WEED.TO - Earnings call transcript Q4 2024

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Operator

Good morning. My name is Joanna, and I will be your conference operator today. I would like to welcome you to Canopy Growth's Fourth Quarter and Fiscal Year 2024 Financial Results Conference Call. [Operator Instructions]

I will now turn the call over to Tyler Burns, Director of Investor Relations. the begin may you conference call. Tyler,

Tyler Burns

and call today, morning, David and Judy thank Chief you our On Klein; Hong. Officer, Financial us. joining Chief we Officer, for Executive Good have Growth's Canopy

Canopy today, results March financial fourth XX, opened markets our financial Growth a announcing for year news fiscal and issued quarter XXXX. the release ended Before

news and financial website EDGAR will and SEDAR on release statements our on The be the under tab. Investors and have been available filed

today. our like that qualified would and this to management's I Please discussion today's begin, that and will regarding with statements SEC materially during reports discussion actual release in forward-looking the review will filed you forward-looking current included Canopy's differ to note we cause SEDAR the by are -- from that be is end could Before entirety that this assumptions statements projections. factors call issued for of results various and remind on its the views include earnings cautionary and release at the based news

otherwise reconciliations non-GAAP is are Please measures measures closest GAAP earnings reported our dollars in included that any addition, Canadian unless in all financial note between provided to information their In stated. release.

conduct by will question-and-answer David remarks we will and questions Judy, where Following we from session a take analysts.

the With that, to over turn I will David. call

David Klein

and everyone, thank Quarter financial review Year Fiscal you Fourth and morning, Growth's 'XX Good for to joining today Canopy us results.

from year the year cannabis I'll the the for During how exciting fiscal all growth poised highlights business is achievements across of past fully profitable the call, ahead cannabis-focused a is markets. global that share and key Canopy demonstrating most stronger, in

was transformative year let's Canopy. First, for on that fiscal the 'XX touch

our an third took time This business the growth by of has to year, asset-light it focus we leveraging our to extensive add accelerated on requirement priority enabled our and infrastructure while to This core decisive our market growth. across to improved invest us parties and categories. streamline margins when ahead where need of actions to and as we maintain without on focus model. scale all we capacity the or our strengths has During implementing

took a go businesses action on reduce by in most and focus believe what burn we the the future weren't easy, noncannabis success. as of work divesting financial changes its one the commercial our Canopy we In to very growth. consumer that Canopy's undertook entire our drive establishing strengthening bold enhancing all Canopy's of our All team and proud for to evolution the I'm exciting lifetime. of our parallel, execution, and platform to we while greater strategic execute trends These cash and position is ensure

'XX entering result, a fiscal with Canopy As strong foundation. is a

deliver geographies have business focused the growth. can a business. of built categories We're profitable in and well that we've a and potential, We greatest positioned

Looking pleased to of I'm in implemented. impact our that positive report the year results to our the fiscal we've performance the demonstrate in 'XX. already changes

that can has step sheet while has EBITDA and to for is Canopy adjusted profitability. that businesses, a costs. gross our business ample lean profile of our performance all runway growth consolidated and across now attractive investing without strengthened A in agile that organization change margin an financial nearing support a support balance growth

of adult-use our competitive high-quality Focusing market strengthened in consistent flower central resurgence our Tweed. is of has Kincardine sites Canadian national The of and the the highlighted on business. from by pillar production Doja flower positioning our the

fifth increase store summer our XXX selling Spectrum the our points points X,XXX Tweed XX% Canada for flower of fourth delivered of the marking over deep in points and added industry-leading and ensuring business during revenue including insured we has care we Additionally, expanded increased access the as enter beverages, consumers assortment the space In XXX over online for to in across patients well season. growth. quarter quarter as product medical for our consecutive distribution important revenue a Canadian year-over-year Therapeutics as

continues international 'XX. Australia, also revenue cannabis Our delivered markets our in high-quality from cannabis which Canadian to business record benefit increased fiscal for including in demand

