Canopy Growth Reports Full Year and 4th Quarter Fiscal 2020 Financial Results; Provides Strategic Review Update
Generated Net Revenue of $399 million in FY 2020, up 76% over FY 2019
In connection with previously announced organizational and strategic review, recorded impairment and restructuring charges of $743 million; the majority of which are non-cash charges
Gross Margin of (85)% in Q4 FY2020; excluding restructuring and other charges, achieved Adjusted Gross Margin of 42%
Net Loss of $1.3 billion; Adjusted EBITDA loss of $102 million in Q4 2020
SMITHS FALLS, ON, May 29, 2020 /PRNewswire/ - Canopy Growth Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (NYSE: CGC) today announced its financial results for the fourth quarter and full twelve-month fiscal year ended March 31, 2020. The Company is also sharing details of its new strategic plan aimed at winning in priority markets and categories and executing a path to profitability. All financial information in this press release is reported in millions of Canadian dollars, unless otherwise indicated. The fourth quarter and full twelve-month fiscal year 2020 financial results presented in this press release have been prepared in accordance with U.S. GAAP.
"Through the COVID-19 pandemic we have worked hard to ensure the health and well-being of our teams and customers and the continuity of our business. During this time, our team has rolled out our exciting new cannabis-infused beverages and vape products in Canada and a portfolio of CBD products in the US," shared CEO David Klein. "True to key priorities that I have outlined for Canopy, we have taken steps to align our capacity with the current market demand and focus our resources against the core markets with the largest and most tangible near-term profit opportunity."
Added Klein, "I am excited to implement our strategy reset and organization redesign over the course of fiscal 2021. We have a renewed strategic focus and a clear change agenda that is already underway. We are building what we believe is the best cannabis company in the world by putting the consumer at the heart of everything we do and are re-aligning our organization to be faster and more agile."
Strategic and Organizational Update
Canopy Growth's overall strategy is to unleash the full potential of cannabis, capture sizable market share in focus categories and markets and execute a path to profitability to build sustainable, long-term shareholder value.
The Company no longer strives to be the first to every market, but strives to the best and become a leading consumer insights and product development company in select priority markets, that matches products and consumer preferences in the cannabis space. To achieve this, Canopy Growth will focus on:
-- Becoming a relentlessly consumer-centric organization by building
world-class consumer insights and analytics, coupled with focused,
leading-edge R&D and innovation to produce a differentiated product
portfolio that will delight consumers. The Company will bring these
products to the hands of consumers through best-in-class sales
execution;
-- Markets and product categories with the highest and most tangible profit
opportunities in the near term. Core markets will be Canada, US and
Germany with focus on recreational and medical. To capture future
opportunities in emerging markets and categories outside the core,
Canopy Growth will deploy an asset-light approach;
-- Driving quality in all aspects of our operation and be positioned to
deliver the right product at the right time at the right price from the
right facility; and
-- Continuing to lead the industry and set industry standards. This
includes spearheading the next phase of the cannabis industry evolution
and shaping how the industry evolves. The Company will continue to give
back to neighbors and communities through its Grow Good Together
initiatives.
Canopy Growth expects Fiscal 2021 to be a transition year as the Company resets its strategic focus, rolls out a new organizational design, and implements a comprehensive operational and supply chain productivity program. Given this, as well as the significant COVID-19 related uncertainties that exist, the Company is withdrawing its previously communicated milestones for achieving positive Adjusted EBITDA and Net Income. Depending on the impacts of COVID-19, Canopy Growth may provide new metrics by which to measure the Company's performance in the second half of fiscal 2021.
Fourth Quarter Fiscal 2020 Financial Summary
Net revenue Gross margin
Adjusted
Net loss Adjusted Free cash
percentage gross margin EBITDA(2) flow(3)
percentage(1)
Reported $107.9 (85%) 42% $(1,326.4) $(102.0) $(304.7)
---
vs. Q3 2020 (13%)
NM
1,100 bps (1110%) (5%) 15%
---
vs. Q4 2019 15%
NM
2,000 bps (282%) (8%) 22%
---
Fiscal Year 2020 Financial Summary
Net revenue Gross margin
Adjusted Net loss Adjusted Free cash
percentage gross margin EBITDA(2) flow(3)
percentage4
Reported $398.8 (8%) 26% $(1,387.4) $(442.8) $(1,477.6)
---
vs. Fiscal
2019 76%
(2,000) bps
1,400 bps (95%) (53%) (25%)
---
(1) Adjusted gross margin is a non-
GAAP measure, and for Q4 2020
excludes (i) restructuring and
other charges of $132.1 million
related to the impact of
restructuring actions; and (ii)
$4.7 million related to the flow-
through of inventory step-up
associated with fiscal 2020
business combinations. See "Non-
GAAP Measures".
