Q4 2025 Canopy Growth Corp Earnings Call
Joanna: Good morning, my name is Joanna, I will be your conference operator for today.
Good morning, My name is Joanna L B, a coffee shop radar today.
Tyler Burns: I would like to welcome you to Canopy Growth's fourth quarter and Financial Results Conference Call. Currently, all...
Speaker Change: Would like to welcome you to canopy calls its fourth quarter and fiscal year 2025 financial results Conference call. Currently all participants are in a listen only mode.
Tyler Burns: I will now turn the call over to Tyler Burns, Director and Vice-President. Tyler, you may begin.
Speaker Change: I'll now turn the call over to Tyler Burns Director of Investor Relations you May begin the conference call.
Luc Mongeau: Good morning, and thank you for joining us.
Speaker Change: Good morning, and thank you for joining us on our call today, we have canopy Growth's, Chief Executive Officer, Luc Macho, and Chief Financial Officer, Judy Hong before financial markets opened today and that would be growth issued a news release announcing the financial results for our fourth quarter and fiscal year 2025 ended March.
Tyler Burns: On our call today, we have Canopy Growth's Chief Executive Officer, Luc Mongeau, and Chief Financial Officer, Judy Hong.
Tyler Burns: Before financial markets opened today, Canopy Growth issued a news release announcing the financial results for our fourth quarter and fiscal year 2025 ended March 31st, 2025. The news release and financial statements have been filed on EDGAR and CDAR and will be available on our website under the Investor tab.
Speaker Change: 30 <unk>.
Speaker Change: 2025, the news release and financial statements have been filed on Edgar and SEDAR and will be available on our website under the investor tab.
Tyler Burns: Before we begin, I would like to remind you that our discussion during this call will include forward-looking statements that are based on management's current views and assumptions and that this discussion is qualified in its entirety by the cautionary note regarding forward-looking statements included at the end of the news release issued today. Please review today's earnings release and Canopy Growth's reports filed with the SEC and CDAR for various factors that could cause actual results to differ materially from projected In addition, reconciliations between any non-GAAP measures to their closest reported GAAP measures are included in our earnings release.
Speaker Change: Before we begin I would like to remind you that our discussion during this call.
Speaker Change: Will include forward looking statements that are based on management's current views and assumptions and that this discussion is qualified in its entirety by the cautionary note regarding forward looking statements included at the end of the news release issued today.
Speaker Change: He used to review today's earnings release, and canopy Growth's reports filed with the SEC and SEDAR for various factors that could cause actual results to differ materially from projections.
Speaker Change: In addition, reconciliations between any non-GAAP measures to their closest reported GAAP measures are included in our earnings release. Please note that all financial information is provided in Canadian dollars unless otherwise stated.
Tyler Burns: Please note that all financial information is provided in Canadian dollars unless otherwise stated.
Luc Mongeau: Following remarks by Luke and Judy, we will conduct a question and answer session where we will take questions from analysts. With that, I will turn the call over to Luke. Thank you, Tyler. Good morning, everyone, and thank you for joining us today. It is a pleasure to be back with you as we review the fourth quarter in fiscal year 25 and look ahead to the path forward.
Speaker Change: Following remarks by looping Judy we will conduct a question and answer session, where we will take questions from analysts with that I will turn the call over to Luke.
Speaker Change: Thank you Tyler good morning, everyone.
Speaker Change: And thank you for joining us today.
Speaker Change: It is a pleasure to be back with you as we review the fourth quarter and fiscal year 'twenty five and look ahead to the path forward.
Luc Mongeau: Today, after almost five months at the helm, I want to share my observations about the business and share a series of actions that are already underway to drive performance in fiscal 26 and beyond.
Speaker Change: Today after almost five months at the helm.
Speaker Change: I want to show my observations about the business and share a series of actions that are already underway to drive performance in fiscal 'twenty six and beyond.
Luc Mongeau: Judy will then speak to our financial results and give an update on CanopyUSA. Since joining Canopy, I've worked closely with our teams across every business, function, and region. And what's clear to me is that Canopy, as the key ingredients to become a winning operator in both the Canadian adult use and in the Canadian and global medical cannabis market. and to strengthen our leadership within the global premium vaporizer category. We have strong brands and products, the right capabilities, and a highly talented team. But like many companies in evolving industries, we face challenges. A lack of focus.
Speaker Change: Judy will then speak to our financial results and give an update on canopy USA.
Judy: Since joining canopy I've worked closely with our teams across every business function in region.
Judy: And what's clear to me is that canopy is the key.
Judy: Key ingredients to become a winning operator and both the Canadian adult use and then the Canadian and global medical cannabis markets.
Judy: And to strengthen our leadership within the global premium Vaporizer category.
Judy: We have strong brands and products.
Judy: Capabilities and.
Highly talented team.
Judy: But like many companies and evolving industries, we face challenges.
A lack of focus.
Luc Mongeau: combined with too many priorities. suboptimal alignment, and a lack of cross-functional synchronization. shifting regulations, and a lack of consistent execution at scale. We have started taking key steps to focus. streamline and synchronize organization and to create the space within the P&L and balance sheet for more impactful action. We're focusing our teams on the core category fundamentals. growing high-quality cannabis efficiently, converting that cannabis into desirable products, and keeping these products in stock at the right price and with attractive margins. We're setting clear strategic priorities and supporting them with a lean organizational structure, strong operational planning, and discipline execution.
Combined with too many priorities.
Judy: Sub optimal alignment and in light of a lack of cross functional synchronization.
Shifting regulations and a lack of consistent execution at scale.
We have started taking key steps to focus.
<unk> line and synchronized organization and to create the space within the P&L and balance sheet for more impactful actions.
We're focusing our teams on the core category fundamentals.
Growing I quality cannabis efficiently converting that cannabis into desirable products and keeping these products in stock at the right price and with attractive margins.
We're setting clear strategic priorities and supporting them with a lean organizational structure strong operational planning and disciplined execution.
Luc Mongeau: It's about simplification, synchronization, and executional excellence. That's the core of our plan going forward. and we're acting with urgency to reduce cost. improve margins, and create financial flexibility. Now let me walk you through some of the actions we've already taken. starting with structure and focus. As part of our transformation, we've restructured all lines of business to improve synchronization between our supply chain and our commercial teams to drive sharper execution across the company. First, We've unified our global medical cannabis businesses across Canada, Europe, and Australia into a single structure, reporting directly to me, a single structure to improve speed, scalability, and market responsiveness.
It's about simplification synchronization and execution excellence.
That's the core of our plan going forward.
And we're acting with urgency to reduce cost.
<unk> margins and create financial flexibility.
Yes.
Now, let me walk you through some of the actions we've already taken.
Starting with structure and focus.
As part of our transformation, we've restructure all lines of business to improve synchronization between our supply chain and our commercial teams to drive sharper execution across the company.
First.
We have unified our global medical cannabis businesses across Canada, Europe, and Australia into a single structure reporting directly to me a single structure to improve speed.
Capability and market responsiveness.
Luc Mongeau: Building on the strength of our profitable Canadian medical business. which grew at plus 13% in fiscal 25. This action reinforces our commitment to global medical cannabis by improving product availability, enhancing the healthcare provider and patient experience, and positioning us for expansion in key European markets over the next 12 to 18 months. We've also reprioritized our Spectrum Therapeutics red, yellow, and blue product lines in Germany and Poland to simplify the prescribing and purchasing journey. We strongly believe this focus will help drive consistent supply, patient retention, and reinforces our branded leadership in the European medical market. Our existing medical sales also now complemented by integrated bulk cannabis sales into select European markets.
Building on the strength of our profitable Canadian medical business.
Which grew at plus 13% in fiscal 'twenty five.
This action reinforces our commitment to global medical cannabis by improving product availability.
And then seeing that health care provider and patient experience.
And positioning us for expansion in key European markets over the next 12 to 18 months.