In execution in also and growth cannabis assortment commercial Poland, markets an our business fiscal Germany and product the expanded improved Republic in addition, 'XX. international in to Czech contributed

to net Moving fiscal on portable was quarter demand meet the year-over-year. demand Bickel higher-than-expected with Bickel Storz contributed the 'XX, Volcano, Storz other fourth double to Bickel new & & increasing required its third quarter exceptional legendary early Storz initial our vaporizer us best Venty the of brand's continued launched demand. When this XX% for delivering paired devices, which for in to to revenue with business, vaporizer, production ever including &

billion businesses, to fiscal 'XX. these by of since strengthen commercial Collectively, actions our debt over total we in advancements to addition actions 'XX. $X.X executed reduction which our fiscal of number reduced beginning in 'XX, in Canopy's fiscal debt also over million to the balance a these sheet $XXX brings Canopy's In

convertible the to $XXX subsequent debt maturity also estimated years. of eliminated a end we of Further, X short-term by the 'XX, extended note a fiscal or million and obligation have

until As a cash has Canopy of healthy XXXX no a has balance result, over $XXX material March debt due million. and

and the Our ahead of and peers. future industry provides sheet we with strengthened flexibility believe positions required balance to our us certainty growth, power Canopy

we year we stage exited 'XX a businesses our set plans fiscal be for Canopy. will 'XX for the are showing as commercial a Our believe that fiscal momentum and banner

we investments addition and market strategic consolidate, peak flower both also speed flower with as producers. is are and to present during third-party accelerate Our to volumes the domestically Canadian securing to And with our internationally. to and opportunities that mature tangible from capital through continues retaining to in surge are us sales the deliver to excess industry and Canopy Kincardine Canadian capacity achieved provide market, expect periods. critical capacity Upgrades to avoid facility cannabis continues within our until winning increase procurement to underway high-quality at capacity customers, already production platform flower

increased This at deliver healthy on will We versus market the which annual believe our our share Canada in costs stronger growth growth by distribution, driven share of growth arriving with back as half a reflect fiscal the soft be 'XX pre-roll, market year. focus plans, which capacity, across chasing vape expanded in sales force in new and introduction all the the the gains products, speak. we will through and of are profitable gel categories in strengthened growth flower

international We believe Canopy's plans also for fiscal our 'XX. annual growth healthy will in business deliver

its legalization gains to comfortable doctors of of prescribing international addition benefits. anticipate the become continued significant will country's as In explore markets, and more in cannabis the more across increase we cannabis a drive medical market Germany's our size medical patients

Germany, European-based is expand positioned actively well on our capitalize Canopy to this offering. long-term to leader Germany growth, and in we to to add a we're our third-party suppliers supply believe and additional As working to

as to the continued vaporizer Bickel well our Venty 'XX. Storz & as the plan demand drive in premium distribution brand's business, Storz U.S. to we and Bickel expect Looking on for significant to for keep in & building momentum expanded fiscal the growth

brand's that of in that I'm We brand further as a and Jurgen to was illustrating & the within Bickel adoption largest German of a German greater continues Bickel, kind Managing the homegrown importance shaping this as We're markets cannabis have of in Director Storz critical Germany. member elected association, Board and the in the Association. strong its of it pleased role the Cannabis Canopy medical representation Business advancement & play Storz cannabis will pleased of connection recently German cannabis from that benefit recreational the and the to industry. co-founder among Bickel's Storz the highlight also Bickel feel and strength Canopy's & German consumers,

like which would to we quarter the Shifting lay to accelerated about USA, groundwork for states: strategy. and growth of for highly markets. across focus March to to expansion remain ended X finalized In take Canopy's Wana plans the Overall, state-level the and our opportunity their continues USA number potential XXXX, is Canopy U.S. I for Canopy into the optimistic reiterate to for New York, overwhelming forward of support new advance moving key cannabis Connecticut Vermont. the shareholders a resolution required to this rapidly, the thanks

brand's to new While expanding continue product the assortment. also SKUs Colorado launching gummy in

the In the solventless important to ranked award-winning vapes It's Jetty's only X state the in the New when launched takes of U.S. impressive in the consider as quite of best is currently and in addition, nationally New California, Northeast. products team the are made you live that really note also Colorado, available to which products Jetty states, York rosin that New #X Coast Jetty Jersey. recently, as vape Jetty's the Jersey, West more

company opportunity to the take that a the recently as to acknowledge like distressed been I'd asset. operating has Acreage, to Shifting

