Canopy Growth Corporation (CGC), a leading global cannabis company, has undergone a transformative year, emerging as a stronger, fully cannabis-focused business poised for profitable growth across the most exciting global cannabis markets. The company's fiscal year 2024 financial results demonstrate the positive impact of its strategic initiatives, showcasing improved margins, a leaner organization, and a strengthened balance sheet.

Financials

For the fiscal year ended March 31, 2024, Canopy reported annual net revenue of $297,146,000, a decrease from the prior year, as the company divested its non-cannabis businesses to focus solely on its core cannabis operations. Despite the revenue decline, Canopy's annual net loss improved significantly to $657,269,000, compared to a larger loss in the previous year. The company's annual operating cash flow was -$281,950,000, and its annual free cash flow was -$285,946,000, both showing improvements year-over-year.

In the fourth quarter of fiscal 2024, Canopy delivered consolidated net revenue of $73 million, representing a 16% increase compared to the same period last year. This growth was driven by strong performance across all three of the company's business units: Canada cannabis, international markets cannabis, and Storz & Bickel.

Canada Cannabis Segment

Canopy's Canada cannabis segment generated net revenue of $37 million in the fourth quarter, up 4% year-over-year. The company's Canadian medical cannabis sales continued to grow, increasing 16% compared to the prior year, benefiting from a greater number of insured patients and a larger product assortment in the Spectrum online store. However, the adult-use business-to-business (B2B) channel saw a 4% decline, as growth in the 7ACRES brand and Wana edibles was offset by declines in the Twd brand due to supply constraints.

The Canada cannabis segment's gross margin in the fourth quarter was 0%, with a cash gross margin of 13%, impacted by temporary factors such as lower cultivation yields at the Kincardine facility, reduced manufacturing utilization, and the consumption of higher-cost inventory. Canopy expects these issues to be transient and anticipates further improvements in Canada gross margins in fiscal 2025, driven by initiatives such as the installation of new LED lighting at Kincardine, strategic sourcing of flower supply, and the introduction of a new pre-roll machine.

International Markets Cannabis Segment

Canopy's international markets cannabis segment reported a 32% year-over-year increase in net revenue in the fourth quarter. This was driven by strong growth in Poland, which saw triple-digit sales growth, as well as double-digit growth in Germany. These gains were partially offset by declines in Storz & Bickel device sales in Australia. The international markets cannabis segment achieved a robust gross margin of 40% in the fourth quarter, benefiting from a favorable shift in country mix.

Storz & Bickel Segment

Canopy's Storz & Bickel vaporizer business delivered an exceptional performance in the fourth quarter, with net revenue increasing 43% year-over-year to $22 million. This growth was fueled by continued strong demand for the new Venty portable vaporizer, which was launched in the third quarter, as well as strong pre-4/20 loading by distributors and retailers. Storz & Bickel's gross margin improved to 41% in the fourth quarter, up from 34% in the prior year, driven by a favorable product and geographic mix.

Liquidity

Canopy has made significant progress in strengthening its balance sheet and improving its cash flow. As of March 31, 2024, the company had $203 million in cash and short-term investments and $597 million in debt. Subsequent to the quarter end, Canopy completed several transactions that further reduced its debt and enhanced its cash position, including the exchange of $81 million of a promissory note into Canopy's exchangeable shares and the issuance of a new five-year convertible note.

These actions have eliminated substantially all of Canopy's short-term debt obligations, reduced the senior secured term loan principal balance, and provided the company with increased financial flexibility to invest in future growth while funding its operations. Canopy's free cash flow in the fourth quarter was an outflow of $23 million, a significant improvement of 77% compared to the prior year.

Outlook

Looking ahead to fiscal 2025, Canopy is focused on driving growth and profitability across its key business segments. In Canada, the company plans to continue investing in product quality and expanding distribution while further improving margins. In international markets, Canopy expects to see growth in its priority markets of Germany, Poland, and the Czech Republic, as well as the launch of new products.

For the Storz & Bickel segment, Canopy is focused on accelerating growth in key markets, driven by the Venty portable vaporizer and other product lines, which the company believes will help mitigate the potential impact of a recently implemented vape ban in the non-medical channel in Australia.

Canopy's Canopy USA strategy is also progressing rapidly, with the company's US cannabis investments, including Wana, Jetty, and Acreage, laying the groundwork for accelerated growth across several key state-level cannabis markets. The company believes the timing of its US strategy aligns well with major regulatory developments, such as the rescheduling of cannabis, which it expects will provide an immediate and meaningful improvement to the cash flow of all state-legal cannabis businesses, including those within Canopy USA.

Overall, Canopy is entering fiscal 2025 with a strong foundation, a focused business, and a platform for profitable growth. The company's strategic initiatives, strengthened balance sheet, and improved financial performance position it well to capitalize on the exciting opportunities in the global cannabis market.