(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".
4 Adjusted gross margin is a non-
GAAP measure, and for fiscal 2020
excludes charges of $136.8 million
incurred in Q4 2020, as described
in footnote 1 above. See "Non-
GAAP Measures".
Fourth Quarter Fiscal 2020 Corporate Financial Highlights
-- Revenues: Net revenue in Q4 2020 decreased 13% versus Q3 2020 driven
primarily by lower Canadian recreational revenue.
-- Gross margin: : Reported gross margin, including one-time restructuring
and other charges, was (85%). Adjusted gross margin, excluding one-time
restructuring and other charges and inventory step-up costs, was 42% in
Q4 2020, representing an increase of 1,100 bps from Q3 2020. Adjusted
gross margin performance in Q4 2020 was positively impacted by higher
facility utilization and growth in high margin international medical
cannabis sales.
-- Operating expenses: SG&A expenses in Q4 2020 increased 17% over Q3 2020
driven primarily by a combined $15 million increase in General &
Administrative and Sales & Marketing expenses.
-- Net Loss: Net loss of $1.3 billion in Q4 2020, primarily driven by
impairment and restructuring charges, other impairment charges which
were primarily identified during our annual impairment testing, and
other non-cash fair value changes.
-- Adjusted EBITDA: Adjusted EBITDA loss of $102 million in Q4 2020, a $5
million wider loss versus Q3 2020 driven by lower sales and higher
operating expenses.
-- Cash Position: Gross cash balance was $2.0 billion at March 31, 2020,
down from $2.3 billion at the end of Q3 2020 reflecting the EBITDA loss,
capital investments and mergers and acquisitions activities.
-- Restructuring and Impairment Costs: In line with our previous
announcement (March 4, 2020), we recorded a pre-tax restructuring and
impairment charge of $743 million in Q4 2020, of which $28 million is
estimated to be a cash charge. Additionally, we recorded impairment
charges of $100 million Q4 2020, which were primarily identified during
our annual impairment testing process.
Business & Operational Highlights
-- COVID-19 response: Management has been closely monitoring the impact of
COVID-19, with a focus on the health and safety of our employees,
business continuity and supporting our communities. The majority of
non-production related staff continue to work from home; we implemented
daily screening process for production facility access; temporarily
closed corporate-owned retail stores in mid-March but re-opened 20
stores with reduced hours as well as click & collect ordering; rolled
out click & collect to 100% of all Tokyo Smoke and Tweed licensed stores
and added same day delivery for Tokyo Smoke partner stores.
-- UL certified Juju Power 510 battery as well as 510 vape cartridges under
Tweed and Twd. brands, representing a total of five SKUs, are available
in the Canadian recreational market.
-- UL certified Tokyo Smoke Luma pod-based vape devices, Luma "Go" pods and
Luma "Pause" pods are available in the Canadian recreational market.
-- Ready to Drink ("RTD") beverages under Tweed and Houseplant brands,
representing a total of three SKUs, are available in the Canadian
recreational market.
-- Company has expanded offering of Hemp-derived CBD products with the
launch of a line of First & Free topical creams in select states in the
US and the launch of This Works' line of clinically-proven CBD Booster
skin products in the United Kingdom, Germany and select states in the
US.
-- On May 1, 2020, an indirect wholly-owned subsidiary of Constellation
Brands (NYSE:STZ) exercised warrants for approximately C$245 million ,
representing approximately 5.1% of our issued and outstanding common
shares.
Fourth Quarter and Fiscal Year 2020 Financial and Operational Review
(in millions of
Canadian dollars,
unaudited) Q4 2020 vs. Q3 2020 vs. Q4 2019 FY2020 vs. FY2019
---
Canadian recreational
revenue
-Business to business $36.7 (31%) (36%) $157.3 34%
-Business to consumer $13.1 (14%) 12% $52.0 125%
---
Canadian recreational
revenue $49.8 (28%) (28%) $209.3 49%
---
Canadian medical
revenue $14.9 1% 29% $56.8 (17%)
---
International medical
revenue $20.7 11% 1051% $68.0 574%
---
All other revenue $29.7 (11%) 23% $105.5 210%
---
Excise taxes $(7.2) (39%) (42%) $(40.8) 51%
---
Net revenue $107.9 (13%) 15% $398.8 76%
---
(in millions of
Canadian dollars,
unaudited) Q4 2020 vs. Q3 2020 vs. Q4 2019 FY2020 vs. FY2019
---
Canadian recreational
revenue
- Dry bud(1) $48.9 (29%) 51% $238.1 188%
-Oils, softgels and
Cannabis 2.0
products(2) $6.3 34% (83%) $22.7 -61%
-Other revenue
adjustments(3) $(5.4) 2%
NM $(51.5)
NM
---
Global medical revenue
- Dry bud $9.8 7% 34% $35.8 -30%
-Oils and softgels $25.8 6% 329% $89.0 224%
---
All other revenue $29.7 (11%) 23% $105.5 210%
---
Excise taxes4 $(7.2) (39%) (42%) $(40.8) 51%
---
Net revenue $107.9 (13%) 15% $398.8 76%
---
(1) Excludes the impact of other
revenue adjustments.
