SMITHS FALLS, ON, Nov. 5,
2021 /PRNewswire/ - Canopy Growth Corporation ("Canopy
Growth" or the ("Company") (TSX:
WEED) (NASDAQ: CGC) today announces its
financial results for the second quarter fiscal 2022 ended
September 30, 2021. All financial
information in this press release is reported in Canadian dollars,
unless otherwise indicated.
Highlights
- Announced plan to acquire the #1 edibles company in
North America, Wana Brands, upon U.S. THC permissibility
further strengthening U.S. ecosystem.
- Delivered a robust innovative new product pipeline with over
40+ new SKUs launching globally during Q2 FY2022.
- Launched whisl, an innovative CBD vape designed for mood
management, through an exclusive partnership with Circle K in the
U.S.
- Net revenue declined by 3% in Q2 FY2022 versus Q2 FY2021.
Maintained market leadership position in premium flower category
and increased market share in vapes and edibles during
Q2 FY2022 across tracked Canadian recreational cannabis
market.
- Pushing out positive Adjusted EBITDA target due to Canada supply challenges and a delayed revenue
ramp in the U.S.; taking a number of actions to improve Canadian
performance and remain optimistic about the mid-to long-term
outlook.
"In new industries where the potential is immense, progress is
rarely a straight line. With a focused strategy, a foundation
for growth, and our burgeoning U.S. ecosystem, Canopy is uniquely
positioned to win as the industry matures."
David Klein, Chief Executive
Officer, Canopy Growth Corporation
"Achieving profitability remains a top priority. We are
focused on increasing market share in Canada, premiumizing our product mix and
delivering on our cost savings commitment."
Mike Lee, Chief Financial
Officer, Canopy Growth Corporation
Second Quarter Fiscal 2022 Financial Summary
(in millions of Canadian dollars,
unaudited)
|
Net Revenue
|
Gross margin
percentage
|
Adjusted
gross margin
percentage1
|
Net loss
|
Adjusted
EBITDA2
|
Free cash
flow3
|
|
|
|
|
|
|
|
Reported
|
$131.4
|
(54%)
|
(52%)
|
$(16.3)
|
$(162.6)
|
$(101.3)
|
vs. Q2
FY2021
|
(3%)
|
(7,300)
bps
|
(7,100)
bps
|
83%
|
(90%)
|
47%
|
_____________________________
|
1
|
Adjusted gross margin
is a non-GAAP measure, and for Q2 fiscal 2022 excludes $3.1 million
related to the flow-through of inventory step-up associated with
the acquisition of Supreme Cannabis (Q2 FY2021 - excludes $0.3
million related to the flow-through of inventory step-up associated
with fiscal 2020 business combinations). See "Non-GAAP
Measures".
|
2
|
Adjusted EBITDA is a
non-GAAP measure. See "Non-GAAP Measures".
|
3
|
Free cash flow is a
non-GAAP measure. See "Non-GAAP Measures".
|
Second Quarter Fiscal 2022 Financial Summary
Revenues:
Net revenue of $131 million in Q2
FY2022 was a decline of 3% versus Q2 FY2021. Total net cannabis
revenue of $95 million in Q2 FY2022,
represented an increase of 1% over Q2 FY2021. Excluding the impact
from acquired businesses, net revenue declined 13% and cannabis
revenue declined 14% versus Q2 FY2021.
Gross margin:
Reported gross margin in Q2 FY2022 was (54%) as compared to 19%
in Q2 FY2021. Excluding non-cash charges related to inventory
write-downs and inventory step-up charges from acquisitions, as
well as certain other non-recurring items including Canadian
government payroll subsidies pursuant to a COVID-19 relief program,
gross margin would have been approximately 12%. Inventory
write-downs in Q2 FY22 amounted to $87
million and primarily relate to excess Canadian cannabis
inventory resulting from lower sales relative to forecast as well
as declines in expected near-term demand. Gross margin in Q2 FY2022
was further impacted by lower production output and price
compression in the Canadian recreational business as well as higher
third-party shipping, distribution and warehousing costs across
North America.