Speaker Change: We've also re prioritized our spectrum therapeutics, red yellow and blue products lines in Germany and Poland.
To simplify the prescribing and purchasing journey.
Speaker Change: We strongly believe this focus without drive consistent supply patient retention and reinforces our branded leadership in the Europe European medical market.
Speaker Change: Our existing medical sales also now complemented by integrated bulk cannabis sales and to select European markets.
Luc Mongeau: All these actions combined are already showing early signs of success.
Speaker Change: All of these action combines are already showing early signs of success.
Luc Mongeau: Second. We're significantly refocusing and streamlining our Canadian adult youth business to gain share profitably. Particularly in the product segments with greatest profit potential, including iPod and Seaflower, Pre-Rolls, and Vapors. We completed skew rationalization in Q4, removing about a third of our lowest performing SKUs and shifting focus to higher velocity, higher margin products and categories. The CIDR more targeted portfolio is focused on high demand formats that we can supply consistently. This, combined with tighter joint planning processes, is already straightening our relationships with boards and key accounts. This focus is allowing us to bring innovation to market in a faster and more impactful way as well.
Speaker Change: Okay.
Speaker Change: Second.
Speaker Change: We're Sydney significantly refocusing and streamlining our Canadian adult use business to gain share profitably.
Speaker Change: Particularly in the product segments with greatest profit potential, including I potency flower pre rolls and base.
Speaker Change: We completed the SKU rationalization in Q4 <unk>.
Speaker Change: We're moving about a third of our low lowest performing skus and shifting focus to argue velocity higher margin products and categories.
Speaker Change: This tighter more targeted portfolio is focus on the item and formats that we can supply consistently.
Speaker Change: This combined with tighter joint planning processes is already strengthening our relationships with boards and key accounts.
Speaker Change: This focus is allowing us to bring innovation to market in a faster and more impactful way as well.
Luc Mongeau: This quarter, we introduce advanced C-cell, all-in-one babes to the Canadian market under the Tweed and 7 Acres brand. and launch an expanded lineup of Playboard-infused pre-rolls. Early consumer response has been positive. with encouraging signs of market share and growth ranking.
Speaker Change: This quarter, we introduce advanced C. So all in one base the Canadian market onto the Sweden, seven acres brands and launch and expect expanded lineup of play board infuse pre rolls.
Speaker Change: Early consumer response has been positive.
Speaker Change: With encouraging signs in market share and growth Wang teams.
Luc Mongeau: Third, we've established a dedicated, centralized, global operation function reporting directly into me, expanding its scope beyond Canada to support all cannabis markets. This structure is designed to improve supply and demand planning. enable smarter product allocation to high margin, high opportunity market, and strengthen execution across every line of business. A key mandate of this function is enhancing our sales and operations planning process in collaboration with each business. These improvements are already showing up in higher fill rates, which have risen from the mid-80s range that we saw at time during fiscal 26 to the mid-90s this past March and April, driven by better forecasting, planning and coordination.
Speaker Change: Third we've established a dedicated centralized global operation function reporting directly to me.
Speaker Change: I think it's called beyond Canada support all cannabis markets.
Speaker Change: This structure is designed to improve supply and demand planning.
Speaker Change: Enable smarter product allocation to high margin high opportunity market and strength in execution across every line of business.
Speaker Change: A key mandate of dysfunction is enhancing our sales and operations planning process and calibration with each business.
Speaker Change: These improvements are already showing up in higher fill rates, which I have arisen from the mid <unk> range that we saw time during fiscal 'twenty six to the mid Ninety's. This past March and April driven by better forecasting planning and coordination.
Luc Mongeau: We're taking a disciplined approach to improving the efficiency of our operation. A recent upgrade of our German medical facility is expected to materially improve pharmacy order fulfillment. We're also investing in automation enhancements to lower our production costs across our Canadian manufacturing operation. Lastly, we've introduced a new stage gate process for product development and commercialization. pair with a more focused portfolio strategy. This will help ensure new products are competitively positioned and margin accretive at launch. At Storz & Bickel, we're focusing on streamlining the operation and increasing our ability to bring key innovations to market to broaden the brand reach and strengthen our global leadership position.
Speaker Change: We're taking a disciplined approach to improving the efficiency of our operations.
Speaker Change: A recent upgrade our German medical facility is expected to materially improve pharmacy order fulfillment.
Speaker Change: We're also investing in automation enhancements to lower our production costs across our Canadian manufacturing operations.
Speaker Change: Lastly, we've introduced our new stage gate process for product development and commercialization.
Speaker Change: Bear with a more focused portfolio strategy. This will help ensure our new products are competitively positioned and margin accretive at launch.
Speaker Change: Our stores in vehicle <unk>.
Speaker Change: Focusing on streamlining the operation and increasing our ability to bring key innovations to market to broadens our brand reach and strengthen our global leadership position.
Luc Mongeau: We've also taken steps to drive more financial efficiency. With a new structure in place, we're focused on reducing costs and ensuring financial discipline across the organization. We've already undertaken a company-wide cost review to identify these efficiencies in our business. We initiated this action during the fourth quarter and we're on track to reduce operating expenses on an annual basis by at least $20 million over the next 12 to 18 months. Roughly 80% of the targeted savings have already been identified and over 50% have already been executed. Additionally, at the end of the fourth quarter, we made an additional $100 million U.S.
Speaker Change: We've also we've also taken steps to drive more financial efficiency.
Speaker Change: With a new structure in place, we're focused on reducing costs and ensuring financial discipline across the organization.
Speaker Change: We have already undertaken a companywide cost reviews to identify these efficiencies in our business.
Speaker Change: We initiated this action during the fourth quarter and we're on track to reduce operating expenses on an annual basis by at least $20 million over the next 12 to 18 months.
Speaker Change: Roughly 80% of the targeted savings have already been identified and over 50% of already been executed.
Speaker Change: Additionally, at the end of the fourth quarter we.
Speaker Change: We made an additional $100 million of U S. Early prepayments again, our senior secured term loan.
Luc Mongeau: early prepayment, again, our senior secure turn loan. that steps reduce our annual interest expense by approximately 13 million U.S. dollars. Together, these actions are creating the space we need in our P&L and balance sheet to gradually reinvest in the business. including Strategic M&A when the right opportunities arise.
Speaker Change: That steps reduced our annual interest expense by approximately 13 million U S dollars.
Speaker Change: Together these actions are creating the space, we need in our P&L and balance sheet to gradually reinvest in the business, including strategic M&A when the right opportunities arise.
Speaker Change: Yeah.
Luc Mongeau: for Fiscal 26. Our focus is on accelerating profitable growth across all businesses by executing with discipline and aligning resources to the highest potential opportunities. In global medical, we're prioritizing supply consistency and deepening engagements with clinics, healthcare providers, and patients. and Canada Adult Hughes were focused on winning in high demand formats and straightening our presence at retail. And at Storz & Bickel, we're enhancing margins, production procurement efficiencies and preparing to launch a new device later this calendar year.
Speaker Change: For fiscal 'twenty six.
Speaker Change: Our focus is on accelerating profitable growth across all businesses by executing with discipline and aligning resources to the highest potential opportunities.
Speaker Change: In global medical where price of prioritizing supply consistency and deepening engagements with clinics, our care providers and patients.
Speaker Change: And Canada adult use.
Speaker Change: We're focused on winning and <unk> formats, and straightening out presents up retail.
Speaker Change: And at the stores in backhaul, we're announcing margins production procurement efficiencies and preparing to launch a new device later this calendar year.
Luc Mongeau: Looking down south. We continue to believe in the long-term potential of the U.S. market. With Canopy USA now fully operational under the leadership of Brooks Juergens. The team is focused on streamlining operation and leveraging its people, products and footprints to drive growth and scale. As Canopy USA is navigating financial challenges, particularly related to acreage, we're monitoring the current situation closely and will provide further updates as necessary. Judy will speak more to the financial details and value of investment in more detail shortly.
