Canopy Gwth (TSX:WEED) released fourth-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below.

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Summary

Roundhill Cannabis ETF reported a 6% increase in net revenue to $285 million, driven by 18% growth in Canadian medical cannabis and a 20% increase in Canadian adult use cannabis.

The strategic acquisition of MTL Cannabis has positioned the company as a leader in the Canadian medical cannabis market, with integration efforts advancing rapidly and $6 million in targeted annualized cost synergies already achieved.

Management expressed confidence in achieving positive adjusted EBITDA during fiscal 2027, supported by continued revenue growth and decreasing costs, with a focus on expanding markets in Europe and leveraging their strengthened platform and product portfolio.

Full Transcript

OPERATOR (Operator)

Good morning and thank you for joining us. On our call today we have Canopy Growth's Chief Executive Officer Luc Mongeau and Chief Financial Officer Tom Stewart. Prior to the opening of financial markets today, Canopy Growth issued a news release announcing the financial results for its fourth quarter and fiscal year ended March 31, 2026. The news release and financial statements have been filed on EDGAR and Sedar and will be available on the website under the Investors tab.

Before we begin, I would like to remind you that our discussion during the call will include forward-looking statements that are based on management's current views and assumptions and that this discussion is qualified in 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's reports filed with the SEC and SEDAR 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 GAAP measures are included in our earnings release. Please note that all financial information is provided in Penny and Dollars unless otherwise stated. Following remarks by Luke and Tom, we will conduct a question and answer session where we will take questions from analysts and with that I would like to turn the call over to Luke.

Luc Mongeau, Chief Executive Officer

Thank you. Good morning everyone and thank you for joining us today. Fiscal 2026 was a defining year for Canopy Growth. We made the hard calls early, streamlining the business, sharpening our focus and reallocating resources to where we see the greatest long-term opportunity. We also invested in people needed to execute at a higher level. These actions are now beginning to show up in the business. On that, I want to take this opportunity to thank our teams and say how proud I am of how they responded throughout the year.

The focus, collaboration and execution across the organization was critical to the progress we achieved. Our full-year performance reflected continued momentum with net revenue increasing 20% in Canada adult use cannabis and 18% in Canada medical. Alongside operational execution across the platform over the past year, we also optimized our structure and reset the cost base to a more sustainable level, removing significant expenses from the business.

These changes drove stronger financial performance in fiscal 2026 and we expect the benefits to be even more meaningful in the current year. In parallel, we recapitalized the business to strengthen our balance sheet, stabilize our cash balance and extend debt maturities to 2031. This improved financial position expands our strategic flexibility while reducing risk and uncertainty. The defining milestone of the year was the acquisition of MTL Cannabis, establishing Canopy as the leading Canadian medical cannabis business by Revi.

With increased scale, broader capabilities and greater market reach, we are now operating for a significantly stronger position. Valential has only been part of Canopy for two months. Integration efforts have advanced quickly. We are already executing on 6 million of our targeted 10 million of annualized cost synergies and the benefit extend way beyond cost savings. We are leveraging Canopy's robust distribution platform to extend the reach of the MTL products, including the recently announced launch of MTL strains in Germany.

Just as importantly, the MTL team brought a strong track record of producing best-in-class products and executing at high operational standards. These capabilities are now being embedded more broadly across the organization with team actively sharing best practices to improve productivity and execution across our cultivation network. As integration continues, we're also building more disciplined and repeatable processes across the organization, strengthening our framework for producing high-quality cannabis consistently and at scale.

We have recently seen the results of these efforts in Europe where we have delivered strong sequential growth in the past two quarters. We believe strength and capabilities will become increasingly important as the industry continues to evolve globally, particularly in the European market. With that, let me turn to our financial results for the year. Net revenue increased 6% to $285 million driven by growth in our Canadian medical and adult use business.

Canadian Medical delivered the most consistent performance with an 18% increase in net revenue for the full year and positive year-over-year growth in all four quarters. These impressive results were driven by a larger product assortment and increased order size as we expand our base of insured customers. But even more encouraging as I mentioned earlier is that we entered fiscal 2027 in an even stronger position after joining forces with MTL Cannabis to become the market leader in Canada.

