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Business transformation and cost reduction actions initiated in FY2023 expected to drive overall cost reduction of $240-$310 million by the end of FY2024
Actions to strengthen balance sheet have reduced overall debt position by approximately $500 million from Q2 FY2023 to quarter-to-date in Q1 FY2024 and are anticipated to generate proceeds of up to $150 million from facility divestitures by the end of Q2 FY2024
Revised proxy statement filed with modifications to the structure of Canopy USA in order to maintain compliance with NASDAQ listing requirements while preserving strategic benefits
SMITHS FALLS, ON, June 22, 2023 /PRNewswire/ – Canopy Growth Corporation (“Canopy Growth” or the “Company”) (TSX:WEED) (NASDAQ: CGC) today announced its financial results for the fourth quarter and fiscal year ended March 31, 2023 and the filing of an annual report on Form 10-K, including the audited consolidated financial statements for the fiscal year ended March 31, 2023 and the unqualified report thereon of the Company’s independent registered public accounting firm. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.
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 the Smiths Falls, Ontario facility (expected to be completed in Q1 FY2024); (iv) consolidating cultivation at its existing facilities in Kincardine, Ontario and Kelowna, British Columbia; and (v) moving to an adaptive third-party sourcing model for all cannabis beverages, edibles, vapes, and extracts, enabling the Company to bring new products to market without significant investment in research, development, and production infrastructure.
● Restructuring steps undertaken in FY2023 reduced Selling, General & Administrative (“SG&A”) expenses and Cost of Goods Sold (“COGS”) by a combined $125 million through the end of FY2023.
● The Company’s FY2023 net revenue decreased 21% year-over-year to $403 million. After adjusting for the divestiture of C3 in Q4 FY2022 and the Canadian retail business in Q3 FY2023, revenue declined 11% in FY2023 compared to FY2022.
● Canadian medical cannabis revenue in FY2023 increased 6% year-over-year, while Q4 FY2023 revenue increased 8% year-over-year despite operating in a declining market.
● Enhanced flower quality drove the resurgence of the Company’s mainstream Tweed brand to the #9 position in the Canadian adult-use market in Q4 FY2023, up from #16 in the prior year.¹
● Subsequent to quarter-end, the Company entered into an agreement with Indiva Limited, giving Canopy Growth control of the distribution, marketing, and sales of industry-leading Wana branded products in Canada. The addition of Wana branded gummies is expected to improve Adjusted EBITDA for the Company’s Canadian cannabis business and strengthen its position in the Canadian edibles category.
“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 USA strategy which enables a fast start, the Company is well positioned as it strives towards its goal of long-term North American cannabis leadership.’’
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 $150 million in Fiscal 2024.”
Judy Hong, Chief Financial Officer
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 $10 million in net revenue for FY2022, or approximately 2% of total net revenue for the Company. For the nine months ended December 31, 2022, the correction resulted in a decrease of approximately $14 million in net revenue, or approximately 4% of total consolidated revenue for the Company.
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 U.S.; (iv) changes to the BioSteel business including cost reductions in warehousing, production, product sampling and overall staffing reductions; and (v) exploring additional options to further minimize operating cash burn.
Balance Sheet and Liquidity
The Company ended FY2023 with cash, cash equivalents and short-term investments of $783 million. Targeted actions that have been completed or are currently underway to further strengthen our balance sheet include:
● Reduction of approximately $500 million in debt from Q2 FY2023 to quarter-to-date in Q1 FY2024, including the equitization of $267 million of the 4.25% unsecured notes due in July 2023 (the “2023 Notes”) and a paydown of USD $188 million of the senior secured term loan at $0.93 per dollar of debt, reducing annual interest payments by approximately $45 million.
● Refinancing $100 million of the 2023 Notes held by Greenstar Canada Investment Limited Partnership, a wholly-owned subsidiary of Constellation Brands, Inc. (“CBI”), to extend the maturity date to December 31, 2024. The Company maintains its intention to negotiate an exchange to purchase the 2023 Notes held by CBI in exchange for shares prior to maturity.
● Facility divestitures expected to generate proceeds of up to $150 million by the end of September 2023. During the first quarter, the Company received approximately $56 million in proceeds from transactions that closed after March 31, 2023. Under the provisions of the senior secured term loan agreement, 50% of the proceeds will be used to repay outstanding amounts under the senior secured term loan.
