Earnings Call Insights: Canopy Growth Corporation (CGC) Q4 2025
Management View
- CEO Luc Mongeau outlined a focused transformation plan, emphasizing 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.” He highlighted actions already taken: restructuring all lines of business for synchronization between supply chain and commercial teams, unifying global medical cannabis operations across Canada, Europe, and Australia, and streamlining the Canadian adult-use portfolio by removing about a third of the lowest performing SKUs. “We’re acting with urgency to reduce costs, improve margins, and create financial flexibility,” Mongeau stated, referencing a new centralized global operations function and a stage gate process for product development.
- Mongeau signaled that roughly 80% of targeted annual operating expense savings of at least $20 million have already been identified, with over 50% executed. An early prepayment of $100 million U.S. against the senior secured term loan was made, reducing annual interest expense by approximately $13 million U.S.
- CFO Judy Hong stated, “Q4 fiscal 2025 fell short of our expectations, driven by lower revenue in Storz & Bickel, 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.”
Outlook
- Management expects continued strong momentum in Canada medical, growth in Europe—particularly Germany and Poland—and efforts to stabilize Australia. In Canada adult use, a more focused portfolio and new product launches are expected to improve revenue and margins. There is an emphasis on lowering cultivation and production costs.
- For Storz & Bickel, management expects sales to decline in the first half of the year, with improvement anticipated in the second half, driven by a new device launch. Annualized cost savings of at least $20 million are targeted over the next 12 to 18 months through headcount reduction, more efficient sales and marketing spend, and lower professional fees and IT expenses.
- CFO Hong stated, “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 potential impact towards Storz & Bickel business.”
Financial Results
- Q4 net revenue in Canada was $40 million, with medical sales growing 13% versus last year, while adult use was down 3%. Adjusted gross margin in Canada was 11%, and adjusted cash gross margin was 23%. Inventory write-downs and higher initial costs for new products impacted gross margin.
- International market cannabis sales declined 35% in Q4 fiscal 2025 compared to Q4 fiscal 2024, or 23% excluding U.S. CBD sales. Germany saw double-digit growth, but this was offset by declines in Poland and Australia. International markets’ gross margin was 25% in Q4 fiscal 2025.
- Storz & Bickel reported $17 million in Q4 revenue, down 23% year-over-year, with a gross margin of 37%. Q4 fiscal 2025 adjusted EBITDA loss was $9 million, improving from a loss of $15 million a year ago.
- Free cash flow was an outflow of $36 million in Q4, compared to an outflow of $23 million a year ago. As of March 31, 2024, cash and short-term investments totaled $131 million, with a principal debt balance of $316 million.
Q&A
- Aaron Grey, Alliance Global Partners: Asked about near-term opportunities and key levers for achieving positive adjusted EBITDA. CEO Mongeau responded that “we’ve identified $20 million of cost reductions…we’re focusing on the action on the opportunities that are the nearest to us with the highest potentials for return,” citing the strong performance of the medical business and a more focused approach to Canadian rec.
- Bill Kirk, ROTH Capital Partners: Inquired about the difference between current streamlining efforts and past programs. Mongeau explained, “we eliminated two layers of management between myself and our sales leadership…it’s way more than just a cost reduction exercise. It is really a change in the culture of how we go to market.”
- Brenna Cunnington, ATB Capital Markets: Sought further clarity on Acreage underperformance. CFO Hong reiterated, “Acreage’s performance in 2024 was challenged by its liquidity and credit challenges…the key driver really was the underperformance in Ohio.”
- Pablo Zuanic, Zuanic & Associates: Asked about supply chain investment and Canadian medical outlook. Mongeau detailed improvements in centralized supply chain management, while Hong noted, “We’ve outperformed in the market. So we were up 16% in Canada medical…and our largest competitor was up sort of in the 4% rate.”
Sentiment Analysis
- Analysts expressed skepticism about the effectiveness and differentiation of the new streamlining efforts, as well as concerns about Acreage and international execution, pressing management for specifics and timelines.
- Management’s tone was measured but focused, emphasizing urgency and cultural change. Mongeau conveyed confidence in the new organizational structure and the company’s ability to win in targeted segments, stating, “when Canopy focuses, we know Canopy can be successful.”
- Compared to the previous quarter, analyst sentiment was more probing and less optimistic, while management shifted from initial optimism to a more pragmatic, operationally focused stance.
Quarter-over-Quarter Comparison
- The current quarter saw a sharper focus on operational streamlining, cost reduction, and supply chain centralization, compared to broader strategic optimism in the previous quarter.
- Guidance language shifted from projecting near-term profitability to a more cautious tone, with management now unwilling to provide a timeline for positive adjusted EBITDA.
- Analysts in both quarters concentrated on international growth and cash management, but Q4 featured more pointed questions about execution risk and the sustainability of cost savings.
- Key metric changes included a decline in Storz & Bickel revenue and international market sales, against continued growth in the Canadian medical segment.
Risks and Concerns
- Management cited challenges including lower revenue in Storz & Bickel, Poland, and Australia; inventory write-downs; and ongoing liquidity and credit issues at Acreage.
- Mitigation strategies include aggressive cost reduction, centralized operations, tighter inventory management, and a focus on profitable market segments. Management is monitoring Acreage’s financial challenges and discussing potential debt solutions with lenders.
Final Takeaway
Canopy Growth management underscored a decisive shift toward operational discipline, cost reduction, and focused growth in core markets. While the company acknowledged revenue headwinds and execution risks, it pointed to early successes in cost savings and market share gains in Canadian medical cannabis. The path forward centers on achieving positive adjusted EBITDA, ongoing portfolio simplification, and leveraging a new organizational structure to drive profitability and financial flexibility in fiscal 2026 and beyond.