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Canopy Growth Corp (CGC)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 delivered solid top-line growth with net revenue up 9% year over year to $72.1MM CAD; cannabis segment net revenue rose 24% (adult-use +43%, medical +13%, international +4%) while consolidated gross margin compressed to 25% from 35% on mix, Poland softness, and near‑term production costs .
  • Versus S&P Global consensus (USD basis), revenue beat by ~11.8% ($52.9MM actual vs $47.3MM estimate), EPS modestly beat (-$0.142 actual vs -$0.144 estimate), while EBITDA missed slightly (-$6.0MM actual vs -$5.8MM estimate). Drivers: Canada adult-use distribution expansion and infused PRJs; margin pressure from temporary labor and Poland/regional mix [GetEstimates]* .
  • Management advanced structural cost discipline ($17MM annualized savings achieved vs $20MM target) and outlined margin repair (pricing, automation, PRJ capacity, bulk sales). Storz & Bickel was soft (-25% YoY) but a new device launch is slated for H2 CY2025 to support H2 performance .
  • Balance sheet and cash flow improved: free cash outflow narrowed to $11.6MM (from $55.7MM), cash/short-term investments rose to $144MM; subsequent lender agreement for US$50MM term-loan prepayments expected to lower annual interest by ~US$6.5MM, supporting FY26 FCF improvements .
  • Stock reaction catalysts: sustained adult-use share gains and European supply normalization vs pacing of margin recovery and category demand (Storz & Bickel). Watch execution on automation, pricing actions, and European registrations (Q3 timing) .

What Went Well and What Went Wrong

What Went Well

  • Canada adult-use net revenue grew 43% YoY on increased distribution (≈4,800 new points), focused portfolio, and strong demand for infused PRJs, vapes, and flower; “I am confident our retail ground game will keep driving distribution gains” .
  • Canada medical delivered its third consecutive growth quarter (+13% YoY) with superior gross margin and improved insured patient mix; “Canada Medical has quietly become one of our most consistent performers” .
  • International returned to growth (+4% YoY), with triple‑digit Germany and margin‑accretive bulk sales; new MD of Europe appointed to strengthen execution and supply .

What Went Wrong

  • Consolidated gross margin fell to 25% (from 35%); cannabis margin to 24% (from 33%) due to near‑term labor/third‑party costs to meet PRJ demand and Poland softness .
  • Storz & Bickel revenue declined 25% YoY and margin dropped to 29% (from 39%) on lapping strong prior-year devices and softer U.S. demand; macro uncertainty weighed on premium devices .
  • EPS loss persisted (reported -$0.22 per share) and adjusted EBITDA loss widened YoY (-$7.9MM vs -$5.3MM) as margin compression outweighed SG&A reductions .

Financial Results

Consolidated Performance vs Prior Periods (CAD)

MetricQ3 FY2025Q4 FY2025Q1 FY2026
Net Revenue ($MM CAD)$74.8 $65.0 $72.1
Gross Margin (%)32% 16% 25%
Adjusted EBITDA ($MM CAD)$(3.5) $(9.2) $(7.9)
Free Cash Flow ($MM CAD)$(28.2) $(36.2) $(11.6)
Net Loss from Continuing Ops ($MM CAD)$(121.9) $(221.5) $(41.5)
Basic & Diluted EPS ($/share)$(1.11) $(1.43) $(0.22)

Segment Breakdown (Q1 FY2026, CAD)

SegmentNet Revenue ($MM CAD)Gross Margin (%)
Cannabis (Total)$57.0 24%
- Canada Adult-Use$27.0 —
- Canada Medical$21.2 —
- International$8.8 —
Storz & Bickel$15.1 29%
Consolidated$72.1 25%

KPIs and Operating Metrics (Q1 FY2026)

KPIValue
Claybourne infused PRJ sales (seq)+58%
SG&A YoY change-21%
Annualized cost savings achieved (vs $20MM target)$17MM
New points of distribution added (Canada adult-use)~4,800
Cash and Short-term Investments ($MM CAD, 6/30/25)$144
Free Cash Flow ($MM CAD)$(11.6)
Cash interest payments ($MM CAD, Q1)$6 vs $18 prior-year
Working capital (seq change)$(8MM)
Debt balance ($MM CAD, 6/30/25)$295

Results vs S&P Global Consensus (USD basis) – Q1 FY2026

Metric (USD)ConsensusActualBeat/Miss
Revenue ($MM USD)$47.33*$52.89Beat [GetEstimates]*
Primary EPS ($)-0.144*-0.142Beat (slight) [GetEstimates]*
EBITDA ($MM USD)-$5.84*-$6.01Miss (slight) [GetEstimates]*

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Cannabis Gross Margin trajectoryH2 FY2026Focus on improving Canada adult-use margins and profitability Pricing actions; add automation and PRJ capacity by end of Q3; margin accretive bulk sales; target exit-year low-to-mid 30s GM (cannabis) Raised specificity
Storz & Bickel device launchH2 CY2025New device expected later CY2025 Launch in “coming weeks”; broaden consumer appeal; support H2 performance Maintained, timing narrowed
Free Cash Flow outlookFY2026Positive FCF over time as cost actions ramp Significant FY26 FCF improvement on lower interest, WC discipline, lower capex/restructuring Clarified
Cost SavingsFY2026≥$20MM annualized savings over 12–18 months $17MM achieved since Mar 1, 2025; SG&A -21% YoY In progress
Interest ExpenseThrough 3/31/26—US$50MM term-loan prepayments expected to reduce annual interest by ~US$6.5MM New
Canada Adult-Use toplineFY2026Refocused portfolio to improve execution Expect sustained topline performance through FY26 via distribution, retail execution, infused PRJs/vapes/flower Maintained

