SMITHS FALLS, ON, Nov. 14, 2019 /CNW/ - Canopy Growth Corporation
("Canopy Growth" or the "Company") (TSX: WEED) (NYSE: CGC) today
announced its financial results for the second quarter ended
September 30, 2019. All financial
information in this press release is reported in Canadian dollars,
unless otherwise indicated. This press release is intended to be
read in conjunction with the Company's Condensed Interim
Consolidated Financial Statements and Management Discussion &
Analysis for the three and six months ended September 30, 2019, which will be filed on SEDAR
(www.sedar.com) and will be available at
www.canopygrowth.com.
Key highlights include:
- The company has established leading market share across the
country including a noteworthy share of over 35% in Alberta, Canada's most developed provincial
recreational market.
- Consumer demand for cannabis continues to increase versus Q1
2020 with Company-owned recreational same-store sales growth of 17%
and global medical organic growth of 23%.
- More than 30 SKUs submitted to Health Canada for Cannabis
2.0 products across chocolate, vapes, and beverage formats.
- As part of a management-initiated portfolio review, the Company
has taken a restructuring charge of $32.7
million for returns, return provisions, and pricing
allowances primarily related to its softgel & oil portfolio.
Additionally, management has recorded an inventory charge of
$15.9 million to align the portfolio
with the new strategy. This new strategy includes new retail
pricing architecture, a rationalized package assortment, and a
focused marketing/educational strategy to further develop this
category. The Q2 2020 gross margin impact of the portfolio
restructuring costs is $40.4 million.
With this acute restructuring charge, management believes that
current inventory levels both internally and externally are in-line
with demand forecasts.
- Consolidated Q2 2020 gross revenue, excluding the portfolio
restructuring costs, was up 6% to $118.3
million including increases from full-quarter benefits of
the C3 and ThisWorks acquisitions (flat excluding incremental
revenue from acquisitions). Net of the portfolio restructuring
costs, revenue was $76.6 million, a
decrease of 15% over Q1 2020.
- Cannabis gross revenues for Q2 2020, excluding the portfolio
restructuring costs, was $94.7
million, an increase of 2% over Q1 2020.
- The Company ended Q2 2020 with $2.7
billion in cash and cash equivalents and marketable
securities available for sale, with its Canadian Infrastructure and
global M&A programs substantially completed.
Management Commentary
"The last two quarters have been challenging for the Canadian
cannabis sector as provinces have reduced purchases to lower
inventory levels, retail store openings have fallen short of
expectations, and Cannabis 2.0 products are yet to come to
market," said Mark Zekulin, CEO,
Canopy Growth. "However, we believe these conditions are a
short-term headwind in what is a brand-new industry, and Canopy
continues to be best positioned with cash-on-hand, a world-class
infrastructure, and a portfolio of intellectual property to deliver
sustained, long-term market leadership."
Added Zekulin: "We took the necessary steps to address inventory
levels on our oils and softgels; looking beyond this, the
fundamentals are strong: our retail store sales are growing on an
overall and same-store basis, our Canadian medical revenues are up,
and international medical sales are growing on both an organic and
inorganic basis. And, even though revenue is muted during the
quarter due to the restructuring charge, actual cannabis shipments
grew quarter-over-quarter, which is a great accomplishment in light
of the inventory reset that's occurring at the
provinces. We believe our fundamentals are strong and
are confident we're moving in the right direction."
"After five years of investment in market research, product
development, product marketing, production engineering, as well as
production facility design, construction and qualification, we are
ready to bring our Cannabis 2.0 product offerings to market," said
Zekulin. "This marks the end of significant expansion
investments in Canada and we are
confident that the high quality, differentiated beverage, vape and
edible products that we are bringing to market combined with a
retail channel that we expect to grow significantly next fiscal
year, will drive the next leg of growth for our business."
Second Quarter
Fiscal 2020 Financial and Operational Summary
|
|
|
|
|
|
|
(CDN millions,
except where indicated)
|
Q2
2020
|
Q1
2020
|
%
Change
|
Q2
2019
|
%
Change
|
|
|
(Restated1)
|
|
(Restated1)
|
|
Gross revenue
excluding other revenue adjustments
|
$118.3
|
$111.4
|
6%
|
$23.3
|
408%
|
Other revenue
adjustments2
|
$32.7
|
$8.0
|
309%
|
$-
|
NM
|
Excise
taxes
|
$9.0
|
$12.9
|
-30%
|
$-
|
NM
|
Net
revenue3
|
$76.6
|
$90.5
|
-15%
|
$23.3
|
229%
|
|
|
|
|
|
|
Gross margin
percentage, before fair value impacts in cost of sales4
|
-13%
|
19%
|
-32%
|
33%
|
-46%
|
Operating
expenses5
|
$269.4
|
$233.3
|
15%
|
$181.8
|
48%
|
Adjusted
EBITDA6
|
$(155.7)
|
$(92.0)
|
69%
|
$(61.9)
|
152%
|
Attributed as
follows:
|
|
|
|
|
|
- Operations and
corporate overhead
|
$(109.0)
|
$(57.8)
|
89%
|
$(50.6)
|
115%
|
- Strategic
investments and business development
|
$(36.2)
|
$(18.0)
|
101%
|
$(4.3)
|
742%
|
- Non-operating or
under-utilized facilities
|
$(10.5)
|
$(16.2)
|
-35%
|
$(7.0)
|
50%
|
|
|
|
|
|
|
Net loss
|
$(374.6)
|
$(1,281.2)
|
-71%
|
$(330.6)
|
13%
|
Loss on
extinguishment of warrants7
|
$-
|
$(1,176.4)
|
-100%
|
$-
|
NM
|
Kilograms harvested
(kilograms)
|
40,570
|
40,960
|
-1%
|
15,217
|
167%
|
(CDN millions, except
where indicated)
|
Q2
2020
|
Q1
2020
|
%
Change
|
Q4
2019
|
%
Change
|
|
|
|
|
|
|
Cash, cash
equivalents and marketable securities
|
$2,736.2
|
$3,140.9
|
-13%
|
$4,515.0
|
-39%
|
Inventory
|
$461.8
|
$393.7
|
17%
|
$262.1
|
76%
|
NM = Not
Meaningful
|
1 Refer to
Note 2(d) of the Interim Financial Statements for further details
on the impact of the change in accounting policy with respect to
royalty payments in the three months ended September 30,
2019.
