Before the market opened on Friday, Canopy Growth Corporation (Nasdaq: CGC) (TSX: WEED) released first quarter earnings and the market responded negatively to the report.

Although the headline number from the earnings report is ugly, there are a few bright spots in Canopy Growth’s earnings report. Today, we issued an update on the Canadian Licensed Producer (LP) and covered 9 key points frm the earnings report.

During the quarter, the Canadian cannabis producer incurred a C$1.72 billion ($1.33 billion) impairment charge. After this earnings report, we have less faith in the management team’s ability to make the business profitable
Canopy Growth said it expects to report positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in fiscal 2024. This metric would allow the company to exclude certain investments from the calculation and we will monitor how the management team executes on this.
In the back half of the year, the Canadian cannabis producer expects to start noticing considerable benefits from the previously announced cost cutting strategy. We hope the management team can execute on this initiative and will monitor how the plan impacts the fundamentals of the business.
During the quarter, Canopy Growth generated $110 million of net revenue and reported a C$2 billion net loss. On comparative basis, the results are much worse than the prior year (reported almost C$400 million of net income) and we are cautiously optimistic with the business.
When compared to the same period last year, total global cannabis net revenue dropped by almost 30%. Canopy Growth attributed the decrease to a decline in value flower sales due to a deliberate business transition to focus on higher margin, premium and mainstream products, in Canada.
As of June 30th, Canopy Growth reported to have $1.2 billion of cash and short-term investments. This amount is approx. $200 million lower than it was on June 30, 2021, and the company attributed the decrease to EBITDA losses and the upfront payment made as consideration for the options to acquire Jetty Extracts
BioSteel was a bright spot for Canopy Growth in the quarter and the business reported record revenues for the period. During the last year, the number of stores that sell BioSteel products has skyrocketed. We are bullish on the retail agreement that BioSteel formed with Walmart Stores (NYSE: WMT) which covers 2,200 stores in 39 states.
A major milestone for BioSteel was the formation of a partnership with the NHL and NHLPA to become the Official Hydration Partner of the league. The partnership will provide the BioSteel brand with league-wide rink side marketing and product supply rights, retail activation rights, community engagement platforms, player marketing and activation rights.
The international side of the cannabis industry was another bright spot for Canopy Growth. During the quarter, international medical cannabis net revenue doubled on a year-over-year basis. The cannabis company said the increase was primarily driven by strong sales in Israel and Australia.

If you are interested in learning more about Canopy Growth’s earnings report, please send an email to support@technical420.com with the subject “Canopy Growth First Quarter Financials” to be added to our distribution list.

Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.