SMITHS FALLS, ON, Aug. 6, 2021 /PRNewswire/ - Canopy Growth
Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (NASDAQ:
CGC) today announces its financial results for the first quarter
fiscal 2022 ended June 30, 2021. All
financial information in this press release is reported in Canadian
dollars, unless otherwise indicated.
Highlights
- Achieved 23% revenue growth in Q1 2022 versus Q1 2021 driven by
strong double-digit growth in both cannabis and other consumer
products businesses.
- Maintained #1 market share1 in tracked Canadian
recreational cannabis market amid a highly competitive
landscape.
- Completed acquisition of Ace Valley and Supreme Cannabis, with
commercial and operational Integration progressing smoothly.
- Led by consumer insights, a robust innovation pipeline with
over 100+ SKUs across key product categories set to hit store
shelves from Q2 2022 to Q4 2022.
- Momentum with cannabis reform increasing as the Company
continues to build its U.S. presence through broad portfolio of
innovative CBD and CPG brands.
- Remains committed to accelerating top-line growth in the second
half of fiscal 2022 and achieving positive Adjusted EBITDA by end
of fiscal 2022.
"With the right strategy and strong foundation in place we are
confident in our ability to deliver long-term success as Canopy's
products and brands continue to demonstrate their appeal to
consumers in our core markets," said David
Klein, CEO, Canopy Growth. "While we're encouraged by
regulatory advancement in the U.S., Canopy is not waiting as we
continue to scale our business on both sides of the border with an
exciting product pipeline planned for the coming quarters."
"We're continuing to drive cost savings and operational
efficiencies across the company, and remain broadly on track to our
target of $150-$200 million in fiscal 2022- fiscal 2023," added
Mike Lee, CFO. "We look forward to
scaling our new operating model in coming months as we push forward
our profitability goals in fiscal year 2022."
First Quarter Fiscal 2022 Financial Summary
(in millions of
Canadian
dollars,
unaudited)
|
Net
revenue
|
Gross
margin percentage
|
Adjusted
gross margin
percentage2
|
Net income
(loss)
|
Adjusted
EBITDA3
|
Free cash
flow4
|
Reported
|
$136.2
|
20%
|
21%
|
$390.0
|
$(63.6)
|
$(186.1)
|
vs. Q1
2021
|
23%
|
1,400 bps
|
1,400 bps
|
404%
|
31%
|
(3%)
|
________________________
|
1 Unless otherwise indicated, market
share data disclosed in this press release is calculated using the
Company's internal proprietary market share tool that utilizes
point of sales data supplied by a third-party data provider,
government agencies and our own retail store operations across the
country. The tool captures point of sale data from an average of
30% of stores in Alberta, British Columbia, Saskatchewan, Manitoba
and Newfoundland & Labrador, point of sale data from 100% of
stores in New Brunswick, Nova Scotia and Prince Edward Island, as
well as depletions and e-commerce sales data from the
OCS.
|
2 Adjusted gross margin is a non-GAAP
measure, and for Q1 2022 excludes $1.4 million related to the
flow-through of inventory step-up associated with the acquisition
of Supreme Cannabis (Q1 2021 - excludes $1.2 million related to the
flow-through of inventory step-up associated with fiscal 2020
business combinations). See "Non-GAAP Measures".
|
3 Adjusted EBITDA is a non-GAAP
measure. See "Non-GAAP Measures".
|
4 Free cash flow is a non-GAAP
measure. See "Non-GAAP Measures".
|
- Revenues: Net revenue of $136
million in Q1 2022 was an increase of 23% versus Q1 2021
driven by strong double-digit growth across Canadian cannabis and
other consumer products, partially offset by a decline in
international cannabis. Total net cannabis revenue of $93 million in Q1 2022, represented an increase
of 17% over Q1 2021. Total other consumer products revenue in Q1
2022 increased 39% year-over year to $43
million. Excluding the impact from acquired businesses, net
revenue increased 19% versus Q1 2021.
