Generated Net Revenue of $399 million in FY 2020, up 76% over FY
2019
In connection with previously announced
organizational and strategic review, recorded impairment and
restructuring charges of $743
million; the majority of which are non-cash charges
Gross Margin of (85)% in Q4 FY2020; excluding
restructuring and other charges, achieved Adjusted Gross Margin of
42%
Net Loss of $1.3
billion; Adjusted EBITDA loss of $102
million in Q4 2020
SMITHS FALLS, Ontario,
May 29, 2020 /PRNewswire/ -- Canopy
Growth Corporation ("Canopy Growth" or the "Company") (TSX:
WEED) (NYSE: CGC) today announced its financial results for
the fourth quarter and full twelve-month fiscal year ended
March 31, 2020. The Company is
also sharing details of its new strategic plan aimed at winning in
priority markets and categories and executing a path to
profitability. All financial information in this press
release is reported in millions of Canadian dollars, unless
otherwise indicated. The fourth quarter and full twelve-month
fiscal year 2020 financial results presented in this press release
have been prepared in accordance with U.S. GAAP.
"Through the COVID-19 pandemic we have worked hard to ensure the
health and well-being of our teams and customers and the continuity
of our business. During this time, our team has rolled out
our exciting new cannabis-infused beverages and vape products in
Canada and a portfolio of CBD
products in the US," shared CEO David
Klein. "True to key priorities that I have outlined for
Canopy, we have taken steps to align our capacity with the current
market demand and focus our resources against the core markets with
the largest and most tangible near-term profit opportunity."
Added Klein, "I am excited to implement our strategy reset and
organization redesign over the course of fiscal 2021. We have
a renewed strategic focus and a clear change agenda that is already
underway. We are building what we believe is the best cannabis
company in the world by putting the consumer at the heart of
everything we do and are re-aligning our organization to be faster
and more agile."
Strategic and Organizational Update
Canopy Growth's overall strategy is to unleash the full
potential of cannabis, capture sizable market share in focus
categories and markets and execute a path to profitability to build
sustainable, long-term shareholder value.
The Company no longer strives to be the first to every market,
but strives to the best and become a leading consumer insights and
product development company in select priority markets, that
matches products and consumer preferences in the cannabis space. To
achieve this, Canopy Growth will focus on:
- Becoming a relentlessly consumer-centric organization by
building world-class consumer insights and analytics, coupled with
focused, leading-edge R&D and innovation to produce a
differentiated product portfolio that will delight consumers. The
Company will bring these products to the hands of consumers through
best-in-class sales execution;
- Markets and product categories with the highest and most
tangible profit opportunities in the near term. Core markets will
be Canada, US and Germany with focus on recreational and
medical. To capture future opportunities in emerging markets and
categories outside the core, Canopy Growth will deploy an
asset-light approach;
- Driving quality in all aspects of our operation and be
positioned to deliver the right product at the right time at the
right price from the right facility; and
- Continuing to lead the industry and set industry standards.
This includes spearheading the next phase of the cannabis industry
evolution and shaping how the industry evolves. The Company will
continue to give back to neighbors and communities through its Grow
Good Together initiatives.
Canopy Growth expects Fiscal 2021 to be a transition year as the
Company resets its strategic focus, rolls out a new organizational
design, and implements a comprehensive operational and supply chain
productivity program. Given this, as well as the significant
COVID-19 related uncertainties that exist, the Company is
withdrawing its previously communicated milestones for achieving
positive Adjusted EBITDA and Net Income. Depending on the
impacts of COVID-19, Canopy Growth may provide new metrics by which
to measure the Company's performance in the second half of fiscal
2021.
Fourth Quarter
Fiscal 2020 Financial Summary
|
|
|
|
|
|
|
|
|
Net
revenue
|
Gross margin
percentage
|
Adjusted
gross margin
percentage1
|
Net
loss
|
Adjusted
EBITDA2
|
Free cash
flow3
|
Reported
|
$107.9
|
(85%)
|
42%
|
$(1,326.4)
|
$(102.0)
|
$(304.7)
|
vs. Q3
2020
|
(13%)
|
NM
|
1,100 bps
|
(1110%)
|
(5%)
|
15%
|
vs. Q4
2019
|
15%
|
NM
|
2,000 bps
|
(282%)
|
(8%)
|
22%
|
Fiscal Year 2020
Financial Summary
|
|
|
|
|
|
|
|
|
Net
revenue
|
Gross margin
percentage
|
Adjusted
gross margin
percentage4
|
Net
loss
|
Adjusted
EBITDA2
|
Free cash
flow3
|
Reported
|
$398.8
|
(8%)
|
26%
|
$(1,387.4)
|
$(442.8)
|
$(1,477.6)
|
vs. Fiscal
2019
|
76%
|
(2,000)
bps
|
1,400 bps
|
(95%)
|
(53%)
|
(25%)
|
1 Adjusted gross margin is a non-GAAP
measure, and for Q4 2020 excludes (i) restructuring and other
charges of $132.1 million related to the impact of restructuring
actions; and (ii) $4.7 million related to the flow-through of
inventory step-up associated with fiscal 2020 business
combinations. See "Non-GAAP Measures".
|
2 Adjusted EBITDA is a non-GAAP
measure. See "Non-GAAP Measures".
|
3 Free
cash flow is a non-GAAP measure. See "Non-GAAP
Measures".
|
4 Adjusted gross margin is a non-GAAP
measure, and for fiscal 2020 excludes charges of $136.8 million
incurred in Q4 2020, as described in footnote 1 above. See
"Non-GAAP Measures".
|
Fourth Quarter Fiscal 2020 Corporate Financial
Highlights
- Revenues: Net revenue in Q4 2020 decreased 13% versus Q3
2020 driven primarily by lower Canadian recreational
revenue.
- Gross margin: : Reported gross margin, including
one-time restructuring and other charges, was (85%). Adjusted gross
margin, excluding one-time restructuring and other charges and
inventory step-up costs, was 42% in Q4 2020, representing an
increase of 1,100 bps from Q3 2020. Adjusted gross margin
performance in Q4 2020 was positively impacted by higher facility
utilization and growth in high margin international medical
cannabis sales.