Speaker Change: Looking down subs, we continue to believe in the long term potential of the U S market.
Speaker Change: With canopy USA now fully operational and due to the leadership of Brooks the organs.
Speaker Change: This team is focused on streamlining operation and leveraging its people products and footprint to drive growth and scale.
Speaker Change: At <unk> USA is navigating financial challenges, particularly related to acreage maam.
Speaker Change: Monitoring the current situation closely and we'll provide further updates as necessary.
Speaker Change: Judy will speak more to the financial details and value of investment in more detail shortly.
Luc Mongeau: As I wrap up, I want to be clear that my immediate focus, I feel, is on the areas where canopy growth has the clearest path to near-term value creation. Our financial priorities remain unchanged. achieving positive adjusted EBITDA and generating positive free cash flow. These are the critical milestones for Canopy, and we're acting decisively to ensure that our structural and operational improvements translate into stronger performance. I believe that Canopy Growth has the right brands, products, people, and assets to lead in all the markets we serve. I look forward to sharing further updates as we move through fiscal 2026.
Speaker Change: As I wrap up I want.
Speaker Change: To be clear that my immediate focus as CEO is on the areas, where it kind of peak relative to the euro.
Speaker Change: Two near term value creation.
Speaker Change: Our financial priorities remain unchanged.
Speaker Change: Achieving positive adjusted EBITDA and generating positive free cash flow.
Speaker Change: These are the critical milestone for canopy and we're acting decisively to ensure that we are structural and operational improvements translate into stronger performance.
Speaker Change: I believe that canopy growth is the right brands products people and assets to lead in all the markets we serve.
Speaker Change: I look forward to sharing further updates as we move through fiscal 2026.
Luc Mongeau: Thank you.
Judy Hong: And with that, I'll turn it over to Judy to walk through our financial results and outlook.
Speaker Change: Thank you and with that I'll turn it over to Judy to walk through our financial results and outlook.
Judy Hong: Thank you, Luc, and good morning, everyone. I will start by reviewing our fourth quarter and full year fiscal 2025 results, including performance by key business units. I'll then discuss progress on our balance sheet and cash flow, followed by an update on CanopyUSA, and I'll end with a discussion on our priorities and outlook for fiscal 2026. Let's begin with our fourth quarter results. Q4 Fiscal 25 fell short of our expectations, driven by lower revenue in sores and bickles, Poland, and Australia medical businesses. These were partially offset by continued strength in our Canada and Germany medical and our continued cost discipline, which drove year-over-year improvement in adjusted EBITDA.
Judy Hong: Thank you Luke and good morning, everyone I will start by reviewing our fourth quarter and full year fiscal 2025 results, including performance by key business unit.
Speaker Change: I'll, then discuss progress on our balance sheet and cash flow followed by an update on canopy USA.
Speaker Change: And I'll end with a discussion on our priorities and outlook for fiscal 2026.
Speaker Change: Let's begin with our fourth quarter results.
Speaker Change: Q4 fiscal 'twenty five fell short of our expectations driven by lower revenue in Storz, <unk>, Bickel, Poland and Australia medical businesses.
Speaker Change: These were partially offset by continued strength in our Canada, and Germany medical and our continued cost discipline, which drove year over year improvement in adjusted EBITDA.
Judy Hong: On a four-year basis, excluding the impact of divested businesses and U.S. CBD, net revenue was relatively stable compared to last year, and adjusted EBITDA loss improved significantly compared to the prior year. Free cash flow was an outflow of $36 million for Q4 compared to an outflow of $23 million a year ago, as lower interest payment was offset by higher CapEx and increase in working capital in part due to timing. For full year fiscal 25, free cash flow improved by $55 million compared to a year ago.
Speaker Change: On a full year basis.
Speaker Change: Excluding the impact of divested businesses and U S. CBD net revenue was relatively stable compared to last year and adjusted EBITDA loss improved significantly compared to the prior year.
Speaker Change: Free cash flow was an outflow of 36 million for Q4 compared to an outflow of 23 million a year ago as lower interest payment was offset by higher Capex and increase in working capital in part due to timing.
Speaker Change: For full year fiscal 'twenty, five free cash flow improved by $55 million compared to a year ago.
Judy Hong: I'd like to now review the results of our key businesses in more detail, starting with Canada. Q4 net revenue was $40 million, up 4% compared to a year ago. Canada medical business maintained its momentum and grew sales 13% versus last year, benefiting from customer mix continuing to shift towards a greater number of insurer patients and larger product assortment in the spectrum online store. Our adult-use business was down 3%. A strong contribution from Claiborne-infused pre-roll joints was offset by lower sales in flour and non-infused pre-rolls. We are seeing improvement in our tweed, flower, and pre-rolls in recent months, driven by increased distribution and stronger velocity.
Speaker Change: I'd like to now review the results of our key businesses in more detail starting with Canada.
Speaker Change: Q4, net revenue was $40 million up 4% compared to a year ago.
Speaker Change: Canada medical business maintained its momentum and grew sales, 13% versus last year benefiting from customer mix continuing to shift towards a greater number of insured patients and larger product assortment and the spectrum online store.
Speaker Change: Our adult use business was down 3% a strong contribution from Claiborne infused pre rolled joints was offset by lower sales and flower and non infused payrolls.
Speaker Change: We are seeing improvement in our Tweed flower and pre rolls in recent months driven by increased distribution and stronger velocity.
Judy Hong: Canada's adjusted gross margin in Q4 was 11%, and adjusted cash gross margin adding back non-cash depreciation costs and COGS was 23%. Let me unpack Canada's gross margin for Q4, which was negatively impacted by a few factors in the quarter. First, similar to Q3, we experienced higher costs to produce Claiborne, which was launched in November of last year. It's typical to experience higher initial costs for new products and we had to utilize both internal and external production capabilities to fulfill initial orders that exceeded expectations. We've already implemented measures to improve margins by refining price tag architecture and installing semi-automation capability to lower labor costs and reduce reliance on third-party production.
Speaker Change: Canada adjusted gross margin in Q4 was 11% and adjusted cash gross margin, adding back noncash depreciation cost in Cogs was 2023%.
Speaker Change: Let me Unpack, Canada gross margin for Q4, which was negatively impacted by a few factors in the quarter.
Speaker Change: First similar to Q3, we experienced higher cost to produce Claiborne, which was launched in November of last year.
Speaker Change: It's typical to experienced higher initial cost for new products and we have to utilize both internal and external production capabilities to fulfill initial orders that exceeded expectations.
Speaker Change: We've already implemented measures to improve margins by refining price pack architecture, and installing semi automation capability to lower labor costs and reduced reliance on third party production.
Judy Hong: Second, we encourage higher write-down of inventory of select products Green Q4 following our typical year-end inventory review and also reflecting our more streamlined product portfolio strategy. We have now stood up new sales and operations planning process and a more stringent procurement control to tightly manage our inventory in fiscal 26. Despite quarterly fluctuations, Canada adjusted growth margins for the full year, Fiscal 25, with 25%, and cash growth margins with 36%. We expect Canada growth margins to show improvement over the course of Fiscal 26.
Speaker Change: Second we incurred higher write down of inventory of select products. During Q4, following our typical yearend inventory review and also reflecting our more streamlined product portfolio strategy.
Speaker Change: We have now stood up new sales and operations planning process and a more stringent procurement control to tightly manage our inventory in fiscal 2006.
Speaker Change: Despite quarterly fluctuations, Canada adjusted gross margin for the full year fiscal 'twenty five was 25% and cash gross margin was 36%, we expect Canada gross margins to show improvement over the course of fiscal 'twenty six.
Judy Hong: International markets cannabis sales declined 35% in Q4 fiscal 25 compared to Q4 fiscal 24 which included approximately 1.7 million in U.S. CBD sales. Excluding U.S. CBD sales, which has been transitioned out, Q4 sales declined 23%. Germany saw another quarter of double-digit growth, however, this growth was more than offset by declines in Poland, which was negatively impacted by a significant drop in the number of medical cannabis prescriptions following a regulatory ban on online prescriptions. Australia also saw a decline in medical cannabis sales due to increasing competition and larger clinics increasingly prescribing their own products. For full year fiscal 25, international market sales decreased 4% with growth in Europe offset by a decline in Australia.
