Canopy Growth Reports Fourth Quarter and Fiscal Year 2023 Financial Results
Business transformation and cost reduction actions initiated in FY2023 expected to drive overall cost reduction of
Actions to strengthen balance sheet have reduced overall debt position by approximately
Revised proxy statement filed with modifications to the structure of Canopy
Highlights
- In FY2023, the Company announced a series of comprehensive steps to align its Canadian cannabis operations and resources including: (i) the divestiture of the Company's national cannabis retail operations (completed in Q3 FY2023); (ii) ceasing the sourcing of cannabis flower from the
Mirabel, Quebec facility (completed in Q4 FY2023); (iii) exiting cannabis flower cultivation in theSmiths Falls, Ontario facility (expected to be completed in Q1 FY2024); (iv) consolidating cultivation at its existing facilities inKincardine, Ontario andKelowna, British Columbia ; and (v) moving to an adaptive third-party sourcing model for all cannabis beverages, edibles, vapes, and extracts which will enable the Company to select and bring to market exciting and exclusive formats without the required investment in research and development and production footprint. - Restructuring steps undertaken in FY2023 reduced Selling, General & Administrative ("SG&A") expenses and Cost of Goods Sold ("COGS") by a combined
$125 million - The Company's FY2023 net revenue decreased
21% year-over year to$403 million 11% in FY2023 as compared to FY2022. - Canadian medical cannabis revenue in FY2023 increased
6% year-over-year and Q4 FY2023 increased8% year-over-year in a declining market. - Enhanced flower quality drove resurgence of the Company's mainstream Tweed brand to #9 spot in the Canadian adult-use market in Q4 FY2023 up from #16 in prior year1.
- Subsequent to quarter-end, the Company entered into an agreement with Indiva Limited that gives Canopy Growth control of all distribution, marketing, and sales of industry leading Wana branded products in
Canada . The addition of Wana branded gummies is expected to drive Adjusted EBITDA improvement for the Company's Canadian cannabis business and advance its path to leadership in the edibles category inCanada .
"Fiscal 2023 was a transformational year for Canopy Growth as we began to implement a comprehensive strategy to accelerate our path to profitability, and position our business to realize the tremendous opportunities ahead. Our actions are already yielding results and we expect to realize significant benefits from our cost reduction program in Fiscal 2024. Paired with continued progress in our Canopy
David Klein, Chief Executive Officer
"Our actions throughout Fiscal 2023 have streamlined the organization, reduced costs, and eliminated a significant portion of Canopy Growth's debt. We recognize there is more work to be done, and we have several initiatives already underway to further reduce the operating cash burn in the businesses and improve our balance sheet, including facility divestitures that are anticipated to generate proceeds of up to
Judy Hong, Chief Financial Officer
____________________ |
1 Unless otherwise indicated, market share data disclosed in this press release is calculated using the Company's internal proprietary market share tool |
BioSteel Review and Remedial Actions
In connection with the preparation of our financial statements for our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 (the "Form 10-K"), we identified certain trends in the BioSteel Sports Nutrition Inc. ("BioSteel") business unit. With the oversight of the Audit Committee, we launched an internal review, together with independent external counsel and forensic accountants.
This review identified material misstatements in certain of our prior financial statements related to certain sales in the BioSteel business unit, particularly with respect to the timing and amount of revenue recognition. The review also identified material weaknesses in the Company's internal control over financial reporting as of March 31, 2023. Overall, the correction resulted in a decrease of approximately
As a result of the review, we are continuing to implement several remedial actions, including management changes and appropriate personnel actions. The Company is also considering all legal options that may be available in connection with the associated overpayment made in FY2023 to the minority shareholders of BioSteel as a result of the overstatement of revenues.
Additionally, Canopy Growth has taken decisive actions to sustain growth and improve profitability of BioSteel including: (i) exiting all BioSteel international business; (ii) prioritizing resources towards the growing Canadian market; (iii) refining our market strategy in the
Balance Sheet and Liquidity
The Company ended FY2023 with cash, cash equivalents and short-term investments of
- Reduction of approximately
$500 million $267 million 4.25% unsecured notes due in July 2023 (the "2023 Notes") and a paydown ofUSD of the senior secured term loan at$188 million $0.93 $45 million - Refinancing
$100 million - Facility divestitures which are expected to generate proceeds of up to
$150 million $56 million 50% of proceeds will be used to paydown outstanding amounts of the senior secured term loan.
FY2024 Outlook and Priorities
To advance our goal of becoming a leading premium cannabis branded company in
- Achieving breakeven to positive adjusted EBITDA in all of our businesses, with the exception of BioSteel, by end of FY2024;
- Strengthening our balance sheet and improving liquidity; and
- Monitoring and supporting the creation of value in Canopy
USA , LLC ("CUSA").
