Earlier this morning, Canopy Growth Corporation (TSX: WEED) (NASDAQ: CGC) reported third quarter financial results and the stock dropped more than 15% on the announcement.
During the last year, Canopy Growth has been under considerable pressure and the stock has been punished as a result. We believe the business faces near-term risks and want our readers to be aware of some of the most important takeaways from the earnings report:
- During the quarter, Canopy Growth generated $101 million of revenue which represents a more than 25% decrease when compared to the same period in 2022. During this period, the company recorded a $267 million net loss which is $151 million higher than the same period in 2022
- As of December 31st, the company had $789 million of cash and short-term investments
- Canopy Growth announced that it is transitioning to an asset-light model in Canada by exiting cannabis flower cultivation at its Smiths Falls, Ontario facility, ceasing the sourcing of cannabis flower from the Mirabel, Quebec facility, and moving to a third-party sourcing model for cannabis 2.0 products.
- The company is reducing headcount across the business by approximately 60%, including 800 positions impacted by the changes announced today, of which 40% are impacted immediately.
- Some of the changes to the Canadian business include the divestiture of Canopy Growth’s Canadian retail operations, the organizational restructuring of certain corporate functions, and the closure of the Scarborough, Ontario research facility.
- Canopy Growth continues to progress its U.S. strategy through Canopy USA, LLC (“CUSA”) and is committed to remaining dual–listed on the TSX and on the Nasdaq.
- Based on the current revenue run rate and the cost reduction initiatives, management reaffirms its expectation to achieve positive Adjusted EBITDA in FY2024, with the exception of its investment in BioSteel.
Although we are cautious with Canopy Growth in the near-term, we are favorable on the business due to the strength of its balance sheet. Over the next year, we expect the management team to do a better job at allocating resources and will monitor how it executes on its cost cutting strategy.
If you are interested in learning more about Canopy Growth’s earnings report, please send an email to email@example.com with the subject “Canopy Growth” to be added to our distribution list.
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