which U.S., in where Acreage seventh the dispensaries turning including in Cleveland, are believe tremendous that to the month continues largest its other to continues entered York operations Akron, and positioned June states, However, Acreage New and and upside. the Recently, use adult Ohio, Botanist have with in well of hone Canton, state its the Wickliffe. presence Columbus market key in we is

flow addition years. emphasize cultivation X state has processing unequivocal operations including in in provide strides and Canopy aligning our expansion setup Acreage the on for financial legal our positioned with state Canopy into timing front, the also rescheduling ahead. industry. growth believe USA of significant for Acreage in in USA. Tier the significant also believe rescheduling. perspective, best the cash this the Acreage's to within rescheduling as it last significant major U.S. been received largest locations I'd potential. cannabis support the well the this is ecosystem, The immediate an in that all and a Notably, realize a retail strategy and change like profitable the is have We centers to state, regulatory and is for awards of population its especially businesses, nicely dispensary from and We've will entry to over And with a X meaningful with forward leap those represents multiple facility the advancement that to improvement including that

is our a significant Canopy year Growth, closing, in we for progress fiscal demonstrated 'XX cannabis. of capabilities that the In was our and opportunity enduring belief global where

we're our future. to the year Looking optimistic about ahead,

we team. have the great great have to and -- markets. brands, have got great strong attractive We experienced a exposure a most We've and

to continue in era. poised the Canopy's ahead the be are believe plans best opportunities we think have with And We to we 'XX fiscal significant. is place,

call pass the review Judy in our I'll to to greater detail. financials that, With

Judy Hong

fourth and improve our XXXX. start then made we've XXXX additional sheet our across reviewing taken results, and to outlook P&L followed quarter Thank that I'll including much, significant fiscal the year. and and discuss good for flow, we've priorities everyone. you morning, progress this balance by the fiscal David, our actions our year full by I'll very cash

in million a Storz to compared improvement QX business growth $XX XX% with of revenue net Let's Canopy year-over-year, growth of quarter all year showcasing delivering by gross compared FY XX% of margins, consolidated 'XX adjusted in delivered led X which QX begin QX & by EBITDA by revenue a year Canopy transformative for capped FY increased flow. fourth year-over-year results. cash with 'XX our and Bickel, to free ago. and units revenue its the organic

margin gross EBITDA back by adjusted QX temporary a year impacted again, last gross loss significant expenses noncash call. margin margin gross margin QX the million, XX%. $XX factors later depreciation in adding I'll gross and XX%, and versus year. improvement last to of QX Consolidated address negatively was was in of was cash XX% year. XX% in a an COGS that was Full improvement was XX%, compared Canada

the over to was progress flow of improvement path to like QX the store. Starting XX% net increasing of grow million, year revenue and to with key in improvement of our a was benefiting compared million, $XX Free greater year of to compared continued from to a $XX X% compared detail, mix QX insured the Canada $XX online ago. cash patients last assortments results our towards businesses larger sales in quarter. I'd including product to a more number review nearly year, million of now last against strongly, last and an an Medical up XX% Canada. profitability. customer outflow Spectrum

COGS quarter supply Acres gross in Wana the margin Our constrained as offset edibles and was we gross this contributions SKUs. Tweed adult XX%. and certain by down was in was use the from Canada was business adding in were X% noncash depreciation X brand margin back in as declines X% growth BXB on QX costs brand cash

unpack which in me for Canada gross softer planned. margin Let QX, than came

COGS program. cost generate year-over-year in continue the to from We reduction reductions

factors. QX However, temporary margin few a by was gross impacted negatively

in we higher-than-expected the at Kincardine unplanned per seasonality unit. facility, resulted disruptions, by driven First, lower experienced cost yields which cultivation and inventory

Second, of manufacturing driving with lower was reduced, indirect operations costs. of cultivation our under-absorption yields, the our utilization

facility [indiscernible] former Lastly, also negatively Hershey margins. prior the was consumption cost the impacted of gross inventory, higher which to produced our of

transient, QX we're pleased in gross manufacturing are year, year this notwithstanding factors the business margin XXXX. already margins yields and that All Canadian our in we higher utilization seeing performance and cultivation in of Canadian and our gross lumpiness these achieved cash improvement in operation our of fiscal full XX% are

