Continued progress of premiumization strategy
and record quarter from BioSteel accelerating path to
profitability
SMITHS
FALLS, ON, August 5, 2022 /CNW/ - Canopy Growth
Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (NASDAQ:
CGC) today announces its financial results for the first quarter
ended June 30, 2022. All financial
information in this press release is reported in Canadian dollars,
unless otherwise indicated.
Highlights
- Q1 FY2023 net revenue was flat compared to Q4
FY20221.
- Company maintained #1 share of combined premium flower and
pre-rolled joint ("PRJ") segment in Q1
FY20232.
- Increased share of the combined mainstream flower and PRJ
segment by 35 bps to 4.0% in Q1 FY2023.
- International medical cannabis net revenue approximately
doubled versus Q1 FY2022 driven primarily by strong sales in
Israel and Australia.
- Record BioSteel revenues in Q1 FY2023 increased 169% versus Q1
FY2022. Secured retail agreement with Walmart Stores covering 2,200
stores in 39 states. Entered partnership to become the Official
Hydration Partner of the NHL and NHLPA.
- Cost reduction program on track with operating
expenses3 in Q1 FY2023 decreasing by 13% versus Q1
FY2022.
"Through advancements in our North American brand led strategy
we delivered a record quarter from BioSteel and maintained #1 share
in the premium flower and pre-rolled joint segment, while driving
growth of our premium Doja and mainstream Tweed brands. As our U.S.
THC ecosystem continues to strengthen with Acreage operating in the
recreational cannabis market in New
Jersey, along with the expansion of Wana across North America, we remain focused on delivering
a robust pipeline of innovation aligned to what consumers are
looking for – premium, infused, and ready to enjoy."
David Klein, Chief Executive
Officer
"The cost saving program announced earlier in the quarter
combined with sound expense discipline contributed to a meaningful
decline in operating expenses during the quarter. We expect cost
savings to ramp in the second half of the year, enabling us to
execute on our path to profitability even as we continue to invest
in strategic growth initiatives including in BioSteel and our U.S.
THC ecosystem."
Judy Hong, Chief Financial
Officer
First Quarter Fiscal 2023
Financial Summary
(in millions of Canadian
dollars,
unaudited)
|
|
Net Revenue
|
Gross margin
percentage
|
Adjusted
gross margin
percentage4
|
Net loss5
|
Adjusted
EBITDA6
|
Free cash
flow7
|
|
|
|
|
|
|
|
|
Reported
|
|
$110.1
|
(1 %)
|
2 %
|
$(2,087,556)
|
$(74,800)
|
$(142,808)
|
vs. Q1
FY2022
|
|
(19 %)
|
(2,100) bps
|
(1,900) bps
|
(635 %)
|
(18 %)
|
23 %
|
|
1
|
On an organic basis,
excluding C3.
|
2
|
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 third-party data
providers, government agencies and our own retail store operations
across the country.
|
3
|
Non-GAAP measure.
Excludes Asset Impairment and Restructuring costs, and
Acquisition-Related costs.
|
4
|
Adjusted gross margin
is a non-GAAP measure, and for Q1 FY2023 excludes $4.0 million of
restructuring costs recorded in cost of goods sold (Q1 FY2022 -
excludes $1.4 million related to the flow-through of inventory
step-up associated with the acquisition of Supreme Cannabis and
$nil of restructuring costs recorded in cost of goods sold). See
"Non-GAAP Measures".
|
5
|
Net loss includes a
non-cash goodwill impairment of $1,725 million related to our
cannabis operations reporting unit. This impairment
represents the full goodwill balance associated with the cannabis
operations reporting unit and was triggered as a result of the
decrease in the Company's market capitalization in Q1
FY2023.
|
6
|
Adjusted EBITDA is a
non-GAAP measure. See "Non-GAAP Measures".
|
7
|
Free cash flow is a
non-GAAP measure. See "Non-GAAP Measures".
|
Revenues:
Net revenue of $110 million in Q1
FY2023 declined 19% versus Q1 FY2022. Total global cannabis net
revenue of $66 million in Q1 FY2023
represented a decline of 29% over Q1 FY2022 driven in part by a
decline in value flower sales in the Canadian recreational cannabis
market due to a deliberate business transition to focus on higher
margin, premium and mainstream products. Other consumer products
revenue of $44 million in Q1 FY2023,
represented an increase of 1% over Q1 FY2022. Excluding the impact
from acquired businesses and divestiture of C3, net
revenue declined 17% and global cannabis net revenue declined 28%
versus Q1 FY2022.