Fourth Quarter FY2023 Financial Summary
(in millions of Canadian | Net Revenue | Gross margin | Adjusted | Net loss | Adjusted | Free cash |
Reported | (103 %) | (18 %) | ||||
vs. Q4 FY20222 | (14 %) | 6,300 bps | 2,700 bps | (10 %) | 27 % | (13 %) |
FY2023 Financial Summary
(in millions of Canadian | Net Revenue | Gross margin | Adjusted | Net loss | Adjusted | Free cash |
Reported | (26 %) | (3 %) | ||||
vs. FY20222 | (21 %) | 1,400 bps | 1,000 bps | 901 % | 18 % | 3 % |
_____________________ |
2 Restated |
3 Adjusted gross margin is a non-GAAP measure, and for Q4 FY2023 excludes |
4 Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures" and Schedule 5 for a reconciliation of net loss to adjusted EBITDA. |
5 Free cash flow is a non-GAAP measure. See "Non-GAAP Measures" and Schedule 6 for a reconciliation of net cash used in operating activities to free cash flow. |
6 Adjusted gross margin is a non-GAAP measure, and for FY2023 excludes |
Business Highlights
Transformation of Canadian cannabis operations to asset-light model and expected cost reductions are on track
- Since FY2020, the Company has closed 10 production sites in
Canada and is on track to end production at its 1 Hershey Drive,Smiths Falls, Ontario facility by the end of Q1 FY2024. - Cost reduction initiatives undertaken in FY2023 are on track to reduce the Company's headcount by over 1200 positions.
During a year of significant business change and continued market fragmentation, Canopy Growth's Canadian cannabis business stabilized exiting FY2023
- The Company's Canadian medical cannabis revenue in Q4 FY2023 increased
8% year-over-year in a declining market and Canadian adult-use cannabis Business-to-business revenue in Q4 FY2023 increased slightly over Q3 FY2023. - Canadian adult-use cannabis performance was aided by the resurgence of the Company's mainstream Tweed brand. The resurgence was driven by strong consumer demand for new, high-quality Tweed Kush Mints and Tweed Tiger Cake flower and PRJ product offerings.
FY2024 focus on continued stabilization of Canadian adult-use cannabis business expected to be driven by new, high-quality flower and pre-rolled joints as well as a stronger edibles portfolio
- Leveraging our experience with the resurgence of the Tweed brand in FY2023, the Company's focus on enhancing flower quality is expected to improve the competitive positioning of our premium Doja and 7ACRES branded product offerings.
- Focused on reestablishing the growth of the Wana brand in the Canadian market and bringing Wana's innovation across
the United States into the Canadian market, including, for instance, Wana's new passionfruit pineapple 1:1:1 (CBG/CBD/THC) gummy, a low dose product perfect for relaxing, which will soon be available inOntario , BC, andAlberta .
Focusing BioSteel in
- BioSteel is continuing to gain market share in
Canada , including through its high visibility NHL partnerships and has reached an11.2% share of convenience and gas channel inCanada 7 in Q4 FY2023, up from3.4% in the prior year. In FY2024, the BioSteel business is focused on expanding distribution in the food, drug, and mass channels and club accounts acrossCanada . - BioSteel All-Commodity Volume in the
U.S. of37.7% in Q4 FY20238, up from18.9% in the prior year. The Company is refining BioSteel's U.S. market strategy with a tighter geographical focus as well as sharper emphasis on the specialty retail channel. - Storz & Bickel has enhanced its
U.S commercial strategy and is focused on driving improved growth with a planned launch of new Storz & Bickel vaporizers in FY2024.
CUSA strategy advancing and expected to accelerate entry into the
- Subsequent to quarter end, the Company filed a revised proxy statement related to the Company's strategy to accelerate entry into the
U.S. cannabis market through its interest in CUSA and realize the opportunity of the world's largest cannabis market. - In order to ensure continued compliance with NASDAQ's listing rules, Canopy Growth has modified the structure of the Company's interest in CUSA such that it is not expected to be required to consolidate the financial results of CUSA with the Company's financial statements in accordance with generally accepted accounting principles in
the United States . - The Company is focused on concluding the regulatory review and filing a definitive proxy statement related to CUSA in order to finalize the date for the special meeting of shareholders to authorize the creation of a new class of non-voting exchangeable shares in the capital of the Company (the "Exchangeable Shares").
- Acreage9 reported Q1 FY2023 revenue of USD
$56 million Connecticut and secured approval to locate an adult-use dispensary in Pennsauken,New Jersey . Acreage anticipates commencing adult-use sales at the new Pennsauken location before the end of 2023. - In the three months ended March 31, 2023, Wana Brands10 launched 19 SKUs in 8 markets including the launch in
Colorado of Wana Optimals Quick Calm, a groundbreaking product offering a calming, typically non-intoxicating cannabinoid-terpene blend for fast-acting relief from anxious feelings. - In the three months ended March 31, 2023, Jetty11 expanded to the state of
New York with products offered at twoNew York City dispensaries, Housing Works Cannabis Company and Union Square Travel Agency. Jetty also maintained its position as the #1 Solventless vape inCalifornia 12 in addition to fully staffing itsCalifornia sales team to provide coverage of over 500 retail accounts.
