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Canopy Growth Reports Third Quarter Fiscal 2021 Financial Results

09 febbraio 2021 | 12.31

LETTURA: 26 minuti

Business transformation continues to gain traction

Improved commercial and operational execution drives record net revenue of $153 million, up 23% vs Q3 2020

Q3 2021 Canadian recreational market share increased by 30bps vs Q2 2021 based on our proprietary market share tracker

Provides medium-term financial targets, including expectations to achieve profitability during the second half of FY 2022, while continuing to invest behind consumer insights, R&D and the U.S. market

With renewed sense of optimism, Canopy further advanced the U.S. growth strategy ahead of potential cannabis reform

SMITHS FALLS, Ontario, Feb. 9, 2021 /PRNewswire/ -- Canopy Growth Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (NASDAQ: CGC) today announces its financial results for the third quarter fiscal 2021 ended December 31, 2020. All financial information in this press release is reported in millions of Canadian dollars, unless otherwise indicated.

Third Quarter Fiscal 2021 Financial Summary

	Net revenue	Gross marginpercentage	Adjustedgross marginpercentage¹	Net loss	AdjustedEBITDA²	Free cashflow³
Reported	$152.5	16%	26%	$(829.3)	$(68.4)	$(135.4)
vs. Q3 2020	23%	(1,500) bps	(500) bps	(656%)	29%	62%
¹ Adjusted gross margin percentage is a non-GAAP measure, and for Q3 2021 excludes restructuring costs included in cost of goods sold of $15.6 million.
² Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures".
³Free cash flow is a non-GAAP measure. See "Non-GAAP Measures".

"We delivered another quarter of record net revenue, with growth across all our businesses, led by improved commercial and supply chain execution," said David Klein, CEO. "We are building a track record of winning in our core markets, while also accelerating our U.S. growth strategy with the momentum building behind the promising cannabis reform in the U.S."

"We are executing against our cost savings program, with several initiatives already completed and more underway to build a leaner and more agile business," added Mike Lee, CFO. "These cost savings, along with our top-line growth and continued cost discipline, puts Canopy firmly on a path to achieve profitability during Fiscal 2022, with further improvement anticipated beyond."

Medium-Term Financial Milestones

With our new strategy in place, our organizational changes complete, and our operational cost savings program now underway, the Company is in position to establish the following medium-term financial targets:

Key drivers underpinning the Company's financial targets include:

Third Quarter Fiscal 2021 Corporate Financial Highlights

Business & Operational Highlights

Third Quarter Fiscal 2021 Financial and Operational Review

Revenue by Channel

(in millions of Canadian dollars, unaudited)	Q3 2021	Q3 2020	vs. Q3 2020

Canadian recreational net revenue
- Business to business¹	$43.1	$43.0	NM
- Business to consumer	$20.2	$15.2	33%
	$63.3	$58.2	9%
Canadian medical net revenue²	$14.0	$13.5	4%
International medical revenue	$21.5	$18.7	15%
	$35.5	$32.2	10%
Cannabis net revenue	$98.8	$90.4	9%

All other revenue	$53.7	$33.4	61%
Net revenue	$152.5	$123.8	23%
¹ Reflects excise taxes of $16.0 million and other revenue adjustments of $3.8 million for Q3 2021 (Q3 2020 - $10.5 million and $5.3 million, respectively).
² Reflects excise taxes of $1.4 million in Q3 2021 (Q3 2020 - $1.3 million).

Revenue by Form

(in millions of Canadian dollars, unaudited)	Q3 2021	Q3 2020	vs. Q3 2020

Canadian recreational net revenue
- Dry bud¹	$66.2	$69.3	(4%)
- Oils and softgels¹	$7.3	$4.7	55%
- Cannabis 2.0 products²	$9.6	$-	NM
- Other revenue adjustments³	$(3.8)	$(5.3)	28%
- Excise taxes	$(16.0)	$(10.5)	(52%)
	$63.3	$58.2	9%
Global medical net revenue
- Dry bud	$9.0	$9.2	(2%)
- Oils and softgels	$27.0	$24.3	11%
- Cannabis 2.0 products²	$0.9	$-	NM
- Excise taxes	$(1.4)	$(1.3)	(8%)
	$35.5	$32.2	10%
Cannabis net revenue	$98.8	$90.4	9%

All other revenue	$53.7	$33.4	61%
Net revenue	$152.5	$123.8	23%
¹ Excludes the impact of other revenue adjustments.
² Cannabis 2.0 products include cannabis-infused chocolates, cannabis-infused beverages, and cannabis vape products (including power sources such as rechargeable and compact batteries, ready-to-go vape pens, and cartridges/vape pods).
³ Other revenue adjustments represent the Company's determination of returns and pricing adjustments, and relate to the Canadian recreational business-to-business channel.

