Canopy Growth Corporation · TSX:WEED
Canopy Growth — Cowen 2020 Cannabis Conference
42 slides from Canopy Growth's conference presentation, Dec 2, 2020
Slide 1: Canopy Growth Corporation – Cowen 2020 Cannabis Conference
CANOPY GROWTH CORPORATION Cowen 2020 Cannabis Conference November 30—December 2, 2020
Slide 2: Disclaimers and Cautionary Statements
DISCLAIMERS AND CAUTIONARY STATEMENTS This presentation contains “forward-looking statements” and “forward-looking information” within the meaning of applicable U.S. and Canadian securities laws (collectively, “forward-looking statements”), which involve certain known and unknown risks and uncertain
Slide 3: Non-GAAP Measures
NON-GAAP MEASURES Adjusted EBITDA is a non-U.S. 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) income, adjusted to exclude income tax recovery (expen
Slide 4: Key Takeaways
KEY TAKEAWAYS • Compelling growth opportunity • Focused strategy to win in our core markets • Building world-class insights and innovation capabilities • Deliver best-in-class product portfolio and quality execution • Achieve profitable growth and build shareholder value 4
Slide 5: Clear Destination
CLEAR DESTINATION HANL?BD@AC4EDL4 7HNN4QFELAE@?N4 @AB@CDEB4?A< 7F1HB4 F741?AA?9@B @AAFG?E@FA I?JKLEB B@RL?9NL4BD?JL4@A47F1HB4 1FABHILJ 1?ELCFJ@LB4?A<4I?JKLEB MH?N@EO4 @A<HBEJO4 LPL1HEL4Q?ED4 LPL1HE@FA4 BE?A<?J< EF4QJF7@E?9@N@EO _
Slide 6: Compelling Growth Opportunity
COMPELLING GROWTH OPPORTUNITY 6
Slide 7: Global Cannabis TAM Opportunity Is Immense
GLOBAL CANNABIS TAM OPPORTUNITY IS IMMENSE VTTU ^TU ]TU 1%++%;*-4E?I_49341"6+.#3 \TU 7"86-4I%#)/. !"#$%"&'()&*#+&,%--%$./& [TU 0120,304&3#&%22+#%,5&6789:&.-& ZTU +03%."&/%"0/&$;&<=>8>?& YTU XTU @ WTU ABC&<%-%4%C&%-4&!0+D%-;&3#& VTU %,,#E-3&*#+&FG8H #*&I"#$%"&'()&& TU HK419< HB419< @.%(34I/& B2%*+4I/
Slide 8: CGC's Core Markets to Reach $22BN Sales by 2023
CGC’S CORE MARKETS TO REACH $22BN SALES BY 2023 15,000 CGC Focus Market TAM Growth, C$ in ’000s 6X Total TAM retail sales for Canada, 10,000 US CBD, and Germany: $22B by 2023 4X • 5,000 Over $60BN in TAM upon federal 10X permissibility of THC in US 0 Canada US (CBD only) Germany 2019 2020 2023 Sourc
Slide 9: Canada—Drivers of TAM Growth
CANADA—DRIVERS OF TAM GROWTH Convert Illicit to Legal: Less than 40% of Canadian consumer say they buy cannabis in legal dispensaries Legal market could become 85% of total Cannabis Growth in store count a key driver of legal market growth Recreational sales in Canada by 2023 2,500 100% At least 90%
Slide 10: Canada—Drivers of TAM Growth
CANADA—DRIVERS OF TAM GROWTH Recruit new consumers through 2.0 products: Cannabis Beverages, $1,300 17% of Canadian adults say they Functional intend to use recreational Beverages (Non- cannabis Alcoholic), $2,000 • 5% of total alcoholic beverages Alcoholic Beverages, and functional beverages equate