_________________ |
7 Nielsen data 13-weeks ended April 1, 2023. |
8 IRI data for the 13 weeks ended April 2, 2023. |
9 Until such time as the rights to acquire Acreage are exercised, neither the Company nor CUSA will have any direct or indirect economic or voting interests in Acreage, neither the Company nor CUSA will directly or indirectly control Acreage, and each of the Company, CUSA and Acreage will continue to operate independently of one another. The Company holds non-voting and non-participating shares in CUSA that are exchangeable into common shares of CUSA. |
10 Until such time as CUSA elects to exercise its rights to acquire Mountain High Products, LLC, Wana Wellness, LLC and The Cima Group, LLC (collectively, "Wana"), CUSA will have no direct or indirect economic or voting interests in Wana, CUSA will not directly or indirectly control Wana, and CUSA, on the one hand, and Wana, on the other hand, will continue to operate independently of one another. The Company holds non-voting and non-participating shares in CUSA that are exchangeable into common shares of CUSA. |
11 Until such time as CUSA elects to exercise its rights to acquire Lemurian, Inc. ("Jetty"), CUSA will have no direct or indirect economic or voting interests in Jetty, CUSA will not directly or indirectly control Jetty, and CUSA, on the one hand, and Jetty, on the other hand, will continue to operate independently of one another. The Company holds non-voting and non-participating shares in CUSA that are exchangeable into common shares of CUSA. |
12 Based on April 2023 BDS Analytics Inc. data. |
Fourth Quarter and FY2023 Financial Summary
Revenues:
Net revenue of
Net revenue of
Gross Margin:
Reported gross margin in Q4 FY2023 was (
Reported gross margin in FY2023 was (
Operating Expenses:
Total SG&A expenses in Q4 FY2023 declined by
Total SG&A expenses in FY2023 declined by
Net Loss:
Net Loss in Q4 FY2023 was
Net Loss in FY2023 was
Adjusted EBITDA:
Adjusted EBITDA loss in Q4 FY2023 was
Adjusted EBITDA loss in FY2023 was
Free Cash Flow:
Free Cash Flow in Q4 FY2023 was an outflow of
Free Cash Flow in FY2023 was an outflow of
Cash Position:
Cash and short-term investments were
Fourth Quarter FY2023 Revenue Review13
Revenue by Channel
(in millions of Canadian dollars, | Q4 FY2023 | Q4 FY2022 | Vs. Q4 FY2022 | FY2023 | FY2022 | Vs. FY2022 | |
(As Restated) | (As Restated) | ||||||
Canadian adult-use cannabis | |||||||
Business-to-business14 | (16 %) | (34 %) | |||||
Business-to-consumer | $- | (100 %) | (41 %) | ||||
(44 %) | (36 %) | ||||||
Canadian medical cannabis15 | 8 % | 6 % | |||||
(31 %) | (27 %) | ||||||
Rest-of-world cannabis | |||||||
C3 | $- | (100 %) | $- | (100 %) | |||
Other rest-of-world cannabis16 | (19 %) | (10 %) | |||||
(37 %) | (51 %) | ||||||
Storz & Bickel | (28 %) | (24 %) | |||||
BioSteel17 | NM | 101 % | |||||
This Works | (10 %) | (20 %) | |||||
Other | (42 %) | (21 %) | |||||
Net revenue | (14 %) | (21 %) |
_________________ |
13 In Q4 FY2023, we are reporting our financial results for the following five reportable segments: (i) |
14 For Q4 FY2023, amount is net of excise taxes of |
15 15 For Q4 FY2023, amount is net of excise taxes of |
16 For Q4 FY2023, amount reflects other revenue adjustments of |
17 For Q4 FY2023, amount reflects other revenue adjustments of |
Canada Cannabis
- Adult-use business-to-business net revenue in Q4 FY2023 decreased
16% as compared to Q4 FY2022 driven primarily by lower sales volumes, particularly in value-priced dried flower, resulting from both the strategic shift in our product portfolio and increased competition. These factors were partially offset by a more favorable product mix. - Adult-use business-to-consumer net revenue in Q4 FY2023 decreased
100% as compared to Q4 FY2022 due to the disposition of all retail locations during Q3 FY2023. - Medical net revenue in Q4 FY2023 increased
8% as compared to Q4 FY2022 driven by growth in insured patient registrations and continued expansion of product offerings.
Rest-of-world Cannabis
- Rest-of-world cannabis revenue in Q4 FY2023 decreased
37% over Q4 FY2022 due primarily to the divestiture of C3, the impact of shipments toIsrael in Q4 FY2022, and a decline in ourU.S. CBD business, partially offset by growth in the Australian market. - Excluding the impact of the divestiture of C3, rest-of-world cannabis net revenue decreased
19% as compared to Q4 FY2022.
Storz & Bickel
- Storz & Bickel vaporizer revenue in Q4 FY2023 decreased
28% over Q4 FY2022 due primarily to the continued trend of reductions in consumer spending as seen in the prior quarters of FY2023 and again in Q4 FY2023.
This Works
- This Works sales in Q4 FY2023 decreased
10% over Q4 FY2022 due in part to softer performance of certain product lines and the impact of foreign exchange rates.
