Increased demand drives double digit quarterly sales
growth.
Additional growth limited by available strain mix
in quarter.
Strong product availability subsequent to
quarter end enabled major milestone of first million dollar sales
day.
SMITHS FALLS, ON, Feb. 14, 2017 /CNW/ - Canopy Growth Corporation
(TSX: WEED) ("Canopy Growth" or "the Company") today released its
financial results for the third quarter of fiscal year 2017, the
period ended December 31,
2016. All financial information in this press release is
reported in Canadian dollars, unless otherwise indicated.
Consolidated financial results include the accounts of the
Company and its wholly‑owned subsidiaries which include Tweed Inc.
("Tweed"), Tweed Farms Inc. ("Tweed Farms"), and Bedrocan Canada
Inc. ("Bedrocan Canada") and its investments in affiliates.
Third Quarter Fiscal 2017 Highlights
- The Company had over 29,000 registered patients at December 31, 2016 compared to over 8,000 at
December 31, 2015, representing a
greater than 260% increase.
- Revenue of $9.8 million; a 15%
increase over second quarter fiscal year 2017 and a 180% increase
over the prior year period
- Revenue growth limited by the available product mix for sale;
supply was limited in the quarter by the Company's rigorous
procedures to fully test the record harvest and approve the
extensive product released for sale subsequent to quarter end
- Harvested a company record 5,264 kilograms compared to 1,711
kilograms in the second quarter fiscal year 2017, representing a
208% increase
- Inventory at December 31, 2016
valued at $50.6 million comprised of
8,375 kilograms of dry cannabis and 2,683 litres of cannabis oils,
providing a strong base for growing demand and continue growth. Of
the total dry cannabis on hand, less than 10% was available for
sale during and at the end of the quarter to address the demand for
THC/CBD varieties and price points.
- Net income of $3.0 million
compared to a net loss of $3.3
million in the prior year period
- Acquired Quebec-based ACMPR
license applicant Vert Cannabis (formerly Vert Médical) and
majority stake in licensed hemp producer HEMP.ca
- Acquired German licensed medical distributor MedCann GMBH
- Closed bought deal financing that raised gross proceeds of
$60 million
- $92.5 million in cash and cash
equivalents at quarter end
Subsequent to Third Quarter Fiscal 2017
- Acquired 472,000 square foot and 42 acre property at 1 Hershey
Drive, Smiths Falls, Ontario on
January 13, 2017
- Closed acquisition of Mettrum Health Corp. ("Mettrum") on
January 31, 2017
- Changed TSX trading symbol from CGC to WEED on the February 1, 2017
"The third quarter provided new opportunities and challenges for
our business, with demand largely exceeding supply throughout the
quarter," said Bruce Linton,
Chairman & CEO. "A function of our growing patient base, the
time required to move from a record harvest to sale, and an
extensive phenotyping exercise to establish breeding stock and
further elevate our product offering all resulted in constrained
product available for sale during the quarter. The successful
late-quarter harvest of the Tweed Farms facility running at full
capacity has begun to ease supply constraints while at the same
time we have introduced a new diversity of product into our online
store under the Tweed, Leafs By Snoop and DNA Genetics banners,
driving strong sales this month."
Added Linton, "the recent release of our first wave of new
genetics and Tweed Farms product resulted in one million dollars of store sales in a single
day, on February 1. That is a major
milestone for Canopy. Two years ago, we had our first million
dollar quarter, a year ago we had our first million dollar month,
and now we have had our first million dollar day. It's definitely
trending well."
Added Linton, "We continued to push the boundaries of our
business during the quarter through multiple strategic
accomplishments that will help drive our future growth. We worked
to strengthen our market position in Canada with our move to acquire Mettrum and
the acquisition of Vert Cannabis to establish a unique brand
presence in Quebec. We also
established a base of operations in Germany, a strategic future market for Canopy,
with the purchase of cannabis distributor, MedCann GMBH."
Third Quarter Fiscal 2017 Revenue Review
Revenue for the third quarter fiscal 2017 was $9.8 million,
a 15% increase over the second quarter fiscal 2017 in which revenue
was $8.5 million and an increase of
180% over the prior year period in which revenue was $3.5 million. Revenue year-to-date in
fiscal 2017 totaled $25.2 million, an
increase of 230% over the prior year period when revenue was
$7.7 million.
During the third quarter fiscal 2017, Canopy Growth sold
1,245 kilograms and kilogram equivalents at an average price
of $7.36 per gram, up from 462
kilograms at an average price of $7.34 per gram during the prior year period.
