Transformation strategy gains traction
Net Revenue of $110
million increases 22% over Q1 FY20
Net Loss of $128
million; Adjusted EBITDA loss of $92
million narrows versus Q1 FY20
Established leadership position in growing
cannabis-infused beverage segment; shipping +1.2mm cans to Canadian
provinces since launch
Strengthened foothold in U.S. market with launch
of shopcanopy.com
SMITHS FALLS, Ontario,
Aug. 10, 2020 /PRNewswire/
-- Canopy Growth Corporation ("Canopy Growth" or the
"Company") (TSX: WEED) (NYSE: CGC) today announced its financial
results for the first quarter fiscal 2021 ended June 30, 2020. All financial information in
this press release is reported in millions of Canadian dollars,
unless otherwise indicated.
"We're proud of our strong first-quarter performance, despite
unprecedented volatility and uncertainty in the market and across
the globe," said David Klein,
CEO. "We grew our revenue year-over-year and are seeing market
share improvement, notably achieving number one market share in
cannabis-infused beverages in the Canadian market. We are
implementing a renewed corporate strategy with the appointment of a
new leadership team which will focus on delivering quality products
to our consumers, positioning our business for continued
growth. The proposed retooled Acreage announcement refocuses
our entry for the evolving U.S. market, where we are seeing
increased momentum."
"Following our previously announced restructuring actions, we
have substantially reduced our expense and cash burn in this
quarter in addition to reducing headcount by over 18% since
beginning of this calendar year. Our marketing and R&D
investments are being re-allocated to programs with high-return
potential in order to drive sales," added Mike Lee, CFO. "Our gross margins in the quarter
came in below our expectations due to under-utilization of our
large-scale infrastructure. We've already proven we can deliver
40%-plus gross margin and are confident that we can return to that
level as we work toward higher capacity utilization across our
facilities as demand for our cannabis products continue to grow. In
the meantime, we are focused on further optimizing our operating
footprint through a full end-to-end strategy that looks at people,
process, technology, and infrastructure that we believe will lead
to best in class margins over time."
First Quarter Fiscal 2021 Financial Summary
|
Net
revenue
|
Gross margin
percentage
|
Adjusted
gross margin
percentage1
|
Net
loss
|
Adjusted
EBITDA2
|
Free cash
flow3
|
Reported
|
$110.4
|
6%
|
7%
|
$(128.3)
|
$(92.2)
|
$(180.1)
|
vs. Q1
2020
|
22%
|
(1,400)
bps
|
(1,300
bps)
|
34%
|
1%
|
51%
|
1 Adjusted gross margin percentage is
a non-GAAP measure. 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".
|
First Quarter Fiscal 2021 Corporate Financial
Highlights
- Revenues: Net revenue in Q1 2021 increased by 22% versus
Q1 2020 driven by higher medical cannabis sales in Canada and Germany, strong Storz & Bickel ("S&B")
vaporizer sales and the benefit of a full quarter of contribution
from acquired businesses C3 (acquired in April 2019) and This Works (acquired in
May 2019) that were reflected for a
full quarter in Q1 2021. Excluding the impact from acquired
businesses, net sales growth increased 9% versus Q1 2020. The
growth was partially offset by a decline in Canadian Recreational
cannabis revenue due to restricted retail operating environment in
response to the COVID-19 pandemic and increased competition in
dried flower-based products.
- Gross margin: Gross margin was 6%. Adjusted gross
margin, excluding inventory step-up costs, was 7%, down 1,300 bps
versus Q1 2020. Gross margin was impacted by lower production
output as well as manufacturing variances and inventory
adjustments.
- Operating expenses: Total SG&A expenses declined by
23% versus Q1 2020, driven by year-over-year reductions in Sales
& Marketing expenses, partially offset by higher General &
Administrative (G&A) and Research & Development ("R&D")
expenses. Sales & Marketing expense decline of 25% reflects
lower compensation expenses resulting from corporate restructuring
actions taken earlier in the year, delayed or cancelled marketing
activities and reduced travel-related expenses due to the COVID-19
pandemic. G&A expenses increased 2%, while R&D expenses
rose 61% mainly driven by research studies that commenced in Q2 and
Q3 2020 and increased activities to support Cannabis 2.0 product
development. Share-based Compensation expenses decreased 65% over
Q1 2020.