(2) Cannabis 2.0 products include
cannabis-infused chocolates,
cannabis-infused beverages, and
cannabis vape products (including
power sources such as rechargeable
and compact batteries, ready-to-go
vape pens, and cartridges/vape
pods)
(3) Other revenue adjustments
represent the Company's
determination of returns and pricing
adjustments, and relate to the
Canadian recreational business-to-
business channel.
4 Excise taxes is presented net of
the impact from other revenue
adjustments.
Canadian Cannabis
-- Recreational B2B sales in Q4 2020 decreased 31% from Q3 2020 as growth
in softgels, oil, and Cannabis 2.0 products was more than offset by an
overall decline in flower and pre-roll joints.
-- Recreational B2C sales in Q4 2020 decreased 14% from prior quarter due
to the expected off peak seasonal demand decline and the closure of
corporate-owned retail stores late in the quarter in response to
COVID-19.
-- Medical sales in Q4 2020 remained consistent quarter over quarter (Q3
2020 vs. Q4 2020).
International Cannabis
-- C3 revenue in Q4 2020 increased 10% over Q3 2020.
-- Germany cannabis sales increased 14% in Q4 2020 over Q3 2020 benefiting
from improved supply and increased demand.
-- International cannabis revenue accounted for 24% of total cannabis
revenues in Q4 2020.
Strategic Acquisitions
-- This Works sales in Q4 2020 were consistent with seasonally strong Q3
2020.
-- Storz & Bickel ("S&B") vaporizer revenue decreased over Q3 2020 due to
seasonal decline.
-- BioSteel Sports Nutrition revenue decreased by 20% over Q3 2020 due to
expected seasonal decline and reduction of thirty-party distribution and
retail in response to COVID-19.
Webcast and Conference Call Information
The Company will host a conference call and audio webcast with David Klein, CEO and Mike Lee, CFO at 10:00 AM Eastern Time on May 29, 2020.
Webcast Information
A live audio webcast will be available at:
https://produceredition.webcasts.com/starthere.jsp?ei=1308617&tp_key=850fd370f4
Replay Information
A replay of the call will be accessible by webcast, until 11:59 PM ET on August 27, 2020, at
https://produceredition.webcasts.com/starthere.jsp?ei=1308617&tp_key=850fd370f4
U.S. GAAP Financial Reporting
Effective April 1, 2020, Canopy Growth is considered a U.S. domestic issuer and is required to prepare financial statements in compliance with U.S. GAAP. Accordingly, our consolidated audited financial statements for the year ended March 31, 2020, including all comparative figures, have been restated in accordance with these standards.
As part of this transition, Canopy Growth will also be required to provide an auditor attestation report under Section 404(b) of the Sarbanes-Oxley Act in connection with its Annual Report on Form 10-K to be filed with the Securities and Exchange Commission ("SEC").
Non-GAAP Measures
Adjusted EBITDA is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. Adjusted EBITDA is calculated as the reported net loss, adjusted to exclude income tax recovery (expense), other income (expense), net, and loss on equity method investments, share-based compensation expense, depreciation and amortization expense, asset impairment and restructuring costs, restructuring and other charges recorded in cost of goods sold, and charges related to the flow-through of inventory step-up on business combinations, and further adjusted to remove acquisition-related costs. The Adjusted EBITDA reconciliation is presented within this news release and explained in the Company's Annual Report on Form 10-K to be filed with the SEC.
Adjusted Gross Margin 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 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 associated with business combinations. The Adjusted Gross Margin reconciliation is presented within this news release.
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 to be filed with the SEC.