Gross margin:
Reported gross margin in Q1 FY2023 was (1%) as compared to 20%
in Q1 FY2022. Excluding non-cash restructuring costs recorded in
COGS of $4 million, adjusted gross
margin was 2%. Gross margin in Q1 FY2023 was further impacted by
lower production output and price compression in the Canadian
recreational business, a shift in business mix, and a decrease in
the amount of payroll subsidies received from the Canadian
government pursuant to a COVID-19 relief program.
Operating expenses:
Total SG&A ("SG&A") expenses in Q1 FY2023 declined
by 8% versus Q1 FY2022, driven by year-over-year reductions in
General & Administrative and Research and Development expenses,
offset by increases in Sales and Marketing.
Goodwill impairment:
The Company recognized a non-cash goodwill impairment of
$1,725 million related to our
cannabis operations reporting unit which is included in our
quarterly net loss. This impairment represents the full
goodwill balance associated with the cannabis operations reporting
unit and was triggered as a result of the decrease in the Company's
market capitalization in Q1 FY2023.
Net Loss:
Net Loss in Q1 FY2023 was $2,088
million, which is a $2,478
million increase in the net loss versus Q1 FY2022, driven
primarily by the non-cash $1,725
million impairment in goodwill, and non-cash fair value
changes.
Adjusted EBITDA:
Adjusted EBITDA loss in Q1 FY2023 was
$75 million, an $11 million
increase in Adjusted EBITDA loss versus Q1 FY2022 primarily
driven by the decline in gross margin, partially offset by the
reduction in our total SG&A expenses.
Free Cash Flow:
Free Cash Flow in Q1 FY2023 was an
outflow of $143 million, a 23% decrease in
outflow versus Q1 FY2022. Relative to Q1
FY2022, the Free Cash Flow outflow decrease reflects a
decrease in the cash used for operating activities and optimizing
our capital expenditures as part of the previously-noted
restructuring actions.
Cash Position:
Cash and short-term investments amounted to $1.2
billion at June 30,
2022, representing a decrease
of $0.2 billion from $1.4 billion at March 31, 2022 reflecting primarily
EBITDA losses, and the upfront payment made as consideration
for the options to acquire Jetty Extracts upon federal
permissibility of THC in the U.S.
Business Highlights
Strong brand performance and innovation are helping
stabilize market share in core segments of the Canadian
recreational cannabis market
- Maintained Canopy Growth's #1 share in combined premium flower
and PRJ segment in Q1 FY2023. With a continued focus on premium
NPD, Canopy launched 11 new premium flower and PRJ products in Q1
FY2023 which resulted in brand share of Doja in the premium flower
and PRJ segment increasing 13 bps to 2.1%.
- Maintained share in the combined mainstream flower and PRJ
segment with the introduction of 6 new mainstream flower and PRJ
offerings in Q1 FY2023. Strong consumer demand for new flower
strains increased the Tweed brand's share of the combined
mainstream flower and PRJ segment by 35 bps to 4.0% in Q1
FY2023.
- Consumer demand for new Ready-to-Drink ("RTD") beverage flavour
extensions under the Deep Space and Tweed brand banners helped
increase the Company's share of RTD beverage category by 33 bps to
23%. The Deep Space brand maintained its #2 rank in the over 5 mg
THC beverage category. Strong consumer demand for the Tweed
portfolio of Iced Tea and Fizz beverages increased the Tweed
brand's share of the RTD beverage market by 136 bps to 10.4% and
maintained the brand's #1 market share rank in the under 5 mg THC
beverage category.
- Robust NPD pipeline including a combined 26 premium and
mainstream flower and PRJ offerings expected in Q2 FY2023 secured
60 new listings across Alberta,
Ontario and Quebec.