- Gross margin: Reported gross margin in Q1 2022 was 20%
as compared to 6% in Q1 2021. Gross margin in Q1 2021 was
negatively impacted by lower production output and unfavorable pack
size and geographic mix in the Canadian recreational business as
well as start up costs in the U.S. including building inventory and
activating new production capacity along with higher third-party
shipping, distribution and warehousing costs, partially offset by
payroll subsidies received from the Canadian government in Q1 2022,
pursuant to a COVID-19 relief program. Adjusted gross margin,
excluding charges related to the flow-through of inventory step-up
on business combinations, was 21% compared to 7% in Q1 2021.
- Operating expenses: Total SG&A ("SG&A") expenses
in Q1 2022 declined by 17% versus Q1 2021, driven by year-over-year
reductions in General & Administrative ("G&A") and Research
and Development ("R&D") expenses partially offset by an
increase in Sales & Marketing ("S&M") expenses. G&A
expenses declined 48% year-over-year primarily due to reductions in
staffing and professional fees and benefit from payroll subsidies
received from the Canadian government in Q1 2022, pursuant to a
COVID-19 relief program. R&D expenses declined 39%
year-over-year principally due to product timing and lower finished
product development expenses. S&M expenses increased 34%
year-over-year due largely to a return to more normal advertising
and promotional spending in the first quarter of fiscal 2022; in
the first quarter of fiscal 2021, the Company delayed or cancelled
various product and brand marketing initiatives due to the measures
established to contain the spread of COVID-19.
- Net Earnings: Net Earnings in Q1 2022 of $390 million, which is a $518 million improvement versus Q1 2021, was
driven primarily by Other Income totalling $581 million during Q1 2022 primarily
attributable to non-cash fair value changes of $601 million.
- Adjusted EBITDA: Adjusted EBITDA loss in Q1 2022 was
$64 million, a $29 million narrower loss versus Q1 2021 driven
by higher sales and lower operating expenses. Adjusted EBITDA loss
in Q1 2022 was negatively impacted by a $10.1 million impairment charge related to the
changes in our sourcing strategy for certain products.
- Free Cash Flow: Free Cash Flow in Q1 2022 was an outflow
of $186 MM, a 3% greater outflow vs
Q1 2021. Relative to Q4 2021, Free Cash Flow during the quarter was
negatively impacted by the timing of certain one-time payments
totalling $19 million, incremental
interest payment associated with the US$750
million debt financing that occurred in Q4 2021 as well as
the impact of inventory build for BioSteel's Ready-To-Drink ("RTD")
products in the U.S.
- Cash Position: Cash and Short-term Investments amounted
to $2.1 billion at June 30, 2021, representing a decrease of
$0.2 billion from $2.3 billion at March 31,
2021 reflecting EBITDA losses and capital investments.
First Quarter Fiscal 2022 Business & Operational
Highlights
- Achieved another quarter of strong double-digit revenue
growth year-over-year
-
- Canadian recreational sales grew 35% year-over-year, even as
the industry was impacted by COVID lockdowns for much of the
quarter.
-
- Canopy Growth maintained #1 market share in tracked provinces,
with total market share (including Ace
Valley and Supreme) of 15.2% during Q1 2022.
- In total Flower category, Canopy Growth also maintained #1
market share with 17.9% in Q1 2022.
- U.S. CBD business continues to build momentum driven by Martha
Steward CBD which is now the #3 brand among all CBD supplements in
the food, drug and convenience-store channel, according to IRI data
for the 12 weeks ended July 11, 2021.
In addition, distribution of Quatreau CBD beverages is ramping up
in the U.S.
- Other Consumer Products brands also delivered strong growth
driven by Storz & Bickel which saw sales increase by 41%
year-over-year and BioSteel, which grew sales triple digits
year-over-year driven by the launch of its RTD beverages.
- Led by consumer insights, already launched 50+ SKUs over
past two quarters, 100+ SKUs expected to enter markets in coming
quarters
-
- In Flower, national launch of Doja is ongoing including
Ontario-exclusive Doja Legendary
Larry flower, launched in Q1 2022, garnering strong consumer
feedback. 7 Acres Papaya flower launched in Q1 2022. National
launch of Tweed lineage strain products is also ongoing. Launch of
Tweed Quickies and Ace Valley Pinners small size, single strain
pre-rolled joints (0.35 g and 0.3g, respectively) in the current
quarter addresses consumer preference for sharing cannabis in a
group setting without having to pass a single joint around. The
Company expects to bring a robust program of flower innovation to
the market over the coming months including single strain genetics
across key brands and new packaging.
