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

Canopy Growth Reports Second Quarter Fiscal Year 2024 Financial Results


Strong execution drove significant improvement in gross margins and reduced cash burn in Q2 FY2024

Management reaffirms expectation to achieve positive Adjusted EBITDA in all business units exiting FY2024

Solidified foundation expected to deliver profitable growth and achieve sustainable cannabis market leadership

SMITHS FALLS, ON, Nov. 9, 2023 /PRNewswire/ - Canopy Growth Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (Nasdaq: CGC) today announces its financial results for the second quarter ended September 30, 2023. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

Highlights

"Canopy Growth has successfully transformed into an asset-light, cannabis-focused company with a stronger balance sheet. These actions have resulted in a Company that looks and operates fundamentally different than before, a Canopy Growth that is purpose-built for the markets and geographies of greatest opportunity."  

David Klein, Chief Executive Officer

"Our financial results demonstrated marked improvement this quarter, including significant gross margin gains and reduced cash burn. This enhanced performance, together with a series of completed balance sheet strengthening actions, has solidified our foundation and set the stage for profitable growth ahead."         

Judy Hong, Chief Financial Officer

Second Quarter Fiscal 2024 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


$69.6

34 %

33 %

$(148.2)

$(11.9)

$(67.1)

vs. Q2 FY2023


(21 %)

3,500 bps

2,800 bps

25 %

79 %

32 %

 

Financial Highlights

Business Highlights

Improved product portfolio driving profitable growth of Canadian cannabis business

Strong demand is expected to accelerate growth in international medical cannabis markets

Expanded Storz & Bickel product portfolio with introduction of new Venty portable vaporizer

 

 U.S. THC platform demonstrates asset-light growth capabilities 

On November 3, 2023, we received a letter from the staff of the SEC (the "Staff") in which the Staff indicated that, despite the Reorganization Amendments, it would object to the deconsolidation of Canopy USA once Canopy USA acquires Wana, Jetty or the Fixed Shares of Acreage. We are currently assessing additional structural amendments to Canopy USA that would facilitate the deconsolidation of Canopy USA from the financial results of Canopy Growth, and intend to maintain active discussions with the Staff on such changes.

 

Second Quarter Fiscal 2024 Revenue Review9

Revenue by Channel

(in millions of Canadian dollars, unaudited)


Q2 FY2024

Q2 FY2023

Vs. Q2 FY2023

Canada cannabis





Canadian adult-use cannabis





Business-to-business10


$24.0

$25.3

(5 %)

Business-to-consumer


$-

$12.8

(100 %)



$24.0

$38.1

(37 %)

Canadian medical cannabis11


$15.0

$14.2

6 %



$39.0

$52.3

(25 %)






Rest-of-world cannabis12


$9.0

$10.5

(14 %)

Storz & Bickel


$12.0

$13.5

(11 %)

This Works


$7.1

$6.9

3 %

Other


$2.5

$4.7

(47 %)






Net revenue


$69.6

$87.9

(21 %)

The Q2 FY2024 and Q2 FY2023 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 November 9, 2023.

Webcast Information

A live audio webcast will be available at https://app.webinar.net/8jnJ0EJDRBz

Replay Information

A replay will be accessible by webcast until 11:59 PM Eastern Time on February 7, 2024 at https://app.webinar.net/8jnJ0EJDRBz

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, divestiture, and other 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 September 30, 2023 (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.

1 Adjusted gross margin is a non-GAAP measure, and for Q2 FY2024 excludes $(0.7) MM of restructuring cost reversals recorded in cost of goods sold (Q2 FY2023 - excludes $4.8 MM 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.
2 Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures" and Schedule 5 for a reconciliation of net loss to Adjusted EBITDA. 
3 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.

4 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.

