Achieved record quarterly net revenue of
$135 million
Net Loss of $97
million; Adjusted EBITDA loss of $86
million, a 43% improvement versus Q2 FY20
Implementing initiatives to capture
$150-$200
million of savings across our cost structure
Increased market share by 200 basis points in
Canadian recreational market based on our proprietary market share
tracker
Building momentum in the U.S. and establishing
foundation for long-term leadership position
SMITHS FALLS, ON, Nov. 9, 2020 /CNW/ - Canopy Growth Corporation
("Canopy Growth" or the "Company") (TSX: WEED) (NYSE: CGC) today
announced its financial results for the second quarter fiscal 2021
ended September 30, 2020. All
financial information in this press release is reported in millions
of Canadian dollars, unless otherwise indicated.
"Our renewed strategy of winning consumer mindshare, along with
increased agility and execution, has resulted in record net revenue
for the second quarter and momentum across key areas of business,"
said David Klein, CEO. "Canopy
Growth is positioned for continued growth as we establish a strong
leadership position that is showcased through our vast portfolio of
differentiated brands and products – including our industry leading
cannabis-infused beverages."
"We saw another quarter of improvement in our operating expense
ratio while our marketing and R&D investments are being
re-directed to drive sales," added Mike
Lee, CFO. "Importantly, our end-to-end review has identified
cost savings opportunities in the range of $150-$200 million
across cost of goods sold, general and administrative expenses, and
inventory, and efforts are underway to quickly capture value.
Leveraging ongoing improvements across our business, we are
accelerating our path to profitability, notably in our largest
market, Canada."
Second Quarter Fiscal 2021 Financial Summary
|
Net
revenue
|
Gross margin
percentage
|
Net
loss
|
Adjusted
EBITDA1
|
Free cash
flow2
|
Reported
|
$135.3
|
19%
|
$(96.6)
|
$(85.7)
|
$(190.4)
|
vs. Q2
2020
|
77%
|
1,400 bps
|
(140%)
|
43%
|
57%
|
1 Adjusted EBITDA is a non-GAAP
measure. See "Non-GAAP Measures".
|
2 Free
cash flow is a non-GAAP measure. See "Non-GAAP
Measures".
|
Second Quarter Fiscal 2021 Corporate Financial
Highlights
- Revenues: We achieved record quarterly net revenue of
$135.3 million in Q2 2021 driven by
increase in Canadian recreational revenue, continued strength in
Storz & Bickel ("S&B") vaporizer sales and ThisWorks, and
contribution from BioSteel, which was acquired in October 2019. Growth versus the prior year period
also benefited from favorable comparison, as Q2 2020 results
included a $32.7 million charge for
returns, return provisions and pricing allowances primarily related
to restructuring the Company's recreational softgel & oil
portfolio. Adjusting for Q2 2020 charge, net sales increased 24%
versus Q2 2020.
- Gross margin: Gross margin of 19% was up 1,400bps versus
Q2 2020. Gross margin during Q2 2021 compared to Q1 2021 was
impacted by an unfavorable business mix driven by lower
contribution from International Medical business and continued
lower production output, partially offset by lower inventory
adjustment.
- Operating expenses: Total SG&A ("SG&A") expenses
declined by 19% versus Q2 2020, driven by year-over-year reductions
in Sales & Marketing and General & Administrative
("G&A") expenses, partially offset by higher Research &
Development ("R&D") expenses. Sales & Marketing expense
decline of 30% reflects lower compensation expenses resulting from
corporate restructuring actions taken earlier in the year, delayed
or cancelled marketing activities and reduced travel-related
expenses due to the COVID-19 pandemic. G&A expenses decreased
by 26%, while R&D expenses rose by 19% mainly driven by ongoing
research studies that commenced after Q2 2020. Excluding
Acquisition-related costs of $3.5
million, SG&A expenses declined by 20% versus Q2 2020.
Share-based Compensation expenses decreased 76% over Q2 2020.
