Le Lézard
Classified in: Health, Business, Covid-19 virus
Subjects: ERN, MAT

Canopy Growth Reports Third Quarter Fiscal Year 2023 Financial Results and Announces Canadian Business Transformation Plan


Company takes firm actions to transform Canadian business to enable growth and profitability

Announces cost reduction program of additional $140-$160 million to be realized over the next 12 months

Restructuring includes significant reduction in production footprint and headcount

SMITHS FALLS, ON, Feb. 9, 2023 Canopy Growth Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (NASDAQ: CGC) today announces its financial results for the third quarter ended December 31, 2022. Canopy Growth is also announcing significant changes to the Company's Canadian cannabis business. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

Highlights

"Canopy must reach profitability to achieve our ambition of long-term North American cannabis market leadership. We are transforming our Canadian business to an asset-light model and significantly reducing the overall size of our organization. These changes are difficult but necessary to drive our business to profitability and growth."
David Klein, Chief Executive Officer

"The right-sizing of our Canadian business is expected to significantly reduce our cash costs. Canopy is firmly on the path to deliver at least quarterly breakeven adjusted EBITDA in our Canadian cannabis business in Fiscal 2024, even at current revenue run-rate."
Judy Hong, Chief Financial Officer

Third Quarter Fiscal 2023 Financial Summary

(in millions of Canadian
dollars, unaudited)


Net Revenue

Gross margin
percentage

Adjusted
gross margin
percentage1

Net loss

Adjusted
EBITDA2

Free cash
flow3

















Reported


$101.2

(2 %)

1 %

$(266.7)

$(87.5)

$(145.8)

vs. Q3 FY2022


(28 %)

(900 bps)

(1,200 bps)

(131 %)

(30 %)

13 %

 

1Adjusted gross margin is a non-GAAP measure, and for Q3 FY2023 excludes $3.6 million of restructuring costs recorded in cost of goods sold (Q3 FY2022 - excludes $3.1 million related to the flow-through of inventory step-up associated with the acquisition of Supreme Cannabis and $4.6 of restructuring costs recorded in cost of goods sold). 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".

Revenues:

Net revenue of $101 million in Q3 FY2023 declined 28% versus Q3 FY2022. The decrease is primarily attributable to increased competition in the Canadian adult-use cannabis market, the divestiture of C3 Cannabinoid Compound Company GmbH ("C³"), a decline in our U.S. CBD business, and softer performance from Storz & Bickel and This Works. When adjusting for both the impact of the divestiture of C3 and our Canadian retail business, revenues for the period decreased 23% in Q3 FY2023 versus Q3 FY2022.

Gross margin:

Reported gross margin in Q3 FY2023 was (2%) as compared to 7% in Q3 FY2022. Excluding non-cash restructuring costs recorded in COGS of $4 million, adjusted gross margin4 was 1%. Gross margin in Q3 FY2023 was impacted primarily by a decrease in the amount of payroll subsidies received from the Canadian government pursuant to a COVID-19 relief program, the divestiture of C3 and lower gross margins in the BioSteel business segment primarily attributable to the write-down of aged inventory, and higher distribution and warehousing costs. While lower production output and price compression in the Canadian adult-use cannabis business continued to pressure gross margins, the Canadian cannabis segment saw an improvement in gross margins in Q3 FY2023 compared to Q3 FY2022 and compared to Q2 FY2023.

Operating expenses:

Total SG&A expenses in Q3 FY2023 increased by 5% versus Q3 FY2022, driven by year-over-year increases in acquisition-related expenses primarily relating to the Company's previously announced transaction with respect to the formation of CUSA and higher General & Administrative ("G&A") expenses. The increase in G&A expenses was primarily due to a decrease in the amount of payroll subsidies received from the Canadian government pursuant to a COVID-19 relief program. The decrease in Sales and Marketing expenses is net of the impact of incremental investments in BioSteel, relating to the activation of the National Hockey League ("NHL") partnership announced in July 2022. Excluding acquisition-related expenses, the impact of the disposition of C3 and the COVID-19 relief program, total SG&A expenses decreased 10% in Q3 FY2023 compared to the prior year period.