Operating expenses:
Total SG&A ("SG&A") expenses in Q2 FY2022 declined by
15% versus Q2 FY2021, 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 49% year-over-year primarily due to reductions in staffing
and professional fees and benefit from payroll subsidies received
from the Canadian government in Q2 FY2022, pursuant to a COVID-19
relief program. R&D expenses declined 38% year-over-year
principally due to project timing. S&M expenses increased 49%
year-over-year primarily due a return to more normal advertising
and promotions spending in Q2 FY2022, compared to the prior year,
higher sponsorship fees associated with BioSteel's partnership
deals and increased advertising expenses associated with new
product launches.
Net Earnings:
Net Earnings in Q2 FY2022 amounted to a loss of
$16 million, which is an $80 million
improvement versus Q2
FY2021, driven primarily by Other
Income totaling $196 million during Q2 FY2022 mostly
attributable to non-cash fair value changes of $233 million.
Adjusted EBITDA:
Adjusted EBITDA loss in Q2 FY2022 was
$163 million, a $77 million wider loss versus
Q2 FY2021 driven by lower sales, a decline in gross margins,
partially offset by the reduction in our total selling, general and
administrative expense. Adjusted EBITDA loss in Q2 FY2022,
excluding non-cash inventory write-downs would have been a loss of
$76 million.
Free Cash Flow:
Free Cash Flow in Q2
FY2022 was an outflow of $101 million, a
47% decrease in outflow vs Q2
FY2021. Relative to Q2 FY2021, the
Free Cash Flow outflow reduction reflects the decrease in
cash used for operating activities and the lower purchases of
property, plant and equipment.
Cash Position:
Cash and Short-term Investments amounted to $2.0
billion at September 30,
2021, representing a decrease
of $0.3 billion from $2.3 billion at March 31,
2021 reflecting EBITDA losses and capital investments.
Outlook
Pushing out positive Adjusted EBITDA target due to market
share challenges in the Canadian recreational business and a
slower-than-expected ramp-up of U.S. distribution for
BioSteel
- The Company continues to expect revenue acceleration in the
second half of FY2022 but the magnitude and pace of improvement is
expected to be more modest than previously anticipated. The Company
is focused on stabilizing its market share of the Canadian
recreational cannabis in the second half of FY2022. Distribution
expansion of BioSteel is expected to accelerate in the second half
of FY2022 but shipments may depend on timing of chain
authorizations and associated shelf resets.
- The Company is taking steps to improve its Canadian
recreational business, with increased supply of in-demand high THC
flower products and new product launches across flower, pre-roll
joints, vapes, edibles and beverages expected to improve market
share. Additionally, the Company recently implemented a portfolio
optimization strategy that is designed to improve distribution of
high-velocity and high-margin products while reducing supply chain
complexity and improving service levels on priority SKUs. The
portfolio optimization work, along with increased sales, is
expected to lead to improved gross margin in the Canadian
operations.
- The Company remains optimistic about its growth opportunities
in the U.S. for both its BioSteel ready-to-drink ("RTD") beverages
and its portfolio of CBD brands. Brand awareness continues to rise,
velocity is tracking in-line with expectations and feedback from
distributors and retailers has been positive. BioSteel is expected
to see its distribution ramp up over the balance of FY2022 and into
FY2023 driven by increased listings with national and regional
chain accounts.
- Implementation of the previously announced cost
savings
program is well underway, with the Company
having realized $70 million, including $32 million in Q2 FY2022, of the $150
million to $200 million in cost savings expected by the end of the first
half of FY2023. The Company is taking steps to reduce/delay
discretionary spending and further tighten G&A expenses, an
effort that is also expected to contribute to the Company achieving
positive adjusted EBITDA.
- Further mitigating impact to Free Cash Flow through a reduced
CapEx plan, with FY2022 CapEx now expected to be in the range of
$100 million to $150 million.