- Net Loss: Net loss of $96.6
million in Q2 2021, a $339.2
million wider loss versus Q2 2020, was driven by lower other
income.
- Adjusted EBITDA: Adjusted EBITDA loss was $85.7 million in Q2 2021, compared to a loss of
$150.4 million in Q2 2020 driven by
higher revenue and lower operating expenses.
- Cash Position: Cash and Short-term Investments amounted
to $1.722 billion at September 30, 2020, representing a decrease of
$254 million from $1.976 billion at March
31, 2020 reflecting the EBITDA loss and capital
investments.
Business & Operational Highlights
- Strengthened competitive positioning in Canada recreational market:
-
- Our Canada recreational market
share (covering British Columbia,
Ontario, Alberta, Saskatchewan, Manitoba, New
Brunswick, Nova Scotia,
Prince Edward Island and
Newfoundland & Labrador)
increased to 15.5% during Q2 2021, up 200 bps versus Q1 2021, based
on our internal market share tracking tool. Notably, our market
share grew by 190 bps in Ontario
and 140bps in British Columbia,
while it declined by 40 bps in Alberta in Q2 2021 vs Q1 2021.
- We grew our market share in the flower category by 320bps
during Q2 2021 vs. Q1 2021. Twd. continued to drive market share
gains in the growing value flower segment, as market share of value
flower sold in Ontario more than
doubled to 13.7%.
- Established leadership position in cannabis-infused beverage
segment during Q2 2021, commanding a 54% dollar share with five
Ready-to- Drink ("RTD") THC cannabis beverages under Tweed,
Houseplant and DeepSpace brands in the Canadian recreational
market. We launched Quatreau RTD CBD beverages across Canada in the current quarter. To date, over
2.0 million beverage units have been shipped since late
March 2020.
- Opened 9 retail stores in Alberta during Q2 2021, bringing the total
number of stores carrying the Company's award-winning Tweed and
Tokyo Smoke retail banners in Canada to 48 (32 Corporate-owned) at the end
of Q2 2021. One additional retail store opened in Alberta in October
2020.
- Stepped up activities in the U.S. market to drive
accelerated revenue growth:
-
- Launched Martha Stewart branded
health and wellness CBD gummies, oil and soft gels in September 2020. The launch generated significant
earned media, which is already driving strong consumer demand.
Martha Stewart CBD products are now expanding into brick-and-mortar
stores, with a significant number of stores are expected to be
added in the coming months.
- BioSteel signed distribution agreements with leading beverage
distribution companies, Reyes Beer Division and Manhattan Beer,
alongside several other partnerships through Constellation Brands'
distribution network. These distribution agreements will bring
BioSteel's ready-to-drink, electrolyte-packed sports hydration
beverages to consumers, covering 100% of the US market through
direct-store-delivery (DSD) network by early 2021. BioSteel is
currently in discussion with a number of large national accounts
and expects to have products on shelf across Food/Drug/Mass as well
as Convenience & Gas channel over the course of calendar year
2021.
- Storz & Bickel (S&B) vaporizer products continued to
see strong growth driven by both distribution gains and reorders
from new US distributors. We have added an additional shift to keep
up with demand and plan to triple production capacity by next
summer.
- This Works strengthened direct (TW.com, shopcanopy.com) and
third-party ecommerce sales channels and launched StressCheck hand
sanitizer in U.S. with additional product lines and expanded
distribution expected in the coming months.
- The Company and Acreage Holdings, Inc. ("Acreage") implemented
an amended arrangement between the two companies. The amended
arrangement reduces the total purchase obligation for Canopy and
provides flexibility to majority or total ownership of Acreage upon
the occurrence (or waiver by the Company) of changes in federal
laws in the United States to
permit the general cultivation, distribution and possession of
marijuana (as defined in the relevant legislation) or to remove the
regulation of such activities from the federal laws of the United States. Companies announced initial
plans for Acreage to launch THC-Infused beverages in the states of
California and Illinois in the summer of 2021.