- Net Loss: Net loss of $128
million in Q1 2021, a $66
million narrower loss versus Q1 2020, was driven by higher
revenue and lower SG&A expenses.
- Adjusted EBITDA: Adjusted EBITDA loss was $92 million in Q1 2021, compared to a loss of
$93 million in Q1 2020.
- Cash Position: Cash and Short-term Investments amounted
to $2.0 billion at June 30, 2020, unchanged from $2.0 billion at March 31,
2020 reflecting the investment of approximately $245 million by an indirect wholly-owned
subsidiary of Constellation Brands (NYSE:STZ) to exercise warrants
in the Company offset by the EBITDA loss and capital
investments.
Business & Operational Highlights
- Significant progress on our strategic priorities and
organizational design: Key activities included implementing new
organizational structure and aligning resources to reflect a new
strategy, initiating end to end supply chain review, and rolling
out dried flower quality improvement programs.
- Strengthened competitive positioning in Canada recreational market:
-
- Completed a national repositioning of Twd. dried flower value
brand; our dollar share increased nearly 5pts in value flower in
the province of Ontario during the
latest 4-weeks ended July 19,
2020.
- Company's Rec 2.0 products accounted for 13% of total
Canada B2B sales in Q1 2021;
Four Ready-to- Drink ("RTD") cannabis beverages under Tweed,
Houseplant and DeepSpace brands available nation-wide in the
Canadian recreational market; over 1.2 million beverage units have
been shipped since late March
2020.
- Stepped up activities in the U.S. market to drive
accelerated revenue growth:
-
- Launched shopcanopy.com ("ShopCanopy") ecommerce site in
current quarter; ShopCanopy provides a one-stop shopping
destination for the Company's growing portfolio of CBD products in
the U.S.
- BioSteel RTD non-CBD beverages in new environmentally friendly
Tetrapak packaging is now available for sale online in the U.S; we
are actively engaging with major retailers in an effort to expand
distribution of BioSteel products to key markets across the
U.S.
- Expanded distribution of S&B vaporizer products in the
U.S.
- Final preparations underway for the launch of Martha Stewart branded health and wellness CBD
products expected in the coming weeks.
- The Company and Acreage Holdings, Inc. ("Acreage") entered into
a proposal agreement to amend the terms of the existing arrangement
between the Company and Acreage (the "Amended Arrangement"), that
reaffirms the Company's path to the U.S. THC market when federally
permissible; the Amended Arrangement is subject to, among other
things, Acreage shareholder approval and court approval.
- Continuing to assess the impact of the COVID-19 pandemic, with
a focus on the health and safety of our employees, business
continuity and supporting our communities. To date, there has
been minimal disruption to production and supply chain, all of our
22 corporate-owned retail stores have re-opened and our liquidity
position remains strong.
First Quarter Fiscal 2021 Financial and Operational
Review
Revenue by Channel
(in millions of
Canadian dollars, unaudited)
|
Q1
2021
|
Q1
2020
|
vs. Q1
2020
|
|
|
|
|
Canadian
recreational net revenue
|
|
|
|
- Business to
business1
|
$34.9
|
$38.9
|
(10%)
|
- Business to
consumer
|
$9.3
|
$10.6
|
(12%)
|
Canadian
recreational net revenue
|
$44.2
|
$49.5
|
(11%)
|
Canadian medical
net revenue2
|
$13.9
|
$11.7
|
19%
|
International
medical revenue
|
$20.2
|
$10.5
|
92%
|
All other
revenue
|
$32.1
|
$18.8
|
71%
|
Net
revenue
|
$110.4
|
$90.5
|
22%
|
1 Includes excise taxes of $7.2
million (Q1 2020 - $11.5 million).
|
2 Includes excise taxes of $1.4
million (Q1 2020 - $1.4 million).
