Company takes firm actions to transform
Canadian business to enable growth and profitability
Announces cost reduction program of additional
$140-$160
million to be realized over the next 12 months
Restructuring includes significant reduction
in production footprint and headcount
SMITHS
FALLS, ON, Feb. 9, 2023 Canopy Growth Corporation
("Canopy Growth" or the "Company") (TSX: WEED) (NASDAQ: CGC) today
announces its financial results for the third quarter ended
December 31, 2022. Canopy Growth is
also announcing significant changes to the Company's Canadian
cannabis business. All financial information in this press release
is reported in Canadian dollars, unless otherwise indicated.
Highlights
- Canopy Growth announced today that it is transitioning to an
asset-light model in Canada by
exiting cannabis flower cultivation in the Company's Smiths Falls, Ontario facility, ceasing the
sourcing of cannabis flower from the Mirabel, Quebec facility, and moving to a
third-party sourcing model for cannabis beverages, edibles, vapes,
and extracts.
- Today's changes come in addition to multiple cost reduction
activities within FY2023, including the divestiture of Canopy
Growth's Canadian retail operations, the organizational
restructuring of certain corporate functions, and the closure of
the Scarborough, Ontario research
facility.
- As a result of the cost reduction initiatives undertaken in
fiscal 2023, the Company intends to close its 1 Hershey Drive
facility in Smiths Falls, Ontario,
in addition to reducing headcount across the business by
approximately 60%, including 800 positions impacted by the changes
announced today, of which 40% are impacted immediately.
- Management expects these cost reduction initiatives will reduce
annual Cost of Goods Sold ("COGS") and Selling, General &
Administrative ("SG&A") expenses by a combined $140-$160 million
over the next 12 months, bringing the total cost reduction target
to $240-$310
million inclusive of the reductions announced in
April 2022.
- Canopy Growth continues to progress its U.S. strategy through
Canopy USA, LLC ("CUSA") and is
committed to remaining dual–listed on the TSX and the Nasdaq.
- Based on our current revenue run rate and these cost reduction
initiatives, management reaffirms its expectation to achieve
positive Adjusted EBITDA in FY2024, with the exception of
investment in BioSteel.
"Canopy must reach profitability to achieve our ambition of
long-term North American cannabis market leadership. We are
transforming our Canadian business to an asset-light model and
significantly reducing the overall size of our organization. These
changes are difficult but necessary to drive our business to
profitability and growth."
David Klein, Chief Executive
Officer
"The right-sizing of our Canadian business is expected to
significantly reduce our cash costs. Canopy is firmly on the path
to deliver at least quarterly breakeven adjusted EBITDA in our
Canadian cannabis business in Fiscal 2024, even at current revenue
run-rate."
Judy Hong, Chief Financial
Officer
Third Quarter Fiscal 2023 Financial Summary
(in millions of Canadian
dollars, unaudited)
|
|
Net Revenue
|
Gross margin
percentage
|
Adjusted
gross margin
percentage1
|
Net loss
|
Adjusted
EBITDA2
|
Free cash
flow3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
$101.2
|
(2 %)
|
1 %
|
$(266.7)
|
$(87.5)
|
$(145.8)
|
vs. Q3
FY2022
|
|
(28 %)
|
(900 bps)
|
(1,200 bps)
|
(131 %)
|
(30 %)
|
13 %
|
1Adjusted
gross margin is a non-GAAP measure, and for Q3 FY2023 excludes $3.6
million of restructuring costs recorded in cost of goods sold (Q3
FY2022 - excludes $3.1 million related to the flow-through of
inventory step-up associated with the acquisition of Supreme
Cannabis and $4.6 of restructuring costs recorded in cost of goods
sold). 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".
|
Revenues:
Net revenue of $101 million in Q3
FY2023 declined 28% versus Q3 FY2022. The decrease is primarily
attributable to increased competition in the Canadian adult-use
cannabis market, the divestiture of C3 Cannabinoid Compound Company
GmbH ("C³"), a decline in our U.S. CBD business, and softer
performance from Storz & Bickel and This Works. When adjusting
for both the impact of the divestiture of C3 and our
Canadian retail business, revenues for the period decreased 23% in
Q3 FY2023 versus Q3 FY2022.
Gross margin:
Reported gross margin in Q3 FY2023 was (2%) as compared to
7% in Q3 FY2022. Excluding non-cash restructuring costs recorded in
COGS of $4 million, adjusted gross
margin4 was 1%. Gross margin in Q3 FY2023 was
impacted primarily by a decrease in the amount of payroll subsidies
received from the Canadian government pursuant to a COVID-19 relief
program, the divestiture of C3 and lower gross margins
in the BioSteel business segment primarily attributable to the
write-down of aged inventory, and higher distribution and
warehousing costs. While lower production output and price
compression in the Canadian adult-use cannabis business continued
to pressure gross margins, the Canadian cannabis segment saw an
improvement in gross margins in Q3 FY2023 compared to Q3 FY2022 and
compared to Q2 FY2023.
Operating expenses:
Total SG&A expenses in Q3 FY2023 increased by 5% versus Q3
FY2022, driven by year-over-year increases in acquisition-related
expenses primarily relating to the Company's previously announced
transaction with respect to the formation of CUSA and higher
General & Administrative ("G&A") expenses. The increase in
G&A expenses was primarily due to a decrease in the amount of
payroll subsidies received from the Canadian government pursuant to
a COVID-19 relief program. The decrease in Sales and Marketing
expenses is net of the impact of incremental investments in
BioSteel, relating to the activation of the National Hockey League
("NHL") partnership announced in July
2022. Excluding acquisition-related expenses, the impact of
the disposition of C3 and the COVID-19 relief program,
total SG&A expenses decreased 10% in Q3 FY2023 compared to the
prior year period.
Net Loss:
Net Loss in Q3 FY2023 was $267
million, which is a $151
million increase in the net loss versus Q3 FY2022, driven
primarily by non–cash fair value changes and an increase in asset
impairment and restructuring costs.