Second Quarter Fiscal 2022 Business Highlights
Amid a highly competitive Canadian recreational market,
increased market share in vapes and edibles and maintained market
leadership in premium flower category
- In Q2 FY2022, increased vape market share by 20 bps to
8.5%4 and increased edibles market share by 50 bps to
8.7%, from Q1 FY2022.
- Maintained #1 market share in premium flower category in Q2
FY2022 with 13.2%, down 310 bps quarter over quarter, #2 market
share in the value flower category in Q2 FY2022 with 18.1%, down
540 bps sequentially.
- Market share softness across flower categories was driven by
insufficient supply of flower with in-demand attributes, including
higher THC, in the premium and mainstream categories as well
heightened competition focused on single strain offerings in the
value flower category.
- Flower products with in-demand attributes, including higher
THC, have begun coming to market, with supply expected to build
over 2H FY2022.
____________________
|
4
|
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 26% of stores in Alberta, British Columbia,
Saskatchewan, Manitoba and Newfoundland & Labrador, point of
sale data from 100% of stores in New Brunswick, Nova Scotia, Prince
Edward Island and Quebec, as well as depletions and e-commerce
sales data from the OCS.
|
U.S. business continues to gain momentum, distribution
expected to ramp into spring CY2022
- BioSteel RTD beverages continued to build distribution
throughout Q2 FY2022, with All Commodity Volume ("ACV") increasing
to 6.5% in the latest 13-weeks ending October 3, 2021 in IRI. BioSteel has recently
secured new distribution with a number of key retailers, and active
discussions underway with additional national and regional chain
retailers.
- Martha Stewart CBD remains one of the fastest growing CBD brand
across all formats and is now the #3 brand among all CBD gummies in
the food, drug and convenience-store channel with 12.4% market
share, according to IRI data for the 4 weeks ended October 3, 2021. A range of new Martha Stewart
CBD confectionary products has shipped in the current quarter.
- Subsequent to quarter end, Canopy announced an agreement to
acquire, upon federal permissibility of THC, Wana Brands, the #1 cannabis edibles brand in
North America. Wana's leadership
position and ongoing expansion across the U.S. bolsters Canopy
Growth's product, brand and geographic exposure to the U.S.
cannabis market upon federal permissibility.
Over 40 new SKUs shipped in Q2 FY2022 including new
innovative cannabis-based mood management vape
In Flower:
- Launched a range of premium flower SKUs in Q2 FY2022 including
new DOJA Okanagan Grown Ultra Sour and Cold Creek Kush, as well as
DOJA Craft limited time offerings including Cali Kush Cake and GMO
Garlic Breath.
- Launched small format pre-rolled joints in Q2 FY2022 - Tweed
Quickies, in Green Kush and Afghan Kush, and Ace Valley Pinners, in
Kosher Kush, OG Mellon and Great White Shark – the first CBD
dominant pre–roll in the category.
- The Company expects to bring additional flower and pre-roll
products to market over the coming months including new strains
across all categories with DOJA 91K,
Tweed Powdered Donuts, Twd. Garlic Jelly flower shipped in the
current quarter.
In Vapes:
- The Company launched the new nicotine-free, whisl CBD vaporizer
in the U.S in Q2 FY2022. whisl brings cannabis-based mood
management to vapes, offering three uniquely formulated options to
help consumers dial in to their desired effect – focus, calm, or
winding down. whisl is available on shopcanopy.com and in over
3,500 Circle K stores across the U.S. currently. whisl is already
the #3 CBD vape in the U.S. per IRI data for the 4 weeks ended
October 3, 2021.
- Storz & Bickel released three new vaporizer updates in Q2
FY2022 including the limited-edition VOLCANO ONYX and the MIGHTY+
vaporizer featuring a fast-charging USB-C socket, pre-set
Superbooster temperature and 60-second rapid heat up time.