|
Revenue by Form
(in millions of
Canadian dollars, unaudited)
|
Q1
2021
|
Q1
2020
|
vs. Q1
2020
|
|
|
|
|
Canadian
recreational revenue
|
|
|
|
- Dry
bud1
|
$40.1
|
$60.8
|
(34%)
|
- Oils and
softgels1
|
$7.7
|
$8.2
|
(6%)
|
- Cannabis 2.0
products2
|
$7.0
|
$-
|
NM
|
- Other revenue
adjustments3
|
$(3.4)
|
$(8.0)
|
58%
|
- Excise
taxes
|
$(7.2)
|
$(11.5)
|
37%
|
|
$44.2
|
$49.5
|
(11%)
|
Global medical
revenue
|
|
|
|
- Dry
bud
|
$10.2
|
$7.2
|
42%
|
- Oils and
softgels
|
$25.0
|
$16.4
|
52%
|
- Cannabis 2.0
products2
|
$0.3
|
$-
|
NM
|
- Excise
taxes
|
$(1.4)
|
$(1.4)
|
0%
|
|
$34.1
|
$22.2
|
54%
|
|
|
|
|
All other
revenue
|
$32.1
|
$18.8
|
71%
|
Net
revenue
|
$110.4
|
$90.5
|
22%
|
1 Excludes the impact of other
revenue adjustments.
|
2 Cannabis 2.0 products include
cannabis-infused chocolates, cannabis-infused beverages, and
cannabis vape products (including power sources such as
rechargeable and compact batteries, ready-to-go vape pens, and
cartridges/vape pods)
|
3 Other revenue adjustments represent
the Company's determination of returns and pricing adjustments, and
relate to the Canadian recreational business-to-business
channel.
|
Canadian Cannabis
- Canadian medical revenue increased 19% from Q1 2020. The
year-over-year increase due primarily to the prior year quarter
being impacted by the transition of medical customers to the
Spectrum Therapeutics online store and limited supply of medical
cannabis medical products, as well as higher average basket size we
saw in Q1 2021.
- Recreational B2C net sales declined 12% over the comparative
period due primarily to the restricted cannabis retail operating
environment in response to the COVID-19 pandemic, including full
closure of our corporate owned store for the first half of Q1 2021,
and upon reopening with click & collect/curbside pick up and
reduced hours.
- Recreational B2B net sales declined by 10% from Q1 2020
primarily as a result of increased competition driving lower market
share in dried flower, partially offset by new cannabis 2.0
products and reduced provisions for returns.
International Cannabis
- C3 revenue in Q1 2021 increased 75% over Q1 2020 due
to the recognition of a full quarter of revenue in Q1 2021
(compared to approximately two months of revenue in Q1 2020
following the acquisition of C3 by the Company in
April 2019) and growth of the
Dronabinol market in Germany.
C3 revenue increased by 17% on an organic basis,
adjusted for the timing of acquisitions.
- Dried flower sales in Germany
grew 181% in Q1 2021 over Q1 2020 due to increased supply and
patient demand.
Strategic Acquisitions
- S&B vaporizer revenue in Q1 2021 increased 74% over Q1
2020, benefiting from expanded distribution in the United States and broader product
portfolio.
- This Works sales in Q1 2021 increased 160% over Q1 2020 due in
part to the recognition of a full quarter of revenue in Q1 2021
(compared to less than a month of revenue in Q1 2020 following the
acquisition of This Works by the Company in May 2020). This Works sales declined by 13% on an
organic basis, mainly due to the closure of retail stores as a
result of the COVID-19 pandemic.
The first quarter fiscal 2021 and first quarter fiscal 2020
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 10,
2020.
Webcast Information
A live audio webcast will be available at:
https://produceredition.webcasts.com/starthere.jsp?ei=1343663&tp_key=96c72fd568
Replay Information
A replay of the call will be accessible by webcast, until
11:59 PM ET on November 8, 2020, at
https://produceredition.webcasts.com/starthere.jsp?ei=1343663&tp_key=96c72fd568
Non-GAAP Measures
Adjusted EBITDA is a non-GAAP measure used by management that is
not defined by U.S. GAAP and may not be comparable to similar
measures presented by other companies. Adjusted EBITDA is
calculated as the reported net loss, adjusted to exclude income tax
recovery (expense); other income (expense), net; loss on equity
method investments; share-based compensation expense; depreciation
and amortization expense; asset impairment and restructuring costs;
and charges related to the flow-through of inventory step-up on
business combinations, and further adjusted to remove
acquisition-related costs. The Adjusted EBITDA reconciliation is
presented within this news release and explained in the Company's
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 charges related to the flow-through of inventory
step-up associated with business combinations. Adjusted Gross
Margin Percentage is calculated as Adjusted Gross Margin divided by
Net Revenue. The Adjusted Gross Margin reconciliation is
presented within this news release.