|
2 Other revenue adjustments represent
the Company's determination of returns and pricing adjustments, and
which primarily relate to oils and softgels.
|
3 Includes other revenue adjustments,
and the impact from other revenue adjustments on excise
taxes.
|
4 Gross margin percentage, before
fair value impacts in cost of sales, is a non-IFRS measure. See
"Non-IFRS Measures" below.
|
5 Includes share-based compensation
expense and depreciation and amortization, both of which are
non-cash expenses.
|
6 Adjusted EBITDA is a non-IFRS
measure. See "Non-IFRS Measures" below.
|
7 Relates to a non-cash loss on the
extinguishment of warrants held by Constellation upon the amendment
of the Investor Rights Agreement between Canopy Growth and
Constellation.
|
Second Quarter
Fiscal 2020 Revenue Highlights
|
|
|
|
|
|
|
(CDN millions, except
where indicated)
|
Q2
2020
|
Q1
2020
|
%
Change
|
Q2
2019
|
%
Change
|
Canadian recreational
cannabis
|
|
|
|
|
|
- Business to
business1
|
$49.4
|
$58.4
|
-15%
|
$-
|
NM
|
Canadian recreational
cannabis
|
|
|
|
|
|
- Business to
consumer
|
$13.1
|
$10.6
|
24%
|
$-
|
NM
|
Canadian medical
cannabis
|
$14.1
|
$13.1
|
8%
|
$19.9
|
-29%
|
Canadian
cannabis
|
$76.6
|
$82.1
|
-7%
|
$19.9
|
285%
|
International medical
cannabis
|
$18.1
|
$10.5
|
72%
|
$2.2
|
723%
|
Cannabis gross
revenue excluding other
revenue adjustments
|
$94.7
|
$92.6
|
2%
|
$22.1
|
329%
|
Other
revenue
|
$23.6
|
$18.8
|
26%
|
$1.2
|
1867%
|
Gross revenue
excluding other revenue adjustments
|
$118.3
|
$111.4
|
6%
|
$23.3
|
408%
|
Other revenue
adjustments2
|
$32.7
|
$8.0
|
309%
|
$-
|
NM
|
Excise
taxes3
|
$9.0
|
$12.9
|
-30%
|
$-
|
NM
|
Net
revenue
|
$76.6
|
$90.5
|
-15%
|
$23.3
|
229%
|
1 Excludes
the impact of other revenue adjustments.
|
2 Other revenue adjustments represent
the Company's determination of returns and pricing adjustments, and
which primarily relate to oils and softgels.
|
3 Excise taxes is presented net of
the impact from other revenue adjustments.
|
Second Quarter
Fiscal 2020 Product Sales Highlights
|
|
|
|
|
|
|
(CDN millions, except
where indicated)
|
Q2
2020
|
Q1
2020
|
%
Change
|
Q2
2019
|
%
Change
|
Recreational -
Business to business
|
|
|
|
|
|
Dry cannabis sales
(kilograms)
|
7,497
|
6,881
|
9%
|
-
|
NM
|
Dry cannabis
revenue
|
$47.4
|
$51.5
|
-8%
|
$-
|
NM
|
Cannabis oil and
softgels sales (kilogram
equivalents)
|
259
|
1,288
|
-80%
|
-
|
NM
|
Cannabis oil and
softgels revenue excluding other
revenue adjustments
|
$2.0
|
$6.9
|
-71%
|
$-
|
NM
|
Other revenue
adjustments1
|
$(32.7)
|
$(8.0)
|
309%
|
$-
|
NM
|
|
|
|
|
|
|
Recreational -
Business to consumer
|
|
|
|
|
|
Dry cannabis sales
(kilograms)
|
1,064
|
792
|
34%
|
-
|
NM
|
Dry cannabis
revenue
|
$11.6
|
$9.3
|
25%
|
$-
|
NM
|
Cannabis oil and
softgels sales (kilogram
equivalents)
|
98
|
99
|
-1%
|
-
|
NM
|
Cannabis oil and
softgels revenue
|
$1.5
|
$1.3
|
15%
|
$-
|
NM
|
|
|
|
|
|
|
Medical
|
|
|
|
|
|
Dry cannabis sales
(kilograms)
|
998
|
807
|
24%
|
1,698
|
-41%
|
Dry cannabis
revenue
|
$9.6
|
$7.2
|
33%
|
$14.7
|
-35%
|
Cannabis oil and
softgels sales (kilogram
equivalents)
|
997
|
682
|
46%
|
499
|
100%
|
Cannabis oil and
softgels revenue
|
$22.6
|
$16.4
|
38%
|
$7.4
|
205%
|
1 Other revenue adjustments represent
the Company's determination of returns and pricing adjustments, and
which primarily relate to oils and softgels.