- In Vapes, the Company strengthened its positioning in
the Canadian vape market with the additional of 1.0 ml 510
cartridges and Tweed Citrus C-land all-in-one vape pens during Q1
2022. With the addition of Ace Valley and Supreme Cannabis vape
products to the Company's portfolio, Canopy Growth has captured the
#3 market share for vapes in Canada. Addressing increasing consumer demand
for premium vape cartridges and devices, Canopy is scheduled to
bring a range of vape innovations to market over the coming
quarters including premium Live Resin cartridges as well as
multiple new or upgraded vape devices.
- In Beverages, in response to consumer demand for
great-tasting 5mg and 10mg THC beverages, the Company has expanded
its portfolio of THC beverages with Tweed Iced Tea beverages
(available in lemon and raspberry flavors, both with 5 mg THC)
entering market in Q1 2022 and new Tweed Fizz seltzer beverages
(available in Watermelon and Mango flavors, both with 5 mg THC)
shipping in the current quarter. The Company expects to double the
number of THC beverages on the market over the coming months
including line extensions of its popular Deep Space 10 mg THC
beverages.
- In Edibles, the Company's Twd. Strawberry gummies,
launched in Q4 2021, have captured #2 market share in the total
gummy category in Canada. Canopy
Growth's portfolio of gummies expanded in Q1 2022 with the launch
of Ace Valley Dessert flavor gummies
(Key Lime Pie and Peaches & Honey), followed by the launch of
Twd. Mixed Berry as well as Ace Valley Dream CBN gummies in the
current quarter. The Ace Valley Dream gummies contain the CBN minor
cannabinoid which lends itself to a key consumer need state, sleep.
The Company is scheduled to bring a robust portfolio of new gummy
innovations to market over the coming months featuring gourmand
flavours, higher THC levels and advanced "human effects".
- Remain focused on further capitalizing on the U.S.
market
-
- Path to cannabis reform took an important step forward with
release of the draft Cannabis Administration and Opportunity
Act.
- Multiple routes to market upon federal permissibility of U.S
THC market already exist for the Company, including immediate path
through planned acquisition of Acreage Holdings and conditional
ownership of TerrAscend, which provides further optionality to
increase presence.
- Leveraging balance sheet strength, the Company is actively
seeking legally permitted investments in THC businesses/brands to
increase exposure to U.S. THC market in advance of federal
permissibility.
- Achieving profitability and improving cashflow remain the
Company's top priority
-
- Implementation of supply chain optimization is well underway,
with the Company having realized $38
million, including $32 million
in Q1 2022, of the $150 million to
$200 million in cost savings expected
by the end of the first half of FY 2023.
- Adjusted EBITDA performance improved, despite price/mix
headwinds in our cannabis business, driven by strong operating
expense discipline.
- The Company remains committed to achieving positive Adjusted
EBITDA by the end of FY 2022 driven by accelerating top-line
growth, cost savings initiatives and improved price/mix.