Year‑to‑date, the Company has sold 3,399 kilograms and
kilogram equivalents at an average price of $7.12 per gram compared to 996 kilograms at
an average price of $7.49 per gram in
same period last year.
Third Quarter Fiscal 2017 Cost of Sales Review
The recovery to cost of sales during the quarter ended
December 31, 2016 was comprised of a
non-cash unrealized gain on changes in the fair value of biological
assets of $18.1 million which was
partially offset by inventory expensed of $9.5 million and $1.4
million for other production costs, for a net recovery to
cost of sales of $7.2
million. The recovery to cost of sales during the
nine month period ended December 31,
2016 was comprised of a non-cash unrealized gain on changes
in the fair value of biological assets of $40.9 million, which was partially offset by the
inventory expensed of $24.6 million
and other production costs of $5.3
million for a net recovery to cost of sales of $11.0 million.
Third Quarter Fiscal 2017 Gross Margin Review
Gross margin for the third quarter fiscal 2017 was $16.9 million, or 174% of revenue compared to
$2.8 million or 79% of revenue in the
comparison period. Gross margin over year-to-date in fiscal 2017
was $36.2 million or 144% of revenue
compared to $16.3 million or 213% of
revenue in same period last year. Gross margin includes the
unrealized gains on changes in fair value of biological assets.
Third Quarter Fiscal 2017 Adjusted Product
Contribution Review
The Company's "Adjusted Product Contribution"1 is a
Non-GAAP metric used by management which adjusts the reported gross
margin by excluding the fair value measurements as required by IFRS
and measures the cost of sales for the grams actually sold in the
period. Management believes this measure provides useful
information as it reflects the gross margin based on the Company's
weighted average cost per gram from seed to sale against the grams
sold.
The Adjusted Product Contribution in the third quarter of fiscal
2017 was $6.7 million, or 68% of
revenue compared to $2.4 million, or
70% of revenue in the comparison period last year. Year‑to‑date,
the Adjusted Product Contribution was $16.3
million, or 65% of revenue compared to $5.0 million or 65% of revenue in the prior year
period.
Third Quarter Fiscal 2017 Operating Expense
Review
Sales and marketing expenses in the third quarter fiscal 2017
were $3.8 million, or 39% of revenue, including non-cash
share-based compensation of $0.6
million related to previously issued escrowed shares. In
comparison, sales and marketing expenses were $1.4 million or 39% of revenue in the same
period last year. Year-to-date, the sales and marketing expenses
were $8.9 million or 35% of revenue
compared to sales and marketing expenses of $3.3 million or 43% of revenue in the prior year
period. Year-to-date sales and marketing expenses in fiscal 2017
include non-cash, share‑based compensation of $1.0 million related to previously issued
escrowed shares and $1.3 million in
higher patient support payments directly attributed to patient
growth. Also included are higher staff levels, costs associated
with the Company's medical outreach program, branding programs and
the expanding client care center.
General and Administrative ("G&A") expenses in the third
quarter fiscal 2017 and 2016 were $4.0
million and $2.0 million,
respectively. G&A expenses, as a percentage of revenue,
continued a downward trend, decreasing from 56% in the third
quarter fiscal 2016 to 42% of revenue in the third quarter fiscal
2017. Year-to-date, G&A expenses in were $10.9 million or 43% or revenue. In
comparison, G&A expenses were $5.6
million or 73% of revenue, in the same period last
year. The increase in G&A expenses over the nine months
ended December 31, 2016 reflects the
Company's growth and building of commercial capacity and
capability. These costs include a full nine months of Bedrocan
operations, amounting to an increase of $1.5
million over the prior year period, fees related to the
Company's graduation to the TSX in the amount of $0.4 million, higher audit and professional
services fees of $0.3 million, and
higher finance charges such as credit card payment processing fees
of $0.3 million due to increased
sales activity. G&A expenses during the nine-months ended
December 31, 2016 also included
higher employee compensation related expenses due to increased
staff levels, one-time employee compensation related expenses, and
extensive use of consultants, legal and advisory services in merger
and acquisition activities and in expanding and commercializing the
Company's operations and facility costs at Tweed, Tweed Farms and
Bedrocan. In addition, compliance costs associated with meeting
Health Canada requirements, as well as other public company related
expenses including related professional fees were included.
Third Quarter Fiscal 2017 Earnings
Review
Net income in the third quarter fiscal 2017 was $3.0 million or $0.03 per basic share and $0.02 per diluted share compared to a net loss of
$3.3 million or $0.04 per basic and diluted share in the
comparative period last year.
