Canopy Growth Corporation

Good morning. My name is Joanna. I will be your conference operator today. I would like to welcome you to Canopy Growth's fourth quarter and fiscal year 2025 financial results conference call. Currently, all participants are in a listen-only mode. I will now turn the call over to Tyler Burns, Director, Investor Relations. Tyler, you may begin the conference call.

Good morning, and thank you for joining us. On our call today, we have Canopy Growth's Chief Executive Officer, Luke Mongeau, and Chief Financial Officer, Judy Hong. Before financial markets open 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. 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 projections. In addition, reconciliations between any non-GAAP measures to their closest reported gap measures are included in our earnings release. Please note that all financial information is provided in Canadian dollars unless otherwise stated. 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. 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. Judy will then speak to our financial results and give an update on Canopy USA. 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 has the key ingredients to become a winning operator in both the Canadian adult use and in the Canadian and global medical cannabis markets. 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 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 the 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 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 disciplined execution. 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 costs, 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 restructure all lines of business to improve synchronization between our supply chain and our commercial teams to drive shopper 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. Building of 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 are also now complemented by integrated bulk cannabis sales into select European markets. All these action combines are already showing early signs of success. Second, we're significantly refocusing and streamlining our Canadian adult use business to gain share profitably, particularly in the product segments with greatest profit potential, including iPotency flour, pre-rolls, and vapes. 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. This tighter, 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. This quarter, we introduce advanced C-cell all-in-one vapes to the Canadian market under the Tweed and Seven Acres brands and launch an expanded lineup of clayboard-infused pre-rolls. Early consumer response has been positive with encouraging signs of market share and growth rankings. Third, we've established a dedicated centralized global operation function reporting directly to me, expanding its scope beyond Canada to support all cannabis markets. The 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 the time during fiscal 26 to the mid-90s this past March and April, driven by better forecasting, planning, and coordination. We're taking a disciplined approach to improving the efficiency of our operations. A recent upgrade to our German medical facility is expected to materially improve pharmacy order fulfillment. We're also investing in automation enhancements to lower production costs across our Canadian manufacturing operations. Lastly, we've introduced a new stage-gate process for product development and commercialization. Fared with a more focused portfolio strategy, this will help ensure new products are competitively positioned and margin and creative 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. 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. early prepayment against our senior secured term loan. Those steps reduced our annual interest expense by approximately $13 million U.S. 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. 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. In Canada, adult use, we're focused on winning in high-demand formats and straightening our presence of retail. And at stores in Bickel, we're enhancing margins to production procurement efficiencies and preparing to launch a new device later this calendar year. 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 Jorgensen. The team is focused on streamlining operation and leveraging its people, products, and footprint 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. As I wrap up, I want to be clear that my immediate focus as CEO 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 does drive 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 thank you and with that i'll turn it over to judy to walk through our financial results and outlook thank you luke and good morning everyone