- Continuing to assess the impact of the COVID-19 pandemic, with
a focus on the health and safety of our employees, business
continuity and supporting our communities.
Second Quarter Fiscal 2021 Financial and Operational
Review
Revenue by Channel
(in millions of
Canadian dollars, unaudited)
|
Q2
2021
|
Q2
2020
|
vs. Q2
2020
|
|
|
|
|
Canadian
recreational net revenue
|
|
|
|
- Business to
business1
|
$42.2
|
$8.8
|
380%
|
- Business to
consumer
|
$18.7
|
$13.1
|
43%
|
|
$60.9
|
$21.9
|
178%
|
Canadian medical
net revenue2
|
$13.9
|
$13.0
|
7%
|
International
medical revenue
|
$17.5
|
$18.1
|
(3%)
|
|
$31.4
|
$31.1
|
1%
|
Cannabis net
revenue
|
$92.3
|
$53.0
|
74%
|
|
|
|
|
All other
revenue
|
$43.0
|
$23.6
|
82%
|
Net
revenue
|
$135.3
|
$76.6
|
77%
|
1 Reflects excise taxes of $14.2
million and other revenue adjustments of $3.8 million for Q2 2021
(Q2 2020 - $7.8 million and $32.7 million,
respectively).
|
2 Reflects excise taxes of $1.4
million (Q2 2020 - $1.2 million).
|
Revenue by Form
(in millions of
Canadian dollars, unaudited)
|
Q2
2021
|
Q2
2020
|
vs. Q2
2020
|
|
|
|
|
Canadian
recreational net revenue
|
|
|
|
- Dry
bud1
|
$63.9
|
$59.0
|
8%
|
- Oils and
softgels1
|
$7.0
|
$3.4
|
106%
|
- Cannabis 2.0
products2
|
$8.0
|
$-
|
NM
|
- Other revenue
adjustments3
|
$(3.8)
|
$(32.7)
|
88%
|
- Excise
taxes
|
$(14.2)
|
$(7.8)
|
(82%)
|
|
$60.9
|
$21.9
|
178%
|
Global medical net
revenue
|
|
|
|
- Dry bud
|
$9.0
|
$9.6
|
(6%)
|
- Oils and
softgels
|
$23.1
|
$22.7
|
2%
|
- Cannabis 2.0
products2
|
$0.7
|
$-
|
NM
|
- Excise
taxes
|
$(1.4)
|
$(1.2)
|
(17%)
|
|
$31.4
|
$31.1
|
1%
|
Cannabis net
revenue
|
$92.3
|
$53.0
|
74%
|
|
|
|
|
All other
revenue
|
$43.0
|
$23.6
|
82%
|
Net
revenue
|
$135.3
|
$76.6
|
77%
|
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
- Recreational B2B net sales increased by 2% from Q2 2020,
adjusting for a $32.7 million charge
in Q2 2020 for returns, return provisions and pricing allowances
primarily related to restructuring the Company's softgel & oil
portfolio. Recreational B2B net sales increased by 21%
compared to Q1 2021 driven by store openings across Canada and improved market share
performance.
- Recreational B2C net sales increased 43% over the comparative
period due primarily to an increase in number of corporate stores
and cannabis 1.0 products (dried flower, oils and soft gels) and
cannabis 2.0 products driving increased foot traffic. Recreational
B2C net sales essentially doubled versus Q1 2021 as store
operations returned to pre-COVID level and we opened up additional
stores in Alberta.
- Canadian medical net revenue increased 7% from Q2 2020 driven
primarily by higher average basket size we saw in Q2 2021.
International Cannabis
- C3 revenue in Q2 2021 decreased 3% over Q2 2020 due to a
packaging supply issue with one of the distributors, which has
since been resolved.
- Dried flower sales in Germany
decreased 5% in Q2 2021 over Q2 2020 driven by slower market growth
and intensifying competition in flower and extract
segments.