- Operating expenses: SG&A expenses in Q4 2020
increased 17% over Q3 2020 driven primarily by a combined
$15 million increase in General &
Administrative and Sales & Marketing expenses.
- Net Loss: Net loss of $1.3
billion in Q4 2020, primarily driven by impairment and
restructuring charges, other impairment charges which were
primarily identified during our annual impairment testing, and
other non-cash fair value changes.
- Adjusted EBITDA: Adjusted EBITDA loss of $102 million in Q4 2020, a $5 million wider loss versus Q3 2020 driven by
lower sales and higher operating expenses.
- Cash Position: Gross cash balance was $2.0 billion at March 31,
2020, down from $2.3 billion
at the end of Q3 2020 reflecting the EBITDA loss, capital
investments and mergers and acquisitions activities.
- Restructuring and Impairment Costs: In line with our
previous announcement (March 4,
2020), we recorded a pre-tax restructuring and impairment
charge of $743 million in Q4 2020, of
which $28 million is estimated to be
a cash charge. Additionally, we recorded impairment charges of
$100 million Q4 2020, which were
primarily identified during our annual impairment testing
process.
Business & Operational Highlights
- COVID-19 response: Management has been closely
monitoring the impact of COVID-19, with a focus on the health and
safety of our employees, business continuity and supporting our
communities. The majority of non-production related staff continue
to work from home; we implemented daily screening process for
production facility access; temporarily closed corporate-owned
retail stores in mid-March but re-opened 20 stores with reduced
hours as well as click & collect ordering; rolled out click
& collect to 100% of all Tokyo Smoke and Tweed licensed stores
and added same day delivery for Tokyo Smoke partner stores.
- UL certified Juju Power 510 battery as well as 510 vape
cartridges under Tweed and Twd. brands, representing a total of
five SKUs, are available in the Canadian recreational market.
- UL certified Tokyo Smoke Luma pod-based vape devices, Luma "Go"
pods and Luma "Pause" pods are available in the Canadian
recreational market.
- Ready to Drink ("RTD") beverages under Tweed and Houseplant
brands, representing a total of three SKUs, are available in the
Canadian recreational market.
- Company has expanded offering of Hemp-derived CBD products with
the launch of a line of First & Free topical creams in select
states in the US and the launch of This Works' line of
clinically-proven CBD Booster skin products in the United Kingdom, Germany and select states in the US.
- On May 1, 2020, an indirect
wholly-owned subsidiary of Constellation Brands (NYSE:STZ)
exercised warrants for approximately C$245
million , representing approximately 5.1% of our issued and
outstanding common shares.
Fourth Quarter and
Fiscal Year 2020 Financial and Operational Review
|
|
|
|
|
|
|
(in millions of
Canadian dollars, unaudited)
|
Q4
2020
|
vs. Q3
2020
|
vs. Q4
2019
|
FY2020
|
vs.
FY2019
|
Canadian
recreational revenue
|
|
|
|
|
|
- Business to
business
|
$36.7
|
(31%)
|
(36%)
|
$157.3
|
34%
|
- Business to
consumer
|
$13.1
|
(14%)
|
12%
|
$52.0
|
125%
|
Canadian
recreational revenue
|
$49.8
|
(28%)
|
(28%)
|
$209.3
|
49%
|
Canadian medical
revenue
|
$14.9
|
1%
|
29%
|
$56.8
|
(17%)
|
International
medical revenue
|
$20.7
|
11%
|
1051%
|
$68.0
|
574%
|
All other
revenue
|
$29.7
|
(11%)
|
23%
|
$105.5
|
210%
|
Excise
taxes
|
$(7.2)
|
(39%)
|
(42%)
|
$(40.8)
|
51%
|
Net
revenue
|
$107.9
|
(13%)
|
15%
|
$398.8
|
76%
|
|
|
|
|
|
|
(in millions of
Canadian dollars, unaudited)
|
Q4
2020
|
vs. Q3
2020
|
vs. Q4
2019
|
FY2020
|
vs.
FY2019
|
Canadian
recreational revenue
|
|
|
|
|
|
- Dry
bud1
|
$48.9
|
(29%)
|
51%
|
$238.1
|
188%
|
- Oils, softgels and
Cannabis 2.0 products2
|
$6.3
|
34%
|
(83%)
|
$22.7
|
-61%
|
- Other revenue
adjustments3
|
$(5.4)
|
2%
|
NM
|
$(51.5)
|
NM
|
Global medical
revenue
|
|
|
|
|
|
- Dry bud
|
$9.8
|
7%
|
34%
|
$35.8
|
-30%
|
- Oils and
softgels
|
$25.8
|
6%
|
329%
|
$89.0
|
224%
|
All other
revenue
|
$29.7
|
(11%)
|
23%
|
$105.5
|
210%
|
Excise
taxes4
|
$(7.2)
|
(39%)
|
(42%)
|
$(40.8)
|
51%
|
Net
revenue
|
$107.9
|
(13%)
|
15%
|
$398.8
|
76%
|
1 Excludes the impact of other
revenue adjustments.
|
2 Cannabis 2.0 products include
cannabis-infused chocolates, cannabis-infused beverages, and
cannabis vape products (including power sources such as
rechargeable and compact batteries, ready-to-go vape pens, and
cartridges/vape pods)
|
3 Other revenue adjustments represent
the Company's determination of returns and pricing adjustments, and
relate to the Canadian recreational business-to-business
channel.
|
4 Excise taxes is presented net of
the impact from other revenue adjustments.
|
Canadian Cannabis
- Recreational B2B sales in Q4 2020 decreased 31% from Q3 2020 as
growth in softgels, oil, and Cannabis 2.0 products was more than
offset by an overall decline in flower and pre-roll joints.
- Recreational B2C sales in Q4 2020 decreased 14% from prior
quarter due to the expected off peak seasonal demand decline and
the closure of corporate-owned retail stores late in the quarter in
response to COVID-19.