Medical cannabis revenues increasing, with multiple
potential growth drivers
- International medical cannabis net revenue doubled versus Q1
FY2022 driven primarily by strong sales in Israel and Australia. Sales force in Germany focused on expanding pharmacy network.
- Critical focus of Canadian medical cannabis business on
increasing veteran registrations through the Spectrum Veteran Care
program.
Gains in distribution and sales velocity of BioSteel RTD
drove record revenue in Q1 FY2023
- BioSteel revenue in Q1 FY2023 increased 169% versus Q1 FY2022
with BioSteel RTDs achieving 21% ACV8, up from 3% in Q1
FY2022. Agreement secured with Walmart for product to blanket
2,200 stores across 39 states.
- BioSteel entered partnership to become the Official Hydration
Partner of the NHL and NHLPA. Sponsorship will provide the
BioSteel brand with league-wide rink side marketing and product
supply rights, retail activation rights, community engagement
platforms, player marketing and activation rights.
U.S. THC Ecosystem continues to strengthen
- Wana9 continued their North American expansion by
entering Puerto Rico and
Arkansas in addition to opening
three additional states. Building on the success of its Optimals
line, including Wana Optimals Fast Asleep, which ranks as the No. 1
Quick onset sleep gummie in North
America, Wana has added a variety of new SKUs to a range of
markets.
- Acreage Holdings10 made strong progress in the first
quarter of calendar 2022 with revenue increasing 48% year over year
and delivered their 5th consecutive quarter of positive Adjusted
EBITDA. In April 2022, Acreage
commenced adult-use operations in New
Jersey with their flagship brand, The Botanist, now
available for adult-use consumers in multiple dispensaries in the
state.
|
8
|
IRI data for the 4
weeks ended June 12, 2022.
|
9
|
Until such time as the
Company elects to exercise its rights to acquire Wana Brands, the
Company will have no direct or indirect economic or voting
interests in Wana Brands, the Company will not directly or
indirectly control Wana Brands, and the Company, on the one hand,
and Wana Brands, on the other hand, will continue to operate
independently of one another.
|
10
|
Until such time as the
Company elects to exercise its rights to acquire Acreage Holdings,
the Company will have no direct or indirect economic or voting
interests in Acreage Holdings, the Company will not directly or
indirectly control Acreage Holdings, and the Company, on the one
hand, and Acreage Holdings, on the other hand, will continue to
operate independently of one another.
|
First Quarter Fiscal 2023 Revenue Review
Revenue by Channel
(in millions of
Canadian dollars, unaudited)
|
|
Q1
FY2023
|
Q1
FY2022
|
Vs. Q1
FY2022
|
Canadian
recreational cannabis
|
|
|
|
|
Business to
business11
|
|
$26.6
|
$42.7
|
(38 %)
|
Business to
consumer
|
|
$12.4
|
$17.3
|
(28 %)
|
|
|
$39.0
|
$60.0
|
(35 %)
|
Canadian medical
cannabis12
|
|
$13.4
|
$13.5
|
(1 %)
|
|
|
$52.4
|
$73.5
|
(29 %)
|
International and
other
|
|
|
|
|
C3
|
|
$-
|
$11.4
|
(100 %)
|
Other13
|
|
$13.8
|
$8.0
|
73 %
|
|
|
$13.8
|
$19.4
|
(29 %)
|
Global cannabis net
revenue
|
|
$66.2
|
$92.9
|
(29 %)
|
Other consumer
products
|
|
|
|
|
Storz &
Bickel
|
|
$15.6
|
$24.1
|
(35 %)
|
This Works
|
|
$5.5
|
$6.5
|
(15 %)
|
BioSteel14
|
|
$17.9
|
$6.7
|
169 %
|
Other
|
|
$4.9
|
$6.0
|
(18 %)
|
Other consumer
products revenue
|
|
$43.9
|
$43.3
|
1 %
|
Net
revenue
|
|
$110.1
|
$136.2
|
(19 %)
|
|
11
|
For Q1 FY2023, amount
is net of excise taxes of $11.6 million and other revenue
adjustments of $0.6 million (Q1 FY2022 - $17.8 million and $3.0
million, respectively).