Canada In the of by improvement fiscal further expect Kincardine upcoming at cultivation 'XX increase lighting expected driven the gross addition, we margins FY winter LED in in installation first in is new XXXX in yields to half months. of our

to carry a million strategic year in greater costs. International rate and flexible In in and Germany a expected continued new growth XX% compared to was year to sales up sales declines and of addition, cultivation in and to production by for Storz in Australia flower favorable in of these pre-roll driven primarily in products sales also distributor launched [indiscernible] markets cost period. Storz margin the pool vaporizer of & Storz and pre-roll also significantly retailer now & year running Bickel & sequentially. capacity, cannabis meet that from up country XX% flower Bickel We and XX% the the is at from ramped double-digit XX% sales and portable revenue driven consumer in International promotions. sales by contributing margin QX expanded in Bickel And reduce benefited year-over-year. new a & offset margin to in grew supply triple-digit also sales prior markets compared loaded demand portion and our devices the gross cannabis was saw ahead device saw and is higher mix QX increase XX% $XX increase Venty. strong this stronger successfully of We also a QX, machine Poland Storz overall we've QX. last Bickel to reduce 'XX and Venty margins increased with sales expected for reduction FY XXX to outsized geographies already we've last and our our higher XX% partially were at year, labor strong QX. gross up compared shift is sourcing all year-over-year. was cost, and by of demand that up was to coming events QX as the favorable

used fiscal Canada adjusted of driven ago. temporary was impacted $XX million, a the QX date. to have outlined SG&A of cost Looking of expenses improvement at compared & achieved margins $XX reduction in a loss included in operation exiting an an to declined the million, an now by Bickel compared of which used which $XXX outflow million realized million includes $XX from softer in $XX was Storz EBITDA down that realize improvement from we our growth year. call, million cash I the savings $XX gross additional SG&A the undertaken EBITDA within Cash XXXX. I'd is million. strategic also million the $XXX XXXX. a but reduction fiscal announced savings placement 'XX. fees, was to of $XX Through factors cost including cost Canopy margin XX% Canada, year-over-year. [indiscernible] we of transformation QX and in $XX $XX discount profitability loss million, with of proceeds loan expenses IT, million, improvement cost target by and prior markets million company G&A, a cash last of now in a $XX million interest for corporate flow year of from by during QX, opportunities, was the continuing and to balance million private received cumulative the sale was cash our par. completed in factors, in to for our at of in $XX asset of like XXXX, investments to which of BioSteel Cash $XX identified approximately legal year-over-year, temporary XXXX senior Free QX primarily adjusted We've paydown to flow that mostly million and secured we gross program our million flow was $XX a from International driven and end public positive for $XXX Total costs term revenue initiatives adjusted payments million to professional proceeds QX announced achieved insurance, to fiscal QX, April due by year. negative fiscal QX, sheet. February has in expect which earlier review EBITDA 'XX of in savings, XX%

Turning to sheet. the balance

of the short-term improved we and transactions our XXXX, XX, $XXX several our balance debt $XXX we've that and million investments in sheet. to completed end, had reduced million. March of balance debt As Subsequent further quarter cash and

we and plus by promissory note million Canopy's balance. First, exchanged Constellation $XX of canceled principal amount $XXX remaining million accrued the interest the into held of shares exchangeable the

issued proceeds million Second, note to XX September XXXX May we with exchanged new a XXXX. note of in a in approximately maturing note X-year maturing USD and CAD XX the million gross convertible now of

growth Third, X.X executing like XXXX position on to while In cannabis, growth ensuring invest and XXX as and new cannabis, see footing, improve which to provide medical enhancing business our high-quality products both additional remain in for to in original to proceeds the substantially continuing USD obligations, by of supply sheet XXX loan we're international principal reducing term products while of in have senior the we've fiscal further Czech with to in balance activities quality commitment CAD a term. deliver the USD March In our expect and driving additional Republic from consistent remain launch and the share to now and distribution We will million, loan balance near million coming enhanced our our our we months. I'd profitably our is on operations. matures on to all financial term position, channels BioSteel Poland by growth million our short-term gaining as these adult-use provide secured stable over asset significantly and the Canada now key focused and on future improving the margins. which now market on the focused well for market funding debt further sales. These expanding eliminating product our in of of invest of paydown and cash made Germany, markets outlook actions 'XX. the markets flexibility into key priorities focused our