Strategic Businesses
- S&B vaporizer revenue in Q2 2021 increased 100% over Q2
2020, benefiting from expanded distribution in the U.S., a broader
product portfolio and increased customer demand. S&B is
achieving record monthly sales as the business continues to benefit
from new US distributors added earlier this year as well as
reorders.
- This Works sales in Q2 2021 increased 34% over Q2 2020 due to
strengthened ecommerce sales channel, sell-ins to the UK
brick-and-mortar stores ahead of the holiday season and launch of
new Stress Check hand sanitizer in the U.S.
- BioSteel sales benefited from reopening of big box retailers
after the pandemic, expanded retail distribution in Canada and the launch of ready-to-drink sports
drinks in the U.S. Over half of BioSteel's sales during the period
came from the U.S. market.
The second quarter fiscal 2021 and second quarter fiscal 2020
financial results presented in this press release have been
prepared in accordance with U.S. GAAP.
Webcast and Conference Call Information
The Company will host a conference call and audio webcast with
David Klein, CEO and Mike Lee, CFO at 10:00 AM
Eastern Time on November 9,
2020.
Webcast Information
A live audio webcast will be available at:
https://produceredition.webcasts.com/starthere.jsp?ei=1384068&tp_key=9317fbfde9
Replay Information
A replay will be accessible by webcast until 11:59 PM ET on February 7,
2021 at:
https://produceredition.webcasts.com/starthere.jsp?ei=1384068&tp_key=9317fbfde9
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) income, 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; 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.
About Canopy Growth Corporation
Canopy Growth (TSX:WEED, NYSE:CGC) is a world-leading
diversified cannabis, hemp and cannabis device company, offering
distinct brands and curated cannabis varieties in dried, oil and
Softgel capsule forms, as well as medical devices through the
Company's subsidiary, Storz & Bickel GMbH & Co. KG. From
product and process innovation to market execution, Canopy Growth
is driven by a passion for leadership and a commitment to building
a world-class cannabis company one product, site and country at a
time. The Company has operations in over a dozen countries across
five continents.
The Company's medical division, Spectrum Therapeutics is proudly
dedicated to educating healthcare practitioners, conducting robust
clinical research, and furthering the public's understanding of
cannabis, and has devoted millions of dollars toward cutting edge,
commercializable research and IP development. Spectrum Therapeutics
sells a range of full-spectrum products using its colour-coded
classification Spectrum system as well as single cannabinoid
Dronabinol under the brand Bionorica Ethics.
The Company operates retail stores across Canada under its award-winning Tweed and Tokyo
Smoke banners. Tweed is a globally recognized cannabis brand which
has built a large and loyal following by focusing on quality
products and meaningful customer relationships.
From our public listing on the Toronto Stock Exchange and New
York Stock Exchange to our continued international expansion, pride
in advancing shareholder value through leadership is engrained in
all we do at Canopy Growth. Canopy Growth has established
partnerships with leading sector names including cannabis icons
Snoop Dogg and Seth Rogen, breeding
legends DNA Genetics and Green House Seeds, and Fortune 500 alcohol
leader Constellation Brands, to name but a few. For more
information visit www.canopygrowth.com.
Notice Regarding Forward Looking Statements
This press release contains "forward-looking statements" within
the meaning of applicable securities laws, which involve certain
known and unknown risks and uncertainties. Forward-looking
statements predict or describe our future operations, business
plans, business and investment strategies and the performance of
our investments. These forward-looking statements are generally
identified by their use of such terms and phrases as "intend,"
"goal," "strategy," "estimate," "expect," "project," "projections,"
"forecasts," "plans," "seeks," "anticipates," "potential,"
"proposed," "will," "should," "could," "would," "may," "likely,"
"designed to," "foreseeable future," "believe," "scheduled" and
other similar expressions. Our actual results or outcomes may
differ materially from those anticipated. You are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date the statement was made.