Earnings Call Themes & Trends

TopicQ3 FY2025 (Dec-24)Q4 FY2025 (Mar-25)Q1 FY2026 (Jun-25)Trend
Product performance (infused PRJs, vapes, flower)Claybourne launch; #3 market share in BC/ON after 6 weeks Adult-use declined 3% YoY; infused PRJ offset Adult-use +43% YoY; 4,800 new points; strong PRJ/vape demand Improving
Supply chain/automation—Global ops function broadened; cost initiatives European supply improvements concluding by Q3; automation and PRJ capacity to improve margins Improving
Europe (Germany/Poland)Int’l +14% YoY; strong Poland/Germany Int’l -35% YoY; Poland regulatory headwinds Int’l +4% YoY; triple-digit Germany; fixing Poland allocation/processes; new MD Europe Mixed to improving
Cost reduction/SG&ACost savings aided best Adj. EBITDA to date New ≥$20MM actions identified $17MM savings achieved; SG&A -21% YoY Continuing
U.S./ReschedulingCanopy USA integration; new President Acreage default; fair-value declines Management sees momentum; not speculating on rescheduling; focus on profitable ops in select geographies Cautious
Storz & Bickel+19% YoY (holiday) -23% YoY -25% YoY; new device to support H2 Choppy near-term

Management Commentary

  • “Canada Medical has quietly become one of our most consistent performers, and I see it as a blueprint for how we can scale success in international markets.” — Luc Mongeau, CEO .
  • “Improving gross margin is fundamental to strengthening our balance sheet, achieving positive EBITDA and unlocking future growth… we’re embedding margin accountability across every part of the business.” — Luc Mongeau, CEO .
  • “We expect ideally we’re exiting this year with the margin in the low to mid thirties… expanding production capacity, being able to reduce temporary labor costs on our key categories are going to meaningfully improve the gross margin in the cannabis segment.” — Tom Stewart, Interim CFO .
  • “Free cash flow was an outflow of $12MM in Q1 compared to $56MM last year… cash interest payments totaled $6MM, down from $18MM… subsequent agreement to reduce our term loan by US$50MM… expected to reduce interest by ~US$6.5MM annually.” — Tom Stewart, Interim CFO .

Q&A Highlights

  • Gross margin trajectory: CFO targeted exit-year low-to-mid 30s gross margin in cannabis; initiatives include automation, PRJ capacity expansion, and prioritizing supply to profitable markets .
  • Poland: CEO cited internal flower allocation processes as a constraint; processes now implemented, expecting return to growth “very soon” .
  • Europe expansion: Near-term focus on Germany and Poland; new MD Europe will build broader strategy and infrastructure; bulk of European product grown in Canada .
  • U.S. outlook: CEO sees momentum in select geographies enabling profitable operations ahead of any rescheduling; declined to speculate on timing .

Estimates Context

  • Q1 FY2026 (USD basis, S&P Global): Revenue $47.33MM estimate vs $52.89MM actual (beat ~11.8%), Primary EPS -$0.144 estimate vs -$0.142 actual (slight beat), EBITDA -$5.84MM estimate vs -$6.01MM actual (slight miss) [GetEstimates]*.
  • Company-reported EPS (basic/diluted) was -$0.22 (CAD) vs S&P “Primary EPS” actual -$0.142 (USD); definitions and FX differences can drive divergence. Expect sell-side models to raise near-term revenue, with margin assumptions tempered until automation and European supply improvements are visible .
  • Forward consensus (USD basis): Q2 FY2026 revenue $51.56MM estimate; EPS -$0.126; Q3 FY2026 revenue $50.52MM; EPS -$0.032, signaling expectations for sequential improvement and narrowing losses [GetEstimates]*.

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Adult-use momentum is tangible: distribution expansion and targeted portfolio are driving share/volume; monitor sustained execution and PRJ/vape innovation cadence into H2 .
  • Margin repair is the pivotal debate: near-term pressure from labor/partners should ease with automation/PRJ capacity by Q3; price actions and bulk sales are levers, but Poland mix and Storz & Bickel demand remain swing factors .
  • Cash discipline improving: lower interest expense from prepayments, improved working capital, and trimmed capex/restructuring support FY26 FCF trajectory; liquidity position strengthened in Q1 .
  • Europe catalyzed by Germany: triple-digit growth and operational upgrades could accelerate H2; Poland normalization is a key watch item; new leadership in Europe adds execution focus .
  • Storz & Bickel reset: new device launch in H2 CY2025 should support topline and margins; U.S. consumer sentiment is the external variable to watch .
  • Consensus reset likely: raise revenue estimates near-term; maintain conservative margin trajectories until automation takes hold; EPS path depends on mix, pricing, and SG&A discipline [GetEstimates]* .
  • Tactical setup: buy-the-beat narrative on revenue tempered by margin caution; trade around H2 catalysts (automation go-live, European registrations, SB device launch) and monitor CSOI and FCF inflection .

Footnotes: Values from S&P Global are marked with * and reflect USD. Company financials are CAD unless noted. All other figures and statements cited from company documents and transcripts.