FY2024 Outlook and Priorities
To advance our goal of becoming a leading premium cannabis branded company in North America, Canopy Growth will focus on the following in FY2024:
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 | Net Revenue | Gross Margin % | Adjusted Gross Margin %³ | Net Loss | Adjusted EBITDA⁴ | Free Cash Flow⁵ |
|---|---|---|---|---|---|---|
| Reported | C$87.5 MM | (103%) | (18%) | (C$647.6 MM) | (C$95.6 MM) | (C$142.8 MM) |
| vs. Q4 FY2022² | (14%) | +6,300 bps | +2,700 bps | (10%) | 27% Improvement | (13%) |
| FY2023 Financial Summary | Net Revenue | Gross Margin % | Adjusted Gross Margin %⁶ | Net Loss | Adjusted EBITDA | Free Cash Flow |
|---|---|---|---|---|---|---|
| Reported | C$402.9 MM | (26%) | (3%) | (C$3,309.5 MM) | (C$349.7 MM) | (C$566.8 MM) |
| vs. FY2022² | (21%) | +1,400 bps | +1,000 bps | 901% | 18% Improvement | 3% Improvement |
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 in Ontario, BC, and Alberta.
Focusing BioSteel in North America, advancing innovation at Storz & Bickel to drive growth
BioSteel is continuing to gain market share in Canada, including through its high visibility NHL partnerships and has reached an 11.2% share of convenience and gas channel in Canada7 in Q4 FY2023, up from 3.4% in the prior year. In FY2024, the BioSteel business is focused on expanding distribution in the food, drug, and mass channels and club accounts across Canada.
BioSteel All-Commodity Volume in the U.S. of 37.7% in Q4 FY20238, up from 18.9% 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 U.S. cannabis market
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”).
U.S. THC companies continue to strengthen and expand their businesses
Acreage9 reported Q1 FY2023 revenue of USD $56 million. In Q1 FY2023, Acreage began adult-use retail operations in 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 two New York City dispensaries, Housing Works Cannabis Company and Union Square Travel Agency. Jetty also maintained its position as the #1 Solventless vape in California12 in addition to fully staffing its California sales team to provide coverage of over 500 retail accounts.
Fourth Quarter and FY2023 Financial Summary
Revenues:
Net revenue of $88 million in Q4 FY2023 declined 14% as compared to Q4 FY2022 with the decrease primarily attributable to the divestitures of C3 Cannabinoid Compound Company GmbH (“C³”) in the fourth quarter of FY2022 and the Canadian business-to-consumer cannabis business in the third quarter of FY2023, as well the impacts of increased competition in the Canadian adult use cannabis market and softer performance from Storz & Bickel and This Works. When adjusting for the impact of the divestiture of our Canadian retail business, Canadian cannabis revenues for the period decreased 8% in Q4 FY2023 as compared to Q4 FY2022, and were stable compared to Q3 FY2023.
Net revenue of $403 million in FY2023 declined 21% as compared to FY2022. The decrease is primarily attributable to increased competition in the Canadian adult-use cannabis market, the divestitures of C³ and the Canadian business-to-consumer cannabis business, and softer performance from Storz & Bickel and This Works. These decreases were partially offset by growth of our BioSteel business in the Canadian market.
Gross Margin:
Reported gross margin in Q4 FY2023 was (103%) as compared to (166%) in Q4 FY2022. Excluding non-cash restructuring costs and inventory write-downs associated with the Company’s strategic changes recorded in COGS for a total of $75 million, adjusted gross margin was (18%). Adjusted gross margin during Q4 FY2023 was negatively impacted by higher inventory write-downs and charges relating to costs associated with certain contract manufacturing agreements that are not expected to recur past FY2023 in the BioSteel business unit.
Reported gross margin in FY2023 was (26%) as compared to (40%) in FY2022. Excluding non-cash restructuring costs recorded in COGS of $90 million, adjusted gross margin was (3%) in FY2023. Adjusted gross margin during FY2023 was negatively impacted by higher inventory write-downs and charges relating to costs associated with certain contract manufacturing agreements that are not expected to recur past FY2023 in the BioSteel business unit.
Operating Expenses:
Total SG&A expenses in Q4 FY2023 declined by 11% as compared to Q4 FY2022, driven by year-over-year decreases in general and administrative (“G&A”), research and development (“R&D”) as well as depreciation and amortization expenses. These decreases were primarily due to the restructuring actions announced in April 2022 and February 2023. Partially offsetting these decreases were an increase in BioSteel sales and marketing expenses, relating to the activation of the National Hockey League (“NHL”) partnership announced in July 2022 and other BioSteel sales and marketing activities, as well as acquisition-related costs. Excluding acquisition‑related expenses, the impact of the disposition of C3 in the fourth quarter of FY2022 and the disposition of the Canadian retail business in the Q3 FY2023, as well as the COVID-19 relief program, total SG&A expenses decreased 13% in Q4 FY2023 compared to the prior year period.