- The Company is scheduled to ship premium 7Acres live-resin
dab-friendly concentrates in the coming months.
In Beverages:
- The Company further expanded its beverage
portfolio with
Tweed Iced Tea (available in lemon and raspberry flavours, both with 5
mg THC) entering the
market in Q1 FY2022 and new Tweed Fizz seltzers
(available in Watermelon and Mango flavours, both with 5
mg THC) entering the market in Q2 FY2022.
- The Company has expanded the popular Deep Space brand having
shipped Deep Space Limon Splashdown in the current quarter.
In Edibles:
- In Q2 FY2022, the Company launched Ace Valley Dream CBN
gummies containing the minor cannabinoid CBN which lends itself to
sleep. The Company also launched Ace Valley Super CBD gummies
in Q2 FY2022.
- The Company has extended the popular Deep Space brand into the
edibles category with shipments of our new Deep Space XPRESS
gummies beginning in Q3 FY2022. The Deep Space XPRESS gummy
contains the maximum allowable 10 mg THC per gummy and are
available in the original Deep Space Cola and new Limon Splashdown
flavours. In addition, new Tweed XPRESS gummies will begin to ship
in Q3 FY2022.
- Also in Q3 FY2022, the Company has begun shipping new Martha
Stewart Harvest Medley CBD Wellness Gummies, Mini CBD Peppermint
Ribbons, and the Snowflake CBD Gummy Sampler.
Second Quarter Fiscal 2022 Revenue Review
Revenue by Channel
|
(in millions of
Canadian dollars, unaudited)
|
|
Q2
FY2022
|
Q2
FY2021
|
Vs. Q2
FY2021
|
|
Canadian
recreational cannabis
|
|
|
|
|
|
Business to
business5
|
|
$41.9
|
$42.2
|
(1%)
|
|
Business to
consumer
|
|
$16.7
|
$18.7
|
(11%)
|
|
|
|
$58.6
|
$60.9
|
(4%)
|
|
Canadian medical
cannabis6
|
|
$13.1
|
$13.9
|
(6%)
|
|
|
|
$71.7
|
$74.8
|
(4%)
|
|
International and
other
|
|
|
|
|
|
C3
|
|
$11.9
|
$13.6
|
(13%)
|
|
Other
|
|
$11.7
|
$5.9
|
98%
|
|
|
|
$23.6
|
$19.5
|
21%
|
|
Global cannabis net
revenue
|
|
$95.3
|
$94.3
|
1%
|
|
Other consumer
products
|
|
|
|
|
|
Storz &
Bickel
|
|
$14.5
|
$21.9
|
(34%)
|
|
This Works
|
|
$9.1
|
$7.8
|
17%
|
|
Bio Steel
|
|
$7.5
|
$5.1
|
47%
|
|
Other
|
|
$5.0
|
$6.2
|
(19%)
|
|
Other consumer
products revenue
|
|
$36.1
|
$41.0
|
(12%)
|
|
Net
revenue
|
|
$131.4
|
$135.3
|
(3%)
|
|
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 $12.9 million and other revenue adjustments of $nil for Q2 2022
(Q2 2021 – $14.2 million and $3.8 million, respectively)
|
6
|
Reflects excise taxes
of $1.4 million for Q2 2022 (Q2 2021 - $1.4 million).
