Canopy Growth Reports Third Quarter Fiscal Year 2023 Financial Results and Announces Canadian Business Transformation Plan
Canopy Growth Corporation (CGC) announced a transformation of its Canadian operations to an asset-light model, focusing on profitability. The company aims to cut costs by $140-$160 million over the next 12 months by downsizing its production footprint and reducing headcount by approximately 60%, affecting around 800 positions. Q3 FY2023 financial results showed net revenue of $101 million, down 28% year-over-year, and a net loss of $267 million. Despite challenges, management forecasts positive Adjusted EBITDA in FY2024. The company expects pre-tax charges of $425-$525 million due to restructuring, impacting the current quarter and first half of FY2024.
- Projected cost reductions of $140-$160 million over the next 12 months.
- Management expects to achieve positive Adjusted EBITDA in FY2024.
- Net revenue decreased by 28% in Q3 FY2023 compared to Q3 FY2022.
- Net loss increased to $267 million in Q3 FY2023, a $151 million rise from the previous year.
Company takes firm actions to transform Canadian business to enable growth and profitability
Announces cost reduction program of additional
Restructuring includes significant reduction in production footprint and headcount
Highlights
Canopy Growth announced today that it is transitioning to an asset-light model inCanada by exiting cannabis flower cultivation in the Company'sSmiths Falls, Ontario facility, ceasing the sourcing of cannabis flower from theMirabel, Quebec facility, and moving to a third-party sourcing model for cannabis beverages, edibles, vapes, and extracts.- Today's changes come in addition to multiple cost reduction activities within FY2023, including the divestiture of
Canopy Growth 's Canadian retail operations, the organizational restructuring of certain corporate functions, and the closure of theScarborough, Ontario research facility. - As a result of the cost reduction initiatives undertaken in fiscal 2023, the Company intends to close its
1 Hershey Drive facility inSmiths Falls, Ontario , in addition to reducing headcount across the business by approximately60% , including 800 positions impacted by the changes announced today, of which40% are impacted immediately. - Management expects these cost reduction initiatives will reduce annual Cost of Goods Sold ("COGS") and Selling, General & Administrative ("SG&A") expenses by a combined
$140 -$160 million $240 -$310 million April 2022 . Canopy Growth continues to progress itsU.S. strategy throughCanopy USA, LLC ("CUSA") and is committed to remaining dual–listed on the TSX and the Nasdaq.- Based on our current revenue run rate and these cost reduction initiatives, management reaffirms its expectation to achieve positive Adjusted EBITDA in FY2024, with the exception of investment in BioSteel.
"Canopy must reach profitability to achieve our ambition of long-term North American cannabis market leadership. We are transforming our Canadian business to an asset-light model and significantly reducing the overall size of our organization. These changes are difficult but necessary to drive our business to profitability and growth."
"The right-sizing of our Canadian business is expected to significantly reduce our cash costs. Canopy is firmly on the path to deliver at least quarterly breakeven adjusted EBITDA in our Canadian cannabis business in Fiscal 2024, even at current revenue run-rate."
