Canopy Growth CEO David Klein had a lot to celebrate on his first earnings call.

Canopy shares (CGC) surged as much as 20% Friday after the world’s largest cannabis company reported results for its fiscal third quarter, highlighted by shrinking adjusted losses and net revenue that topped analysts’ expectations.

The company also boasted a major improvement to gross margins, which came in at 34%, marking the highest margin benchmark for Canopy since its fiscal first quarter in 2018. That, coupled with its adjusted EBITDA losses shrinking $64 million from last quarter helped strengthen the case that Canopy, under Klein’s leadership, is getting serious about minimizing costs and operating expenses to make good on its 40%-margin goal and path to profitability.

In his first interview as CEO, Klein told Yahoo Finance a large part of delivering on both of those goals moving forward will be avoiding unnecessary expenditures and doubling down on investments that Canopy has already made.

“I think we need to focus on the businesses that we have,” Klein told Yahoo Finance’s YFi PM, praising deals made under his predecessors, including taking a majority stake in sports nutrition company BioSteel and acquiring cosmetics company This Works. “I think right now we’re going through a phase in the cannabis space where we at Canopy need to focus on execution and more-focused execution, meaning we have to pick a couple of areas we intend to win and then we need to make sure we’re investing behind those areas so that we do in fact win in those key profit pools.”

One of those areas of focus identified by his predecessor and former Canopy Growth CEO Bruce Linton was the opportunity in CBD retail products, estimated by research firm Brightfield Group to become a $25 billion market opportunity by 2025. As CEO, Linton not only orchestrated both the This Works acquisition and BioSteel investment to line up adding CBD to various consumer products, but also doubled the $150 million he planned to pour into hemp-CBD cultivation efforts in the U.S.

Klein made it clear that he still sees the same opportunity Canopy has with CBD efforts, but said future acquisitions that might again expand future losses won’t be a pillar of his regime.

“Our investments will be more in route-to-market, in sales execution, in brand building execution in that marketplace more than it will be in things like M&A,” he said.

Closer ties to Constellation

As a former CFO at alcohol giant Constellation Brands (STZ), which invested billions in Canopy Growth, Klein is expectedly more aligned with the pressure being applied by Constellation leadership to tighten the purse stings — something Linton said was part of his ousting. Constellation Brands CEO Bill Newlands sits on Canopy’s Board, along with five other Constellation-affiliated directors including newly appointed Canopy Board Chair Judy Schmeling, who also serves as Constellation’s audit committee chair.

Klein highlighted that newfound alignment with the board as a positive moving forward and made very clear what he is using as his measurement for success.

“If anything else, what I am trying to do is to build a closer relationship with Constellation to take advantage of their consumer insights, their brand building capabilities, their sales execution capability because we can really benefit from that,” he said. “At the end of the day my job is to create as much value at Canopy Growth as I possibly can so that we actually entice Constellation to exercise their warrants in 2023, which would bring $3.5 billion of cash to Canopy at that time.”

Canopy ended the quarter with roughly $1.73 billion in cash on its balance sheet, which was less than the $2.03 billion it had at the end of the prior quarter. For the time being, however, Klein said his company isn’t facing the same cash concerns some of his cannabis competitors are facing after turning in profitless quarter after profitless quarter.

Zack Guzman is the host of YFi PM as well as a senior writer and on-air reporter covering entrepreneurship, cannabis, startups, and breaking news at Yahoo Finance. Follow him on Twitter @zGuz.

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