|
Revenue by Form
|
(in millions of
Canadian dollars, unaudited)
|
|
Q2
FY2022
|
Q2
FY2021
|
Vs. Q2
FY2021
|
|
Canadian
recreational cannabis
|
|
|
|
|
|
Dry
bud7
|
|
$56.8
|
$63.9
|
(11%)
|
|
Oils and
softgels7
|
|
$5.5
|
$7.0
|
(21%)
|
|
Beverages, edibles,
topicals and vapes7
|
|
$9.2
|
$8.0
|
15%
|
|
Other revenue
adjustments8
|
|
$-
|
$(3.8)
|
100%
|
|
Excise
taxes
|
|
$(12.9)
|
$(14.2)
|
9%
|
|
|
|
$58.6
|
$60.9
|
(4%)
|
|
Medical cannabis
and other
|
|
|
|
|
|
Dry bud
|
|
$9.1
|
$9.9
|
(8%)
|
|
Oils and soft
gels
|
|
$20.8
|
$23.5
|
(11%)
|
|
Beverages, edibles,
topicals and vapes
|
|
$8.2
|
$1.4
|
486%
|
|
Excise
taxes
|
|
$(1.4)
|
$(1.4)
|
0%
|
|
|
|
$36.7
|
$33.4
|
10%
|
|
Global cannabis net
revenue
|
|
$95.3
|
$94.3
|
1%
|
|
Other consumer
products
|
|
|
|
|
|
Storz &
Bickel
|
|
$14.5
|
$21.9
|
(34%)
|
|
This Works
|
|
$9.1
|
$7.8
|
17%
|
|
Bio Steel
|
|
$7.5
|
$5.1
|
47%
|
|
Other
|
|
$5.0
|
$6.2
|
(19%)
|
|
|
|
|
|
|
|
Other consumer
products revenue
|
|
$36.1
|
$41.0
|
(12%)
|
|
|
|
|
|
|
|
Net
revenue
|
|
$131.4
|
$135.3
|
(3%)
|
|
This table has been
recast to align with our new segment reporting.
|
__________________
|
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.
|
Second Quarter Fiscal 2022 Revenue Review
Canadian Cannabis
- Recreational B2B net sales in Q2 FY2022 decreased 1% over prior
year period primarily due to insufficient supply of flower products
with in-demand attributes and continued price compression,
particularly in the value-priced dried flower category. These
factors were largely offset by contribution from the acquisitions
of Ace Valley and Supreme Cannabis.
- Recreational B2C net sales in Q2 FY2022 decreased 11% versus Q2
FY2021 largely driven by the rapid increase in third party retail
locations across provinces.
- Medical net revenue in Q2 FY2022 decreased 6% from Q2 FY2021
driven primarily by higher average order sizes offset by a fewer
number of orders.
International Cannabis
- C3 revenue in Q2 FY2022 decreased 13% year-over-year
as a result of increased competition as well as the negative impact
of FX, as the Canadian dollar has strengthened against the Euro
compared to a year ago.
- Other revenue in Q2 FY2022 increased 98% over the prior year
period primarily due to growth in U.S. CBD sales.
Other Consumer Products
- S&B vaporizer revenue in Q2 FY2022 decreased 34% over Q2
FY2021 in part due to a strong comparison during the year-ago
period,as well as shipping restrictions and production shortages
caused by global supply chain difficulties.
- This Works sales in Q2 FY2022 increased 17% over Q2 FY2021,
driven by Amazon and third-party e-commerce sales.
- BioSteel sales in Q2 FY2022 increased 47% over Q2 FY2021 driven
by the launch of RTD beverages and expanded distribution in the
U.S. market.
The second quarter fiscal 2022 and second 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 November 5, 2021.
Webcast Information
A live audio webcast will be available at:
https://produceredition.webcasts.com/starthere.jsp?ei=1505860&tp_key=a4b00798a9
Replay Information
A replay will be accessible by webcast until 11:59 PM ET on February 3,
2022 at:
https://produceredition.webcasts.com/starthere.jsp?ei=1505860&tp_key=a4b00798a9
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
Securities and Exchange Commission ("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 definitive agreements with Mountain High Products, LLC,
Wana Wellness, LLC and The Cima Group, LLC (each, a "Wana Entity"),
including the consummation of the acquisition of each Wana
Entity.