First Quarter Fiscal 2022 Revenue Review
Revenue by Channel
(in millions of
Canadian dollars, unaudited)
|
Q1
2022
|
Q1
2021
|
vs. Q1
2021
|
|
|
|
|
Canadian
recreational cannabis
|
|
|
|
- Business to
business5
|
$42.7
|
$34.9
|
22%
|
- Business to
consumer
|
$17.3
|
$9.4
|
84%
|
|
$60.0
|
$44.3
|
35%
|
Canadian medical
cannabis6
|
$13.5
|
$13.9
|
(3%)
|
|
$73.5
|
$58.2
|
26%
|
International and
other
|
|
|
|
-
C3
|
$11.4
|
$15.4
|
(26%)
|
- Other
|
$8.0
|
$5.7
|
40%
|
|
$19.4
|
$21.1
|
(8%)
|
Global cannabis
net revenue
|
$92.9
|
$79.3
|
17%
|
|
|
|
|
Other consumer
products
|
|
|
|
- Storz &
Bickel
|
$24.1
|
$17.1
|
41%
|
- This
Works
|
$6.5
|
$6.1
|
7%
|
- BioSteel
|
$6.7
|
$2.4
|
179%
|
- Other
|
$6.0
|
$5.5
|
9%
|
Other consumer
products revenue
|
$43.3
|
$31.1
|
39%
|
|
|
|
|
Net
revenue
|
$136.2
|
$110.4
|
23%
|
This table has been
recast to align with our new segment reporting. International and
other revenue includes revenue from our international medical
business and hemp-derived CBD business. Other consumer products
includes revenue from Storz & Bickel, This Works, BioSteel,
clinics, accessories and other ancillary businesses.
|
________________________________
|
5 Reflects excise taxes of $17.8
million and other revenue adjustments of $3.0 million for Q1 2022
(Q1 2021 - $7.2 million and $3.4 million, respectively).
|
6 Reflects excise taxes of $1.4
million for Q1 2022 (Q1 2021 - $1.4 million).
|
Revenue by Form
(in millions of
Canadian dollars, unaudited)
|
Q1
2022
|
Q1
2021
|
vs. Q1
2021
|
|
|
|
|
Canadian
recreational cannabis
|
|
|
|
- Dry
bud7
|
$66.0
|
$40.1
|
65%
|
- Oils and
softgels7
|
$5.7
|
$7.7
|
(26%)
|
- Beverages, edibles,
topicals7
and
vapes
|
$9.1
|
$7.1
|
28%
|
- Other revenue
adjustments8
|
$(3.0)
|
$(3.4)
|
12%
|
- Excise
taxes
|
$(17.8)
|
$(7.2)
|
(147%)
|
|
$60.0
|
$44.3
|
35%
|
Medical cannabis
and other
|
|
|
|
- Dry bud
|
$9.6
|
$10.8
|
(11%)
|
- Oils and
softgels
|
$20.5
|
$25.2
|
(19%)
|
- Beverages, edibles,
topicals
and
vapes
|
$4.2
|
$0.4
|
950%
|
- Excise
taxes
|
$(1.4)
|
$(1.4)
|
0%
|
|
$32.9
|
$35.0
|
(6%)
|
Global cannabis
net revenue
|
$92.9
|
$79.3
|
17%
|
|
|
|
|
Other consumer
products
|
|
|
|
- Storz &
Bickel
|
$24.1
|
$17.1
|
41%
|
- This
Works
|
$6.5
|
$6.1
|
7%
|
- BioSteel
|
$6.7
|
$2.4
|
179%
|
- Other
|
$6.0
|
$5.5
|
9%
|
Other consumer
products revenue
|
$43.3
|
$31.1
|
39%
|
|
|
|
|
Net
revenue
|
$136.2
|
$110.4
|
23%
|
This table has been
recast to align with our new segment reporting.
|
Canadian Cannabis
- Recreational B2B net sales in Q1 2022 increased 22% over prior
year period due primarily to growth in the retail store network in
Canada and growth in value
flower.
- Recreational B2C net sales in Q1 2022 increased 84% versus Q1
2021 due primarily to growth in flower sales, the availability of
vape, beverage and edible products and a higher number of corporate
owned stores. The number of corporate owned stores increased over
the comparison period by 12 to 34. Same store sales increased 65%
year-over-year when normalized for days closed due to
COVID-19.
- Canadian medical net revenue in Q1 2022 decreased 3% from Q1
2021 driven primarily by a lower number of orders partially offset
by higher average order size.
International Cannabis
- C3 revenue in Q1 2022 declined 26% year-over-year
due to COVID-19 restrictions that limited sales activities and
increased competition.
- Other revenue in Q1 2022 increased 39% over the prior year
period due primarily to growth in U.S. CBD sales.