Year-to-date, the Company recorded net income of $4.5 million or $0.04 per basic and diluted share, compared to
net income of $1.6 million or
$0.02 per basic and diluted
share.
Third Quarter Fiscal 2017 Adjusted EBITDA
The Company's "Adjusted EBITDA"2 is a Non-GAAP metric
used by management which is Income (loss) from operations, as
reported, before interest, tax, and adjusted for removing
other non-cash items, including the stock based compensation
expense, depreciation, and the non-cash effects of accounting for
biological assets and inventories, and further adjusted to remove
acquisition related costs. Management believes Adjusted EBITDA is a
useful financial metric to assess its operating performance on a
cash basis before the impact of non-cash items and acquisition
activities.
Adjusted EBITDA in the third quarter fiscal 2017 amounted to a
loss of $4.6 million compared to a
loss of $3.6 million in the same
period last year. In the nine-months ended December 31, 2016, the Company's Adjusted EBITDA
amounted to a loss of $11.7 million.
In the nine-months ended December 31,
2015, the Company's Adjusted EBITDA amounted to a loss of
$9.7 million.
Third Quarter Fiscal 2017 Balance Sheet
Review
At December 31, 2016, the
Company's cash, comprised of cash and cash equivalents totaled
$92.5 million, representing an
increase of $77.1 million from
March 31, 2016, principally due to
the equity raised through to December 31,
2016.
Inventory at December 31, 2016
amounted to $50.6 million
(March 31, 2016 - $22.2 million) and biological assets amounted to
$5.3 million (March 31, 2016 - $5.3
million), together totaling $55.9
million (March 31, 2016 -
$27.5 million). At
December 31, 2016, the Company held
8,375 kilograms of dry cannabis and 2,683 L of cannabis oils.
Included in the dry cannabis quantities was 711 kilograms available
for sale in the Company's on-line stores, 3,809 kilograms in
process of finishing or awaiting approval for sale and 3,855
kilograms held for extraction. Dry cannabis inventory held for
extraction is expected to be rapidly converted to oils and capsules
when the new AES industrial capacity extraction equipment is fully
commissioned and capsules are approved for sale by Health
Canada.
The Unaudited Condensed Interim Consolidated Financial
Statements and Management's Discussion and Analysis documents for
the three and nine months ended December 31,
2016 have been filed with SEDAR and are available on
www.sedar.com. The basis of financial reporting in the Unaudited
Condensed Interim Consolidated Financial Statements and
Management's Discussion and Analysis documents is in thousands of
Canadian dollars, unless otherwise indicated.
Note 1: The Adjusted Product Contribution is a non-GAAP
financial measure that does not have any standardized meaning
prescribed by IFRS and may not be comparable to similar measures
presented by other companies. The Adjusted Product Contribution is
reconciled and explained in Management's Discussion & Analysis
under "Adjusted Product Contribution (Non-GAAP Measure)", a copy of
which has been filed today
on www.sedar.com.
Note 2: The Adjusted EBITDA is a non-GAAP financial measure
that does not have any standardized meaning prescribed by IFRS and
may not be comparable to similar measures presented by other
companies. The Adjusted EBITDA is reconciled and explained in
Management's Discussion & Analysis under "Adjusted EBITDA
(Non-GAAP Measure)", a copy of which has been filed today
on www.sedar.com.
Webcast and Conference Call Information
Canopy Growth will host a conference call and audio webcast with
Bruce Linton, CEO and Tim Saunders, CFO at 8:30
AM Eastern Time today.
Webcast Information
A live audio webcast will be available at:
http://event.on24.com/r.htm?e=1350656&s=1&k=1C4DF1B689538C61DF6BF810ECC1EEEE
Calling Information
Toll Free Dial-In Number: 1-888-231-8191
International Dial-In Number (647) 427-7450
Conference ID: 55425439
Replay Information
A replay of the call will be accessible by telephone until
11:59 PM ET on March 14, 2017.
Toll Free Dial-in Number: 1-855-859-2056
Replay Password: 55425439
About Canopy Growth Corporation
Canopy Growth is a
world-leading diversified cannabis company, offering diverse brands
and curated cannabis strain varieties in dried and oil extract
forms. Through its wholly‑owned subsidiaries, Canopy Growth
operates numerous state-of-the-art production facilities with over
half a million square feet of indoor and greenhouse production
capacity. Canopy Growth has established partnerships with leading
sector names in Canada and abroad. For more information
visit www.canopygrowth.com.