Adjusted EBITDA5:
Adjusted EBITDA loss in Q3 FY2023 was $88
million, a $21 million
increase in Adjusted EBITDA loss versus Q3 FY2022 primarily driven
by a decrease in the amount of payroll subsidies received from the
Canadian government pursuant to a COVID-19 relief program.
Free Cash Flow6:
Free Cash Flow in Q3 FY2023 was an outflow of $146 million, a 13% decrease in outflow versus Q3
FY2022. Relative to Q3 FY2022, the decrease in outflow is due to
the timing of certain payments in each period. Year-to-date
Free Cash Flow in FY2023 is a 7% decrease in outflow versus the
comparable period in FY2022, representing the impact of reduced
capital expenditures and impacts of cost reduction actions,
partially offset by investments in growth initiatives at BioSteel
and costs related to the formation of CUSA.
Cash Position:
Cash and short-term investments amounted to $789 million at December
31, 2022, representing a decrease of $583 million from $1,372 million at March 31, 2022 reflecting the impact of cash used
in operating activities, the first tranche of the term loan credit
agreement repayment of $118 million,
as well as cash used for acquisitions and investments, including
the acquisition of the Verona,
Virginia manufacturing facility for BioSteel and a premium
payment made to obtain an option to acquire Acreage Holdings, Inc.
("Acreage") outstanding debt as part of the October 2022 CUSA announcement. Gross debt
amounted to $1,206 million at
December 31, 2022, representing a
decline of $295 million from
$1,501 million at March 31, 2022.
4 Adjusted
gross margin is a non-GAAP measure, and for Q3 FY2023 excludes $3.6
million of restructuring costs recorded in cost of goods sold (Q3
FY2022 - excludes $3.1 million related to the flow-through of
inventory step-up associated with the acquisition of Supreme
Cannabis and $4.6 of restructuring costs recorded in cost of goods
sold). See "Non-GAAP Measures".
|
5 Adjusted
EBITDA is a non-GAAP measure. See "Non-GAAP Measures".
|
6 Free cash
flow is a non-GAAP measure. See "Non-GAAP Measures".
|
Canopy USA strategy is expected to
fast track entry into the U.S. cannabis market
- Canopy Growth continues to progress its U.S. strategy through
CUSA and is committed to remaining dual-listed on the TSX and
NASDAQ through continued engagement with NASDAQ on a path forward
that is focused on delivering on the benefits of this
transformational strategy. As a result of the formation of CUSA,
and related transaction with, CUSA, the Company expects to reduce
its annual operating expenditures through a more streamlined and
singular approach to its U.S. strategy. In the near term, CUSA is
expected to generate revenue and cost synergies by leveraging its
brand portfolio, routes to market and operations of the full U.S.
cannabis ecosystem while eliminating redundancies and the public
company reporting costs of Acreage, all of which are expected to be
realized while cannabis remains federally illegal in the United States.
- In light of NASDAQ's objections to the consolidation of CUSA
into the financials of Canopy Growth, we are prepared to make
changes to the structure of our interest in CUSA such that Canopy
Growth would not be required to consolidate the financial results
of CUSA into Canopy Growth's financial statements, which may
include: (1) reducing Canopy Growth's economic interest in CUSA on
an as-converted basis to no greater than 90%, (2) reducing the
number of managers on CUSA's board of managers from four to three,
including, reducing Canopy Growth's nomination right to a single
manager, (3) modifying the terms of the Protection Agreement
entered into with CUSA and CUSA's Limited Liability Company
Agreement in order to eliminate certain negative covenants and (4)
modifying the terms of the agreements with third-party investors in
CUSA to, among other things, remove their right to guaranteed
returns.
Business Highlights
Aligning Canadian Cannabis Operations to Challenged Market
Realities
- On April 26, 2022, the
Company announced a series of initiatives to reduce costs and drive
efficiency, which were expected to generate savings of
$100-$150
million within 12-18 months of the announcement. To
date, these initiatives have generated approximately $80 million in savings.
- Today, Canopy Growth announced the next series of comprehensive
steps to align its Canadian cannabis operations and resources in
response to unfavorable market realities, which include:
-
- Transitioning to an asset-light model by exiting cannabis
flower cultivation in the Company's Smiths Falls, Ontario facility, ceasing the
sourcing of cannabis flower from the Mirabel, Quebec facility and consolidating
cultivation at existing facilities in Kincardine, Ontario and Kelowna, British Columbia;
- Moving to an adaptive third-party sourcing model for all
cannabis beverages, edibles, vapes, and extracts which will enable
the Company to select and bring to market exciting and exclusive
formats without the required investment in R&D and production
footprint;
- As a result of these changes, the Company intends to
consolidate flower, pre-rolled joints, softgel, and oil
manufacturing in Canopy Growth's current beverage production
facility in Smiths Falls, Ontario.
The Company will transition to a flexible sourcing strategy and
migrate the existing genetics program to Quebec-based EXKA; and
- In addition to the closure of the Scarborough, Ontario facility in January 2023, the Company intends to close the 1
Hershey Drive facility in Smiths Falls,
Ontario and is in active discussions with respect to
restructuring the joint venture entity which holds cultivation
facility in Mirabel, Quebec.
- Reflecting today's announcement and based on information
currently available to Management, the Company expects to record
estimated pre-tax charges of approximately $425 - $525
million, of which $25 -
$40 million is expected to be cash
charges. These pre-tax charges are expected to be substantially
recorded in the current quarter and the first half of fiscal 2024.
The charges the Company expects to incur in connection with these
actions are preliminary estimates and are subject to a number of
assumptions and risks, and actual results may differ materially.
The Company may also incur other material charges7 not
currently contemplated due to events that may occur as a result of,
or in connection with, these actions.
