Canopy Growth (WEED) Q1 2025 earnings summary

Executive summary

• Achieved profitable quarterly Adjusted EBITDA across all business units for the first time, driven by operational efficiency and cost management, with a focus on profitable revenue over market share.

• Gross profit rose 67% year-over-year to $23M in Q1 FY2025, despite a 13% decline in net revenue to $66M, mainly due to divested businesses.

• Canadian medical business delivered its sixth consecutive quarter of growth and record top line, while adult use revenue declined due to supply challenges.

• Storz & Bickel posted over 100% revenue growth in Germany, offsetting declines in Australia; international markets, especially Poland and Germany, showed strong performance.

• Canopy USA advanced with acquisitions of Jetty and Wana, and is positioned for growth in key U.S. states, with Acreage expected to benefit from Ohio's adult-use market launch.

Financial highlights

• Consolidated net revenue was $66.2M in Q1, down 13% year-over-year, or 3% excluding divested businesses.

• Gross profit dollars grew 67% year-over-year, with gross margin improving to 35% from 18% last year.

• Adjusted EBITDA loss was $5.3M, a 77% improvement year-over-year.

• Free cash flow outflow was $55.7M, improving by $52M year-over-year.

• SG&A expenses declined 24% year-over-year due to cost reduction programs.

Outlook and guidance

• All business units delivered positive adjusted EBITDA in Q1 FY2025; positive consolidated adjusted EBITDA expected in the second half of FY2025.

• Modest revenue improvement expected in Q2, with stronger year-over-year growth in Q3 and Q4 for Canada cannabis business.

• Continued supply challenges anticipated in Q2, with growth in the back half of fiscal year driven by expanded distribution, improved sales velocity, and new product launches.

• International focus on accelerating growth in Europe, especially Germany and Poland.

• Canopy USA positioned to benefit from near-term U.S. market opportunities; full acquisition of Wana and Acreage expected by mid-2025.