The following schedules are provided in this news release:
-- Schedule 1 - Consolidated Balance Sheet at March 31, 2020 and March 31,
2019
-- Schedule 2 - Consolidated Statements of Operations for FY2020 and FY2019
-- Schedule 3 - Consolidated Statements of Operations for Q4 2020 and Q4
2019
-- Schedule 4 - Consolidated Statements of Cash Flows for FY2020 and FY2019
-- Schedule 5 - Adjusted EBITDA Reconciliations for Q4 2020, Q3 2020, Q2
2020, Q1 2020, and FY2020
-- Schedule 6 - Adjusted EBITDA - IFRS to US GAAP Differences for Q3 2020,
Q2 2020, and Q1 2020
-- Schedule 7 - Gross Margin - IFRS to US GAAP Differences for Q4 2020, Q3
2020, Q2 2020, Q1 2020, and FY2020
-- Schedule 8 - Adjusted Gross Margin Reconciliations for Q4 2020, Q3 2020,
Q2 2020, Q1 2020, and FY2020
-- Schedule 9 - Free Cash Flow Reconciliation for Q4 2020 and FY2020
Exemption for Filing of Restated Interim Financial Reports
As of April 1, 2020, the Company is considered an "SEC issuer" as defined under National Instrument 51-102 - Continuous Disclosure Obligations ("NI-51-102") and must file restated interim financial reports prepared in accordance with the generally accepted accounting principles in the United States that the SEC has identified as having substantial authoritative support, as supplemented by Regulation S-X and Regulation S-B under the 1934 Act ("U.S. GAAP") for the interim periods since its most recently completed financial year for which annual financial statements have been filed (the "Restated Interim Financial Reports") on or before the deadline for the Company to file its audited annual financial statements for the year ended March 31, 2020, being June 1, 2020.
The Company is relying on an exemption granted by the Ontario Securities Commission to provide the Company with an additional 45 days from the deadline otherwise applicable under NI 51-102. As such, the Company will be filing its Restated Interim Financial Reports and related MD&A prepared in accordance with U.S. GAAP on or before July 16, 2020. The Company confirms that its management and other insiders are subject to our Insider Trading Policy which contains an insider trading black-out policy that reflects the principles in Section 9 of National Policy 11-207 - Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions.
About Canopy Growth Corporation
Canopy Growth (TSX:WEED, NYSE:CGC) is a world-leading diversified cannabis, hemp and cannabis device company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms, as well as medical devices through the Company's subsidiary, Storz & Bickel GMbH & Co. KG. From product and process innovation to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company one product, site and country at a time. The Company has operations in over a dozen countries across five continents.
The Company's medical division, Spectrum Therapeutics is proudly dedicated to educating healthcare practitioners, conducting robust clinical research, and furthering the public's understanding of cannabis, and has devoted millions of dollars toward cutting edge, commercializable research and IP development. Spectrum Therapeutics sells a range of full-spectrum products using its colour-coded classification Spectrum system as well as single cannabinoid Dronabinol under the brand Bionorica Ethics.
The Company operates retail stores across Canada under its award-winning Tweed and Tokyo Smoke banners. Tweed is a globally recognized cannabis brand which has built a large and loyal following by focusing on quality products and meaningful customer relationships.
From our public listing on the Toronto Stock Exchange and New York Stock Exchange to our continued international expansion, pride in advancing shareholder value through leadership is engrained in all we do at Canopy Growth. Canopy Growth has established partnerships with leading sector names including cannabis icons Snoop Dogg and Seth Rogen, breeding legends DNA Genetics and Green House Seeds, and Fortune 500 alcohol leader Constellation Brands, to name but a few. Canopy Growth operates eleven licensed cannabis production sites with over 5.2 million square feet of production capacity, including over one million square feet of GMP certified production space. For more information visit www.canopygrowth.com
Notice Regarding Forward Looking Statements
This press release contains "forward-looking statements" within the meaning of applicable securities laws, which involve certain known and unknown risks and uncertainties. Forward-looking statements predict or describe our future operations, business plans, business and investment strategies and the performance of our investments. These forward-looking statements are generally identified by their use of such terms and phrases as "intend," "goal," "strategy," "estimate," "expect," "project," "projections," "forecasts," "plans," "seeks," "anticipates," "potential," "proposed," "will," "should," "could," "would," "may," "likely," "designed to," "foreseeable future," "believe," "scheduled" and other similar expressions. Our actual results or outcomes may differ materially from those anticipated. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.