Speaker Change: International markets, Canada sales declined 35% in Q4 fiscal 'twenty five compared to Q4 fiscal 'twenty four which included approximately $1 7 million and U S. CBD sales.
Speaker Change: Excluding U S CBD sales, which has been transitioned out Q4 sales declined 23%.
Speaker Change: Germany saw another quarter of double digit growth. However, this growth was more than offset by declines in Poland, which was negatively impacted by a significant drop in the number of medical cannabis prescriptions following a regulatory ban on online prescriptions.
Speaker Change: Australia also saw decline in medical cannabis sales due to increasing competition and larger clinics increasingly prescribing their own products.
Speaker Change: For full year fiscal 'twenty five international market sales decreased 4% with growth in Europe offset by a decline in Australia.
Judy Hong: International markets gross margin was 25% in Q4 fiscal 25, which was lower than expected due to softer sales in high margin Poland. We are focused on improving gross margins in Europe as we expect to recapture growth in Poland as the market stabilizes, and we're also refining product mix and pricing in Germany. In Australia, we've streamlined costs and expect to launch additional new products in Fiscal 26. We also expect contributions from opportunistic bulk sales to international markets in Fiscal 26 as part of our Global Supply Planning Initiative.
Speaker Change: International markets gross margin was 25% in Q4 fiscal 'twenty, five which was lower than expected due to softer sales in high margin Poland.
Speaker Change: We are focused on improving gross margins in Europe, as we expect to recapture growth in Poland as the market stabilizes and we're also refining product mix and pricing in Germany.
Speaker Change: In Australia, we have streamlined costs and expect to launch additional new products in fiscal 'twenty six.
Speaker Change: And we also expect contribution from opportunistic bulk sales to international markets in fiscal 'twenty six as part of our global supply planning initiatives.
Judy Hong: Storz and Bickel had a soft quarter with revenue of $17 million in Q4, down 23% year-over-year. Last year's Q4 benefited significantly from having a full quarter of contributions from Venti. Additionally, sores and bickles sales were pressured by softer than expected vaporizer demands in its key markets, which began in the middle of Q4. We believe that increased uncertainty around tariffs and inflation is temporarily dampening consumer demand for vaporizer devices in general. The softness has continued into Q1 Fiscal 26, as evidenced by Soares & Bickle's direct-to-consumer sales declining over 50% during the 4-20 promotional events compared to last year.
Speaker Change: <unk> had a soft quarter with revenue of $17 million in Q4 down 23% year over year.
Speaker Change: Last year's Q4 benefited significantly from having a full quarter of contribution from 20 <unk>.
Speaker Change: Additionally, <unk> sales were pressured by softer than expected vaporizer demand in its key markets, which began in the middle of Q4.
Speaker Change: We believe that increased uncertainty around tariffs and inflation is temporarily dampening consumer demand for vaporizer devices in general.
Speaker Change: This softness has continued into Q1 fiscal 'twenty six as evidenced by Storz <unk> bickel direct to consumer sales declining over 50% during the 420 promotional events compared to last year.
Judy Hong: Storys and Bickle's Q4 gross margin was 37% compared to 41% last year, driven primarily by lower sales.
Speaker Change: Storz <unk> Bickel Q4, gross margin was 37% compared to 41% last year, driven primarily by lower sales.
Judy Hong: Looking at our SG&A expenses for Q4 fiscal 25, sales and marketing, G&A, and R&D expenses have combined declined 28% year over year, primarily due to cost reduction initiatives, as well as lower bonus compared to Q4 fiscal 2024. Q4 fiscal 25 adjusted EBITDA loss was $9 million, an improvement of $6 million compared to a loss of $15 million a year ago. Q4 adjusted EBITDA was impacted by lower-than-expected sales and stores in Bickel and Poland, as well as higher inventory write-down in Canada. We are disappointed that we did not achieve positive adjusted EBITDA in Fiscal 25, but we're committed to achieving positive adjusted EBITDA in the near term, driven by additional cost reductions, improved growth in global medical, and better commercial execution in Canada adult year.
Speaker Change: Looking at our SG&A expenses for Q4 fiscal 'twenty, five sales and marketing G&A and R&D expenses.
Speaker Change: Combined declined 28% year over year, primarily due to cost reduction initiatives as well as lower bonus compared to Q4 fiscal 2024.
Speaker Change: Q4 fiscal 'twenty five adjusted EBITDA was loss was $9 million, an improvement of $6 million compared to a loss of $15 million a year ago.
Speaker Change: Q4, adjusted EBITDA was impacted by lower than expected sales and storz, <unk>, bickel, and Poland as well as higher inventory write down in Canada.
Speaker Change: We are disappointed that we did not achieve positive adjusted EBITDA in fiscal 'twenty five, but we're committed to achieving positive adjusted EBITDA in the near term driven by additional cost reductions improved growth in global medical and better commercial execution and Canada adult use.
Judy Hong: I'd like to now review our cash flow and balance sheet. Free cash flow was an outflow of $36 million in Q4 compared to an outflow of $23 million in Q4 of last year. Cash used from continuing operations was $33 million, which included cash interest payment of $12 million, down from $18 million last year. Full year free cash flow with an outflow of $177 million, an improvement of $109 million compared to fiscal 24. In addition to negative adjusted EBITDA, fiscal 25 free cash flow includes $63 million in interest payments, $40 million of outflow from negative working capital movement, mostly driven by inventory bills in Canada, $30 million in restructuring and non-recurring cash payments, including lease payments for facilities not in use, and $11 million in CAPEX.
Speaker Change: I'd like to now review, our cash flow and balance sheet free.
Speaker Change: Free cash flow was an outflow of $36 million in Q4 compared to an outflow of $23 million in Q4 of last year.
Speaker Change: Cash used from continuing operation was 33 million, which included cash interest payment of $12 million down from $18 million last year.
Speaker Change: Full year free cash flow was an outflow of 177 million an improvement of $109 million compared to fiscal 'twenty four.
Speaker Change: In addition to negative adjusted EBITDA fiscal 'twenty five free cash flow includes $63 million in interest payments $40 million of outflow from negative working capital movement, mostly driven by inventory build in Canada 30 million in restructuring and nonrecurring cash payments, including lease.
Speaker Change: Payments for facility has not been used and $11 million in Capex for.
Judy Hong: For Fiscal 26, we expect to achieve significant improvement in free cash flow driven by interest expenses of approximately $38 million for the full year, down from $63 million based on current debt balances and interest rates. Improvement in working capital driven by tighter inventory management and initiatives to improve the timeliness of revenue collection, particularly in the Canada medical business. lower restructuring and non-recurring cash expenses relative to Fiscal 25 and reduction in CapEx compared to Fiscal 25.
Speaker Change: For fiscal 'twenty, we expect to achieve significant improvement in free cash flow driven by interest expenses of approximately $38 million for the full year down from $63 million based on current debt balances and interest rates.
Speaker Change: Improvement in working capital driven by tighter inventory management and initiatives to improve the timeliness of revenue collection, particularly into Canada medical business.
Speaker Change: Lower restructuring and nonrecurring cash expenses relative to fiscal 'twenty, five and reduction in capex compared to fiscal 'twenty five.
Judy Hong: Turning to the balance sheet, as of March 31, 2024, we had $131 million in cash and short-term investments and a total principal debt balance of $316 million. During Q4, we further reduced our term loan balance by USD $100 million by making an early prepayment in the amount of USD $97.5 million, bringing term loan principal balance to approximately USD $150 million and extending maturity to September 2027. During Q4, we completed USD $250 million ATM program that was launched in June of last year and launched a new USD $200 million program in February of this year. We've generated total gross proceeds of USD $27 million under the new program and have USD $173 million left to be completed.
