Cannabis Insight | CGC Earnings, Call Invite, Interstate Commerce, MI Trends - 2.10.1

Canopy Collapses, Mimics The Winners

Canopy Growth (CGC) reported 3Q23 financial results and absolutely puked the quarter. Net revenue of $101 million in Q323 declined 28% versus Q322. "The decrease is primarily attributable to increased competition in the Canadian adult-use cannabis market, the divestiture of C3 Cannabinoid Compound Company GmbH, a decline in our U.S. CBD business, and softer performance from Storz & Bickel and This Works." IS THERE ANYWHERE THEY DIDN'T SEE WEAKNESS? The reported gross margin in Q323 was (2%) as compared to 7% in Q322, and total SG&A expenses in Q323 increased by 5% versus Q322. Adjusted EBITDA loss was $88 million, a $21 million increase in Adjusted EBITDA loss versus last year. Net Loss was $267 million, which is a $151 million increase in the net loss versus last year, driven primarily by non‑cash fair value changes and an increase in asset impairment and restructuring costs. Cash and short-term investments amounted to $789 million at December 31, 2022, representing a decrease of $583 million from $1,372 million at March 31, 2022. To say the least, these results stink, and it is clear that Constellation Brands (STZ) did not pick a winner. 

While they did miss on earnings, they did do one smart thing, and that is to mimic a best-in-class Canadian cannabis company, Cronos. Canopy announced that they are transitioning to an asset-light model in Canada, similar to what Cornos did in 3Q21, by exiting cannabis flower cultivation in the Company’s Smiths Falls, Ontario facility, ceasing the sourcing of cannabis flower from the Mirabel, Quebec facility, and moving to a third-party sourcing model for cannabis beverages, edibles, vapes, and extracts. As a result of the cost reduction initiatives undertaken in fiscal 2023, the Company intends to close its 1 Hershey Drive facility in Smiths Falls, Ontario, in addition to reducing headcount across the business by approximately 60%, including 800 positions impacted by the changes announced today, of which 40% are impacted immediately.

The Canadian cannabis market is the most challenging place to play in an industry that has seen severe headwinds around the world over the past 18 months. While we do not believe that Canopy is a winner in the space, the move to an asset-light business model is a move in the right direction, but we should have seen this transition two years ago. This management team is clearly not looking for the open ice but instead chasing. 



  • Date & Time:  Monday, February 13th @ 2PM ET 
  • Webcast & Slides: 

We will be hosting a call with Adam Smith from the Alliance for Sensible Markets on the progress California has made toward implementing Interstate commerce.

The call be on February 13th @ 2 PM with Adam Smith. On January 30th, California Governor Gavin Newsom’s Department of Cannabis Control sent a strong and well-reasoned argument to the state’s attorney general articulating the Governor’s belief that regulating commerce in legal cannabis between state markets would pose no additional legal risk to the state. The move heralds the arrival of a critical new phase of the struggle for a more rational industry.

Michigan Cannabis Trends.

In the month of January, Michigan recorded ~$196M in cannabis sales, which represents a sequential decline of 11.5% and a YoY increase of 28.6%. Unit volumes in the month were down 12.2% sequentially but is up 93.3% YoY.  The average price per unit was up 0.8% sequentially and down 33.5% YoY. 

Cannabis Insight | CGC Earnings, Call Invite, Interstate Commerce, MI Trends - 2.10.2

Cannabis Insight | CGC Earnings, Call Invite, Interstate Commerce, MI Trends - 2.10.3