John Schroyer
Top executives at Canopy Growth Corp. (TSX: WEED) (Nasdaq: CGC) did their best this past week to convince stakeholders that the business is now making progress on a “path to profitability,” as Chief Financial Officer Judy Hong put it during the company’s second-quarter earnings call.
Hong and CEO David Klein tag-teamed during the call to argue that cost-cutting measures, a strategic pivot to an “asset-light” business model, and further investment in brand partnerships, such as the one the company has with Wana Brands, will be the savior of the struggling Canadian cannabis business – which lost C$2.1 billion last year and has been a going concern for months.
“Ultimately, we remain convinced by the potential of the $50 billion-$70 billion North American cannabis market, and to meet this opportunity, we’ve transformed Canopy into an asset-light and more focused organization,” Klein said during the call. “Our core business is stabilizing and growing.”
Hong added that Canopy’s first quarter of its 2023 fiscal year, which ended June 30, was “a key inflection point” that actually demonstrated the massive pivot is working.
“In Canada cannabis, we’re firmly on a path to achieving profitability at current run rate revenue,” Hong said, adding that the launch of U.S.-based Wana Brands edibles in Canada through Canopy’s retail network will be a major boost to the company’s bottom line in its home nation.
“If we achieve $35 million-$40 million of revenue in Canada, then we believe that we have the cost structure to achieve our profitability,” Hong said. “And this is now three quarters in a row where we’ve been in that range of revenue.”
Klein also said he was bullish that other brand performances – namely Canadian brand Tweed and California extract maker Jetty – would help it achieve profitability. In addition, Canopy’s diversification with BioSteel has also given the company a bit more financial stability.
He also said expanding the success of Wana Brands to its other brands is a crucial element of its strategy moving forward, along with bringing a reputation for solid quality to its Tweed brand.