Forward-looking statements include, but are not limited to, statements with respect to:
-- the uncertainties associated with the COVID-19 pandemic, including our
ability to continue operations, the ability of our suppliers and
distribution channels to continue to operate, and the use of our
products by consumers, and disruptions to the global and local economies
due to related stay-at-home orders, quarantine policies and restrictions
on travel, trade and business operations and a reduction in
discretionary consumer spending;
-- laws and regulations and any amendments thereto applicable to our
business and the impact thereof, including uncertainty regarding the
application of U.S. state and federal law to U.S. hemp (including CBD)
products and the scope of any regulations by the U.S. Federal Drug
Administration, the U.S. Federal Trade Commission, the U.S. Patent and
Trademark Office, the U.S. Department of Agriculture (the "USDA") and
any state equivalent regulatory agencies over U.S. hemp (including CBD)
products;
-- expectations regarding the regulation of the U.S. hemp industry in the
U.S., including the promulgation of regulations for the U.S. hemp
industry by the USDA;
-- expectations regarding the potential success of, and the costs and
benefits associated with, our acquisitions, joint ventures, strategic
alliances and equity investments;
-- the plan of arrangement with Acreage Holdings, Inc., including the
consummation of such acquisition upon the occurrence or waiver of
changes in U.S. federal law to permit the general cultivation,
distribution and possession of marijuana or to remove the regulation of
such activities from the federal laws of the United States and our
intention to waive such condition as soon as the policies of the New
York Stock Exchange and/or the Toronto Stock Exchange permit completion
of the acquisition, provided that completion of the acquisition would
not violate any third-party agreements, including those entered into by
us with Constellation Brands, Inc. and its affiliates (together, the
"CBI Group");
-- the grant, renewal and impact of any license or supplemental license to
conduct activities with cannabis or any amendments thereof;
-- our international activities and joint venture interests, including
required regulatory approvals and licensing, anticipated costs and
timing, and expected impact;
-- the ability to successfully create and launch brands and further create,
launch and scale cannabis-based products and U.S. hemp-derived consumer
products in jurisdictions where such products are legal and that we
currently operate in;
-- the benefits, viability, safety, efficacy, dosing and social acceptance
of cannabis, including CBD and other cannabinoids;
-- the anticipated benefits and impact of the CBI Group investments in us
(the "CBI Group Investments");
-- the potential exercise of the warrants held by the CBI Group,
pre-emptive rights and/or top-up rights in connection with the CBI Group
Investments, including proceeds to us that may result therefrom or the
potential conversion of notes held by the CBI Group in connection with
the CBI Group Investments;
-- expectations regarding the use of proceeds of equity financings,
including the proceeds from the CBI Group Investments;
-- the legalization of the use of cannabis for medical or recreational in
jurisdictions outside of Canada, the related timing and impact thereof
and our intentions to participate in such markets, if and when such use
is legalized;
-- our ability to execute on our strategy and the anticipated benefits of
such strategy;
-- the ongoing impact of the legalization of additional cannabis product
types and forms for recreational use in Canada, including federal,
provincial, territorial and municipal regulations pertaining thereto,
the related timing and impact thereof and our intentions to participate
in such markets;
-- the ongoing impact of developing provincial, territorial and municipal
regulations pertaining to the sale and distribution of cannabis, the
related timing and impact thereof, as well as the restrictions on
federally regulated cannabis producers participating in certain retail
markets and our intentions to participate in such markets to the extent
permissible;
-- the future performance of our business and operations;
-- our competitive advantages and business strategies;
-- the competitive conditions of the industry;
-- the expected growth in the number of customers using our products;
-- our ability or plans to identify, develop, commercialize or expand our
technology and research and development initiatives in cannabinoids, or
the success thereof;
-- expectations regarding revenues, expenses and anticipated cash needs;
-- expectations regarding cash flow, liquidity and sources of funding;
-- expectations regarding capital expenditures;
-- the expansion of our production and manufacturing, the costs and timing
associated therewith and the receipt of applicable production and sale
licenses;
-- the expected growth in our growing, production and supply chain
capacities;
-- expectations regarding the resolution of litigation and other legal
proceedings;
-- expectations with respect to future production costs;
-- expectations with respect to future sales and distribution channels;
-- the expected methods to be used to distribute and sell our products;
-- our future product offerings;
-- the anticipated future gross margins of our operations;
-- accounting standards and estimates;
-- expectations regarding our distribution network; and
-- expectations regarding the costs and benefits associated with our
contracts and agreements with third parties, including under our
third-party supply and manufacturing agreements.
Certain of the forward-looking statements contained herein concerning the industries in which we conduct our business are based on estimates prepared by us using data from publicly available governmental sources, market research, industry analysis and on assumptions based on data and knowledge of these industries, which we believe to be reasonable. However, although generally indicative of relative market positions, market shares and performance characteristics, such data is inherently imprecise. The industries in which we conduct our business involve risks and uncertainties that are subject to change based on various factors, which are described further below.
