Canopy Growth Corporation Q3 FY2025 earnings call

Luc's remarks: Joined as CEO, shared background in consumer packaged goods, discussed optimism in cannabis sector despite challenges. Highlighted medical cannabis business strength in Canada and international markets, Claybourne brand launch in Canada adult use, Storz & Bickel's premium vaporizer performance, and Canopy USA integration with Brooks Jorgensen as President. Judy's remarks: Q3 consolidated net revenue CAD75M, down 5% YOY but up 8% excluding divested businesses. Q3 adjusted EBITDA loss CAD3M, improved 61% YOY. Canada medical continued momentum, adult use improved with Claybourne launch and Wana Gummies return. International markets had strong European performance. Storz & Bickel had strong revenue but lower gross margin. Discussed cash flow improvement, balance sheet, and priorities for Canada, international markets, and Storz & Bickel for remaining fiscal 2025 and into fiscal 2026.

Canada: Q3 net revenue was CAD41 million, a 1% increase year-over-year. Canada medical saw 16% year-over-year revenue growth, marking another record revenue quarter. Canada adult use was down 10% year-over-year but up 15% quarter-over-quarter. Canada gross margin in Q3 was 25% and cash gross margin (adding back noncash depreciation) was 35%. International markets cannabis: Net revenue was CAD12 million in Q3 FY 2025, up 14% compared to Q3 of last year. Gross margin was 41% in Q3 of FY25, up 100 basis points from Q3 FY 2024. Storz & Bickel: Revenue was CAD22 million in Q3, up 19% compared to last year. Gross margin was 41% compared to 51% last year due to higher indirect costs.

Canada: Expect continued strength in medical business and improved adult use with Claybourne rollout, new products, and expanded distribution. International markets cannabis: Expect continued momentum in European business with consistent product availability and new product launches. Fiscal 2026: Focus on driving long-term sustainable growth and improving profitability and cash flow. Near term: Believes achieving positive adjusted EBITDA at consolidated level is in sight in coming quarters.

Cannabis sector challenges: Regulations not evolving as fast as expected, consumer trends like beverages taking longer to develop, illicit market endures, and uncertain US legalization. Competitive pressure: Some core brands in Canada adult use facing competitive pressure, and Australia medical cannabis market facing increased competition.

Q: Aaron Grey asked about plans for international to capitalize on growth and if the asset light model will enable capturing and maintaining share.

A: Judy Hong said European business, especially Poland and Germany, is strong, leveraging Canadian supply and third-party partners. Luc added medical market has strong fundamentals.

Q: Bill Kirk asked in what ways Luc views the company differently than predecessor and agreement with prior strategy.

A: Luc said it's early, but impressed with talent, processes, and supply chain, working closely with team.

Q: Matt Bottomley asked about cadence of ATM line and cash flow towards breakeven.

A: Judy Hong said expect further cash flow improvement in FY2026, improved operations, paydown of term loan, and flexibility to reinvest.

Q: Frederico Gomes asked about Poland market specifics.

A: Judy Hong said Poland is a strong contributor, insulated from some competition, demand exceeding supply, and excited about leadership position.

Q: Pablo Zuanic asked about Constellation Brands' involvement and distribution capabilities.

A: Judy Hong said Constellation is passive shareholder, and international distribution leverages existing partnerships and improved supply from Canada.