|
12
|
For Q1 FY2023, amount
is net of excise taxes of $1.2 million (Q1 FY2022 - $1.4
million).
|
13
|
For Q1 FY2023, amount
reflects other revenue adjustments of $0.6 million (Q1 FY2022 -
$0.4 million).
|
14
|
For Q1 FY2023, amount
reflects other revenue adjustments of $1.7 million (Q1 FY2022 -
$1.9 million).
|
Revenue by Form
(in millions of
Canadian dollars, unaudited)
|
|
Q1
FY2023
|
Q1
FY2022
|
Vs. Q1
FY2022
|
Canadian
recreational cannabis
|
|
|
|
|
Dry
bud15,16
|
|
$38.6
|
$66.0
|
(42 %)
|
Oils and
softgels15,16
|
|
$5.2
|
$5.7
|
(9 %)
|
Beverages, edibles,
topicals and vapes15,16
|
|
$7.4
|
$9.1
|
(19 %)
|
Other revenue
adjustments16
|
|
$(0.6)
|
$(3.0)
|
80 %
|
Excise
taxes
|
|
$(11.6)
|
$(17.8)
|
35 %
|
|
|
$39.0
|
$60.0
|
(35 %)
|
Medical cannabis
and other17
|
|
|
|
|
Dry bud
|
|
$14.2
|
$9.6
|
48 %
|
Oils and soft
gels
|
|
$9.2
|
$20.5
|
(55 %)
|
Beverages, edibles,
topicals and vapes
|
|
$5.0
|
$4.2
|
19 %
|
Excise
taxes
|
|
$(1.2)
|
$(1.4)
|
14 %
|
|
|
$27.2
|
$32.9
|
(17 %)
|
Global cannabis net
revenue
|
|
$66.2
|
$92.9
|
(29 %)
|
Other consumer
products
|
|
|
|
|
Storz &
Bickel
|
|
$15.6
|
$24.1
|
(35 %)
|
This Works
|
|
$5.5
|
$6.5
|
(15 %)
|
BioSteel17
|
|
$17.9
|
$6.7
|
169 %
|
Other
|
|
$4.9
|
$6.0
|
(18 %)
|
Other consumer
products revenue
|
|
$43.9
|
$43.3
|
1 %
|
|
|
|
|
|
Net
revenue
|
|
$110.1
|
$136.2
|
(19 %)
|
Canadian Cannabis
- Recreational B2B net sales in Q1 FY2023 decreased 38% over the
prior year period primarily due to the continuing impacts of price
compression resulting from increased competition and lower sales in
the value-priced dried flower category. These factors were
partially offset by a more favourable product mix due primarily to
a decrease in the volume of value-priced dried product sold
compared to the prior year and a full quarter of net revenue
contribution from Supreme Cannabis.
- Recreational B2C net sales in Q1 FY2023 decreased 28% versus Q1
FY2022 largely driven by increased competition from the rapid
increase in third party retail locations across provinces.
- Medical net revenue in Q1 FY2023 decreased 1% from Q1 FY2022
driven primarily by higher average order sizes offset by a fewer
number of orders.
International Cannabis
- C3 revenue in Q1 FY2023 decreased 100%
year-over-year as a result of the divestiture that was completed on
January 31, 2022.
- Other revenue in Q1 FY2023 increased 73% over the prior year
period primarily due to bulk cannabis sales by Supreme Cannabis
into the Israel medical cannabis
market and increasing global medical sales including to
Australia.
Other Consumer Products
- BioSteel sales in Q1 FY2023 increased 169% over Q1 FY2022 in
part due to continued growth in our distribution channels and sales
velocities across North America
and higher international sales.
- Storz & Bickel vaporizer revenue in Q1 FY2023 decreased 35%
over Q1 FY2022 due primarily to temporary disruptions with certain
distributors and slowdown in consumer spending in North America and Europe.
- This Works sales in Q1 FY2023 decreased 15% over Q1 FY2022 due
in part to softer performance of certain product lines, which
benefited during the period of COVID-19 restrictions in Q1 FY2022
and the phasing of orders for certain products in Europe to Q2 FY2023.