The forward-looking statements contained herein are based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including: (i) management's perceptions of historical trends, current conditions and expected future developments; (ii) our ability to generate cash flow from operations; (iii) general economic, financial market, regulatory and political conditions in which we operate; (iv) the production and manufacturing capabilities and output from our facilities and our joint ventures, strategic alliances and equity investments; (v) consumer interest in our products; (vi) competition; (vii) anticipated and unanticipated costs; (viii) government regulation of our activities and products including but not limited to the areas of taxation and environmental protection; (ix) the timely receipt of any required regulatory authorizations, approvals, consents, permits and/or licenses; (x) our ability to obtain qualified staff, equipment and services in a timely and cost-efficient manner; (xi) our ability to conduct operations in a safe, efficient and effective manner; (xii) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our recent acquisitions into our existing operations; (xiii) our ability to continue to operate in light of the COVID-19 pandemic and the impact of the pandemic on demand for, and sales of, our products and our distribution channels; and (xiv) other considerations that management believes to be appropriate in the circumstances. While our management considers these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct.
By their nature, forward-looking statements are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the forward-looking statements in this press release and other reports we file with, or furnish to, the Securities and Exchange Commission (the "SEC") and other regulatory agencies and made by our directors, officers, other employees and other persons authorized to speak on our behalf. Such factors include, without limitation, the risk that the COVID-19 pandemic may disrupt our operations and those of our suppliers and distribution channels and negatively impact the use of our products; consumer demand for cannabis and U.S. hemp products; that cost savings and any other synergies from the CBI Group Investments may not be fully realized or may take longer to realize than expected; future levels of revenues; our ability to manage disruptions in credit markets or changes to our credit rating; future levels of capital, environmental or maintenance expenditures, general and administrative and other expenses; the success or timing of completion of ongoing or anticipated capital or maintenance projects; business strategies, growth opportunities and expected investment; the adequacy of our capital resources and liquidity, including but not limited to, availability of sufficient cash flow to execute our business plan (either within the expected timeframe or at all); the potential effects of judicial or other proceedings on our business, financial condition, results of operations and cash flows; volatility in and/or degradation of general economic, market, industry or business conditions; compliance with applicable environmental, economic, health and safety, energy and other policies and regulations and in particular health concerns with respect to vaping and the use of cannabis and U.S. hemp products in vaping devices; the anticipated effects of actions of third parties such as competitors, activist investors or federal, state, provincial, territorial or local regulatory authorities, self-regulatory organizations, plaintiffs in litigation or persons threatening litigation; changes in regulatory requirements in relation to our business and products; and the factors discussed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended March 31, 2020 to be filed with the SEC. 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.
Schedule 1
CANOPY GROWTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars, except number of shares, unaudited)
March 31, March 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $
1,303,176 $
2,480,830
Short-term investments 673,323 2,034,133
Restricted short-term investments 21,539 21,432
Amounts receivable, net 90,155 106,974
Inventory 391,086 190,072
Prepaid expenses and other assets 85,094 85,691
---
Total current assets 2,564,373 4,919,132
Equity method investments 65,843 112,385
Other financial assets 249,253 363,427
Property, plant and equipment 1,524,803 1,096,340
Intangible assets 476,366 558,070
Goodwill 1,954,471 1,489,859
Other assets 22,636 25,902
---
Total assets $
6,857,745 $
8,565,115
=== ===
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $
123,393 $
188,920
Other accrued expenses and liabilities 64,994 37,613
Current portion of long-term debt 16,393 103,716
Other liabilities 215,809 81,414
---
Total current liabilities 420,589 411,663
Long-term debt 449,022 842,259
Deferred income tax liabilities 47,113 105,081
Liability arising from Acreage
Arrangement 250,000
