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Highlights:
- Canopy Growth reduces operating loss by 34%, signaling continued cost-saving progress.
- Medical cannabis revenue grows 16%, while adult-use cannabis sees a decline.
- Cash reserves rise to C$231 million, up 18% from the previous quarter.
Canopy Growth Corporation (TSX:WEED) reported its financial results for the second quarter of fiscal 2025, ending September 30, 2024, showing progress in its journey toward profitability despite a slight decline in revenue. The company highlighted its focus on cost-saving initiatives, a pivot to higher-margin medical cannabis sales, and strategic investments in international markets as key drivers of its ongoing recovery.
Canopy's total revenue for the quarter was C$117 million, marking a 9% year-over-year (YoY) decrease. However, excluding revenue from businesses that were divested in the previous fiscal year, revenue increased by 3% compared to the same period last year. This improvement indicates that Canopy’s operational restructuring and strategic focus are beginning to yield positive results.
The company reported a gross margin of 35%, which represents a 1% increase YoY. This growth was largely attributed to the ongoing cost savings program and a shift toward higher-margin medical cannabis sales, which has become a central part of Canopy’s revised business model. The company's operating loss from continuing operations was C$46 million, down from a loss of C$7 million in the same quarter last year. The loss was mainly driven by the divestiture of a facility in Smiths Falls, Ontario, as part of Canopy's broader restructuring efforts.
Adjusted EBITDA for the quarter stood at a loss of C$6 million, but this marked a 54% improvement from the same period last year, reflecting the success of Canopy’s cost-saving measures and operational efficiency improvements. The company also reported a free cash flow outflow of C$56 million, a 16% improvement YoY, driven primarily by lower cash interest expenses.
Canopy's cash and short-term investments grew to C$231 million at the end of Q2, up from C$195 million in Q1 of fiscal 2025. This increase is a positive sign for the company’s liquidity position as it continues to make investments in strategic acquisitions, international expansion, and new product launches.
In its domestic market, Canopy Growth’s Canadian revenue was C$37 million, reflecting an 8% decline YoY. However, the company saw a 16% increase in medical cannabis revenue, while adult-use cannabis sales fell by 24%. This decline was attributed to an interruption in the supply of Wana edibles, a popular product line within the adult-use segment. Canopy plans to strengthen its adult-use business in the second half of the fiscal year by reintroducing Wana edibles, enhancing its Tweed and 7ACRES product offerings, and investing in distribution and marketing efforts.
On the international front, Canopy Growth reported C$10 million in revenue, up 12% YoY, driven by strong growth in Poland and Germany. The company’s gross margin for international sales reached 47%, up 17% YoY, due to a favorable shift in its sales mix toward the lower-cost Polish market. Canopy is optimistic about future growth in the European market, with plans to secure agreements with EU-based cultivators to expand cannabis flower supply.
In the U.S., Canopy’s recent acquisition of Wana Brands, a major player in the cannabis edibles market, aligns with the company’s strategy to capitalize on the growing hemp-derived THC and CBD market. Wana has also launched the ShopWanderous online marketplace, enhancing Canopy’s digital footprint. Additionally, Canopy’s acquisition of Acreage Holdings remains on track to close in the first half of calendar 2025.
Canopy’s Storz & Bickel division saw strong growth, delivering C$16 million in revenue, a 32% YoY increase, benefiting from regulatory changes in Germany and expanding sales in the U.S.
While Canopy Growth’s Q2 results reflect challenges in the Canadian adult-use market, the company is positioning itself for future growth through a combination of cost optimization, international expansion, and the development of new product lines. The company’s efforts in Europe, as well as its strategic acquisitions, provide a solid foundation for long-term growth as it aims to return to profitability in the near future.