Third Quarter Fiscal 2023 Financial Summary
(in millions of Canadian | Net Revenue | Gross margin | Adjusted | Net loss | Adjusted | Free cash | |
Reported | (2 %) | 1 % | |||||
vs. Q3 FY2022 | (28 %) | (900 bps) | (1,200 bps) | (131 %) | (30 %) | 13 % |
1Adjusted gross margin is a non-GAAP measure, and for Q3 FY2023 excludes |
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". |
Revenues:
Net revenue of
Gross margin:
Reported gross margin in Q3 FY2023 was (
Operating expenses:
Total SG&A expenses in Q3 FY2023 increased by
Net Loss:
Net Loss in Q3 FY2023 was
Adjusted EBITDA5:
Adjusted EBITDA loss in Q3 FY2023 was
Free Cash Flow6:
Free Cash Flow in Q3 FY2023 was an outflow of
Cash Position:
Cash and short-term investments amounted to
4 Adjusted gross margin is a non-GAAP measure, and for Q3 FY2023 excludes |
5 Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures". |
6 Free cash flow is a non-GAAP measure. See "Non-GAAP Measures". |
Canopy Growth continues to progress itsU.S. strategy through CUSA and is committed to remaining dual-listed on the TSX and NASDAQ through continued engagement with NASDAQ on a path forward that is focused on delivering on the benefits of this transformational strategy. As a result of the formation of CUSA, and related transaction with, CUSA, the Company expects to reduce its annual operating expenditures through a more streamlined and singular approach to itsU.S. strategy. In the near term, CUSA is expected to generate revenue and cost synergies by leveraging its brand portfolio, routes to market and operations of the fullU.S. cannabis ecosystem while eliminating redundancies and the public company reporting costs of Acreage, all of which are expected to be realized while cannabis remains federally illegal inthe United States .- In light of NASDAQ's objections to the consolidation of CUSA into the financials of
Canopy Growth , we are prepared to make changes to the structure of our interest in CUSA such thatCanopy Growth would not be required to consolidate the financial results of CUSA intoCanopy Growth 's financial statements, which may include: (1) reducingCanopy Growth 's economic interest in CUSA on an as-converted basis to no greater than90% , (2) reducing the number of managers on CUSA's board of managers from four to three, including, reducingCanopy Growth 's nomination right to a single manager, (3) modifying the terms of the Protection Agreement entered into with CUSA and CUSA's Limited Liability Company Agreement in order to eliminate certain negative covenants and (4) modifying the terms of the agreements with third-party investors in CUSA to, among other things, remove their right to guaranteed returns.
Business Highlights
Aligning Canadian Cannabis Operations to Challenged Market Realities
- On
April 26, 2022 , the Company announced a series of initiatives to reduce costs and drive efficiency, which were expected to generate savings of$100 -$150 million $80 million - Today,
Canopy Growth announced the next series of comprehensive steps to align its Canadian cannabis operations and resources in response to unfavorable market realities, which include: - Transitioning to an asset-light model by exiting cannabis flower cultivation in the Company's
Smiths Falls, Ontario facility, ceasing the sourcing of cannabis flower from theMirabel, Quebec facility and consolidating cultivation at existing facilities inKincardine, Ontario andKelowna, British Columbia ; - 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 R&D and production footprint;
- As a result of these changes, the Company intends to consolidate flower, pre-rolled joints, softgel, and oil manufacturing in
Canopy Growth 's current beverage production facility inSmiths Falls, Ontario . The Company will transition to a flexible sourcing strategy and migrate the existing genetics program toQuebec -based EXKA; and - In addition to the closure of the
Scarborough, Ontario facility inJanuary 2023 , the Company intends to close the1 Hershey Drive facility inSmiths Falls, Ontario and is in active discussions with respect to restructuring the joint venture entity which holds cultivation facility inMirabel, Quebec . - Reflecting today's announcement and based on information currently available to Management, the Company expects to record estimated pre-tax charges of approximately
$425 $525 million $25 $40 million
7 All figures reported above with respect to the pre-tax charges are preliminary and are unaudited and subject to change and adjustment as the Company prepares its consolidated financial statements for the years ended |
New standalone Canadian cannabis business unit expected to increase agility and accountability, benefit from brand and SKU optimization
- The Canadian cannabis business has been reorganized as a standalone business unit, which will have single point of accountability for commercial operations, allowing for agility and accountability. Early progress to-date in Q3 FY2023, shows that customer order fill rates have increased by over
20% , to above90% in the current quarter.· - The Company's Canadian cannabis business unit is completing a brand and SKU optimization, which is expected to reduce in–market brand and SKU count by approximately
25% and50% , respectively, as the Company further focuses on the highest performing and more profitable segments within the Canadian adult-use cannabis market.
Demonstrating continued momentum across our Consumer Products businesses; strong sequential revenue growth for Storz & Bickel; meaningful year-over-year gains in BioSteel distribution and sales velocity
- Despite a decrease in revenues as compared to Q3 FY2022, Storz & Bickel delivered sequential revenue growth of
50% in Q3 FY2023 driven by traditionally strong seasonal sales. - BioSteel has reached a
10.4% share of convenience and gas channel inCanada , up 300 basis points ("bps") sequentially, and13.8% share inOntario , representing a sequential quarterly increase of 260 bps8. - BioSteel All-Commodity Volume in the
U.S. of34% in Q3 FY2023, represents an increase of 2600 bps compared to the corresponding period of the prior year9. - BioSteel Ready-to-Drink ("RTD")
U.S. scanned sales for the year endedJanuary 1, 2023 increased157% from prior year10. - Subsequent to the end of Q3 FY2023, BioSteel announced the signing of multi-year partnerships with 6 NHL teams.