|
We sold 10,913 kilograms and kilogram equivalents of cannabis
products during Q2 2020, an increase of 3% from the previous
quarter. Total gross revenue for Q2 2020, before portfolio
restructuring costs, was $118.3 million.
Gross revenue of $32.2 million was
generated in the medical channel in Q2 2020, as sales increased 34%
from the previous quarter to 1,995 kilogram and kilogram
equivalents. Oils and softgels represented 50% of our medical sales
during the quarter. Canadian medical cannabis gross revenue
increased 8% from Q1 2020 to $14.1
million in Q2 2020, as our larger harvests in recent months,
the broadening of our brand and product offerings for our medical
customers, and an increase in the number of patients registered
with Spectrum Therapeutics to 75,600 at September 30, 2019 have resulted in sequential
improvements in the number of orders placed by our customers and
growth in our revenue during the quarter.
International medical cannabis gross revenue was $18.1 million in Q2 2020, with the 72% growth
driven primarily by the acquisition in May
2019 of C3, which contributed a full quarter of
revenue in the amount of $14.0
million to our results in Q2 2020. Additionally, our German
medical business returned to growth in Q2 2020 as we resolved the
supply constraints experienced in previous quarters which led to
notable shipments to Germany in
July and early August 2019. Cannabis now on hand today in our
German facility and held in inventory by German pharmacy customers
may serve the partial needs of Q3 2020. While management is very
confident in the sustained growth of the German market over the
long term, management does not expect this level of growth to
repeat in Q3 2020.
Gross revenue from the Canadian recreational channel in Q2 2020
was $29.8 million and reflects
portfolio restructuring costs of $32.7
million. Revenue of $13.1
million was generated in the business-to-consumer retail
channel, representing sequential growth of 24% from the previous
quarter as we continue to build-out our retail store platform
across Canada. At the time of this
release we have 27 retail stores open across Canada, operating under the Tweed or Tokyo
Smoke banner. Gross revenue from the business-to-business channel
was $16.7 million, reflecting the
portfolio restructuring costs as described above. Solid product
inventory levels at Canopy in the second half of the quarter,
supplied by our large harvest in the first quarter, helped drive
strong shipment velocities of dried flower and pre-rolled joints
across our Canadian recreational channels. This resulted in dried
bud shipments up 12% quarter over quarter. Revenue from the sale of
our dry bud products was $59.0
million in Q2 2020 and included revenue of $7.8 million on sales 1.2 million higher-margin
pre-rolled cannabis products.
Other revenue was $23.6 million in
Q2 2020, an increase from $18.8
million in the previous quarter which was attributable to
the acquisition of This Works, which contributed a full quarter of
revenue in Q2 2020, and revenue from other strategic sources
including extraction services and clinic partners.
Second Quarter Fiscal 2020 Gross Margin (before the fair
value impacts in cost of sales) Overview (See Non-IFRS
Measures)
Our reported gross margin before fair value impacts in cost of
sales was negative 13% of net revenue in Q2 2020. Gross
margin before fair value impacts in cost of sales was 38% for Q2
2020 when adjusted for the following items: (1) operating costs of
$10.5 million relating to facilities
that were not yet cultivating cannabis, were under-utilized, or
were not yet producing cannabis-related products, (2) the impact of
$9.2 million on gross margin of the
portfolio restructuring costs, as described above, (3) a charge for
excess finished recreational cannabis inventory of $15.9 million resulting from our assessment of
current and forecasted "sell-in" rates of certain oil and softgel
products, as described above, and (4) other adjustments related to
the net realizable value of inventory.
We continue to build high-quality, dried flower inventory that
we believe will be necessary to meet the increased demand that will
be generated by growth in the recreational cannabis retail platform
across Canada over the next 12 to
18 months, particularly in the province of Ontario. As the Company nears completion of
its expansion program in Canada,
we expect our gross margins to continue to improve in the coming
quarters when all of the cultivation and processing are in use and
approaching planned capacity.