The Q4 FY2023, Q4 FY2022, FY2023 and FY2022 financial results presented in this press release have been prepared in accordance with
Webcast and Conference Call Information
The Company will host a conference call and audio webcast with David Klein, CEO and Judy Hong, CFO at 5:30 PM Eastern Time on June 22, 2023.
Webcast Information
A live audio webcast will be available at https://app.webinar.net/0aNQ3wXleEd.
Replay Information
A replay will be accessible by webcast until 11:59 PM Eastern Time on September 20, 2023 at https://app.webinar.net/0aNQ3wXleEd.
Non-GAAP Measures
Adjusted EBITDA is a non-GAAP measure used by management that is not defined by
Free Cash Flow is a non- GAAP measure used by management that is not defined by
Adjusted Gross Margin and Adjusted Gross Margin Percentage are non-GAAP measures used by management that are not defined by
About Canopy Growth Corporation
Canopy Growth Corporation ("Canopy") is a leading North American cannabis and CPG company dedicated to unleashing the power of cannabis to improve lives.
Through an unwavering commitment to our consumers, Canopy delivers innovative products with a focus on premium and mainstream cannabis brands including Doja, 7ACRES, Tweed, and Deep Space. Our CPG portfolio features sugar-free sports hydration brand BioSteel, targeted 24-hour skincare and wellness solutions from This Works, gourmet wellness products by Martha Stewart CBD, and category defining vaporizer technology made in
Canopy has also established a comprehensive ecosystem to realize the opportunities presented by the
Beyond our world-class products, Canopy is leading the industry forward through a commitment to social equity, responsible use, and community reinvestment—pioneering a future where cannabis is understood and welcomed for its potential to help achieve greater well-being and life enhancement.
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. To the extent any forward-looking statements in this news release constitutes "financial outlooks" within the meaning of applicable Canadian securities laws, the reader is cautioned that this information may not be appropriate for any other purpose and the reader should not place undue reliance on such financial outlooks. 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:
- 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 toU.S. hemp (including CBD) products and the scope of any regulations by theU.S. Food and Drug Administration, theU.S. Drug Enforcement Administration, theU.S. Federal Trade Commission, theU.S. Patent and Trademark Office, theU.S. Department of Agriculture (the "USDA") and any state equivalent regulatory agencies overU.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;
- our ability to refinance debt as and when required on terms favorable to us and comply with covenants contained in our debt facilities and debt instruments;
- the Company's ability to execute on its strategy to accelerate the Company's entry into the
U.S. cannabis market through the creation of CUSA; - expectations regarding the potential success of, and the costs and benefits associated with the Reorganization Amendments;
- expectations related to our announcement of certain restructuring actions and the potential success of, and the costs and benefits associated with the comprehensive steps and actions being undertaken by the Company with respect to its Canadian operations including any progress, challenges and effects related thereto as well as changes in strategy, metrics, investments, operating expenses, employee turnover and other changes with respect thereto;
- expectations to capitalize on the opportunity for growth in
the United States cannabis sector and the anticipated benefits of such strategy; - the timing and outcome of the arrangement agreement we entered into with Acreage and CUSA on October 24, 2022, as amended (the "Floating Share Arrangement Agreement"), the anticipated benefits of such arrangement, the anticipated timing of the acquisition of Acreage's Class E subordinate voting shares (the "Fixed Shares") and Acreage's Class D subordinated voting shares by CUSA, the satisfaction or waiver of the closing conditions set out in the Floating Share Arrangement Agreement and the arrangement agreement we previously entered into with Acreage on April 18, 2019, as amended, including receipt of all regulatory approvals, and the anticipated timing and occurrence of the Company's exercise of the option to acquire the Fixed Shares and closing of such transaction;
- the negotiation and potential exchange to purchase the note held by CBI in exchange for shares prior to its maturity;
- the anticipated timing and occurrence of the Company's special meeting of shareholders to approve an amendment to the Company's articles of incorporation to, among other things, create and authorize the issuance of the Exchangeable Shares (the "Amendment Proposal");
- expectations regarding the laws and regulations and any amendments thereto relating to the
U.S. hemp industry in theU.S. , including the promulgation of regulations for theU.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 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;
- our remediation plan and our ability to remediate the material weaknesses in our internal control over financial reporting;
- our ability to continue as a going concern;
- the anticipated benefits and impact of the investments in us (the "CBI Group Investments") from Constellation Brands, Inc. ("CBI") and its affiliates (collectively, 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;
- 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 adult-use 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 adult-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; and (xiii) 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. Financial outlooks, as with forward-looking statements generally, are, without limitation, based on the assumptions and subject to various risks as set out herein. Our actual financial position and results of operations may differ materially from management's current expectations and, as a result, our Adjusted EBITDA and SG&A cost savings may differ materially from the values provided in this news release.