Our Canada adult used business returned to growth in the year with net revenue increasing by 20%. That represents a significant turnaround in a category where Canopy had been stagnating. The growth was driven by product innovation focused on the fastest growing adult use categories including infused Pre Rolls, Vape and ICHC. Flower we believe there is room for Canopy to significantly increase our share of the recreational market in Canada on the strength of our leading brand.

The most recent market share data from May 2026 shows that Canopy has improved from the number 8 overall ranking to number 6. We have taken consumer-led approach across our medical and adult use portfolios, focusing our efforts behind the brand, products and category where we believe we can build enduring market leadership in the international business. We have reset our European operations to better unlock the flower supply chain that involves streamlining processes, strengthening execution and making sure we got the right product into the market.

These efforts have helped us overcome challenges we experienced early in the year. As a result, the international business a very strong finish to the year, delivering 68% year-over-year net revenue growth in the fourth quarter. That momentum has continued to the first quarter of fiscal 2027, driven by a broader portfolio of products. Europe will remain an important area of focus for us this year. Stores and nickel net revenue will down in the year due to challenges in its two largest markets in US and Germany.

The successful launch of the VZ vaporizer during the year helped boost sales in a new category focus on affordability and portability. Post quarter end, the SMB team, inspired by new leadership, has been focused on cost optimization and a reset of our commercial approach in the U.S. overall, we exit fiscal 2026 as a stronger, better positioned organization with improved scale, stronger financial flexibility and the team that knows how to execute.

I believe these changes make us stronger and demonstrate how Canopy is becoming a different company. We're energized, we're encouraged, we're confident and we're just getting started. Without a doubt there is much work still to be done and I'm very confident in the strategy we have in place to deliver meaningful growth. More on this in a few minutes. First, I will ask Tom to review our fourth quarter results.

Tom Stewart (Chief Financial Officer)

Thank you, Luke, and good morning, everyone. We reported $71.2 million of net revenue in the fourth quarter of fiscal 2026, which was 10% higher than Q4 of the previous year. Growth in the quarter was driven by the cannabis segment and in particular Canada Medical and International Cannabis. Cannabis net revenue for the fourth quarter was $54.5 million, up 20% compared to a year ago. This growth was led by Canada Medical Cannabis with revenue increasing 27% to $25.3 million, marking another record quarter.

Key drivers include continued expansion in insured patient registrations as well as our medical team's ongoing focus on providing the best-in-class service experience to our medical consumers. In addition, and in response to changes to Veterans Affairs Canada reimbursement, we moved quickly in fiscal 2027 to implement targeted actions designed to mitigate the impact on both veterans and the business. These initiatives included strategic pricing actions, refinements of the product mix, and patient retention efforts focused on maintaining accessibility and long-term engagement with our medical platform.

International Cannabis net revenue was $8.6 million, up 68% compared to a year ago. The increase was largely driven by year-over-year growth in Poland and Germany as our focus on supply chain improvements for the European business have delivered another quarter of growth for international cannabis. Cannabis gross margin in Q4 was $3.7 million or 7% of net revenue, which was below our typical gross margin range primarily due to inventory-related charges of $10.7 million as a result of the MTL acquisition.

As part of integrating our two businesses, we conducted a comprehensive review of the combined inventory and product portfolio with a focus on simplifying our combined offerings and prioritizing our highest quality, best-performing products. As a result, we made deliberate decisions to reduce redundant and overlapping inventory to ensure our stock levels are well-positioned for fiscal 2027. We also recognize costs associated with the flow-through of first accounting step-up on acquired inventory balances.

Importantly, excluding the impact of these acquisition-related charges, adjusted gross margin for the Cannabis segment was 26% in Q4 fiscal 2026 as compared to 12% in Q4 fiscal 2025. We are moving through a transition period as the two organizations integrate operations, align teams, share best practices, and optimize the product portfolio. As a result, we may see slower growth in the first half of fiscal 2027, putting near-term pressure on our revenue as we continue to adjust our product offerings and make improvements at our cultivation facilities to position the business for long-term success.

We would fully expect to see gross margin improvements in fiscal 2027 within the cannabis segment on integrating the MTL business. At the same time, the $6 million of MTL transaction synergies we are executing will increasingly take effect. To give more color on that figure, it includes items such as the elimination of MTL's public company costs, headcount reductions, and rationalization of redundant facilities. As part of our new footprint assessment, we made the decision to close our cultivation facility in Kelowna, BC.