Free Cash Flow is a non- GAAP measure used by management that is
not defined by U.S. GAAP and may not be comparable to similar
measures presented by other companies. This measure is
calculated as net cash provided by (used in) operating activities
less purchases of and deposits on property, plant and equipment.
The Free Cash Flow reconciliation is presented within this news
release and explained in the Company's Quarterly Report on Form
10-Q to be filed with the SEC.
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's medical division, Spectrum Therapeutics is proudly
dedicated to educating healthcare practitioners, conducting robust
clinical research, and furthering the public's understanding of
cannabis, and has devoted millions of dollars toward cutting edge,
commercializable research and IP development. Spectrum Therapeutics
sells a range of full-spectrum products using its colour-coded
classification Spectrum system as well as single cannabinoid
Dronabinol under the brand Bionorica Ethics.
The Company operates retail stores across Canada under its award-winning Tweed and Tokyo
Smoke banners. Tweed is a globally recognized cannabis brand which
has built a large and loyal following by focusing on quality
products and meaningful customer relationships.
From our public listing on the Toronto Stock Exchange and New
York Stock Exchange to our continued international expansion, pride
in advancing shareholder value through leadership is engrained in
all we do at Canopy Growth. Canopy Growth has established
partnerships with leading sector names including cannabis icons
Snoop Dogg and Seth Rogen, breeding
legends DNA Genetics and Green House Seeds, and Fortune 500 alcohol
leader Constellation Brands, to name but a few. For more
information visit www.canopygrowth.com.
Notice Regarding Forward Looking Statements
This press release contains "forward-looking statements" within
the meaning of applicable securities laws, which involve certain
known and unknown risks and uncertainties. Forward-looking
statements predict or describe our future operations, business
plans, business and investment strategies and the performance of
our investments. These forward-looking statements are generally
identified by their use of such terms and phrases as "intend,"
"goal," "strategy," "estimate," "expect," "project," "projections,"
"forecasts," "plans," "seeks," "anticipates," "potential,"
"proposed," "will," "should," "could," "would," "may," "likely,"
"designed to," "foreseeable future," "believe," "scheduled" and
other similar expressions. Our actual results or outcomes may
differ materially from those anticipated. You are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date the statement was made.
Forward-looking statements include, but are not limited to,
statements with respect to:
- the uncertainties associated with the COVID-19 pandemic,
including our ability to continue operations, the ability of our
suppliers and distribution channels to continue to operate, and the
use of our products by consumers, and disruptions to the global and
local economies due to related stay-at-home orders, quarantine
policies and restrictions on travel, trade and business operations
and a reduction in discretionary consumer spending;
- laws and regulations and any amendments thereto applicable to
our business and the impact thereof, including uncertainty
regarding the application of U.S. state and federal law to U.S.
hemp (including CBD) products and the scope of any regulations by
the U.S. Federal Drug Administration, the U.S. Federal Trade
Commission, the U.S. Patent and Trademark Office, the U.S.
Department of Agriculture (the "USDA") and any state equivalent
regulatory agencies over U.S. hemp (including CBD) products;
- expectations regarding the regulation of the U.S. hemp industry
in the U.S., including the promulgation of regulations for the U.S.
hemp industry by the USDA;
- expectations regarding the potential success of, and the costs
and benefits associated with, our acquisitions, joint ventures,
strategic alliances and equity investments;
- the plan of arrangement with Acreage Holdings, Inc., as may be
amended pursuant to the Proposal Agreement, 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;
- the ability to successfully create and launch brands and
further create, launch and scale cannabis-based products and U.S.