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 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, risks related to our ability to remediate the material weaknesses identified in our internal control over financial reporting as of March 31, 2023, or inability to otherwise maintain an effective system of internal control; the risk that the restatement of the Company's: (i) audited consolidated financial statements for the fiscal year ended March 31, 2022, originally included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, and (ii) unaudited consolidated financial statements for the quarterly periods ended June 30, 2022, September 30, 2022 and December 31, 2022, originally included in the our Quarterly Reports on Form 10-Q for such quarterly periods could negatively affect investor confidence and raise reputation risks; our ability to continue as a going concern; our limited operating history; risks that we may be required to write down intangible assets, including goodwill, due to impairment; the ability of parties to certain transactions to receive, in a timely manner and on satisfactory terms, the necessary regulatory, court and shareholder approvals; 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); volatility in and/or degradation of general economic, market, industry or business conditions; risks relating to our current and future operations in emerging markets; 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
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.
Participants in the Solicitation
Canopy Growth and its directors and executive officers may be deemed participants in the solicitation of proxies from Canopy Growth shareholders with respect to the Amendment Proposal. A description of each of these persons' interests in the Amendment Proposal is contained in the Company's revised preliminary proxy statement on Schedule 14A filed with the SEC on May 22, 2023 (as may be amended, the "Preliminary Proxy Statement") and will be contained in the Company's definitive proxy statement relating to the Amendment Proposal (the "Definitive Proxy Statement") when it becomes available. The Preliminary Proxy Statement is (and the Definitive Proxy Statement when it becomes available will be) available free of charge at the SEC's website at www.sec.gov, or by directing a request to Canopy Growth Corporation, 1 Hershey Drive,
Schedule 1
CANOPY GROWTH CORPORATION | ||||||||
March 31, | March 31, | |||||||
(As Restated) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 677,007 | $ | 776,005 | ||||
Short-term investments | 105,595 | 595,651 | ||||||
Restricted short-term investments | 11,765 | 12,216 | ||||||
Amounts receivable, net | 93,987 | 86,581 | ||||||
Inventory | 148,901 | 204,539 | ||||||
Prepaid expenses and other assets | 39,999 | 52,620 | ||||||
Total current assets | 1,077,254 | 1,727,612 | ||||||
Other financial assets | 568,292 | 800,328 | ||||||
Property, plant and equipment | 499,466 | 942,780 | ||||||
Intangible assets | 188,719 | 252,695 | ||||||
Goodwill | 85,563 | 1,866,503 | ||||||
Other assets | 19,804 | 15,342 | ||||||
Total assets | $ | 2,439,098 | $ | 5,605,260 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 76,234 | $ | 64,270 | ||||
Other accrued expenses and liabilities | 75,991 | 75,278 | ||||||
Current portion of long-term debt | 556,890 | 9,296 | ||||||
Other liabilities | 94,727 | 64,346 | ||||||
Total current liabilities | 803,842 | 213,190 | ||||||
Long-term debt | 749,991 | 1,491,695 | ||||||
Deferred income tax liabilities | 357 | 15,991 | ||||||
Liability arising from Acreage Arrangement | - | 47,000 | ||||||
Warrant derivative liability | - | 26,920 | ||||||
Other liabilities | 124,886 | 190,049 | ||||||
Total liabilities | 1,679,076 | 1,984,845 | ||||||
Commitments and contingencies | ||||||||
Redeemable noncontrolling interest | - | 32,500 | ||||||
Canopy Growth Corporation shareholders' equity: | ||||||||
Common shares - $nil par value; Authorized - unlimited number of shares; | 7,938,571 | 7,482,809 | ||||||
Additional paid-in capital | 2,506,485 | 2,521,246 | ||||||
Accumulated other comprehensive loss | (13,860) | (42,282) | ||||||
Deficit | (9,672,761) | (6,378,199) | ||||||
Total Canopy Growth Corporation shareholders' equity | 758,435 | 3,583,574 | ||||||
Noncontrolling interests | 1,587 | 4,341 | ||||||
Total shareholders' equity | 760,022 | 3,587,915 | ||||||
Total liabilities and shareholders' equity | $ | 2,439,098 | $ | 5,605,260 | ||||
Schedule 2
CANOPY GROWTH CORPORATION | ||||||||||||||||