- In the third quarter of calendar 2022, Acreage11 reported revenue increasing
28% year over year and delivering their 7th consecutive quarter of positive Adjusted EBITDA12 (as calculated by Acreage and set forth in Acreage's Third Quarter 2022 Financial Results press release available under Acreage's profile on SEDAR at www.sedar.com and through EDGAR at www.sec.gov/edgar). Subsequent to the end of their fourth quarter of calendar 2022, Acreage began adult-use retail operations in the state ofConnecticut . - In
January 2023 , Wana13 and TerrAscend Corp. announced an agreement to bring Wana-branded edibles to the new adult-use market in the state ofNew Jersey and expand availability in the state ofMaryland 14. - In
February 2023 , Jetty15 announced the upcoming availability of Jetty products in the state ofNew York 16.
8 Nielsen data 13-weeks ended |
9 IRI data for the 52 weeks ended |
10 IRI data for the 52 weeks ended |
11 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. |
12 Canopy Growth and Acreage may calculate Adjusted EBITDA differently as Adjusted EBITDA does not have any standardized meaning and therefore may not be comparable as between the Company and Acreage. |
13 Until such time as CUSA elects to exercise its rights to acquire |
15 Until such time as CUSA elects to exercise its rights to acquire |
16 https://www.linkedin.com/feed/update/urn:li:activity:7027376107637137408/ |
Third Quarter Fiscal 2023 Revenue Review17
Revenue by Channel
(in millions of Canadian dollars, unaudited) | Q3 FY2023 | Q3 FY2022 | Vs. Q3 FY2022 | |
Canadian adult-use cannabis | ||||
Business-to-business18 | (35 %) | |||
Business-to-consumer | (24 %) | |||
(32 %) | ||||
Canadian medical cannabis19 | 9 % | |||
(23 %) | ||||
Rest-of-world cannabis | ||||
C3 | $- | (100 %) | ||
Other rest-of-world cannabis20 | (54 %) | |||
(74 %) | ||||
Storz & Bickel | (20 %) | |||
BioSteel21 | (4 %) | |||
This Works | (22 %) | |||
Other | (24 %) | |||
Net revenue | (28 %) |
7 All figures reported above with respect to the pre-tax charges are preliminary and are unaudited and subject to change and adjustment as the Company prepares its consolidated financial statements for the years ended |
Canada Cannabis
- Adult-use business-to-business net revenue in Q3 FY2023 decreased
35% over the prior year period 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 favourable product mix. - Adult-use business-to-consumer net revenue in Q3 FY2023 decreased
24% versus Q3 FY2022 largely driven by increased competition from the rapid growth in third party retail locations across provinces. - Medical net revenue in Q3 FY2023 increased
9% from Q3 FY2022 driven by growth in insured patient registrations and continued expansion of product offerings.
Rest-of-world Cannabis
- Rest-of-world cannabis revenue in Q3 FY2023 decreased
74% over Q3 FY2022 due primarily to the divestiture of C3 and a decline in ourU.S. CBD business. - Excluding the impact of the divestiture of C3, rest-of-world cannabis net revenue decreased
54% as compared to Q3 FY2022, primarily due to declines in sales toIsrael and ourU.S. CBD business, partially offset by strong growth inAustralia .
Storz & Bickel
- Storz & Bickel vaporizer revenue in Q3 FY2023 decreased
20% over Q3 FY2022 due primarily to continued slowdown in consumer spending.
BioSteel
- BioSteel sales in Q3 FY2023 decreased
4% over Q3 FY2022 due to lapping of strong sales in the prior year quarter driven by the timing of distribution load-in in theU.S.
This Works
- This Works sales in Q3 FY2023 decreased
22% over Q3 FY2022 due in part to softer performance of certain product lines and the impact of foreign exchange rates.
The Q3 FY2023 and Q3 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
Webcast Information
A live audio webcast will be available at https://app.webinar.net/DpogWGlRL06.
