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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".

3 Free 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:

i) 

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".

2 From 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".

 

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