Canopy Growth(US:CGC)2025-11-07 11:45Financial Performance - The company reported a significant increase in revenue for the second quarter of fiscal 2026, with a year-over-year growth of 25% compared to the second quarter of fiscal 2025[162]. - The company anticipates a further 30% increase in revenue for the upcoming fiscal year, driven by new product launches and market expansion efforts[162]. - For the three months ended September 30, 2025, net revenue was CAD 66.7 million, a 6% increase from CAD 63.0 million in the same period of 2024[209]. - Net revenue for the six months ended September 30, 2025, increased by 7% to $138.8 million from $129.2 million in the same period of 2024[240]. - Cannabis segment net revenue was $107.8 million for the six months ended September 30, 2025, up from $91.5 million in 2024, reflecting an increase of 18%[242]. - Canadian adult-use cannabis revenue increased to $51.0 million in the six months ended September 30, 2025, a 37% increase from $37.3 million in 2024[243]. - Canadian medical cannabis revenue rose to $43.0 million, a 15% increase from $37.5 million in the prior year, driven by more insured customers and larger order sizes[244]. - International cannabis revenue decreased to $13.8 million, down 17% from $16.8 million in 2024, primarily due to supply chain challenges in Europe[245]. Cost and Margin Analysis - The gross margin percentage decreased to 33% for the three months ended September 30, 2025, down from 35% in the same period of 2024, reflecting a 200 basis points decline[217]. - Gross margin for the Cannabis segment was CAD 15.9 million, or 31% of net revenue, for the three months ended September 30, 2025, compared to CAD 16.2 million, or 36% of net revenue, in the same period of 2024[219]. - Gross margin percentage declined by 600 basis points from 35% in 2024 to 29% in 2025[240]. - The cost of goods sold for the three months ended September 30, 2025, was CAD 44.8 million, a 9% increase from CAD 41.2 million in the same period of 2024[217]. Operating Expenses - Total operating expenses decreased by 43% from $67.8 million in Q2 2025 to $38.8 million in Q2 2026[221]. - General and administrative expenses fell by 14% from $16.8 million in Q2 2025 to $14.4 million in Q2 2026, primarily due to headcount reductions and lower third-party costs[223]. - Sales and marketing expenses increased slightly by 1% from $15.0 million in Q2 2025 to $15.1 million in Q2 2026, driven by higher customer acquisition costs[224]. - Acquisition, divestiture, and other costs decreased by 56% from $3.9 million in Q2 2025 to $1.7 million in Q2 2026[225]. - Loss on asset impairment and restructuring dropped significantly by 98% from $20.8 million in Q2 2025 to $0.5 million in Q2 2026[228]. Profitability and Loss - Net loss from continuing operations significantly improved to CAD 1.6 million for the three months ended September 30, 2025, compared to a loss of CAD 131.6 million in the same period of 2024, representing a 99% reduction in losses[209]. - Net loss from continuing operations decreased by 99% from $131.6 million in Q2 2025 to $1.6 million in Q2 2026, attributed to a significant change in other income[236]. - The net loss from continuing operations decreased to $43.2 million for the six months ended September 30, 2025, compared to a net loss of $260.7 million for the same period in 2024, representing a year-over-year improvement of 83%[265]. - Adjusted EBITDA improved by 45% from a loss of $5.5 million in Q2 2025 to a loss of $3.0 million in Q2 2026, mainly due to cost savings in selling, general, and administrative expenses[238]. - Adjusted EBITDA for the six months ended September 30, 2025, was a loss of $10.965 million, slightly worse than the loss of $10.787 million in the same period of 2024, indicating a 2% increase in loss[268]. Cash Flow and Liquidity - The company has reported a cash flow increase of 20% in the last quarter, improving liquidity and financial stability[162]. - Cash and cash equivalents as of September 30, 2025, were $298.1 million, indicating sufficient liquidity to meet short-term obligations[270]. - Cash used in operating activities decreased to $28.3 million for the six months ended September 30, 2025, compared to $105.6 million for the same period in 2024[278]. - Cash provided by investing activities was $16.0 million for the six months ended September 30, 2025, compared to cash used of $32.0 million in 2024[279]. - Free cash flow for the six months ended September 30, 2025 was an outflow of $30.8 million, significantly improved from an outflow of $112.1 million in 2024[291]. Debt and Financing - The company completed a debt and equity financing transaction resulting in approximately $96.4 million in new senior unsecured convertible debentures and 3,350,430 common share purchase warrants[272]. - Total debt outstanding decreased to $228.2 million as of September 30, 2025, down from $304.1 million as of March 31, 2025[292]. - Long-term debt repayments totaled $71.7 million for the six months ended September 30, 2025, primarily related to the Credit Facility and settlement of debentures[288]. - Interest expense decreased by $23.9 million, from $42.4 million in the six months ended September 30, 2024, to $18.5 million in the same period of 2025, primarily due to reduced debt balances[267]. Market Expansion and Strategic Initiatives - The total user base for the company's cannabis products has expanded by 15% over the past six months, reaching approximately 1.2 million active users[162]. - The launch of new innovative cannabis products, including edibles and beverages, is expected to contribute to a projected gross margin improvement of 5%[172]. - The anticipated legalization of cannabis in additional U.S. states is expected to create new market opportunities, potentially increasing customer base by 40%[165]. - Canopy USA, LLC is being established to accelerate entry into the U.S. cannabis market, with expectations of capturing a significant share of the growing sector[163]. - The company is actively pursuing the acquisition of Jetty, with the final tranche closing expected in Q3 2026, which is anticipated to enhance market presence in the U.S.[163]. Regulatory Compliance - The company is focused on maintaining compliance with evolving regulations, which is critical for sustaining growth and operational efficiency[166]. Segment Reporting - As of June 30, 2025, the company has restructured its reportable segments to two: cannabis operations and Storz & Bickel, focusing on segment net revenue and gross margin for performance evaluation[173]. - Canopy USA holds 100% of Wana and Acreage, and approximately 77% of Jetty, reflecting significant ownership in key cannabis brands[183]. - As of September 30, 2025, Canopy Growth has a non-controlling interest in Canopy USA, having deconsolidated its financial results as of April 30, 2024[181].