hemp-derived consumer products in jurisdictions where such products
are legal and that we currently operate in;
- the benefits, viability, safety, efficacy, dosing and social
acceptance of cannabis, including CBD and other cannabinoids;
- the anticipated benefits and impact of the CBI Group
investments in us (the "CBI Group Investments");
- the potential exercise of the warrants held by the CBI Group,
pre-emptive rights and/or top-up rights in connection with the CBI
Group Investments, including proceeds to us that may result
therefrom or the potential conversion of notes held by the CBI
Group in connection with the CBI Group Investments;
- expectations regarding the use of proceeds of equity
financings, including the proceeds from the CBI Group
Investments;
- the legalization of the use of cannabis for medical or
recreational in jurisdictions outside of Canada, the related timing and impact thereof
and our intentions to participate in such markets, if and when such
use is legalized;
- our ability to execute on our strategy and the anticipated
benefits of such strategy;
- the ongoing impact of the legalization of additional cannabis
product types and forms for recreational use in Canada, including federal, provincial,
territorial and municipal regulations pertaining thereto, the
related timing and impact thereof and our intentions to participate
in such markets;
- the ongoing impact of developing provincial, territorial and
municipal regulations pertaining to the sale and distribution of
cannabis, the related timing and impact thereof, as well as the
restrictions on federally regulated cannabis producers
participating in certain retail markets and our intentions to
participate in such markets to the extent permissible;
- the future performance of our business and operations;
- our competitive advantages and business strategies;
- the competitive conditions of the industry;
- the expected growth in the number of customers using our
products;
- our ability or plans to identify, develop, commercialize or
expand our technology and research and development initiatives in
cannabinoids, or the success thereof;
- expectations regarding revenues, expenses and anticipated cash
needs;
- expectations regarding cash flow, liquidity and sources of
funding;
- expectations regarding capital expenditures;
- the expansion of our production and manufacturing, the costs
and timing associated therewith and the receipt of applicable
production and sale licenses;
- the expected growth in our growing, production and supply chain
capacities;
- expectations regarding the resolution of litigation and other
legal proceedings;
- expectations with respect to future production costs;
- expectations with respect to future sales and distribution
channels;
- the expected methods to be used to distribute and sell our
products;
- our future product offerings;
- the anticipated future gross margins of our operations;
- accounting standards and estimates;
- expectations regarding our distribution network; and
- expectations regarding the costs and benefits associated with
our contracts and agreements with third parties, including under
our third-party supply and manufacturing agreements.
Certain of the forward-looking statements contained herein
concerning the industries in which we conduct our business are
based on estimates prepared by us using data from publicly
available governmental sources, market research, industry analysis
and on assumptions based on data and knowledge of these industries,
which we believe to be reasonable. However, although generally
indicative of relative market positions, market shares and
performance characteristics, such data is inherently imprecise. The
industries in which we conduct our business involve risks and
uncertainties that are subject to change based on various factors,
which are described further below.
The forward-looking statements contained herein are based upon
certain material assumptions that were applied in drawing a
conclusion or making a forecast or projection, including: (i)
management's perceptions of historical trends, current conditions
and expected future developments; (ii) our ability to generate cash
flow from operations; (iii) general economic, financial market,
regulatory and political conditions in which we operate; (iv) the
production and manufacturing capabilities and output from our
facilities and our joint ventures, strategic alliances and equity
investments; (v) consumer interest in our products; (vi)
competition; (vii) anticipated and unanticipated costs; (viii)
government regulation of our activities and products including but
not limited to the areas of taxation and environmental protection;
(ix) the timely receipt of any required regulatory authorizations,
approvals, consents, permits and/or licenses; (x) our ability to
obtain qualified staff, equipment and services in a timely and
cost-efficient manner; (xi) our ability to conduct operations in a
safe, efficient and effective manner; (xii) our ability to realize
anticipated benefits, synergies or generate revenue, profits or
value from our recent acquisitions into our existing operations;
(xiii) our ability to continue to operate in light of the COVID-19
pandemic and the impact of the pandemic on demand for, and sales
of, our products and our distribution channels; and (xiv) other
considerations that management believes to be appropriate in the
circumstances. While our management considers these assumptions to
be reasonable based on information currently available to
management, there is no assurance that such expectations will prove
to be correct.