_____________________________
|
7 Excludes the impact of other
revenue adjustments.
|
8 Other revenue adjustments represent
the Company's determination of returns and pricing adjustments, and
relate to the Canadian recreational business-to-business
channel.
|
Other Consumer Products
- S&B vaporizer revenue in Q1 2022 increased 41% over Q1
2021, benefitting from strengthened distribution in the U.S. and
strong consumer demand across all key product lines including
Mighty, Volcano Classic and Hybrid and Crafty+.
- This Works sales in Q1 2022 increased 7% over Q1 2021, driven
by Amazon and third-party e-commerce sales.
- BioSteel sales in Q1 2022 increased 179% over Q1 2021 driven by
the launch of RTD beverages and expanded distribution in the U.S.
market.
The first quarter fiscal 2022 and first quarter fiscal 2021
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 Mike Lee, CFO at 10:00 AM
Eastern Time on August 6,
2021.
Webcast Information
A live audio webcast will be available at:
https://produceredition.webcasts.com/starthere.jsp?ei=1479656&tp_key=7a3d0094a3
Replay Information
A replay will be accessible by webcast until 11:59 PM ET on November 4,
2021 at:
https://produceredition.webcasts.com/starthere.jsp?ei=1479656&tp_key=7a3d0094a3
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 to be filed with 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 Company's Quarterly Report on 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.
About Canopy Growth Corporation
Canopy Growth (TSX:WEED,NASDAQ:CGC ) is a world-leading
diversified cannabis and cannabinoid-based consumer product
company, driven by a passion to improve lives, end prohibition, and
strengthen communities by unleashing the full potential of
cannabis. Leveraging consumer insights and innovation, we offer
product varieties in high quality dried flower, oil, softgel
capsule, infused beverage, edible, and topical formats, as well as
vaporizer devices by Canopy Growth and industry-leader Storz &
Bickel. Our global medical brand, Spectrum Therapeutics, sells a
range of full-spectrum products using its colour-coded
classification system and is a market leader in both Canada and Germany. Through our award-winning Tweed and
Tokyo Smoke banners, we reach our adult-use consumers and have
built a loyal following by focusing on top quality products and
meaningful customer relationships. Canopy Growth has entered into
the health and wellness consumer space in key markets including
Canada, the United States, and Europe through BioSteel sports nutrition, and
This Works skin and sleep solutions; and has introduced additional
federally-permissible CBD products to the
United States through our First & Free and Martha
Stewart CBD brands. Canopy Growth has an established partnership
with Fortune 500 alcohol leader Constellation Brands. 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, and the ability of our suppliers and
distributors, to effectively manage the restrictions, limitations
and health issues presented by the COVID-19 pandemic, the ability
to continue our production, distribution and sale of our products
and the demand for and use of our products by consumers,
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. Food and Drug Administration (the "FDA"), the U.S. Drug
Enforcement Administration (the "DEA"), the U.S. Federal Trade
Commission (the "FTC"), the U.S. Patent and Trademark Office (the
"USPTO"), the U.S. Department of Agriculture (the "USDA") and any
state equivalent regulatory agencies over U.S. hemp (including CBD)
products;
- 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 amended plan of arrangement with Acreage Holdings, Inc.,
including the consummation of such acquisition;
- 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,
including proceeds to us that may result therefrom or the potential
conversion of the convertible senior notes issued by Canopy Growth
and 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
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 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;
- 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;