Replay Information
A replay will be accessible by webcast until
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
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
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;
- the Company's ability to execute on its strategy to accelerate the Company's entry into the
U.S. cannabis market through the creation ofCanopy USA , LLC ("Canopy USA ")(the "Reorganization"); - expectations regarding the potential success of, and the costs and benefits associated with the Reorganization;
- expectations regarding the potential success of, and the costs and benefits associated with comprehensive steps and actions being undertaken by the Company with respect to its Canadian operations (the "Canadian Transformation Plan")
- 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 Holdings and
Canopy USA onOctober 24, 2022 (the "Floating Share Arrangement Agreement)", the anticipated benefits of such arrangement, the anticipated timing of the related Acreage Holdings special meeting of shareholders and the acquisition of Acreage Holdings' Class E subordinate voting shares (the "Fixed Shares") and Class D subordinated voting shares byCanopy USA , 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 Holdings, 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 anticipated timing and occurrence of the Company's special meeting of shareholders to approve an amendment to the Company's articles of incorporation (the "Amendment Proposal");
- expectations related to our announcement of certain restructuring actions (the "Restructuring Actions"), the Reorganization, the Canadian Transformation Plan and any progress, challenges and effects related thereto as well as changes in strategy, metrics, investments, costs, operating expenses, employee turnover and other changes with respect thereto;
- our ability to refinance debt as and when required on terms favorable to us and comply with covenants contained in our debt facilities and debt instruments;
- expectations regarding the laws and regulations and any amendments thereto relating to the
U.S. hemp industry in theU.S. , including the promulgation of regulations for theU.S. hemp industry by theUSDA 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;
- the anticipated benefits and impact of the investments in us (the "CBI Group Investments") from Constellation Brands, Inc. ("CBI") and its affiliates (together, the "
CBI Group "); - the potential exercise of the warrants held by the
CBI Group , pre-emptive rights and/or top-up rights held by theCBI 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
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
Participants in the Solicitation
Schedule 1
| ||||||||
|
| |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 598,131 | $ | 776,005 | ||||
Short-term investments | 191,119 | 595,651 | ||||||
Restricted short-term investments | 12,932 | 12,216 | ||||||
Amounts receivable, net | 104,640 | 96,443 | ||||||
Inventory | 213,937 | 204,387 | ||||||
Prepaid expenses and other assets | 52,151 | 52,700 | ||||||
Total current assets | 1,172,910 | 1,737,402 | ||||||
Other financial assets | 598,387 | 800,328 | ||||||
Property, plant and equipment | 874,029 | 942,780 | ||||||
Intangible assets | 213,530 | 252,695 | ||||||
142,076 | 1,866,503 | |||||||
Other assets | 19,223 | 15,342 | ||||||
Total assets | $ | 3,020,155 | $ | 5,615,050 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 63,139 | $ | 64,270 | ||||
Other accrued expenses and liabilities | 75,985 | 75,278 | ||||||
Current portion of long-term debt | 455,483 | 9,296 | ||||||
Other liabilities | 84,134 | 64,054 | ||||||
Total current liabilities | 678,741 | 212,898 | ||||||
Long-term debt | 750,118 | 1,491,695 | ||||||
Deferred income tax liabilities | 8,988 | 15,991 | ||||||
Liability arising from Acreage Arrangement | - | 47,000 | ||||||
Warrant derivative liability | 668 | 26,920 | ||||||
Other liabilities | 141,891 | 190,049 | ||||||
Total liabilities | 1,580,406 | 1,984,553 | ||||||
Commitments and contingencies | ||||||||
Redeemable noncontrolling interest | 11,408 | 36,200 | ||||||
Common shares - $nil par value; Authorized - unlimited number of shares; | 7,867,310 | 7,482,809 | ||||||