Warrant derivative liability 322,491
Other liabilities 190,660 134,004
---
Total liabilities 1,679,875 1,493,007
Commitments and contingencies
Redeemable noncontrolling interest 69,750 6,400
Canopy Growth Corporation shareholders'
equity:
Common shares -$nil par value;
Authorized -unlimited number of
shares; 6,373,544 6,029,222
Issued -350,112,927 shares and
337,510,408 shares, respectively
Additional paid-in capital 2,615,155 1,592,024
Accumulated other comprehensive income
(loss) 220,899 (5,905)
Deficit (4,323,236) (835,118)
---
Total Canopy Growth Corporation
shareholders' equity 4,886,362 6,780,223
Noncontrolling interests 221,758 285,485
---
Total shareholders' equity 5,108,120 7,065,708
---
Total liabilities and
shareholders' equity $
6,857,745 $
8,565,115
=== ===
Schedule 2
CANOPY GROWTH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of Canadian dollars, except number of shares and per share data, unaudited)
Years ended March 31,
2020 2019
Revenue $
439,626 $
253,431
Excise taxes 40,854 27,090
---
Net revenue 398,772 226,341
Cost of goods sold 430,456 198,096
---
Gross margin (31,684) 28,245
Operating expenses:
Selling, general and administrative
expenses 693,737 392,250
Share-based compensation 320,276 273,447
Asset impairment and restructuring
costs 623,266
---
Total operating expenses 1,637,279 665,697
---
Operating loss (1,668,963) (637,452)
Loss from equity method investments (64,420) (10,752)
Other income (expense), net 224,329 (59,709)
---
Loss before income taxes (1,509,054) (707,913)
Income tax recovery (expense) 121,614 (4,112)
---
Net loss (1,387,440) (712,025)
Net (loss) income attributable to
noncontrolling interests and
redeemable noncontrolling interest (66,114) 24,256
---
Net loss attributable to
Canopy Growth Corporation $
(1,321,326) $
(736,281)
=== ===
Basic and diluted loss per share $(3.80) $(2.76)
Basic and diluted weighted average
common shares outstanding 348,038,163 266,997,406
---
Schedule 3
CANOPY GROWTH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of Canadian dollars, except number of shares and per share data, unaudited)
Three months ended March 31,
2020 2019
Revenue $
115,068 $
106,485
Excise taxes 7,155 12,435
---
Net revenue 107,913 94,050
Cost of goods sold 199,738 73,005
---
Gross margin (91,825) 21,045
Operating expenses:
Selling, general and administrative
expenses 197,579 153,064
Share-based compensation 78,354 90,614
Asset impairment and restructuring
costs 623,266
---
Total operating expenses 899,199 243,678
---
Operating loss (991,024) (222,633)
Loss from equity method investments (57,752) (1,731)
Other income (expense), net (376,295) (114,251)
---
Loss before income taxes (1,425,071) (338,615)
Income tax recovery (expense) 98,666 (8,877)
---
Net loss (1,326,405) (347,492)
Net (loss) income attributable to
noncontrolling interests and
redeemable noncontrolling interest (23,384) 32,024
---
Net loss attributable to
Canopy Growth Corporation $
(1,303,021) $
(379,516)
=== ===
Basic and diluted loss per
share $
(3.72) $
(1.10)
Basic and diluted weighted average
common shares outstanding 349,837,102 343,877,591
Schedule 4
CANOPY GROWTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars, unaudited)
Years ended March 31,
2020 2019
Cash flows from operating activities:
Net loss $
(1,387,440) $
(712,025)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation of property, plant and equipment 73,716 30,062
Amortization of intangible assets 51,297 16,856
Share of loss on equity method investments 64,420 10,752
Share-based compensation 320,276 278,228
Asset impairment and restructuring costs 623,266
Income tax (expense) recovery (121,614) 4,112
Non-cash foreign currency (2,012) (18,776)
Interest paid (25,472) (14,521)
Change in operating assets and liabilities,
net of effects from purchases of businesses:
Amounts receivable 20,979 (67,688)
Prepaid expenses and other assets (26,917) (87,476)
Inventory (177,091) (144,917)
Accounts payable and accrued liabilities (20,750) 69,540
Other, including non-cash fair value
adjustments (165,293) 100,822
---
Net cash used in operating activities (772,635) (535,031)
---
Cash flows from investing activities:
Purchases of and deposits on property, plant
and equipment (704,944) (644,456)
Purchases of intangible assets (16,957) (74,359)
Redemption (purchases) of short-term
investments 1,427,482 (2,029,812)
Proceeds on assets classified as held for
sale
Investments in equity method investments (5,135) (36,896)
Investments in other financial assets (129,590) (91,337)
Investment in Acreage Arrangement (395,190)
Change in acquisition related liabilities (24,482)
Net cash outflow on acquisition of
noncontrolling interests (6,712)
Net cash outflow on acquisition of
subsidiaries (498,838) (344,413)
---
Net cash used in investing activities (347,654) (3,227,985)
---
Cash flows from financing activities:
Proceeds from issuance of common shares and
warrants 5,072,500
Payment of share issue costs (21,646)
Proceeds from issuance of shares by Canopy