- 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 (the "Notes") issued by
Canopy Growth and held by the CBI Group;
- expectations regarding the use of proceeds of equity
financings, including the proceeds from CBI;
- 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)
|
|
September
30,
2021
|
March 31,
2021
|
ASSETS
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$807,621
|
$1,154,653
|
Short-term
investments
|
1,150,325
|
1,144,563
|
Restricted short-term
investments
|
12,219
|
11,332
|
Amounts receivable,
net
|
92,630
|
92,435
|
Inventory
|
353,309
|
367,979
|
Prepaid expenses and
other assets
|
86,905
|
67,232
|
Total current
assets
|
2,503,009
|
2,838,194
|
Other financial
assets
|
509,284
|
708,167
|
Property, plant and
equipment
|
1,123,323
|
1,074,537
|
Intangible
assets
|
342,172
|
308,167
|
Goodwill
|
2,004,006
|
1,889,354
|
Other
assets
|
8,962
|
5,061
|
Total
assets
|
$6,490,756
|
$6,823,480
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
Current
liabilities:
|
|
|
Accounts
payable
|
$94,367
|
$67,262
|
Other accrued expenses
and liabilities
|
86,076
|
100,813
|
Current portion of
long-term debt
|
8,825
|
9,827
|
Other
liabilities
|
70,635
|
106,428
|
Total current
liabilities
|
259,903
|
284,330
|
Long-term
debt
|
1,517,778
|
1,573,136
|
Deferred income tax
liabilities
|
25,464
|
21,379
|
Liability arising
from Acreage Arrangement
|
162,000
|
600,000
|
Warrant derivative
liability
|
104,773
|
615,575
|
Other
liabilities
|
105,818
|
107,240
|
Total
liabilities
|
2,175,736
|
3,201,660
|
Commitments and
contingencies
|
|
|
Redeemable
noncontrolling interest
|
69,400
|
135,300
|
Canopy Growth
Corporation shareholders' equity:
|
|
|
Common shares - $nil
par value; Authorized - unlimited number of
shares; Issued -
393,383,061 shares and 382,875,179 shares, respectively
|
7,468,717
|
7,168,557
|
Additional paid-in
capital
|
2,485,914
|
2,415,650
|
Accumulated other
comprehensive loss
|
(27,448)
|
(34,240)
|
Deficit
|
(5,686,796)
|
(6,068,156)
|
Total Canopy Growth
Corporation shareholders' equity
|
4,240,387
|
3,481,811
|
Noncontrolling
interests
|
5,233
|
4,709
|
Total shareholders'
equity
|
4,245,620
|
3,486,520
|
Total liabilities and
shareholders' equity
|
$6,490,756
|
$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
September 30,
|
|
2021
|
2020
|
Revenue
|
$145,648
|
$150,828
|
Excise
taxes
|
14,274
|
15,562
|
Net revenue
|
131,374
|
135,266
|
Cost of goods
sold
|
202,514
|
109,186
|
Gross
margin
|
(71,140)
|
26,080
|
Operating
expenses:
|
|
|
Selling, general and
administrative expenses
|
125,756
|
147,253
|
Share-based
compensation
|
15,953
|
21,984
|
Expected credit losses
on financial assets and related charges
|
-
|
94,745
|
Asset impairment and
restructuring costs
|
2,510
|
46,363
|
Total operating
expenses
|
144,219
|
310,345
|
Operating
loss
|
(215,359)
|
(284,265)
|
Loss from equity
method investments
|
-
|
(32,991)
|
Other income
(expense), net
|
195,821
|
221,256
|
Loss before income
taxes
|
(19,538)
|
(96,000)
|
Income tax recovery
(expense)
|
3,207
|
(552)
|
Net loss
|
(16,331)
|
(96,552)
|
Net loss attributable
to noncontrolling interests and redeemable noncontrolling interest
|
(5,273)
|
(64,491)
|
Net loss attributable