Total SG&A expenses in FY2023 declined by 3% as compared to FY2022, driven by year-over-year decreases in G&A, R&D as well as depreciation and amortization expenses. These decreases were primarily due to the restructuring actions announced in April 2022 and February 2023. Partially offsetting these decreases were an increase in BioSteel sales and marketing expenses, relating to the activation of the NHL partnership announced in July 2022 and other BioSteel sales and marketing activities, as well as acquisition-related costs. Excluding acquisition‑related expenses, the impact of the disposition of C3 in the fourth quarter of FY2022 and the disposition of the Canadian retail business in the third quarter of FY2023, as well as the COVID-19 relief program, total SG&A expenses decreased 8% in FY2023 compared to the prior year.
Net Loss:
Net Loss in Q4 FY2023 was $648 million, which is a $59 million increase as compared to Q4 FY2022, driven primarily by an increase in asset impairment and restructuring costs of $164 million partially offset by improved gross margins.
Net Loss in FY2023 was $3,310 million, which is a $2,979 million increase as compared to FY2022, driven primarily by a $1,887 million increase in asset impairment and restructuring costs primarily related to goodwill impairment losses associated with the Company’s cannabis operations reporting unit, as well as a $1,219 million primarily related to the impact of non-cash fair value changes partially offset by improved gross margins.
Adjusted EBITDA:
Adjusted EBITDA loss in Q4 FY2023 was $96 million, a $36 million improvement in Adjusted EBITDA loss as compared to Q4 FY2022 primarily driven by the year-over-year improvement in gross margin and reduced operating expenses.
Adjusted EBITDA loss in FY2023 was $350 million, a $76 million improvement in Adjusted EBITDA loss as compared to FY2022 primarily driven by the year-over-year improvement in gross margin and reduced operating expenses inclusive of the impact of a $64 million reduction in COVID-19 relief payments in FY2023 as compared to FY2022.
Free Cash Flow:
Free Cash Flow in Q4 FY2023 was an outflow of $143 million, a 13% increase in outflow as compared to Q4 FY2022. Relative to Q4 FY2022, the increase in outflow is due to the timing of certain payments in each period and investments in growth initiatives at BioSteel and costs related to the formation of CUSA, partially offset by reduced capital expenditures and impacts of cost reduction actions.
Free Cash Flow in FY2023 was an outflow of $567 million, a 3% decrease in outflow as compared to FY2022. Relative to FY2022, the decrease in outflow is due to the timing of certain payments in each period, reduced capital expenditures and impacts of cost reduction actions, partially offset investments in growth initiatives at BioSteel and costs related to the formation of CUSA.
Cash Position:
Cash and short-term investments were $783 million at March 31, 2023, representing a decrease of $589 million from $1,372 million at March 31, 2022 reflecting the impact of cash used in operating activities, the first tranche of the term loan credit agreement repayment of $118 million, as well as cash used for acquisitions and investments, including the acquisition of the Verona, Virginia manufacturing facility for the BioSteel business and a premium payment made to obtain an option to acquire Acreage Holdings, Inc. (“Acreage”) outstanding debt in connection with the formation of CUSA in October 2022. Partially offsetting these net outflows were net proceeds of $135 million from the issuance of USD$100 million in convertible debentures in February 2023. Debt amounted to $1,307 million at March 31, 2023, representing a decline of $194 million from $1,501 million at March 31, 2022. Subsequent to March 31, 2023, $127 million of debt owing under the credit facility was repaid at $0.93 cents on the dollar for $117 million, and $100 million of the 2023 Notes were settled through the issuance of a promissory note due at the end of the third quarter of FY2025.