7 All
figures reported above with respect to the pre-tax charges are
preliminary and are unaudited and subject to change and adjustment
as the Company prepares its consolidated financial statements for
the years ended March 31, 2023, and March 31, 2022. Accordingly,
investors are cautioned not to place undue reliance on the
foregoing information. The Company does not intend to provide
preliminary results in the future. The preliminary results provided
in this news release constitute "forward-looking information" and
"forward-looking statements" within the meaning of applicable
Canadian and U.S. securities laws, are based on several assumptions
and are subject to a number of risks and uncertainties. Actual
results may differ materially. See " Notice Regarding Forward
Looking Statements" below.
|
New standalone Canadian cannabis business unit expected to
increase agility and accountability, benefit from brand and SKU
optimization
- The Canadian cannabis business has been reorganized as a
standalone business unit, which will have single point of
accountability for commercial operations, allowing for agility and
accountability. Early progress to-date in Q3 FY2023, shows that
customer order fill rates have increased by over 20%, to above 90%
in the current quarter.·
- The Company's Canadian cannabis business unit is completing a
brand and SKU optimization, which is expected to reduce in–market
brand and SKU count by approximately 25% and 50%, respectively, as
the Company further focuses on the highest performing and more
profitable segments within the Canadian adult-use cannabis
market.
Demonstrating continued momentum across our Consumer
Products businesses; strong sequential revenue growth for Storz
& Bickel; meaningful year-over-year gains in BioSteel
distribution and sales velocity
- Despite a decrease in revenues as compared to Q3 FY2022, Storz
& Bickel delivered sequential revenue growth of 50% in Q3
FY2023 driven by traditionally strong seasonal sales.
- BioSteel has reached a 10.4% share of convenience and gas
channel in Canada, up 300 basis
points ("bps") sequentially, and 13.8% share in Ontario, representing a sequential quarterly
increase of 260 bps8.
- BioSteel All-Commodity Volume in the U.S. of 34% in Q3 FY2023,
represents an increase of 2600 bps compared to the corresponding
period of the prior year9.
- BioSteel Ready-to-Drink ("RTD") U.S. scanned sales for the year
ended January 1, 2023 increased 157%
from prior year10.
- Subsequent to the end of Q3 FY2023, BioSteel announced the
signing of multi-year partnerships with 6 NHL teams.
U.S. THC companies continue to strengthen and expand their
businesses
- In the third quarter of calendar 2022, Acreage11
reported revenue increasing 28% year over year and delivering their
7th consecutive quarter of positive Adjusted EBITDA12
(as calculated by Acreage and set forth in Acreage's Third Quarter
2022 Financial Results press release available under Acreage's
profile on SEDAR at www.sedar.com and through EDGAR at
www.sec.gov/edgar). Subsequent to the end of their fourth quarter
of calendar 2022, Acreage began adult-use retail operations in the
state of Connecticut.
- In January 2023,
Wana13 and TerrAscend Corp. announced an agreement to
bring Wana-branded edibles to the new adult-use market in the state
of New Jersey and expand
availability in the state of Maryland14.
- In February 2023,
Jetty15 announced the upcoming availability of Jetty
products in the state of New
York16.
8 Nielsen
data 13-weeks ended December 3, 2022.
|
9 IRI data
for the 52 weeks ended January 1, 2023.
|
10 IRI data
for the 52 weeks ended January 1, 2023.
|
11 Until such time as the rights to
acquire Acreage are exercised, neither the Company nor CUSA will
have any direct or indirect economic or voting interests in
Acreage, neither the Company nor CUSA will directly or indirectly
control Acreage, and each of the Company, CUSA and Acreage will
continue to operate independently of one another. The Company holds
non-voting and non-participating shares in CUSA that are
exchangeable into common shares of CUSA.
|
12 Canopy Growth and Acreage may
calculate Adjusted EBITDA differently as Adjusted EBITDA does not
have any standardized meaning and therefore may not be comparable
as between the Company and Acreage.
|
13 Until such time as CUSA elects to
exercise its rights to acquire Mountain High Products, LLC, Wana
Wellness, LLC and The Cima Group, LLC (collectively, "Wana"), CUSA
will have no direct or indirect economic or voting interests in
Wana, CUSA will not directly or indirectly control Wana, and CUSA,
on the one hand, and Wana, on the other hand, will continue to
operate independently of one another. The Company holds
non-voting and non-participating shares in CUSA that are
exchangeable into common shares of CUSA.
|
14
https://ir.terrascend.com/news-events/press-releases/detail/94/wana-brands-partners-with-terrascend-to-bring-its
|
15 Until such time as CUSA elects to
exercise its rights to acquire Lemurian, Inc. ("Jetty"), CUSA will
have no direct or indirect economic or voting interests in Jetty,
CUSA will not directly or indirectly control Jetty, and CUSA, on
the one hand, and Jetty, on the other hand, will continue to
operate independently of one another. The Company holds non-voting
and non-participating shares in CUSA that are exchangeable into
common shares of CUSA.
|
16
https://www.linkedin.com/feed/update/urn:li:activity:7027376107637137408/
|
Third Quarter Fiscal 2023 Revenue Review17
Revenue by Channel
(in millions of
Canadian dollars, unaudited)
|
|
Q3
FY2023
|
Q3
FY2022
|
Vs. Q3
FY2022
|
Canada
cannabis
|
|
|
|
|
Canadian adult-use
cannabis
|
|
|
|
|
Business-to-business18
|
|
$21.5
|
$33.3
|
(35 %)
|
Business-to-consumer
|
|
$11.0
|
$14.5
|
(24 %)
|
|
|
$32.5
|
$47.8
|
(32 %)
|
Canadian medical
cannabis19
|
|
$14.1
|
$12.9
|
9 %
|
|
|
$46.6
|
$60.7
|
(23 %)
|
Rest-of-world
cannabis
|
|
|
|
|
C3
|
|
$-
|
$9.7
|
(100 %)
|
Other rest-of-world
cannabis20
|
|
$5.8
|
$12.6
|
(54 %)
|
|
|
$5.8
|
$22.3
|
(74 %)
|
|
|
|
|
|
Storz &
Bickel
|
|
$20.2
|
$25.2
|
(20 %)
|
BioSteel21
|
|
$16.4
|
$17.0
|
(4 %)
|
This
Works
|
|
$8.3
|
$10.7
|
(22 %)
|
Other
|
|
$3.9
|
$5.1
|
(24 %)
|
|
|
|
|
|
Net
revenue
|
|
$101.2
|
$141.0
|
(28 %)
|
7 All
figures reported above with respect to the pre-tax charges are
preliminary and are unaudited and subject to change and adjustment
as the Company prepares its consolidated financial statements for
the years ended March 31, 2023, and March 31, 2022. Accordingly,
investors are cautioned not to place undue reliance on the
foregoing information. The Company does not intend to provide
preliminary results in the future. The preliminary results provided
in this news release constitute "forward-looking information" and
"forward-looking statements" within the meaning of applicable
Canadian and U.S. securities laws, are based on several assumptions
and are subject to a number of risks and uncertainties. Actual
results may differ materially. See " Notice Regarding Forward
Looking Statements" below.