Three months ended March 31, | Years ended March 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(As Restated) | (As Restated) | |||||||||||||||
Revenue | $ | 98,153 | $ | 116,119 | $ | 450,901 | $ | 572,214 | ||||||||
Excise taxes | 10,618 | 14,353 | 47,997 | 61,893 | ||||||||||||
Net revenue | 87,535 | 101,766 | 402,904 | 510,321 | ||||||||||||
Cost of goods sold | 178,039 | 271,090 | 507,044 | 713,457 | ||||||||||||
Gross margin | (90,504) | (169,324) | (104,140) | (203,136) | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative expenses | 104,334 | 117,591 | 456,225 | 472,756 | ||||||||||||
Share-based compensation | 4,740 | 11,669 | 31,188 | 47,525 | ||||||||||||
Asset impairment and restructuring costs | 405,129 | 241,141 | 2,256,742 | 369,339 | ||||||||||||
Total operating expenses | 514,203 | 370,401 | 2,744,155 | 889,620 | ||||||||||||
Operating loss | (604,707) | (539,725) | (2,848,295) | (1,092,756) | ||||||||||||
Loss from equity method investments | - | - | - | (100) | ||||||||||||
Other income (expense), net | (59,263) | (57,428) | (466,025) | 753,341 | ||||||||||||
Loss before income taxes | (663,970) | (597,153) | (3,314,320) | (339,515) | ||||||||||||
Income tax recovery | 16,361 | 8,458 | 4,774 | 8,948 | ||||||||||||
Net loss | (647,609) | (588,695) | (3,309,546) | (330,567) | ||||||||||||
Net loss attributable to noncontrolling interests and | (7,529) | (6,217) | (31,388) | (20,524) | ||||||||||||
Net loss attributable to Canopy Growth Corporation | $ | (640,080) | $ | (582,478) | $ | (3,278,158) | $ | (310,043) | ||||||||
Basic and diluted loss per share | $ | (1.28) | $ | (1.48) | $ | (7.07) | $ | (0.79) | ||||||||
Basic and diluted weighted average common shares | 498,778,062 | 394,248,404 | 463,724,414 | 391,324,285 | ||||||||||||
Schedule 3
CANOPY GROWTH CORPORATION | ||||||||
Years ended March 31, | ||||||||
2023 | 2022 | |||||||
(As Restated) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (3,309,546) | $ | (330,567) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation of property, plant and equipment | 56,736 | 76,247 | ||||||
Amortization of intangible assets | 27,781 | 38,171 | ||||||
Share of loss on equity method investments | - | 100 | ||||||
Share-based compensation | 31,188 | 47,525 | ||||||
Asset impairment and restructuring costs | 2,227,989 | 332,949 | ||||||
Income tax recovery | (4,774) | (8,948) | ||||||
Non-cash fair value adjustments and charges related to | 353,827 | (866,739) | ||||||
Change in operating assets and liabilities, net of effects from | ||||||||
Amounts receivable | (9,906) | 13,603 | ||||||
Inventory | 55,638 | 173,037 | ||||||
Prepaid expenses and other assets | 2,484 | 24,552 | ||||||
Accounts payable and accrued liabilities | 17,629 | (35,844) | ||||||
Other, including non-cash foreign currency | (6,592) | (9,897) | ||||||
Net cash used in operating activities | (557,546) | (545,811) | ||||||
Cash flows from investing activities: | ||||||||
Purchases of and deposits on property, plant and equipment | (9,217) | (36,684) | ||||||
Purchases of intangible assets | (1,337) | (11,429) | ||||||
Proceeds on sale of property, plant and equipment | 13,609 | 27,279 | ||||||
Redemption of short-term investments | 502,589 | 545,991 | ||||||
Net cash proceeds on sale of subsidiaries | 14,932 | 118,149 | ||||||
Net cash outflow on acquisition of subsidiaries | (24,223) | (14,947) | ||||||
Investment in other financial assets | (67,150) | (379,414) | ||||||
Other investing activities | 4,176 | (18,126) | ||||||
Net cash provided by investing activities | 433,379 | 230,819 | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common shares and warrants | 1,049 | 2,700 | ||||||
Proceeds from exercise of stock options | 281 | 5,567 | ||||||
Issuance of long-term debt and convertible debentures | 135,160 | - | ||||||
Repayment of long-term debt | (118,179) | (50,763) | ||||||
Other financing activities | (38,005) | (3,037) | ||||||
Net cash used in financing activities | (19,694) | (45,533) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 44,863 | (18,123) | ||||||
Net decrease in cash and cash equivalents | (98,998) | (378,648) | ||||||
Cash and cash equivalents, beginning of period | 776,005 | 1,154,653 | ||||||
Cash and cash equivalents, end of period | $ | 677,007 | $ | 776,005 | ||||
Schedule 4
Adjusted Gross Margin1 Reconciliation (Non-GAAP Measure) | ||||||||
Three months ended March 31, | ||||||||
(in thousands of Canadian dollars except where indicated; unaudited) | 2023 | 2022 | ||||||
(As Restated) | ||||||||
Net revenue | $ | 87,535 | $ | 101,766 | ||||