Forward-looking statements include, but are not limited to,
statements with respect to:
- the uncertainties associated with the COVID-19 pandemic,
including our ability to continue operations, the ability of our
suppliers and distribution channels to continue to operate, and the
use of our products by consumers, and disruptions to the global and
local economies due to related stay-at-home orders, quarantine
policies and restrictions on travel, trade and business operations
and a reduction in discretionary consumer spending;
- laws and regulations and any amendments thereto applicable to
our business and the impact thereof, including uncertainty
regarding the application of U.S. state and federal law to U.S.
hemp (including CBD) products and the scope of any regulations by
the U.S. Federal Drug Administration, the U.S. Federal Trade
Commission, the U.S. Patent and Trademark Office, the U.S.
Department of Agriculture (the "USDA") and any state equivalent
regulatory agencies over U.S. hemp (including CBD) products;
- expectations regarding the regulation of the U.S. hemp industry
in the U.S., including the promulgation of regulations for the U.S.
hemp industry by the USDA;
- expectations regarding the potential success of, and the costs
and benefits associated with, our acquisitions, joint ventures,
strategic alliances and equity investments;
- the amended plan of arrangement with Acreage Holdings, Inc,
including the consummation of such acquisition;
- the grant, renewal and impact of any license or supplemental
license to conduct activities with cannabis or any amendments
thereof;
- our international activities and joint venture interests,
including required regulatory approvals and licensing, anticipated
costs and timing, and expected impact;
- the ability to successfully create and launch brands and
further create, launch and scale cannabis-based products and U.S.
hemp-derived consumer products in jurisdictions where such products
are legal and that we currently operate in;
- the benefits, viability, safety, efficacy, dosing and social
acceptance of cannabis, including CBD and other cannabinoids;
- the anticipated benefits and impact of the investments in us
(the "CBI Group Investments") by Constellation Brands, Inc. 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 in connection with the CBI
Group Investments, including proceeds to us that may result
therefrom or the potential conversion of notes held by the CBI
Group in connection with the CBI Group Investments;
- expectations regarding the use of proceeds of equity
financings, including the proceeds from the CBI Group
Investments;
- the legalization of the use of cannabis for medical or
recreational in jurisdictions outside of Canada, the related timing and impact thereof
and our intentions to participate in such markets, if and when such
use is legalized;
- our ability to execute on our strategy and the anticipated
benefits of such strategy;
- the ongoing impact of the legalization of additional cannabis
product types and forms for recreational use in Canada, including federal, provincial,
territorial and municipal regulations pertaining thereto, the
related timing and impact thereof and our intentions to participate
in such markets;
- the ongoing impact of developing provincial, territorial and
municipal regulations pertaining to the sale and distribution of
cannabis, the related timing and impact thereof, as well as the
restrictions on federally regulated cannabis producers
participating in certain retail markets and our intentions to
participate in such markets to the extent permissible;
- the future performance of our business and operations;
- our competitive advantages and business strategies;
- the competitive conditions of the industry;
- the expected growth in the number of customers using our
products;
- our ability or plans to identify, develop, commercialize or
expand our technology and research and development initiatives in
cannabinoids, or the success thereof;
- expectations regarding revenues, expenses and anticipated cash
needs;
- expectations regarding cash flow, liquidity and sources of
funding;
- expectations regarding capital expenditures;
- the expansion of our production and manufacturing, the costs
and timing associated therewith and the receipt of applicable
production and sale licenses;
- the expected growth in our growing, production and supply chain
capacities;
- expectations regarding the resolution of litigation and other
legal proceedings;
- expectations with respect to future production costs;
- expectations with respect to future sales and distribution
channels;
- the expected methods to be used to distribute and sell our
products;
- our future product offerings;
- the anticipated future gross margins of our operations;
- accounting standards and estimates;
- expectations regarding our distribution network; and
- expectations regarding the costs and benefits associated with
our contracts and agreements with third parties, including under
our third-party supply and manufacturing agreements.