| Revenue by Channel | Q4 FY2023 | Q4 FY2022 (As Restated) | vs. Q4 FY2022 |
|---|---|---|---|
| Canada Cannabis | |||
| Canadian Adult-Use Cannabis – Business-to-Business¹⁴ | C$21.6 MM | C$25.8 MM | (16%) |
| Canadian Adult-Use Cannabis – Business-to-Consumer | C$0.0 MM | C$13.1 MM | (100%) |
| Canadian Adult-Use Cannabis Total | C$21.6 MM | C$38.9 MM | (44%) |
| Canadian Medical Cannabis¹⁵ | C$14.1 MM | C$13.1 MM | 8% |
| Canada Cannabis Total | C$35.7 MM | C$52.0 MM | (31%) |
| Rest-of-World Cannabis | |||
| C3 | C$0.0 MM | C$3.1 MM | (100%) |
| Other Rest-of-World Cannabis¹⁶ | C$8.8 MM | C$10.8 MM | (19%) |
| Rest-of-World Cannabis Total | C$8.8 MM | C$13.9 MM | (37%) |
| Storz & Bickel | C$15.5 MM | C$21.6 MM | (28%) |
| BioSteel¹⁷ | C$19.3 MM | C$3.5 MM | NM |
| This Works | C$5.4 MM | C$6.0 MM | (10%) |
| Other | C$2.8 MM | C$4.8 MM | (42%) |
| Net Revenue | C$87.5 MM | C$101.8 MM | (14%) |
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 to Israel in Q4 FY2022, and a decline in our U.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 U.S. GAAP.
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 U.S. GAAP and may not be comparable to similar measures presented by other companies. Adjusted EBITDA is calculated as the reported net income (loss), adjusted to exclude income tax recovery (expense); other income (expense), net; loss on equity method investments; share-based compensation expense; depreciation and amortization expense; asset impairment and restructuring costs; expected credit losses on financial assets and related charges; restructuring costs recorded in cost of goods sold; and charges related to the flow-through of inventory step-up on business combinations, and further adjusted to remove acquisition-related costs. Asset impairments related to periodic changes to the Company’s supply chain processes are not excluded from Adjusted EBITDA given their occurrence through the normal course of core operational activities. The Adjusted EBITDA reconciliation is presented within this news release and explained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“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 Annual Report on Form 10-K filed with the SEC.
Adjusted Gross Margin and Adjusted Gross Margin Percentage are non-GAAP measures used by management that are not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. Adjusted Gross Margin is calculated as gross margin excluding restructuring and other charges recorded in cost of goods sold, and charges related to the flow-through of inventory step-up on business combinations. Adjusted Gross Margin Percentage is calculated as Adjusted Gross Margin divided by net revenue. The Adjusted Gross Margin and Adjusted Gross Margin Percentage reconciliation is presented within this news release and explained in the Company’s Annual Report on Form 10-K filed with the “SEC”.
Contact:
Laura Nadeau
Communications
media@canopygrowth.com
Tyler Burns
Director, Investor Relations
tyler.burns@canopygrowth.com
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 Germany by Storz & Bickel.
Canopy has also established a comprehensive ecosystem to realize the opportunities presented by the U.S. THC market through its rights to Acreage Holdings, a vertically integrated multi-state cannabis operator with principal operations in densely populated states across the Northeast, as well as Wana Brands, a leading cannabis edible brand in North America, and Jetty Extracts, a California-based producer of high-quality cannabis extracts and pioneer of clean vape technology.
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 applicable to our business and their impact, including uncertainty regarding the application of U.S. state and federal law to U.S. hemp (including CBD) products and the scope of regulations by the U.S. Food and Drug Administration (FDA), U.S. Drug Enforcement Administration (DEA), U.S. Federal Trade Commission (FTC), U.S. Patent and Trademark Office (USPTO), U.S. Department of Agriculture (USDA), and equivalent state regulatory agencies.
● Expectations regarding the amount or frequency of impairment losses, including write-downs of intangible assets and goodwill.
● Our ability to refinance debt on favorable terms and comply with covenants contained in our debt facilities and debt instruments.
● The Company’s ability to execute its strategy to accelerate entry into the U.S. cannabis market through the creation of Canopy USA (CUSA).
● Expectations regarding the potential success of, and the costs and benefits associated with, the Reorganization Amendments.
● Expectations related to restructuring actions announced in FY2023, including the potential success, costs, benefits, progress, challenges, strategy changes, operating expenses, employee turnover, and other related impacts on Canadian operations.
● Expectations to capitalize on growth opportunities in the U.S. cannabis sector and the anticipated benefits of this strategy.
● The timing and outcome of the arrangement agreement with Acreage and CUSA, including regulatory approvals, satisfaction of closing conditions, acquisition of Acreage shares, and the Company’s exercise of its option to acquire the Fixed Shares.
● The negotiation and potential exchange of the note held by Constellation Brands, Inc. (CBI) for Company shares before its maturity.
● The anticipated timing and occurrence of the Company’s special shareholders’ meeting to approve the Amendment Proposal creating and authorizing the issuance of Exchangeable Shares.
● Expectations regarding laws and regulations affecting the U.S. hemp industry, including regulations issued by the USDA and state regulatory authorities.
