Core Viewpoint - Cannabis stocks surged on Monday, with Canopy Growth (CGC.US) and Tilray Brands (TLRY.US) rising nearly 20%, Aurora Cannabis (ACB.US) up nearly 13%, and Cronos Group (CRON.US) increasing by nearly 12% due to reports that Trump is considering reclassifying cannabis as a lower-risk substance [1] Group 1 - Canopy Growth (CGC.US) experienced a significant price increase of nearly 20% [1] - Tilray Brands (TLRY.US) also saw a rise of nearly 20% [1] - Aurora Cannabis (ACB.US) rose nearly 13% [1] - Cronos Group (CRON.US) increased by nearly 12% [1] Group 2 - The surge in cannabis stocks is linked to a report from The Wall Street Journal regarding Trump's potential reclassification of cannabis [1]

Financial Data and Key Metrics Changes - Canopy Growth reported a cannabis net revenue of CAD 57 million, representing a 24% year-over-year increase [20] - Adjusted EBITDA loss was CAD 8 million, compared to a loss of CAD 5 million in the prior year, primarily due to lower gross margins [27] - Cannabis gross margin in Q1 was 24%, down from the previous year, attributed to higher production costs and softer sales in high-margin markets [22][23] Business Line Data and Key Metrics Changes - Canada Medical net revenue grew 13%, marking three consecutive quarters of growth [6] - International net revenues increased by 4%, with Germany showing triple-digit growth [6][21] - Canada adult use net revenue surged 43%, driven by improved distribution and strong consumer demand [11][22] - Stores and Bickel segment revenue decreased by 25% year-over-year, totaling CAD 15 million [24] Market Data and Key Metrics Changes - In Europe, double-digit revenue growth was achieved, particularly in Germany, while Poland faced supply challenges due to regulatory changes [8][21] - The Canadian adult use market saw significant growth, with nearly 4,800 new points of distribution added in Q1 [11] Company Strategy and Development Direction - The company is focused on improving gross margins and achieving positive EBITDA as a company-wide priority [14] - Canopy Growth is enhancing its operational efficiency through cost reduction initiatives, having already achieved CAD 17 million in annualized savings [13][26] - The company is positioning itself for long-term growth in the U.S. market, despite current regulatory challenges [15][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to sustain momentum and improve margins in the upcoming quarters [16][30] - The focus remains on operational fundamentals to drive top-line growth and improve gross margins [30] Other Important Information - The company has secured CAD 144 million in cash and short-term investments, with a debt balance of CAD 295 million [29] - Canopy USA has secured USD 20 million in funding to support operations and streamline costs [16][30] Q&A Session Summary Question: Can you speak to some of the drivers of gross margin improvement? - Management expects to exit the year with margins in the low to mid-thirties, driven by efficiency improvements and prioritizing supply to profitable markets [35] Question: Can you elaborate on the supply challenges in Poland? - The company is focusing on internal processes to improve flower allocation, which previously hindered success in the Polish market [39] Question: What other European markets are promising for growth? - Management highlighted the importance of establishing the right infrastructure in Germany and Poland, with significant growth potential in these markets [44] Question: What momentum is building in the U.S. regarding rescheduling? - While not commenting directly on rescheduling, management noted increasing demand and infrastructure in select U.S. geographies [46]

Group 1 - Proactive provides fast, accessible, informative, and actionable business and finance news content to a global investment audience [2] - The news team covers medium and small-cap markets, as well as blue-chip companies, commodities, and broader investment stories [3] - Proactive's content includes insights across various sectors such as biotech, pharma, mining, natural resources, battery metals, oil and gas, crypto, and emerging technologies [3] Group 2 - Proactive is committed to adopting technology to enhance workflows and improve content production [4] - The company utilizes automation and software tools, including generative AI, while ensuring all content is edited and authored by humans [5]