Speaker Change: Turning to the balance sheet as of March 31, 2024, we had $131 million in cash and short term investments and a total principal debt balance of $316 million.
Speaker Change: During Q4, we further reduced our term loan balance by USD 100 million by making an early prepayment in the amount of USD $97 5 million, bringing term loan principal balance to approximately USD $150 million and extending maturity to September 2027.
Speaker Change: During Q4, we completed a USD $250 million ATM program that was launched in June of last year and launched a new USD $200 million program in February of this year.
Speaker Change: We've generated total gross proceeds of USD $27 million under the new program and have USD $173 million left to be completed.
Judy Hong: I'd like to now provide an update on CanopyUSA. We have previously indicated that we plan to provide more details around the business performance and financials of Canopy USA when we report our year-end earnings. As a reminder, CanopyUSA was deconsolidated from our financials as of April 2024, and the acquisitions of 77% of Jetty closed in June, acquisitions of 100% of Vauna closed in October, and acquisitions of 100% of Acreage closed in December of 2024. Acreage was also a public company until the acquisition closed. Starting with our Q1 Fiscal 25 filing, Canopy's non-controlling interest in Canopy USA had been reflected as long-term assets within our balance sheet, with associated changes in fair value recorded through our income statement.
Speaker Change: I'd like to now provide an update on canopy USA.
Speaker Change: We have previously indicated that we plan to provide more details around the business performance and financials of canopy USA. When we report our year end earnings.
Speaker Change: As a reminder cannot be USA was deconsolidation from our financials as of April 2024, and the acquisitions of 77% of Jedi closed in June acquisitions of 100% of Varna closed in October and acquisition of 100% of acreage closed in December of 2024.
Speaker Change: Acreage was also a public company until the acquisition closed.
Speaker Change: Starting with our Q1 fiscal 'twenty five filing canopies noncontrolling interest and canopy USA had been reflected as long term assets within our balance sheet with associated changes in fair value recorded through our income statement.
Judy Hong: The determination of fair value is based upon underlying assumptions, including current and expected business performance. In addition, Canopy also holds investments in the aqueous debt. At March 31, 2025, the fair value of Canopy USA investment, including acreage debt, which is presented within the other investments line of our balance sheet, was approximately $178 million on a combined basis. This is comprised of approximately $33 million of value relative to entities which hold Terrasen Investments, which was down from $151 million as of June 30, 2024, driven primarily by the declines in Terrasen's share price. and approximately $145 million of value represented by debt and equity investments in Canopy USA's ownership in Juana, Jetty, and Acreage, down from $289 million as of June 30, 2024, where the decline in value is primarily driven by continued challenges at Acreage.
Speaker Change: The determination of fair value is based upon underlying assumptions, including current and expected business performance.
Speaker Change: In addition cannot be also hold investments in the acreage that.
Speaker Change: At March 31, 2025, the fair value of canopy, USA investments, including acreage debt, which is presented within the other investments line of our balance sheet was approximately $178 million on a combined basis.
Speaker Change: This is comprised of approximately $33 million of value relative to entities, which hold tariffs and investments, which was down from $151 million as of June 32024, driven primarily by the declines in <unk> share price.
Speaker Change: And approximately $145 million of value represented by debt and equity investments in canopy, usa's ownership and Wanna Jedi in acreage down from $289 million as of June 32024, where the decline in value is primarily driven by continued challenges in acreage.
Judy Hong: As we have indicated during the prior earnings calls, Acreage's results were impacted by its credit challenges in 2024 and underperformance relative to expectations in the Ohio adult-use cannabis market since the third calendar quarter of 2024. In August of 2024, Acreage previously disclosed that their Ohio-based revenue was expected to double. However, Ohio has still not fully opened up as an adult-use market, and thus Acreage's revenue is falling well short of their expectations. In addition to underperformance in Ohio, liquidity challenges faced by Acreage have persisted, impairing its ability to invest in its business and negatively impacting performance in its core states, including New Jersey.
Speaker Change: As we have indicated during the prior earnings call Acreages results were impacted by its credit challenges in 2024, and underperformance relative to expectations in the Ohio adult use cannabis market since the third calendar quarter of 2024.
Speaker Change: In August of 2024 acreage previously disclosed that their Ohio based revenue was expected to double however, Ohio has still not fully opened up as an adult use market and thus acreages revenue is falling well short of their expectations.
Speaker Change: In addition to underperformance in Ohio liquidity challenges faced by acreage have persisted impairing its ability to invest in its business and negatively impacting performance in its core states, including New Jersey.
Judy Hong: And primarily as a result of challenges at Acreage, for Canopy USA's fiscal year ended December 31, 2024, on an annualized basis, Canopy USA is run rating at approximately USD 210 million of annualized revenue, well short of the original estimated 2023 revenue run rate of USD 300 million, as previously indicated during our Q1 earnings call. Turning quickly to Juana and Jetty, Juana's revenue in Colorado and its licensing revenue were pressured by challenging market dynamics and intense price competition in the gummies category. In March of 2025, Juana announced that its hemp-infused, ready-to-drink Juana beverages are available at Total Wine & More locations nationwide.
Speaker Change: And primarily as a result of challenges that acreage for canopy USA. Its fiscal year ended December 31, 2024 on an annualized basis cannot be USA is run rating at approximately USD $210 million of annual annualized revenue well short of the original estimated.
Speaker Change: 'twenty three revenue run rate of USD 300 million as previously indicated during our Q1 earnings call.
Speaker Change: Turning quickly to Wanna and Jody one is revenue in Colorado and its licensing revenue were pressured by challenging market dynamics and intense price competition in the gummies category.
Speaker Change: In March of 2025 want to announce that hence infused ready to drink beverages are available at total wine <unk> more locations nationwide.
Judy Hong: Jetty's shipment was impacted by a distributor transition in mid-year 2024. However, its depletion revenue, which is revenue from distributors to retailers, remained strong, and it maintained its market share leadership in the sovereignless VATE category in the U.S. in 2024.
Speaker Change: Eddie shipment was impacted by a distributor transition in mid year 2024, However, its depletion revenue, which is revenue from distributors to retailers, which remained strong and it maintained its market share leadership in the sovereign list the category in the U S. In 2024.
Judy Hong: For the first time, we've also included summarized balance sheet and income statement information for CanopyUSA in Note 13 of the financial statements in our 10-K. We note that the income statement information included here is for the eight months ended December 31, 2024, and reflects the P&L of Juana, Jetty, and Acreage from the time of the close of their acquisitions, which occurred at different times during 2024.
Speaker Change: For the first time. We've also included summarized balance sheet and income statement information for canopy USA in note 13 of the financial statements in our 10-K.
Speaker Change: We note that the income statement information included here is for the eight months ended December 31, 2024, and reflects the P&L of Wanna jetty and acreage from the time of the close of the acquisition, which occurred at different times during 2024.
Judy Hong: Now I'll speak briefly about Acreage's liquidity challenges. Acreage is currently in default under its credit agreement dated as of September 13, 2024. The lenders, which includes Canopy, have agreed to forbear remedies with respect to such default until June 1, 2025, while potential solutions, including a potential debt extension, are being discussed.
Speaker Change: Now I'll speak briefly about acreage is liquidity challenges acreage is currently in default under its credit agreement dated as of September 13, 2020 for the lenders, which includes canopy have agreed to forbear remedies with respect to such default until June one 2025, while potential solutions.
Speaker Change: Including a potential debt extension are being discussed.
Judy Hong: I'd like to now provide our key priorities and outlook for Fiscal 26. In global medical cannabis, we expect continued strong momentum in Canada medical growth in Europe with efforts aimed at maximizing our growth potential in Germany and Poland, driven by increased number of in-demand products and ensuring consistent supply, while we're focused on stabilizing our business in Australia medical cannabis. We note that we now have fully transitioned Storz & Bickel's business in Australia to Storz & Bickel Germany, which generated approximately $8 million in fiscal 24. In Canada Adult Use, we expect to show improved performance in revenue and margins driven by a more focused product portfolio, driving better sales execution and continued momentum behind our new product, including Claiborne infused pre-rolls and recently launched Tweed and 7 Acres All-in-One Dates.