|
Canada Cannabis
- Adult-use business-to-business net revenue in Q3 FY2023
decreased 35% over the prior year period driven primarily by lower
sales volumes, particularly in value-priced dried flower, resulting
from both the strategic shift in our product portfolio and
increased competition. These factors were partially offset by a
more favourable product mix.
- Adult-use business-to-consumer net revenue in Q3 FY2023
decreased 24% versus Q3 FY2022 largely driven by increased
competition from the rapid growth in third party retail locations
across provinces.
- Medical net revenue in Q3 FY2023 increased 9% from Q3 FY2022
driven by growth in insured patient registrations and continued
expansion of product offerings.
Rest-of-world Cannabis
- Rest-of-world cannabis revenue in Q3 FY2023 decreased 74% over
Q3 FY2022 due primarily to the divestiture of C3 and a
decline in our U.S. CBD business.
- Excluding the impact of the divestiture of C3,
rest-of-world cannabis net revenue decreased 54% as compared to Q3
FY2022, primarily due to declines in sales to Israel and our U.S. CBD business, partially
offset by strong growth in Australia.
Storz & Bickel
- Storz & Bickel vaporizer revenue in Q3 FY2023 decreased 20%
over Q3 FY2022 due primarily to continued slowdown in consumer
spending.
BioSteel
- BioSteel sales in Q3 FY2023 decreased 4% over Q3 FY2022 due to
lapping of strong sales in the prior year quarter driven by the
timing of distribution load-in in the U.S.
This Works
- This Works sales in Q3 FY2023 decreased 22% over Q3 FY2022 due
in part to softer performance of certain product lines and the
impact of foreign exchange rates.
The Q3 FY2023 and Q3 FY2022 financial results presented in this
press release have been prepared in accordance with U.S. GAAP.
Webcast and Conference Call Information
The Company will host a conference call and audio webcast with
David Klein, CEO and Judy Hong, CFO at 10:00
AM Eastern Time on February 9, 2023.
Webcast Information
A live audio webcast will be available at
https://app.webinar.net/DpogWGlRL06.
Replay Information
A replay will be accessible by webcast until 11:59 PM Eastern Time on May 8, 2023 at
https://app.webinar.net/DpogWGlRL06.
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 income (loss), adjusted to exclude
income tax recovery (expense); other income (expense), net; loss on
equity method investments; share-based compensation expense;
depreciation and amortization expense; asset impairment and
restructuring costs; restructuring costs 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. Asset impairments related to periodic
changes to the Company's supply chain processes are not excluded
from Adjusted EBITDA given their occurrence through the normal
course of core operational activities. The Adjusted EBITDA
reconciliation is presented within this news release and explained
in the Company's Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2022 (the
"Form 10-Q") to be filed with the Securities and Exchange
Commission (the "SEC").
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 Form 10-Q to be filed with the SEC.
Adjusted Gross Margin and Adjusted Gross Margin Percentage are
non-GAAP measures used by management that are 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 on business combinations. Adjusted Gross Margin Percentage
is calculated as Adjusted Gross Margin divided by net revenue. The
Adjusted Gross Margin and Adjusted Gross Margin Percentage
reconciliation is presented within this news release and explained
in the Form 10-Q to be filed with the SEC.
About Canopy Growth Corporation
Canopy Growth Corporation ("Canopy") is a leading North American
cannabis and CPG company dedicated to unleashing the power of
cannabis to improve lives.
Through an unwavering commitment to our consumers, Canopy
delivers innovative products with a focus on premium and mainstream
cannabis brands including Doja, 7ACRES, Tweed, and Deep Space. Our
CPG portfolio features sugar-free sports hydration brand BioSteel,
targeted 24-hour skincare and wellness solutions from This Works,
gourmet wellness products by Martha Stewart CBD, and category
defining vaporizer technology made in Germany by Storz & Bickel.
Canopy has also established a comprehensive ecosystem to realize
the opportunities presented by the U.S. THC market through its
rights to Acreage Holdings, a vertically integrated multi-state
cannabis operator with principal operations in densely populated
states across the Northeast, as well as Wana Brands, a leading cannabis edible brand in
North America, and Jetty Extracts,
a California-based producer of
high-quality cannabis extracts and pioneer of clean vape
technology.
Beyond our world-class products, Canopy is leading the industry
forward through a commitment to social equity, responsible use, and
community reinvestment—pioneering a future where cannabis is
understood and welcomed for its potential to help achieve greater
well-being and life enhancement.