Core Viewpoint - Canopy Growth Corporation reported a quarterly loss of $0.14 per share, slightly better than the Zacks Consensus Estimate of a loss of $0.15, and an improvement from a loss of $0.37 per share a year ago, indicating a positive earnings surprise of +6.67% [1] Financial Performance - The company posted revenues of $52.13 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 8.81%, and showing an increase from $48.39 million in the same quarter last year [2] - Over the last four quarters, Canopy Growth has surpassed consensus EPS estimates only once [2] Stock Performance - Canopy Growth shares have declined approximately 61.7% since the beginning of the year, contrasting with the S&P 500's gain of 7.8% [3] Future Outlook - The company's earnings outlook will be crucial for assessing future stock performance, including current consensus earnings expectations for upcoming quarters [4] - The current consensus EPS estimate for the next quarter is -$0.14 on revenues of $48.3 million, and for the current fiscal year, it is -$0.46 on revenues of $198.45 million [7] Industry Context - The Medical - Products industry, to which Canopy Growth belongs, is currently ranked in the bottom 39% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

[Q1 FY2026 Financial & Operational Highlights](index=1&type=section&id=Q1%20FY2026%20Financial%20%26%20Operational%20Highlights) Canopy Growth saw 9% revenue growth to $72.1 million, improved operating loss, and reduced cash outflow, despite lower gross margins [Consolidated Financial Performance](index=1&type=section&id=Consolidated%20Financial%20Performance) Consolidated net revenue rose 9% to $72.1 million, operating loss improved 21%, and free cash flow outflow decreased 79%, but gross margin fell to 25% Consolidated Financial Performance Metrics (thousands of CAD) | Metric (thousands of CAD) | Q1 FY2026 | vs. Q1 FY2025 | | :------------------------ | :-------- | :------------ | | Net Revenue | $72,134 | 9% | | Gross margin percentage | 25% | (1,000) basis points | | Net loss from continuing operations | $(41,527) | 68% | | Adjusted EBITDA | $(7,916) | (50%) | | Free cash flow | $(11,643) | 79% | - Operating loss from continuing operations was **$23 million** in Q1 FY2026, representing an improvement of **21%** compared to Q1 FY2025, driven primarily by a reduction in operating expenses[11](index=11&type=chunk) - Cash and short-term investments increased to **$144 million** at June 30, 2025, from **$131 million** at March 31, 2025[11](index=11&type=chunk) [Segment Performance Overview](index=2&type=section&id=Segment%20Performance%20Overview) Canopy Growth now reports two segments: Cannabis revenue grew 24%, while Storz & Bickel revenue declined 25% - As of the three months ended June 30, 2025, the Company began reporting its financial results for the following two reportable segments: (i) Cannabis - includes the global production, distribution and sale of a diverse range of cannabis and cannabis-related products; and (ii) Storz & Bickel - includes the production, distribution and sale of vaporizers and accessories[4](index=4&type=chunk) Segment Net Revenue (millions of CAD) | Segment (millions of CAD) | Q1 FY2026 | Q1 FY2025 | Vs. Q1 FY2025 | | :------------------------ | :-------- | :-------- | :------------ | | Cannabis | $57.0 | $46.1 | 24% | | Storz & Bickel | $15.1 | $20.1 | (25%) | | Net revenue (Consolidated)| $72.1 | $66.2 | 9% | [Cannabis Segment Performance](index=2&type=section&id=Cannabis%20Highlights) Cannabis revenue increased 24% year-over-year, driven by strong Canadian adult-use sales, though gross margins decreased to 24% Cannabis Sub-segment Revenue (millions of CAD) | Cannabis Sub-segment (millions of CAD) | Q1 FY2026 | Q1 FY2025 | Vs. Q1 FY2025 | | :------------------------------------- | :-------- | :-------- | :------------ | | Canadian adult-use cannabis | $27.0 | $18.9 | 43% | | Canadian medical cannabis | $21.2 | $18.8 | 13% | | International markets cannabis | $8.8 | $8.4 | 5% | - Total Claybourne infused PRJ sales increased **58%** sequentially in Q1 FY2026 compared to Q4 FY2025, maintaining **2** category market share in Alberta, **3** in Ontario, and **3** nationally[11](index=11&type=chunk) - Cannabis gross margins decreased to **24%** in Q1 FY2026 compared to **33%** in Q1 FY2025, primarily due to a shift to higher-cost manufactured products like infused PRJs in Canada and lower sales in the high-margin Poland market[11](index=11&type=chunk) - The Company expects to improve cannabis gross margins in the second half of FY2026 through automation technology, increased PRJ production capacity, and pursuit of margin-accretive bulk cannabis sales in Canada and Europe[11](index=11&type=chunk) [Storz & Bickel Segment Performance](index=2&type=section&id=Storz%20%26%20Bickel%20Highlights) Storz & Bickel net revenue decreased 25% to $15 million, with gross margin falling to 29%, as cost efficiency measures are implemented Storz & Bickel Financial Performance (thousands of CAD) | Metric (thousands of CAD) | Q1 FY2026 | Q1 FY2025 | | :------------------------ | :-------- | :-------- | | Net revenue | $15,152 | $20,119 | | Gross margin percentage | 29% | 39% | - Storz & Bickel delivered net revenue in Q1 FY2026 of **$15 million**, representing a decrease of **25%** compared to Q1 FY2025, primarily attributable to lapping strong sales in the prior year and consumer economic uncertainty[11](index=11&type=chunk) - Storz & Bickel has implemented several cost efficiency measures, including bringing additional manufacturing capabilities in-house and headcount reductions, which are expected to reduce cost of goods sold and SG&A expenses over the coming quarters[11](index=11&type=chunk) - Storz & Bickel is preparing to launch a new vaporizer in the second half of calendar year 2025, which the Company believes will generate strong consumer interest[11](index=11&type=chunk) [Corporate Information & Disclosures](index=3&type=section&id=Corporate%20Information%20%26%20Disclosures) This section covers board appointments, webcast details, non-GAAP definitions, company overview, and forward-looking statements [Board of Directors Appointment](index=3&type=section&id=Appointment%20of%20Shan%20Atkins%20to%20Board%20of%20Directors) Margaret Shan Atkins was appointed to the Board, bringing extensive experience in retail, consumer goods, and finance - Margaret Shan Atkins was appointed to Canopy Growth's Board of Directors, effective August 6, 2025[14](index=14&type=chunk) - Ms. Atkins brings extensive experience in retail strategy and operations, consumer goods, wholesale distribution, cybersecurity oversight, accounting and finance, and private investment in both the U.S. and Canada[14](index=14&type=chunk) - She previously served as a partner in the consumer and retail practice of Bain & Company and a C-suite executive at a Fortune 15 public retailer, and currently serves on the boards of Darden Restaurants and SpartanNash[15](index=15&type=chunk)[16](index=16&type=chunk) [Webcast & Conference Call](index=4&type=section&id=Webcast%20and%20Conference%20Call%20Information) Canopy Growth will host a conference call and webcast on August 8, 2025, to discuss Q1 FY2026 financial results - The Company will host a conference call and audio webcast with Luc Mongeau, CEO and Tom Stewart, Interim CFO at 10:00 AM Eastern Time on August 8, 2025[19](index=19&type=chunk) - A live audio webcast will be available at: https://onlinexperiences.com/Launch/QReg/ShowUUID=8135284A-F8CD-45B7-A384-634DE671498[20](index=20&type=chunk) [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Measures) This section defines Adjusted EBITDA and Free Cash Flow, key non-GAAP measures for performance and liquidity - Adjusted EBITDA is a non-GAAP measure used by management to demonstrate the operating performance of businesses, calculated as net income (loss) adjusted to exclude income tax, other income/expense, loss on equity method investments, share-based compensation, depreciation/amortization, asset impairment/restructuring costs, and acquisition/divestiture costs[20](index=20&type=chunk) - Free cash flow is a non-GAAP measure that presents meaningful information regarding the amount of cash flow required to maintain and organically expand the Company's business and its liquidity requirements, calculated as net cash provided by (used in) operating activities less purchases of and deposits on property, plant and equipment[21](index=21&type=chunk) [About Canopy Growth](index=5&type=section&id=About%20Canopy%20Growth) Canopy Growth is a leading cannabis company with global operations and a U.S. THC market strategy via Canopy USA - Canopy Growth is a world-leading cannabis company dedicated to unleashing the power of cannabis to improve lives, delivering innovative products from owned and licensed brands including Tweed, 7ACRES, DOJA, Deep Space, and Claybourne, as well as category defining vaporization devices by Storz & Bickel[24](index=24&type=chunk) - Canopy Growth serves medical cannabis patients globally with principal operations in Canada, Europe and Australia[24](index=24&type=chunk) - Canopy Growth has established a comprehensive ecosystem to realize the opportunities presented by the U.S. THC market through an unconsolidated, non-controlling interest in Canopy USA, LLC, which includes ownership of Acreage Holdings, Inc., Wana Wellness, LLC, and Lemurian, Inc. ('Jetty')[25](index=25&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Notice%20Regarding%20Forward%20Looking%20Statements) This disclaimer highlights risks and uncertainties that could cause actual results to differ from forward-looking expectations - This press release contains 'forward-looking statements' within the meaning of applicable securities laws, which involve certain known and unknown risks and uncertainties, and readers are cautioned that actual results or outcomes may differ materially