Additional paid-in capital | 2,510,086 | 2,519,766 | ||||||
Accumulated other comprehensive loss | (14,248) | (42,282) | ||||||
Deficit | (8,937,603) | (6,370,337) | ||||||
1,425,545 | 3,589,956 | |||||||
Noncontrolling interests | 2,796 | 4,341 | ||||||
Total shareholders' equity | 1,428,341 | 3,594,297 | ||||||
Total liabilities and shareholders' equity | $ | 3,020,155 | $ | 5,615,050 | ||||
Schedule 2
| ||||||||
Three months ended | ||||||||
2022 | 2021 | |||||||
Revenue | $ | 113,349 | $ | 155,024 | ||||
Excise taxes | 12,136 | 14,052 | ||||||
Net revenue | 101,213 | 140,972 | ||||||
Cost of goods sold | 103,654 | 130,882 | ||||||
Gross margin | (2,441) | 10,090 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative expenses | 122,636 | 116,835 | ||||||
Share-based compensation | 6,428 | 6,777 | ||||||
Asset impairment and restructuring costs | 22,259 | 36,439 | ||||||
Total operating expenses | 151,323 | 160,051 | ||||||
Operating loss | (153,764) | (149,961) | ||||||
Other income (expense), net | (113,340) | 34,282 | ||||||
Loss before income taxes | (267,104) | (115,679) | ||||||
Income tax recovery | 382 | 183 | ||||||
Net loss | (266,722) | (115,496) | ||||||
Net loss attributable to noncontrolling interests and | (5,139) | (6,571) | ||||||
Net loss attributable to | $ | (261,583) | $ | (108,925) | ||||
Basic and diluted loss per share | $ | (0.54) | $ | (0.28) | ||||
Basic and diluted weighted average common shares outstanding | 486,112,598 | 393,818,282 | ||||||
Schedule 3
| ||||||||
Nine months ended | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss) income | $ | (2,586,189) | $ | 258,128 | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation of property, plant and equipment | 43,185 | 56,467 | ||||||
Amortization of intangible assets | 20,561 | 27,462 | ||||||
Share of loss on equity method investments | - | 100 | ||||||
Share-based compensation | 21,725 | 35,856 | ||||||
Asset impairment and restructuring costs | 1,797,854 | 113,250 | ||||||
Income tax expense (recovery) | 11,587 | (490) | ||||||
Non-cash fair value adjustments and charges related to | 325,742 | (893,024) | ||||||
Change in operating assets and liabilities, net of effects from | ||||||||
Amounts receivable | (8,197) | 4,083 | ||||||
Inventory | (9,550) | 6,702 | ||||||
Prepaid expenses and other assets | (6,866) | 28,818 | ||||||
Accounts payable and accrued liabilities | (3,202) | (30,764) | ||||||
Other, including non-cash foreign currency | (24,459) | (25,713) | ||||||
Net cash used in operating activities | (417,809) | (419,125) | ||||||
Cash flows from investing activities: | ||||||||
Purchases of and deposits on property, plant and equipment | (6,176) | (36,620) | ||||||
Purchases of intangible assets | (1,265) | (4,564) | ||||||
Proceeds on sale of property, plant and equipment | 10,894 | 25,660 | ||||||
Redemption of short-term investments | 415,322 | 340,218 | ||||||
Net cash proceeds on sale of subsidiaries | 12,432 | 10,324 | ||||||
Investment in other financial assets | (67,186) | (374,414) | ||||||
Net cash outflow on acquisition of subsidiaries | (24,223) | (14,947) | ||||||
Other investing activities | 2,327 | (16,759) | ||||||
Net cash provided by (used in) investing activities | 342,125 | (71,102) | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common shares and warrants | 856 | 1,460 | ||||||
Proceeds from exercise of stock options | 270 | 5,455 | ||||||
Repayment of long-term debt | (117,951) | (50,217) | ||||||
Other financing activities | (29,096) | (3,036) | ||||||
Net cash used in financing activities | (145,921) | (46,338) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 43,731 | (2,942) | ||||||
Net decrease in cash and cash equivalents | (177,874) | (539,507) | ||||||
Cash and cash equivalents, beginning of period | 776,005 | 1,154,653 | ||||||
Cash and cash equivalents, end of period | $ | 598,131 | $ | 615,146 | ||||
Schedule 4
Adjusted Gross Margin1 Reconciliation (Non-GAAP Measure) | ||||||||
Three months ended | ||||||||
(in thousands of Canadian dollars except where indicated; unaudited) | 2022 | 2021 | ||||||
Net revenue | $ | 101,213 | $ | 140,972 | ||||