The Q1 FY2023 and Q1 FY2022 financial results presented in this
press release have been prepared in accordance with U.S. GAAP.
|
15
|
Excludes the impact of
other revenue adjustments.
|
16
|
Other revenue
adjustments represent the Company's determination of returns and
pricing adjustments and relate to the Canadian recreational
business‐to‐business channel.
|
17
|
Includes the impact of
other revenue adjustments, which represent the Company's
determination of returns and other pricing adjustments.
|
Webcast and Conference Call Information
The Company will host a conference call and audio webcast with
David Klein, CEO and Judy Hong, CFO at 10:00
AM Eastern Time on August 5, 2022.
Webcast Information
A live audio webcast will be available at
https://app.webinar.net/bXk1q7d6DRl
Replay Information
A replay will be accessible by webcast until 11:59 PM ET on November 5,
2022 at https://app.webinar.net/bXk1q7d6DRl
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 amount or frequency of impairment
losses, including as a result of the write-down of intangible
assets, including goodwill.
- expectations related to our announcement of certain
restructuring actions (the "Restructuring Actions") and any
progress, challenges and effects related thereto as well as changes
in strategy, metrics, investments, costs, operating expenses,
employee turnover and other changes with respect thereto.
- our ability to refinance debt as and when required on terms
favorable to us and comply with covenants contained in our debt
facilities and debt instruments.
- expectations regarding the laws and regulations and any
amendments thereto relating to the U.S. hemp industry in the U.S.,
including the promulgation of regulations for the U.S. hemp
industry by the USDA and relevant state regulatory
authorities.
- expectations regarding the potential success of, and the costs
and benefits associated with, our acquisitions, joint ventures,
strategic alliances, equity investments and dispositions;
- the 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.
- expectations regarding the use of proceeds of equity
financings, including the proceeds from the CBI Group
Investments.
- the legalization of the use of cannabis for medical or
recreational in jurisdictions outside of Canada, the related timing and impact thereof
and our intentions to participate in such markets, if and when such
use is legalized.
- our ability to execute on our strategy and the anticipated
benefits of such strategy.
- the ongoing impact of the legalization of additional cannabis
product types and forms for recreational use in Canada, including federal, provincial,
territorial and municipal regulations pertaining thereto, the
related timing and impact thereof and our intentions to participate
in such markets.
- the ongoing impact of developing provincial, territorial and
municipal regulations pertaining to the sale and distribution of
cannabis, the related timing and impact thereof, as well as the
restrictions on federally regulated cannabis producers
participating in certain retail markets and our intentions to
participate in such markets to the extent permissible.
- the timing and nature of legislative changes in the U.S.
regarding the regulation of cannabis including tetrahydrocannabinol
("THC").
- the future performance of our business and operations.
- our competitive advantages and business strategies.
- the competitive conditions of the industry.
- the expected growth in the number of customers using our
products.
- our ability or plans to identify, develop, commercialize or
expand our technology and research and development initiatives in
cannabinoids, or the success thereof.
- expectations regarding revenues, expenses and anticipated cash
needs.
- expectations regarding cash flow, liquidity and sources of
funding.
- expectations regarding capital expenditures.