5 Until such time as Canopy USA (as defined herein) elects to exercise its rights to acquire Mountain High Products, LLC, Wana Wellness, LLC and The Cima Group, LLC (collectively, "Wana"), Canopy USA will have no direct or indirect economic or voting interests in Wana, Canopy USA will not directly or indirectly control Wana, and Canopy USA, 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 Canopy USA that are exchangeable into common shares of Canopy USA. 
6 Until such time as Canopy USA elects to exercise its rights to acquire Lemurian, Inc. ("Jetty"), Canopy USA will have no direct or indirect economic or voting interests in Jetty, Canopy USA will not directly or indirectly control Jetty, and Canopy USA, 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 Canopy USA that are exchangeable into common shares o Canopy USA. 
7 Based on October 2023 BDSA data for dollars sold for all product categories.
8 Until such time as the rights to acquire Acreage Holdings, Inc. ("Acreage") are exercised, neither the Company nor Canopy USA will have any direct or indirect economic or voting interests in Acreage, neither the Company nor Canopy USA will directly or indirectly control Acreage, and each of the Company, Canopy USA and Acreage will continue to operate independently of one another. The Company holds non-voting and non-participating shares in Canopy USA that are exchangeable into common shares of Canopy USA.

9 In Q2 FY2024, we are reporting our financial results for the following four reportable segments: (i) Canada cannabis; (ii) rest-of-world cannabis; (iii) Storz & Bickel; and (iv)
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.
10 For Q2 FY2024, amount is net of excise taxes of $10.8 MM and other revenue adjustments of $0.5 MM (Q2 FY2023 - $11.4 MM and $0.4 MM, respectively).
11 For Q2 FY2024, amount is net of excise taxes of $1.7 MM (Q2 FY2023 - $1.1 MM).
12 For Q2 FY2024, amount reflects other revenue adjustments of $0.1 MM (Q2 FY2023 - $0.5 MM).

About Canopy Growth

Canopy Growth is a leading North American cannabis and consumer packaged goods ("CPG")  company dedicated to unleashing the power of cannabis to improve lives.   

Through an unwavering commitment to our consumers, Canopy Growth delivers innovative products with a focus on premium and mainstream cannabis brands including Doja, 7ACRES, Tweed, and Deep Space. Canopy Growth's CPG portfolio features 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 Growth has also established a comprehensive ecosystem to realize the opportunities presented by the U.S. THC market through its rights to Acreage, 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 its world-class products, Canopy Growth 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.

References to information included on, or accessible through, website do not constitute incorporation by reference of the information contained at or available through such websites, and you should not consider such information to be part of this press release.

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 selling, general and administrative ("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 in our internal control over financial reporting, or inability to otherwise maintain an effective system of internal control; the risk that our recent restatement 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 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 related to Acreage's financial statements expressing doubt about its ability to continue as a going concern; 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; 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 threatened litigation or proceedings, or reviews 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 the Canadian Transformation Plan 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 macroeconomic 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 and in Item 1A of Part II of the Form 10-Q 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
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars, except number of shares and per share data, unaudited)



September 30,
2023



March 31,
2023


ASSETS


Current assets:







Cash and cash equivalents


$

240,376



$

667,693


Short-term investments



30,000




105,526


Restricted short-term investments



7,990




11,765


Amounts receivable, net



68,856




68,459


Inventory



87,470




83,230


Assets of discontinued operations



35,541




116,291


Prepaid expenses and other assets



23,462




24,290


Total current assets



493,695




1,077,254


Other financial assets



556,355




568,292


Property, plant and equipment



346,227




471,271


Intangible assets



148,765




160,750


Goodwill



83,858




85,563


Noncurrent assets of discontinued operations



20,366




56,569


Other assets



18,958




19,996


Total assets


$

1,668,224



$

2,439,695









LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:







Accounts payable


$

22,724



$

31,835


Other accrued expenses and liabilities



51,668




53,743


Current portion of long-term debt and convertible debentures



49,964




556,890


Liabilities of discontinued operations



18,627




67,624


Other liabilities



53,269




93,750


Total current liabilities



196,252




803,842


Long-term debt



631,228




749,991


Noncurrent liabilities of discontinued operations



1,962




3,417


Other liabilities



89,318




122,423


Total liabilities



918,760




1,679,673


Commitments and contingencies







Canopy Growth Corporation shareholders' equity:







Common shares - $nil par value; Authorized - unlimited number of shares;
   Issued - 829,083,667 shares and 517,305,551 shares, respectively



8,219,846




7,938,571


Additional paid-in capital



2,575,174




2,506,485


Accumulated other comprehensive loss



(24,799)




(13,860)


Deficit



(10,020,896)




(9,672,761)


Total Canopy Growth Corporation shareholders' equity



749,325




758,435


Noncontrolling interests



139




1,587


Total shareholders' equity



749,464




760,022


Total liabilities and shareholders' equity


$

1,668,224



$

2,439,695


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 September 30,




2023



2022







(As Restated)


Revenue


$

82,076



$

100,437


Excise taxes



12,481




12,496


Net revenue



69,595




87,941


Cost of goods sold



46,169




88,552


Gross margin



23,426




(611)


Operating expenses







Selling, general and administrative expenses



57,611




95,020


Share-based compensation



2,717




9,573


(Gain)/loss on asset impairment and restructuring



(29,895)




43,968


Total operating expenses



30,433




148,561


Operating loss from continuing operations



(7,007)




(149,172)


Other income (expense), net



(128,334)




(39,074)


Loss from continuing operations before income taxes



(135,341)




(188,246)


Income tax expense



(12,821)




(8,220)


Net loss from continuing operations



(148,162)




(196,466)


Discontinued operations, net of tax



(176,638)




(109,345)


Net loss



(324,800)




(305,811)


Net loss from continuing operations attributable to
   noncontrolling interests and redeemable noncontrolling
   interest



-




(1,289)


Discontinued operations attributable to noncontrolling
   interests and redeemable noncontrolling interest



(14,786)




(12,352)


Net loss attributable to Canopy Growth Corporation


$

(310,014)



$

(292,170)









Basic and diluted loss per share







Continuing operations


$

(0.21)



$

(0.41)


Discontinued operations



(0.22)




(0.21)


Basic and diluted loss per share


$

(0.43)



$

(0.62)


Basic and diluted weighted average common shares
   outstanding



716,294,433




471,592,150


Schedule 3

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



Six months ended September 30,




2023



2022







(As Restated)


Cash flows from operating activities:







Net loss


$

(366,661)



$

(2,397,561)


Loss from discontinued operations, net of tax



(207,930)




(131,960)


Net loss from continuing operations



(158,731)




(2,265,601)


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







Depreciation of property, plant and equipment



16,568




29,554


Amortization of intangible assets



13,073




11,870


Share-based compensation



6,434




14,838


(Gain)/loss on asset impairment and restructuring



(25,986)




1,783,784


Income tax expense



14,839




11,969


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



44,438




231,704


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







Amounts receivable



(12,903)




12,100


Inventory



(4,240)




2,393


Prepaid expenses and other assets



(250)




(11,259)


Accounts payable and accrued liabilities



(13,038)




(13,447)


Other, including non-cash foreign currency



(52,817)




(29,640)


Net cash used in operating activities - continuing operations



(172,613)




(221,735)


Net cash used in operating activities - discontinued operations



(54,709)




(52,180)


Net cash used in operating activities



(227,322)




(273,915)


Cash flows from investing activities:







Purchases of and deposits on property, plant and equipment



(2,636)




(4,308)


Purchases of intangible assets



(803)




(938)


Proceeds on sale of property, plant and equipment



152,417




10,784


Redemption of short-term investments



81,015




211,092


Net cash proceeds on sale of subsidiaries



-




12,432


Investment in other financial assets



(472)




(29,205)


Other investing activities



(9,682)




7,143


Net cash provided by investing activities - operating activities



219,839




207,000


Net cash used in investing activities - discontinued operations



(17,122)




-


Net cash provided by investing activities



202,717




207,000


Cash flows from financing activities:







Proceeds from issuance of common shares and warrants



33,795




856


Proceeds from exercise of stock options



-




270


Repayment of long-term debt



(415,185)




(423)


Other financing activities



(25,908)




(13,116)


Net cash used in financing activities



(407,298)




(12,413)


Effect of exchange rate changes on cash and cash equivalents



(2,129)




50,042


Net decrease in cash and cash equivalents



(434,032)




(29,286)


Cash and cash equivalents, beginning of period1



677,007




776,005


Cash and cash equivalents, end of period2


$

242,975



$

746,719


1 Includes cash of our discontinued operations of $9,314 and $13,610 for March 31, 2023 and 2022, respectively.

2 Includes cash of our discontinued operations of $2,599 and $4,864 for September 30, 2023 and 2022, respectively.

Schedule 4

Adjusted Gross Margin1 Reconciliation (Non-GAAP Measure)




Three months ended September 30,


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


2023



2022


Net revenue


$

69,595



$

87,941









Gross margin, as reported



23,426




(611)


Adjustments to gross margin:







Restructuring costs recorded in cost of goods sold



(689)




4,822


Adjusted gross margin1


$

22,737



$

4,211









Adjusted gross margin percentage1



33

%



5

%

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 September 30,


(in thousands of Canadian dollars, unaudited)


2023



2022


Net loss from continuing operations


$

(148,162)



$

(196,466)


Income tax expense



12,821




8,220


Other (income) expense, net



128,334




39,074


Share-based compensation



2,717




9,573


Acquisition, divestiture, and other costs



10,488




14,006


Depreciation and amortization2



12,530




20,427


(Gain)/loss on asset impairment and restructuring



(29,895)




43,968


Restructuring costs recorded in cost of goods sold



(689)




4,822


Adjusted EBITDA1


$

(11,856)



$

(56,376)


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 September 30,


(in thousands of Canadian dollars, unaudited)


2023



2022


Net cash used in operating activities - continuing
   operations


$

(66,393)



$

(96,832)


Purchases of and deposits on property,
   plant and equipment - continuing operations



(690)




(2,015)


Free cash flow1 - continuing operations


$

(67,083)



$

(98,847)


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)




Three months ended September 30,


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

2023



2022


Canada cannabis segment







Net revenue


$

38,992



$

52,304


Gross margin, as reported



14,121




(7,652)


Gross margin percentage, as reported



36

%



(15)

%

Adjustments to gross margin:







Restructuring costs recorded in cost of goods sold



(689)




-


Adjusted gross margin1


$

13,432



$

(7,652)


Adjusted gross margin percentage1



34

%



(15)

%








Rest-of-world cannabis segment







Revenue


$

8,977



$

10,552


Gross margin, as reported



2,691




(1,332)


Gross margin percentage, as reported



30

%



(13)

%

Adjustments to gross margin:







Restructuring costs recorded in cost of goods sold



-




3,730


Adjusted gross margin1


$

2,691



$

2,398


Adjusted gross margin percentage1



30

%



23

%








Storz & Bickel segment







Revenue


$

11,991



$

13,494


Gross margin, as reported



3,918




6,002


Gross margin percentage, as reported



33

%



44

%








Adjusted gross margin1


$

3,918



$

6,002


Adjusted gross margin percentage1



33

%



44

%








This Works segment







Revenue


$

7,074



$

6,868


Gross margin, as reported



3,386




2,303


Gross margin percentage, as reported



48

%



34

%

Adjustments to gross margin:







Restructuring costs recorded in cost of goods sold



-




1,092


Adjusted gross margin1


$

3,386



$

3,395


Adjusted gross margin percentage1



48

%



49

%








Other







Revenue


$

2,561



$

4,723


Gross margin, as reported



(690)




68


Gross margin percentage, as reported



(27)

%



1

%








Adjusted gross margin1


$

(690)



$

68


Adjusted gross margin percentage1



(27)

%



1

%








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




SOURCE Canopy Growth Corporation


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