Net Loss:

Net Loss in Q3 FY2023 was $267 million, which is a $151 million increase in the net loss versus Q3 FY2022, driven primarily by non?cash fair value changes and an increase in asset impairment and restructuring costs.

Adjusted EBITDA5:

Adjusted EBITDA loss in Q3 FY2023 was $88 million, a $21 million increase in Adjusted EBITDA loss versus Q3 FY2022 primarily driven by a decrease in the amount of payroll subsidies received from the Canadian government pursuant to a COVID-19 relief program.

Free Cash Flow6:

Free Cash Flow in Q3 FY2023 was an outflow of $146 million, a 13% decrease in outflow versus Q3 FY2022. Relative to Q3 FY2022, the decrease in outflow is due to the timing of certain payments in each period. Year-to-date Free Cash Flow in FY2023 is a 7% decrease in outflow versus the comparable period in FY2022, representing the impact of reduced capital expenditures and impacts of cost reduction actions, partially offset by investments in growth initiatives at BioSteel and costs related to the formation of CUSA.

Cash Position:

Cash and short-term investments amounted to $789 million at December 31, 2022, representing a decrease of $583 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 BioSteel and a premium payment made to obtain an option to acquire Acreage Holdings, Inc. ("Acreage") outstanding debt as part of the October 2022 CUSA announcement. Gross debt amounted to $1,206 million at December 31, 2022, representing a decline of $295 million from $1,501 million at March 31, 2022.

4 Adjusted gross margin is a non-GAAP measure, and for Q3 FY2023 excludes $3.6 million of restructuring costs recorded in cost of goods sold (Q3 FY2022 - excludes $3.1 million related to the flow-through of inventory step-up associated with the acquisition of Supreme Cannabis and $4.6 of restructuring costs recorded in cost of goods sold). See "Non-GAAP Measures".

5 Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures".

6 Free cash flow is a non-GAAP measure. See "Non-GAAP Measures".


Canopy USA strategy is expected to fast track entry into the U.S. cannabis market 

Business Highlights

Aligning Canadian Cannabis Operations to Challenged Market Realities

7 All figures reported above with respect to the pre-tax charges are preliminary and are unaudited and subject to change and adjustment as the Company prepares its consolidated financial statements for the years ended March 31, 2023, and March 31, 2022. Accordingly, investors are cautioned not to place undue reliance on the foregoing information. The Company does not intend to provide preliminary results in the future. The preliminary results provided in this news release constitute "forward-looking information" and "forward-looking statements" within the meaning of applicable Canadian and U.S. securities laws, are based on several assumptions and are subject to a number of risks and uncertainties. Actual results may differ materially. See " Notice Regarding Forward Looking Statements" below. 

New standalone Canadian cannabis business unit expected to increase agility and accountability, benefit from brand and SKU optimization 

Demonstrating continued momentum across our Consumer Products businesses; strong sequential revenue growth for Storz & Bickel; meaningful year-over-year gains in BioSteel distribution and sales velocity 

U.S. THC companies continue to strengthen and expand their businesses

8 Nielsen data 13-weeks ended December 3, 2022.

9 IRI data for the 52 weeks ended January 1, 2023.

10 IRI data for the 52 weeks ended January 1, 2023.

11 Until such time as the rights to acquire Acreage are exercised, neither the Company nor CUSA will have any direct or indirect economic or voting interests in Acreage, neither the Company nor CUSA will directly or indirectly control Acreage, and each of the Company, CUSA and Acreage will continue to operate independently of one another. The Company holds non-voting and non-participating shares in CUSA that are exchangeable into common shares of CUSA.

12 Canopy Growth and Acreage may calculate Adjusted EBITDA differently as Adjusted EBITDA does not have any standardized meaning and therefore may not be comparable as between the Company and Acreage.