- Medical sales in Q4 2020 remained consistent quarter over
quarter (Q3 2020 vs. Q4 2020).
International Cannabis
- C3 revenue in Q4 2020 increased 10% over Q3 2020.
- Germany cannabis sales
increased 14% in Q4 2020 over Q3 2020 benefiting from improved
supply and increased demand.
- International cannabis revenue accounted for 24% of total
cannabis revenues in Q4 2020.
Strategic Acquisitions
- This Works sales in Q4 2020 were consistent with seasonally
strong Q3 2020.
- Storz & Bickel ("S&B") vaporizer revenue decreased over
Q3 2020 due to seasonal decline.
- BioSteel Sports Nutrition revenue decreased by 20% over Q3 2020
due to expected seasonal decline and reduction of thirty-party
distribution and retail in response to COVID-19.
Webcast and Conference Call Information
The Company will host a conference call and audio webcast with
David Klein, CEO and Mike Lee, CFO at 10:00 AM
Eastern Time on May 29,
2020.
Webcast Information
A live audio webcast will be available at:
https://produceredition.webcasts.com/starthere.jsp?ei=1308617&tp_key=850fd370f4
Replay Information
A replay of the call will be accessible by webcast, until
11:59 PM ET on August 27, 2020, at
https://produceredition.webcasts.com/starthere.jsp?ei=1308617&tp_key=850fd370f4
U.S. GAAP Financial Reporting
Effective April 1, 2020, Canopy
Growth is considered a U.S. domestic issuer and is required to
prepare financial statements in compliance with U.S. GAAP.
Accordingly, our consolidated audited financial statements for the
year ended March 31, 2020, including
all comparative figures, have been restated in accordance with
these standards.
As part of this transition, Canopy Growth will also be required
to provide an auditor attestation report under Section 404(b) of
the Sarbanes-Oxley Act in connection with its Annual Report on Form
10-K to be filed with the Securities and Exchange Commission
("SEC").
Non-GAAP Measures
Adjusted EBITDA is a non-GAAP measure used by management that is
not defined by U.S. GAAP and may not be comparable to similar
measures presented by other companies. Adjusted EBITDA is
calculated as the reported net loss, adjusted to exclude income tax
recovery (expense), other income (expense), net, and loss on equity
method investments, share-based compensation expense, depreciation
and amortization expense, asset impairment and restructuring costs,
restructuring and other charges recorded in cost of goods sold, and
charges related to the flow-through of inventory step-up on
business combinations, and further adjusted to remove
acquisition-related costs. The Adjusted EBITDA reconciliation is
presented within this news release and explained in the Company's
Annual Report on Form 10-K to be filed with the SEC.
Adjusted Gross Margin is a non-GAAP measure used by management
that is not defined by U.S. GAAP and may not be comparable to
similar measures presented by other companies. Adjusted Gross
Margin is calculated as gross margin excluding restructuring and
other charges recorded in cost of goods sold and charges related to
the flow-through of inventory step-up associated with business
combinations. The Adjusted Gross Margin reconciliation is presented
within this news release.
Free Cash Flow is a non- GAAP measure used by management that is
not defined by U.S. GAAP and may not be comparable to similar
measures presented by other companies. This measure is
calculated as net cash provided by (used in) operating activities
less purchases of and deposits on property, plant and equipment.
The Free Cash Flow reconciliation is presented within this news
release and explained in the Company's Annual Report on Form 10-K
to be filed with the SEC.
The following schedules are provided in this news release:
- Schedule 1 – Consolidated Balance Sheet at March 31, 2020 and March
31, 2019
- Schedule 2 – Consolidated Statements of Operations for FY2020
and FY2019
- Schedule 3 – Consolidated Statements of Operations for Q4 2020
and Q4 2019
- Schedule 4 – Consolidated Statements of Cash Flows for FY2020
and FY2019
- Schedule 5 – Adjusted EBITDA Reconciliations for Q4 2020, Q3
2020, Q2 2020, Q1 2020, and FY2020
- Schedule 6 – Adjusted EBITDA – IFRS to US GAAP Differences for
Q3 2020, Q2 2020, and Q1 2020
- Schedule 7 – Gross Margin – IFRS to US GAAP Differences for Q4
2020, Q3 2020, Q2 2020, Q1 2020, and FY2020
- Schedule 8 – Adjusted Gross Margin Reconciliations for Q4 2020,
Q3 2020, Q2 2020, Q1 2020, and FY2020
- Schedule 9 – Free Cash Flow Reconciliation for Q4 2020 and
FY2020
Exemption for Filing of Restated Interim Financial
Reports
As of April 1, 2020, the Company
is considered an "SEC issuer" as defined under National
Instrument 51-102 – Continuous Disclosure
Obligations ("NI-51-102") and must file restated
interim financial reports prepared in accordance with the generally
accepted accounting principles in the
United States that the SEC has identified as having
substantial authoritative support, as supplemented by Regulation
S-X and Regulation S-B under the 1934 Act ("U.S.
GAAP") for the interim periods since its most recently
completed financial year for which annual financial statements have
been filed (the "Restated Interim Financial Reports") on or
before the deadline for the Company to file its audited annual
financial statements for the year ended March 31, 2020, being June
1, 2020.
The Company is relying on an exemption granted by the Ontario
Securities Commission to provide the Company with an additional 45
days from the deadline otherwise applicable under NI 51-102. As
such, the Company will be filing its Restated Interim Financial
Reports and related MD&A prepared in accordance with U.S. GAAP
on or before July 16, 2020. The
Company confirms that its management and other insiders are subject
to our Insider Trading Policy which contains an insider trading
black-out policy that reflects the principles in Section 9 of
National Policy 11-207 – Failure-to-File Cease Trade Orders and
Revocations in Multiple Jurisdictions.