to Canopy Growth Corporation
|
$(11,058)
|
$(32,061)
|
|
|
|
Basic (loss) earnings
per share
|
$(0.03)
|
$(0.09)
|
Basic weighted
average common shares outstanding
|
393,274,758
|
371,520,534
|
|
|
|
Diluted (loss)
earnings per share
|
$(0.03)
|
$(0.09)
|
Diluted weighted
average common shares outstanding
|
393,274,758
|
371,520,534
|
Schedule 3
CANOPY GROWTH
CORPORATION
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of
Canadian dollars, unaudited)
|
|
|
|
|
Six months ended
September 30,
|
|
2021
|
2020
|
Cash flows from
operating activities:
|
|
|
Net income
(loss)
|
$373,624
|
$(224,874)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation of
property, plant and equipment
|
37,108
|
36,373
|
Amortization of
intangible assets
|
16,804
|
29,432
|
Share of loss on
equity method investments
|
100
|
40,180
|
Share-based
compensation
|
29,079
|
52,669
|
Asset impairment and
restructuring costs
|
80,690
|
59,157
|
Expected credit losses
on financial assets and related charges
|
-
|
94,745
|
Income tax
recovery
|
(307)
|
(2,486)
|
Non-cash fair value
adjustments
|
(834,090)
|
(268,143)
|
Change in operating
assets and liabilities, net of effects from purchases of businesses:
|
|
|
Amounts
receivable
|
12,354
|
1,498
|
Prepaid expenses and
other assets
|
(3,423)
|
(6,604)
|
Inventory
|
40,208
|
(23,500)
|
Accounts payable and
accrued liabilities
|
3,778
|
(11,408)
|
Other, including
non-cash foreign currency
|
(7,670)
|
(57,334)
|
Net cash used in
operating activities
|
(251,745)
|
(280,295)
|
Cash flows from
investing activities:
|
|
|
Purchases of and
deposits on property, plant and equipment
|
(35,658)
|
(90,195)
|
Purchases of
intangible assets
|
(2,729)
|
(7,604)
|
Proceeds on sale of
property, plant and equipment
|
2,290
|
-
|
Proceeds on sale of
intangible assets
|
-
|
18,337
|
Purchases of
short-term investments
|
(705)
|
(367,779)
|
Net cash proceeds on
sale of subsidiaries
|
10,324
|
-
|
(Investments in) sale
of other financial assets
|
110
|
(7,526)
|
Investment in Acreage
Arrangement
|
-
|
(49,849)
|
Loan advanced to
Acreage Hempco
|
-
|
(66,995)
|
Net cash outflow on
acquisition of subsidiaries
|
(9,070)
|
-
|
Other investing
activities
|
(10,859)
|
3,481
|
Net cash used in
investing activities
|
(46,297)
|
(568,130)
|
Cash flows from
financing activities:
|
|
|
Proceeds from issuance
of common shares and warrants
|
1,460
|
-
|
Proceeds from exercise
of stock options
|
4,886
|
10,756
|
Proceeds from exercise
of warrants
|
-
|
244,990
|
Issuance of long-term
debt
|
-
|
1,564
|
Repayment of long-term
debt
|
(49,991)
|
(5,920)
|
Other financing
activities
|
(3,036)
|
(585)
|
Net cash (used in)
provided by financing activities
|
(46,681)
|
250,805
|
Effect of exchange
rate changes on cash and cash equivalents
|
(2,309)
|
(32,269)
|
Net decrease in cash
and cash equivalents
|
(347,032)
|
(629,889)
|
Cash and cash
equivalents, beginning of period
|
1,154,653
|
1,303,176
|
Cash and cash
equivalents, end of period
|
$807,621
|
$673,287
|
Schedule 4
Adjusted Gross
Margin1 Reconciliation (Non-GAAP Measure)
|
|
Three months ended
September 30,
|
(in thousands of
Canadian dollars except where indicated; unaudited)
|
2021
|
2020
|
Net
revenue
|