from those anticipated[27](index=27&type=chunk) - Forward-looking statements predict or describe future operations, business plans, business and investment strategies, and the performance of investments, generally identified by terms such as 'intend,' 'goal,' 'expect,' 'project,' 'will,' and 'should'[27](index=27&type=chunk) - A variety of factors, including laws and regulations, impairment losses, debt refinancing ability, impacts of the Canopy USA strategy, competitive conditions, and various operational and market risks, could cause actual results to differ materially[28](index=28&type=chunk)[34](index=34&type=chunk) [Financial Schedules](index=9&type=section&id=Financial%20Schedules) This section presents condensed interim consolidated financial statements and reconciliations for key metrics [Condensed Interim Consolidated Balance Sheets](index=9&type=section&id=Schedule%201) Balance sheets show total assets slightly decreased to $904.7 million, with cash and equivalents increasing to $126.2 million Condensed Interim Consolidated Balance Sheets (thousands of CAD) | ASSETS (thousands of CAD) | June 30, 2025 | March 31, 2025 | | :------------------------ | :------------ | :------------- | | Cash and cash equivalents | $126,202 | $113,811 | | Total current assets | $303,359 | $294,574 | | Total assets | $904,671 | $917,701 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | $98,669 | $94,404 | | Total liabilities | $415,695 | $430,488 | | Total shareholders' equity| $488,976 | $487,213 | [Condensed Interim Consolidated Statements of Operations](index=10&type=section&id=Schedule%202) Net loss from continuing operations improved to $(41.5) million, with net revenue up but gross margin down Condensed Interim Consolidated Statements of Operations (thousands of CAD) | Metric (thousands of CAD) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | | Net revenue | $72,134 | $66,212 | | Cost of goods sold | $54,096 | $43,181 | | Gross margin | $18,038 | $23,031 | | Total operating expenses | $40,662 | $52,139 | | Operating loss from continuing operations | $(22,624) | $(29,108) | | Net loss from continuing operations | $(41,527) | $(129,191) | | Basic and diluted loss per share (Continuing operations) | $(0.22) | $(1.63) | [Condensed Interim Consolidated Statements of Cash Flows](index=11&type=section&id=Schedule%203) Net cash outflow from operating activities significantly improved to $(10.3) million in Q1 FY2026 Condensed Interim Consolidated Statements of Cash Flows (thousands of CAD) | Cash Flow Activity (thousands of CAD) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(10,337) | $(51,780) | | Net cash used in investing activities | $(705) | $(33,029) | | Net cash provided by financing activities | $25,460 | $105,775 | | Net increase in cash and cash equivalents | $12,391 | $21,856 | | Cash and cash equivalents, end of period | $126,202 | $192,156 | [Adjusted EBITDA Reconciliation](index=12&type=section&id=Schedule%204) Adjusted EBITDA loss was $(7.9) million in Q1 FY2026, influenced by lower net loss and other income/expense changes Adjusted EBITDA Reconciliation (thousands of CAD) | Metric (thousands of CAD) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | | Net loss from continuing operations | $(41,527) | $(129,191) | | Income tax expense | $291 | $6,194 | | Other (income) expense, net | $18,612 | $93,889 | | Share-based compensation | $(99) | $4,151 | | Acquisition, divestiture, and other costs | $2,484 | $8,627 | | Depreciation and amortization | $9,670 | $11,030 | | Loss on asset impairment and restructuring | $2,653 | $20 | | Adjusted EBITDA | $(7,916) | $(5,280) | [Free Cash Flow Reconciliation](index=13&type=section&id=Schedule%205) Free cash flow outflow significantly improved to $(11.6) million, driven by reduced operating cash use and capital expenditures Free Cash Flow Reconciliation (thousands of CAD) | Metric (thousands of CAD) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities - continuing operations | $(10,337) | $(51,780) | | Purchases of and deposits on property, plant and equipment - continuing operations | $(1,306) | $(3,920) | | Free cash flow - continuing operations | $(11,643) | $(55,700) | [Segmented Gross Margin](index=14&type=section&id=Schedule%206) Cannabis segment gross margin was 24%, down from 33%, while Storz & Bickel's gross margin decreased to 29% Segmented Gross Margin (thousands of CAD) | Segment (thousands of CAD) | Q1 FY2026 Net Revenue | Q1 FY2026 Gross Margin | Q1 FY2026 Gross Margin % | Q1 FY2024 Net Revenue | Q1 FY2024 Gross Margin | Q1 FY2024 Gross Margin % | | :------------------------ | :-------------------- | :--------------------- | :----------------------- | :-------------------- | :--------------------- | :----------------------- | | Cannabis | $56,982 | $13,591 | 24% | $46,093 | $15,271 | 33% | | Storz & Bickel | $15,152 | $4,447 | 29% | $20,119 | $7,760 | 39% |