By their nature, forward-looking statements are subject to
inherent risks and uncertainties that may be general or specific
and which give rise to the possibility that expectations,
forecasts, predictions, projections or conclusions will not prove
to be accurate, that assumptions may not be correct and that
objectives, strategic goals and priorities will not be achieved. A
variety of factors, including known and unknown risks, many of
which are beyond our control, could cause actual results to differ
materially from the forward-looking statements in this press
release and other reports we file with, or furnish to, the
Securities and Exchange Commission (the "SEC") and other regulatory
agencies and made by our directors, officers, other employees and
other persons authorized to speak on our behalf. Such factors
include, without limitation, the risk that the COVID-19 pandemic
may disrupt our operations and those of our suppliers and
distribution channels and negatively impact the use of our
products; consumer demand for cannabis and U.S. hemp products; that
cost savings and any other synergies from the CBI Group Investments
may not be fully realized or may take longer to realize than
expected; future levels of revenues; our ability to manage
disruptions in credit markets or changes to our credit rating;
future levels of capital, environmental or maintenance
expenditures, general and administrative and other expenses; the
success or timing of completion of ongoing or anticipated capital
or maintenance projects; business strategies, growth opportunities
and expected investment; the adequacy of our capital resources and
liquidity, including but not limited to, availability of sufficient
cash flow to execute our business plan (either within the expected
timeframe or at all); the potential effects of judicial or other
proceedings on our business, financial condition, results of
operations and cash flows; volatility in and/or degradation of
general economic, market, industry or business conditions;
compliance with applicable environmental, economic, health and
safety, energy and other policies and regulations and in particular
health concerns with respect to vaping and the use of cannabis and
U.S. hemp products in vaping devices; the anticipated effects of
actions of third parties such as competitors, activist investors or
federal, state, provincial, territorial or local regulatory
authorities, self-regulatory organizations, plaintiffs in
litigation or persons threatening litigation; changes in regulatory
requirements in relation to our business and products; and the
factors discussed under the heading "Risk Factors" in the Company's
Annual Report on Form 10-K for the year ended March 31, 2020 filed with the SEC on June 1, 2020. 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,
2020
|
|
March 31,
2020
|
ASSETS
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$975,870
|
|
$1,303,176
|
Short-term
investments
|
|
1,060,901
|
|
673,323
|
Restricted short-term
investments
|
|
16,436
|
|
21,539
|
Amounts receivable,
net
|
|
72,578
|
|
90,155
|
Inventory
|
|
389,800
|
|
391,086
|
Prepaid expenses and
other assets
|
|
98,362
|
|
85,094
|
Total current
assets
|
|
2,613,947
|
|
2,564,373
|
Equity method
investments
|
|
58,654
|
|
65,843
|
Other financial
assets
|
|
273,624
|
|
249,253
|
Property, plant and
equipment
|
|
1,508,668
|
|
1,524,803
|
Intangible
assets
|
|
444,199
|
|
476,366
|
Goodwill
|
|
1,929,418
|
|
1,954,471
|
Other
assets
|
|
17,320
|
|
22,636
|
Total
assets
|
|
$6,845,830
|
|
$6,857,745
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$89,368