Slide 11: Drive Market Share Growth in Canada
DRIVE MARKET SHARE GROWTH IN CANADA KEY OPPORTUNITIES KEY ACTION PLAN A more focused portfolio of • SKU rationalization products • Refine pricing and packaging across flower, pre-roll and vapes Improve our share in the growing value segment • Continue to improve customer order fill rates Win in 2.0
Slide 12: US CBD Market Is Growing Quickly
US CBD MARKET IS GROWING QUICKLY US CBD Retail Sales by Products, USD in ’000s CBD Product CAGR (2020-2025) 12,000 Beverages 10,000 Topicals & Skincare 8,000 Edibles 6,000 Softgel / Pill 4,000 Pet 2,000 Vape / Inhalable 0 Oil / Tincture 2019 2020E 2021E 2022E 2023E Pet Topicals & Skincare Oil / Tinc
Slide 13: Our US CBD Roadmap
OUR US CBD ROADMAP N%6+85/&4I%#.5%4B./$%#.4;#%+&/&4 5/%(.54%+&4$/((+/--419<4,600*/-_4 "*(4%+&4-"!.4,/(-4*+4B/2./0;/#4WTWTf4 E5/4(%6+854,/+/#%./&4-*,+*!*8%+.4 /%#+/&40/&*%_4$5*854*-4%(#/%&34 &#*:*+,4-.#"+,48"+-60/#4&/0%+&f4 I%#.5%4B./$%#.419<42#"&68.-4%#/4 +"$4/>2%+&*+,4*+."4;#*8)'%+&' 0"#.%#4-."#/-_
Slide 14: Build a Cannabis and Hemp Powerhouse in the US Upon Permissibility
BUILD A CANNABIS AND HEMP POWERHOUSE IN THE US UPON PERMISSIBILITY Scalable Brands Constellation Brands Partnership • Bring our THC brands into the US • Balance sheet strength and access to market through MSO licensing or banking hemp-derived CBD extensions • Leverage Constellation’s powerful • Grow
Slide 15: Focused Strategy to Win in Our Core Markets
FOCUSED STRATEGY TO WIN IN OUR CORE MARKETS 15
Slide 16: Focused Strategy
FOCUSED STRATEGY INSIGHTS AND INNOVATION FOCUS MARKETS • Prioritize three core markets-Canada, US, • Know everything about the consumer Germany • Already best-in-industry science • Asset-light models in APAC or LATAM • Focus and re-deploy against commercial • Medical focus on wellness and OTC opport
Slide 17: Building World-Class Insights and Innovation Capabilities
BUILDING WORLD-CLASS INSIGHTS AND INNOVATION CAPABILITIES 17
Slide 18: Consumer Insights—Consumers, Intenders and Rejectors
CONSUMER INSIGHTS—DRIVING GROWTH REQUIRES THAT WE UNDERSTAND THREE UNIQUE GROUPS—CONSUMERS, INTENDERS AND REJECTORS CONSUMERS INTENDERS REJECTERS GET GET GET DE''$56(0jD("'(DW,(-"53E%$'3 0jD("'(DW,(256$5;$'3 0jD("'(DW,('$K$-6$'3 TO TO TO X5-'$73$(=$?7=(4E'-173$(9'$VE$5-G S7>$(61$2'(92'36(0jD("'(DW,(
Slide 19: Consumer Insights—Unique Barriers for Each Group
CONSUMER INSIGHTS—EACH GROUP PRESENTS UNIQUE BARRIERS THAT NEED TO BE ADDRESSED TO ACHIEVE GROWTH CONSUMERS INTENDERS REJECTERS 9?JJ@LJB 9?JJ@LJB 9?JJ@LJB4EF4NLC?N41?AA?9@B CANNABIS C%">25?U3%$== C%">25?U3%$== LEGAL !$#$'(&"E?16(&$9"'$ !"6(7:7'$("9(5$:(4'";E-63 I$7'("9(E5>5":5/(="33("9(-"56'"=/( Y'2