PART I. FINANCIAL INFORMATION Details the company's unaudited condensed interim consolidated financial statements and related disclosures for Q1 FY2026 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents Canopy Growth Corporation's unaudited condensed interim consolidated financial statements for Q1 FY2026, including balance sheets, operations, cash flows, and notes [Condensed Interim Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Interim%20Consolidated%20Balance%20Sheets) Details the company's financial position as of June 30, 2025, with **$904.7 million** total assets, **$415.7 million** total liabilities, and stable equity Consolidated Balance Sheet Summary (in thousands of Canadian dollars) | Balance Sheet Item | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | **Total Current Assets** | $303,359 | $294,574 | | **Total Assets** | **$904,671** | **$917,701** | | **Total Current Liabilities** | $98,669 | $94,404 | | **Total Liabilities** | **$415,695** | **$430,488** | | **Total Shareholders' Equity** | **$488,976** | **$487,213** | [Condensed Interim Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Reports **9% YoY net revenue increase** to **$72.1 million** for Q1 FY2026, with net loss significantly narrowing to **$41.5 million** Statement of Operations Summary (in thousands of Canadian dollars) | Metric | Q1 FY2026 (3 mos ended Jun 30, 2025) | Q1 FY2025 (3 mos ended Jun 30, 2024) | | :--- | :--- | :--- | | Net Revenue | $72,134 | $66,212 | | Gross Margin | $18,038 | $23,031 | | Operating Loss from Continuing Operations | $(22,624) | $(29,108) | | Net Loss from Continuing Operations | $(41,527) | $(129,191) | | Basic and Diluted Loss Per Share | $(0.22) | $(1.63) | [Condensed Interim Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Shows a slight increase in total shareholders' equity to **$489.0 million**, driven by **$38.3 million** from share issuances offsetting net loss - During the quarter, the company issued common shares for gross proceeds of **$38.3 million** through its At-The-Market (ATM) program[15](index=15&type=chunk) [Condensed Interim Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Cash%20Flows) Highlights a significant reduction in net cash used in operating activities to **$10.3 million**, with a net increase in cash of **$12.4 million** Cash Flow Summary (in thousands of Canadian dollars) | Cash Flow Activity | Q1 FY2026 (3 mos ended Jun 30, 2025) | Q1 FY2025 (3 mos ended Jun 30, 2024) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(10,337) | $(51,780) | | Net Cash Used in Investing Activities | $(705) | $(33,029) | | Net Cash Provided by Financing Activities | $25,460 | $105,775 | | **Net Increase in Cash** | **$12,391** | **$21,856** | | **Cash and Cash Equivalents, End of Period** | **$126,202** | **$192,156** | [Notes to the Condensed Interim Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Interim%20Consolidated%20Financial%20Statements) Provides critical details on accounting policies and significant events, including going concern alleviation, Canopy USA deconsolidation, and debt management - Management concludes that the **substantial doubt about the Company's ability to continue as a going concern has been alleviated** due to actions taken, including the sale of common shares under the February 2025 ATM Program and other potential financing and cost-saving strategies[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - As of April 30, 2024, Canopy Growth deconsolidated the financial results of Canopy USA following structural amendments to comply with Nasdaq listing requirements and after discussions with the SEC. Canopy USA holds the company's U.S. cannabis investments, including Wana, Jetty, and Acreage[52](index=52&type=chunk)[56](index=56&type=chunk)[73](index=73&type=chunk) - During the quarter, the company sold **21,006,528 common shares** for gross proceeds of **$38.3 million** under its February 2025 ATM Program. Subsequent to quarter-end, it sold an additional **34.6 million shares** for **$54.3 million**[132](index=132&type=chunk)[170](index=170&type=chunk) - The company has changed its reportable segments to two: (1) **Cannabis**, which includes global cannabis operations, and (2) **Storz & Bickel**, which includes vaporizers and accessories[165](index=165&type=chunk)[166](index=166&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 FY2026 financial performance, highlighting **9% revenue growth**, gross margin decline, narrowed net loss, liquidity, and going concern alleviation [Business Overview](index=46&type=section&id=Business%20Overview) Outlines Canopy Growth's global cannabis business, focusing on Canopy USA's