Given our focus on scaling our cultivation capacity at our GMP-certified Kincardine facility and MTL's facilities in Quebec, we expect to continue to execute against our projected cost synergies to reach our target of $10 million of run-rate savings within 18 months of the MTL transaction closing. More broadly, the cost reductions we implemented at Canopy over the past year will become increasingly apparent in fiscal 2027. General and administrative operating expenses were down approximately $9.5 million in fiscal 2026, a 15% reduction, which was largely driven by the rationalization of approximately 130 positions across the organization prior to the acquisition of the MTL team. The adjusted EBITDA loss of $6 million in Q4 fiscal 2026 represented a $3 million year-over-year improvement but was higher than the $3 million loss in Q3 fiscal 2026. Absent the inventory charges in Q4, we would have shown sequential improvement and that's significantly closer to our adjusted EBITDA break-even on that basis and with our expectation of continued revenue growth and decreasing costs, we remain confident in achieving our target of reaching positive adjusted EBITDA during fiscal 2027.

Turning to our financial position, as Luke mentioned, we significantly strengthened our balance sheet in fiscal 2026, having completed a strategic recapitalization transaction at the start of the fourth quarter. We ended the year with $365 million of cash after completing the MTL acquisition with a total debt of $234 million, our net cash position was $131 million. As compared to the end of fiscal 2025, we have delivered an improvement of $304 million, going from a net debt position of $173 million to a net cash position of $131 million.

Importantly, as we move towards an accelerated growth stage, we have much greater financial capacity to support our growth and, where appropriate, inorganic opportunities. I want to note that while we did not have any sales under the ATM program during the fourth quarter, we would continue to look to use the program opportunistically during fiscal 2027 to support strategic priorities and initiatives if and when they arise. In closing, I would like to acknowledge the continued positive momentum in the US Regulatory landscape.

We are proud to see the framework we pioneered for Canopy USA becoming increasingly relevant with our US peers, leveraging this structure to benefit from the positive momentum in the US Market.

Luc Mongeau, Chief Executive Officer

Thank you very much, Tom. We enter fiscal 2027 with confidence. Since becoming CEO, we have prioritized capital allocation toward higher return opportunities, robust cost management, and executing with excellence. This disciplined approach positions us well to achieve profitability and create long-term shareholder value. Markets outside of Canada, including the U.S., present both immediate and long-term growth opportunities in Europe. Our strengthened cannabis platform and expanded portfolio of products have helped us build momentum.

Our operations in Germany provide important advantages in supplying European markets efficiently and reliably, and we are targeting expansion into the UK during this fiscal year. In Canada Medical, we plan to leverage Canopy's leadership position and nationwide network of clinics to continue supporting patient growth. We remain committed to supporting our veteran community by delivering compelling value relative to other medical cannabis providers while continuing to uphold the quality, consistency, and reliability patients expect from our portfolio.

For the Canada adult-use market, the improved quality of our flower combined with continuing product innovation will be the levers that enable us to grow our brand and our business. Early fiscal 2027 trends remain encouraging, including continued market share momentum across key product categories. As of five weeks into fiscal 2027, we hold top three market positions across a number of key categories on a trailing 13-week basis, including number two in premium flower, number two in infused pre-rolls up from number four on a trailing 13-week basis, and number three in oils and soft channels.

Stores and vehicle is executed on a refreshed strategic plan focused on strengthening sales and marketing efforts in the US and improving operational efficiency throughout the supply chain. To conclude, we strengthened our platform, improved execution, expanded our scale, and positioned the business for its next phase of growth. We enter fiscal 2027 with momentum and a clear focus on accelerating our growth. I'm energized by the momentum building across Canopy.

OPERATOR (Operator)

Thank you, 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. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. If you are using the speakerphone, please lift the handset before pressing any keys. We do ask that you limit yourself to two questions.

For any additional questions, you may press star one. Again, the first question comes from Ken McCai with Canaco Genuity. Please go ahead.

Ken McCai, Canaco Genuity

Thank you. Good morning, Tom. I heard your comments with respect to mitigating the impact on your medical business and on veterans from the change in reimbursement, but I wonder whether you could help us just better handicap the potential impact or trajectory of your Canadian business given how material that headwind is in year and some recent competitor commentary with respect to that headwind.