Certain of the forward-looking statements contained herein
concerning the industries in which we conduct our business are
based on estimates prepared by us using data from publicly
available governmental sources, market research, industry analysis
and on assumptions based on data and knowledge of these industries,
which we believe to be reasonable. However, although generally
indicative of relative market positions, market shares and
performance characteristics, such data is inherently imprecise. The
industries in which we conduct our business involve risks and
uncertainties that are subject to change based on various factors,
which are described further below.
The forward-looking statements contained herein are based upon
certain material assumptions that were applied in drawing a
conclusion or making a forecast or projection, including: (i)
management's perceptions of historical trends, current conditions
and expected future developments; (ii) our ability to generate cash
flow from operations; (iii) general economic, financial market,
regulatory and political conditions in which we operate; (iv) the
production and manufacturing capabilities and output from our
facilities and our joint ventures, strategic alliances and equity
investments; (v) consumer interest in our products; (vi)
competition; (vii) anticipated and unanticipated costs; (viii)
government regulation of our activities and products including but
not limited to the areas of taxation and environmental protection;
(ix) the timely receipt of any required regulatory authorizations,
approvals, consents, permits and/or licenses; * 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)
|
|
|
|
|
|
|
|
September 30,
2020
|
|
March 31,
2020
|
ASSETS
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$673,287
|
|
$1,303,176
|
Short-term
investments
|
|
1,048,921
|
|
673,323
|
Restricted short-term
investments
|
|
14,332
|
|
21,539
|
Amounts receivable,
net
|
|
79,668
|
|
90,155
|
Inventory
|
|
398,454
|
|
391,086
|
Prepaid expenses and
other assets
|
|
77,227
|
|
85,094
|
Total current
assets
|
|
2,291,889
|
|
2,564,373
|
Equity method
investments
|
|
25,663
|
|
65,843
|
Other financial
assets
|
|
381,878
|
|
249,253
|
Property, plant and
equipment
|
|
1,495,143
|
|
1,524,803
|
Intangible
assets
|
|
437,344
|
|
476,366
|
Goodwill
|
|
1,933,476
|
|
1,954,471
|
Other
assets
|
|
8,337
|
|
22,636
|
Total
assets
|
|
$6,573,730
|
|
$6,857,745
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$81,064
|
|
$123,393
|
Other accrued expenses
and liabilities
|
|
83,064
|
|
64,994
|
Current portion of
long-term debt
|
|
13,272
|
|
16,393
|
Other
liabilities
|
|
147,060
|
|
215,809
|
Total current
liabilities
|
|
324,460
|
|
420,589
|
Long-term
debt
|
|
520,424
|
|
449,022
|
Deferred income tax
liabilities
|
|
39,569
|
|
47,113
|
Liability arising
from Acreage Arrangement
|
|
147,000
|
|
250,000
|
Warrant derivative
liability
|
|
221,948
|
|
322,491
|
Other
liabilities
|
|
167,267
|
|
190,660
|
Total
liabilities
|
|
1,420,668
|
|
1,679,875
|
Commitments and
contingencies
|
|
|
|
|
Redeemable
noncontrolling interest
|
|
83,900
|
|
69,750
|
Canopy Growth
Corporation shareholders' equity:
|
|
|
|
|
Common shares - $nil
par value; Authorized - unlimited number of
shares; Issued - 372,046,111
shares and 350,112,927 shares, respectively