- 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;
(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, changes in laws, regulations and
guidelines and our compliance with such laws, regulations and
guidelines; the risk that the COVID-19 pandemic may disrupt our
operations and those of our suppliers and distribution channels and
negatively impact the demand for and use of our products; consumer
demand for cannabis and U.S. hemp products; our limited operating
history; 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; risks associated with
jointly owned investments; risks relating to our current and future
operations in emerging markets; 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 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,
2021. 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
CONDENSED INTERIM
CONSOLIDATED BALANCE SHEETS
(in thousands of
Canadian dollars, except number of shares and per share data,
unaudited)
|
|
|
|
|
|
June
30, 2021
|
|
March 31, 2021
|
ASSETS
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$559,840
|
|
$1,154,653
|
Short-term
investments
|
1,491,286
|
|
1,144,563
|
Restricted short-term
investments
|
14,336
|
|
11,332
|
Amounts receivable,
net
|
106,455
|
|
92,435
|
Inventory
|
411,675
|
|
367,979
|
Prepaid expenses and
other assets
|
91,584
|
|
67,232
|
Total current
assets
|
2,675,176
|
|
2,838,194
|
Other financial
assets
|
791,658
|
|
708,167
|
Property, plant and
equipment
|
1,142,614
|
|
1,074,537
|
Intangible
assets
|
347,063
|
|
308,167
|
Goodwill
|
2,000,458
|
|
1,889,354
|
Other
assets
|
9,514
|
|
5,061
|
Total
assets
|
$6,966,483
|
|
$6,823,480
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$91,339
|
|
$67,262
|
Other accrued expenses
and liabilities
|
79,938
|
|
100,813
|
Current portion of
long-term debt
|
15,705
|
|
9,827
|
Other
liabilities
|
69,148
|
|
106,428
|
Total current
liabilities
|
256,130
|
|
284,330
|
Long-term
debt
|
1,545,073
|
|
1,573,136
|
Deferred income tax
liabilities
|
26,570
|
|
21,379
|
Liability arising
from Acreage Arrangement
|
450,000
|
|
600,000
|
Warrant derivative
liability
|
299,318
|
|
615,575
|
Other
liabilities
|
109,038
|
|
107,240
|
Total
liabilities
|
2,686,129
|
|
3,201,660
|
Commitments and
contingencies
|
|
|
|
Redeemable
noncontrolling interest
|
135,300
|
|
135,300
|
Canopy Growth
Corporation shareholders' equity:
|
|
|
|
Common shares - $nil
par value; Authorized - unlimited number of shares;
|
|
|
|
Issued - 393,119,100
shares and 382,875,179 shares, respectively
|
7,463,557
|
|
7,168,557
|
Additional paid-in
capital
|
2,413,779
|
|
2,415,650
|
Accumulated other
comprehensive loss
|
(61,518)
|
|
(34,240)
|
Deficit
|
(5,675,738)
|
|
(6,068,156)
|
Total Canopy Growth
Corporation shareholders' equity
|
4,140,080
|
|
3,481,811
|
Noncontrolling
interests
|
4,974
|
|
4,709
|
Total shareholders'
equity
|
4,145,054
|
|
3,486,520
|
Total liabilities and
shareholders' equity
|
$6,966,483
|
|
$6,823,480
|
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
June 30,
|
|
2021
|
|
2020
|
Revenue
|
$155,423
|
|
$119,088
|
Excise
taxes
|
19,214
|
|
8,672
|
Net revenue
|
136,209
|
|
110,416
|
Cost of goods
sold
|
108,971
|
|
103,921
|
Gross
margin
|
27,238
|
|
6,495
|
Operating
expenses:
|
|
|
|
Selling, general and
administrative expenses
|
112,574
|
|
135,392
|
Share-based
compensation
|
13,126
|
|
30,685
|
Asset impairment and
restructuring costs
|
89,249
|
|
12,794
|
Total operating
expenses
|
214,949
|
|
178,871
|
Operating
loss
|
(187,711)
|
|
(172,376)
|
Loss from equity
method investments
|
(100)
|
|
(7,189)
|
Other income
(expense), net
|
580,666
|
|
48,205
|
Income (loss) before
income taxes
|
392,855
|
|
(131,360)
|
Income tax (expense)
recovery
|
(2,900)
|
|
3,038
|
Net income
(loss)
|
389,955
|
|
(128,322)
|
Net loss attributable
to
|
|
|
|
noncontrolling
interests and redeemable noncontrolling interest
|
(2,463)
|
|
(19,821)
|
Net income (loss)
attributable to Canopy Growth
Corporation
|
$392,418
|
|
$(108,501)
|
|
|
|
|
Basic earnings (loss)
per share
|
$1.02
|
|
$(0.30)
|
Basic weighted
average common shares outstanding
|
384,055,133
|
|
363,763,347
|
