Canopy Growth Corp. (WEED.TO) accused the increase in expenses due to a larger than expected loss in its fiscal fourth quarter results released after the closing bell on Thursday.
Co-CEO Bruce Linton is assuring investors that while the company spends aggressively to gain dominance in global cannabis, it will not need to do it forever.
"We are certainly not monitoring the Amazon model, but you see the value of the investment when people transform their behavior. We are facing this," Linton told analysts on a conference call Friday morning, referring to the giant's reputation of e-commerce for big expenses. "You saw, I think, the bottom of our minimum margin."
Ont-based Smiths Falls reported a net loss of $ 323.4 million, or 98 cents per share, compared to a loss of $ 54.4 million in the same quarter last year. According to FactSet, analysts expect losses on average of $ 95.2 million, or 25 cents per share.
Shares listed in Toronto fell 6.87% to $ 53.70 at 10:35 am ET.
The loss is due in part to the increase in operating expenses, mainly from sales and marketing, increased clearing and acquisition costs. Sales and marketing expenses rose to $ 53.1 million, or 56% of revenues, from $ 14.7 million in the previous period.
"As you build from 600,000 square feet of licensed in Canada to 4.8 million square feet over a period of five quarters, you will find yourself with a lot of resources that are coming in streaming but are not in progress. They carry a load that you don't presents to advantage, "said Linton.
Adjusted gross margin fell to 16% in the fourth quarter, from 22% in the previous period.
Chief Financial Officer Mike Lee said investors should expect the short-term costs associated with the company's structure to produce infused beverages, which should be completed by mid-September.
Revenues rose to $ 94.1 million in the quarter ended March 31, compared to $ 83 million in the third fiscal quarter. Net of excise taxes, analysts had expected the company to reach a turnover of $ 90.6 million in the fourth quarter.
Canopy Growth said it sold 9,326 kilograms or kilograms of cannabis equivalent in the fourth quarter. That's up from 2,528 kilograms or equivalent kilograms sold over the same period last year.
The company reported revenues of $ 68.9 million from the Canadian recreational market, down from $ 71.6 million in the previous quarter.
Meanwhile, Canopy Growth is working to increase its presence in the United States and other global markets.
Shareholders approved an agreement to purchase the US multinational operator Acreage Holdings Inc. (ACRG-U.CN) on Wednesday. The cannabis agreement becomes eligible for sale under US federal law.
Last month, Canopy Growth announced that it would buy the skin care company This Works for $ 73.8 million to add beauty and sleep products to its portfolio of cannabis, oil, hemp and medicinal capsules.
Lee said the company is exploring ways to accelerate acquisition integration by developing a "M & A turnkey" playbook. The comment comes when the company warns that the acquisition of the acroe could lead to a charge that would "have a materially negative impact on the net income in the first quarter of the 2020 budget."
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