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Canopy reports record revenue but profit remains elusive

Smiths Falls, Ontario-based Canopy Growth reported record net revenue of 135 million Canadian dollars ($104 million) in the second quarter ended Sept. 30, topping analyst expectations, along with a net loss of about CA$97 million.

The revenue gain was led by dry bud sales in the Canadian recreational market, which grew 60% from the prior quarter to CA$64 million.

That helped drive market share in Canada to 15.5% in the quarter, Canopy said in a news release.

Ancillary revenues were another bright spot for the company.

The “all other revenue” category grew to CA$43 for the quarter, a substantial improvement from the previous period’s CA$32 million. The category captures sales of Storz & Bickel vaporizers globally as well as BioSteel – a sports drink – in North America.

However sales of cannabis 2.0 products, which Canopy has invested heavily in, rose marginally to CA$8 million.

That covers sales of cannabis-infused chocolates, cannabis vape products and cannabis-infused beverages.

The company’s new CEO has touted the important role beverages will play in the company’s future, even though those products have yet to prove themselves with consumers.

Medical cannabis sales continued to stall.

International medical revenue declined 15% from the previous quarter to CA$17.5 million.

Sales of medical marijuana overseas – especially in Europe – are an important part of the value proposition for many publicly traded Canadian cannabis companies.

Canopy lost ground in the competitive Germany market.

Dried flower sales there fell 5% in the quarter compared to one year ago.

In Canada, Canopy sold CA$13.9 million of medical cannabis, the same amount as the previous quarter.

Canopy said it set in motion a plan to “capture savings” worth up to CA$200 million.

“We saw another quarter of improvement in our operating expense ratio while our marketing and R&D investments are being re-directed to drive sales,” CFO Mike Lee said in a news release.

“Importantly, our end-to-end review has identified cost savings opportunities in the range of $150-$200 million across cost of goods sold, general and administrative expenses, and inventory, and efforts are underway to quickly capture value.”

Canopy’s shares trade as CGC on the New York Stock Exchange and WEED on the Toronto Stock Exchange.

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