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How Canopy Growth Makes Money: Recreational and Medical Marijuana

Cover Progress Corp. (NYSE: CGC; TSX: WEED) is a Canada-based holding firm that produces, distributes, and sells a wide range of hashish and hemp-based merchandise for medical and leisure use. Its merchandise embrace dried flower, hemp, vape pens and cartridges, THC- and CBD-infused drinks, and edibles.

Based in 2013, Cover Progress faces competitors from numerous U.S. and primarily Canada-based hashish firms, together with Cronos Group Inc. (NASDAQ: CRON; TSX: CRON.TO), Aurora Hashish Inc. (NYSE: ACB; TSX: ACB.TO), and OrganiGram Holdings Inc. (NASDAQ: OGI; TSX: OGI.TO).

Key Takeaways

  • Cover Progress produces, distributes, and sells medical and leisure hashish.
  • Leisure-use hashish is the corporate’s largest income.
  • Cover Progress just lately carried out vital operational modifications, eliminating about 220 full-time positions.
  • The corporate opened 305 new retail shops in Canada throughout Q3 FY 2021.

Cover Progress’s Financials

Cover Progress prepares its monetary statements in accordance with the U.S. generally accepted accounting principles (GAAP). The monetary information introduced under are in Canadian {dollars} in accordance with the corporate’s monetary statements.

Cover Progress administration has targeted on a method of absorbing monetary losses brief time period to be able to dramatically develop its operations and gross sales within the rising leisure and medical hashish markets within the U.S, Canada, and globally.

The corporate posted a web lack of $829.3 million in Q3 of its 2021 fiscal 12 months (FY), the three-month interval that ended Dec. 31, 2020. It was a major deterioration from a web lack of $109.6 million through the year-ago quarter. Nonetheless, web income in Q3 FY 2021 grew 23.2% to $152.5 million.

Cover Progress’s Income Sources

Cover Progress gives a breakdown of its web income into these 5 sources: Leisure: Enterprise to Enterprise; Leisure: Enterprise to Client; Medical: Canadian; Medical: Worldwide; and Different. The leisure sources of income had been new in FY 2019, throughout which hashish was first legalized in Canada.

Leisure: Enterprise to Enterprise

Cover Progress’s business-to-business wholesale mannequin was developed in response to the legalization of leisure hashish in Canada, as the present medical hashish market was largely primarily based on a business-to-consumer mannequin. The business-to-business wholesale mannequin sells giant portions of hashish to provincial and territorial companies, which then distribute the product to bodily and on-line retail shops.

The section posted web income of $43.1 million in Q3 FY 2021, comprising greater than 28% of whole web income. The section’s web income for the quarter rose 0.3% in comparison with the identical three-month interval a 12 months in the past, making it Cover Progress’s slowest-growing income.

Leisure: Enterprise to Client

Cover Progress’s business-to-consumer mannequin started with on-line medical gross sales on to customers. Following legalization, the corporate launched bodily retail shops, wherever permissible, for the leisure market, together with for the Tweed and Tokyo Smoke manufacturers.

Internet income for the section was $20.2 million in Q3 FY 2021, comprising about 13% of the full. Internet income grew by 32.7% in comparison with the year-ago quarter, making it the second-fastest-growing income.

Medical: Canadian

Cover Progress’s medical division is operated by its Spectrum Therapeutics model. It produces and distributes all kinds of hashish merchandise geared toward serving to prospects with ache, temper, and sleep circumstances. Canadian medical web income grew 3.8% in Q3 FY 2021 to $13.9 million, comprising greater than 9% of Cover Progress’s whole web income.

Medical: Worldwide

The Spectrum Therapeutics model sells merchandise in a lot of different international locations apart from Canada. Worldwide medical web income rose 15.0% in Q3 FY 2021 to $21.5 million, comprising about 14% of whole web income.


Cover Progress’s “Different” sources of income embrace: gross sales of vaporizer gadgets by its Storz & Bickel model; sports activities vitamin drinks, mixes, proteins, gum, and mints by the BioSteel model; and income from magnificence, skincare, wellness, and sleep merchandise bought by the This Works model. Different web income grew 60.9% in Q3 FY 2021 to $53.7 million, making it the corporate’s fastest-growing income. These different sources of income comprise about 35% of whole web income.

Cover Progress’s Current Developments

In December 2020, Cover Progress introduced a collection of operational modifications geared toward streamlining its Canadian operations and additional bettering its gross margins. The corporate ceased its operations in a lot of places throughout Canada and eradicated roughly 220 full-time positions. The corporate additionally bought manufacturing services in two separate places in December 2020 and January 2021 for mixed proceeds of $40.7 million.

In its Q3 FY 2021 earnings report launched on Feb. 9, 2021, Cover Progress mentioned that it opened 305 new retail shops throughout Canada.

On Nov. 3, 2020, U.S. voters in New Jersey, Arizona, and Montana authorized poll measures to legalize leisure marijuana, and Mississippi voted to legalize medical marijuana use. South Dakota authorized poll measures to legalize each.

How Cover Progress Reviews Variety and Inclusiveness

As a part of our effort to enhance the notice of the importance of diversity in companies, we provide buyers a glimpse into the transparency of Cover Progress and its dedication to range, inclusiveness, and social duty. We examined the information Cover Progress releases. It exhibits Cover Progress doesn’t disclose any information concerning the range of its board of administrators, C-Suite, common administration, and staff total. It additionally exhibits Cover Progress doesn’t reveal the range of itself by race, gender, capability, veteran standing, or LGBTQ+ id.

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