Second Quarter
Fiscal 2020 Operating Expense Summary
|
|
|
|
|
|
|
(CDN millions,
except where indicated)
|
Q2
2020
|
Q1
2020
|
%
Change
|
Q2
2019
|
%
Change
|
|
|
(Restated1)
|
|
(Restated1)
|
|
Sales and
marketing
|
$60.5
|
$49.2
|
23%
|
$40.2
|
50%
|
Research and
development
|
$11.9
|
$8.5
|
40%
|
$1.9
|
526%
|
General and
administration
|
$87.9
|
$62.3
|
41%
|
$37.1
|
137%
|
Acquisition-related
costs
|
$2.6
|
$13.2
|
-80%
|
$3.2
|
-19%
|
Share-based
compensation expense2
|
$92.9
|
$87.3
|
6%
|
$95.8
|
-3%
|
Depreciation and
amortization2
|
$13.6
|
$12.8
|
6%
|
$3.6
|
278%
|
Total
|
$269.4
|
$233.3
|
15%
|
$181.8
|
48%
|
1 Refer to
Note 2(d) of the Interim Financial Statements for further details
on the impact of the change in accounting policy with respect to
royalty payments in the three months ended September 30,
2019.
|
2 Share-based compensation expense
and depreciation and amortization are non-cash expenses.
|
The increase in sales and marketing expense in Q2 2020 over the
previous quarter was primarily due to pre-revenue investments in
brand awareness, product marketing and consumer education
initiatives focused on preparation for the launch of our Cannabis
2.0 products in Canada, and the
rollout of CBD products in the United
States and other international markets in the coming months.
Staffing costs also increased as we continue to enhance our
marketing and sales capabilities in the Canadian, United States, and international markets, and
as we build-out our network of Tweed and Tokyo Smoke-branded retail
stores in Canada.
The increase in research and development expense in Q2 2020 over
the previous quarter was due our investment in new research and
development efforts. Included in this are costs associated with
hiring researchers and engineers, in the areas of vaporizers and
vape research and development, new cannabis-based product form
factors, including beverages and edibles, plant genetics, applied
technology and cannabis-based medical therapy clinical research. As
a result, we incurred higher compensation costs associated with the
teams conducting research and development activities, costs
associated with advanced product and system development and
testing, as well as costs associated with conducting external
laboratory testing and clinical trials for CBD-based human and
animal health products.
General and administration expense increased in Q2 2020 over the
previous quarter due to an increase in costs associated with
enhancing our finance and information technology capabilities,
higher public company compliance and regulatory requirements,
losses incurred related to legal disputes with a third-party
supplier, losses associated with additional reserves on onerous
retail lease obligations which were driven by an overall softening
of the retail real estate market in Canada, and other pre-revenue administrative
costs associated with expanding our operations.
The increase in share-based compensation expense is primarily
attributable to the continued increase in the number of stock
options granted to employees, which is primarily related to the
increase in the number of employees of the Company from
approximately 2,000 at September 30,
2018 to approximately 4,550 at September 30, 2019. The number of outstanding
stock options increased from 22.2 million at September 30, 2018 to 32.9 million at
September 30, 2019. The Company
has re-structured its formula for granting options, as part of a
broader total rewards assessment to ensure overall compensation
structures reflect the Company's size and maturity.
Second Quarter Fiscal 2020 Adjusted EBITDA summary
(See Non-IFRS Measures)
Adjusted EBITDA in Q2 2020 amounted to a loss of $155.7 million, reflecting continuing losses
in our core operations in Canada
and Europe as we scale as a new
business serving a completely new sector, make investments ahead of
revenue in many new markets around the world, and make investments
in research and development that we believe will generate future
value as we build a portfolio of intellectual property
that can be used to generate new profit streams in the future.
We believe these pre-revenue investments are necessary to position
Canopy Growth to generate a significant and sustained increase in
shareholder value over the long-term.
Total other expense, net was $109.3 million in Q2 2020 as compared to
$1,143.7 million in Q1
2020. The other expense amount recorded in Q1 2020 is reflective of
the loss on extinguishment of the warrants held by Constellation,
as discussed in our Q1 2020 earnings release.
Second Quarter
Fiscal 2020 Earnings Summary
|
|
|
|
|
|
|
(CDN millions, except
where indicated)
|
Q2
2020
|
Q1
2020
|
%
Change
|
Q2
2019
|
%
Change
|
Adjusted
EBITDA1
|
$(155.7)
|
$(92.0)
|
69%
|
$(61.9)
|
152%
|
Attributed as
follows:
|
|
|
|
|
|
- Operations and
corporate overhead
|
$(109.0)
|
$(57.8)
|
89%
|
$(50.6)
|
115%
|
- Strategic
investments and business Development
|
$(36.2)
|
$(18.0)
|
101%
|
$(4.3)
|
742%
|
- Non-operating or
under-utilized facilities
|
$(10.5)
|
$(16.2)
|
-35%
|
$(7.0)
|
50%
|
|
|
|
|
|
|
Net loss
|
$(374.6)
|
$(1,281.2)
|
-71%
|
$(330.6)
|
13%
|
Net loss per share
(basic and diluted)
|
$(1.08)
|
$(3.70)
|
-71%
|
$(1.52)
|
-29%
|
1 Adjusted EBITDA is a non-IFRS
measure. See "Non-IFRS Measures" below.
|
Second Quarter Fiscal 2020 Balance Sheet and Cash Flow
Summary
At September 30, 2019, the
Company's cash and cash equivalents available and marketable
securities totaled $2.7 billion,
representing a decrease of $404.7 million from June 30, 2019. The primary uses of cash
during the quarter were for our operations, as reflected in the
Adjusted EBITDA loss for the quarter, and capital spending of
$228.3 million as we near completion
of the build-out of our infrastructure in Canada, most notably the construction of
purpose-built, highly-scalable advanced manufacturing and beverage
production facilities.