Speaker Change: I'd like to now provide our key priorities and outlook for fiscal 'twenty six.
Speaker Change: In global medical cannabis and we expect continued strong momentum in Canada medical growth in Europe with efforts aimed at maximizing our growth potential in Germany, and Poland driven by increased number of in demand products and ensuring consistent supply while were focused on stabilizing our business in Australia Medical Canada.
Speaker Change: Yes.
Speaker Change: We note that we now have fully transitioned storz <unk> bickel business in Australia to Storz, <unk>, Bickel, Germany, which generated approximately $8 million in fiscal 'twenty four.
Speaker Change: And Canada adult use we expect to show improved performance in revenue and margins driven by a more focused product portfolio driving better sales execution and continued momentum behind our new products, including Claiborne infused pre rolls and recently launched Tweed and seven acres all in one day.
Judy Hong: We're also focused on improving growth margins by lowering program cultivation costs and reducing production costs. For Soars & Bickle, we're focused on navigating a challenging macro backdrop by working closely with our key distributors while reducing costs to protect our margins. We expect sales to decline in the first half of the year with improvement expected in the second half of the year driven by a new device launch planned for this fall. And as Luc indicated, we've identified additional cost reduction opportunities in all areas of businesses, and we expect to realize annualized savings of at least $20 million over the next 12 to 18 months through a reduction in headcount, a more efficient sales and marketing spend, lower professional fees, and IT expenses.
Speaker Change: We're also focused on improving gross margins by lowering program cultivation costs and reducing production costs.
Speaker Change: For stores apical we're focused on navigating a challenging macro backdrop by working closely with our key distributors, while reducing cost to protect our margins.
Speaker Change: We expect sales to decline in the first half of the year with improvement expected in the second half of the year driven by a new device launch planned for this fall.
Speaker Change: And as Luc indicated we've identified additional cost reduction opportunities in all areas of businesses and we expect to realize annualized annualized savings of at least $20 million over the next 12 to 18 months through reduction in head count a more efficient sales and marketing spend lower professional fees.
Speaker Change: And it expenses.
Judy Hong: We're committed to achieving positive adjusted EBITDA as soon as possible, but we're not providing the exact timing at the moment due to a heightened macro uncertainty and its relative and its potential impact to our stores and Bickel business. In closing, our refined strategy and focus, along with rigorous cost discipline, is expected to position us for accelerated growth, improvement, and improved margins in fiscal 2026 and beyond.
Speaker Change: We're committed to achieving positive adjusted EBITDA as soon as possible, but we're not providing the exact timing at the moment due to a heightened macro uncertainty and its relative and its potential impact to our stores and digital business.
Speaker Change: In closing our refined strategy and focus along with rigorous cost discipline is expected to position us for accelerated growth improvement and improved margin in fiscal 2026 and beyond.
Judy Hong: This concludes my prepared comments.
Speaker Change: This concludes my prepared comments, we will now take questions.
Tyler Burns: We'll now take questions. Ladies and gentlemen, we will now begin the question and answer. If you have a question, please press the star followed by the one on your touch screen. You will hear a prompt that your hand has. If you are using a speakerphone, please lift the handset before pressing the button.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone.
Speaker Change: You'll hear a prompt that you had has been raised if you are using a speaker phone. Please lift the handset before pressing any case would.
Tyler Burns: do us that you please limit yourself to one. If you have additional questions, you may press star 1 again to begin.
Speaker Change: We do ask that you. Please limit yourself to one question should you have additional questions. You May press star one again to be joined the queue.
Aaron Grey: comes from Aaron Grey at Alliance Global. Hi, good morning, and thank you for the question. appreciate the color.
Speaker Change: First question comes from Aaron Grey at Alliance Global Partners. Please go ahead.
Aaron Grey: Hi, good morning, and thank you for the question.
Speaker Change: I appreciate the color.
Aaron Grey: Hi, can you guys hear me okay? Yeah, we can hear you. Hi, Aaron. Hi, how are you doing? Appreciate the color and look that you provided, including kind of the management style that you're looking to take, you know, with the business, with streamlining some of the operations. You know, in line with that, you know, it'd be great to get some additional color. what you're seeing as more of the near-term, low-hanging fruit opportunities versus actions in place that will benefit you in the long-term. And then if we think about, you know, what'll be the key levers that you're gonna have to ultimately get to that positive adjusted EBITDA.
Speaker Change: Hi can you guys hear me okay.
Judy Hong: Yes, we can hear you iron Hi, How're you doing Judy.
Judy Hong: Appreciate the color that you provided.
Speaker Change: Kind of the management style that you're looking to take with the business with streamlining some of the operations.
Speaker Change: In line with that you know it would be great to get some additional color maybe in terms of what youre seeing as more of a near term low hanging fruit opportunities versus actions in place that will benefit you in the long term and then if we think about.
Speaker Change: What will be the key levers that you're going to have to ultimately get to that positive adjusted EBITDA and I know.
Aaron Grey: I know you're not giving a timeline now, but we've talked about it in the past that it's really gonna come down to getting a growth driver on the top line. So where are you seeing the best opportunity for that? Maybe via stores and BIC or interest rates? I know it was a lot in there, but maybe some high-level, you know, commentary on that would be appreciated.
Speaker Change: We're not giving a timeline now but.
Speaker Change: Talked about in the past, it's really going to come down to getting a growth driver on the top line. So where are you seeing the best opportunity for that maybe via Storz, <unk> Bickel International where Canadian so.
Speaker Change: No. It was not in there, but maybe some high level commentary on that would be appreciated that you've been that can help a little bit longer. Thank you.
Luc Mongeau: Now that you've been... Fantastic. You know, for me, I look at the business, I look at fiscal 25, we ended up with minus $23 million of EBITDA. You know, we're focusing, we've identified $20 million of cost reductions. That gives you a bit of dimensions there. We're going after that $20 million very aggressively, as fast as we can. Most importantly, it's about the growth. And the growth, we're very bullish on our medical business. We know this business in Canada is doing extremely well for us, and it was not getting the full attention that it deserves. So we're talking about a business that grew up double digits in fiscal 25.
Speaker Change: Fantastic.
Speaker Change: For me I look at the business. So look at fiscal 'twenty five we ended up with.
Speaker Change: Minus 23 million of EBITDA, we're focusing we have identified.
Speaker Change: $20 million of cost reductions that gives you a bit of.
Speaker Change: I mentioned that we're going up to the $20 million very aggressively.
Speaker Change: First as we've done.
Speaker Change: Most importantly, it's about the growth the growth.
Speaker Change: We're very bullish on our medical.
Speaker Change: The business, we know this business in Canada is doing extremely well.
Speaker Change: All forward estimate was not getting the full attention that it deserves. So we're talking about a business that grew up double digits in fiscal 'twenty five.
Luc Mongeau: We have the engine, we have the right products, we have the right back of the house there. So this business is now reporting directly into me, and we're giving it the attention it deserves. At the same time, we combine our medical business in Europe and Australia with the leadership of that Canadian business. So now we're fully integrated. I'll be honest, we're disappointed with our 25 global medical results. And the key driver of that was inconsistency of supply. We have a great team in Germany, we have a great operation in Germany. When we're in stock, we know we can bring great quality flour at the right price.
Speaker Change: We have the right products, we have the right back of the house. There. So this business is now report reporting directly into.
Speaker Change: And to me and we're giving you the attention it deserves the same time, we combined our medical business in Europe, and Australia with the leadership of Doug Canadian business. So now we're fully integrated.
Speaker Change: I'll be honest, we are disappointed with our 25.
Speaker Change: <unk> medical results and the key driver of that was inconsistency of supply.
