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Canopy Growth Corp (CGC)·Q3 2025 Earnings Summary

Executive Summary

  • Consolidated net revenue was CAD $74.761MM, down 5% year-over-year, while Adjusted EBITDA loss improved 61% to CAD $(3.469)MM; free cash flow outflow improved 17% to CAD $(28.181)MM .
  • Record Canada medical cannabis net revenue of CAD $19.6MM (+16% YoY) and Storz & Bickel revenue of CAD $22.0MM (+19% YoY) were key growth drivers; adult-use declined 10% YoY but rose 15% sequentially on Claybourne and Wana contributions .
  • Gross margin was 32%, down 400 bps YoY due to initial Claybourne launch costs and higher indirect costs at Storz & Bickel; total debt fell to CAD $442MM at December 31, 2024 from CAD $554MM at September 30, 2024, aided by an early term loan prepayment .
  • Management reiterated that achieving positive consolidated Adjusted EBITDA is “firmly in sight” in coming quarters; Q4 setup includes solid S&B with tough comps, international comps impacted by removal of ~CAD $1.7MM U.S. CBD sales, and ~$2.1MM headwind from divestitures plus U.S. CBD .

What Went Well and What Went Wrong

What Went Well

  • Record Canada medical cannabis revenue (+16% YoY), with momentum from insured patients and expanded product assortment; CFO: “Canada medical continued its momentum, marking another record revenue quarter” .
  • Storz & Bickel delivered CAD $22MM (+19% YoY) on strong holiday season, robust DTC online sales, Venty, and Germany growth .
  • Claybourne infused pre-rolls successfully launched in November; ascended to #3 market share in infused pre-rolls in BC and Ontario after six weeks; CEO: “focused on achieving sustainable profitability” while highlighting Claybourne’s early success .

What Went Wrong

  • Gross margin contracted 400 bps YoY to 32%, driven by higher initial Claybourne costs and increased indirect costs at Storz & Bickel, partially offset by higher-margin medical mix .
  • Canada adult-use net revenue fell 10% YoY (though +15% QoQ), reflecting prior Wana supply disruptions and competitive pressure; sequential improvement driven by Claybourne, Wana return, and bulk flower sales .
  • Net loss from continuing operations was CAD $(121.896)MM with “Other income (expense), net” at CAD $(97.758)MM; cash interest remained a sizable outflow (CAD $17MM in Q3 vs CAD $21MM last year) .

Financial Results

Metric (CAD)Q1 FY2025Q2 FY2025Q3 FY2025
Net Revenue ($MM)$66.212 $62.991 $74.761
Gross Margin %35% 35% 32%
Operating Loss from Continuing Ops ($MM)$(29.108) $(45.943) $(23.822)
Net Loss from Continuing Ops ($MM)$(129.191) $(131.550) $(121.896)
Adjusted EBITDA ($MM)$(5.280) $(5.507) $(3.469)
Free Cash Flow ($MM)$(55.700) $(56.441) $(28.181)
EPS (Basic & Diluted)Q1 FY2025Q2 FY2025Q3 FY2025
Loss per Share – Continuing Ops ($)$(1.63) $(1.52) $(1.11)

Segment revenue breakdown (CAD $MM):

SegmentQ1 FY2025Q2 FY2025Q3 FY2025
Canada Adult-Use Cannabis$18.9 $18.388 $21.2
Canada Medical Cannabis$18.8 $18.689 $19.6
International Markets Cannabis$10.1 $10.060 $12.0
Storz & Bickel$18.4 $15.854 $22.0
This Works$0.0 $0.0 $0.0
Other$0.0 $0.0 $0.0
Net Revenue$66.2 $62.991 $74.8

KPIs – Segment gross margin (%) by period:

Segment GM %Q1 FY2025Q2 FY2025Q3 FY2025
Canada Cannabis32% 32% 25%
International Markets Cannabis36% 47% 41%
Storz & Bickel40% 32% 41%
This Works0% 0% 0%
Other0% 0% 0%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA (Consolidated)Coming quarters“Remain on a path to achieve positive Adjusted EBITDA… in the coming quarters” (Q2) “Achieving positive adjusted EBITDA at the consolidated level is firmly in sight in the coming quarters” (Q3) Maintained (confidence reiterated)
International Markets (U.S. CBD impact)Q4 FY2025 YoY compN/APrior-year Q4 included >CAD $1.7MM U.S. CBD; now excluded from business Lower prior-year comp base clarity
Storz & BickelQ4 FY2025Expect continued momentum in 2H FY2025 Another solid quarter expected, but YoY growth likely challenged due to tough comps Tempered near-term YoY growth
Canada Adult-Use2H FY2025 into FY2026Re-introduction of Wana, new product pipeline incl. infused pre-roll expected to strengthen 2H Continued Claybourne rollout, new products, enhanced field sales strategy to grow distribution/velocity Execution emphasis raised
Term Loan/MaturityThrough Mar 31, 2025Option to prepay additional US$100MM at 97.5% to extend maturity to Sep 2027 Option reiterated; term loan principal ~US$250MM post prepayment; further extension possible with additional prepayment Maintained optionality