Notice Regarding Forward Looking Statements
This news
release contains forward-looking statements. Often, but not always,
forward-looking statements can be identified by the use of words
such as "plans", "expects" or "does not expect", "is expected",
"estimates", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases or state that
certain actions, events or results "may", "could", "would", "might"
or "will" be taken, occur or be achieved. Forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of Canopy Growth Corporation and its subsidiaries to
be materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Examples of such statements include future operational
and production capacity, the impact of enhanced infrastructure and
production capabilities, and forecasted available product
selection. The forward-looking statements included in this news
release are made as of the date of this news release and Canopy
Growth Corporation does not undertake an obligation to publicly
update such forward-looking statements to reflect new information,
subsequent events or otherwise unless required by applicable
securities legislation. Neither the TSX Exchange nor its Regulation
Services Provider (as that term is defined in policies of the TSX
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
|
CANOPY GROWTH
CORPORATION
|
Unaudited Non-GAAP
Measure
|
Three Months
Ended
|
|
Nine Months
Ended
|
(In CDN$000's,
except gram amounts)
|
December 31,
2016
|
|
December 31,
2015
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Product
Contribution1
|
|
|
|
|
|
|
|
|
|
|
|
Weighed average
cost per gram
|
$
|
2.47
|
|
$
|
2.29
|
|
$
|
2.63
|
|
$
|
2.68
|
Grams sold in the
period
|
|
1,245,095
|
|
|
461,544
|
|
|
3,398,803
|
|
|
996,045
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
9,752
|
|
$
|
3,481
|
|
$
|
25,234
|
|
$
|
7,657
|
|
Adjusted cost of
sales
|
|
(3,075)
|
|
|
(1,059)
|
|
|
(8,939)
|
|
|
(2,672)
|
Adjusted Product
Contribution
|
$
|
6,677
|
|
$
|
2,422
|
|
$
|
16,295
|
|
$
|
4,985
|
Adjusted Product
Contribution percentage of revenue
|
|
68%
|
|
|
70%
|
|
|
65%
|
|
|
65%
|
|
|
|
|
|
|
|
|
|
|
|
|
As compared to the
Gross Margin per IFRS:
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
$
|
16,943
|
|
$
|
2,756
|
|
$
|
36,215
|
|
$
|
16,298
|
|
Gross margin
percentage of revenue
|
|
174%
|
|
|
79%
|
|
|
144%
|
|
|
213%
|
|
Notes:
|
1 - The Adjusted
Product Contribution removes the fair value measurements required
under IFRS and recognizes the cost of sales based
on the weighted average cost per gram to produce and applied to the
grams sold in the period.
|
|
CANOPY GROWTH
CORPORATION
|
Unaudited Non-GAAP
Measure
|
Three Months
Ended
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Nine Months
Ended
|
(In
CDN$000's)
|
December 31,
2016
|
|
December 31,
2015
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Adjusted
EBITDA2 Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations - as reported
|
$
|
4,753
|
|
$
|
(2,703)
|
|
$
|
6,783
|
|
$
|
2,248
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
2,115
|
|
|
1,162
|
|
|
4,347
|
|
|
2,107
|
Acquisition
Costs
|
|
1,383
|
|
|
16
|
|
|
1,975
|
|
|
1,155
|
Contingent
consideration provision
|
|
527
|
|
|
-
|
|
|
527
|
|
|
-
|
Share of loss in
equity investments
|
|
-
|
|
|
-
|
|
|
50
|
|
|
-
|
Depreciation and
amortization
|
|
1,048
|
|
|
755
|
|
|
2,943
|
|
|
1,475
|
|
|
5,073
|
|
|
1,933
|
|
|
9,842
|
|
|
4,737
|
IFRS non-cash
accounting related to biological assets and inventory
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on
changes in fair value of biological assets
|
|
(18,141)
|
|
|
(9,013)
|
|
|
(40,901)
|
|
|
(26,768)
|
|
Inventory allowance
to net realizeable value
|
|
4,475
|
|
|
155
|
|
|
4,370
|
|
|
1,014
|
|
Net change in
biological assets and inventory
|
|
(775)
|
|
|
6,057
|
|
|
8,237
|
|
|
9,042
|
|
|
(14,441)
|
|
|
(2,801)
|
|
|
(28,294)
|
|
|
(16,712)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
(4,615)
|
|
$
|
(3,571)
|
|
$
|
(11,669)
|
|
$
|
(9,727)
|
|
|
|
|
|
|
|
|
|
|
|
|
2 - Adjusted
EBITDA is Earnings Before Interest, Tax, and Depreciation and other
non-cash items, and as adjusted for acquisition related
items.
|
SOURCE Canopy Growth Corporation