|
|
|
|
Diluted earnings
(loss) per share
|
$0.84
|
|
$(0.30)
|
Diluted weighted
average common shares outstanding
|
404,546,243
|
|
363,763,347
|
Schedule 3
CANOPY GROWTH
CORPORATION
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of
Canadian dollars, unaudited)
|
|
|
|
|
|
Three months ended
June 30,
|
|
2021
|
|
2020
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$389,955
|
|
$(128,322)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation of
property, plant and equipment
|
17,116
|
|
17,415
|
Amortization of
intangible assets
|
8,016
|
|
16,632
|
Share of loss on
equity method investments
|
100
|
|
7,189
|
Share-based
compensation
|
13,126
|
|
30,685
|
Asset impairment and
restructuring costs
|
89,249
|
|
12,794
|
Income tax expense
(recovery)
|
2,900
|
|
(3,038)
|
Non-cash foreign
currency
|
(17,846)
|
|
8,688
|
Interest
paid
|
(23,666)
|
|
(57)
|
Change in operating
assets and liabilities, net of effects from purchases
|
|
|
|
of
businesses:
|
|
|
|
Amounts
receivable
|
(4,946)
|
|
17,577
|
Prepaid expenses and
other assets
|
(8,804)
|
|
(16,059)
|
Inventory
|
44,228
|
|
(10,772)
|
Accounts payable and
accrued liabilities
|
(16,960)
|
|
3,755
|
Other, including
non-cash fair value adjustments
|
(658,248)
|
|
(75,033)
|
Net cash used in
operating activities
|
(165,780)
|
|
(118,546)
|
Cash flows from
investing activities:
|
|
|
|
Purchases of and
deposits on property, plant and equipment
|
(20,279)
|
|
(61,547)
|
Purchases of
intangible assets
|
(833)
|
|
(3,088)
|
Proceeds on sale of
intangible assets
|
-
|
|
18,337
|
Purchases of
short-term investments
|
(346,603)
|
|
(382,486)
|
Net cash proceeds on
sale of subsidiaries
|
10,324
|
|
-
|
Sale of (investments
in) other financial assets
|
56
|
|
(2,564)
|
Recovery of amounts
related to construction financing
|
-
|
|
10,000
|
Payment of acquisition
related liabilities
|
(8,367)
|
|
(4,511)
|
Net cash outflow on
acquisition of noncontrolling interests
|
-
|
|
(125)
|
Net cash outflow on
acquisition of subsidiaries
|
(8,857)
|
|
-
|
Net cash used in
investing activities
|
(374,559)
|
|
(425,984)
|
Cash flows from
financing activities:
|
|
|
|
Payment of share issue
costs
|
(444)
|
|
(595)
|
Proceeds from issuance
of shares by RIV Capital
|
-
|
|
92
|
Proceeds from exercise
of stock options
|
3,592
|
|
4,722
|
Proceeds from exercise
of warrants
|
-
|
|
244,990
|
Issuance of long-term
debt
|
-
|
|
4,439
|
Repayment of long-term
debt
|
(48,116)
|
|
(6,345)
|
Net cash (used in)
provided by financing activities
|
(44,968)
|
|
247,303
|
Effect of exchange
rate changes on cash and cash equivalents
|
(9,506)
|
|
(30,079)
|
Net decrease in cash
and cash equivalents
|
(594,813)
|
|
(327,306)
|
Cash and cash
equivalents, beginning of period
|
1,154,653
|
|
1,303,176
|
Cash and cash
equivalents, end of period
|
$559,840
|
|
$975,870
|
Schedule 4
Adjusted Gross
Margin1 Reconciliation (Non-GAAP Measure)
|
|
Three months ended
June 30,
|
(in thousands of
Canadian dollars except where indicated; unaudited)
|
2021
|
|
2020
|
Net
revenue
|
$136,209
|
|
$110,416
|
|
|
|
|
Gross margin, as
reported
|
27,238
|
|
6,495
|
Adjustments to gross
margin:
|
|
|
|
Charges related to the
flow-through of inventory
|
|
|
|
step-up on business
combinations
|
1,414
|
|
1,213
|
Adjusted gross
margin1
|
$28,652
|
|
$7,708
|
|
|
|
|
Adjusted gross margin
percentage1
|
21%
|
|
7%
|
|
|
|
|
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
June 30,
|
(in thousands of
Canadian dollars, unaudited)
|
2021
|
|
2020
|
Net income
(loss)
|
$389,955
|
|
$(128,322)
|
Income tax expense
(recovery)
|
2,900
|
|
(3,038)
|
Other (income)
expense, net
|
(580,666)
|
|
(48,205)
|
Loss on equity method
investments
|
100
|
|
7,189
|
Share-based
compensation2
|
13,126
|
|
30,685
|
Acquisition-related
costs
|
5,780
|
|
1,394
|
Depreciation and
amortization2
|
25,132
|
|
34,047
|
Asset impairment and
restructuring costs
|
78,618
|
|
12,794
|
Charges related to the
flow-through of inventory
|
|
|
|
step-up on business
combinations
|
1,414
|
|
1,213
|
Adjusted
EBITDA1
|
$(63,641)
|
|
$(92,243)
|
|
|
|
|
1Adjusted
EBITDA is a non-GAAP measure. See "Non-GAAP Measures".