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY2025 and Q2 FY2025)Current Period (Q3 FY2025)Trend
Europe/International momentumPoland growth; asset-light supply; securing EU partners; Intl GM improved to 36% (Q1); EU partner agreements and 47% GM (Q2) Strong quarter; Europe up >70%; Intl revenue CAD $12MM (+14% YoY); Tweed launched in Germany; Intl GM 41% (+100 bps YoY) Strengthening
Australia medical competitionIntl decline partly due to Australia; focus on quality and supply; S&B medical positioning Noted increased competition; transitioning S&B sales to Germany to refocus Australia on medical Mixed/pressure
Claybourne infused pre-rollsPipeline highlighted; launch expected to support 2H adult-use Launched Nov; #3 market share in BC/ON in 6 weeks; sequential adult-use +15% Rising
Storz & Bickel/VentyStrong growth in Germany; Venty contribution (Q1/Q2) Revenue CAD $22MM (+19% YoY); GM 41% with higher indirect costs; solid Q4 but tough comps Strong, margin variability
Regulatory/legal (Germany)Demand rising post legalization; securing EU supply (Q1) Positive regulatory backdrop; expanded portfolio; Tweed entry Supportive
Canopy USA integrationWana/Jetty acquisitions progressing; Acreage closing tracking (Q2) Acreage closed Dec; integration underway; Brooks Jorgensen named President Progressing
Balance sheet/interestTerm loan extension (Q1); early US$100MM prepayment announced (Oct) Debt reduced to CAD $442MM; cash interest CAD $17MM in Q3 (down YoY) Improving

Management Commentary

  • CEO: “As I step into my role as Chief Executive Officer, I am focused on achieving sustainable profitability while maximizing our ability to create value in the key markets and segments we serve.”
  • CFO: “The third quarter marked our best Adjusted EBITDA to date… balance sheet actions taken during the quarter further strengthen our financial position…” .
  • CFO on Canada gross margin: “Decline… primarily attributable to higher initial cost to produce Claybourne; expect cash gross margins to return to at least mid- to high 30% targeted range…” .
  • CFO on path to profitability: “Achieving positive adjusted EBITDA at the consolidated level is firmly in sight in the coming quarters.” .
  • CEO on Claybourne: “Claybourne has risen to become the #3 infused pre-roll in British Columbia and Ontario in less than 6 weeks.” .

Q&A Highlights

  • International strategy: Management emphasized an asset-light model leveraging GMP-certified Canadian supply and EU partners; Europe accounted for ~60% of international segment with demand exceeding supply in Poland .
  • New CEO philosophy: Early in role, focusing on validating strategy and resource allocation; impressed with talent, processes, supply chain; more detail planned for Q4 call .
  • Cash flow and ATM cadence: Expect further cash flow improvement in FY2026; reduced cash interest after term loan paydown; modest capex; ATM provides flexibility for growth initiatives .
  • Constellation Brands: Now more of a passive investor via exchangeable shares; ongoing exchange of best practices but not operational involvement; distribution leverage not central near-term .
  • Germany distribution: Leveraging distribution partners and improved flower quality/THC; no major step-change in investments expected given current partnerships and supply .

Estimates Context

  • S&P Global (Capital IQ) consensus estimates for revenue/EPS/EBITDA for the latest reported quarter and next quarter were unavailable at time of request due to SPGI daily request limit exceeded. As a result, explicit beat/miss vs Wall Street consensus cannot be shown. Values would normally be retrieved from S&P Global; consensus comparisons are omitted due to unavailability at this time.

Key Takeaways for Investors

  • Medical cannabis and Storz & Bickel are the core growth engines; record Canada medical revenue (+16% YoY) and S&B (+19% YoY) underpin margin profile despite launch costs .
  • Adult-use momentum improving with Claybourne; sequential +15% adult-use and #3 market share in infused pre-rolls in BC/ON suggests share gains; watch cost curve normalization to restore mid/high-30s cash GM .
  • Balance sheet risk moderating: debt reduced to CAD $442MM; option to extend maturity to Sep 2027 with additional US$100MM prepayment by Mar 31, 2025; cash interest trending down (CAD $17MM in Q3) .
  • Europe is a clear bright spot: Tweed brand entry in Germany and outsized Poland growth support sustained international GM strength (41% in Q3); capacity/supply partnerships mitigate capital intensity .
  • Near-term setup: Q4 yoy growth for S&B likely challenged on tough comps; international comps exclude prior ~CAD $1.7MM U.S. CBD; monitor adult-use sell-through and Claybourne rollout .
  • Profitability trajectory: Adjusted EBITDA loss narrowed to CAD $(3.469)MM; management sees positive consolidated Adjusted EBITDA “firmly in sight” in coming quarters, contingent on continued mix improvement and cost discipline .
  • Strategic optionality in U.S.: Canopy USA integration (Wana, Jetty, Acreage) progressing and leadership in place; synergy capture is an important medium-term upside lever as regulatory landscape evolves .