- 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; inflation risks; the risks and uncertainty regarding
future product development; our reliance on licenses issued by and
contractual arrangements with various federal, state and provincial
governmental authorities; the risk that cost savings and any other
synergies from the CBI Group Investments may not be fully realized
or may take longer to realize than expected; the implementation and
effectiveness of key personnel changes; the risks that our
Restructuring Actions will not result in the expected cost savings,
efficiencies and other benefits or will result in greater than
anticipated turnover in personnel; risks 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,
2022. 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,
2022
|
|
March 31,
2022
|
ASSETS
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$769,495
|
|
$776,005
|
Short-term
investments
|
|
447,620
|
|
595,651
|
Restricted short-term
investments
|
|
12,177
|
|
12,216
|
Amounts receivable,
net
|
|
96,626
|
|
96,443
|
Inventory
|
|
205,513
|
|
204,387
|
Prepaid expenses and
other assets
|
|
62,141
|
|
52,700
|
Total current
assets
|
|
1,593,572
|
|
1,737,402
|
Other financial
assets
|
|
602,229
|
|
800,328
|
Property, plant and
equipment
|
|
926,369
|
|
942,780
|
Intangible
assets
|
|
242,479
|
|
252,695
|
Goodwill
|
|
138,419
|
|
1,866,503
|
Other assets
|
|
14,459
|
|
15,342
|
Total
assets
|
|
$3,517,527
|
|
$5,615,050
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$64,647
|
|
$64,270
|
Other accrued expenses
and liabilities
|
|
59,913
|
|
75,278
|
Current portion of
long-term debt
|
|
193,072
|
|
9,296
|
Other
liabilities
|
|
86,776
|
|
64,054
|
Total current
liabilities
|
|
404,408
|
|
212,898
|
Long-term
debt
|
|
1,264,645
|
|
1,491,695
|
Deferred income tax
liabilities
|
|
14,658
|
|
15,991
|
Liability arising from
Acreage Arrangement
|
|
-
|
|
47,000
|
Warrant derivative
liability
|
|
1,555
|
|
26,920
|
Other
liabilities
|
|
149,341
|
|
190,049
|
Total
liabilities
|
|
1,834,607
|
|
1,984,553
|
Commitments and
contingencies
|
|
|
|
|
Redeemable
noncontrolling interest
|
|
37,150
|
|
36,200
|
Canopy Growth
Corporation shareholders' equity:
|
|
|
|
|
Common shares - $nil
par value; Authorized - unlimited number of shares;
Issued -
417,217,611 shares and 394,422,604 shares, respectively
|
|
7,601,570
|
|
7,482,809
|
Additional paid-in
capital
|
|
2,515,453
|
|
2,519,766
|
Accumulated other
comprehensive loss
|
|
(21,554)
|
|
(42,282)
|
Deficit
|
|
(8,454,214)
|
|
(6,370,337)
|
Total Canopy Growth
Corporation shareholders' equity
|
|
1,641,255
|
|
3,589,956
|
Noncontrolling
interests
|
|
4,515
|
|
4,341
|
Total shareholders'
equity
|
|
1,645,770
|
|
3,594,297
|
Total liabilities and
shareholders' equity
|
|
$3,517,527
|
|
$5,615,050
|
Schedule 2
CANOPY GROWTH
CORPORATION
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of
Canadian dollars, except number of shares and per share data,
unaudited)
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
|
2022
|
|
2021
|
Revenue
|
|
$122,862
|
|
$155,423
|
Excise taxes
|
|
12,747
|
|
19,214
|
Net revenue
|
|
110,115
|
|
136,209
|
Cost of goods
sold
|
|
111,507
|
|
108,971
|
Gross
margin
|
|
(1,392)
|
|
27,238
|
Operating
expenses:
|
|
|
|
|
Selling, general and
administrative expenses
|
|
103,413
|
|
112,574
|
Share-based
compensation
|
|
5,439
|
|
13,126
|
Asset impairment and
restructuring costs
|
|
1,727,985
|
|
89,249
|
Total operating
expenses
|
|
1,836,837
|
|
214,949
|
Operating
loss
|
|
(1,838,229)
|
|
(187,711)
|
Loss from equity
method investments
|
|
-
|
|
(100)
|
Other income
(expense), net
|
|
(245,578)
|
|
580,666
|
(Loss) income before
income taxes
|
|
(2,083,807)
|
|
392,855
|
Income tax
expense
|
|
(3,749)
|
|
(2,900)
|
Net (loss)
income
|
|
(2,087,556)
|
|
389,955
|
Net loss attributable
to noncontrolling interests and
redeemable noncontrolling interest
|
|
(4,408)
|
|
(2,463)
|
Net (loss) income
attributable to Canopy Growth Corporation
|
|
$(2,083,148)
|
|
$392,418
|
|
|
|
|
|
Basic (loss) earnings
per share
|
|