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. To the extent any
forward-looking statements in this news release constitutes
"financial outlooks" within the meaning of applicable Canadian
securities laws, the reader is cautioned that this information may
not be appropriate for any other purpose and the reader should not
place undue reliance on such financial outlooks. 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:
- 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. Food and Drug Administration, the U.S. Drug Enforcement
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 amount or frequency of impairment
losses, including as a result of the write-down of intangible
assets, including goodwill;
- the Company's ability to execute on its strategy to accelerate
the Company's entry into the U.S. cannabis market through the
creation of Canopy USA , LLC
("Canopy USA")(the
"Reorganization");
- expectations regarding the potential success of, and the costs
and benefits associated with the Reorganization;
- expectations regarding the potential success of, and the costs
and benefits associated with comprehensive steps and actions being
undertaken by the Company with respect to its Canadian operations
(the "Canadian Transformation Plan")
- expectations to capitalize on the opportunity for growth in
the United States cannabis sector
and the anticipated benefits of such strategy;
- the timing and outcome of the arrangement agreement we entered
into with Acreage Holdings and Canopy USA on October 24,
2022 (the "Floating Share Arrangement Agreement)", the
anticipated benefits of such arrangement, the anticipated timing of
the related Acreage Holdings special meeting of shareholders and
the acquisition of Acreage Holdings' Class E subordinate voting
shares (the "Fixed Shares") and Class D subordinated voting shares
by Canopy USA, the satisfaction or
waiver of the closing conditions set out in the Floating Share
Arrangement Agreement and the arrangement agreement we previously
entered into with Acreage Holdings, including receipt of all
regulatory approvals, and the anticipated timing and occurrence of
the Company's exercise of the option to acquire the Fixed Shares
and closing of such transaction;
- the anticipated timing and occurrence of the Company's special
meeting of shareholders to approve an amendment to the Company's
articles of incorporation (the "Amendment Proposal");
- expectations related to our announcement of certain
restructuring actions (the "Restructuring Actions"), the
Reorganization, the Canadian Transformation Plan and any progress,
challenges and effects related thereto as well as changes in
strategy, metrics, investments, costs, operating expenses, employee
turnover and other changes with respect thereto;
- our ability to refinance debt as and when required on terms
favorable to us and comply with covenants contained in our debt
facilities and debt instruments;
- expectations regarding the laws and regulations and any
amendments thereto relating to the U.S. hemp industry in the U.S.,
including the promulgation of regulations for the U.S. hemp
industry by the USDA and relevant state regulatory authorities;
- expectations regarding the potential success of, and the costs
and benefits associated with, our acquisitions, joint ventures,
strategic alliances, equity investments and dispositions;
- 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;
- our 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 investments in us
(the "CBI Group Investments") from Constellation Brands, Inc.
("CBI") and its affiliates (together, the "CBI Group");
- the potential exercise of the warrants held by the CBI Group,
pre-emptive rights and/or top-up rights held by the CBI Group;
- 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
adult-use 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 adult-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 timing and nature of legislative changes in the U.S.
regarding the regulation of cannabis including tetrahydrocannabinol
("THC");
- 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 and regulatory proceedings, reviews and investigations;
- expectations with respect to future production costs;
- expectations with respect to future sales and distribution
channels and networks;
- 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;
- expectations regarding the costs and benefits associated with
our contracts and agreements with third parties, including under
our third-party supply and manufacturing agreements; and
- expectations on price changes in cannabis markets.
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; * 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;
and (xiii) 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. Financial outlooks, as with
forward-looking statements generally, are, without limitation,
based on the assumptions and subject to various risks as set out
herein. Our actual financial position and results of operations may
differ materially from management's current expectations and, as a
result, our Adjusted EBITDA and SG&A cost savings may differ
materially from the values provided in this news release.
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, our limited operating history; the
risks that if Canopy USA acquires
Wana, Jetty or the Fixed Shares of Acreage without structural
amendments to our interest in Canopy USA, the listing of our common shares on
Nasdaq may be jeopardized; our ability to implement structural
changes to our interest in Canopy USA, if necessary;; inherent uncertainty
associated with projections; the diversion of management time on
issues related to Canopy USA; the
ability of parties to certain transactions to receive, in a timely
manner and on satisfactory terms, the necessary regulatory, court
and shareholder approvals; the risks that our Restructuring Actions
will not result in the expected cost-savings, efficiencies and
other benefits or will result in greater than anticipated turnover
in personnel; risks that we may be required to write down
intangible assets, including goodwill, due to impairment; changes
in laws, regulations and guidelines and our compliance with such
laws, regulations and guidelines; risk relating to the long term
macroeconomics effects of the COVID-19 pandemic and any future
pandemic or epidemic; consumer demand for cannabis and U.S. hemp
products; inflation risks; the risks and uncertainty regarding
future product development; our reliance on licenses issued by and
contractual arrangements with various federal, state and provincial
governmental authorities; the risk 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; the implementation and
effectiveness of key personnel changes; risks associated with
jointly owned investments; risks relating to our current and future
operations in emerging markets; risks relating to inventory write
downs; future levels of revenues and the impact of increasing
levels of competition; risks related to the protection and
enforcement of our intellectual property rights; our ability to
manage disruptions in credit markets or changes to our credit
ratings; 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; risks related to the integration of
acquired businesses; the timing and manner of the legalization of
cannabis in the United States;
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);
counterparty risks and liquidity risks that may impact our ability
to obtain loans and other credit facilities on favorable terms; the
potential effects of judicial, regulatory or other proceedings, or
threatened litigation or proceedings, on our business, financial
condition, results of operations and cash flows; risks related to
stock exchange restrictions; risks associated with divestment and
restructuring; volatility in and/or degradation of general
economic, market, industry or business conditions; our exposure to
risks related to an agricultural business, including wholesale
price volatility and variable product quality; third-party
manufacturing risks; third-party transportation risks; 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, 2022 and in Item 1A of Part II of the
Form 10-Q. 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.