Speaker Change: Have a great team.
Speaker Change: In Germany, we have a great operation in Germany, we when we're in stock. We know we can bring great quality flower of the right price, we know how to distribute it when we're in stock we do extremely well just to maybe into auctions and supply has led to a.
Luc Mongeau: We know how to distribute it. When we're in stock, we do extremely well. Just too many interruptions in supply has led to a bunch of false starts. So we're focusing on really near to us opportunities that we know will pay back and should pay back relatively swiftly.
Speaker Change: Bunch of false starts so we're focusing on really near to us opportunities that we know will.
Speaker Change: The.
Speaker Change: Feedback and should pay back relatively swiftly.
Luc Mongeau: Then we look at Canadian REC. We believe in Canadian REC. It is a big market. It's a $5 billion market. There are significant opportunities for players who are focused. So, in the past, we used to be, you know, we played, we tried to play in every single categories and subcategories. So, we took decisive action in recent months. As I said, we streamlined the portfolio, but most importantly, we're focusing with clear intentionality in the large segments where we know we can compete and we can provide consistent supply. You probably heard about it. We launched Playborn, for example, at the end of fiscal 25.
Speaker Change: Then we looked at Canadian <unk>, we believe in Canadian Rec. It is a big market. It's a $5 billion market. There are significant opportunities for players who are focus so in the past we used to be we played we tried to play in every single categories and subcategories.
Speaker Change: So we took.
Speaker Change: Decisive action.
Speaker Change: In recent months as I said, we streamlined the portfolio, but most importantly, we're focusing.
Speaker Change: With clear intentionality and the large segments, where we know we can compete and we can provide consistent consistent supply you've probably heard about it we launched <unk> for example.
Speaker Change: Of fiscal 'twenty five the brand is already being number three in some regions. So when canopy focuses.
Luc Mongeau: The brand is already number three in some regions. So, when Canopy focuses, we know Canopy can be successful. So, short answer, we're focusing on the opportunities that are the nearest to us with the highest potentials for return.
Speaker Change: Canopy can be successful so short answer we're focusing of the axa on the opportunities that are the nearest to us we've got potential for return.
Bill Kirk: Question from Bill Kirk at Roth Kaplan. Hi, thanks for taking the call or taking the questions. We've heard versions of increased focus or streamlining operations, cost savings programs. We've heard those before.
Speaker Change: Next question from Bill Quirk at Roth Capital Partners. Please go ahead.
Bill Quirk: Hi, Thanks for taking the call and taking the questions.
Bill Quirk: We've heard versions that increased focus on streamlining operations cost savings programs. We've heard we've heard this before so I guess, Luke what truly makes today's conversation incremental to the programs of the past and the progress of the past.
Luc Mongeau: So, I guess, Luke, what truly makes today's conversation incremental to the programs of the past and the progress? Yeah, I cannot really comment that much on what was said in the past, but I can assure you that from my perspective, the actions that we're taking are dramatically streamlining the organization. And so from my point of view, I inherited an organization that was set up, for lack of a better word, like a large corporation that worked at organizations that were billions of dollars. I've inherited what I would qualify as a large corporation structure. We're transforming the organization, its culture into fighting business units, focused, streamlined fighting units with just the right amount of centralized core capabilities to really enable these units to win.
Bill Quirk: Yes, I cannot really comment that much of what was said in the in the past but.
Bill Quirk: I can I can assure you that from my perspective, the actions that we're thinking taking are dramatically streamlining the organization. So from my point of view I noted an organization that was set up for lack of a better word like a large corporations have worked organs.
Bill Quirk: Patients that were billions of dollars I've inherited what I would qualify as a large corporation structure, we're transforming the organization its culture into business fighting business units focused streamlined.
Bill Quirk: By adding units, which just the right amount of centralized core capabilities to really enable these units to win I'll give you. An example, and Canadian Rec, we eliminated two layers of management management between myself and our sales leadership. So as you can.
Luc Mongeau: I'll give you an example. In Canadian Rec, we eliminated two layers of management between myself and our sales leadership. As you can imagine, decisions are made much faster. We're pushing this decision making down in the organization, and it's allowing us to have the right data at the right time, make the right decision in a much, much swifter manner than we did in the past. So it's way more than just a cost reduction exercise. It is really a change in the culture of how we go to market. And I'll tell you honestly, I'm extremely encouraged by the reaction of the organization.
Bill Quirk: Can't imagine decisions are made much faster we're pushing this is this isn't making down in the organization.
Bill Quirk: It's allowing us to have the right data at the right time to make the right decision and a much much swifter miners than we did in the past so it's way more than just a cost reduction.
Bill Quirk: Exercise it is really a change in the culture of all we go to market and I'll tell you honestly I'm extremely.
Bill Quirk: Encourage by the reaction of the organization. These are individuals quote into the <unk>.
Luc Mongeau: These are individuals qualified in a... talented individuals who want to win, and now we're giving them the tool, most importantly, the structure, the processes that allow them to go out there and compete anyway.
Bill Quirk: Yes.
Bill Quirk: Talented individuals who want to win and now we're giving them the tool and most importantly, the structure the processes that will allow them to go out there and compete and win.
Brenna Cunnington: This question comes from Brenna Cunnington at ATP Capital. Hi, this is Brennan for Frederico. Thanks for taking our questions. Regarding acreage's underperformance, so in addition to your earlier commentary on Ohio, New Jersey underperforming expectations, based on the company's closing stores in New York, we can hopefully safely assume that's also been a very challenging market for them. So just curious what other factors have really underpinned the underperformance of acreage? And how should we be thinking about Canopy USA more broadly? Sure. So I think we've provided a lot of details already in my prepared comments, but really, I think we've said in previous calls that Acreage's performance in 2024 was challenged by its liquidity and credit challenges.
Brennan Cunnington: Next question comes from Brennan Cunnington at ATB capital markets. Please go ahead.
Speaker Change: Hi, This is Brian on for Frederico, Thanks for taking my questions.
Bill Quirk: Regarding acreages under performance. So in addition to your earlier commentary on Ohio, New Jersey underperforming expectations based on the company's losing certain New York weekend, hopefully slightly stable. That's also been a very challenging market for them. So just curious what other factors are really underpins the underperformance of acreage and how should we be thinking about canopy USD.
Bill Quirk: More broadly going forward.
Bill Quirk: Sure. So I think we've provided a lot of details already on in my prepared prepared comments, but really I think we've said in previous calls that acreage is performance in 2024 was challenged by it.
Bill Quirk: Liquidity and credit challenges the company was public until the close of the acquisition in December their public filings through September quarter, and that I think shows the performance was challenged.
Luc Mongeau: The company was public until the close of the acquisition in December, their public filing through September quarter end that I think shows the performance was challenged. And I think the key driver really was the underperformance in Ohio that I think a lot of the market participants expected to open with a lot of growth potential. And unfortunately, even as we sit here today, it's still not a full adult use market. So there was a sizable underperformance relative to the expectations in Ohio. And based on the underperformance of Ohio, the liquidity challenges really continue to persist, which also then impacted their ability to invest and grow in other parts of their core markets, including New Jersey, as well as New York.
Bill Quirk: And I think the key driver really was the underperformance in Ohio that.
Bill Quirk: A lot of the market participants expected to open.
Bill Quirk: With a lot of growth potential and unfortunately, even as we sit here today, it's still not a full adult use markets. So there was a ah.
Bill Quirk: Sizable underperformance relative to your expectations in Ohio.
Bill Quirk: And based on the underperformance of Ohio.
Bill Quirk: Liquidity Challenge has really continued to persist, which also then impacted their ability to invest and grow in other parts of their core markets, including New Jersey as well as New York So that.
Luc Mongeau: So that is the situation today. We are still bullish on the long term potential of the U.S. market. But, you know, I think the situation today is that there's been underperformance relative to really Acreage's expectation, primarily because of Ohio.
Bill Quirk: That is the situation.