● Expectations regarding the success, costs, and benefits of acquisitions, joint ventures, strategic alliances, equity investments, and dispositions.
● The grant, renewal, and impact of licenses or supplemental licenses to conduct cannabis-related activities.
● International operations and joint venture interests, including regulatory approvals, licensing, anticipated costs, timing, and expected business impact.
● Our ability to successfully create, launch, and scale cannabis-based and U.S. hemp-derived consumer products in legal markets.
● The benefits, viability, safety, efficacy, dosing, and social acceptance of cannabis, including CBD and other cannabinoids.
● Our remediation plan and ability to address material weaknesses in internal controls over financial reporting.
● Our ability to continue operating as a going concern.
● The anticipated benefits and impact of investments from Constellation Brands, Inc. (CBI) and its affiliated companies.
● The potential exercise of warrants, pre-emptive rights, and top-up rights held by the CBI Group.
● Expectations regarding the use of proceeds from equity financings, including funds received from the CBI Group Investments.
● The legalization of medical and adult-use cannabis in jurisdictions outside Canada, the timing and impact of legalization, and our plans to participate in those markets.
● Our ability to execute our overall business strategy and achieve its anticipated benefits.
● The ongoing impact of legalization of additional cannabis product categories for adult use in Canada and related federal, provincial, territorial, and municipal regulations.
● The ongoing impact of evolving provincial, territorial, and municipal regulations governing cannabis sales and distribution, including restrictions affecting federally regulated cannabis producers.
● The timing and nature of legislative changes in the United States regarding cannabis regulation, including tetrahydrocannabinol (THC).
● The future performance of our business and operations.
● Our competitive advantages and business strategies.
● Competitive conditions within the cannabis industry.
● Expected growth in the number of customers using our products.
● Our ability to identify, develop, commercialize, and expand cannabinoid technologies and research and development initiatives.
● Expectations regarding revenues, expenses, and anticipated cash requirements.
● Expectations regarding cash flow, liquidity, and funding sources.
● Expectations regarding future capital expenditures.
● Expansion of production and manufacturing capacity, associated costs and timing, and receipt of required production and sales licenses.
● Expected growth in cultivation, production, and supply chain capacity.
● Expectations regarding the resolution of litigation, legal proceedings, regulatory reviews, and investigations.
● Expectations regarding future production costs.
● Expectations regarding future sales and distribution channels and networks.
● Expected methods of distributing and selling our products.
● Future product offerings.
● Anticipated future gross margins of our operations.
● Accounting standards and estimates.
● Expectations regarding our distribution network.
● Expectations regarding the costs and benefits of contracts and agreements with third parties, including third-party supply and manufacturing agreements.
● Expectations regarding 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; (x) our ability to obtain qualified staff, equipment and services in a timely and cost-efficient manner; (xi) our ability to conduct operations in a safe, efficient and effective manner; (xii) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our recent acquisitions into our existing operations; 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 U.S. hemp products in vaping devices; the risks and uncertainty regarding future product development; changes in regulatory requirements in relation to our business and products; our reliance on licenses issued by and contractual arrangements with various federal, state and provincial governmental authorities; inherent uncertainty associated with projections; future levels of revenues and the impact of increasing levels of competition; third-party manufacturing risks; third-party transportation risks; inflation risks; our exposure to risks related to an agricultural business, including wholesale price volatility and variable product quality; changes in laws, regulations and guidelines and our compliance with such laws, regulations and guidelines; risks relating to inventory write downs; risks relating to our ability to refinance debt as and when required on terms favorable to us and to comply with covenants contained in our debt facilities and debt instruments; risks associated with jointly owned investments; our ability to manage disruptions in credit markets or changes to our credit ratings; the success or timing of completion of ongoing or anticipated capital or maintenance projects; risks related to the integration of acquired businesses; the timing and manner of the legalization of cannabis in the United States; business strategies, growth opportunities and expected investment; counterparty risks and liquidity risks that may impact our ability to obtain loans and other credit facilities on favorable terms; the potential effects of judicial, regulatory or other proceedings, litigation or other investigations, or threatened litigation or proceedings or investigations, on our business, financial condition, results of operations and cash flows; risks associated with divestment and restructuring; 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; consumer demand for cannabis and U.S. hemp products; the risks that our restructuring actions will not result in the expected cost-savings, efficiencies and other benefits or will result in greater than anticipated turnover in personnel; the implementation and effectiveness of key personnel changes; risks related to stock exchange restrictions; risks related to the protection and enforcement of our intellectual property rights; the risk 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 capital, environmental or maintenance expenditures, general and administrative and other expenses; risks relating to the long term macroeconomics effects of the COVID-19 pandemic and any future pandemic or epidemic; 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, 2023. 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.
