Hear it from Klein https://www.bnnbloomberg.ca/canopy-growth-shares-soar-amid-quarterly-sales-boost-u-s-midterm-results-1.1843908
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In an interview, Canopy Chief Executive Officer David Klein said that the company is poised to be profitable once it would be able to consolidate the three U.S. cannabis businesses it has placed an option to acquire once a “triggering event,” such as the U.S. federal legalization of cannabis, would occur.
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Canopy previously announced that it plans to form a standalone entity called Canopy USA that will acquire the three U.S. businesses – Acreage Holdings Inc., Wana Brands and Jetty – and is set for a shareholder vote in January. As well, Canopy previously noted in past quarterly updates that it expects to report positive adjusted EBITDA in its next fiscal year, excluding its investments in BioSteel and the U.S. cannabis market.
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“Our global cannabis business, so keeping Biosteel off to the side, is expected to be profitable once we close all the U.S. transactions that are associated with Canopy USA. That’s through a combination of those businesses in the U.S. being profitable and growing, and continued focus in our Canadian business as represented by the recent change to exit retail,” Klein said.
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Klein added that the company remains in discussions with the Nasdaq over its Canopy USA concept following a disclosure that the exchange has yet to approve its plans as it may run afoul of regulations that forbid publicly-traded companies from doing business with a federally illegal drug like cannabis.
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Klein also said that he sees “stabilization” in Canopy’s Canadian recreational cannabis sales following a decline of 35 per cent to $38.1 million although its medical cannabis operations reported an eight per cent revenue bump to $14.2 million. Much of that is tied to an ongoing shift in focusing on the company’s premium and mainstream brands, which now represent about 58 per cent of its recreational sales and command better margins than its lower-cost offerings.
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“We’ve gained share with some of our premium brands like Doja, Tweed and Deep Space and stabilization is important when you consider the mid-shift activity that we’re doing to really focus our portfolio on premium and mainstream and away from value where we were previously,” Klein said.
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Interestingly, Klein noted that he is seeing a “slowdown” in the shift from Canadian consumers buying their cannabis in the legal market from illicit operators, which may broadly impact how much growth Canada’s major cannabis could see in the market. The industry continues to await regulatory changes to the Cannabis Act by Health Canada could help spur more recreational sales as well as alleviate an onerous tax burden imposed on Canadian pot companies.
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Klein also highlighted Tuesday’s U.S. midterm election results that saw voters in Missouri and Maryland approve recreational cannabis legalization measures while pro-legalization politicians like Rep. Nancy Mace and Pennsylvania Senator-elect John Fetterman both won their respective elections.
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“I think we’ve proved once again that cannabis is an electable issue for people to run on,” he said. “Two more states legalizing is just building on the momentum of cannabis legalization in the U.S.”
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