$(5.23)
|
|
$1.02
|
Basic weighted average
common shares outstanding
|
|
398,467,568
|
|
384,055,133
|
|
|
|
|
|
Diluted (loss) earnings
per share
|
|
$(5.23)
|
|
$0.84
|
Diluted weighted
average common shares outstanding
|
|
398,467,568
|
|
404,546,243
|
Schedule 3
CANOPY GROWTH
CORPORATION
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of
Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
|
2022
|
|
2021
|
Cash flows from
operating activities:
|
|
|
|
|
Net (loss)
income
|
|
$(2,087,556)
|
|
$389,955
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Depreciation of
property, plant and equipment
|
|
15,129
|
|
17,116
|
Amortization of
intangible assets
|
|
6,722
|
|
8,016
|
Share of loss on
equity method investments
|
|
-
|
|
100
|
Share-based
compensation
|
|
5,439
|
|
13,126
|
Asset impairment and
restructuring costs
|
|
1,726,877
|
|
81,709
|
Income tax
expense
|
|
3,749
|
|
2,900
|
Non-cash fair value
adjustments and charges related to
settlement of convertible senior notes
|
|
213,610
|
|
(600,922)
|
Change in operating
assets and liabilities, net of effects from
purchases
of businesses:
|
|
|
|
|
Amounts
receivable
|
|
(183)
|
|
(4,946)
|
Inventory
|
|
(1,126)
|
|
(18,158)
|
Prepaid expenses and
other assets
|
|
(9,555)
|
|
(8,804)
|
Accounts payable and
accrued liabilities
|
|
(15,549)
|
|
(9,644)
|
Other, including
non-cash foreign currency
|
|
1,928
|
|
(36,228)
|
Net cash used in
operating activities
|
|
(140,515)
|
|
(165,780)
|
Cash flows from
investing activities:
|
|
|
|
|
Purchases of and
deposits on property, plant and equipment
|
|
(2,293)
|
|
(20,279)
|
Purchases of
intangible assets
|
|
(606)
|
|
(833)
|
Redemption (purchases)
of short-term investments
|
|
153,996
|
|
(346,603)
|
Net cash proceeds
(outflows) on sale of subsidiaries
|
|
(475)
|
|
10,324
|
Sale of (investments
in) equity method investments
|
|
-
|
|
56
|
Investment in other
financial assets
|
|
(29,205)
|
|
-
|
Net cash outflow on
acquisition of subsidiaries
|
|
-
|
|
(8,857)
|
Other investing
activities
|
|
-
|
|
(8,367)
|
Net cash provided by
(used in) investing activities
|
|
121,417
|
|
(374,559)
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from exercise
of stock options
|
|
210
|
|
3,592
|
Repayment of long-term
debt
|
|
(211)
|
|
(48,116)
|
Other financing
activities
|
|
(1,043)
|
|
(444)
|
Net cash (used in)
provided by financing activities
|
|
(1,044)
|
|
(44,968)
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
13,632
|
|
(9,506)
|
Net decrease in cash
and cash equivalents
|
|
(6,510)
|
|
(594,813)
|
Cash and cash
equivalents, beginning of period
|
|
776,005
|
|
1,154,653
|
Cash and cash
equivalents, end of period
|
|
$769,495
|
|
$559,840
|
Schedule 4
Adjusted Gross Margin1 Reconciliation (Non-GAAP
Measure)
|
|
Three months ended June
30,
|
(in thousands of
Canadian dollars except where indicated; unaudited)
|
|
2022
|
|
2021
|
Net revenue
|
|
$110,115
|
|
$136,209
|
|
|
|
|
|
Gross margin, as
reported
|
|
(1,392)
|
|
27,238
|
Adjustments to gross
margin:
|
|
|
|
|
Restructuring costs
recorded in cost of good sold
|
|
3,961
|
|
-
|
Charges related to the
flow-through of inventory
step-up
on business combinations
|
|
-
|
|
1,414
|
Adjusted gross
margin1
|
|
$2,569
|
|
$28,652
|
|
|
|
|
|
Adjusted gross margin
percentage1
|
|
2 %
|
|
21 %
|
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)
|
|
2022
|
|
2021
|
Net (loss)
income
|
|
$(2,087,556)
|
|
$389,955
|
Income tax
expense
|
|
3,749
|
|
2,900
|
Other (income)
expense, net
|
|
245,578
|
|
(580,666)
|
Loss on equity method
investments
|
|
-
|
|
100
|
Share-based
compensation2
|
|
5,439
|
|
13,126
|
Acquisition-related
costs
|
|
4,193
|
|
5,780
|
Depreciation and
amortization2
|
|
21,851
|
|
25,132
|
Asset impairment and
restructuring costs
|
|
1,727,985
|
|
78,618
|
Restructuring costs
recorded in cost of goods sold
|
|
3,961
|
|
-
|
Charges related to the
flow-through of inventory
step-up
on business combinations
|
|
-
|
|
1,414
|
Adjusted
EBITDA1
|
|
$(74,800)
|
|
$(63,641)
|
1Adjusted
EBITDA is a non-GAAP measure. See "Non-GAAP Measures".