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, Smiths Falls, Ontario, K7A 0A8 or by email to invest@canopygrowth.com. Investors should read the Preliminary Proxy Statement (and the Definitive Proxy Statement when it becomes available) because they will contain important information.
Schedule 1
CANOPY GROWTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars, except number of shares and per share data, unaudited)
| Assets | March 31, 2023 | March 31, 2022 (As Restated) |
|---|---|---|
| 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 & 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 & Shareholders’ Equity | March 31, 2023 | March 31, 2022 (As Restated) |
|---|---|---|
| Current Liabilities | ||
| Accounts Payable | 76,234 | 64,270 |
| Other Accrued Expenses & 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)¹ | 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 & Shareholders’ Equity | 2,439,098 | 5,605,260 |
Schedule 2
CANOPY GROWTH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of Canadian dollars, except number of shares and per share data, unaudited)
| Statement of Operations | 2023 | 2022 (As Restated) |
|---|---|---|
| Revenue | 98,153 | 116,119 |
| Excise Taxes | 10,618 | 14,353 |
| Net Revenue | 87,535 | 101,766 |
| Cost of Goods Sold | 178,039 | 271,090 |
| Gross Margin | (90,504) | (169,324) |
| Operating Expenses | ||
| Selling, General & Administrative Expenses | 104,334 | 117,591 |
| Share-Based Compensation | 4,740 | 11,669 |
| Asset Impairment & Restructuring Costs | 405,129 | 241,141 |
| Total Operating Expenses | 514,203 | 370,401 |
| Operating Loss | (604,707) | (539,725) |
| Loss from Equity Method Investments | – | (100) |
| Other Income (Expense), Net | (59,263) | (57,428) |
| Loss Before Income Taxes | (663,970) | (597,153) |
| Income Tax Recovery | 16,361 | 8,458 |
| Net Loss | (647,609) | (588,695) |
| Net Loss Attributable to Noncontrolling Interests & Redeemable Noncontrolling Interest | (7,529) | (6,217) |
| Net Loss Attributable to Canopy Growth Corporation | (640,080) | (582,478) |
| Basic & Diluted Loss Per Share | (1.28) | (1.48) |
| Basic & Diluted Weighted Average Common Shares Outstanding | 498,778,062 | 394,248,404 |
Schedule 3
CANOPY GROWTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars, unaudited)
| Cash Flows | FY2023 | FY2022 (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 & 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 & Restructuring Costs | 2,227,989 | 332,949 |
| Income Tax Recovery | (4,774) | (8,948) |
| Non-Cash Fair Value Adjustments & Charges Related to Settlement of Unsecured Senior Notes | 353,827 | (866,739) |
| Changes in Operating Assets & Liabilities | ||
| Amounts Receivable | (9,906) | 13,603 |
| Inventory | 55,638 | 173,037 |
| Prepaid Expenses & Other Assets | 2,484 | 24,552 |
| Accounts Payable & 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 Property, Plant & Equipment | (9,217) | (36,684) |
| Purchases of Intangible Assets | (1,337) | (11,429) |
| Proceeds from Sale of Property, Plant & Equipment | 13,609 | 27,279 |
| Redemption of Short-Term Investments | 502,589 | 545,991 |
| Net Cash Proceeds from 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 & Warrants | 1,049 | 2,700 |
| Proceeds from Exercise of Stock Options | 281 | 5,567 |
| Issuance of Long-Term Debt & 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 & Cash Equivalents | 44,863 | (18,123) |
| Net Decrease in Cash & Cash Equivalents | (98,998) | (378,648) |
| Cash & Cash Equivalents – Beginning of Period | 776,005 | 1,154,653 |
| Cash & 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)
| Adjusted Gross Margin Reconciliation | 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 Step-Up on Business Combinations | – | 4,163 |
| Adjusted Gross Margin¹ | (15,629) | (46,046) |
| Adjusted Gross Margin Percentage¹ | (18%) | (45%) |
| Adjusted Gross Margin Reconciliation | FY2023 | FY2022 (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 Step-Up on Business Combinations | – | 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)
| Adjusted EBITDA Reconciliation | 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 & Amortization² | 20,771 | 30,489 |
| Asset Impairment & 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 Step-Up on Business Combinations | – | 4,163 |
| Adjusted EBITDA¹ | (95,644) | (131,876) |
| Adjusted EBITDA Reconciliation | FY2023 | FY2022 (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 & Amortization² | 84,517 | 114,418 |
| Asset Impairment & 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 Step-Up on Business Combinations | – | 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)
| Free Cash Flow Reconciliation | 2023 | 2022 |
|---|---|---|
| Net Cash Used in Operating Activities | (139,737) | (126,686) |
| Purchases of & Deposits on Property, Plant & Equipment | (3,041) | (64) |
| Free Cash Flow¹ | (142,778) | (126,750) |
1Free cash flow is a non-GAAP measure. See “Non-GAAP Measures”.
