Canopy Growth (NASDAQ:CGC) executives said the company made “real progress” in its fiscal third quarter ended Dec. 31, 2025, pointing to a stronger balance sheet, continued growth in Canadian cannabis, and early signs of stabilization in its international operations.
Balance sheet strengthened; recapitalization extends maturities
CEO Luc Mongeau said Canopy ended the quarter with CAD 371 million in cash and cash equivalents and a net cash position of CAD 146 million. After the quarter closed, the company completed a $150 million recapitalization that Mongeau and CFO Tom Stewart said improved liquidity and extended all debt maturities to 2031.
Proposed MTL Cannabis acquisition highlighted as accretive
Management repeatedly emphasized the proposed acquisition of MTL Cannabis, which was announced during the quarter. Mongeau described MTL as a profitable, cash-generating business that Canopy expects to be accretive to the combined organization. He said MTL would add high-quality cultivation capabilities, strengthen Canopy’s position in Canadian medical cannabis, and enhance its presence in Quebec adult-use cannabis.
Mongeau also said MTL’s flower supply is expected to support growth domestically and in international markets. On a cash requirement for the transaction, Mongeau told analysts the expected cash outlay would likely be between CAD 40 million and CAD 50 million.
On profitability, Stewart said the company expects the MTL transaction to be accretive to gross margin and Adjusted EBITDA. He added that, given MTL’s historical margin performance, management is targeting a near-term blended gross margin in the mid- to high-30% range, while noting additional runway if European operations stabilize and grow due to higher price points in that market.
Canadian cannabis revenue grew; Adjusted EBITDA loss narrowed
Stewart said global cannabis net revenue was CAD 52 million, up 4% year-over-year. Growth was led by Canadian medical cannabis, while Canadian adult-use also posted gains.
- Canada medical cannabis: Net revenue increased 15% year-over-year to CAD 23 million, which Stewart called another record quarter. He attributed the growth to increased insured patient registrations and larger order sizes, as well as service improvements such as faster fulfillment and reduced shipping times. Mongeau noted it was the sixth consecutive quarter of growth in the medical channel.
- Canada adult-use cannabis: Revenue rose 8% year-over-year to CAD 23 million. Stewart said growth was supported by infused pre-rolls and new all-in-one vapes from Tweed and Claybourne. He added that disrupted retail operations in British Columbia reduced provincial purchases during the quarter, creating headwinds that were not expected to recur in the fourth quarter.
- International cannabis: Sales increased 22% quarter-over-quarter, which Stewart framed as stabilization and a return to growth as the company retooled its supply chain.
On profitability, Stewart reported cannabis gross margin of 25% in the quarter, down from 28% a year earlier. He attributed the decline primarily to lower international sales and a shift in Canadian adult-use mix.
The company’s cost-reduction efforts remained a central theme. Stewart said Canopy has identified and captured $29 million of annualized savings, which he said exceeded initial expectations. Excluding acquisition, divestiture, and other costs (including litigation costs and recoveries from previously divested businesses), SG&A declined 12% year-over-year.
Those savings and improving Canadian performance contributed to Canopy’s narrowest Adjusted EBITDA loss to date, at CAD 3 million. Stewart reiterated the company’s goal of achieving positive Adjusted EBITDA during fiscal 2027. When asked whether that meant full-year or a quarterly result, Stewart said the company expects to reach positivity “at some point during fiscal 2027.”
Free Cash Flow was an outflow of CAD 19 million, improving from an outflow of CAD 28 million in the prior-year period, primarily due to lower cash interest payments from reduced debt balances and more favorable working capital movements.
Europe supply and EU GMP progress in focus
International growth opportunities—particularly in Europe—were a key topic in the Q&A. Mongeau said Canopy has “demonstrated in the past” that when it has product availability in Europe, its sales and distribution capabilities can deliver results. He said the company’s focus has been on ensuring the right supply of flower for European demand and better integrating demand signals with North American production capabilities.
As an example, Mongeau said Canopy’s European sales team had about two strains to sell for a long period during the quarter, but management forecasts that in early fiscal 2027 the team will have over a dozen different strains available.
On regulatory readiness, Mongeau said Smiths Falls is already EU GMP qualified and Canopy is pursuing what he described as a “second level of certification,” adding that documentation is in place and management feels confident. He also pointed to a facility in Germany (SLR) that can receive, clear, and distribute flower in Europe, with ongoing operational improvements.
Storz & Bickel posts strong sequential growth; strategy emphasizes awareness and innovation
Canopy also discussed its Storz & Bickel vaporizer business. Stewart said net revenue was CAD 23 million, up 45% sequentially, driven by seasonally strong sales, Black Friday online sales up 16% year-over-year, and the first full quarter of sales for the new VEAZY device. He said those positives were partially offset by softer demand in certain markets and tariff-related pressures.
Storz & Bickel gross margin decreased to 37% from 40% a year earlier, which Stewart said reflected tariff impacts on lower volumes. Stewart cautioned that because the third quarter is traditionally Storz & Bickel’s strongest, the sequential revenue comparison in the fourth quarter could be challenging.
Mongeau said the growth plan for Storz & Bickel is “two-pronged”: expanding U.S. market penetration and accelerating innovation. He highlighted affordability and portability as drivers, citing strong performance of the entry-level VEAZY device, and said the company also sees opportunity to expand beyond flower-focused devices into products for concentrates and distillates.
Looking ahead, management said priorities include continued adult-use innovation and distribution expansion in Canada, patient growth and service excellence in Canadian medical, further sequential improvement in international cannabis driven by Europe, and continued cost discipline across the company. Stewart said he expects improvements in cannabis gross margins in the fourth quarter and into fiscal 2027, supported by better international performance and operational execution.
About Canopy Growth (NASDAQ:CGC)
Canopy Growth Corporation is a leading Canadian cannabis company engaged in the production, distribution and sale of both medical and recreational cannabis products. Headquartered in Smiths Falls, Ontario, the company cultivates a diversified portfolio of offerings that includes dried flower, pre-rolled joints, oils, softgel capsules and edibles. Canopy Growth also markets derivative products such as beverages and wellness formulations under a range of brands, aiming to serve both patient and adult-use markets.
The company operates through multiple subsidiaries, including Tweed Inc, Spectrum Therapeutics and Tokyo Smoke, each targeting distinct consumer segments.