About Canopy Growth Corporation
Canopy Growth
(TSX:WEED, NYSE:CGC) is a world-leading diversified cannabis, hemp
and cannabis device company, offering distinct brands and curated
cannabis varieties in dried, oil and Softgel capsule forms, as well
as medical devices through the Company's subsidiary, Storz &
Bickel GMbH & Co. KG. From product and process innovation to
market execution, Canopy Growth is driven by a passion for
leadership and a commitment to building a world-class cannabis
company one product, site and country at a time. The Company has
operations in over a dozen countries across five continents.
The Company's medical division, Spectrum Therapeutics is proudly
dedicated to educating healthcare practitioners, conducting robust
clinical research, and furthering the public's understanding of
cannabis, and has devoted millions of dollars toward cutting edge,
commercializable research and IP development. Spectrum Therapeutics
sells a range of full-spectrum products using its colour-coded
classification Spectrum system as well as single cannabinoid
Dronabinol under the brand Bionorica Ethics.
The Company operates retail stores across Canada under its award-winning Tweed and Tokyo
Smoke banners. Tweed is a globally recognized cannabis brand which
has built a large and loyal following by focusing on quality
products and meaningful customer relationships.
From our public listing on the Toronto Stock Exchange and New
York Stock Exchange to our continued international expansion, pride
in advancing shareholder value through leadership is engrained in
all we do at Canopy Growth. Canopy Growth has established
partnerships with leading sector names including cannabis icons
Snoop Dogg and Seth Rogen, breeding
legends DNA Genetics and Green House Seeds, and Fortune 500 alcohol
leader Constellation Brands, to name but a few. Canopy Growth
operates eleven licensed cannabis production sites with over 5.2
million square feet of production capacity, including over one
million square feet of GMP certified production space. For more
information visit www.canopygrowth.com
Notice Regarding Forward Looking Statements
This press
release contains "forward-looking statements" within the meaning of
applicable securities laws, which involve certain known and unknown
risks and uncertainties. Forward-looking statements predict or
describe our future operations, business plans, business and
investment strategies and the performance of our investments. These
forward-looking statements are generally identified by their use of
such terms and phrases as "intend," "goal," "strategy," "estimate,"
"expect," "project," "projections," "forecasts," "plans," "seeks,"
"anticipates," "potential," "proposed," "will," "should," "could,"
"would," "may," "likely," "designed to," "foreseeable future,"
"believe," "scheduled" and other similar expressions. Our actual
results or outcomes may differ materially from those anticipated.
You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date the
statement was made.
Forward-looking statements include, but are not limited to,
statements with respect to:
- the uncertainties associated with the COVID-19 pandemic,
including our ability to continue operations, the ability of our
suppliers and distribution channels to continue to operate, and the
use of our products by consumers, and disruptions to the global and
local economies due to related stay-at-home orders, quarantine
policies and restrictions on travel, trade and business operations
and a reduction in discretionary consumer spending;
- laws and regulations and any amendments thereto applicable to
our business and the impact thereof, including uncertainty
regarding the application of U.S. state and federal law to U.S.
hemp (including CBD) products and the scope of any regulations by
the U.S. Federal Drug Administration, the U.S. Federal Trade
Commission, the U.S. Patent and Trademark Office, the U.S.
Department of Agriculture (the "USDA") and any state equivalent
regulatory agencies over U.S. hemp (including CBD) products;
- expectations regarding the regulation of the U.S. hemp industry
in the U.S., including the promulgation of regulations for the U.S.
hemp industry by the USDA;
- expectations regarding the potential success of, and the costs
and benefits associated with, our acquisitions, joint ventures,
strategic alliances and equity investments;
- the plan of arrangement with Acreage Holdings, Inc., including
the consummation of such acquisition upon the occurrence or waiver
of changes in U.S. federal law to permit the general cultivation,
distribution and possession of marijuana or to remove the
regulation of such activities from the federal laws of the United States and our intention to waive
such condition as soon as the policies of the New York Stock
Exchange and/or the Toronto Stock Exchange permit completion of the
acquisition, provided that completion of the acquisition would not
violate any third-party agreements, including those entered into by
us with Constellation Brands, Inc. and its affiliates (together,
the "CBI Group");
- the grant, renewal and impact of any license or supplemental
license to conduct activities with cannabis or any amendments
thereof;
- our international activities and joint venture interests,
including required regulatory approvals and licensing, anticipated
costs and timing, and expected impact;
- the ability to successfully create and launch brands and
further create, launch and scale cannabis-based products and U.S.
hemp-derived consumer products in jurisdictions where such products
are legal and that we currently operate in;
- the benefits, viability, safety, efficacy, dosing and social
acceptance of cannabis, including CBD and other cannabinoids;
- the anticipated benefits and impact of the CBI Group
investments in us (the "CBI Group Investments");
- the potential exercise of the warrants held by the CBI Group,
pre-emptive rights and/or top-up rights in connection with the CBI
Group Investments, including proceeds to us that may result
therefrom or the potential conversion of notes held by the CBI
Group in connection with the CBI Group Investments;
- expectations regarding the use of proceeds of equity
financings, including the proceeds from the CBI Group
Investments;
- the legalization of the use of cannabis for medical or
recreational in jurisdictions outside of Canada, the related timing and impact thereof
and our intentions to participate in such markets, if and when such
use is legalized;
- our ability to execute on our strategy and the anticipated
benefits of such strategy;
- the ongoing impact of the legalization of additional cannabis
product types and forms for recreational use in Canada, including federal, provincial,
territorial and municipal regulations pertaining thereto, the
related timing and impact thereof and our intentions to participate
in such markets;
- the ongoing impact of developing provincial, territorial and
municipal regulations pertaining to the sale and distribution of
cannabis, the related timing and impact thereof, as well as the
restrictions on federally regulated cannabis producers
participating in certain retail markets and our intentions to
participate in such markets to the extent permissible;
- the future performance of our business and operations;
- our competitive advantages and business strategies;
- the competitive conditions of the industry;
- the expected growth in the number of customers using our
products;
- our ability or plans to identify, develop, commercialize or
expand our technology and research and development initiatives in
cannabinoids, or the success thereof;
- expectations regarding revenues, expenses and anticipated cash
needs;
- expectations regarding cash flow, liquidity and sources of
funding;
- expectations regarding capital expenditures;
- the expansion of our production and manufacturing, the costs
and timing associated therewith and the receipt of applicable
production and sale licenses;
- the expected growth in our growing, production and supply chain
capacities;
- expectations regarding the resolution of litigation and other
legal proceedings;
- expectations with respect to future production costs;
- expectations with respect to future sales and distribution
channels;
- the expected methods to be used to distribute and sell our
products;
- our future product offerings;
- the anticipated future gross margins of our operations;
- accounting standards and estimates;
- expectations regarding our distribution network; and
- expectations regarding the costs and benefits associated with
our contracts and agreements with third parties, including under
our third-party supply and manufacturing agreements.