| Free Cash Flow Reconciliation | FY2023 | FY2022 |
|---|---|---|
| Net Cash Used in Operating Activities | (557,546) | (545,811) |
| Purchases of & Deposits on Property, Plant & Equipment | (9,217) | (36,684) |
| Free Cash Flow¹ | (566,763) | (582,495) |
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)
| Metric | 2023 | 2022 (As Restated) |
|---|---|---|
| Net Revenue | 35,731 | 52,031 |
| Gross Margin (As Reported) | (69,825) | (114,895) |
| Gross Margin % (As Reported) | (195%) | (221%) |
| Adjustments | ||
| Restructuring Costs Recorded in Cost of Goods Sold | 69,589 | 65,520 |
| Charges Related to Inventory Step-Up on Business Combinations | – | 4,163 |
| Adjusted Gross Margin¹ | (236) | (45,212) |
| Adjusted Gross Margin %¹ | (1%) | (87%) |
| Metric | 2023 | 2022 (As Restated) |
|---|---|---|
| Revenue | 8,770 | 13,944 |
| Gross Margin (As Reported) | 354 | (53,120) |
| Gross Margin % (As Reported) | 4% | (381%) |
| Adjustments | ||
| Restructuring Costs Recorded in Cost of Goods Sold | 938 | 53,595 |
| Adjusted Gross Margin¹ | 1,292 | 475 |
| Adjusted Gross Margin %¹ | 15% | 3% |
| Metric | 2023 | 2022 (As Restated) |
|---|---|---|
| Revenue | 15,494 | 21,624 |
| Gross Margin (As Reported) | 5,303 | 9,661 |
| Gross Margin % (As Reported) | 34% | 45% |
| Adjusted Gross Margin¹ | 5,303 | 9,661 |
| Adjusted Gross Margin %¹ | 34% | 45% |
| Metric | 2023 | 2022 (As Restated) |
|---|---|---|
| Revenue | 19,298 | 3,475 |
| Gross Margin (As Reported) | (26,185) | (13,361) |
| Gross Margin % (As Reported) | (136%) | (384%) |
| Adjustments | ||
| Restructuring Costs Recorded in Cost of Goods Sold | 3,202 | – |
| Adjusted Gross Margin¹ | (22,983) | (13,361) |
| Adjusted Gross Margin %¹ | (119%) | (384%) |
| Metric | 2023 | 2022 (As Restated) |
|---|---|---|
| Revenue | 5,352 | 5,988 |
| Gross Margin (As Reported) | 1,223 | 2,377 |
| Gross Margin % (As Reported) | 23% | 40% |
| Adjustments | ||
| Restructuring Costs Recorded in Cost of Goods Sold | 1,146 | – |
| Adjusted Gross Margin¹ | 2,369 | 2,377 |
| Adjusted Gross Margin %¹ | 44% | 40% |
1 Adjusted gross margin and adjusted gross margin percentage are non-GAAP measures. See “Non-GAAP Measures”.
| Metric | FY2023 | FY2022 (As Restated) |
|---|---|---|
| Net Revenue | 187,067 | 257,910 |
| Gross Margin (As Reported) | (95,291) | (212,820) |
| Gross Margin % (As Reported) | (51%) | (83%) |
| Adjustments | ||
| Restructuring Costs Recorded in Cost of Goods Sold | 71,278 | 67,492 |
| Charges Related to the Flow-Through of Inventory Step-Up on Business Combinations | – | 11,847 |
| Adjusted Gross Margin¹ | (24,013) | (133,481) |
| Adjusted Gross Margin %¹ | (13%) | (52%) |
| Metric | FY2023 | FY2022 (As Restated) |
|---|---|---|
| Revenue | 38,949 | 79,306 |
| Gross Margin (As Reported) | (3,322) | (28,875) |
| Gross Margin % (As Reported) | (9%) | (36%) |
| Adjustments | ||
| Restructuring Costs Recorded in Cost of Goods Sold | 8,224 | 56,177 |
| Adjusted Gross Margin¹ | 4,902 | 27,302 |
| Adjusted Gross Margin %¹ | 13% | 34% |
| Metric | FY2023 | FY2022 (As Restated) |
|---|---|---|
| Revenue | 64,845 | 85,410 |
| Gross Margin (As Reported) | 26,112 | 37,284 |
| Gross Margin % (As Reported) | 40% | 44% |
| Adjusted Gross Margin¹ | 26,112 | 37,284 |
| Adjusted Gross Margin %¹ | 40% | 44% |
| Metric | FY2023 | FY2022 (As Restated) |
|---|---|---|
| Revenue | 69,649 | 34,622 |
| Gross Margin (As Reported) | (40,613) | (15,722) |
| Gross Margin % (As Reported) | (58%) | (45%) |
| Adjustments | ||