Gross margin, as reported | (90,504) | (169,324) | ||||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 74,875 | 119,115 | ||||||
Charges related to the flow-through of inventory | - | 4,163 | ||||||
Adjusted gross margin1 | $ | (15,629) | $ | (46,046) | ||||
Adjusted gross margin percentage1 | (18) | % | (45) | % | ||||
1 Adjusted gross margin and adjusted gross margin percentage are non-GAAP measures. See "Non-GAAP Measures". | ||||||||
Years ended March 31, | ||||||||
(in thousands of Canadian dollars except where indicated; unaudited) | 2023 | 2022 | ||||||
(As Restated) | ||||||||
Net revenue | $ | 402,904 | $ | 510,321 | ||||
Gross margin, as reported | (104,140) | (203,136) | ||||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 90,485 | 123,669 | ||||||
Charges related to the flow-through of inventory | - | 11,847 | ||||||
Adjusted gross margin1 | $ | (13,655) | $ | (67,620) | ||||
Adjusted gross margin percentage1 | (3) | % | (13) | % | ||||
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 March 31, | ||||||||
(in thousands of Canadian dollars, unaudited) | 2023 | 2022 | ||||||
(As Restated) | ||||||||
Net loss | $ | (647,609) | $ | (588,695) | ||||
Income tax recovery | (16,361) | (8,458) | ||||||
Other (income) expense, net | 59,263 | 57,428 | ||||||
Share-based compensation | 4,740 | 11,669 | ||||||
Acquisition-related costs | 3,548 | 1,272 | ||||||
Depreciation and amortization2 | 20,771 | 30,489 | ||||||
Asset impairment and restructuring costs | 405,129 | 241,141 | ||||||
Restructuring costs recorded in cost of goods sold | 74,875 | 119,115 | ||||||
Charges related to the flow-through of inventory | - | 4,163 | ||||||
Adjusted EBITDA1 | $ | (95,644) | $ | (131,876) | ||||
1Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures". | ||||||||
2 From Consolidated Statements of Cash Flows. | ||||||||
Years ended March 31, | ||||||||
(in thousands of Canadian dollars, unaudited) | 2023 | 2022 | ||||||
(As Restated) | ||||||||
Net loss | $ | (3,309,546) | $ | (330,567) | ||||
Income tax recovery | (4,774) | (8,948) | ||||||
Other (income) expense, net | 466,025 | (753,341) | ||||||
Loss on equity method investments | - | 100 | ||||||
Share-based compensation | 31,188 | 47,525 | ||||||
Acquisition-related costs | 35,694 | 11,060 | ||||||
Depreciation and amortization2 | 84,517 | 114,418 | ||||||
Asset impairment and restructuring costs | 2,256,742 | 358,708 | ||||||
Restructuring costs recorded in cost of goods sold | 90,485 | 123,669 | ||||||
Charges related to the flow-through of inventory | - | 11,847 | ||||||
Adjusted EBITDA1 | $ | (349,669) | $ | (425,529) | ||||
1Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures". | ||||||||
2 From Consolidated Statements of Cash Flows. | ||||||||
Schedule 6
Free Cash Flow1 Reconciliation (Non-GAAP Measure) | ||||||||
Three months March 31, | ||||||||
(in thousands of Canadian dollars, unaudited) | 2023 | 2022 | ||||||
Net cash used in operating activities | $ | (139,737) | $ | (126,686) | ||||
Purchases of and deposits on property, plant and equipment | (3,041) | (64) | ||||||
Free cash flow1 | $ | (142,778) | $ | (126,750) | ||||
1Free cash flow is a non-GAAP measure. See "Non-GAAP Measures". | ||||||||
Years ended March 31, | ||||||||
(in thousands of Canadian dollars, unaudited) | 2023 | 2022 | ||||||
Net cash used in operating activities | $ | (557,546) | $ | (545,811) | ||||
Purchases of and deposits on property, plant and equipment | (9,217) | (36,684) | ||||||
Free cash flow1 | $ | (566,763) | $ | (582,495) | ||||
1Free cash flow is a non-GAAP measure. See "Non-GAAP Measures". | ||||||||
Schedule 7
Segmented Gross Margin and Segmented Adjusted Gross Margin1 Reconciliation (Non-GAAP Measure)2 | ||||||||
Three months ended March 31, | ||||||||
(in thousands of Canadian dollars except where indicated; unaudited) | 2023 | 2022 | ||||||
(As Restated) | ||||||||
Net revenue | $ | 35,731 | $ | 52,031 | ||||
Gross margin, as reported | (69,825) | (114,895) | ||||||
Gross margin percentage, as reported | (195) | % | (221) | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 69,589 | 65,520 | ||||||
Charges related to the flow-through of inventory | - | 4,163 | ||||||
Adjusted gross margin1 | $ | (236) | $ | (45,212) | ||||
Adjusted gross margin percentage1 | (1) | % | (87) | % | ||||
Rest-of-world cannabis segment | ||||||||
Revenue | $ | 8,770 | $ | 13,944 | ||||
Gross margin, as reported | 354 | (53,120) | ||||||
Gross margin percentage, as reported | 4 | % | (381) | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 938 | 53,595 | ||||||
Adjusted gross margin1 | $ | 1,292 | $ | 475 | ||||
