Cannabis company Canopy Growth (CGC) posts mixed third-quarter earnings, beating revenue estimates on the one hand while reporting adjusted per-share earnings that rang in significantly below expectations.
Canopy Growth CEO David Klein joins Yahoo Finance Live to discuss the marijuana operator's growth outlook while medical sales reach a record high.
Klein addresses Canopy Growth's recent layoffs as the brand shifts its capacity. On the future of US cannabis regulation, as it relates to the 2024 election, Klein states "we are built to succeed" on a state-by-state basis.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Eyek Ntekim
Video Transcript
- Shares of Canopy Growth are moving to the upside here, up just about 2% in the premarket trading, after beating on revenue reporting a smaller than expected loss. For its fiscal third quarter, we want to bring in the company's CEO David Klein, CEO of Canopy Growth joining us now for more. David, it's great to have you here.
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So going into this quarter, really over the last several months, there has been many concerns just liquidity concerns your ability here to continue as a going concern. What is your message to the street following these better than expected results?
DAVID KLEIN: Yeah, so I think-- I think the results for us were really strong in the quarter delivering good top line growth, delivering really solid gross margins, as well as completing our transformation to being 100% cannabis focused. I think that all is very strong for us in terms of building on our balance sheet strength.
We've paid down over a $1 billion worth of debt over the last year. So we're feeling really good about where we are as a business. And maybe just as importantly, we are able to schedule our shareholder vote, which allows us to bring our US enterprise to life over the next several months. So all in all, a real exciting quarter for us.
- David, when you think about the going on strategy from here forward and operations wise, we've heard a wave of layoffs come forward over the start of this year. Is a significant restructuring something that you, CEO, the rest of the C-suite, have had to think about and consider?
DAVID KLEIN: Yeah, so the good news for us is that it's behind us. It's why we're able to deliver really good gross margins because we got our footprint right. We've been operating with too much capacity. And so over the last year, we cleaned that up.
And we feel really good about the enterprise that we have here today. And now that we have good gross margins, now we can really focus on driving top line growth, which is really where more the excitement comes from.
- David, how do you do that?
DAVID KLEIN: It really is executing in the market and bringing-- in the past year, we've brought new strains to market, which really resonate with consumers. We're going to continue to do that. We're bringing new product formats to the market, in particular, in Canada, and we're actually going to enter in maybe a bigger way a couple of other categories for us in the Canadian market.
- David, you just mentioned the new products. What does that look like? And how are you figuring out, I guess, what's going to register not only with, obviously, users, but also with shareholders, or winning back that confidence that's been lost across the industry?
DAVID KLEIN: Yeah, so I think it's really about getting products in the hands of consumers that they want. So a category that's doing really well is a category like edibles or a category like pre-rolls. Consumers want convenience.
And, you know, we're riding the back of some real massive macro trends. Research shows that people between the ages of 21 and 35, actually prefer cannabis to alcohol. And so we think that creates a massive tailwind for us. We just need to put products in the hands of those consumers that they can very easily enjoy them.
- David, of course, here in the general election year, there's several states where cannabis is on the ballot, but more importantly here, federally, for your business, when you think about the balance of power in DC and specifically the White House, as well, if there is a changing of the guard in the White House, what does that look like for the broader cannabis industry for the next four years?
DAVID KLEIN: So I think there are a couple of things to really think about here. The first is there's been some discussion coming out of Health and Human Services and now sitting with the DEA about rescheduling cannabis from a Schedule I substance to a Schedule III substance.
That has a dramatic positive effect on our business. And then secondly, the way we've set up our operations in the US, we can be successful on a state by state basis. And so we're kind of built to succeed as the regulatory environment exists today.
And yeah, we'd love to see a little softer, a little more softening at the federal level from a regulatory standpoint. But that'll be just icing on the cake.
- David, so would a Trump presidency then be better for your business?
there's I think that's the way-- the way our business is set up, it really is executing in each state that we're in. And as I said, like if we can get rescheduling, that would have a very positive effect on our business. But we don't need much beyond that in order for our operations to be successful.
And, you know, a political standpoint, I would say that the overwhelming majority of Americans of all demographics favor cannabis legalization of some form. And so we've seen momentum behind Republican initiatives to loosen regulations.
And we've seen momentum behind the proposals from the Democrats. So we'll just have to see how it all plays out. But we're prepared to do well in any environment.
- Yeah, 70% of US adults saying marijuana should be legal according to a Gallup poll late last year. David Klein, good to catch up with you, Canopy Growth CEO. Thanks for taking the time.