strategic creation and deconsolidation for U.S. market entry and Nasdaq compliance - The company's core business is the production, distribution, and sale of cannabis and related products for adult-use and medical purposes globally[183](index=183&type=chunk) - The company has restructured its reporting into two segments: **Cannabis** and **Storz & Bickel**[186](index=186&type=chunk)[189](index=189&type=chunk) - Canopy USA was created to hold U.S. cannabis investments (Wana, Jetty, Acreage, TerrAscend). Canopy Growth has since **deconsolidated Canopy USA** to comply with Nasdaq listing rules, holding a non-voting, non-controlling interest until U.S. federal permissibility[187](index=187&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) [Results of Operations](index=56&type=section&id=Results%20of%20Operations) Details Q1 FY2026 operational results, including **9% net revenue growth**, **25% gross margin**, reduced operating expenses, and a narrowed net loss Net Revenue by Segment (in thousands of Canadian dollars) | Segment | Q1 FY2026 | Q1 FY2025 | % Change | | :--- | :--- | :--- | :--- | | Cannabis | $56,982 | $46,093 | 24% | | Storz & Bickel | $15,152 | $20,119 | (25%) | | **Total Net Revenue** | **$72,134** | **$66,212** | **9%** | Gross Margin by Segment | Segment | Q1 FY2026 Margin % | Q1 FY2025 Margin % | Basis Point Change | | :--- | :--- | :--- | :--- | | Cannabis | 24% | 33% | (900) bps | | Storz & Bickel | 29% | 39% | (1,000) bps | | **Total Company** | **25%** | **35%** | **(1,000) bps** | - Total operating expenses decreased **22% YoY** to **$40.7 million**, driven by a **21% reduction in SG&A expenses** and a reversal in share-based compensation[237](index=237&type=chunk) - Adjusted EBITDA loss increased to **$7.9 million** from **$5.3 million** year-over-year, primarily due to lower gross margins, which was partially offset by SG&A cost savings[256](index=256&type=chunk) [Financial Liquidity and Capital Resources](index=63&type=section&id=Financial%20Liquidity%20and%20Capital%20Resources) Discusses financial liquidity, confirming going concern alleviation, with **$126.2 million** cash, improved free cash flow, and **$295.3 million** total debt - The company has **alleviated substantial doubt about its going concern status** by completing balance sheet actions, including raising **$38.3 million** from its ATM program during the quarter[259](index=259&type=chunk)[262](index=262&type=chunk) Free Cash Flow (Non-GAAP, in thousands of Canadian dollars) | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,337) | $(51,780) | | Purchases of property, plant and equipment | $(1,306) | $(3,920) | | **Free Cash Flow** | **$(11,643)** | **$(55,700)** | - Total debt outstanding was **$295.3 million** as of June 30, 2025, down from **$304.1 million** at March 31, 2025, due to paydowns and foreign currency translation[280](index=280&type=chunk) - Subsequent to the quarter, the company agreed to make three additional prepayments on its Credit Facility totaling **US$50 million**, with the first **US$25 million** payment made on July 31, 2025[294](index=294&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=72&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details exposure to market risks, including foreign currency fluctuations, interest rate changes on variable debt, and equity price volatility - The company is exposed to foreign currency risk from its U.S. and European subsidiaries. A hypothetical **10% change in the euro against the Canadian dollar** would affect net assets by approximately **$19.3 million**[312](index=312&type=chunk)[313](index=313&type=chunk) - The company is exposed to interest rate risk on its floating-rate debt, which had an aggregate notional value of **$205.0 million** as of June 30, 2025[317](index=317&type=chunk)[318](index=318&type=chunk) - The company holds financial assets and liabilities, such as investments in shares, warrants, and convertible debentures, which are subject to equity price risk[319](index=319&type=chunk) [Item 4. Controls and Procedures](index=75&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The Chief Executive Officer and Interim Chief Financial Officer concluded that as of June 30, 2025, the company's **disclosure controls and procedures were effective**[323](index=323&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[324](index=324&type=chunk) PART II. OTHER INFORMATION Provides additional information not covered in financial statements, including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=76&type=section&id=Item%201.