| Restructuring Costs Recorded in Cost of Goods Sold | 8,683 | – |
| Adjusted Gross Margin¹ | (31,930) | (15,722) |
| Adjusted Gross Margin %¹ | (46%) | (45%) |
| Metric | FY2023 | FY2022 (As Restated) |
|---|---|---|
| Revenue | 26,029 | 32,296 |
| Gross Margin (As Reported) | 10,205 | 14,800 |
| Gross Margin % (As Reported) | 39% | 46% |
| Adjustments | ||
| Restructuring Costs Recorded in Cost of Goods Sold | 2,300 | – |
| Adjusted Gross Margin¹ | 12,505 | 14,800 |
| Adjusted Gross Margin %¹ | 48% | 46% |
Schedule 8
Summary of BioSteel Revenue and Adjusted EBITDA Restatement Impacts
BioSteel – Net Revenue
| Period | FY2022 | Q1 FY2023 | Q2 FY2023 | Q3 FY2023 | YTD Q3 FY2023 |
|---|---|---|---|---|---|
| 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
| Period | FY2022 | Q1 FY2023 | Q2 FY2023 | Q3 FY2023 | YTD Q3 FY2023 |
|---|---|---|---|---|---|
| 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
| Period | FY2022 | Q1 FY2023 | Q2 FY2023 | Q3 FY2023 | YTD Q3 FY2023 |
|---|---|---|---|---|---|
| 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) |
1 Unless otherwise indicated, market share data disclosed in this press release is calculated using the Company’s internal proprietary market share tool
that utilizes point of sales data supplied by third-party data providers and government agencies.
2 Restated
3 Adjusted gross margin is a non-GAAP measure, and for Q4 FY2023 excludes $75 million of restructuring costs recorded in COGS (Q4 FY2022 – excludes $4.2 million related to the flow-through of inventory step-up associated with the acquisition of Supreme Cannabis and $119 million of restructuring costs recorded in COGS). See “Non-GAAP Measures” and Schedule 4 for a reconciliation of net revenue to adjusted gross margin.
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 $90 million of restructuring costs recorded in cost of goods sold (FY2022 – excludes $11.8 million related to the flow-through of inventory step-up associated with the acquisition of Supreme Cannabis and $123.7 million of restructuring costs recorded in cost of goods sold). See “Non-GAAP Measures” and Schedule 4 for a reconciliation of net revenue to adjusted gross margin.
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.
13 In Q4 FY2023, we are reporting our financial results for the following five reportable segments: (i) Canada cannabis; (ii) rest-of-world cannabis; (iii) Storz & Bickel; (iv) BioSteel; and (v) This Works. Information regarding segment net revenue and segment gross margin for the comparative periods has been restated to reflect the aforementioned change in reportable segments.
14 For Q4 FY2023, amount is net of excise taxes of $9.3 million and other revenue adjustments of $0.6 million (Q4 FY2022 – $13.2 million and $3.3 million, respectively). For FY2023, amount is net of excise taxes of $43.1 million and other revenue adjustments of $3.5 million (FY2022 – $56.7 million and $7.3 million, respectively).
15 For Q4 FY2023, amount is net of excise taxes of $1.3 million (Q4 FY2022 – $1.2 million). For FY2023, amount is net of excise taxes of $4.9 million (FY2022 – $5.2 million).
16 For Q4 FY2023, amount reflects other revenue adjustments of $3.7 million (Q4 FY2022 – $1.8 million). For FY2023, amount reflects other revenue adjustments of $8.6 million (FY2022 – $4.3 million)
17 For Q4 FY2023, amount reflects other revenue adjustments of $6.6 million (Q4 FY2022 – $3.9 million). For FY2023, amount reflects other revenue adjustments of $14.2 million (FY2022 – $9.9 million)