Certain of the forward-looking statements contained herein
concerning the industries in which we conduct our business are
based on estimates prepared by us using data from publicly
available governmental sources, market research, industry analysis
and on assumptions based on data and knowledge of these industries,
which we believe to be reasonable. However, although generally
indicative of relative market positions, market shares and
performance characteristics, such data is inherently imprecise. The
industries in which we conduct our business involve risks and
uncertainties that are subject to change based on various factors,
which are described further below.
The forward-looking statements contained herein are based upon
certain material assumptions that were applied in drawing a
conclusion or making a forecast or projection, including: (i)
management's perceptions of historical trends, current conditions
and expected future developments; (ii) our ability to generate cash
flow from operations; (iii) general economic, financial market,
regulatory and political conditions in which we operate; (iv) the
production and manufacturing capabilities and output from our
facilities and our joint ventures, strategic alliances and equity
investments; (v) consumer interest in our products; (vi)
competition; (vii) anticipated and unanticipated costs; (viii)
government regulation of our activities and products including but
not limited to the areas of taxation and environmental protection;
(ix) the timely receipt of any required regulatory authorizations,
approvals, consents, permits and/or licenses; (x) our ability to
obtain qualified staff, equipment and services in a timely and
cost-efficient manner; (xi) our ability to conduct operations in a
safe, efficient and effective manner; (xii) our ability to realize
anticipated benefits, synergies or generate revenue, profits or
value from our recent acquisitions into our existing operations;
(xiii) our ability to continue to operate in light of the COVID-19
pandemic and the impact of the pandemic on demand for, and sales
of, our products and our distribution channels; and (xiv) other
considerations that management believes to be appropriate in the
circumstances. While our management considers these assumptions to
be reasonable based on information currently available to
management, there is no assurance that such expectations will prove
to be correct.
By their nature, forward-looking statements are subject to
inherent risks and uncertainties that may be general or specific
and which give rise to the possibility that expectations,
forecasts, predictions, projections or conclusions will not prove
to be accurate, that assumptions may not be correct and that
objectives, strategic goals and priorities will not be achieved. A
variety of factors, including known and unknown risks, many of
which are beyond our control, could cause actual results to differ
materially from the forward-looking statements in this press
release and other reports we file with, or furnish to, the
Securities and Exchange Commission (the "SEC") and other regulatory
agencies and made by our directors, officers, other employees and
other persons authorized to speak on our behalf. Such factors
include, without limitation, the risk that the COVID-19 pandemic
may disrupt our operations and those of our suppliers and
distribution channels and negatively impact the use of our
products; consumer demand for cannabis and U.S. hemp products; that
cost savings and any other synergies from the CBI Group Investments
may not be fully realized or may take longer to realize than
expected; future levels of revenues; our ability to manage
disruptions in credit markets or changes to our credit rating;
future levels of capital, environmental or maintenance
expenditures, general and administrative and other expenses; the
success or timing of completion of ongoing or anticipated capital
or maintenance projects; business strategies, growth opportunities
and expected investment; the adequacy of our capital resources and
liquidity, including but not limited to, availability of sufficient
cash flow to execute our business plan (either within the expected
timeframe or at all); the potential effects of judicial or other
proceedings on our business, financial condition, results of
operations and cash flows; volatility in and/or degradation of
general economic, market, industry or business conditions;
compliance with applicable environmental, economic, health and
safety, energy and other policies and regulations and in particular
health concerns with respect to vaping and the use of cannabis and
U.S. hemp products in vaping devices; the anticipated effects of
actions of third parties such as competitors, activist investors or
federal, state, provincial, territorial or local regulatory
authorities, self-regulatory organizations, plaintiffs in
litigation or persons threatening litigation; changes in regulatory
requirements in relation to our business and products; and the
factors discussed under the heading "Risk Factors" in the Company's
Annual Report on Form 10-K for the year ended March 31, 2020 to be filed with the SEC. Readers
are cautioned to consider these and other factors, uncertainties
and potential events carefully and not to put undue reliance on
forward-looking statements.
Forward-looking statements are provided for the purposes of
assisting the reader in understanding our financial performance,
financial position and cash flows as of and for periods ended on
certain dates and to present information about management's current
expectations and plans relating to the future, and the reader is
cautioned that the forward-looking statements may not be
appropriate for any other purpose. While we believe that the
assumptions and expectations reflected in the forward-looking
statements are reasonable based on information currently available
to management, there is no assurance that such assumptions and
expectations will prove to have been correct. Forward-looking
statements are made as of the date they are made and are based on
the beliefs, estimates, expectations and opinions of management on
that date. We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information,
estimates or opinions, future events or results or otherwise or to
explain any material difference between subsequent actual events
and such forward-looking statements, except as required by law. The
forward-looking statements contained in this press release and
other reports we file with, or furnish to, the SEC and other
regulatory agencies and made by our directors, officers, other
employees and other persons authorized to speak on our behalf are
expressly qualified in their entirety by these cautionary
statements.
