Canopy Growth Reports Fourth Quarter and Fiscal Year 2023 Financial Results

Canopy Growth Corporation announced its financial results for the fourth quarter and fiscal year ended March 31, 2023 and the filing of an annual report on Form 10-K, including the audited consolidated financial statements for the fiscal year ended March 31, 2023 and the unqualified report thereon of the Company’s independent registered public accounting firm. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

Highlights

• In FY2023, the Company announced a series of comprehensive steps to align its Canadian cannabis operations and resources including: (i) the divestiture of the Company’s national cannabis retail operations (completed in Q3 FY2023); (ii) ceasing the sourcing of cannabis flower from the Mirabel, Quebec facility (completed in Q4 FY2023); (iii) exiting cannabis flower cultivation in the Smiths Falls, Ontario facility (expected to be completed in Q1 FY2024); (iv) consolidating cultivation at its existing facilities in Kincardine, Ontario and Kelowna, British Columbia; and (v) moving to an adaptive third-party sourcing model for all cannabis beverages, edibles, vapes, and extracts which will enable the Company to select and bring to market exciting and exclusive formats without the required investment in research and development and production footprint.
• Restructuring steps undertaken in FY2023 reduced Selling, General & Administrative (“SG&A”) expenses and Cost of Goods Sold (“COGS”) by a combined $125 million through the end of FY2023.
• The Company’s FY2023 net revenue decreased 21% year-over year to $403 million. When adjusting for the impact of the divestiture of C³ in Q4 FY2022 and our Canadian retail business in Q3 FY2023, revenues decreased 11% in FY2023 as compared to FY2022.
• Canadian medical cannabis revenue in FY2023 increased 6% year-over-year and Q4 FY2023 increased 8% year-over-year in a declining market.
• Enhanced flower quality drove resurgence of the Company’s mainstream Tweed brand to #9 spot in the Canadian adult-use market in Q4 FY2023 up from #16 in prior year¹.
• Subsequent to quarter-end, the Company entered into an agreement with Indiva Limited that gives Canopy Growth control of all distribution, marketing, and sales of industry leading Wana branded products in Canada. The addition of Wana branded gummies is expected to drive Adjusted EBITDA improvement for the Company’s Canadian cannabis business and advance its path to leadership in the edibles category in Canada.

“Fiscal 2023 was a transformational year for Canopy Growth as we began to implement a comprehensive strategy to accelerate our path to profitability, and position our business to realize the tremendous opportunities ahead. Our actions are already yielding results and we expect to realize significant benefits from our cost reduction program in Fiscal 2024. Paired with continued progress in our Canopy USA strategy which enables a fast start, the Company is well positioned as it strives towards its goal of long-term North American cannabis leadership.”
David Klein, Chief Executive Officer

Business Highlights

Transformation of Canadian cannabis operations to asset-light model and expected cost reductions are on track

• Since FY2020, the Company has closed 10 production sites in Canada and is on track to end production at its 1 Hershey Drive, Smiths Falls, Ontario facility by the end of Q1 FY2024.
• Cost reduction initiatives undertaken in FY2023 are on track to reduce the Company’s headcount by over 1200 positions.

During a year of significant business change and continued market fragmentation, Canopy Growth’s Canadian cannabis business stabilized exiting FY2023

• The Company’s Canadian medical cannabis revenue in Q4 FY2023 increased 8% year-over-year in a declining market and Canadian adult-use cannabis Business-to-business revenue in Q4 FY2023 increased slightly over Q3 FY2023.
• Canadian adult-use cannabis performance was aided by the resurgence of the Company’s mainstream Tweed brand. The resurgence was driven by strong consumer demand for new, high-quality Tweed Kush Mints and Tweed Tiger Cake flower and PRJ product offerings.

FY2024 focus on continued stabilization of Canadian adult-use cannabis business expected to be driven by new, high-quality flower and pre-rolled joints as well as a stronger edibles portfolio  

• Leveraging our experience with the resurgence of the Tweed brand in FY2023, the Company’s focus on enhancing flower quality is expected to improve the competitive positioning of our premium Doja and 7ACRES branded product offerings.
• Focused on reestablishing the growth of the Wana brand in the Canadian market and bringing Wana’s innovation across the United States into the Canadian market, including, for instance, Wana’s new passionfruit pineapple 1:1:1 (CBG/CBD/THC) gummy, a low dose product perfect for relaxing, which will soon be available in Ontario, BC, and Alberta.

Focusing BioSteel in North America, advancing innovation at Storz & Bickel to drive growth

• BioSteel is continuing to gain market share in Canada, including through its high visibility NHL partnerships and has reached an 11.2% share of convenience and gas channel in Canada⁷ in Q4 FY2023, up from 3.4% in the prior year. In FY2024, the BioSteel business is focused on expanding distribution in the food, drug, and mass channels and club accounts across Canada.
• BioSteel All-Commodity Volume in the U.S. of 37.7% in Q4 FY20238, up from 18.9% in the prior year. The Company is refining BioSteel’s U.S. market strategy with a tighter geographical focus as well as sharper emphasis on the specialty retail channel.
• Storz & Bickel has enhanced its U.S commercial strategy and is focused on driving improved growth with a planned launch of new Storz & Bickel vaporizers in FY2024.

CUSA strategy advancing and expected to accelerate entry into the U.S. cannabis market

• Subsequent to quarter end, the Company filed a revised proxy statement related to the Company’s strategy to accelerate entry into the U.S. cannabis market through its interest in CUSA and realize the opportunity of the world’s largest cannabis market.
• In order to ensure continued compliance with NASDAQ’s listing rules, Canopy Growth has modified the structure of the Company’s interest in CUSA such that it is not expected to be required to consolidate the financial results of CUSA with the Company’s financial statements in accordance with generally accepted accounting principles in the United States.
• The Company is focused on concluding the regulatory review and filing a definitive proxy statement related to CUSA in order to finalize the date for the special meeting of shareholders to authorize the creation of a new class of non-voting exchangeable shares in the capital of the Company (the “Exchangeable Shares”).

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

• Acreage⁹ reported Q1 FY2023 revenue of USD $56 million. In Q1 FY2023, Acreage began adult-use retail operations in Connecticut and secured approval to locate an adult-use dispensary in Pennsauken, New Jersey. Acreage anticipates commencing adult-use sales at the new Pennsauken location before the end of 2023.
• In the three months ended March 31, 2023, Wana Brands¹⁰ launched 19 SKUs in 8 markets including the launch in Colorado of Wana Optimals Quick Calm, a groundbreaking product offering a calming, typically non-intoxicating cannabinoid-terpene blend for fast-acting relief from anxious feelings.
• In the three months ended March 31, 2023, Jetty¹¹ expanded to the state of New York with products offered at two New York City dispensaries, Housing Works Cannabis Company and Union Square Travel Agency. Jetty also maintained its position as the #1 Solventless vape in California¹² in addition to fully staffing its California sales team to provide coverage of over 500 retail accounts.