Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC) announced its financial results for the first quarter of fiscal 2025, which June 30, 2024. Canopy’s total revenue decreased 13% to C$75 million compared to C$88 million in the same period last year. Revenue decreased in both the Canadian market and international business. The only increase in revenue was at Storz & Bickel, where revenue increased 2% to C$18.4 million.
Despite falling revenue, Canopy managed to beat Yahoo Finance’s average analyst estimate of just $51 million or CAD$70 million. However, the stock fell about 6-8% in early trading on the news of the revenue slump.
Canopy told investors it achieved record medical cannabis sales in Canada, offset by lower net sales from recreational use. Medical cannabis sales increased 20% year-over-year, in part due to strong demand for high-margin Spectrum Therapeutics products and the broader product assortment available through its online platform.
CEO David Klein said: “The fundamentals of our business are getting stronger and our focus on profitable revenue generation is delivering clear results as we set the stage for growth in the second half of fiscal 2025. With our core businesses achieving adjusted EBITDA profitability and positioned for growth, coupled with Canopy USA Canopy Growth is positioned to capitalize on the near-term market opportunity in the U.S. The company is making rapid progress and has established itself as a market leader in the cannabis sector.”
Losses increase
Canopy Growth also reported another staggering net loss for the quarter of C$127 million, compared to a net loss of C$38 million in the same period last year. Net loss from continuing operations in the first quarter of fiscal 2025 was C$129.2 million, compared to a net loss of C$10.6 million in the first quarter of fiscal 2024. The reason for the increase was an expense amount of C$93.9 million in the first quarter of fiscal 2025.
The company stated that its cash and short-term investments at the end of the 30 June, versus 203 million Canadian dollars in the end March 2024.
Net loss per share was CAD -1.60 compared to CAD 0.69 in the previous year. This was well below the average analyst loss estimate of CAD -0.34.
CFO Judy Hong said, “Our strategic initiatives have resulted in significant improvements in gross margins and adjusted EBITDA, as well as a reduction in selling, general and administrative expenses. We are pleased that all of our businesses achieved positive adjusted EBITDA in the first quarter of fiscal 2025 and expect to achieve positive adjusted EBITDA on a consolidated basis in the second half of the fiscal year. We have further enhanced our financial flexibility through additional measures, including the extension of our term loan, which enables us to fund strategic growth initiatives.”
Total operating expenses decreased 24% to C$52 million from C$68 million in the prior year. Canopy attributed the decrease to the divestiture of This Works on December 18, 2023 and the impact of the restructuring actions and cost savings program initiated in the fourth quarter of fiscal 2023.
The Company’s free cash flow was $55.7 million compared to $108.2 million in the prior year. The year-over-year decrease in free cash flow was primarily due to the decrease in cash used in operating activities.
Fears about the company’s continued existence are diminishing
The company told investors it had resolved doubts about its continued existence, citing its $35 million private placement offering in January 2024, the receipt of $25 million from the sale of BioSteel Canada, the exchange of a subsidiary of Constellation Brands, Inc.’s $100 million promissory note for exchangeable shares of Canopy Growth, and the amendments to its unsecured convertible notes that extended the maturity of the debt to March 2026.
However, the company’s long-term debt increased from C$493 million a year earlier to C$558 million.
The company has provided the following infographic on its earnings.
240808 Infographic on the financial results of the first quarter of the fiscal year 2025