Tom Stewart (Chief Financial Officer)

Yeah, so a couple points, Henry, and thank you for the question. Part of our mitigation plan includes ongoing optimization of our reimbursement practices to ensure that we're really collecting for the cost of serving kind of the high-quality service that we provide to our veterans. You know, ultimately when you think about our medical portfolio in and of itself, it's skewed more towards 2.0 products. So oil, soft gels more so than flower. So I think, you know, you're not going to see the straight.

While there would be a top-line effect, it's not going to be as drastic as you might see in our competitive set. My actions are also looking to mitigate the impact on adjusted EBITDA, not just net revenue. So while we would expect to see net revenue come down versus sequentially, we're doing everything we can to mitigate the impact on EBITDA and gross margin. So looking to kind of optimize cost structures where we can and really make sure we're priced competitively without interrupting the high quality of service that we provide to the veteran customers.

Ken McCai, Canaco Genuity

Great, thanks. If I could just pivot into international markets briefly. Obviously, international is increasingly in focus, specifically Germany. We're also aware though that it is an increasingly competitive market. So when you look to and when we think about your marketing spend in year to support growth and market share gains, I think fiscal 26 you had a mid-single-digit increase in sales and marketing. How should we think of the evolution of that line item?

I realize there are offsets on the G and A side, but just trying to handicap the potential spend to drive share and growth in Germany through 27.

Tom Stewart (Chief Financial Officer)

Yeah, I would say on the sales and marketing piece within SG&A, a lot of the spend is tied more to Canada than in Germany. I think where we see the biggest unlock in Germany would be getting some of the MTL flower.

Luc Mongeau, Chief Executive Officer

Yeah, so we still see tremendous potential growth potential in Europe. Our challenges in fiscal 2026 were driven by supply chain issues where we weren't able to consistently supply flower. And we're in a much better place now as demonstrated in the last two quarters where we've seen sequential growth. And you have to remember that the European market as a whole still has a lot of potential for growth. Penetration is still extremely low, and we're very encouraged by our progress in the last two quarters.

Ken McCai, Canaco Genuity

Great, thank you. I'll get back in queue.

OPERATOR (Operator)

Thank you. The next question comes from Aaron Gray with Alliance Global Partners. Please go ahead.

Ken McCai, Canaco Genuity

Hi, thank you for the questions here. So first one for me just on the MTL acquisition. You gave hard numbers in terms of cost synergies expected to be 10 when complete. But maybe on some top line synergies, you alluded to maybe some sharing best practices, flower quality. So maybe you can go into more detail in terms of some of the benefits that maybe might have been better than you expected in terms of potential top line synergies from the MTO and then how we can think about that flowing through to the P and L for canopy growth as you start to get some of those best practices that you're learning.

Thank you.

Luc Mongeau, Chief Executive Officer

Thank you for the question. It's a bit early to tell there, but what we're seeing, one of the key reasons behind the acquisition of MTL was their greater ability to grow great flowers consistently and at scale. And the work I started a couple of months ago where we really bring the teams together to unlock the full potential of our growth facilities. What we're seeing behind the scene is extremely encouraging right now. And you can imagine that this great flower will really accelerate our growth in both the Canadian red market and, as importantly, across the European market.

So we're really confident, we're pleased with the results that have been done behind the scenes so far, and we will start seeing the benefits of this in the quarters to come.

Ken McCai, Canaco Genuity

Okay, great, thanks for that. Second question for me. So can I understand? Canada and international seem to be the priority today, but a lot of things are starting to move now. Here in the US, you had phase one rescheduling with FDA and state medical anticipation for phase two whole plant rescheduling to come potentially later this summer. So as we think about canopy growth, historically you've been one of the more aggressive in terms of looking to capitalize on those U.S. opportunities. So now in 2026, FY 2027, how do we think about your view in terms of what it will take for you to want to re-engage in terms of getting aggressive in the US market? If there's any types of key such as being able to maintain uplifting and consolidated, don't use or otherwise. And then what do you think are the best opportunities in the US market today? Having historically done both MSOs and grants. Thanks.

Luc Mongeau, Chief Executive Officer

Yeah, we've been pretty consistent there. Our near-term focus and priorities are Canada International where we can realize value creation like instantly. So our focus there is not changing. That being said, we're very encouraged by the regulatory changes that are happening across the US. So we know what's happened recently is focused on medical cannabis. Our investment in the US has been more in mixed use, call it recreational. So we're not seeing any immediate benefits there.