Participants in the Solicitation
Canopy Growth and its
directors and executive officers may be deemed participants in the
solicitation of proxies from Canopy Growth shareholders with
respect to the Amendment Proposal. A description of each of these
persons' interests in the Amendment Proposal is contained in the
Company's revised preliminary proxy statement on Schedule 14A filed
with the SEC on January 17, 2023 (as
may be amended, the "Preliminary Proxy Statement") and will be
contained in the Company's definitive proxy statement relating to
the Amendment Proposal (the "Definitive Proxy Statement") when it
becomes available. The Preliminary Proxy Statement is (and the
Definitive Proxy Statement when it becomes available will be)
available free of charge at the SEC's website at www.sec.gov, or by
directing a request to Canopy Growth Corporation, 1 Hershey Drive,
Smiths Falls, Ontario, K7A 0A8 or
by email to invest@canopygrowth.com. Investors should read the
Preliminary Proxy Statement (and the Definitive Proxy Statement
when it becomes available) because they will contain important
information.
Schedule 1
CANOPY GROWTH
CORPORATION CONDENSED INTERIM CONSOLIDATED BALANCE
SHEETS (in thousands of Canadian dollars, except number of
shares and per share data, unaudited)
|
|
|
December 31,
2022
|
|
|
March 31,
2022
|
|
ASSETS
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
598,131
|
|
|
$
|
776,005
|
|
Short-term
investments
|
|
|
191,119
|
|
|
|
595,651
|
|
Restricted short-term
investments
|
|
|
12,932
|
|
|
|
12,216
|
|
Amounts receivable,
net
|
|
|
104,640
|
|
|
|
96,443
|
|
Inventory
|
|
|
213,937
|
|
|
|
204,387
|
|
Prepaid expenses and
other assets
|
|
|
52,151
|
|
|
|
52,700
|
|
Total current
assets
|
|
|
1,172,910
|
|
|
|
1,737,402
|
|
Other financial
assets
|
|
|
598,387
|
|
|
|
800,328
|
|
Property, plant and
equipment
|
|
|
874,029
|
|
|
|
942,780
|
|
Intangible
assets
|
|
|
213,530
|
|
|
|
252,695
|
|
Goodwill
|
|
|
142,076
|
|
|
|
1,866,503
|
|
Other assets
|
|
|
19,223
|
|
|
|
15,342
|
|
Total
assets
|
|
$
|
3,020,155
|
|
|
$
|
5,615,050
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
63,139
|
|
|
$
|
64,270
|
|
Other accrued expenses
and liabilities
|
|
|
75,985
|
|
|
|
75,278
|
|
Current portion of
long-term debt
|
|
|
455,483
|
|
|
|
9,296
|
|
Other
liabilities
|
|
|
84,134
|
|
|
|
64,054
|
|
Total current
liabilities
|
|
|
678,741
|
|
|
|
212,898
|
|
Long-term
debt
|
|
|
750,118
|
|
|
|
1,491,695
|
|
Deferred income tax
liabilities
|
|
|
8,988
|
|
|
|
15,991
|
|
Liability arising from
Acreage Arrangement
|
|
|
-
|
|
|
|
47,000
|
|
Warrant derivative
liability
|
|
|
668
|
|
|
|
26,920
|
|
Other
liabilities
|
|
|
141,891
|
|
|
|
190,049
|
|
Total
liabilities
|
|
|
1,580,406
|
|
|
|
1,984,553
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
Redeemable
noncontrolling interest
|
|
|
11,408
|
|
|
|
36,200
|
|
Canopy Growth
Corporation shareholders' equity:
|
|
|
|
|
|
|
Common shares - $nil
par value; Authorized - unlimited number of shares;
Issued - 494,891,390 shares and 394,422,604 shares,
respectively
|
|
|
7,867,310
|
|
|
|
7,482,809
|
|
Additional paid-in
capital
|
|
|
2,510,086
|
|
|
|
2,519,766
|
|
Accumulated other
comprehensive loss
|
|
|
(14,248)
|
|
|
|
(42,282)
|
|
Deficit
|
|
|
(8,937,603)
|
|
|
|
(6,370,337)
|
|
Total Canopy Growth
Corporation shareholders' equity
|
|
|
1,425,545
|
|
|
|
3,589,956
|
|
Noncontrolling
interests
|
|
|
2,796
|
|
|
|
4,341
|
|
Total shareholders'
equity
|
|
|
1,428,341
|
|
|
|
3,594,297
|
|
Total liabilities and
shareholders' equity
|
|
$
|
3,020,155
|
|
|
$
|
5,615,050
|
|
Schedule 2
CANOPY GROWTH
CORPORATION
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands of Canadian dollars, except number of shares and per
share data, unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31,
|
|
|
|
2022
|
|
|
2021
|
|
Revenue
|
|
$
|
113,349
|
|
|
$
|
155,024
|
|
Excise taxes
|
|
|
12,136
|
|
|
|
14,052
|
|
Net revenue
|
|
|
101,213
|
|
|
|
140,972
|
|
Cost of goods
sold
|
|
|
103,654
|
|
|
|
130,882
|
|
Gross
margin
|
|
|
(2,441)
|
|
|
|
10,090
|
|
Operating
expenses:
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
|
122,636
|
|
|
|
116,835
|
|
Share-based
compensation
|
|
|
6,428
|
|
|
|
6,777
|
|
Asset impairment and
restructuring costs
|
|
|
22,259
|
|
|
|
36,439
|
|
Total operating
expenses
|
|
|
151,323
|
|
|
|
160,051
|
|
Operating
loss
|
|
|
(153,764)
|
|
|
|
(149,961)
|
|
Other income
(expense), net
|
|
|
(113,340)
|
|
|
|
34,282
|
|
Loss before income
taxes
|
|
|
(267,104)
|
|
|
|
(115,679)
|
|
Income tax
recovery
|
|
|
382
|
|
|
|
183
|
|
Net loss
|
|
|
(266,722)
|
|
|
|
(115,496)
|
|
Net loss attributable
to noncontrolling interests and
redeemable noncontrolling interest
|
|
|
(5,139)
|
|
|
|
(6,571)
|
|
Net loss attributable