Canadian Cannabis

International Cannabis

Strategic Businesses

The third quarter fiscal 2021 and third quarter fiscal 2020 financial results presented in this press release have been prepared in accordance with U.S. GAAP.

Note:

Calculated using 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. Tool captures point of sale data from an average of 39% of stores in Alberta, British Columbia, Saskatchewan, Manitoba and Newfoundland & Labrador, point of sale data from 100% of stores in New Brunswick, Nova Scotia and Prince Edward Island, as well as depletions and ecommerce sales data from the OCS.

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 February 9, 2021.

Webcast Information

A live audio webcast will be available at:https://produceredition.webcasts.com/starthere.jsp?ei=1418491&tp_key=44498b6183

Replay Information

A replay will be accessible by webcast until 11:59 PM ET on May 10, 2021 at:https://produceredition.webcasts.com/starthere.jsp?ei=1418491&tp_key=44498b6183

Non-GAAP Measures

Adjusted EBITDA is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. Adjusted EBITDA is calculated as the reported net loss, adjusted to exclude income tax recovery (expense); other income (expense), net; loss on equity method investments; share-based compensation expense; depreciation and amortization expense; asset impairment and restructuring costs; expected credit losses on financial assets and related charges; 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. The Adjusted EBITDA reconciliation is presented within this news release and explained in the Company's Quarterly Report on Form 10-Q to be filed with the SEC.

Free Cash Flow is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. This measure is calculated as net cash provided by (used in) operating activities less purchases of and deposits on property, plant and equipment. The Free Cash Flow reconciliation is presented within this news release and explained in the Company's Quarterly Report on Form 10-Q to be filed with the SEC.

Adjusted Gross Margin and Adjusted Gross Margin Percentage are non-GAAP measures used by management that are not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. Adjusted Gross Margin is calculated as gross margin excluding restructuring costs recorded in cost of goods sold. 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:

Certain of the forward-looking statements contained herein concerning the industries in which we conduct our business are based on estimates prepared by us using data from publicly available governmental sources, market research, industry analysis and on assumptions based on data and knowledge of these industries, which we believe to be reasonable. However, although generally indicative of relative market positions, market shares and performance characteristics, such data is inherently imprecise. The industries in which we conduct our business involve risks and uncertainties that are subject to change based on various factors, which are described further below.

The forward-looking statements contained herein are based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including: (i) management's perceptions of historical trends, current conditions and expected future developments; (ii) our ability to generate cash flow from operations; (iii) general economic, financial market, regulatory and political conditions in which we operate; (iv) the production and manufacturing capabilities and output from our facilities and our joint ventures, strategic alliances and equity investments; (v) consumer interest in our products; (vi) competition; (vii) anticipated and unanticipated costs; (viii) government regulation of our activities and products including but not limited to the areas of taxation and environmental protection; (ix) the timely receipt of any required regulatory authorizations, approvals, consents, permits and/or licenses; (x) our ability to obtain qualified staff, equipment and services in a timely and cost-efficient manner; (xi) our ability to conduct operations in a safe, efficient and effective manner; (xii) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our recent acquisitions into our existing operations; (xiii) our ability to continue to operate in light of the COVID-19 pandemic and the impact of the pandemic on demand for, and sales of, our products and our distribution channels; and (xiv) other considerations that management believes to be appropriate in the circumstances. While our management considers these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct.

By their nature, forward-looking statements are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the forward-looking statements in this press release and other reports we file with, or furnish to, the Securities and Exchange Commission (the "SEC") and other regulatory agencies and made by our directors, officers, other employees and other persons authorized to speak on our behalf. Such factors include, without limitation, the risk that the COVID-19 pandemic may disrupt our operations and those of our suppliers and distribution channels and negatively impact the use of our products; consumer demand for cannabis and U.S. hemp products; that cost savings and any other synergies from the CBI Group Investments may not be fully realized or may take longer to realize than expected; future levels of revenues; our ability to manage disruptions in credit markets or changes to our credit rating; future levels of capital, environmental or maintenance expenditures, general and administrative and other expenses; the success or timing of completion of ongoing or anticipated capital or maintenance projects; business strategies, growth opportunities and expected investment; the adequacy of our capital resources and liquidity, including but not limited to, availability of sufficient cash flow to execute our business plan (either within the expected timeframe or at all); the potential effects of judicial or other proceedings on our business, financial condition, results of operations and cash flows; volatility in and/or degradation of general economic, market, industry or business conditions; compliance with applicable environmental, economic, health and safety, energy and other policies and regulations and in particular health concerns with respect to vaping and the use of cannabis and U.S. hemp products in vaping devices; the anticipated effects of actions of third parties such as competitors, activist investors or federal, state, provincial, territorial or local regulatory authorities, self-regulatory organizations, plaintiffs in litigation or persons threatening litigation; changes in regulatory requirements in relation to our business and products; and the factors discussed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended March 31, 2020 filed with the SEC on June 1, 2020. Readers are cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements.