|
2 From
Consolidated Statements of Cash Flows.
|
|
|
|
|
Schedule 6
Free Cash Flow Reconciliation1 (Non-GAAP
Measure)
|
|
Three months ended June
30,
|
(in thousands of
Canadian dollars, unaudited)
|
|
2022
|
|
2021
|
Net cash used in
operating activities
|
|
$(140,515)
|
|
$(165,780)
|
Purchases of and
deposits on property, plant and equipment
|
|
(2,293)
|
|
(20,279)
|
Free cash
flow1
|
|
$(142,808)
|
|
$(186,059)
|
1Free cash
flow is a non-GAAP measure. See "Non-GAAP Measures".
|
Schedule 7
Segmented Gross Margin Reconciliation
|
|
Three months ended June
30,
|
(in thousands of
Canadian dollars, unaudited)
|
|
2022
|
|
2021
|
Global cannabis
segment
|
|
|
|
|
Net
revenue
|
|
$66,196
|
|
$92,939
|
Cost of goods
sold
|
|
81,668
|
|
79,570
|
Gross
margin
|
|
(15,472)
|
|
13,369
|
Gross margin
percentage
|
|
(23 %)
|
|
14 %
|
|
|
|
|
|
Other consumer
products segment
|
|
|
|
|
Revenue
|
|
$43,919
|
|
$43,270
|
Cost of goods
sold
|
|
29,839
|
|
29,401
|
Gross
margin
|
|
14,080
|
|
13,869
|
Gross margin
percentage
|
|
32 %
|
|
32 %
|
Schedule 8
Segmented Adjusted Gross Margin1 Reconciliation
(Non-GAAP Measure)
|
|
Three months ended June
30,
|
(in thousands of
Canadian dollars except where indicated; unaudited)
|
2022
|
|
2021
|
Global cannabis
segment
|
|
|
|
|
Net revenue
|
|
$66,196
|
|
$92,939
|
|
|
|
|
|
Gross margin, as
reported
|
|
(15,472)
|
|
13,369
|
Adjustments to gross
margin:
|
|
|
|
|
Restructuring costs
recorded in cost of good sold
|
|
3,300
|
|
-
|
Charges related to the
flow-through of inventory
step-up
on business combinations
|
|
-
|
|
1,414
|
Adjusted gross
margin1
|
|
$(12,172)
|
|
$14,783
|
|
|
|
|
|
Adjusted gross margin
percentage1
|
|
(18 %)
|
|
16 %
|
|
|
|
|
|
Other consumer
products segment
|
|
|
|
|
Revenue
|
|
$43,919
|
|
$43,270
|
|
|
|
|
|
Gross margin, as
reported
|
|
14,080
|
|
13,869
|
Adjustments to gross
margin:
|
|
|
|
|
Restructuring costs
recorded in cost of good sold
|
|
661
|
|
-
|
Adjusted gross
margin1
|
|
$14,741
|
|
$13,869
|
|
|
|
|
|
Adjusted gross margin
percentage1
|
|
34 %
|
|
32 %
|
1 Adjusted
gross margin and adjusted gross margin percentage are non-GAAP
measures. See "Non-GAAP Measures".
|
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SOURCE Canopy Growth Corporation