to Canopy Growth Corporation
|
|
$
|
(261,583)
|
|
|
$
|
(108,925)
|
|
|
|
|
|
|
|
|
Basic and diluted loss
per share
|
|
$
|
(0.54)
|
|
|
$
|
(0.28)
|
|
Basic and diluted
weighted average common shares outstanding
|
|
|
486,112,598
|
|
|
|
393,818,282
|
|
Schedule 3
CANOPY GROWTH
CORPORATION CONDENSED INTERIM CONSOLIDATED STATEMENTS OF
CASH FLOWS (in thousands of Canadian dollars,
unaudited)
|
|
|
Nine months
ended December 31,
|
|
|
|
2022
|
|
|
2021
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(2,586,189)
|
|
|
$
|
258,128
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
Depreciation of
property, plant and equipment
|
|
|
43,185
|
|
|
|
56,467
|
|
Amortization of
intangible assets
|
|
|
20,561
|
|
|
|
27,462
|
|
Share of loss on
equity method investments
|
|
|
-
|
|
|
|
100
|
|
Share-based
compensation
|
|
|
21,725
|
|
|
|
35,856
|
|
Asset impairment and
restructuring costs
|
|
|
1,797,854
|
|
|
|
113,250
|
|
Income tax expense
(recovery)
|
|
|
11,587
|
|
|
|
(490)
|
|
Non-cash fair value
adjustments and charges related to
settlement of unsecured senior notes
|
|
|
325,742
|
|
|
|
(893,024)
|
|
Change in operating
assets and liabilities, net of effects from
purchases of businesses:
|
|
|
|
|
|
|
Amounts
receivable
|
|
|
(8,197)
|
|
|
|
4,083
|
|
Inventory
|
|
|
(9,550)
|
|
|
|
6,702
|
|
Prepaid expenses and
other assets
|
|
|
(6,866)
|
|
|
|
28,818
|
|
Accounts payable and
accrued liabilities
|
|
|
(3,202)
|
|
|
|
(30,764)
|
|
Other, including
non-cash foreign currency
|
|
|
(24,459)
|
|
|
|
(25,713)
|
|
Net cash used in
operating activities
|
|
|
(417,809)
|
|
|
|
(419,125)
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Purchases of and
deposits on property, plant and equipment
|
|
|
(6,176)
|
|
|
|
(36,620)
|
|
Purchases of
intangible assets
|
|
|
(1,265)
|
|
|
|
(4,564)
|
|
Proceeds on sale of
property, plant and equipment
|
|
|
10,894
|
|
|
|
25,660
|
|
Redemption of
short-term investments
|
|
|
415,322
|
|
|
|
340,218
|
|
Net cash proceeds on
sale of subsidiaries
|
|
|
12,432
|
|
|
|
10,324
|
|
Investment in other
financial assets
|
|
|
(67,186)
|
|
|
|
(374,414)
|
|
Net cash outflow on
acquisition of subsidiaries
|
|
|
(24,223)
|
|
|
|
(14,947)
|
|
Other investing
activities
|
|
|
2,327
|
|
|
|
(16,759)
|
|
Net cash provided by
(used in) investing activities
|
|
|
342,125
|
|
|
|
(71,102)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Proceeds from issuance
of common shares and warrants
|
|
|
856
|
|
|
|
1,460
|
|
Proceeds from exercise
of stock options
|
|
|
270
|
|
|
|
5,455
|
|
Repayment of long-term
debt
|
|
|
(117,951)
|
|
|
|
(50,217)
|
|
Other financing
activities
|
|
|
(29,096)
|
|
|
|
(3,036)
|
|
Net cash used in
financing activities
|
|
|
(145,921)
|
|
|
|
(46,338)
|
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
|
43,731
|
|
|
|
(2,942)
|
|
Net decrease in cash
and cash equivalents
|
|
|
(177,874)
|
|
|
|
(539,507)
|
|
Cash and cash
equivalents, beginning of period
|
|
|
776,005
|
|
|
|
1,154,653
|
|
Cash and cash
equivalents, end of period
|
|
$
|
598,131
|
|
|
$
|
615,146
|
|
Schedule 4
Adjusted Gross
Margin1 Reconciliation (Non-GAAP Measure)
|
|
|
|
Three months ended
December 31,
|
|
(in thousands of
Canadian dollars except where indicated; unaudited)
|
|
2022
|
|
|
2021
|
|
Net revenue
|
|
$
|
101,213
|
|
|
$
|
140,972
|
|
|
|
|
|
|
|
|
Gross margin, as
reported
|
|
|
(2,441)
|
|
|
|
10,090
|
|
Adjustments to gross
margin:
|
|
|
|
|
|
|
Restructuring costs
recorded in cost of goods sold
|
|
|
3,626
|
|
|
|
4,554
|
|
Charges related to the
flow-through of inventory
step-up on business combinations
|
|
|
-
|
|
|
|
3,147
|
|
Adjusted gross
margin1
|
|
$
|
1,185
|
|
|
$
|
17,791
|
|
|
|
|
|
|
|
|
Adjusted gross margin
percentage1
|
|
|
1
|
%
|
|
|
13
|
%
|
|
|
1 Adjusted
gross margin and adjusted gross margin percentage are non-GAAP
measures. See "Non-GAAP Measures".
|
|
Schedule 5
Adjusted
EBITDA1 Reconciliation (Non-GAAP
Measure)
|
|
|
|
|
|
|
|
|
Three months ended
December 31,
|
|
(in thousands of
Canadian dollars, unaudited)
|
|
2022
|
|
|
2021
|
|
Net loss
|
|
$
|
(266,722)
|
|
|
$
|
(115,496)
|
|
Income tax
recovery
|
|
|
(382)
|
|
|
|
(183)
|
|
Other (income) expense,
net
|
|
|
113,340
|
|
|
|
(34,282)
|
|
Share-based
compensation
|
|
|
6,428
|
|
|
|
6,777
|
|
Acquisition-related
costs
|
|
|
13,347
|
|
|
|
1,617
|
|
Depreciation and
amortization
|
|
|
20,602
|
|
|
|
30,017
|
|
Asset impairment and
restructuring costs
|
|
|
22,259
|
|
|
|
36,439
|
|
Restructuring costs
recorded in cost of goods sold
|
|
|
3,626
|
|
|
|
4,554
|
|
Charges related to the
flow-through of inventory
step-up on business combinations
|
|
|
-
|
|
|
|
3,147
|
|
Adjusted
EBITDA1
|
|
$
|
(87,502
|
)
|
|
$
|
(67,410)
|
|
|
|
|
|
|
|
|
1Adjusted
EBITDA is a non-GAAP measure. See "Non-GAAP Measures".