Bill Quirk: <unk>.
Bill Quirk: We are so bullish on the long term potential of the U S market, but I think the situation today is that there has been.
Bill Quirk: Underperforms relative to really acreage as expectations, primarily because of Ohio.
Pablo Zuanic: Ladies and gentlemen, as a reminder, should you have any questions, please press star comes from Pablo Zuanic at Zuanic.com. Thank you. Good morning, everyone. Luc, congratulations on the progress you've made since you started. My question is about you talked in the call about inconsistencies in the supply chain, especially for international. Can you talk about how you're thinking about in terms of investing on supply chain, whether you need to have more control over supply, own more supply, whether in Canada or overseas? And by the same token, understood in terms of the reorganization and alignment, but would you need to make more investments downstream in international in terms of route to market, if you can touch on that?
Speaker Change: Ladies and gentlemen, as a reminder, should you have any questions. Please press star one.
Speaker Change: Next question comes from Pablo <unk> Associates. Please go ahead.
Speaker Change: Thank you good morning, everyone. Luke congratulations on the progress you've made since you started.
Speaker Change: My question is about you've talked in the call about inconsistencies in the supply chain, especially for international.
Speaker Change: Can you talk about how youre thinking about in terms of our <unk>.
Speaker Change: Vesting on supply chain, whether you need to have more control over supply one more supply where they are and kind of at a china or overseas and baidu.
Bill Quirk: The same token understood in terms of the reorganization and alignment, but we do need to make more investments downstream in international industrial route to market. If you can touch on that.
Pablo Zuanic: And just a separate one, if I may add a second one, we don't hear many companies talk about Canadian medical. And of course, you know, very good performance there. If you can just give us a reminder of how that market is doing, it seems to be declining, but there's more reimbursement. You know, what's the outlook for that market? Market share gain potential, if you can give more color there. Yeah, good morning. There's probably three questions in there. So, let me start with the supply. So, we don't, you know, as I said earlier, we're focusing on the opportunities that are very near and right in front of us right now.
Bill Quirk: And just a separate one if I may add a second one.
Bill Quirk: We don't hear many companies talk about Canadian medical and of course, you know very good performance there.
Bill Quirk: Give us a reminder of how that market is doing it seems to be declining, but theres more reimbursement whats the outlook for that market market share gain potential. If you can give more color on that it would help thank you.
Speaker Change: Yes, good morning.
Speaker Change: There's probably three questions in there so let me start with.
Speaker Change: The supply so we don't.
Bill Quirk: As I said earlier, we're focusing on the opportunities that are very near.
Bill Quirk: And right in front of US right now so for global medical is all about consistency of supply and I'll simplify the what the.
Luc Mongeau: So, for Global Medical, it's all about consistency of supply. And I'll simplify what the situation was. We had a global organization that was functioning in great parts independently of the rest of the organization. And combined that, we had a supply chain that was pretty much led by our Canadian rec business. So, you can imagine the lack of connections, the conflicting priorities and agendas. So with the restructuring, we've pretty much eliminated what I call dysfunctionalities to characterize a little bit. And we're in a place now where we're way better equipped to decide what we plant, what we cultivate, what we harvest, and where we distribute this flower, allowing the decisions to be made ultimately by myself to allocate the flower to the best opportunity in the market.
Bill Quirk: Duration was we have a global organization that was functioning in great parts independently of the rest of the organization.
Bill Quirk: Combined that we are the supply chain that was pretty much led by our Canadian Rec business and so you can imagine.
Bill Quirk: The lack of connections.
Bill Quirk: Lifting.
Bill Quirk: It is an agenda.
Bill Quirk: So with the restructuring we've pretty much.
Bill Quirk: And we've made are eliminated.
Bill Quirk: What I call Dysfunctionality.
Bill Quirk: Two two.
Bill Quirk: To characterize a little bit and we've we're in a place now where we're way better.
Bill Quirk: Quip to decide what we planned what we cultivate what we rvs and where we distribute this flower, allowing the decisions to be made ultimately by myself to allocate the flower to the <unk>.
Bill Quirk: Best opportunity in the market.
Luc Mongeau: So as you can imagine, we're a centralized supply chain team, centralized sales and operations process. We get the demand signals now from across every single business unit, which wasn't the case before, which allows us to make the right decisions at every single step of the growing process. As well with centralized resources, we now can get flower materials in the open markets, which truly will allow us to take our service levels much higher than they've been in the past. So we don't foresee in the near future having to make any investment. to allow us to capture these opportunities.
Bill Quirk: So as you can imagine where central centralized supply chain team centralized sales and operations process, we get the demand signals now from across every single business unit units, which wasn't the case before which allows us to make the right decisions.
Bill Quirk: Every single steps of the growing process as well with centralized resources, we now can get flower materials.
Bill Quirk: In.
Bill Quirk: The open markets, which really will allow us to take our service levels much higher than they've been.
Bill Quirk: So we don't foresee in the near future having to make any investments too.
Bill Quirk: To allow us to capture these opportunities.
Luc Mongeau: And I guess I'll touch on the medical, Canada medical performance. And Pablo, you're right, we have not, in the past, spoke a lot about our medical business, which really has been performing, you know, in a successful way. From a market perspective, I think, you know, there's not a lot of data out there, but we think the market was down in the mid single digit rate. We think we're number two in the market share. And, you know, I think you have also access to some of the information from some of the leading players in the marketplace.
Speaker Change: And I guess I'll touch on the medical Canada Medical performance and Pablo Youre right. We have not in the past spoke a lot about our medical business. It's really has been performing.
Bill Quirk: In a successful way from a market perspective, I think there's not a lot of data out there, but we think the market was down in the mid single digit rate.
Bill Quirk: We think we are number two in the market share and I think you have also access to some of the information from some of the leading players in the marketplace. We've outperformed in the market. So we were up 16% and Canada medical as I said market was down kind of in the mid single digit rate and I think our loss.
Luc Mongeau: We've outperformed in the market. So we were up 16% in Canada medical. As I said, market was down kind of in the mid single digit rate. And I think our largest competitor was up sort of in the 4% rate. So we have outperformed and we are gaining market share. The team has really been focused on really growing the patients that provide us with the highest value and really providing that patient, as well as the broader patient group, the best customer experience. Our spectrum online store is the highest, I think, quality and the feedback we get from the customer experience on the products and just the broader experience has been really tremendous.
Bill Quirk: Just competitor was up sort of in the 4% rate. So we have outperformed and we are gaining market share. The team has really been focused on.
Bill Quirk: <unk> really growing.
Bill Quirk: But the patients that provide us with the highest value and really providing.
Bill Quirk: That patient as well as the broader patient group the best customer experience our spectrum online store is.
Bill Quirk: Is the highest I think quality ended the feedback we get from the customer experience on the products and and just the broader experience has been really tremendous and so team is continuing to really focus on going after those and making sure that they're continuing to get that experience from from a patient.
Luc Mongeau: And so the team is continuing to really focus on going after those and making sure that they're continuing to get that experience from a patient journey perspective. And as Luke said, we're trying to leverage also that experience and that knowledge into our international medical market. Thank you.
Speaker Change: Or any perspective, and as Luke said, we're trying to leverage also about experience and that knowledge into our international medical markets.
Speaker Change: Thank you. This concludes canopy growth's fourth quarter and fiscal year 2025 financial results Conference call.
Tyler Burns: This concludes Canopy's growth fourth quarter and fiscal year 2025. A replay of this conference call will be available until August. Growth's Investor Relations Team will be available to answer any additional questions. Thank you for attending.
Bill Quirk: This conference call will be available until August 28, 2025, and can be accessed following the instructions provided in the company's press release issued earlier today.
Bill Quirk: Canopy Growth's Investor relations team will be available to answer any additional questions.
Bill Quirk: You for attending today's call.
Bill Quirk: [music].
Bill Quirk: Okay.
Bill Quirk: Okay.
Bill Quirk: Okay.