13 Until such time as CUSA elects to exercise its rights to acquire 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.

14 https://ir.terrascend.com/news-events/press-releases/detail/94/wana-brands-partners-with-terrascend-to-bring-its

15 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.

16 https://www.linkedin.com/feed/update/urn:li:activity:7027376107637137408/


Third Quarter Fiscal 2023 Revenue Review17

Revenue by Channel

(in millions of Canadian dollars, unaudited)


Q3 FY2023

Q3 FY2022

Vs. Q3 FY2022

Canada cannabis





Canadian adult-use cannabis





Business-to-business18


$21.5

$33.3

(35 %)

Business-to-consumer


$11.0

$14.5

(24 %)



$32.5

$47.8

(32 %)

Canadian medical cannabis19


$14.1

$12.9

9 %



$46.6

$60.7

(23 %)

Rest-of-world cannabis





C3


$-

$9.7

(100 %)

Other rest-of-world cannabis20


$5.8

$12.6

(54 %)



$5.8

$22.3

(74 %)






Storz & Bickel


$20.2

$25.2

(20 %)

BioSteel21


$16.4

$17.0

(4 %)

This Works


$8.3

$10.7

(22 %)

Other


$3.9

$5.1

(24 %)






Net revenue


$101.2

$141.0

(28 %)

7 All figures reported above with respect to the pre-tax charges are preliminary and are unaudited and subject to change and adjustment as the Company prepares its consolidated financial statements for the years ended March 31, 2023, and March 31, 2022. Accordingly, investors are cautioned not to place undue reliance on the foregoing information. The Company does not intend to provide preliminary results in the future. The preliminary results provided in this news release constitute "forward-looking information" and "forward-looking statements" within the meaning of applicable Canadian and U.S. securities laws, are based on several assumptions and are subject to a number of risks and uncertainties. Actual results may differ materially. See " Notice Regarding Forward Looking Statements" below. 


Canada Cannabis

Rest-of-world Cannabis

Storz & Bickel

BioSteel

This Works

The Q3 FY2023 and Q3 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 10:00 AM Eastern Time on February 9, 2023.

Webcast Information

A live audio webcast will be available at https://app.webinar.net/DpogWGlRL06.

Replay Information

A replay will be accessible by webcast until 11:59 PM Eastern Time on May 8, 2023 at https://app.webinar.net/DpogWGlRL06.

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; 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 Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2022 (the "Form 10-Q") to be filed with the Securities and Exchange Commission (the "SEC").

Free Cash Flow is a non- GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. This measure is calculated as net cash provided by (used in) operating activities less purchases of and deposits on property, plant and equipment. The Free Cash Flow reconciliation is presented within this news release and explained in the Form 10-Q to be 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 Form 10-Q to be filed with the SEC.

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:

Certain of the forward-looking statements contained herein concerning the industries in which we conduct our business are based on estimates prepared by us using data from publicly available governmental sources, market research, industry analysis and on assumptions based on data and knowledge of these industries, which we believe to be reasonable. However, although generally indicative of relative market positions, market shares and performance characteristics, such data is inherently imprecise. The industries in which we conduct our business involve risks and uncertainties that are subject to change based on various factors, which are described further below.

The forward-looking statements contained herein are based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including: (i) management's perceptions of historical trends, current conditions and expected future developments; (ii) our ability to generate cash flow from operations; (iii) general economic, financial market, regulatory and political conditions in which we operate; (iv) the production and manufacturing capabilities and output from our facilities and our joint ventures, strategic alliances and equity investments; (v) consumer interest in our products; (vi) competition; (vii) anticipated and unanticipated costs; (viii) government regulation of our activities and products including but not limited to the areas of taxation and environmental protection; (ix) the timely receipt of any required regulatory authorizations, approvals, consents, permits and/or licenses; * our ability to obtain qualified staff, equipment and services in a timely and cost-efficient manner; (xi) our ability to conduct operations in a safe, efficient and effective manner; (xii) our ability to realize anticipated benefits, synergies or generate revenue, profits or value from our recent acquisitions into our existing operations; and (xiii) other considerations that management believes to be appropriate in the circumstances. While our management considers these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct. Financial outlooks, as with forward-looking statements generally, are, without limitation, based on the assumptions and subject to various risks as set out herein. Our actual financial position and results of operations may differ materially from management's current expectations and, as a result, our Adjusted EBITDA and SG&A cost savings may differ materially from the values provided in this news release.