Schedule
1
|
|
CANOPY GROWTH
CORPORATION
CONSOLIDATED
BALANCE SHEETS
(in thousands of
Canadian dollars, except number of shares, unaudited)
|
|
|
|
|
|
|
|
March 31,
2020
|
|
March 31,
2019
|
ASSETS
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
1,303,176
|
$
|
2,480,830
|
Short-term
investments
|
|
673,323
|
|
2,034,133
|
Restricted short-term
investments
|
|
21,539
|
|
21,432
|
Amounts receivable,
net
|
|
90,155
|
|
106,974
|
Inventory
|
|
391,086
|
|
190,072
|
Prepaid expenses and
other assets
|
|
85,094
|
|
85,691
|
Total current
assets
|
|
2,564,373
|
|
4,919,132
|
Equity method
investments
|
|
65,843
|
|
112,385
|
Other financial
assets
|
|
249,253
|
|
363,427
|
Property, plant and
equipment
|
|
1,524,803
|
|
1,096,340
|
Intangible
assets
|
|
476,366
|
|
558,070
|
Goodwill
|
|
1,954,471
|
|
1,489,859
|
Other
assets
|
|
22,636
|
|
25,902
|
Total
assets
|
$
|
6,857,745
|
$
|
8,565,115
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
$
|
123,393
|
$
|
188,920
|
Other accrued expenses
and liabilities
|
|
64,994
|
|
37,613
|
Current portion of
long-term debt
|
|
16,393
|
|
103,716
|
Other
liabilities
|
|
215,809
|
|
81,414
|
Total current
liabilities
|
|
420,589
|
|
411,663
|
Long-term
debt
|
|
449,022
|
|
842,259
|
Deferred income tax
liabilities
|
|
47,113
|
|
105,081
|
Liability arising
from Acreage Arrangement
|
|
250,000
|
|
-
|
Warrant derivative
liability
|
|
322,491
|
|
-
|
Other
liabilities
|
|
190,660
|
|
134,004
|
Total
liabilities
|
|
1,679,875
|
|
1,493,007
|
Commitments and
contingencies
|
|
|
|
|
Redeemable
noncontrolling interest
|
|
69,750
|
|
6,400
|
Canopy Growth
Corporation shareholders' equity:
|
|
|
|
|
Common shares - $nil
par value; Authorized - unlimited number of shares;
Issued - 350,112,927 shares and 337,510,408 shares,
respectively
|
|
6,373,544
|
|
6,029,222
|
Additional paid-in
capital
|
|
2,615,155
|
|
1,592,024
|
Accumulated other
comprehensive income (loss)
|
|
220,899
|
|
(5,905)
|
Deficit
|
|
(4,323,236)
|
|
(835,118)
|
Total Canopy Growth
Corporation shareholders' equity
|
|
4,886,362
|
|
6,780,223
|
Noncontrolling
interests
|
|
221,758
|
|
285,485
|
Total shareholders'
equity
|
|
5,108,120
|
|
7,065,708
|
Total liabilities and
shareholders' equity
|
$
|
6,857,745
|
$
|
8,565,115
|
Schedule
2
|
|
CANOPY GROWTH
CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands of
Canadian dollars, except number of shares and per share data,
unaudited)
|
|
|
|
|
|
|
Years ended
March 31,
|
|
|
2020
|
|
2019
|
Revenue
|
$
|
439,626
|
$
|
253,431
|
Excise
taxes
|
|
40,854
|
|
27,090
|
Net revenue
|
|
398,772
|
|
226,341
|
Cost of goods
sold
|
|
430,456
|
|
198,096
|
Gross
margin
|
|
(31,684)
|
|
28,245
|
Operating
expenses:
|
|
|
|
|
Selling, general and
administrative expenses
|
|
693,737
|
|
392,250
|
Share-based
compensation
|
|
320,276
|
|
273,447
|
Asset impairment and
restructuring costs
|
|
623,266
|
|
-
|
Total operating
expenses
|
|
1,637,279
|
|
665,697
|
Operating
loss
|
|
(1,668,963)
|
|
(637,452)
|
Loss from equity
method investments
|
|
(64,420)
|
|
(10,752)
|
Other income
(expense), net
|
|
224,329
|
|
(59,709)
|
Loss before income
taxes
|
|
(1,509,054)
|
|
(707,913)
|
Income tax recovery
(expense)
|
|
121,614
|
|
(4,112)
|
Net loss
|
|
(1,387,440)
|
|
(712,025)
|
Net (loss) income
attributable to noncontrolling interests and redeemable
noncontrolling interest
|
|
(66,114)
|
|
24,256
|
Net loss attributable
to Canopy Growth Corporation
|
$
|
(1,321,326)
|
$
|
(736,281)
|
|
|
|
|
|
Basic and diluted
loss per share
|
|
$(3.80)
|
|
$(2.76)
|
Basic and diluted
weighted average common shares outstanding
|
|
348,038,163
|
|
266,997,406
|
Schedule
3
|
|
CANOPY GROWTH
CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands of
Canadian dollars, except number of shares and per share data,
unaudited)
|
|
|
|
|
|
|
Three months ended
March 31,
|
|
|
2020
|
|
2019
|
Revenue
|
$
|
115,068
|
$
|
106,485
|
Excise
taxes
|
|
7,155
|
|
12,435
|
Net revenue
|
|
107,913
|
|
94,050
|
Cost of goods
sold
|
|
199,738
|
|
73,005
|
Gross
margin
|
|
(91,825)
|
|
21,045
|
Operating
expenses:
|
|
|
|
|
Selling, general and
administrative expenses
|
|
197,579
|
|
153,064
|
Share-based
compensation
|
|
78,354
|
|
90,614
|
Asset impairment and
restructuring costs
|
|
623,266
|
|
-
|
Total operating
expenses
|
|
899,199
|
|
243,678
|
Operating
loss
|
|
(991,024)
|
|
(222,633)
|
Loss from equity
method investments
|
|
(57,752)
|
|
(1,731)
|
Other income
(expense), net
|
|
(376,295)
|
|
(114,251)
|
Loss before income
taxes
|
|
(1,425,071)
|
|
(338,615)
|
Income tax recovery
(expense)
|
|
98,666
|
|
(8,877)
|
Net loss
|
|
(1,326,405)
|
|
(347,492)
|
Net (loss) income
attributable to noncontrolling interests and redeemable
noncontrolling interest
|
|
(23,384)
|
|
32,024
|
Net loss attributable
to Canopy Growth Corporation
|
$
|
(1,303,021)
|
$
|
(379,516)
|
|
|
|
|
|
Basic and diluted
loss per share
|
$
|
(3.72)
|
$
|
(1.10)
|
Basic and diluted
weighted average common shares outstanding
|
|
349,837,102
|
|
343,877,591
|
Schedule
4
|
|
CANOPY GROWTH
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands of
Canadian dollars, unaudited)
|
|
|
|
|
|
|
Years ended
March 31,
|