Forward-looking statements are provided for the purposes of assisting the reader in understanding our financial performance, financial position and cash flows as of and for periods ended on certain dates and to present information about management's current expectations and plans relating to the future, and the reader is cautioned that the forward-looking statements may not be appropriate for any other purpose. While we believe that the assumptions and expectations reflected in the forward-looking statements are reasonable based on information currently available to management, there is no assurance that such assumptions and expectations will prove to have been correct. Forward-looking statements are made as of the date they are made and are based on the beliefs, estimates, expectations and opinions of management on that date. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, estimates or opinions, future events or results or otherwise or to explain any material difference between subsequent actual events and such forward-looking statements, except as required by law. The forward-looking statements contained in this press release and other reports we file with, or furnish to, the SEC and other regulatory agencies and made by our directors, officers, other employees and other persons authorized to speak on our behalf are expressly qualified in their entirety by these cautionary statements.

CANOPY GROWTH CORPORATION CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (in thousands of Canadian dollars, except number of shares and per share data, unaudited)

	December 31, 2020	March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$824,960	$1,303,176
Short-term investments	768,564	673,323
Restricted short-term investments	11,426	21,539
Amounts receivable, net	93,673	90,155
Inventory	394,023	391,086
Prepaid expenses and other assets	78,979	85,094
Total current assets	2,171,625	2,564,373
Equity method investments	16,992	65,843
Other financial assets	682,595	249,253
Property, plant and equipment	1,148,338	1,524,803
Intangible assets	366,375	476,366
Goodwill	1,917,900	1,954,471
Other assets	5,357	22,636
Total assets	$6,309,182	$6,857,745

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$86,463	$123,393
Other accrued expenses and liabilities	88,419	64,994
Current portion of long-term debt	13,031	16,393
Other liabilities	160,306	215,809
Total current liabilities	348,219	420,589
Long-term debt	619,165	449,022
Deferred income tax liabilities	23,251	47,113
Liability arising from Acreage Arrangement	450,000	250,000
Warrant derivative liability	415,946	322,491
Other liabilities	157,079	190,660
Total liabilities	2,013,660	1,679,875
Commitments and contingencies
Redeemable noncontrolling interest	111,100	69,750
Canopy Growth Corporation shareholders' equity:
Common shares - $nil par value; Authorized - unlimited number of shares;
Issued - 373,803,786 shares and 350,112,927 shares, respectively	6,787,725	6,373,544
Additional paid-in capital	2,509,678	2,615,155
Accumulated other comprehensive income	27,407	220,899
Deficit	(5,368,178)	(4,323,236)
Total Canopy Growth Corporation shareholders' equity	3,956,632	4,886,362
Noncontrolling interests	227,790	221,758
Total shareholders' equity	4,184,422	5,108,120
Total liabilities and shareholders' equity	$6,309,182	$6,857,745

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 December 31,		Nine months ended December 31,
	2020	2019	2020	2019
Revenue	$169,907	$135,546	$439,823	$324,558
Excise taxes	17,379	11,782	41,613	33,699
Net revenue	152,528	123,764	398,210	290,859
Cost of goods sold	127,943	85,556	341,050	230,718
Gross margin	24,585	38,208	57,160	60,141
Operating expenses:
Selling, general and administrative expenses	144,078	168,910	426,723	496,158
Share-based compensation	19,963	61,679	72,632	241,922
Expected credit losses on financial assets
and related charges	13,735	-	108,480	-
Asset impairment and restructuring costs	400,422	-	459,579	-
Total operating expenses	578,198	230,589	1,067,414	738,080
Operating loss	(553,613)	(192,381)	(1,010,254)	(677,939)
Loss from equity method investments	(671)	(2,664)	(40,851)	(6,668)
Other income (expense), net	(290,567)	57,963	(21,106)	600,624
Loss before income taxes	(844,851)	(137,082)	(1,072,211)	(83,983)
Income tax recovery	15,600	27,448	18,086	22,948
Net loss	(829,251)	(109,634)	(1,054,125)	(61,035)
Net income (loss) attributable to
noncontrolling interests and redeemable
noncontrolling interest	75,129	(18,280)	(9,183)	(42,730)
Net loss attributable to Canopy Growth
Corporation	$(904,380)	$(91,354)	$(1,044,942)	$(18,305)