By their nature, forward-looking statements are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the forward-looking statements in this press release and other reports we file with, or furnish to, the 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, our limited operating history; the risks that if Canopy USA acquires Wana, Jetty or the Fixed Shares of Acreage without structural amendments to our interest in Canopy USA, the listing of our common shares on Nasdaq may be jeopardized; our ability to implement structural changes to our interest in Canopy USA, if necessary;; inherent uncertainty associated with projections; the diversion of management time on issues related to Canopy USA; 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 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; risks that we may be required to write down intangible assets, including goodwill, due to impairment; changes in laws, regulations and guidelines and our compliance with such laws, regulations and guidelines; risk relating to the long term macroeconomics effects of the COVID-19 pandemic and any future pandemic or epidemic; consumer demand for cannabis and U.S. hemp products; inflation risks; the risks and uncertainty regarding future product development; our reliance on licenses issued by and contractual arrangements with various federal, state and provincial governmental authorities; 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; the implementation and effectiveness of key personnel changes; risks associated with jointly owned investments; risks relating to our current and future operations in emerging markets; risks relating to inventory write downs; future levels of revenues and the impact of increasing levels of competition; risks related to the protection and enforcement of our intellectual property rights; our ability to manage disruptions in credit markets or changes to our credit ratings; 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; 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; 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); 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, or threatened litigation or proceedings, on our business, financial condition, results of operations and cash flows; risks related to stock exchange restrictions; risks associated with divestment and restructuring; volatility in and/or degradation of general economic, market, industry or business conditions; our exposure to risks related to an agricultural business, including wholesale price volatility and variable product quality; third-party manufacturing risks; third-party transportation risks; 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, 2022 and in Item 1A of Part II of the Form 10-Q. 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 January 17, 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 [email protected]. 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
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars, except number of shares and per share data, unaudited)



December 31,
2022



March 31,
2022


ASSETS


Current assets:







Cash and cash equivalents


$

598,131



$

776,005


Short-term investments



191,119




595,651


Restricted short-term investments



12,932




12,216


Amounts receivable, net



104,640




96,443


Inventory



213,937




204,387


Prepaid expenses and other assets



52,151




52,700


Total current assets



1,172,910




1,737,402


Other financial assets



598,387




800,328


Property, plant and equipment



874,029




942,780


Intangible assets



213,530




252,695


Goodwill



142,076




1,866,503


Other assets



19,223




15,342


Total assets


$

3,020,155



$

5,615,050









LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:







Accounts payable


$

63,139



$

64,270


Other accrued expenses and liabilities



75,985




75,278


Current portion of long-term debt



455,483




9,296


Other liabilities



84,134




64,054


Total current liabilities



678,741




212,898


Long-term debt



750,118




1,491,695


Deferred income tax liabilities



8,988




15,991


Liability arising from Acreage Arrangement



-




47,000


Warrant derivative liability



668




26,920


Other liabilities



141,891




190,049


Total liabilities



1,580,406




1,984,553


Commitments and contingencies







Redeemable noncontrolling interest



11,408




36,200


Canopy Growth Corporation shareholders' equity:







Common shares - $nil par value; Authorized - unlimited number of shares;
   Issued - 494,891,390 shares and 394,422,604 shares, respectively



7,867,310




7,482,809


Additional paid-in capital



2,510,086




2,519,766


Accumulated other comprehensive loss



(14,248)




(42,282)


Deficit



(8,937,603)




(6,370,337)