Adjusted gross margin percentage1 | 15 | % | 3 | % | ||||
Storz & Bickel segment | ||||||||
Revenue | $ | 15,494 | $ | 21,624 | ||||
Gross margin, as reported | 5,303 | 9,661 | ||||||
Gross margin percentage, as reported | 34 | % | 45 | % | ||||
Adjusted gross margin1 | $ | 5,303 | $ | 9,661 | ||||
Adjusted gross margin percentage1 | 34 | % | 45 | % | ||||
BioSteel segment | ||||||||
Revenue | $ | 19,298 | $ | 3,475 | ||||
Gross margin, as reported | (26,185) | (13,361) | ||||||
Gross margin percentage, as reported | (136) | % | (384) | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 3,202 | - | ||||||
Adjusted gross margin1 | $ | (22,983) | $ | (13,361) | ||||
Adjusted gross margin percentage1 | (119) | % | (384) | % | ||||
This Works segment | ||||||||
Revenue | $ | 5,352 | $ | 5,988 | ||||
Gross margin, as reported | 1,223 | 2,377 | ||||||
Gross margin percentage, as reported | 23 | % | 40 | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 1,146 | - | ||||||
Adjusted gross margin1 | $ | 2,369 | $ | 2,377 | ||||
Adjusted gross margin percentage1 | 44 | % | 40 | % | ||||
1 Adjusted gross margin and adjusted gross margin percentage are non-GAAP measures. See "Non-GAAP Measures". |
2 In Q2 FY23, we are reporting our financial results for the following five reportable segments: (i) |
Years ended March 31, | ||||||||
(in thousands of Canadian dollars except where indicated; unaudited) | 2023 | 2022 | ||||||
(As Restated) | ||||||||
Net revenue | $ | 187,067 | $ | 257,910 | ||||
Gross margin, as reported | (95,291) | (212,820) | ||||||
Gross margin percentage, as reported | (51) | % | (83) | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 71,278 | 67,492 | ||||||
Charges related to the flow-through of inventory | - | 11,847 | ||||||
Adjusted gross margin1 | $ | (24,013) | $ | (133,481) | ||||
Adjusted gross margin percentage1 | (13) | % | (52) | % | ||||
Rest-of-world cannabis segment | ||||||||
Revenue | $ | 38,949 | $ | 79,306 | ||||
Gross margin, as reported | (3,322) | (28,875) | ||||||
Gross margin percentage, as reported | (9) | % | (36) | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 8,224 | 56,177 | ||||||
Adjusted gross margin1 | 4,902 | 27,302 | ||||||
Adjusted gross margin percentage1 | 13 | % | 34 | % | ||||
Storz & Bickel segment | ||||||||
Revenue | $ | 64,845 | $ | 85,410 | ||||
Gross margin, as reported | 26,112 | 37,284 | ||||||
Gross margin percentage, as reported | 40 | % | 44 | % | ||||
Adjusted gross margin1 | 26,112 | 37,284 | ||||||
Adjusted gross margin percentage1 | 40 | % | 44 | % | ||||
BioSteel segment | ||||||||
Revenue | $ | 69,649 | $ | 34,622 | ||||
Gross margin, as reported | (40,613) | (15,722) | ||||||
Gross margin percentage, as reported | (58) | % | (45) | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 8,683 | - | ||||||
Adjusted gross margin1 | (31,930) | (15,722) | ||||||
Adjusted gross margin percentage1 | (46) | % | (45) | % | ||||
This Works segment | ||||||||
Revenue | $ | 26,029 | $ | 32,296 | ||||
Gross margin, as reported | 10,205 | 14,800 | ||||||
Gross margin percentage, as reported | 39 | % | 46 | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 2,300 | - | ||||||
Adjusted gross margin1 | $ | 12,505 | $ | 14,800 | ||||
Adjusted gross margin percentage1 | 48 | % | 46 | % | ||||
1 Adjusted gross margin and adjusted gross margin percentage are non-GAAP measures. See "Non-GAAP Measures"
Schedule 8
Summary of BioSteel Revenue and Adjusted EBITDA Restatement Impacts | |||||
(in thousands of Canadian dollars except where indicated; unaudited) | |||||
BioSteel | |||||
Net Revenue | FY22 | Q1 FY23 | Q2 FY23 | Q3 FY23 | YTD Q3 FY23 |
As Previously Reported | 44,626 | 17,888 | 29,922 | 16,363 | 64,173 |
Restatement Adjustments | (10,004) | (4,195) | (12,445) | 2,818 | (13,822) |
As Restated | 34,622 | 13,693 | 17,477 | 19,181 | 50,351 |
- | |||||
- | Canopy Growth Consolidated | ||||
Net Revenue | FY22 | Q1 FY23 | Q2 FY23 | Q3 FY23 | YTD Q3 FY23 |
As Previously Reported | 520,325 | 110,115 | 117,863 | 101,213 | 329,191 |
Restatement Adjustments | (10,004) | (4,195) | (12,445) | 2,818 | (13,822) |
As Restated | 510,321 | 105,920 | 105,418 | 104,031 | 315,369 |
- | |||||
- | Canopy Growth Consolidated | ||||
Adjusted EBITDA | FY22 | Q1 FY23 | Q2 FY23 | Q3 FY23 | YTD Q3 FY23 |
As Previously Reported | (415,447) | (74,800) | (78,099) | (87,502) | (240,401) |
Restatement Adjustments | (10,082) | (4,194) | (11,776) | 2,346 | (13,624) |
As Restated | (425,529) | (78,994) | (89,875) | (85,156) | (254,025) |
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SOURCE Canopy Growth Corporation