Inventory at September 30, 2019
amounted to $461.8 million
(March 31, 2018 - $262.1 million), including $131.5 million in finished goods and $280.1 million of work-in-process.
The unaudited Consolidated Financial Statements and Management's
Discussion and Analysis for the three and six months ended
September 30, 2019 will be filed on
SEDAR, and will be available at www.sedar.com. The basis of
financial reporting in the Unaudited Condensed Consolidated
Financial Statements and Management's Discussion and Analysis is in
thousands of Canadian dollars, unless otherwise indicated.
Non-IFRS Measures
Gross margin percentage, before fair value impacts in cost of
sales, a non-IFRS measure, is a key operational metric that
does not have any standardized meaning prescribed by IFRS and may
not be comparable to similar measures presented by other
companies. This measure is calculated as net revenue less
inventory production costs expensed to cost of sales, divided by
net revenue, and may be computed from the consolidated statements
of operations presented within this news release.
Adjusted EBITDA, a non-IFRS measure, is a key operational metric
that does not have any standardized meaning prescribed by IFRS and
may not be comparable to similar measures presented by other
companies. Adjusted EBITDA is calculated as earnings before
interest, tax, depreciation and amortization, share-based
compensation expense, fair value changes and other non-cash items,
and further adjusted to remove acquisition-related costs. The
Company attributes Adjusted EBITDA to its operations and corporate
overhead, strategic investments and business developments, and
non-operating or under-utilized facilities. The Adjusted EBITDA
reconciliation is presented within this news release and explained
in Management's Discussion & Analysis under "Adjusted EBITDA
(Non-IFRS Measure)", a copy of which will be filed on SEDAR.
Transition to U.S. GAAP Reporting
As part of our U.S. financial reporting requirements, Canopy
Growth confirmed that, as of September 30,
2019, it no longer met the criteria for qualification as a
foreign private issuer because (1) more than 50% of the outstanding
voting securities are held by residents of the United States, and (2) the majority of
Canopy Growth's directors are United
States citizens.
Therefore, as of April 1, 2020
Canopy Growth will be considered a United
States domestic issuer and a large accelerated filer. As a
result of this change, Canopy Growth will be required to issue its
consolidated financial statements in conformity with accounting
principles generally accepted in the
United States, and provide an auditor attestation report
under Section 404(b) of the Sarbanes-Oxley Act.
Webcast and Conference Call Information
The Company
will host a conference call and audio webcast with Mark Zekulin, CEO and Mike Lee, CFO at 8:30 AM
Eastern Time on November 14,
2019.
Webcast Information
A live audio webcast will be available at:
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Calling Information
Toll Free Dial-In Number: 1-888-231-8191
International Dial-In Number: (647) 427-7450
Conference ID: 3878046
Replay Information
A replay of the call will be accessible by telephone until
11:59 PM ET on February 14, 2020.
Toll Free Dial-in Number: 1-855-859-2056
Replay Password: 3878046
About Canopy Growth Corporation
Canopy Growth
(TSX:WEED, NYSE:CGC) is a world-leading diversified cannabis, hemp
and cannabis device company, offering distinct brands and curated
cannabis varieties in dried, oil and Softgel capsule forms, as well
as medical devices through the Company's subsidiary, Storz &
Bickel GMbH & Co. KG. From product and process innovation to
market execution, Canopy Growth is driven by a passion for
leadership and a commitment to building a world-class cannabis
company one product, site and country at a time. The Company has
operations in over a dozen countries across five continents.
The Company's medical division, Spectrum Therapeutics is proudly
dedicated to educating healthcare practitioners, conducting robust
clinical research, and furthering the public's understanding of
cannabis, and has devoted millions of dollars toward cutting edge,
commercializable research and IP development. Spectrum Therapeutics
sells a range of full-spectrum products using its colour-coded
classification Spectrum system as well as single cannabinoid
Dronabinol under the brand Bionorica Ethics.
The Company operates retail stores across Canada under its award-winning Tweed and Tokyo
Smoke banners. Tweed is a globally recognized cannabis brand which
has built a large and loyal following by focusing on quality
products and meaningful customer relationships.
From our historic public listing on the Toronto Stock Exchange
and New York Stock Exchange to our continued international
expansion, pride in advancing shareholder value through leadership
is engrained in all we do at Canopy Growth. Canopy Growth has
established partnerships with leading sector names including
cannabis icons Snoop Dogg and Seth
Rogen, breeding legends DNA Genetics and Green House Seeds,
and Fortune 500 alcohol leader Constellation Brands, to name but a
few. Canopy Growth operates eleven licensed cannabis production
sites with over 5.2 million square feet of production capacity,
including over one million square feet of GMP certified production
space. For more information visit www.canopygrowth.com
Notice Regarding Forward Looking Statements
This news
release contains "forward-looking statements" within the meaning of
the United States Private Securities Litigation Reform Act of 1995
and "forward-looking information" within the meaning of applicable
Canadian securities legislation. Often, but not always,
forward-looking statements and information can be identified by the
use of words such as "plans", "expects" or "does not expect", "is
expected", "estimates", "intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and phrases
or state that certain actions, events or results "may", "could",
"would", "might" or "will" be taken, occur or be achieved.
