Canadian cannabis producer Canopy Growth (TSX:WEED)(NASDAQ:CGC) released its second-quarter results last week, for the period ending Sept. 30. The company's sales of $117.9 million declined 10% year over year and its net loss of $231.9 million was more than 14 times the $16.3 million loss that the company reported in the prior-year period. The large swing in the loss was due to impairment and restructuring charges, and changes in fair value.
Its adjusted EBITDA, which adjusts out non-cash items, was a negative $78 million versus a loss of $162.6 million a year ago. When looking at a more pure cash basis, however, the results were a bit concerning as Canopy Growth's free cash flow was a negative $135.4 million in Q3 versus a negative $101.3 million in the prior-year period.
Overall, it wasn't a good quarter for the company as revenue has been underwhelming, cash is flowing out of the business more than in the past, and while its gross margins are improving, they are still barely positive.
Canopy Growth isn't giving investors much of a reason to invest in its business right now, outside of the potential that the U.S. market offers it – if legalization takes place. However, that could still be years away from happening, and by then, multi-state operators in the U.S. will likely have even larger positions established. Canopy Growth is a risky buy and with the company still burning through cash and being far from profitability, you need a high risk tolerance to consider investing in it.