the to For work was and by new December we're margins million comments. revenue stronger us by Bickel, of time. Storz strong reported driven potential the corporate shareholder the a profit on supply margins in in as $XX negatively additional continue Bickel's FY standpoint, results will EBITDA channel. improvement phasing from million concludes over at G&A non-medical our From take level, we lessening consolidated we're to was closing, inclusive firm impact in Venty XXXX driven growth that of recently know increased as and Australian well & sales divested enhance fiscal [indiscernible] half product a growth. foundation lines, 'XX accelerating and finally, achieve this focused of key impact divested businesses. We which of in well year-over-year & to supply positive adjusted markets, other KeyLeaf, we prepared questions healthy will $X by products we're as a revenue from believe divested opportunity And believe We'll we sales of expanded value ramp-up from ahead in XXXX. following businesses of the place analysts. and February a on sales my impact path now that growth and increased which impact specifically, growth from in divested excited Storz second also have the implemented This as about gross And to from included expect XXXX achieving growth in of of cost the flower and driven savings. In which from mitigate distribution,

Operator

Global. question [Operator Grey Instructions] Alliance from Aaron at First comes

Aaron Grey

the gross of in color from this terms question margin, regarding transitory thanks my somewhat. first in the your or me question -- for a comments So nature on how

expanding some the gross Just of the or greater we the cadence if the You provide improvements commentary you had more lighting other by and improvement? the could of terms seen utilization from of XX% and the should initiatives grow rooms. cannabis have in that you Canadian some segment. within think margins timing How of the about

impact how we profitability So gross of the overall ramping of think Canadian company margins the the do about of going that the forward? then the from and

Judy Hong

Sure, Aaron.

improvement margin margin that's and you XX%. a QX. Canadian I we a business margin all a cash year year-over-year basis with take on cash of in achieving did step expectation back, XX% restructuring So deliver we've a year on in gross significant taken gross actions full to And the our if basis, post of think that close within of our gross full mid-XX%

if that have I the there think said of margins. million factors would about factors in few dollars. transient gross you think the call, the a estimate as QX on those several magnitude by those I margins, margin, margin I impacted negatively really the impacted

you mid-XX% we're adjust margin Canada. I of . low in kind gross to those, if for to So back think

so of said on of we're we at further with all rest I If in improvement, call, you and looking at taking fiscal the see look the QX actions really that 'XX just beyond, the Kincardine. improved

be is back more that going to half bit loaded. of Some a

the So expanded bit winter the that's think will and the that really the in months from flower as -- months, we -- but go rooms installation lighting, from increased coming of the help the Kincardine grow the year. earlier, on little as I back a side the LED into capacity we the in half will happening come

a back cash pleased positive should you half the in stronger versus Canada back the particularly mid-to-high front. progress continued basis, driver year. mid- think I the this adjusted about year we're half consolidated EBITDA on the but full in the to as the half, the at for will think really in gross of be XX% positive the do we show -- level, Canada And So think first all be achieving in to that all, margin probably

Operator

CIBC. from John question from Next comes Zamparo

John Zamparo

comments My And balance better the repay debt debt? trying what interpret should about that the on I how level of wonder for plan able invest the to given being to is question that understand growth sheet. and I'm to is And the we remaining.

Judy Hong

John. Thanks, Sure.

of I I on think financial call, of debt also any the March reduce XXXX. way. in And the our in next Really, significant debt. of interest substantial We as a showing have a we've amount. that maturity been said think change way position to expenses that we're that our we big So improvement we've are as of maturity terms don't tranche underlying our debt able businesses in our reduced cash that near-term burn reducing is also meaningful the in any is the

in gives the is that well operate flexibility prolonged the today really heavy really think that in given weight. deal as our we greatest as the asset just we with speak. are we cash to for markets investing ability So be it invest opportunities as a the our I to position for in look growth maturity investing to in mean going in timeframe, to us doesn't we of really, have the debt that potential That

look to more a partners. really with just opportunistic I transitioned I lot the us position. those really to being flexibility balance sheet But in think opportunities think improved and asset-light we've it finding for gives

