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A worker processes medical marijuana at Canopy Growth Corporation's Tweed facility in Smiths Falls, Ont.Sean Kilpatrick/The Canadian Press

Canopy Growth Corp.’s chief executive says the company’s hold on the cannabis market has been threatened in the past few months, even as it went on an acquisition spree and tried to overhaul its business.

“Our market share softened and we are not where we want to be from a margins standpoint,” David Klein said on a Friday call with analysts.

His Smiths Falls, Ont., cannabis company said it had a 15.2-per-cent market share – the most of any company in the Canadian recreational pot market – in the first quarter of the year and presides over the highest portion of the flower category at 17.9 per cent.

However, the company only has the third-highest market share in the vapes category and the second highest in the gummies category.

Mr. Klein attributed the softening he saw to lengthy but temporary closures of cannabis stores during the COVID-19 pandemic, internal supply and execution challenges, and a recent spike in competitors releasing single strain products with low prices and high levels of tetrahydrocannabinol, the main psychoactive component in marijuana.

Chief financial officer Mike Lee also identified missed revenue opportunities that stemmed from the timing of marketing around some of Canopy’s U.S. products and the company’s fill rates, a term referring to the proportion of customer orders that can be covered by current inventory.

“It all comes back to execution,” he said. “That is the largest driver behind our share loss in Canada.”

These challenges arose after Canopy spent much of the pandemic laying off hundreds of workers and closing facilities in an effort to streamline operations and bring the company’s output in line with demand.

“As with any organization undergoing a big transformation, there are growing pains and adjusting to new ways of working takes times,” said Mr. Klein.

But Mr. Klein and Mr. Lee appeared confident the company can alleviate its troubles.

Canopy, Mr. Klein said, has been removing any low-performing products from its roster and has a slew of new ones in the pipeline. It recently started selling smaller prerolls in larger packs to meet demand from consumers who have avoided sharing joints during the pandemic.

He’s also confident that the slow movement toward federal legalization of cannabis in the U.S. will benefit Canopy and is keen on utilizing on the recent acquisitions of Supreme Cannabis and Ace Valley to prepare the company for a new legislation across the border.

Meanwhile, Mr. Lee said the company is on track to achieve $150-million to $200-million in cost savings and operational efficiencies through the next fiscal year and was encouraged by the hundreds of cannabis stores slated for opening later this year.

The executives’ remarks came as Canopy said it earned $392.4-million or 84 cents per diluted share in its latest quarter, compared with a loss of 30 cents per share or $108.5-million a year earlier.

Its revenues for the first quarter increased to $136.2-million from $110.4-million or an increase of 19 per cent excluding acquisitions.

Cannabis revenues for the three months ended June 30 grew 17 per cent to $93-million driven by a 35-per-cent increase in Canadian recreational cannabis sales, a three-per-cent decrease in Canadian medical cannabis and an eight-per-cent drop in international sales.

Consumer products revenue was up 39 per cent to $43-million.

Canopy was expected to lose 23 cents per share on $149-million of revenues, according to financial data firm Refinitiv.

The results pushed Canopy’s stock down to $23.71, a drop of 25 cents or roughly one per cent in mid-morning trading.

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