Forward-looking statements or information involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Canopy Growth or its
subsidiaries to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements or information contained in this news
release. Examples of such statements include statements with
respect to the Company's expectations with respect to future
harvests, the Company's expectation for additional finished
inventory available for sale in future quarters, bringing CBD
products to market by the end of fiscal 2020, the accelerated
market expansion for Acreage, the anticipated benefits of the
rebranding of Spectrum Therapeutics on the Company's market share,
the potential opportunity for cannabis products in Europe and the anticipated Increase in
Canadian and Danish product availability, the anticipated increased
sales from Storz & Bickel, the expectation that facilities will
be fully operational in the months ahead, the launch of new CBD
consumer products and brands in fiscal 2020, the timing for
implementation of the transaction with Acreage. Risks,
uncertainties and other factors involved with forward-looking
information could cause actual events, results, performance,
prospects and opportunities to differ materially from those
expressed or implied by such forward-looking information, including
changes in laws, regulations and guidelines; compliance with laws;
international laws; operational, regulatory and other risks;
execution of business strategy; management of growth; difficulty to
forecast; reliance on licences; risks inherent in an agricultural
business; contracts with provincial and territorial governments;
constraints on marketing products; risks inherent in acquisitions
and investments; expansion into foreign jurisdictions; governmental
regulations; cannabis is a controlled substance in the United States; Farm Bill risks;
assumptions as to the ability of the parties to receive, in a
timely manner and on satisfactory terms, the necessary regulatory
and court approvals for the transaction with Acreage; and such
risks contained in the Company's management information circular of
the Company dated May 17, 2019 and in
the annual information form dated June 24,
2019 and filed with Canadian securities regulators and
available on the Company's issuer profile on SEDAR at
www.sedar.com. Readers are cautioned that the foregoing list of
factors is not exhaustive. Although the Company believes that the
assumptions and factors used in preparing the forward-looking
information or forward-looking statements in this news release are
reasonable, undue reliance should not be placed on such information
and no assurance can be given that such events will occur in the
disclosed time frames or at all. The forward-looking information
and forward-looking statements included in this news release are
made as of the date of this news release and the Company does not
undertake an obligation to publicly update such forward-looking
information or forward-looking information to reflect new
information, subsequent events or otherwise unless required by
applicable securities laws.
|
|
|
|
|
CANOPY GROWTH
CORPORATION
|
|
|
|
|
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
UNAUDITED
|
September
30,
|
March 31,
|
(Expressed in CDN
$000's)
|
2019
|
2019
|
|
|
|
|
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
1,102,464
|
$
|
2,480,830
|
Marketable
securities
|
|
1,633,692
|
|
2,034,133
|
Amounts
receivable
|
|
107,487
|
|
106,974
|
Biological
assets
|
|
110,347
|
|
78,975
|
Inventory
|
|
461,757
|
|
262,105
|
Prepaid expenses and
other current assets
|
|
152,761
|
|
107,123
|
|
|
3,568,508
|
|
5,070,140
|
|
|
|
|
|
Investments in equity
method investees
|
|
113,046
|
|
112,385
|
Other financial
assets
|
|
449,028
|
|
363,427
|
Property, plant and
equipment
|
|
1,633,303
|
|
1,096,340
|
Intangible
assets
|
|
514,033
|
|
519,556
|
Goodwill
|
|
1,912,484
|
|
1,544,055
|
Other long-term
assets
|
|
34,781
|
|
25,902
|
|
|
|
|
|
|
$
|
8,225,183
|
$
|
8,731,805
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
286,862
|
$
|
226,533
|
Current portion of
long-term debt
|
|
14,115
|
|
103,716
|
Other current
liabilities
|
|
124,853
|
|
81,414
|
|
|
425,830
|
|
411,663
|
|
|
|
|
|
Long-term
debt
|
|
590,373
|
|
842,259
|
Deferred tax
liability
|
|
91,026