Gross margin, as reported | (2,441) | 10,090 | ||||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 3,626 | 4,554 | ||||||
Charges related to the flow-through of inventory | - | 3,147 | ||||||
Adjusted gross margin1 | $ | 1,185 | $ | 17,791 | ||||
Adjusted gross margin percentage1 | 1 | % | 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 | ||||||||
(in thousands of Canadian dollars, unaudited) | 2022 | 2021 | ||||||
Net loss | $ | (266,722) | $ | (115,496) | ||||
Income tax recovery | (382) | (183) | ||||||
Other (income) expense, net | 113,340 | (34,282) | ||||||
Share-based compensation | 6,428 | 6,777 | ||||||
Acquisition-related costs | 13,347 | 1,617 | ||||||
Depreciation and amortization | 20,602 | 30,017 | ||||||
Asset impairment and restructuring costs | 22,259 | 36,439 | ||||||
Restructuring costs recorded in cost of goods sold | 3,626 | 4,554 | ||||||
Charges related to the flow-through of inventory | - | 3,147 | ||||||
Adjusted EBITDA1 | $ | (87,502 | ) | $ | (67,410) | |||
1Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures". | ||||||||
Schedule 6
Free Cash Flow1 Reconciliation (Non-GAAP Measure) | ||||||||
Three months ended | ||||||||
(in thousands of Canadian dollars, unaudited) | 2022 | 2021 | ||||||
Net cash used in operating activities | $ | (143,894) | $ | (167,380) | ||||
Purchases of and deposits on property, plant and equipment | (1,868) | (962) | ||||||
Free cash flow1 | $ | (145,762) | $ | (168,342) | ||||
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 | ||||||||
(in thousands of Canadian dollars except where indicated; unaudited) | 2022 | 2021 | ||||||
Net revenue | $ | 46,617 | $ | 60,678 | ||||
Gross margin, as reported | (5,281) | (13,121) | ||||||
Gross margin percentage, as reported | (11) | % | (22) | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 1,689 | 1,972 | ||||||
Charges related to the flow-through of inventory | - | 3,147 | ||||||
Adjusted gross margin1 | $ | (3,592) | $ | (8,002) | ||||
Adjusted gross margin percentage1 | (8) | % | (13) | % | ||||
Rest-of-world cannabis segment | ||||||||
Revenue | $ | 5,846 | $ | 22,299 | ||||
Gross margin, as reported | (2,184) | 4,660 | ||||||
Gross margin percentage, as reported | (37) | % | 21 | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 256 | 2,582 | ||||||
Adjusted gross margin1 | $ | (1,928) | $ | 7,242 | ||||
Adjusted gross margin percentage1 | (33) | % | 32 | % | ||||
Storz & Bickel segment | ||||||||
Revenue | $ | 20,214 | $ | 25,205 | ||||
Gross margin, as reported | 9,186 | 11,172 | ||||||
Gross margin percentage, as reported | 45 | % | 44 | % | ||||
Adjusted gross margin1 | $ | 9,186 | $ | 11,172 | ||||
Adjusted gross margin percentage1 | 45 | % | 44 | % | ||||
BioSteel segment | ||||||||
Revenue | $ | 16,363 | $ | 16,974 | ||||
Gross margin, as reported | (7,669) | 1,352 | ||||||
Gross margin percentage, as reported | (47) | % | 8 | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 1,619 | - | ||||||
Adjusted gross margin1 | $ | (6,050) | $ | 1,352 | ||||
Adjusted gross margin percentage1 | (37) | % | 8 | % | ||||
This Works segment | ||||||||
Revenue | $ | 8,289 | $ | 10,730 | ||||
Gross margin, as reported | 4,032 | 5,469 | ||||||
Gross margin percentage, as reported | 49 | % | 51 | % | ||||
Adjustments to gross margin: | ||||||||
Restructuring costs recorded in cost of goods sold | 62 | - | ||||||
Adjusted gross margin1 | $ | 4,094 | $ | 5,469 | ||||
Adjusted gross margin percentage1 | 49 | % | 51 | % | ||||
1 Adjusted gross margin and adjusted gross margin percentage are non-GAAP measures. See "Non-GAAP Measures". |
2 In Q3 FY23, we are reporting our financial results for the following five reportable segments: (i) |
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FAQ
What are the financial results for Canopy Growth Corporation (CGC) for Q3 FY2023?
What cost reduction initiatives is Canopy Growth Corporation (CGC) implementing?
When does Canopy Growth Corporation (CGC) expect to achieve positive Adjusted EBITDA?
How much did Canopy Growth Corporation (CGC) lose in Q3 FY2023?
What pre-tax charges is Canopy Growth Corporation (CGC) anticipating from its restructuring?
