Canopy Growth Navigates a Multi-Front Restructuring

Canopy Growth halves quarterly loss, secures MTL deal approval, and targets positive EBITDA in 2027 amid mixed segment performance and margin pressure.

Canopy Growth Corporation is advancing several strategic initiatives simultaneously. The company is clearing a major hurdle for its acquisition of MTL Cannabis, has reported a significantly reduced quarterly loss, and continues to overhaul its capital structure. A central question remains: can the integration of MTL deliver the promised synergies on schedule?

Quarterly Performance: Losses Narrow Amid Margin Challenges

For the third quarter of its 2026 fiscal year, Canopy Growth reported consolidated net revenue of 75 million CAD, flat compared to the prior-year period. Revenue from cannabis sales specifically increased by 4% to 52 million CAD.

The company's net loss was cut in half, decreasing by 49% year-over-year. Its adjusted EBITDA loss also shrank, falling by 17% to 3 million CAD. This marks the third consecutive quarter of improvement, which management attributes primarily to reductions in selling, general, and administrative (SG&A) expenses. Canopy ended December with 371 million CAD in cash and cash equivalents. The firm maintains its target of achieving positive adjusted EBITDA in fiscal 2027.

Segment performance was mixed. The Canadian market showed strength: medical cannabis revenue grew 15% to 23 million CAD, driven by more insured patients and larger order volumes. Canadian recreational sales also grew, rising 8% to 23 million CAD.

The Storz & Bickel segment saw a strong sequential jump, with revenue of 23 million CAD representing a 45% increase over Q2. This surge was credited to seasonally strong demand and the first full quarter of sales for the new VEAZY™ vaporizer.

Internationally, however, cannabis revenue declined by 31% year-over-year. Canopy identified European supply chain issues as the primary cause. On a sequential basis, there was a silver lining: international sales rose 22% from Q2 as shipments to Europe improved in the latter half of the quarter.

Gross margin remained a pressure point. The consolidated gross margin stood at 29%, 300 basis points below the previous year. The cannabis gross margin fell to 25% (from 28%), largely due to lower international revenue and a shift in product mix. Storz & Bickel's margin decreased to 37% (from 40%), impacted by lower sales volumes and higher U.S. import tariffs. The company states it has realized annualized savings of 29 million CAD since March 1, 2025, and continues to seek further efficiencies.

MTL Acquisition Receives Overwhelming Shareholder Approval

Shareholders of MTL Cannabis voted overwhelmingly in favor of the previously announced acquisition at a special meeting held on February 17. An impressive 99.97% of the votes cast were for the transaction, with approximately 89% of eligible shareholders participating.

The deal's completion remains subject to customary conditions, including final court approval and other third-party clearances. Canopy anticipates closing the transaction before the end of March.

The transaction is valued at approximately 179 million CAD. MTL shareholders are set to receive 0.32 Canopy shares plus 0.144 CAD in cash for each MTL share held. According to Canopy, this represents a premium of roughly 82% to MTL's closing share price on December 12, 2025.

Management expects the deal to generate annual cost synergies of about 10 million CAD within 18 months of closing. CFO Thomas Stewart also aims for a near-term "blended" gross margin in the mid-to-high 30% range. The rationale is that MTL has historically achieved higher margins than Canopy; the acquisition is intended to boost overall gross margin and adjusted EBITDA.

Recapitalization Extends Debt Timeline, Dilution a Consideration

In January, Canopy completed a strategic recapitalization, extending the maturity dates of all its outstanding debt to 2031.

This restructuring came at a cost. To incentivize bondholders to participate, Canopy issued warrants. If exercised, these warrants could lead to dilution for existing shareholders. Furthermore, the MTL acquisition is structured as a share transaction, which will further increase the total share count.

Regarding the stock's performance, shares traded between 1.12 and 1.17 U.S. dollars on Thursday, closing at 1.13 U.S. dollars. Over the past twelve months, the stock has ranged from 0.77 to 2.38 U.S. dollars. A report notes that since its initial public offering, the share price has lost more than 95% of its value, and Canopy has yet to report a profit in its roughly ten years as a public company.

A potential tailwind mentioned is a U.S. regulatory shift: President Donald Trump signed an executive order reclassifying cannabis as a "Schedule III" substance. This move could potentially open doors for Canopy to expand its presence in the U.S. market.

The next immediate milestone is the final court approval for the MTL deal and the planned closure of the acquisition before month-end. Operationally, margin improvement remains the critical factor. Canopy intends to leverage the integration to capture the targeted 10 million CAD in annual synergies within 18 months, while securing its path to a positive adjusted EBITDA in fiscal 2027.