Basic and diluted loss per share	$(2.43)	$(0.26)	$(2.83)	$(0.05)
Basic and diluted weighted average common
shares outstanding	372,908,767	348,530,622	369,418,037	346,877,660

CANOPY GROWTH CORPORATION CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of Canadian dollars, unaudited)

	Nine months ended December 31,
	2020	2019
Cash flows from operating activities:
Net loss	$(1,054,125)	$(61,035)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property, plant and equipment	54,625	49,582
Amortization of intangible assets	43,565	26,650
Share of loss on equity method investments	40,851	6,668
Share-based compensation	72,632	241,922
Asset impairment and restructuring costs	459,579	-
Expected credit losses on financial assets and related charges	108,480	-
Income tax recovery	(18,086)	(22,948)
Non-cash foreign currency	(11,046)	(3,945)
Interest paid	(12,886)	(13,738)
Change in operating assets and liabilities, net of effects from purchases
of businesses:
Amounts receivable	(12,507)	13,749
Prepaid expenses and other assets	(4,353)	(6,214)
Inventory	(28,520)	(240,555)
Accounts payable and accrued liabilities	(8,243)	(11,559)
Other, including non-cash fair value adjustments	2,135	(540,573)
Net cash used in operating activities	(367,899)	(561,996)
Cash flows from investing activities:
Purchases of and deposits on property, plant and equipment	(137,977)	(610,858)
Purchases of intangible assets	(7,238)	(13,724)
Proceeds on sale of property, plant and equipment	30,921	-
Proceeds on sale of intangible assets	18,337	-
(Purchases) redemption of short-term investments	(83,612)	1,324,682
Sale of (investments in) equity method investments	7,000	(4,719)
Investments in other financial assets	(34,236)	(46,647)
Investment in Acreage Arrangement	(49,849)	(395,190)
Loan advanced to Acreage Hempco	(66,995)	-
Recovery of amounts related to construction financing	10,000	-
Payment of acquisition related liabilities	(15,144)	(29,837)
Net cash outflow on acquisition of noncontrolling interests	(125)	-
Net cash outflow on acquisition of subsidiaries	-	(505,156)
Net cash used in investing activities	(328,918)	(281,449)
Cash flows from financing activities:
Payment of share issue costs	(670)	(245)
Proceeds from issuance of shares by Canopy Rivers	92	1,062
Proceeds from exercise of stock options	37,999	39,149
Proceeds from exercise of warrants	244,990	446
Issuance of long-term debt	-	10,268
Repayment of long-term debt	(13,271)	(122,036)
Net cash provided by (used in) financing activities	269,140	(71,356)
Effect of exchange rate changes on cash and cash equivalents	(50,539)	(4,365)
Net decrease in cash and cash equivalents	(478,216)	(919,166)
Cash and cash equivalents, beginning of period	1,303,176	2,480,830
Cash and cash equivalents, end of period	$824,960	$1,561,664

Adjusted Gross Margin¹ Reconciliation (Non-GAAP Measure)
	Three months ended December 31,
(in thousands of Canadian dollars, unaudited)	2020	2019
Net revenue	$152,528	$123,764

Gross margin, as reported	24,585	38,208
Adjustments to gross margin:
Restructuring costs recorded in cost of goods sold	15,637	-
Adjusted gross margin¹	$40,222	$38,208

Adjusted gross margin percentage¹	26%	31%

¹ Adjusted gross margin and adjusted gross margin percentage are non-GAAP measures. See "Non-GAAP Measures".

Adjusted EBITDA¹ Reconciliation (Non-GAAP Measure)
	Three months ended December 31,
(in thousands of Canadian dollars, unaudited)	2020	2019
Net loss	$(829,251)	$(109,634)
Income tax recovery	(15,600)	(27,448)
Other (income) expense, net	290,567	(57,963)
Loss on equity method investments	671	2,664
Share-based compensation²	19,963	61,679
Acquisition-related costs	3,095	3,256
Depreciation and amortization²	32,385	30,464
Asset impairment and restructuring costs	400,422	-
Expected credit losses on financial assets
and related charges	13,735	-
Restructuring costs recorded in cost of goods sold	15,637	-
Adjusted EBITDA¹	$(68,376)	$(96,982)

¹Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures".
²From Condensed Interim Consolidated Statements of Cash Flows.

Free Cash Flow Reconciliation¹
	Three months ended December 31,
(in thousands of Canadian dollars, unaudited)	2020	2019
Net cash used in operating activities	$(87,604)	$(189,911)
Purchases of and deposits on property, plant and equipment	(47,782)	(170,708)
Free cash flow¹	$(135,386)	$(360,619)

¹Free cash flow is a non-GAAP measure. See "Non-GAAP Measures".