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
|
Net loss
|
$
|
(1,387,440)
|
$
|
(712,025)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Depreciation of
property, plant and equipment
|
|
73,716
|
|
30,062
|
Amortization of
intangible assets
|
|
51,297
|
|
16,856
|
Share of loss on
equity method investments
|
|
64,420
|
|
10,752
|
Share-based
compensation
|
|
320,276
|
|
278,228
|
Asset impairment and
restructuring costs
|
|
623,266
|
|
-
|
Income tax (expense)
recovery
|
|
(121,614)
|
|
4,112
|
Non-cash foreign
currency
|
|
(2,012)
|
|
(18,776)
|
Interest
paid
|
|
(25,472)
|
|
(14,521)
|
Change in operating
assets and liabilities, net of effects from purchases of
businesses:
|
|
|
|
|
Amounts
receivable
|
|
20,979
|
|
(67,688)
|
Prepaid expenses and
other assets
|
|
(26,917)
|
|
(87,476)
|
Inventory
|
|
(177,091)
|
|
(144,917)
|
Accounts payable and
accrued liabilities
|
|
(20,750)
|
|
69,540
|
Other, including
non-cash fair value adjustments
|
|
(165,293)
|
|
100,822
|
Net cash used in
operating activities
|
|
(772,635)
|
|
(535,031)
|
Cash flows from
investing activities:
|
|
|
|
|
Purchases of and
deposits on property, plant and equipment
|
|
(704,944)
|
|
(644,456)
|
Purchases of
intangible assets
|
|
(16,957)
|
|
(74,359)
|
Redemption (purchases)
of short-term investments
|
|
1,427,482
|
|
(2,029,812)
|
Proceeds on assets
classified as held for sale
|
|
-
|
|
-
|
Investments in equity
method investments
|
|
(5,135)
|
|
(36,896)
|
Investments in other
financial assets
|
|
(129,590)
|
|
(91,337)
|
Investment in Acreage
Arrangement
|
|
(395,190)
|
|
-
|
Change in acquisition
related liabilities
|
|
(24,482)
|
|
-
|
Net cash outflow on
acquisition of noncontrolling interests
|
|
-
|
|
(6,712)
|
Net cash outflow on
acquisition of subsidiaries
|
|
(498,838)
|
|
(344,413)
|
Net cash used in
investing activities
|
|
(347,654)
|
|
(3,227,985)
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from issuance
of common shares and warrants
|
|
-
|
|
5,072,500
|
Payment of share issue
costs
|
|
-
|
|
(21,646)
|
Proceeds from issuance
of shares by Canopy Rivers
|
|
1,172
|
|
154,976
|
Proceeds from exercise
of stock options
|
|
41,413
|
|
48,159
|
Proceeds from exercise
of warrants
|
|
446
|
|
18,790
|
Issuance of long-term
debt
|
|
14,761
|
|
600,000
|
Payment of debt issue
costs
|
|
-
|
|
(16,380)
|
Repayment of long-term
debt
|
|
(114,953)
|
|
(4,680)
|
Net cash provided by
financing activities
|
|
(57,161)
|
|
5,851,719
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(204)
|
|
69,567
|
Net increase in cash
and cash equivalents
|
|
(1,177,654)
|
|
2,158,270
|
Cash and cash
equivalents, beginning of year
|
|
2,480,830
|
|
322,560
|
Cash and cash
equivalents, end of year
|
$
|
1,303,176
|
$
|
2,480,830
|
Schedule
5
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA1 Reconciliation (Non-GAAP
Measure)
|
|
|
|
|
|
|
|
Three months
ended
|
Year ended
|
|
Mar 31,
|
Dec 31,
|
Sep 30,
|
Jun 30,
|
Mar 31,
|
(in thousands of
Canadian dollars, unaudited)
|
2020
|
2019
|
2019
|
2019
|
2020
|
Net loss
|
$
|
(1,326,405)
|
$
|
(109,634)
|
$
|
242,650
|
$
|
(194,051)
|
$
|
(1,387,440)
|
Income tax (recovery)
expense
|
|
(98,666)
|
|
(27,448)
|
|
(5,767)
|
|
10,267
|
|
(121,614)
|
Other expense
(income), net
|
|
376,295
|
|
(57,963)
|
|
(509,893)
|
|
(32,768)
|
|
(224,329)
|
Loss on equity method
investments
|
|
57,752
|
|
2,664
|
|
2,171
|
|
1,833
|
|
64,420
|
Share-based
compensation
|
|
78,354
|
|
61,679
|
|
92,881
|
|
87,362
|
|
320,276
|
Acquisition-related
costs
|
|
1,840
|
|
3,256
|
|
2,562
|
|
13,182
|
|
20,840
|
Depreciation and
amortization
|
|
48,781
|
|
30,464
|
|
25,016
|
|
20,752
|
|
125,013
|
Asset impairment
and restructuring costs
|
|
623,266
|
|
-
|
|
-
|
|
-
|
|
623,266
|
Restructuring and
other charges recorded in cost of goods sold
|
|
132,089
|
|
-
|
|
-
|
|
-
|
|
132,089
|
Charges related to the
flow-through of inventory step-up on business
combinations
|
|
4,687
|
|
-
|
|
-
|
|
-
|
|
4,687
|
Adjusted
EBITDA
|
$
|
(102,007)
|
$
|
(96,982)
|
$
|
(150,380)
|
$
|
(93,423)
|
$
|
(442,792)
|
Schedule
6
|
|
|
|
|
|
|
|
Adjusted
EBITDA1 - IFRS to US GAAP
Differences
|
|
|
|
|
|
Dec 31,
|
Sep 30,
|
Jun 30,
|
(in thousands of
Canadian dollars, unaudited)
|
|
2019
|
2019
|
2019
|
Adjusted EBITDA, as
previously reported under IFRS
|
|
$
|
(91,661)
|
$
|
(155,745)
|
$
|
(92,060)
|
Adjustments related to
differences in lease accounting on depreciation and
amortization expense
|
|
|
(2,878)
|
|
(2,857)
|
|
(2,639)
|
Adjustments related to
other transition differences
|
|
|
(2,443)
|
|
8,222
|
|
1,276
|
Adjusted EBITDA, as
reported under US GAAP
|
|
$
|
(96,982)
|
$
|
(150,380)
|
$
|
(93,423)
|
|
|
|
|
|
|
|
|
|
|
|
1 Adjusted EBITDA is calculated as
the reported operating income (loss), which excludes interest and
income taxes, adjusted for the removal of share-based compensation
expense, depreciation and amortization expense, asset impairment
and restructuring costs, restructuring and other charges recorded
in cost of goods sold, and charges related to the flow-through of
inventory step-up on business combinations, and further adjusted to
remove acquisition-related costs. See "Non-GAAP
Measures".
