Release Date: February 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Canopy Growth Corp (CGC, Financial) reported a significant improvement in adjusted EBITDA loss, narrowing it by 61% compared to the previous year.
- The company achieved record revenue growth in its Canadian medical cannabis segment, with a 16% year-over-year increase.
- International markets, particularly in Europe, showed strong performance with a 14% increase in net revenue, driven by growth in Poland and Germany.
- The launch of the Claybourne brand in Canada was successful, quickly becoming the number three infused pre-roll in British Columbia and Ontario.
- Canopy Growth Corp (CGC) has made progress in reducing its term loan balance and improving its cash flow, with a 17% improvement in free cash flow compared to the previous year.
Negative Points
- Consolidated net revenue decreased by 5% compared to the previous year, indicating challenges in overall revenue growth.
- The gross margin declined to 32% from 36% a year ago, reflecting increased costs and competitive pressures.
- The adult-use cannabis business in Canada experienced a 10% year-over-year decline, despite a quarter-over-quarter improvement.
- Storz & Bickel's gross margin decreased to 41% from 51% last year, due to higher indirect costs including shipping.
- The path to full legalization in the US remains uncertain, posing a challenge for Canopy Growth Corp (CGC)'s expansion plans in the US market.
Q & A Highlights
Q: Can you elaborate on your plans for international growth, particularly regarding the asset-light model and its impact on margins?
A: Judy Hong, CFO: We had strong international performance, especially in Europe, with key markets like Poland and Germany. Our European business grew over 70% in Q3. We are leveraging our Canadian GMP-certified facility and third-party partners in Europe to supply the market efficiently. This asset-light model allows us to capitalize on growth opportunities while maintaining healthy margins.
Q: How do you view the company and its opportunities differently from your predecessor?
A: Luc Mongeau, CEO: It's early in my tenure, but I'm impressed with the talent, processes, and supply chain quality. I'm working closely with the team to validate and refine our strategies. More insights will be shared in the next call.
Q: With the recent ATM raises, how do you see the cash flow and balance sheet evolving as you move towards breakeven?
A: Judy Hong, CFO: We've made significant progress in improving cash flow and reducing leverage. We expect further improvements in FY2026, driven by better operations and profitability. Our cash balance and continued actions will provide flexibility to reinvest in growth opportunities.
Q: Can you provide more details on the growth and competitive environment in the Polish market?
A: Judy Hong, CFO: Poland has been a strong contributor to our European growth. The market is insulated from competitive pressures due to government-issued import permits, which we have secured. Demand exceeds supply, and we are well-positioned to fulfill our import registrations, maintaining a leadership position.
Q: How involved is Constellation Brands in Canopy Growth's direction, and can you leverage their distribution assets in the US?
A: Judy Hong, CFO: Constellation Brands remains our largest shareholder but is now more passive. We maintain a relationship for sharing best practices, but their role is more as an investor rather than operational involvement.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