|
|
6,745,255
|
|
6,373,544
|
Additional paid-in
capital
|
|
2,533,112
|
|
2,615,155
|
Accumulated other
comprehensive income
|
|
103,306
|
|
220,899
|
Deficit
|
|
(4,463,798)
|
|
(4,323,236)
|
Total Canopy Growth
Corporation shareholders' equity
|
|
4,917,875
|
|
4,886,362
|
Noncontrolling
interests
|
|
151,287
|
|
221,758
|
Total shareholders'
equity
|
|
5,069,162
|
|
5,108,120
|
Total liabilities and
shareholders' equity
|
|
$6,573,730
|
|
$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
September 30,
|
|
Six months
ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenue
|
|
$150,828
|
|
$85,621
|
|
$269,916
|
|
$189,012
|
Excise
taxes
|
|
15,562
|
|
9,008
|
|
24,234
|
|
21,917
|
Net revenue
|
|
135,266
|
|
76,613
|
|
245,682
|
|
167,095
|
Cost of goods
sold
|
|
109,186
|
|
72,970
|
|
213,107
|
|
145,162
|
Gross
margin
|
|
26,080
|
|
3,643
|
|
32,575
|
|
21,933
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
147,253
|
|
181,601
|
|
282,645
|
|
327,248
|
Share-based
compensation
|
|
21,984
|
|
92,881
|
|
52,669
|
|
180,243
|
Expected credit losses
on financial assets and related
charges
|
|
94,745
|
|
-
|
|
94,745
|
|
-
|
Asset impairment and
restructuring costs
|
|
46,363
|
|
-
|
|
59,157
|
|
-
|
Total operating
expenses
|
|
310,345
|
|
274,482
|
|
489,216
|
|
507,491
|
Operating
loss
|
|
(284,265)
|
|
(270,839)
|
|
(456,641)
|
|
(485,558)
|
Loss from equity
method investments
|
|
(32,991)
|
|
(2,171)
|
|
(40,180)
|
|
(4,004)
|
Other income
(expense), net
|
|
221,256
|
|
509,893
|
|
269,461
|
|
542,661
|
(Loss) income before
income taxes
|
|
(96,000)
|
|
236,883
|
|
(227,360)
|
|
53,099
|
Income tax (expense)
recovery
|
|
(552)
|
|
5,767
|
|
2,486
|
|
(4,500)
|
Net (loss)
income
|
|
(96,552)
|
|
242,650
|
|
(224,874)
|
|
48,599
|
Net loss attributable
to noncontrolling interests
and redeemable
noncontrolling interest
|
|
(64,491)
|
|
(16,268)
|
|
(84,312)
|
|
(24,450)
|
Net (loss) income
attributable to Canopy
Growth
Corporation
|
|
$(32,061)
|
|
$258,918
|
|
$(140,562)
|
|
$73,049
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings
per share
|
|
$(0.09)
|
|
$0.75
|
|
$(0.38)
|
|
$0.21
|
Basic weighted
average common shares outstanding
|
|
371,520,534
|
|
347,226,921
|
|
367,663,135
|
|
346,028,903
|
|
|
|
|
|
|
|
|
|
Diluted (loss)
earnings per share
|
|
$(0.09)
|
|
$0.25
|
|
$(0.38)
|
|
$0.19
|
Diluted weighted
average common shares outstanding
|
|
371,520,534
|
|
380,323,118
|
|
367,663,135
|
|
382,765,533
|
CANOPY GROWTH
CORPORATION
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of
Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
Six months ended
September 30,
|
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
|
Net loss
|
|
$(224,874)
|
|
$48,599
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Depreciation of
property, plant and equipment
|
|
36,373
|
|
29,813
|
Amortization of
intangible assets
|
|
29,432
|
|
15,955
|
Share of loss on
equity method investments
|
|
40,180
|
|
4,004
|
Share-based
compensation
|
|
52,669
|
|
180,243
|
Asset impairment and
restructuring costs
|
|
59,157
|
|
-
|
Expected credit losses
on financial assets and related charges
|
|
94,745
|
|
-
|
Income tax (recovery)
expense
|
|
(2,486)
|
|
4,500
|
Non-cash foreign
currency
|
|
(17,756)
|
|
(1,463)
|
Interest
paid
|
|
(12,837)
|
|
(12,750)
|