|
Schedule
7
|
|
|
|
|
|
|
|
|
|
|
Gross Margin -
IFRS to US GAAP Differences
|
|
|
|
|
|
|
|
Three months
ended
|
Year ended
|
|
Mar 31,
|
Dec 31,
|
Sep 30,
|
Jun 30,
|
Mar 31,
|
(in thousands of
Canadian dollars, unaudited)
|
2020
|
2019
|
2019
|
2019
|
2020
|
Net
revenue
|
$
|
107,913
|
$
|
123,764
|
$
|
76,613
|
$
|
90,482
|
$
|
398,772
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold,
as previously reported under IFRS:
|
|
|
|
81,953
|
|
86,321
|
|
77,313
|
|
|
Restatement of royalty
expense
|
|
|
|
-
|
|
-
|
|
(4,131)
|
|
|
Reclassification
adjustments related to US GAAP transition
|
|
|
|
3,603
|
|
(13,351)
|
|
(990)
|
|
|
Cost of goods sold,
as reported under US GAAP
|
|
199,738
|
|
85,556
|
|
72,970
|
|
72,192
|
|
430,456
|
Gross margin, as
reported under US GAAP
|
$
|
(91,825)
|
$
|
38,208
|
$
|
3,643
|
$
|
18,290
|
$
|
(31,684)
|
Gross margin
percentage, as reported under US GAAP
|
|
(85%)
|
|
31%
|
|
5%
|
|
20%
|
|
(8%)
|
|
|
|
|
|
|
|
|
|
|
|
Schedule
8
|
|
|
|
|
|
|
|
|
|
|
Adjusted Gross
Margin1 Reconciliation (Non-GAAP
Measure)
|
|
|
|
|
|
|
|
Three months
ended
|
Year ended
|
|
Mar 31,
|
Dec 31,
|
Sep 30,
|
Jun 30,
|
Mar 31,
|
(in thousands of
Canadian dollars, unaudited)
|
2020
|
2019
|
2019
|
2019
|
2020
|
Gross margin, as
reported under US GAAP
|
$
|
(91,825)
|
$
|
38,208
|
$
|
3,643
|
$
|
18,290
|
$
|
(31,684)
|
Adjustments to gross
margin:
|
|
|
|
|
|
|
|
|
|
|
Restructuring and
other charges recorded in cost of goods sold
|
|
132,089
|
|
-
|
|
-
|
|
-
|
|
132,089
|
Charges related to the
flow-through of inventory step-up on business
combinations
|
|
4,687
|
|
-
|
|
-
|
|
-
|
|
4,687
|
Adjusted gross
margin 1
|
$
|
44,951
|
$
|
38,208
|
$
|
3,643
|
$
|
18,290
|
$
|
105,092
|
Adjusted gross margin
percentage 1
|
|
42%
|
|
31%
|
|
5%
|
|
20%
|
|
26%
|
1 Adjusted gross margin and adjusted
gross margin percentage are non-GAAP measures. See "Non-GAAP
Measures".
|
Schedule
9
|
|
|
|
Free Cash Flow
Reconciliation1
|
Three months
ended
|
|
March 31,
|
March 31,
|
(in thousands of
Canadian dollars, unaudited)
|
2020
|
2019
|
Net cash provided by
(used in) operating activities
|
$
|
(210,639)
|
$
|
(240,132)
|
Purchases of and
deposits on property, plant and equipment
|
|
(94,086)
|
|
(149,220)
|
Free cash
flow1
|
$
|
(304,725)
|
$
|
(389,352)
|
|
|
|
|
|
|
Year ended
|
|
March 31,
|
March 31,
|
(in thousands of
Canadian dollars, unaudited)
|
2020
|
2019
|
Net cash used in
operating activities
|
$
|
(772,635)
|
$
|
(535,031)
|
Purchases of and
deposits on property, plant and equipment
|
|
(704,944)
|
|
(644,456)
|
Free cash
flow1
|
$
|
(1,477,579)
|
$
|
(1,179,487)
|
1Free cash
flow is a non-GAAP measure and is calculated as net cash provided
by (used in) operating activities, less purchases of and deposits
on property, plant and equipment.
|
CONTACT: Laura Nadeau, Media
Relations, media@canopygrowth.com, 613-485-0386; Judy Hong, Vice President, Investor Relations
(USA), Judy.hong@canopygrowth.com;
Tyler Burns, Vice President,
Investor Relations (Canada),
Tyler.burns@canopygrowth.com, 855-558-9333 ext. 122