- Canopy Growth (TSX:WEED) posted significant improvements in free cash flow, gross profitability and adjusted EBITDA in Q1 fiscal 2025, though the business continues to hemorrhage cash
- Free cash flow, gross profit and adjusted EBITDA improved by 49 per cent, 67 per cent and 77 per cent, respectively, on a year-over-year basis
- Canopy Growth is the North American cannabis company behind the brands Doja, 7ACRES, Tweed, Deep Space and Storz & Bickel
- Canopy Growth stock has added 48 per cent year-over-year, but has given back more than 95 per cent since 2019
Canopy Growth (TSX:WEED) posted significant improvements in free cash flow, gross profitability and adjusted EBITDA in Q1 fiscal 2025, though the business continues to hemorrhage cash.
Canopy Growth’s Q1 2025 financial highlights
- A 13 per cent decline in revenue to C$66 million because of divested businesses.
- Gross profit of C$23 million, up by 67 per cent year-over-year.
- A consolidated gross margin of 35 per cent, up from 18 per cent year-over-year, thanks to improvements in the Canadian cannabis segment through a cost savings program, a shift to higher-margin medical sales and a decline in write-downs of excess inventory.
- Operating loss from continuing operations of C$29 million, a 47 per cent improvement year-over-year.
- A free cash flow loss of C$56 million in Q1 fiscal 2025, a 49 per cent improvement year-over-year.
- A consolidated adjusted EBITDA loss of C$5 million, a 77 per cent improvement year-over-year thanks to cost reduction actions.
- A 31 per cent reduction in cost of goods sold year-over-year.
- Selling, general and administrative (SG&A) expenses of C$48 million, down by 24 per cent year-over-year.
- A net loss of C$127.1 million or C$1.60 per diluted share.
- Cash and short-term investments of C$195 million at quarter end, down from C$203 million on March 31, 2024.
Canadian cannabis division highlights
- Record medical cannabis revenue, increasing 20 per cent year-over-year and marking a sixth consecutive quarter of growth, driven by strong demand for high-margin Spectrum Therapeutics products.
- Canadian cannabis net revenue of C$38 million, a decrease of 6 per cent year-over-year because of lower adult-use sales.
- New product launches across priority categories including 7ACRES Ultra Jack flower, Maitri Strawberry Frappe flower (Quebec exclusive), the Tweed Sugar-Free Cola beverage, and the 7ACRES Café Vanilla Delight All-In-One vape.
- An expected increase in Canadian adult-use top-line revenue over the coming quarters from increased pre-roll production capacity, additional third-party suppliers, targeted wholesale pricing actions, increased distribution, and higher flower yields thanks to upgrades underway at the company’s Kincardine facility.
International cannabis division highlights
- A 1 per cent decline in revenue year-over-year, with growth in high-margin Poland offset by a decline in Australia.
- A gross margin of 36 per cent, up by 2 per cent year-over-year.
- Maintained a top-four market share position in the German medical cannabis market, according to the Insight Health Greenline ODV National Database.
- Ongoing moves to increase supply to the German market, including a supply agreement signed during the quarter and additional agreements expected to be completed in fiscal 2025.
Canopy USA
- Closed the acquisition of 75 per cent of Lemurian, as well as two of three Wana entities, with the full acquisition of Wana Extracts expected by end of summer.
- Wana launched its edibles in Connecticut and New York state, in addition to the first three hemp-derived edibles via its partnership with Happi. The subsidiary’s revenue was impacted by “a challenging market dynamic in Colorado,” according to Friday’s news release.
- Jetty expanded its offering in California with the launch of All-In-One and Hybrid solventless vapes, and in New York with the launch of high-THC infused pre-rolls. The subsidiary continues to command the leading market share in the U.S. solventless vape market, according to BDSA.
- Exercised the option to acquire Acreage Holdings, with the acquisition expected to close in the first half of calendar 2025.
- On Tuesday, Acreage began non-medical cannabis sales in Ohio after the state’s legalization of a recreational adult-use market.
Canopy expects to deliver positive adjusted EBITDA through the rest of the fiscal year and to continue freeing up cash flow to bankroll future growth. The company’s latest move in this direction, announced Friday, concerns an amendment to its senior secured term loan, which will enable it to deleverage by up to US$200 million, save up to US$28 million in interest, and extend the maturity date up to Sept. 18, 2027.
Leadership insights
“The fundamentals of our business continue to strengthen, and our focus on profitable revenue generation is yielding clear results as we set the stage for growth in the second half of fiscal 2025,” David Klein, Canopy Growth’s chief executive officer, said in a statement. “With our core businesses delivering adjusted EBITDA profitability and primed for growth, paired with Canopy USA’s positioning to benefit from near-term market opportunities in the U.S., Canopy Growth is advancing rapidly and is well established for multi-market cannabis leadership.”
“Our strategic initiatives have led to notable improvements in gross margins and adjusted EBITDA, as well as reduction in SG&A expenses. We are pleased that all of our business units delivered positive adjusted EBITDA during Q1 fiscal 2025 and expect to achieve positive adjusted EBITDA on a consolidated basis in the second half of the fiscal year,” Judy Hong, Canopy Growth’s chief financial officer. said. “We’ve continued to enhance our financial flexibility through additional actions, including the extension of our term loan, which will enable us to fund strategic growth initiatives.”
About Canopy Growth
Canopy Growth is the North American cannabis company behind the brands Doja, 7ACRES, Tweed, Deep Space and Storz & Bickel.
Canopy Growth stock (TSX:WEED) is down by 7.49 per cent trading at C$8.78 per share as of 9:38 am ET. The stock has added 48 per cent year-over-year, but has given back more than 95 per cent since 2019.
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