Change in operating
assets and liabilities, net of effects from purchases
of businesses:
|
|
|
|
|
Amounts
receivable
|
|
1,498
|
|
11,390
|
Prepaid expenses and
other assets
|
|
(6,604)
|
|
(50,224)
|
Inventory
|
|
(23,500)
|
|
(143,229)
|
Accounts payable and
accrued liabilities
|
|
(11,408)
|
|
10,584
|
Other, including
non-cash fair value adjustments
|
|
(294,884)
|
|
(469,507)
|
Net cash used in
operating activities
|
|
(280,295)
|
|
(372,085)
|
Cash flows from
investing activities:
|
|
|
|
|
Purchases of and
deposits on property, plant and equipment
|
|
(90,195)
|
|
(440,150)
|
Purchases of
intangible assets
|
|
(7,604)
|
|
(9,538)
|
Proceeds on sale of
intangible assets
|
|
18,337
|
|
-
|
(Purchases) redemption
of short-term investments
|
|
(367,779)
|
|
388,027
|
Investments in equity
method investments
|
|
-
|
|
(4,719)
|
Investments in other
financial assets
|
|
(7,526)
|
|
(36,423)
|
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
|
|
(6,394)
|
|
(21,447)
|
Net cash outflow on
acquisition of noncontrolling interests
|
|
(125)
|
|
-
|
Net cash outflow on
acquisition of subsidiaries
|
|
-
|
|
(416,028)
|
Net cash used in
investing activities
|
|
(568,130)
|
|
(935,468)
|
Cash flows from
financing activities:
|
|
|
|
|
Payment of share issue
costs
|
|
(677)
|
|
(129)
|
Proceeds from issuance
of shares by Canopy Rivers
|
|
92
|
|
156
|
Proceeds from exercise
of stock options
|
|
10,756
|
|
36,023
|
Proceeds from exercise
of warrants
|
|
244,990
|
|
446
|
Issuance of long-term
debt
|
|
1,564
|
|
5,278
|
Repayment of long-term
debt
|
|
(5,920)
|
|
(104,282)
|
Net cash provided by
(used in) financing activities
|
|
250,805
|
|
(62,508)
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(32,269)
|
|
(8,305)
|
Net decrease in cash
and cash equivalents
|
|
(629,889)
|
|
(1,378,366)
|
Cash and cash
equivalents, beginning of period
|
|
1,303,176
|
|
2,480,830
|
Cash and cash
equivalents, end of period
|
|
$673,287
|
|
$1,102,464
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA1 Reconciliation (Non-GAAP
Measure)
|
|
|
|
|
|
|
Three months ended
September 30,
|
(in thousands of
Canadian dollars, unaudited)
|
|
2020
|
|
2019
|
Net (loss)
income
|
|
$(96,552)
|
|
$242,650
|
Income tax expense
(recovery)
|
|
552
|
|
(5,767)
|
Other (income)
expense, net
|
|
(221,256)
|
|
(509,893)
|
Loss on equity method
investments
|
|
32,991
|
|
2,171
|
Share-based
compensation2
|
|
21,984
|
|
92,881
|
Acquisition-related
costs
|
|
3,472
|
|
2,562
|
Depreciation and
amortization2
|
|
31,758
|
|
25,016
|
Asset impairment and
restructuring costs
|
|
46,363
|
|
-
|
Expected credit losses
on financial assets and related
charges
|
|
94,745
|
|
-
|
Charges related to the
flow-through of inventory step-up
on business combinations
|
|
281
|
|
-
|
Adjusted
EBITDA1
|
|
$(85,662)
|
|
$(150,380)
|
|
|
|
|
|
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
September 30,
|
(in thousands of
Canadian dollars, unaudited)
|
|
2020
|
|
2019
|
Net cash used in
operating activities
|
|
$(161,749)
|
|
$(213,795)
|
Purchases of and
deposits on property, plant and equipment
|
|
(28,648)
|
|
(228,326)
|
Free cash
flow1
|
|
$(190,397)
|
|
$(442,121)
|
|
|
|
|
|
1Free cash
flow is a non-GAAP measure. See "Non-GAAP Measures".
|
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SOURCE Canopy Growth Corporation