Canopy Growth(US:CGC)2021-09-09 00:43Financial Data and Key Metrics Changes - Canopy Growth has made significant progress in transforming its business over the past 18 months, focusing on three core markets: Canada, the U.S., and Germany, which represent over 95% of the total addressable market [5] - The SG&A expenses have been reduced from 135% of sales in Q1 of fiscal 2020 to 68% in Q1 of fiscal 2022, with expectations for further reductions [5][6] - CapEx has declined significantly to $20 million last quarter, although this should not be viewed as a quarterly run rate for fiscal 2022 [6] Business Line Data and Key Metrics Changes - Net revenue for the Canadian recreational cannabis business grew 36% year-over-year in Q1 fiscal 2022 [8] - Storz & Bickel, the premium vaporizer business, delivered 41% growth, while BioSteel, the sports nutrition brand, achieved 179% growth year-over-year [8] - U.S. operations generated $65 million in revenue in FY 2021, with Q1 2022 U.S. revenues increasing 91% year-over-year, accounting for 15% of total sales [9] Market Data and Key Metrics Changes - The legal Canadian THC market is expected to reach CAD$7.5 billion by 2023, while the U.S. CPG and CBD businesses could tap into a combined $33 billion market [8] - The German THC and dronabinol markets could exceed $2 billion, with the U.S. THC market potentially adding another $40 billion when federally permissible [8] Company Strategy and Development Direction - The company is focused on building a significant ecosystem in the U.S. ahead of expected cannabis reform, with a strong emphasis on social justice and equity commitments [4][20] - Canopy Growth aims to capitalize on growth opportunities in its core markets while preparing to enter the U.S. THC market [8][10] - The innovation pipeline is set to deliver over 100 SKUs over the remainder of fiscal 2022, with a focus on mood management products [7] Management's Comments on Operating Environment and Future Outlook - Management believes momentum is building across the business, with significant growth expected in the second half of fiscal 2022 [4] - The Canadian market is expected to grow 40% this year, primarily driven by existing consumers shifting from the illicit market to legal purchases [34] - Management remains optimistic about cannabis reform in the U.S., citing strong public support for legalization [20][21] Other Important Information - Canopy Growth has partnered with National Expungement Works to support social justice initiatives related to cannabis prohibition [24] - The company is actively seeking additional federally legal investments to increase exposure to the U.S. THC market [20] Q&A Session Summary Question: What types of opportunities is Canopy looking at to increase U.S. THC exposure? - Canopy has a path to owning 70% of Acreage, which is well-positioned in east coast markets, and is also interested in brands and capabilities in states like California [26][27] Question: What are the biggest learnings from launching new CBD brands like Martha and Quatreau? - There is significant consumer interest in stress reduction and wellness, with many consumers entering the CBD category through credible brands like Martha Stewart [29][30] Question: What is the state of the Canadian business as it emerges from the pandemic? - The Canadian market is expected to grow 40% this year, with improvements in access and supply chain challenges being addressed [33][34]