%20Legal%20Proceedings) Details ongoing legal proceedings, including shareholder class action lawsuits and an SEC investigation related to BioSteel financial reporting - The company is a defendant in putative class action lawsuits in Ontario, British Columbia, and New York, all alleging misrepresentations in financial disclosures[328](index=328&type=chunk)[329](index=329&type=chunk)[332](index=332&type=chunk) - The company is the subject of an ongoing **SEC investigation** as a result of self-reporting its internal review of financial reporting matters related to the BioSteel business unit[330](index=330&type=chunk) [Item 1A. Risk Factors](index=78&type=section&id=Item%201A.%20Risk%20Factors) Reports no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Annual Report have occurred[336](index=336&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=78&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered sales of equity securities during the period - None[337](index=337&type=chunk) [Item 3. Defaults Upon Senior Securities](index=78&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Reports no defaults upon senior securities during the period - None[338](index=338&type=chunk) [Item 4. Mine Safety Disclosures](index=78&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[339](index=339&type=chunk) [Item 5. Other Information](index=78&type=section&id=Item%205.%20Other%20Information) Reports no director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[340](index=340&type=chunk) [Item 6. Exhibits](index=78&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including articles of incorporation, material contracts, and officer certifications - Exhibits filed include certifications by the Principal Executive Officer and Principal Financial Officer, and various agreements such as the Third Amended and Restated Credit Agreement[341](index=341&type=chunk)

Industry Overview - The U.S. cannabis industry is projected to be valued at over $34 billion in 2024 and could reach $57 billion by 2030, indicating significant growth potential [1] - Despite short-term volatility, marijuana penny stocks are attracting risk-tolerant investors, particularly in emerging markets and high-demand states [1] Legislative Developments - A major Senate committee has advanced a bill to expand cannabis banking access, which has renewed optimism and momentum in the sector [1] Company Strategies - Canadian cannabis producers are strategically positioning themselves for U.S. market penetration despite uncertain federal legalization [3] - Three notable Canadian cannabis stocks for U.S. expansion in August 2025 are Tilray Brands Inc. (TLRY), Canopy Growth Corporation (CGC), and Village Farms International Inc. (VFF) [5][3] Tilray Brands Inc. (TLRY) - Tilray operates a diversified cannabis and consumer packaged goods business, focusing on beverage and wellness markets, with products distributed in over 1,000 U.S. stores [4][6] - The company reported quarterly net revenue of $211 million, a 9% year-over-year increase, with gross profit climbing 29% to $61 million [7] - Cannabis revenue remained steady at $66 million, and the adjusted net loss narrowed to $2 million, indicating a balanced strategy supporting solid financial performance [8] Canopy Growth Corporation (CGC) - Canopy Growth focuses on branding and distribution through its Canopy USA platform, avoiding direct ownership of dispensaries to mitigate regulatory risks [9][11] - The company reported a 9% year-over-year decline in revenue, but core revenue grew by 3% when adjusted for divestitures, with a consolidated gross margin of 35% [12] - Canopy is in a transition phase, focusing on cost optimization and preparing for sustainable growth as U.S. legalization progresses [13] Village Farms International Inc. (VFF) - Village Farms operates as a greenhouse grower, supplying cannabis products to retailers and processors in the U.S. without owning dispensaries [14][16] - The company reported quarterly revenue of $77.07 million, with a trailing twelve-month revenue growth of over 12% year-over-year [17] - Despite operating at a net loss, Village Farms is focused on improving its financial position and operational efficiency, with Q2 2025 results anticipated for updates on margin improvements [18] Conclusion - Canadian cannabis companies are adapting to market conditions, with Tilray leading in diversified consumer brands, Canopy focusing on branding and cost efficiency, and Village Farms supporting the market through cultivation and wholesale supply [19][20]