Total Canopy Growth Corporation shareholders' equity



1,425,545




3,589,956


Noncontrolling interests



2,796




4,341


Total shareholders' equity



1,428,341




3,594,297


Total liabilities and shareholders' equity


$

3,020,155



$

5,615,050



Schedule 2

CANOPY GROWTH CORPORATION
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of Canadian dollars, except number of shares and per share data, unaudited)











Three months ended December 31,




2022



2021


Revenue


$

113,349



$

155,024


Excise taxes



12,136




14,052


Net revenue



101,213




140,972


Cost of goods sold



103,654




130,882


Gross margin



(2,441)




10,090


Operating expenses:







Selling, general and administrative expenses



122,636




116,835


Share-based compensation



6,428




6,777


Asset impairment and restructuring costs



22,259




36,439


Total operating expenses



151,323




160,051


Operating loss



(153,764)




(149,961)


Other income (expense), net



(113,340)




34,282


Loss before income taxes



(267,104)




(115,679)


Income tax recovery



382




183


Net loss



(266,722)




(115,496)


Net loss attributable to noncontrolling interests and
   redeemable noncontrolling interest



(5,139)




(6,571)


Net loss attributable to Canopy Growth Corporation


$

(261,583)



$

(108,925)









Basic and diluted loss per share


$

(0.54)



$

(0.28)


Basic and diluted weighted average common shares outstanding



486,112,598




393,818,282



Schedule 3

CANOPY GROWTH CORPORATION
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars, unaudited)



Nine months ended December 31,




2022



2021


Cash flows from operating activities:







Net (loss) income


$

(2,586,189)



$

258,128


Adjustments to reconcile net loss to net cash used in operating activities:







Depreciation of property, plant and equipment



43,185




56,467


Amortization of intangible assets



20,561




27,462


Share of loss on equity method investments



-




100


Share-based compensation



21,725




35,856


Asset impairment and restructuring costs



1,797,854




113,250


Income tax expense (recovery)



11,587




(490)


Non-cash fair value adjustments and charges related to
   settlement of unsecured senior notes



325,742




(893,024)


Change in operating assets and liabilities, net of effects from
   purchases of businesses:







Amounts receivable



(8,197)




4,083


Inventory



(9,550)




6,702


Prepaid expenses and other assets



(6,866)




28,818


Accounts payable and accrued liabilities



(3,202)




(30,764)


Other, including non-cash foreign currency



(24,459)




(25,713)


Net cash used in operating activities



(417,809)




(419,125)


Cash flows from investing activities:







Purchases of and deposits on property, plant and equipment



(6,176)




(36,620)


Purchases of intangible assets



(1,265)




(4,564)


Proceeds on sale of property, plant and equipment



10,894




25,660


Redemption of short-term investments



415,322




340,218


Net cash proceeds on sale of subsidiaries



12,432




10,324


Investment in other financial assets



(67,186)




(374,414)


Net cash outflow on acquisition of subsidiaries



(24,223)




(14,947)


Other investing activities



2,327




(16,759)


Net cash provided by (used in) investing activities



342,125




(71,102)


Cash flows from financing activities:







Proceeds from issuance of common shares and warrants



856




1,460


Proceeds from exercise of stock options



270




5,455


Repayment of long-term debt



(117,951)




(50,217)


Other financing activities



(29,096)




(3,036)


Net cash used in financing activities



(145,921)




(46,338)


Effect of exchange rate changes on cash and cash equivalents



43,731




(2,942)


Net decrease in cash and cash equivalents



(177,874)




(539,507)


Cash and cash equivalents, beginning of period



776,005




1,154,653


Cash and cash equivalents, end of period


$

598,131



$

615,146



Schedule 4

Adjusted Gross Margin1 Reconciliation (Non-GAAP Measure)




Three months ended December 31,


(in thousands of Canadian dollars except where indicated; unaudited)


2022



2021


Net revenue


$

101,213



$

140,972









Gross margin, as reported



(2,441)




10,090


Adjustments to gross margin:







Restructuring costs recorded in cost of goods sold



3,626




4,554


Charges related to the flow-through of inventory
   step-up on business combinations



-




3,147


Adjusted gross margin1


$

1,185



$

17,791









Adjusted gross margin percentage1



1

%



13

%



1 Adjusted gross margin and adjusted gross margin percentage are non-GAAP measures. See "Non-GAAP Measures".



Schedule 5

Adjusted EBITDA1 Reconciliation (Non-GAAP Measure)









Three months ended December 31,


(in thousands of Canadian dollars, unaudited)


2022



2021


Net loss


$

(266,722)



$

(115,496)


Income tax recovery



(382)




(183)


Other (income) expense, net



113,340




(34,282)


Share-based compensation



6,428




6,777


Acquisition-related costs



13,347




1,617


Depreciation and amortization



20,602




30,017


Asset impairment and restructuring costs



22,259




36,439


Restructuring costs recorded in cost of goods sold



3,626




4,554


Charges related to the flow-through of inventory
   step-up on business combinations



-




3,147


Adjusted EBITDA1


$

(87,502

)


$

(67,410)









1Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures".



Schedule 6

Free Cash Flow1 Reconciliation (Non-GAAP Measure)









Three months ended December 31,


(in thousands of Canadian dollars, unaudited)


2022



2021


Net cash used in operating activities


$

(143,894)



$

(167,380)


Purchases of and deposits on property, plant and equipment



(1,868)




(962)


Free cash flow1


$

(145,762)



$

(168,342)




1Free cash flow is a non-GAAP measure. See "Non-GAAP Measures".



Schedule 7

Segmented Gross Margin and Segmented Adjusted Gross Margin1 Reconciliation (Non-GAAP Measure)2




Three months ended December 31,


(in thousands of Canadian dollars except where indicated; unaudited)

2022



2021


Canada cannabis segment







Net revenue


$

46,617



$

60,678


Gross margin, as reported



(5,281)




(13,121)


Gross margin percentage, as reported



(11)

%



(22)

%

Adjustments to gross margin:







Restructuring costs recorded in cost of goods sold



1,689




1,972


Charges related to the flow-through of inventory
   step-up on business combinations



-




3,147


Adjusted gross margin1


$

(3,592)



$

(8,002)


Adjusted gross margin percentage1



(8)

%



(13)

%








Rest-of-world cannabis segment







Revenue


$

5,846



$

22,299


Gross margin, as reported



(2,184)




4,660


Gross margin percentage, as reported



(37)

%



21

%

Adjustments to gross margin:







Restructuring costs recorded in cost of goods sold



256




2,582


Adjusted gross margin1


$

(1,928)



$

7,242


Adjusted gross margin percentage1



(33)

%



32

%








Storz & Bickel segment







Revenue


$

20,214



$

25,205


Gross margin, as reported



9,186




11,172


Gross margin percentage, as reported



45

%



44

%








Adjusted gross margin1


$

9,186



$

11,172


Adjusted gross margin percentage1



45

%



44

%








BioSteel segment







Revenue


$

16,363



$

16,974


Gross margin, as reported



(7,669)




1,352


Gross margin percentage, as reported



(47)

%



8

%

Adjustments to gross margin:







Restructuring costs recorded in cost of goods sold



1,619




-


Adjusted gross margin1


$

(6,050)



$

1,352


Adjusted gross margin percentage1



(37)

%



8

%








This Works segment







Revenue


$

8,289



$

10,730


Gross margin, as reported



4,032




5,469


Gross margin percentage, as reported



49

%



51

%

Adjustments to gross margin:







Restructuring costs recorded in cost of goods sold



62




-


Adjusted gross margin1


$

4,094



$

5,469


Adjusted gross margin percentage1



49

%



51

%

 

1 Adjusted gross margin and adjusted gross margin percentage are non-GAAP measures. See "Non-GAAP Measures".

2 In Q3 FY23, we are reporting our financial results for the following five reportable segments: (i) 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.

SOURCE Canopy Growth Corporation


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