Canopy Growth Corporation, one of the leading cannabis producers in Canada, announced its financial results for the third quarter of fiscal 2024 on Tuesday. The company reported a net loss of $216.8 million, a slight improvement from the $264.4 million loss in the same period last year. However, the company also saw an increase in its net revenue, gross margins, and international sales, indicating some signs of progress in its turnaround strategy.
Revenue Increases Across Business Units
Canopy Growth’s net revenue for the quarter ended December 31, 2023, was $78.5 million, after deducting $11.6 million in excise taxes. This represents a 6% increase from the $74.3 million in net revenue in the third quarter of fiscal 2023, excluding the impact of the sale of its Canadian national retail business. The company attributed the revenue growth to its diversified portfolio of cannabis products, including flowers, oils, edibles, vapes, and beverages.
The company’s Canada adult-use cannabis business-to-business net revenue rose 9% year-over-year, reaching $39 million. This was driven by higher sales volumes, an improved product mix, and increased market share. According to the company, it held the top three positions for cannabis flowers in the British Columbia market and re-established its Wana brand of cannabis gummies as a top seller in Ontario and British Columbia.
The company’s Canadian medical cannabis net revenue also increased 11% year-over-year, reaching $14.8 million. This was mainly due to higher sales volumes and higher average selling prices. The company said it continued to serve over 70,000 medical patients in Canada and launched new products such as CBD oil softgels and THC oil spray.
The company’s international cannabis net revenue grew 81% year-over-year, reaching $18.3 million. This was led by strong sales growth in the Australian and German markets, where the company’s medical cannabis products have been well received. The company said its Australian medical cannabis business has generated 12 straight quarters of revenue growth, and its German business has benefited from the launch of its Spectrum Therapeutics brand and the expansion of its distribution network.
The company’s other consumer products net revenue, which includes its vaporizer business Storz & Bickel, its bio-steel sports nutrition business, and its This Works skincare business, reached $24.1 million, up 54% from the previous quarter. The company said the growth was driven by strong sales of the new VENTY portable vaporizer and traditionally strong seasonal sales of its other consumer products.
Losses Narrow as Cost-Cutting Measures Take Effect
Canopy Growth’s net loss attributable to the company decreased to $216.8 million, or $2.62 per diluted share, from $264.4 million, or $5.34 per diluted share, in the third quarter of fiscal 2023. The company said the improvement was mainly due to lower operating expenses, lower share-based compensation expenses, and lower impairment and restructuring charges.
The company’s operating expenses decreased 23% year-over-year, reaching $139.8 million. The company said this was the result of its cost-cutting measures, which included reducing its headcount, closing some of its production facilities, and streamlining its organizational structure. The company also reduced its share-based compensation expenses by 67% year-over-year, reaching $37.1 million. The company said this was due to lower stock price volatility and lower stock option grants.
The company’s impairment and restructuring charges decreased 79% year-over-year, reaching $45.4 million. The company said this was mainly due to lower asset write-downs and lower contract termination costs. The company also reduced its overall debt by $69 million during the quarter and improved its free cash flow from continuing operations by 57% year-over-year, reaching $34 million.
The company’s gross margins increased to 28% in the third quarter of fiscal 2024, up from a negative 11% in the third quarter of fiscal 2023. The company said this was due to higher sales volumes, higher average selling prices, a lower cost of goods sold, and lower inventory provisions.
CEO Optimistic About Future Growth Opportunities
David Klein, the CEO of Canopy Growth, said in a press release that the company is entering a new era of growth and profitability. He said the company is focused on cannabis and demonstrating growth across all of its business units. He also said the company is moving forward with its Canopy USA strategy, which aims to enter the US cannabis market through a partnership with Acreage Holdings, a multi-state operator. The company said it expects to be the first and only US-listed company offering shareholders a unique opportunity to gain exposure to the fastest-growing cannabis market in the world.
“We are executing against our strategy and delivering results,” Klein said. “We have a clear path to profitability and positive cash flow, and we are making the necessary investments to position Canopy Growth for long-term leadership in the global cannabis industry.”
The company said it expects to achieve positive adjusted EBITDA in the second half of fiscal 2024 and positive free cash flow from operations in fiscal 2025. The company also said it expects to launch new products and brands in the coming quarters, including Martha Stewart CBD wellness gummies, Quatreau CBD-infused sparkling water, and Tokyo Smoke Go cannabis beverages.
The company also said it will hold a special meeting of shareholders on April 12, 2024, to seek approval for its proposed acquisition of Acreage Holdings, which is subject to the federal legalization of cannabis in the US. The company said it believes the acquisition will create significant value for both companies and their shareholders and will enable Canopy Growth to access the US cannabis market, which is estimated to be worth over $40 billion by 2025.