Rivers 1,172 154,976
Proceeds from exercise of stock options 41,413 48,159
Proceeds from exercise of warrants 446 18,790
Issuance of long-term debt 14,761 600,000
Payment of debt issue costs (16,380)
Repayment of long-term debt (114,953) (4,680)
---
Net cash provided by financing activities (57,161) 5,851,719
---
Effect of exchange rate changes on cash and
cash equivalents (204) 69,567
---
Net increase in cash and cash equivalents (1,177,654) 2,158,270
Cash and cash equivalents, beginning of year 2,480,830 322,560
---
Cash and cash equivalents, end of
year $
1,303,176 $
2,480,830
=== ===
Schedule 5
Adjusted EBITDA
(1)
Reconciliation (Non-GAAP Measure)
Three months ended Year ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in thousands of Canadian
dollars, unaudited) 2020 2019 2019 2019 2020
--- ---
Net loss $
(1,326,405) $
(109,634) $
242,650 $
(194,051) $
(1,387,440)
Income tax (recovery) expense (98,666) (27,448) (5,767) 10,267 (121,614)
Other expense (income), net 376,295 (57,963) (509,893) (32,768) (224,329)
Loss on equity method
investments 57,752 2,664 2,171 1,833 64,420
Share-based compensation 78,354 61,679 92,881 87,362 320,276
Acquisition-related costs 1,840 3,256 2,562 13,182 20,840
Depreciation and amortization 48,781 30,464 25,016 20,752 125,013
Asset impairment and
restructuring costs 623,266 623,266
Restructuring and other charges recorded
in
cost of goods sold 132,089 132,089
Charges related to the flow-
through of inventory step-up
on business combinations 4,687 4,687
---
Adjusted EBITDA $
(102,007) $
(96,982) $
(150,380) $
(93,423) $
(442,792)
=== ===
Schedule 6
Adjusted EBITDA
(1)
-
IFRS to US GAAP Differences
Dec 31, Sep 30, Jun 30,
(in thousands of Canadian
dollars, unaudited) 2019 2019 2019
---
Adjusted EBITDA, as previously
reported under IFRS $
(91,661) $
(155,745) $
(92,060)
Adjustments related to
differences
in lease
accounting on
depreciation and amortization
expense (2,878) (2,857) (2,639)
Adjustments related to other
transition differences (2,443) 8,222 1,276
---
Adjusted EBITDA, as reported
under US GAAP $
(96,982) $
(150,380) $
(93,423)
===
(1) Adjusted EBITDA is calculated as the reported operating income
(loss), which excludes interest and income taxes, adjusted for the
removal of share-based compensation expense, depreciation and
amortization expense, asset impairment and restructuring costs,
restructuring and other charges 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. See "Non-GAAP Measures".
Schedule 7
Gross Margin - IFRS to US GAAP Differences
Three months ended Year ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in thousands of Canadian dollars,
unaudited) 2020 2019 2019 2019 2020
--- ---
Net revenue $
107,913 $
123,764 $
76,613 $
90,482 $
398,772
Cost of goods sold, as previously
reported under IFRS: 81,953 86,321 77,313
Restatement of royalty expense (4,131)
Reclassification adjustments
related to
US GAAP transition 3,603 (13,351) (990)
---
Cost of goods sold, as reported
under US
GAAP 199,738 85,556 72,970 72,192 430,456
Gross margin, as reported under
US GAAP $
(91,825) $
38,208 $
3,643 $
18,290 $
(31,684)
Gross margin percentage, as
reported
under US GAAP (85%) 31% 5% 20% (8%)
---
Schedule 8
Adjusted Gross Margin(1) Reconciliation (Non-GAAP Measure)
Three months ended Year ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
(in thousands of Canadian
dollars, unaudited) 2020 2019 2019 2019 2020
--- ---
Gross margin, as reported
under
US GAAP $
(91,825) $
38,208 $
3,643 $
18,290 $
(31,684)
Adjustments to gross margin:
Restructuring and other charges
recorded in cost of goods sold 132,089 132,089
Charges related to the flow-
through of inventory step-up on
business combinations 4,687 4,687
---
Adjusted gross margin 1 $
44,951 $
38,208 $
3,643 $
18,290 $
105,092
Adjusted gross margin percentage (1) 42% 31% 5% 20% 26%
---
(1) Adjusted gross margin and
adjusted gross margin
percentage are non-GAAP
measures. See "Non-GAAP
Measures".
Schedule 9
Free Cash Flow
Reconciliation
(1)
Three months ended
March 31, March 31,
(in thousands of Canadian
dollars, unaudited) 2020 2019
Net cash provided by
(used in) operating
activities $
(210,639) $
(240,132)
Purchases of and deposits
on property, plant and
equipment (94,086) (149,220)
---
Free cash flow(1) $
(304,725) $
(389,352)
===
Year ended
March 31, March 31,
(in thousands of Canadian
dollars, unaudited) 2020 2019
Net cash used in
operating activities $
(772,635) $
(535,031)
Purchases of and deposits
on property, plant and
equipment (704,944) (644,456)
---
Free cash flow(1) $
(1,477,579) $
(1,179,487)
===
(1)Free cash flow is a non-
GAAP measure and is
calculated as net cash
provided by (used in)
operating activities, less
purchases of and deposits on
property, plant and
equipment.
View original content to download multimedia:http://www.prnewswire.com/news-releases/canopy-growth-reports-full-year-and-4th-quarter-fiscal-2020-financial-results-provides-strategic-review-update-301067544.html
SOURCE Canopy Growth Corporation
