Canopy Growth Corporation has released its financial results for the second quarter, which ended on September 30, 2023. The industry giant’s report shows that significant execution of business transformation initiatives during this quarter led to a marked improvement in gross margins and a reduced cash burn throughout Q2 FY2024. The company remains confident in achieving positive Adjusted EBITDA across all business units by the end of the fiscal year.
Gross Margins Improve Amid Cost Reduction Efforts
The consolidated gross margin grew to 34% during Q2 FY2024, compared to only 3,500 basis points in Q2 FY2023. This was primarily driven by the executed business transformation initiatives since the beginning of the fiscal year. Canopy Growth also delivered cost reduction worth $54 MM during this quarter, bringing the total savings to an impressive $226 MM since the start of the fiscal year.
Following the sale of the Company’s Hershey Drive facility, the firm generated an aggregate gross proceeds of approximately $155 MM from facilities sales since April 1, 2023.
Financial Performance Highlights Over Q2
- Canadian cannabis operations reported net revenue of $39 MM in Q2 FY2024
- An increase of 4,900 basis points quarter-over-quarter, adjusted gross margin stood at 34%
- Marketing, research, and general expenses totaled $40 MM
- Net debt balance was reported at $411 MM in comparison to $474 MM in the previous quarter
Q2 2024 Revenue Review: A Look into Channels and Contributions
The Q2 FY2024 revenue performance showcased a healthy growth trajectory. The Canadian adult-use cannabis business-to-business channel generated $24.0 MM, and the Canadian medical cannabis market contributed $15.0 MM.
In addition, the Rest-of-world cannabis operations amounted to $9.0 MM. Storz & Bickel brought $12.0 MM, while This Works produced $7.1 MM, and additional net revenues came from other channels, reaching $2.5 MM.
Product Portfolio Drives Growth of Canadian Cannabis Business
Canopy Growth has significantly improved its cannabis flower quality by leveraging new genetics, cultivation procedures, and post-harvest processes. This improvement drove the Company’s rise to the top 3 suppliers of cannabis flowers in British Columbia cannabis stores during the second quarter, up from the 11th position in the same period of the previous year.
Looking Ahead to International Medical Cannabis Markets
Strong demand is expected to accelerate growth in international medical cannabis markets, as the Company started shipping five new SKUs to these markets during Q3 FY2018. With a solid foundation, Canopy Growth aims to achieve sustainable cannabis market leadership in the coming years.