|
|
96,031
|
Share repurchase
credit liability
|
|
1,288,079
|
|
-
|
Other long-term
liabilities
|
|
207,183
|
|
140,404
|
|
|
|
|
|
|
|
2,602,491
|
|
1,490,357
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
Share
capital
|
|
6,331,325
|
|
6,026,618
|
Other
reserves
|
|
2,756,749
|
|
1,673,472
|
Accumulated other
comprehensive income
|
|
(29,064)
|
|
28,630
|
Deficit
|
|
(3,707,022)
|
|
(777,087)
|
|
|
|
|
|
Equity attributable
to Canopy Growth Corporation
|
|
5,351,988
|
|
6,951,633
|
|
|
|
|
|
Non-controlling
interests
|
|
270,704
|
|
289,815
|
|
|
|
|
|
Total
equity
|
|
5,622,692
|
|
7,241,448
|
|
|
|
|
|
|
$
|
8,225,183
|
$
|
8,731,805
|
|
CANOPY GROWTH
CORPORATION
|
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF OPERATIONS
|
FOR THE THREE AND
SIX MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
|
UNAUDITED
|
Three months
ended
|
Six months
ended
|
|
September
30,
|
September
30,
|
September
30,
|
September
30,
|
(Expressed in CDN $000's except share amounts)
|
2019
|
2018
|
2019
|
2018
|
|
|
|
(Restated -
see
note 2(d))
|
(Restated - see
note 2(d))
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
85,621
|
$
|
23,327
|
$
|
189,012
|
$
|
49,243
|
Excise
taxes
|
|
9,008
|
|
-
|
|
21,917
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
76,613
|
|
23,327
|
|
167,095
|
|
49,243
|
|
|
|
|
|
|
|
|
|
Inventory production
costs expensed to cost of
sales
|
|
86,321
|
|
15,624
|
|
159,503
|
|
29,029
|
|
|
|
|
|
|
|
|
|
Gross margin before
the undernoted
|
|
(9,708)
|
|
7,703
|
|
7,592
|
|
20,214
|
|
|
|
|
|
|
|
|
|
Fair value changes in
biological assets included in
inventory sold and other
charges
|
|
69,089
|
|
51,496
|
|
115,219
|
|
77,884
|
Unrealized gain on
changes in fair value of
biological assets
|
|
(82,320)
|
|
(10,944)
|
|
(221,339)
|
|
(68,233)
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
3,523
|
|
(32,849)
|
|
113,712
|
|
10,563
|
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
|
60,483
|
|
40,182
|
|
109,710
|
|
58,875
|
Research and
development
|
|
11,922
|
|
1,944
|
|
20,396
|
|
2,700
|
General and
administration
|
|
87,861
|
|
37,101
|
|
150,132
|
|
56,689
|
Acquisition-related
costs
|
|
2,562
|
|
3,202
|
|
15,744
|
|
5,086
|
Share-based
compensation expense
|
|
83,767
|
|
45,025
|
|
160,848
|
|
68,097
|
Share-based
compensation expense related to
acquisition milestones
|
|
9,114
|
|
50,730
|
|
19,395
|
|
57,825
|
Depreciation and
amortization
|
|
13,644
|
|
3,595
|
|
26,423
|
|
6,625
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
269,353
|
|
181,779
|
|
502,648
|
|
255,897
|
|
|
|
|
|
|
|
|
|
Loss from
operations
|
|
(265,830)
|
|
(214,628)
|
|
(388,936)
|
|
(245,334)
|
|
|
|
|
|
|
|
|
|
Loss on
extinguishment of warrants
|
|
-
|
|
-
|
|
(1,176,350)
|
|
-
|
Other income
(expense), net
|
|
(109,283)
|
|
(115,702)
|
|
(76,662)
|
|
(178,697)
|
Total other income
(expense), net
|
|
(109,283)
|
|
(115,702)
|
|
(1,253,012)
|
|
(178,697)
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
|
(375,113)
|
|
(330,330)
|
|
(1,641,948)
|
|
(424,031)
|
|
|
|
|
|
|
|
|
|
Income tax recovery
(expense)
|
|
493
|
|
(284)
|
|
(13,840)
|
|
2,439
|
|
|
|
|
|
|
|
|
|
Net
loss
|
$
|
(374,620)
|
$
|
(330,614)
|
$
|
(1,655,788)
|
$
|
(421,592)
|
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to:
|
|
|
|
|
|
|
|
|
Canopy Growth
Corporation
|
$
|
(374,184)
|
$
|
(337,136)
|
$
|
(1,657,239)
|
$
|
(417,413)
|
Non-controlling
interests
|
|
(436)
|
|
6,522
|
|
1,451
|
|
(4,179)
|
|
$
|
(374,620)
|
$
|
(330,614)
|
$
|
(1,655,788)
|
$
|
(421,592)
|
|
|
|
|
|
|
|
|
|
Net loss per
share, basic and diluted
|
|
|
|
|
|
|
|
|
Net loss per
share:
|
$
|
(1.08)
|
$
|
(1.52)
|
$
|
(4.79)
|
$
|
(1.98)
|
Weighted average
number of outstanding common
shares:
|
|
347,226,921
|
|
221,725,511
|
|
346,028,903
|
|
210,972,889
|
|
|
|
|
|
CANOPY GROWTH
CORPORATION
|
|
|
|
|
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 2019 AND 2018
|
UNAUDITED
|
September
30,
|
September
30,
|
(Expressed in CDN
$000's)
|
2019
|
2018
|
|
|
|
|
|
Net inflow (outflow)
of cash related to the following activities:
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
Net loss
|
$
|
(1,655,788)
|
$
|
(421,592)
|
Adjustments
for:
|
|
|
|
|
Depreciation of
property, plant and equipment
|
|
35,309
|
|
10,446
|
Amortization of
intangible assets