|
|
$123,393
|
Other accrued expenses
and liabilities
|
|
82,981
|
|
64,994
|
Current portion of
long-term debt
|
|
22,570
|
|
16,393
|
Other
liabilities
|
|
124,757
|
|
215,809
|
Total current
liabilities
|
|
319,676
|
|
420,589
|
Long-term
debt
|
|
477,836
|
|
449,022
|
Deferred income tax
liabilities
|
|
45,816
|
|
47,113
|
Liability arising
from Acreage Arrangement
|
|
285,000
|
|
250,000
|
Warrant derivative
liability
|
|
287,122
|
|
322,491
|
Other
liabilities
|
|
168,239
|
|
190,660
|
Total
liabilities
|
|
1,583,689
|
|
1,679,875
|
Commitments and
contingencies
|
|
|
|
|
Redeemable
noncontrolling interest
|
|
81,600
|
|
69,750
|
Canopy Growth
Corporation shareholders' equity:
|
|
|
|
|
Common shares - $nil
par value; Authorized - unlimited number of shares;
Issued - 370,865,639 shares and 350,112,927 shares,
respectively
|
|
6,724,245
|
|
6,373,544
|
Additional paid-in
capital
|
|
2,520,371
|
|
2,615,155
|
Accumulated other
comprehensive income
|
|
152,415
|
|
220,899
|
Deficit
|
|
(4,431,737)
|
|
(4,323,236)
|
Total Canopy Growth
Corporation shareholders' equity
|
|
4,965,294
|
|
4,886,362
|
Noncontrolling
interests
|
|
215,247
|
|
221,758
|
Total shareholders'
equity
|
|
5,180,541
|
|
5,108,120
|
Total liabilities and
shareholders' equity
|
|
$6,845,830
|
|
$6,857,745
|
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,
|
|
|
2020
|
|
2019
|
Revenue
|
|
$119,088
|
|
$103,391
|
Excise
taxes
|
|
8,672
|
|
12,909
|
Net revenue
|
|
110,416
|
|
90,482
|
Cost of goods
sold
|
|
103,921
|
|
72,192
|
Gross
margin
|
|
6,495
|
|
18,290
|
Operating
expenses:
|
|
|
|
|
Selling, general and
administrative expenses
|
|
135,392
|
|
145,647
|
Share-based
compensation
|
|
30,685
|
|
87,362
|
Asset impairment and
restructuring costs
|
|
12,794
|
|
-
|
Total operating
expenses
|
|
178,871
|
|
233,009
|
Operating
loss
|
|
(172,376)
|
|
(214,719)
|
Loss from equity
method investments
|
|
(7,189)
|
|
(1,833)
|
Other income
(expense), net
|
|
48,205
|
|
32,768
|
Loss before income
taxes
|
|
(131,360)
|
|
(183,784)
|
Income tax recovery
(expense)
|
|
3,038
|
|
(10,267)
|
Net loss
|
|
(128,322)
|
|
(194,051)
|
Net loss attributable
to noncontrolling interests and
redeemable noncontrolling interest
|
|
(19,821)
|
|
(8,182)
|
Net loss attributable
to Canopy Growth Corporation
|
|
$(108,501)
|
|
$(185,869)
|
|
|
|
|
|
Basic and diluted
loss per share
|
|
$(0.30)
|
|
$(0.54)
|
Basic and diluted
weighted average common shares outstanding
|
|
363,763,347
|
|
346,779,156
|
Schedule 3
CANOPY GROWTH
CORPORATION
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of
Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
|
Net loss
|
|
$(128,322)
|
|
$(194,051)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Depreciation of
property, plant and equipment
|
|
17,415
|
|
13,587
|
Amortization of
intangible assets
|
|
16,632
|
|
7,165
|
Share of loss on
equity method investments
|
|
7,189
|
|
1,833
|
Share-based
compensation
|
|
30,685
|
|
87,362
|
Asset impairment and
restructuring costs
|
|
12,794
|
|
-
|
Income tax (recovery)
expense
|
|
(3,038)
|
|
10,267
|
Non-cash foreign
currency
|
|
8,688
|
|
2,834
|
Change in operating
assets and liabilities, net of effects from purchases
of businesses:
|
|
|
|
|
Amounts
receivable
|
|
17,577
|
|
13,506
|
Prepaid expenses and
other assets
|
|
(16,059)
|
|
(24,009)
|
Inventory
|
|
(10,772)
|
|
(50,716)
|
Accounts payable and
accrued liabilities
|
|
3,755
|
|
(12,582)
|
Other, including
non-cash fair value adjustments
|
|
(75,090)
|
|
(13,486)
|
Net cash used in
operating activities
|
|
(118,546)