|
2 From
Condensed Interim Consolidated Statements of Cash Flows.
|
Schedule 6
Free Cash Flow
Reconciliation1
|
|
Three months ended
June 30,
|
(in thousands of
Canadian dollars, unaudited)
|
2021
|
|
2020
|
Net cash used in
operating activities
|
$(165,780)
|
|
$(118,546)
|
Purchases of and
deposits on property, plant and equipment
|
(20,279)
|
|
(61,547)
|
Free cash
flow1
|
$(186,059)
|
|
$(180,093)
|
|
|
|
|
1Free cash
flow is a non-GAAP measure. See "Non-GAAP Measures".
|
Schedule 7
Segmented Gross
Margin Reconciliation
|
|
Three months ended
June 30,
|
(in thousands of
Canadian dollars, unaudited)
|
2021
|
|
2020
|
Global cannabis
segment
|
|
|
|
Net revenue
|
$92,939
|
|
$79,282
|
Cost of goods
sold
|
79,570
|
|
86,140
|
Gross
margin
|
13,369
|
|
(6,858)
|
Gross margin
percentage
|
14%
|
|
(9%)
|
|
|
|
|
Other consumer
products segment
|
|
|
|
Revenue
|
$43,270
|
|
$31,134
|
Cost of goods
sold
|
29,401
|
|
17,781
|
Gross
margin
|
13,869
|
|
13,353
|
Gross margin
percentage
|
32%
|
|
43%
|
Schedule 8
Segmented Adjusted
Gross Margin1 Reconciliation (Non-GAAP
Measure)
|
|
Three months
ended
|
(in thousands of
Canadian dollars except where indicated; unaudited)
|
June 30,
2021
|
|
June 30,
2020
|
Global cannabis
segment
|
|
|
|
Net
revenue
|
$92,939
|
|
$79,282
|
|
|
|
|
Gross margin, as
reported
|
13,369
|
|
(6,858)
|
Adjustments to gross
margin:
|
|
|
|
Charges related to the
flow-through of inventory
step-up
on business combinations
|
1,414
|
|
-
|
Adjusted gross
margin1
|
$14,783
|
|
$(6,858)
|
|
|
|
|
Adjusted gross margin
percentage1
|
16%
|
|
(9%)
|
|
|
|
|
Other consumer
products segment
|
|
|
|
Revenue
|
$43,270
|
|
$31,134
|
|
|
|
|
Gross margin, as
reported
|
13,869
|
|
13,353
|
Adjustments to gross
margin:
|
|
|
|
Charges related to the
flow-through of inventory
|
|
|
|
step-up on business
combinations
|
-
|
|
1,213
|
Adjusted gross
margin1
|
$13,869
|
|
$14,566
|
|
|
|
|
Adjusted gross margin
percentage1
|
32%
|
|
47%
|
|
|
|
|
1 Adjusted gross margin and adjusted
gross margin percentage are non-GAAP measures. See "Non-GAAP
Measures".
|
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SOURCE Canopy Growth Corporation