Growth faces competition from a large number of U.S. and primarily Canada-based cannabis companies, including Cronos Group Inc. (NASDAQ: CRON; TSX: CRON.TO), Aurora Cannabis Inc. (NYSE: ACB; TSX: ACB.TO), and OrganiGram Holdings Inc. (NASDAQ: OGI; TSX: OGI.TO).

Key Takeaways

  • Canopy Growth produces, distributes, and sells medical and recreational cannabis.
  • The company's global cannabis segment is its largest source of revenue, but its other consumer products segment is its largest profit source.
  • Canopy Growth recently divested of its Europe-based C3 cannabis business.
  • The company's Martha Stewart CBD brand recently expanded its product offerings.

Canopy Growth’s Financials

Canopy Growth prepares its financial statements in accordance with the U.S. generally accepted accounting principles (GAAP). The financial data presented below are in Canadian dollars in accordance with the company's financial statements.

Canopy Growth management has focused on a strategy of absorbing financial losses short term in order to dramatically expand its operations and sales in the emerging recreational and medical cannabis markets in the U.S, Canada, and globally.

The company posted a net loss of $115.5 million in Q3 of its 2022 fiscal year (FY), the three-month period that ended Dec. 31, 2021. It was a significant improvement from a net loss of $829.3 million in the year-ago quarter. However, net revenue in Q3 FY 2022 fell 7.6% year over year (YOY) to $141.0 million. Canopy Growth's gross profit, which it refers to as gross margin and which it uses as a profitability metric for its individual business segments, fell 59.0% YOY to $10.1 million.

Canopy Growth’s Business Segments

Canopy Growth conducts its operations through two reportable segments: global cannabis and other consumer products. It provides a breakdown of revenue and gross profit for each of these two segments.

Global Cannabis

Canopy Growth's global cannabis segment produces and distributes a diverse variety of cannabis and cannabinoid-based consumer products globally. The segment includes its Canadian recreational and medical cannabis businesses, which encompass both a business-to-business and business-to-consumer model. It also includes its international cannabis business, which encompasses the C3 Cannabinoid Compound Company GmbH and certain other sources of revenue. C3 develops and manufactures cannabinoid-based pharmaceutical products for distribution in Germany and a number of other European countries. While Canopy Growth recently divested of the C3 business on Jan. 31, 2022, the business still contributed to the company's financial performance during Q3 FY 2022.

The global cannabis segment generated a gross loss of $11.2 million in Q3 FY 2022, a significant deterioration from the gross profit of $7.4 million reported in the year-ago quarter. Revenue for the segment fell 20.1% YOY to $83.0 million. The segment accounted for nearly 59% of Canopy Growth's total revenue for the quarter.

Other Consumer Products

Canopy Growth's other consumer products segment engages in the production and distribution of consumer products, which includes the following: vaporizers through its Storz & Bickel brand; beauty, skincare, wellness, and sleep products through its This Works brand; and sports nutrition beverages, mixes, protein, gum and mints through its BioSteel brand. The segment also generates revenue from various other sources.

The other consumer products segment generated a gross profit of $21.3 million in Q3 FY 2022, up 23.9 % compared to the year-ago quarter. The segment accounted for all of the company's gross profit during the quarter. Revenue rose 19.1% YOY to $58.0 million. The segment accounted for more than 41% of companywide revenue.

Canopy Growth's Recent Developments

On March 14, 2022, Canopy Growth's Martha Stewart CBD brand announced the launch of a new edibles product: Tropical Medley CBD Wellness Gummies. The product offers three new flavors that are inspired by fruits found in tropical destinations.

Article Sources

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  1. Canopy Growth Corp. "Form 10-K for the fiscal year ended March 31, 2021," Page 6.

  2. Canopy Growth Corp. "Form 10-Q for the quarterly period ended December 31, 2021," Page 7.

  3. Canopy Growth Corp. "Form 10-Q for the quarterly period ended December 31, 2021," Page 2.

  4. Canopy Growth Corp. "Form 10-Q for the quarterly period ended December 31, 2021," Pages 28-29.

  5. Canopy Growth Corp. "Form 10-Q for the quarterly period ended December 31, 2021," Page 28.

  6. Canopy Growth Corp. "Form 10-Q for the quarterly period ended December 31, 2021," Page 46.

  7. Canopy Growth Corp. "Form 10-Q for the quarterly period ended December 31, 2021," Page 35.

  8. Canopy Growth Corp. "Form 10-Q for the quarterly period ended December 31, 2021," Page 29.

  9. Canopy Growth Corp. "Martha Stewart CBD Expands Flavor Portfolio with Launch of New Tropical Medley CBD Wellness Gummies."

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