|
|
(158,290)
|
Cash flows from
investing activities:
|
|
|
|
|
Purchases of and
deposits on property, plant and equipment
|
|
(61,547)
|
|
(211,824)
|
Purchases of
intangible assets
|
|
(3,088)
|
|
(7,692)
|
Proceeds on sale of
intangible assets
|
|
18,337
|
|
-
|
(Purchases) redemption
of short-term investments
|
|
(382,486)
|
|
687,818
|
Investments in equity
method investments
|
|
-
|
|
(2,824)
|
Investments in other
financial assets
|
|
(2,564)
|
|
(29,414)
|
Investment in Acreage
Arrangement
|
|
-
|
|
(395,190)
|
Recovery of amounts
related to construction financing
|
|
10,000
|
|
-
|
Payment of acquisition
related liabilities
|
|
(4,511)
|
|
(21,447)
|
Net cash outflow on
acquisition of noncontrolling interests
|
|
(125)
|
|
-
|
Net cash outflow on
acquisition of subsidiaries
|
|
-
|
|
(425,024)
|
Net cash used in
investing activities
|
|
(425,984)
|
|
(405,597)
|
Cash flows from
financing activities:
|
|
|
|
|
Payment of share issue
costs
|
|
(595)
|
|
(74)
|
Proceeds from issuance
of shares by Canopy Rivers
|
|
92
|
|
86
|
Proceeds from exercise
of stock options
|
|
4,722
|
|
16,077
|
Proceeds from exercise
of warrants
|
|
244,990
|
|
427
|
Issuance of long-term
debt
|
|
4,439
|
|
-
|
Repayment of long-term
debt
|
|
(6,345)
|
|
(98,207)
|
Net cash provided by
(used in) financing activities
|
|
247,303
|
|
(81,691)
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(30,079)
|
|
(18,620)
|
Net decrease in cash
and cash equivalents
|
|
(327,306)
|
|
(664,198)
|
Cash and cash
equivalents, beginning of period
|
|
1,303,176
|
|
2,480,830
|
Cash and cash
equivalents, end of period
|
|
$975,870
|
|
$1,816,632
|
Schedule 4
Adjusted Gross
Margin1 Reconciliation (Non-GAAP Measure)
|
|
|
Three months ended
June 30,
|
(in thousands of
Canadian dollars, unaudited)
|
|
2020
|
|
2019
|
Net
revenue
|
|
$110,416
|
|
$90,482
|
|
|
|
|
|
Gross margin, as
reported
|
|
6,495
|
|
18,290
|
Adjustments to gross
margin:
|
|
|
|
|
Charges related to the
flow-through of inventory
step-up on business combinations
|
|
1,213
|
|
-
|
Adjusted gross
margin1
|
|
$7,708
|
|
$18,290
|
|
|
|
|
|
Adjusted gross margin
percentage1
|
|
7%
|
|
20%
|
|
|
|
|
|
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)
|
|
2020
|
|
2019
|
Net loss
|
|
$(128,322)
|
|
$(194,051)
|
Income tax (recovery)
expense
|
|
(3,038)
|
|
10,267
|
Other (income)
expense, net
|
|
(48,205)
|
|
(32,768)
|
Loss on equity method
investments
|
|
7,189
|
|
1,833
|
Share-based
compensation2
|
|
30,685
|
|
87,362
|
Acquisition-related
costs
|
|
1,394
|
|
13,182
|
Depreciation and
amortization2
|
|
34,047
|
|
20,752
|
Asset impairment and
restructuring costs
|
|
12,794
|
|
-
|
Charges related to the
flow-through of inventory
step-up on business combinations
|
|
1,213
|
|
-
|
Adjusted
EBITDA1
|
|
$(92,243)
|
|
$(93,423)
|
|
|
|
|
|
1Adjusted
EBITDA is a non-GAAP measure. See "Non-GAAP Measures".
|
2 From
Statement of Cash Flows.
|
|
|
|
|
Schedule 6
Free Cash Flow
Reconciliation1
|
|
|
|
|
|
|
Three months ended
June 30,
|
(in thousands of
Canadian dollars, unaudited)
|
|
2020
|
|
2019
|
Net cash used in
operating activities
|
|
$(118,546)
|
|
$(158,290)
|
Purchases of and
deposits on property, plant and equipment
|
|
(61,547)
|
|
(211,824)
|
Free cash
flow1
|
|
$(180,093)
|
|
$(370,114)
|
|
|
|
|
|
1Free cash
flow is a non-GAAP measure. See "Non-GAAP Measures".
|
Contact: Laura Nadeau,
Media Relations, media@canopygrowth.com; Judy Hong, Vice President, Investor Relations
(USA), Judy.hong@canopygrowth.com;
Tyler Burns, Vice President,
Investor Relations (Canada),
Tyler.burns@canopygrowth.com