ProfKnowItAll wrote: Canopy Growth Corporation – year ended March 31
Disaster !
Cash $323M
AR $21M ($15M is HST receivable from construction)
Inventory & bios $118M
Financial assets $163M (mostly related to TerrAscend investment – had a $67M gain in quarter)
Intangible assets $416M
Long-term debt $8M (although they just did their $600M convertible debenture)
Deficit $92M
Adjusted Gross Margin – 37.4% (this is the lowest level I have ever seen), if you exclude the COS expenses for non-producing assets it is 63.2% (consistent with their past results, significantly below our 77% avg)
Sales & marketing – 64.7% of sales
Share based compensation – 88.4% of sales (52.2% for employee costs, the rest is on acquisitions)
G&A – 64.5% of sales
Loss from operations - $51M (FYI – this is all in the quarter not the year)
Loss to CGC shareholders - $61.5M
OPEX loss - $36.9M (again, this is for the quarter)
CAPEX - $90.0M
Their cash burn for the quarter was $130.2M – 40.3% of their cash on hand at end of year and 68% of their January raise. Now we understand why they raised $600M.
Adjusted EBITDA loss - $22.9M (for the year it is $41.2M, so more than half of EBITDA loss in last quarter)
“all-in” cost – $5.65, but if you exclude the non-producing asset costs it is $3.25 – still terrible ($4.33 for the year)
Cash cost - $5.65 but $3.25 as above
Sales break-even is $156M for the quarter (but this is with the cost of the non-producing assets, without $92M)
Other income included the $67M Gain on TerrAscend but also the $28M write-off of Bedrocan license and $14.0M in losses at BC Tweed (measured on an equity accounting basis, so not full consolidation).
They buried $25.7M of other costs through the FV calculation, including $8.0M of write-offs and $8.4M for “price changes”
Biological assets – appears that they are still considering selling price based on medical. If this is true, there will be a big inventory write-off eventually to the new wholesale model. This is not entirely clear.
Inventory – 70% of inventory is still in WIP form, 78% of dry inventory is still in WIP. Looks like FG valued at $4.73 per gram (their lowest level ever). Soft gels appear to be in inventory at $7.60. Both of these required some assumptions on my part, so they are written in sand.
Prepaids – includes $8.8M of packaging
Capital assets – included in assets in process is $71.1M for BC Tweed, $64.8 for Hershey & $43.8M for Niagara
Expenses by nature (all these figures are for the year)
Employee comp – 64% of sales
Raw material & COS – 33%
Legal and professional – 13.3%
Share based comp – 65.6%
Total expenses – 274.4% (excluding gain on bios)
Tax losses - $171.4M of non-capital losses (equal to an asset of $45.4M). They have $30M of unrecognized tax losses. Auditors don’t believe they will ever recover, so unrecognized.
Potential uses of funds – LiveWell $20M loan, Civilized $5M debenture, GoodLeaf $5.5M equity, Interest on convertible debentures $25.5M. If you add this to their costs on a pro-forma basis, break-even sales goes up to $173M ($102M without non-producing assets)
They are still saying their Internal Controls over Financial Reporting are ineffective. Don’t expect to rectify until 2019. (End User Spreadsheets). They are excluding half of their acquisitions from consideration of ICOFR assessment
1,033 Full-Time Employees
They disclosed all the benefits of relationship with Constellation but did not include anything related to knowledge transfer on beverages, formulations or infusions, etc.
They loaned $288K to the D&O to buy into Canopy Rivers
Oil sales are 23% of revenue on a dollar basis and 10.6% on a volume basis
Disclose they have multiple option agreements in the US to purchase cultivation infrastructure
Outstanding share count
Shares – 199.3M
Options – 17.2M @ $12.95
Warrants – 18.9M @ $12.96
Tweed Jamaica
Paid $3.8M for a provisional cultivation and sales license
Loss of $400K this quarter
Denmark
Invested $3.2M for a 431,000 square foot greenhouse in Odense, Denmark
Odense is the latitudinal equivalent of High Prairie, AB (3½ hours north of Edmonton)
Vert Mirabel – Bertrand
Created NewCo, each party gets an interest in Newco.
NewCo leases greenhouse from Bertrand
2 year off-take agreement for 100% production
ROFO on production thereafter
Option to buy greenhouse
Option to sell Newco to Bertrand
This is just a glorified contract grow for 2 years then Bertrand will get screwed. In a way, it is genius for CGC but screws over the partner.
BC Tweed
Created Newco, each party gets interest in NewCo
Newco leases greenhouse
CGC funded $20M for pref shares with a 24% cumulative dividend
Additional funds lent by CGC – prime + 3%
Offtake agreement for 2 years at a fixed price
Thereafter at market but a guaranteed profit for BC Tweed
Option to buy greenhouse at increasing price over time, if ever done
Again, glorified contract grow for 2 years then partner gets screwed.
HEXO (Hydropothecary) – third quarter ended April 30th
HEXO is generally a very poor discloser
Cash & Equivalents - $249M
Inv & bios $11M
Deficit $33M (no tax disclosure to figure out losses carryforward)
FV increment on inventory is 76.4% of inventory value.
2% volume decrease in quarter and 2% year over year (yikes)
Adjusted Gross margin – 61.3%
Sales & Marketing – 170% of sales
Share based comp – 63%
G&A – 163% (Salaries & benefits 125% of sales alone)
Adjusted EBITDA Loss - $1.5M
OPEX burn - $4.6M
CAPEX - $14.7M
“All-in” costs - $3.58 per gram
Cash costs - $3.58
Share count
Shares – 75,468,414
Options – 9,407,396 @ $1.68
Warrants – 39,703,115 @ $3.88
101 employees at prior quarter-end, no update this quarter (21 cultivation, 23 operations, 33 sales & Marketing, 4 QA, 20 Corporate)
Order fulfillment costs are a ridiculous percentage of total cost of sales ($2.50 per gram of cost of sales (83%) – they maintain actual production costs are $0.88 per gram).
CannTrust – three months ended March 31
Share count
Shares – 103,744,847
Options – 3,756,500 @ $4.41
Warrants – 6,619,631 @ $10.37
Voting Trust agreement expires August 2018 between Eric Paul, Norman Paul, Brad Rogers, Mitchell Sanders, Forum Financial Corp & Bloom Burton. Only relates to voting on officers.
Forum Financial receiving $324K a year for helping with continuous disclosure, 90 day termination notice
Patient assistance program – 30% discount if taxable income is less than $30,000
International – exported to Australia. Anticipating exporting to Denmark, Germany, Mexico & Brazil
Cash $121M
Inventory & bios $39M
Long-term debt $10M
Deficit $28M ($1M in tax asset – loss carryforward)
Adjusted Gross margin – 61.9%
Selling & shipping – 18.8%
Revenue -$7.63 per gram ($7.27 for flower & $7.90 for oil)
Oil is 57.1% of sales revenue
No international sales disclosed, despite saying they exported to Australia
Mortgage - $10M, moving to $15M, 2 year term, 20 year amortization, 6.08% interest rate