|
|
15,955
|
|
5,236
|
Share of loss on
equity investments
|
|
4,004
|
|
6,932
|
Fair value changes in
biological assets included in inventory sold and other charges
|
|
115,219
|
|
77,884
|
Unrealized gain on
changes in fair value of biological assets
|
|
(221,339)
|
|
(68,233)
|
Share-based
compensation
|
|
180,243
|
|
130,596
|
Other
assets
|
|
(23)
|
|
(18,810)
|
Loss on extinguishment
of warrants
|
|
1,176,350
|
|
-
|
Other income and
expense
|
|
104,909
|
|
171,109
|
Income tax (recovery)
expense
|
|
13,840
|
|
(2,439)
|
Non-cash foreign
currency
|
|
(1,463)
|
|
(410)
|
Changes in non-cash
operating working capital items
|
|
(126,551)
|
|
(88,855)
|
|
|
|
|
|
Net cash used in
operating activities
|
|
(359,335)
|
|
(198,136)
|
|
|
|
|
|
Investing
|
|
|
|
|
Purchases and deposits
of property, plant and
equipment
|
|
(440,150)
|
|
(293,179)
|
Purchases of
intangible assets
|
|
(3,614)
|
|
(6,340)
|
Redemption (purchase)
of marketable securities, net
|
|
388,027
|
|
(2,829)
|
Investments in equity
method investees
|
|
(4,719)
|
|
(42,439)
|
Investments in other
financial assets
|
|
(36,423)
|
|
(29,695)
|
Premium paid for
Acreage Call Option
|
|
(395,190)
|
|
-
|
Net cash outflow on
acquisition of non-controlling interests
|
|
-
|
|
(1,999)
|
Net cash outflow on
acquisition of subsidiaries
|
|
(421,952)
|
|
427
|
Change in acquisition
related liabilities
|
|
(21,447)
|
|
-
|
|
|
|
|
|
Net cash used in
investing activities
|
|
(935,468)
|
|
(376,054)
|
|
|
|
|
|
Financing
|
|
|
|
|
Payment of share issue
costs
|
|
(129)
|
|
(6,819)
|
Proceeds from issuance
of shares by Canopy Rivers
|
|
156
|
|
91,218
|
Proceeds from exercise
of stock options
|
|
36,023
|
|
13,626
|
Proceeds from exercise
of warrants
|
|
446
|
|
133
|
Issuance of long-term
debt
|
|
5,278
|
|
600,000
|
Payment of long-term
debt issue costs
|
|
-
|
|
(16,380)
|
Payment of interest on
long-term debt
|
|
(12,750)
|
|
-
|
Repayment of long-term
debt
|
|
(104,282)
|
|
(747)
|
|
|
|
|
|
Net cash (used)
provided by financing activities
|
|
(75,258)
|
|
681,031
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(8,305)
|
|
-
|
|
|
|
|
|
Net cash (outflow)
inflow
|
|
(1,378,366)
|
|
106,841
|
Cash and cash
equivalents, beginning of period
|
|
2,480,830
|
|
322,560
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
$
|
1,102,464
|
$
|
429,401
|
Adjusted
EBITDA1 Non-IFRS Measure
|
Three months
ended
|
(In
CDN$000's)
|
September
30,
2019
|
September
30,
2018
|
|
|
|
|
|
Adjusted
EBITDA1 Reconciliation
|
|
|
|
|
Loss from
operations - as reported
|
$
|
(265,830)
|
$
|
(214,628)
|
|
|
|
|
|
IFRS fair value
accounting related to biological assets and
inventory
|
Fair value changes in
biological assets included in
inventory sold and other charges
|
|
69,089
|
|
51,496
|
Unrealized gain on
changes in fair value of biological assets
|
|
(82,320)
|
|
(10,944)
|
|
|
(13,231)
|
|
40,552
|
Share-based
compensation expense (per statements of cash flows)
|
|
92,881
|
|
99,556
|
Acquisition-related
costs
|
|
2,562
|
|
3,202
|
Depreciation and
amortization (per statements of cash flows)
|
|
27,873
|
|
9,389
|
|
|
123,316
|
|
112,147
|
Adjusted
EBITDA
|
$
|
(155,745)
|
$
|
(61,929)
|
|
|
|
|
|
Six months
ended
|
(In
CDN$000's)
|
September
30,
2019
|
September
30,
2018
|
|
|
|
|
|
Adjusted
EBITDA1 Reconciliation
|
|
|
|
|
Loss from
operations - as reported
|
$
|
(388,936)
|
$
|
(245,334)
|
|
|
|
|
|
IFRS fair value
accounting related to biological assets and
inventory
|
Fair value changes in
biological assets included in
inventory sold and other charges
|
|
115,219
|
|
77,884
|
Unrealized gain on
changes in fair value of biological assets
|
|
(221,339)
|
|
(68,233)
|
|
|
(106,120)
|
|
9,651
|
Share-based
compensation expense (per statements of cash flows)
|
|
180,243
|
|
130,507
|
Acquisition-related
costs
|
|
15,744
|
|
5,086
|
Depreciation and
amortization (per statements of cash flows)
|
|
51,264
|
|
15,682
|
|
|
247,251
|
|
151,275
|
Adjusted
EBITDA
|
$
|
(247,805)
|
$
|
(84,408)
|
|
1 Adjusted EBITDA is earnings before
interest, tax, depreciation and amortization, share-based
compensation expense, fair value changes and other non-cash items,
and further adjusted to remove acquisition-related
costs.
|
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SOURCE Canopy Growth Corporation