But that being said, the strategy, the canopy strategy has been to lay out investment across the US to ensure that as the market, the regulatory changes happen in the market that we will benefit from there. So we're very happy with our investment in the Jetty brand in California. We're affiliation with the Claiborne infused pre-roll brand. We've got a sizable investment in Terrasense, so we're well positioned to take advantage of the market as regulatory changes.

Ken McCai, Canaco Genuity

Okay, great. Appreciate the call. I'll go ahead and jump back in the queue.

OPERATOR (Operator)

Thank you. The next question comes from Bill Kirk with Roth Capital Partners. Please go ahead.

Bill Kirk, Roth Capital Partners

I'd like to keep going on Aaron's question there. When we think about the US, why isn't now the time to get more aggressive in the US? Like I understand the Canadian and international opportunities might be more immediate, but what else would you need to see in the US to start getting more aggressive? And then if you could, could you remind us maybe some of the run rate metrics for the assets you do have exposure to? In the past, I think you've given trailing twelve-month revenue and a rough EBITDA kind of range for the US assets.

Tom Stewart (Chief Financial Officer)

Yeah, Bill, this is Tom. So I guess building on kind of what would change. Again, the Canopy USA business is not skewed as much to the medical side as kind of some of our, some of the US MSM. So for us, until there's full kind of uplifting potential for fully plant-touching businesses, there's not as much in the way of benefits to us as might seem to be peers. I would say in terms of the run rates, we do disclose in the 10K, Bill, some are exponential information.

So I would direct you to those disclosures. But again, that would be kind of accumulative across all of our assets. So as we think through to building on what Luke said, that includes retail operations, that would include kind of brand revenues for the WAN assets as well as any business in California and serve the states. So really the unlock for us is until we're at a point where we can US plant-touching businesses irrespective of medical versus non-medical can list and further regulations open up, we're really kind of in the same boat as we were before.

Bill Kirk, Roth Capital Partners

Okay, thank you. In the cash flow statement, there was a like a cash outflow for I think it said deconsolidating or two subsidiaries. What was that in the period? What was that deconsolidating cash outflow?

Tom Stewart (Chief Financial Officer)

That might have been related to prior year? Bill, I'd have to go and go back and look at it separately. We can follow up in a summer session if you'd like.

Bill Kirk, Roth Capital Partners

Okay. Thank you, Tom.

OPERATOR (Operator)

Thank you. The next question comes from Brenna Cunnington with ATP Core. Mark, please, go ahead.

Brenna Cunnington, ATP Core

Hey y'all, thanks for taking our questions. Just looking at the balance sheet, we do have quite the cash balance here with $365 million exiting the quarter. From what I recall, some of this will be used with transitional cost related to the integration of MTL. And so I do understand that the cash reserves won't be at this level indefinitely. And I'm all for squirreling away resources for a rainy day, but it does seem like we have a decent amount of excess cash on hand here, above and beyond what's needed for near to medium-term operations.

So could you just walk us through some of your strategic goals for putting this excess cash to work? You mentioned potentially expanding into the UK and we know maybe the US is a potential for investment on the horizon. Could you just provide more details in color on that?

Luc Mongeau, Chief Executive Officer

I'll start and I'll ask Tom to jump in. So our priority remains clear. It's to achieve positive EBITDA and generate positive cash flows. On this, we're focusing our efforts in accelerating growth in Canadian REC and across Europe as well. What's really good, with all the hard work that we did during fiscal 2026, we're at a place where the balance sheet is way more solid than it was a year ago and we're positioned to better take advantage of strategic opportunities that will present themselves to us.

Tom, anything to add?

Tom Stewart (Chief Financial Officer)

No, I think that's right. You're right, Brian. We're not looking to squirrel away cash indefinitely, but we want to be able to be well positioned to capitalize on opportunities if and when they arise.

Brenna Cunnington, ATP Core

Okay, understood. And then just looking internationally, we have heard commentary from various LP peers regarding the standards for Germany's flower getting stricter, specifically with respect to the flower that's moving through Portugal to the EUGMP certified. Could you just provide us with more color on what you're seeing on this front? And is there potentially an opportunity to gain EUGMP certification at some point in the future?

Luc Mongeau, Chief Executive Officer

Yes, we're seeing very similar things. I think we're extremely well positioned to function in that type of environment.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.