|
|
Schedule 6
Free Cash
Flow1 Reconciliation (Non-GAAP Measure)
|
|
|
|
|
|
|
|
|
Three months ended
December 31,
|
|
(in thousands of
Canadian dollars, unaudited)
|
|
2022
|
|
|
2021
|
|
Net cash used in
operating activities
|
|
$
|
(143,894)
|
|
|
$
|
(167,380)
|
|
Purchases of and
deposits on property, plant and equipment
|
|
|
(1,868)
|
|
|
|
(962)
|
|
Free cash
flow1
|
|
$
|
(145,762)
|
|
|
$
|
(168,342)
|
|
|
|
1Free cash
flow is a non-GAAP measure. See "Non-GAAP Measures".
|
|
Schedule 7
Segmented Gross
Margin and Segmented Adjusted Gross Margin1
Reconciliation (Non-GAAP Measure)2
|
|
|
|
Three months ended
December 31,
|
|
(in thousands of
Canadian dollars except where indicated; unaudited)
|
2022
|
|
|
2021
|
|
Canada cannabis
segment
|
|
|
|
|
|
|
Net revenue
|
|
$
|
46,617
|
|
|
$
|
60,678
|
|
Gross margin, as
reported
|
|
|
(5,281)
|
|
|
|
(13,121)
|
|
Gross margin
percentage, as reported
|
|
|
(11)
|
%
|
|
|
(22)
|
%
|
Adjustments to gross
margin:
|
|
|
|
|
|
|
Restructuring costs
recorded in cost of goods sold
|
|
|
1,689
|
|
|
|
1,972
|
|
Charges related to the
flow-through of inventory
step-up on business combinations
|
|
|
-
|
|
|
|
3,147
|
|
Adjusted gross
margin1
|
|
$
|
(3,592)
|
|
|
$
|
(8,002)
|
|
Adjusted gross margin
percentage1
|
|
|
(8)
|
%
|
|
|
(13)
|
%
|
|
|
|
|
|
|
|
Rest-of-world
cannabis segment
|
|
|
|
|
|
|
Revenue
|
|
$
|
5,846
|
|
|
$
|
22,299
|
|
Gross margin, as
reported
|
|
|
(2,184)
|
|
|
|
4,660
|
|
Gross margin
percentage, as reported
|
|
|
(37)
|
%
|
|
|
21
|
%
|
Adjustments to gross
margin:
|
|
|
|
|
|
|
Restructuring costs
recorded in cost of goods sold
|
|
|
256
|
|
|
|
2,582
|
|
Adjusted gross
margin1
|
|
$
|
(1,928)
|
|
|
$
|
7,242
|
|
Adjusted gross margin
percentage1
|
|
|
(33)
|
%
|
|
|
32
|
%
|
|
|
|
|
|
|
|
Storz & Bickel
segment
|
|
|
|
|
|
|
Revenue
|
|
$
|
20,214
|
|
|
$
|
25,205
|
|
Gross margin, as
reported
|
|
|
9,186
|
|
|
|
11,172
|
|
Gross margin
percentage, as reported
|
|
|
45
|
%
|
|
|
44
|
%
|
|
|
|
|
|
|
|
Adjusted gross
margin1
|
|
$
|
9,186
|
|
|
$
|
11,172
|
|
Adjusted gross margin
percentage1
|
|
|
45
|
%
|
|
|
44
|
%
|
|
|
|
|
|
|
|
BioSteel
segment
|
|
|
|
|
|
|
Revenue
|
|
$
|
16,363
|
|
|
$
|
16,974
|
|
Gross margin, as
reported
|
|
|
(7,669)
|
|
|
|
1,352
|
|
Gross margin
percentage, as reported
|
|
|
(47)
|
%
|
|
|
8
|
%
|
Adjustments to gross
margin:
|
|
|
|
|
|
|
Restructuring costs
recorded in cost of goods sold
|
|
|
1,619
|
|
|
|
-
|
|
Adjusted gross
margin1
|
|
$
|
(6,050)
|
|
|
$
|
1,352
|
|
Adjusted gross margin
percentage1
|
|
|
(37)
|
%
|
|
|
8
|
%
|
|
|
|
|
|
|
|
This Works
segment
|
|
|
|
|
|
|
Revenue
|
|
$
|
8,289
|
|
|
$
|
10,730
|
|
Gross margin, as
reported
|
|
|
4,032
|
|
|
|
5,469
|
|
Gross margin
percentage, as reported
|
|
|
49
|
%
|
|
|
51
|
%
|
Adjustments to gross
margin:
|
|
|
|
|
|
|
Restructuring costs
recorded in cost of goods sold
|
|
|
62
|
|
|
|
-
|
|
Adjusted gross
margin1
|
|
$
|
4,094
|
|
|
$
|
5,469
|
|
Adjusted gross margin
percentage1
|
|
|
49
|
%
|
|
|
51
|
%
|
1 Adjusted
gross margin and adjusted gross margin percentage are non-GAAP
measures. See "Non-GAAP Measures".
|
2 In Q3
FY23, we are reporting our financial results for the following five
reportable segments: (i) Canada cannabis; (ii) rest-of-world
cannabis; (iii) Storz & Bickel; (iv) BioSteel; and (v) This
Works. Information regarding segment net revenue and segment gross
margin for the comparative periods has been restated to reflect the
aforementioned change in reportable segments.
|
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SOURCE Canopy Growth Corporation