Operator

[Operator Kang Instructions] Canaccord from next question Genuity. comes Yewon at

Yewon Kang

the of if U.S. the this color CBD kind growth and U.S. under of that the to behalf it any And the well. helped Poland in on Germany My line more forward positive segment. segment. quarter-over-quarter expand question CBD a going the it alongside had nonrecurring on impact strength continued you Kang there. like have on business of growth margin you guys international [indiscernible] provide opportunity? as is top because kind sequential there [indiscernible]. And segment line on this called top the under Obviously, plans Can behind business also on overall opportunity that seems some is you out just This Yewon

Judy Hong

been as I recall, take you I have really can at our that. mean Republic. I you the that think international and as business really approach with priority I key that very, may think regulatory about hasn't it Germany, we've the Australia unlock, if markets, Yes, CBD would. at should the way business, organization looking happened U.S. Czech evolved very we our as Poland, Canopy markets, targeted look frankly, The within think you thought

the have decided USA. actually place the business for We reside CBD that Canopy to U.S. best also is

And -- QX of so the the then in to are from and that we sometime happen in of Canopy XXXX. to process we a that canopy least business, USA winding over down business perspective at expect transitioning fiscal

Operator

Zuanic Next Associates. question comes from Pablo & at Zuanic

Pablo Zuanic

-- Acreage David, thinking them of just what's to And fund fund permissibility, if type any help in funding you actually regarding assets, of what meet federal Wana. them? for that done in structure, remind doesn't And terms changes Ohio. you that way, us, federal help Canopy been approval your Or to to and Canopy standard those approvals don't assuming Canopy if USA. also U.S. Can everything left? has remind potential have terms you how of yet, us shareholder permissibility related about of they the rescheduling in USA and that, can the you in how how does Acreage to need if expansion I'm and right? achieve But growth? has can

David Klein

Yes. Yes.

that Pablo, of we have approval license. approval approvals, don't need nature. the process or a through need anything state go any we We where in each in So do of shareholder terms to

yet, its any you to time some exercised to approvals. going term. Right as into we exercise see regulatory and right Wana be to to take approval problems those purchase their Canopy our Acreage has that option [indiscernible] each That's now, USA. in individual with That exercised to get is And but has Jetty. we've will any it so regulatory expect near process. done know, obligation expect we've major will happen option, the hurdles, through We there state's purchase the and it the what but then through don't happened Canopy hasn't process. we don't move

businesses the at and putting of CSA the all cash In included a of have is happen capital balance a CSA, they across Wana together. businesses would I ability, how terms access situation to. and balance think cash Not those is assets it function their CSA improve our like the sitting will which with really in significant what Jetty

be expect acreages amalgamation capital able businesses will CSA costs well actually keep available put of top are structure with the to synergies those you with also be currently And some so but eliminate when public to when be also bottom will that kind we synergies CSA. to the entities, available be that as mind, challenges there through related will line of resolved together, associated in all And there significant acreage. we line company

Operator

This concludes I remarks. the for conference will Mr. Klein you. back final over turn call Thank call. to the

David Klein

Great. for attending we today's as singularly on Thank wrap focused we're To you up, cannabis. started, call.

growing businesses margins. in have Our healthy improvements are and gross delivered

some joining summer our exciting Our and basis markets. Thanks again across exposure for I enjoy outstanding business consolidated is moving excited a is and Canopy our for the going, a ahead. products approaching positive adjusted forward most you I offers encourage option you EBITDA to of Canopy is us, where business USA rapidly. about on We're believe and try cannabis that firmly the unique world's growth to as

thank will team -- and answer additional day, have you, Relations to a be Investor great Our everyone. available questions

Operator

concludes the issued replay instructions everyone, accessed Growth's attending earlier for be you, Thank of available Fiscal August today's today. XXXX, until Fourth release Canopy company's this XX, press A Financial and will be in Call. Conference provided XXXX conference following the call call. Year This Quarter can and Results

Canopy Growth (CGC) 30 May 242024 Q4 Earnings call transcript