Company Performance - Canopy Growth Corporation (CGC) stock increased by 1.94% to $1.05, outperforming the S&P 500 which fell by 1.6% [1] - Over the past month, CGC shares have decreased by 19.53%, while the Medical sector declined by 3.44% and the S&P 500 rose by 2.25% [1] Upcoming Financial Results - Canopy Growth Corporation is set to announce its earnings on August 8, 2025, with projected earnings of -$0.15 per share, reflecting a year-over-year growth of 59.46% [2] - The consensus estimate anticipates revenue of $47.91 million, indicating a 0.99% decrease from the same quarter last year [2] Full Year Estimates - For the full year, analysts expect earnings of -$0.46 per share and revenue of $198.45 million, representing changes of +84.56% and +2.66% respectively from the previous year [3] Analyst Estimates and Market Sentiment - Recent changes to analyst estimates for Canopy Growth Corporation indicate a shifting business landscape, with positive revisions suggesting analyst optimism about profitability [4] - The Zacks Rank system, which assesses estimate changes, currently ranks Canopy Growth Corporation as 5 (Strong Sell), reflecting a 5.38% decrease in the consensus EPS estimate over the last 30 days [6] Industry Context - The Medical - Products industry, which includes Canopy Growth Corporation, has a Zacks Industry Rank of 183, placing it in the bottom 26% of over 250 industries [7]

Company Performance - Canopy Growth Corporation (CGC) closed at $1.14, reflecting a +2.7% increase from the previous day, outperforming the S&P 500's gain of 0.4% [1] - The stock has decreased by 10.48% over the past month, underperforming the Medical sector's gain of 1.19% and the S&P 500's gain of 4.61% [1] Earnings Expectations - Analysts anticipate Canopy Growth Corporation to report earnings of -$0.11 per share, indicating a year-over-year growth of 70.27% [2] - The consensus estimate for quarterly revenue is $48.08 million, which represents a decline of 0.64% compared to the same period last year [2] Full Year Projections - For the full year, analysts expect earnings of -$0.43 per share and revenue of $199.33 million, reflecting changes of +85.57% and +3.12% respectively from the previous year [3] Analyst Estimate Revisions - Recent modifications to analyst estimates for Canopy Growth Corporation are crucial as they indicate changing business trends, with positive revisions suggesting increased confidence in performance [4] - The Zacks Rank system, which incorporates these estimate changes, provides actionable ratings based on stock performance [5] Zacks Rank and Industry Position - Canopy Growth Corporation currently holds a Zacks Rank of 3 (Hold), with a recent downward shift of 5.69% in the consensus EPS estimate [6] - The Medical - Products industry, part of the Medical sector, has a Zacks Industry Rank of 175, placing it in the bottom 30% of over 250 industries [7]

Industry Overview - The Canadian cannabis market is gaining investor attention as the U.S. cannabis industry continues to grow rapidly, with legal cannabis sales projected to reach nearly $39 billion in 2024 and potentially exceed $44 billion in 2025 [1] - Despite the growth, federal legalization in the U.S. remains stalled, but several states are advancing their own reform efforts, which is attracting interest in Canadian companies with U.S. exposure [1] Company Highlights - **Tilray Brands Inc. (TLRY)**: - Tilray has expanded significantly in the U.S., owning over 150 dispensaries in key markets like California and Michigan, and has diversified into the wellness and THC-infused beverage sectors [4][7] - The company reported a 13% increase in net revenue to $200 million, with its cannabis segment generating $61 million at a 40% gross margin, and a 132% year-over-year growth in the beverage segment [7] - Although Tilray posted a net loss, it narrowed that loss and achieved an adjusted EBITDA of $9 million, indicating improving fundamentals [7] - **Canopy Growth Corporation (CGC)**: - Canopy operates approximately 120 dispensaries in the U.S. and owns the vaporizer company Storz & Bickel, focusing on both recreational and medical markets [8][10] - The latest quarterly report showed net revenue of around C$66 million, a slight decrease from the previous year, but gross profit rose over 65% to achieve a 35% gross margin [10] - Canopy has cut its total debt by nearly 50% over the fiscal year, reflecting a strong focus on long-term sustainability and operational efficiency [10] - **Cronos Group Inc. (CRON)**: - Cronos has a growing presence in the U.S. with distribution deals supplying products to around 80 dispensaries, focusing on cannabinoid innovation [11][13] - The company reported net revenue of over $32 million, reflecting year-over-year growth, and gross profit rose to $13.7 million due to better cost management [13] - Cronos is investing in research and development to position itself for long-term success in the competitive U.S. market [13] Strategic Insights - The three Canadian cannabis companies—Tilray, Canopy Growth, and Cronos—are strategically expanding their U.S. footprint and improving financial health, making them key players to watch as U.S. legalization discussions continue [14]