$131,374
|
$135,266
|
|
|
|
Gross margin, as
reported
|
(71,140)
|
26,080
|
Adjustments to gross
margin:
|
|
|
Charges related
to the flow-through of inventory
step-up
on business combinations
|
3,123
|
281
|
Adjusted gross
margin1
|
$(68,017)
|
$26,361
|
|
|
|
Adjusted gross margin
percentage1
|
(52%)
|
19%
|
|
|
|
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
September 30,
|
(in thousands of
Canadian dollars, unaudited)
|
2021
|
2020
|
Net loss
|
$(16,331)
|
$(96,552)
|
Income tax (recovery)
expense
|
(3,207)
|
552
|
Other (income)
expense, net
|
(195,821)
|
(221,256)
|
Loss on equity method
investments
|
-
|
32,991
|
Share-based
compensation2
|
15,953
|
21,984
|
Acquisition-related
costs
|
2,391
|
3,472
|
Depreciation and
amortization2
|
28,780
|
31,758
|
Asset impairment and
restructuring costs
|
2,510
|
46,363
|
Expected credit losses
on financial assets and related charges
|
-
|
94,745
|
Charges related to the
flow-through of inventory step-up on business
combinations
|
3,123
|
281
|
Adjusted
EBITDA1
|
$(162,602)
|
$(85,662)
|
|
|
|
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
September 30,
|
(in thousands of
Canadian dollars, unaudited)
|
2021
|
2020
|
Net cash used in
operating activities
|
$(85,965)
|
$(161,749)
|
Purchases of and
deposits on property, plant and equipment
|
(15,379)
|
(28,648)
|
Free cash
flow1
|
$(101,344)
|
$(190,397)
|
|
|
|
1Free cash
flow is a non-GAAP measure. See "Non-GAAP Measures".
|
Schedule 7
Segmented Gross
Margin Reconciliation
|
|
|
|
Three months ended
September 30,
|
(in thousands of
Canadian dollars, unaudited)
|
2021
|
2020
|
Global cannabis
segment
|
|
|
Net
revenue
|
$95,325
|
$94,294
|
Cost of goods
sold
|
177,917
|
82,232
|
Gross
margin
|
(82,592)
|
12,062
|
Gross margin
percentage
|
(87%)
|
13%
|
|
|
|
Other consumer
products segment
|
|
|
Revenue
|
$36,049
|
$40,972
|
Cost of goods
sold
|
24,597
|
26,954
|
Gross
margin
|
11,452
|
14,018
|
Gross margin
percentage
|
32%
|
34%
|
Schedule 8
Segmented Adjusted Gross Margin1 Reconciliation
(Non-GAAP Measure)
|
|
Three months
ended
|
(in thousands of
Canadian dollars except where indicated; unaudited)
|
September 30,
2021
|
September 30,
2020
|
Global cannabis
segment
|
|
|
|
Net
revenue
|
|
$95,325
|
$94,294
|
|
|
|
|
Gross margin, as
reported
|
|
(82,592)
|
12,062
|
Adjustments to gross
margin:
|
|
|
|
Charges related to the
flow-through of inventory step-up on business
combinations
|
|
3,123
|
-
|
Adjusted gross
margin1
|
|
$(79,469)
|
$12,062
|
|
|
|
|
Adjusted gross margin
percentage1
|
|
(83%)
|
13%
|
|
|
|
|
Other consumer
products segment
|
|
|
|
Revenue
|
|
$36,049
|
$40,972
|
|
|
|
|
Gross margin, as
reported
|
|
11,452
|
14,018
|
Adjustments to gross
margin:
|
|
|
|
Charges related to the
flow-through of inventory step-up on business
combinations
|
|
-
|
281
|
Adjusted gross
margin1
|
|
$11,452
|
$14,299
|
|
|
|
|
Adjusted gross margin
percentage1
|
|
32%
|
35%
|
|
|
|
|
1 Adjusted gross margin and adjusted
gross margin percentage are non-GAAP measures. See "Non-GAAP
Measures".
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/canopy-growth-reports-second-quarter-fiscal-2022-financial-results-301417390.html
SOURCE Canopy Growth Corporation