📈 TGIF 📈

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William McNarland & Anthony Varrell
May 31, 2024

GM Everyone,

We are coming to the close of yet another action-packed week in the cannabis industry. This week was filled with headlines from Trulieve, Canopy Growth, Slang Worldwide (they still exist?!), and Cansortium, providing a welcome reprieve from obsessing over daily price movements. To top it all off, the latest rumor from the DEA is that rescheduling will be finalized by October. Everyone, pray to whichever god you worship because that would be the best-case scenario, setting us up for a fantastic end to the year. With 52 days left in the comment period, we still have a way to go, so let's keep our eyes on the prize and stay calm as the summer progresses.

Today’s letter can be read in 6 minutes and 12 seconds.

What's Driving the Market Today?

The futures are down this morning, here is what is moving the market:

  • US April inflation data expected to influence Fed rate decisions.

  • Mixed signals from Fed officials dampen bond market volatility.

  • Euro rises slightly on higher-than-expected Eurozone inflation.

  • China's manufacturing decline fuels stimulus expectations.

Canopy Growth Reports FY 2024 Earnings

Facts that matter:

  1. David Klein credits strategic changes for Canopy Growth’s improved financial metrics.

  2. David Klein discusses U.S. market opportunities for Canopy Growth in TDR interview.

  3. International growth in Australia marks a milestone for Canopy Growth, TDR notes.

Quick Hit: Canopy Growth Corporation (TSX:WEED, NASDAQ: CGC), a Canadian based international cannabis and consumer packaged goods company reported its FY 2024 earnings yesterday. The Q4 FY2024 net revenue increased by 7% year-over-year to $72.8 million, with a 16% rise when excluding divested businesses. The company’s total cost of goods sold decreased by 45%, leading to improved gross margins of 27%. Notable growth areas included Storz & Bickel, with a 43% revenue increase, and Canada medical cannabis, which grew 16%. Operating loss from continuing operations was $229 million, showing a 72% improvement in adjusted EBITDA loss. The company has no significant debt obligations due until March 2026.

Initiating Coverage: Curaleaf Holdings

Quick Hit: Curaleaf has a significant market presence, operating in 17 U.S. states and expanding internationally. Its strong retail network and diverse product offerings give it a competitive edge. Strategic acquisitions, like Can4Med, enhance its distribution in Europe, positioning it well for future growth. Its revenue mix shows a strong retail segment, supported by over 900 wholesale partner accounts, highlighting robust market penetration and efficiency.

Coverage Initiated: New Lake Capital Partners

NewLake Capital stands out in the small-cap stock market for its strong financials and its unique position in the cannabis sector. The company’s business model operates on a simple yet efficient premise where it serves as a landlord to cannabis operations, offering real estate solutions that are both strategic and lucrative.They take in the money from the cannabis companies and manage it. The company takes a narrow, thin charge for doing that.

Village Farms Increase Presence with Rose LifeScience Acquisition

Facts that matter:

  1. Village Farms increased its ownership of Quebec-based Rose LifeScience Inc.  by 10%.

  2. Village Farms leverages greenhouse expertise with Rose LifeScience partnership.

  3. Village Farms was highlighted on TDR Small Cap Sunday two weeks ago.

Quick Hit: Village Farms International (NASDAQ: VFF) yesterday announced it has increased its ownership of Quebec-based Rose LifeScience Inc. by 10% to hold an 80% interest. Michael DeGiglio, President and Chief Executive Officer, the company shared his view on the increased ownership: “the companys’ initial 70% acquisition of Rose stands out as one of the most complementary business combinations to date in the Canadian cannabis industry. Since late 2021, the combination of the experienced teams at Rose and Pure Sunfarms have driven Village Farms into the number two share rank nationally as Rose sales grew more than 300% to reach the number two share rank in Quebec, with each closing the gap to number one.”

Canopy Growth Stock CEO on Earning Release | Trade to Black

The TDR Trade to Black podcast is joined by guest David Klien, CEO of Canopy Growth (TSX:WEED, NASDAQ:CGC). David provides an update regarding today's release of Canopy Growth Stock’s fourth quarter and full-year 2024 earnings release. Co-hosts Shadd Dales and Anthony Varrell asked David to explain the financial results and strategic plan for the 2025 corporate year. The following eight main points are discussed in the interview: 1. Canopy Growth's Q4 and fiscal 2024 earnings performance and progress on strategic changes. 2. Detailed financial highlights, including revenue growth, operating expense reduction, and brand achievements. 3. Potential impact of SAFE Banking legislation on Canopy Growth's U.S. market operations. 4. What is the company's primary goal for fiscal 2025? Is it focusing on profitable growth versus market share? 5. Overview of Canopy Growth's flower portfolio in the Canadian market, from value to premium. 6. Approach and strategy for entering and succeeding in the emerging cannabis-infused beverage market. 7. Trends driving demand for innovative consumption methods like the Venty device and dry flower vaporization. 8. Debt management plans with no significant obligations until 2026 and a substantial cash balance. If you have any additional questions for regarding Canopy Growth, please put them in the comments.