Slide 20: Consumer Insights—Opportunities and Actions for Growth
CONSUMER INSIGHTS— OUR TEAM IS FOCUSED ON IDENTIFYING OPPORTUNITIES AND ACTIONS FOR GROWTH BY ADDRESSING BOTH NEEDS AND BARRIERS CONSUMERS INTENDERS REJECTERS CGC OPPORTUNITY CGC OPPORTUNITY CGC OPPORTUNITY </:/("242#"&68.-4.5%.4%&&#/--4 F6.'&/(*:/#4:/#-6-4(/,%(4%+&4*((/,%(48%++%;*-4 </(*:/#4"+4/>*-
Slide 21: Deliver Best-in-Class Product Portfolio and Quality Execution
DELIVER BEST-IN-CLASS PRODUCT PORTFOLIO AND QUALITY EXECUTION 21
Slide 22: Products—Flower
PRODUCTS—FLOWER M6%#./#(347("$/#41%./,"#34B5%#/4;34Q#*8/4E*/#V I%#)/.4B5%#/4@02#":/0/+.- X[U XZU XTU XVU MW4WTWV4:-f4MV4WTWV XZU XWU YVU Y[U VALUE REC REC XZU X\U FLOWER2 WZU FLOWER3 V\U 17.3% XWT4 13.7% ^XT MX47OWT MY47OWT MV47OWV MW47OWV 92- 92- m7=E$ S72536'$7% Y'$%2E%(75;(M&"#$ QB D757;275('$-(9
Slide 23: Products—Flower
PRODUCTS—FLOWER (&,#D2+050-/.M0&+0/0%+,5&/3E4;&./&E-40+T%;&3#&40*.-0&*"#T0+&ZXE%".3;[C&%-4&2"%-/&%+0&$0.-I&.D2"0D0-304 <#*:*+,4I%#)/.4B5%#/4 Q(%+-4@+8(6&/k @02#":/0/+.4*+4G%(6/4 E1'"E?1(%7'>$6<34$-292-( o X%4'"#$%$56(25(%"236E'$(=$#$=3(F4'";E-6(25(%7'>$6(5":H 4'2-25?(7;KE36%$563/(4'2-$( o X55"#762"5
Slide 24: Products—Beverages
PRODUCTS—BEVERAGES BEVERAGES1 ! f$7;$'3124(4"3262"5(25(-7557&23< 54% 259E3$;(&$#$'7?$(3$?%$56 19<49LGLJ?CLB MARKET SHARE ! a('$7;G<6"<;'25>(0jD(&$#$'7?$3/(.( '$7;G<6"<;'25>(DW,(&$#$'7?$3(25( 61$(D757;275('$-'$762"57=(%7'>$6( ! f7E5-1$;(]E76'$7E('$7;G<6"< ;'25>(DW,(&$#$'7?$3(7-'"33( D757;7(25(!"#$%&$
Slide 25: Products—Beverages
PRODUCTS—BEVERAGES ! W2"36$$=(32?5$;(;236'2&E62"5( 7?'$$%$563(:261(O$G$3(W$$'( ,2#232"5/(S75176675(W$$'/(75;("61$'( 47'65$'3(25(D"536$==762"5(W'75;3P( N"=;(!$6:"'>B(,2'$-6<36"'$<;$=2#$'G( 5$6:"'>($J4$-6$;(6"(-"#$'(Q**d(&G( $7'=G(.*.Q ! f7E5-125?(]E76'$7E('$7;G<6"<;'25>( DW,(&$#$'7?$3(25(61$(AC(%7'>$
Slide 26: Products—Vapes
PRODUCTS—VAPES Happy 20th Anniversary Storz & Bickel ! ,$32?5$'(75;(%75E97-6E'$'("9( %$;2-7==G(744'"#$;(#74"'2[$'3(6176( 7'$(;236'2&E6$;(25(&"61(%$;2-7=(75;( '$-'$762"57=(-1755$=3 ! CgW(#74"'2[$'(4'";E-63(-"5625E$;( 6"(3$$(36'"5?(?'":61(;'2#$5(&G(&"61( ;236'2&E62"5(?7253(75;('$"';$'3(9'"%( 5$:(AC(;2
Slide 27: Products—Vapes
PRODUCTS—VAPES 0">G"(C%">$(fE%7(< Af(cQ)\(-$'6292$;(#74$( _Q*(O$-17'?$7&=$(W766$'G(m74$(Y$5(:U( 3G36$%(:U('$-17'?$7&=$(&766$'2$3(9$76E'$( &E66"5=$33(7-62#762"5/(Af(cQ)\(-$'6292$; _Q*( 4'$-23$(-$'7%2-(1$7625?(6$-15"="?G(75;( -7'6'2;?$3B(0:$$;(j"E5;36""61/(0:$$;( 9$76E'$(256$56<-"="'$;(%"E6142$-$3B((Y
Slide 28: Products—Edibles
PRODUCTS—EDIBLES S7'617(C6$:7'6(DW,( Q_(I=7#"'(C7%4=$'( WG($5;("9( k$==5$33(NE%%2$3( I23-7=(L$7'( M#72=7&=$(9"'( .*.Q Y'$<h';$'(!": .c
Slide 29: Products—Topicals
PRODUCTS—TOPICALS 0k(36'$5?61$5$;(;2'$-6( 75;(612';<47'6G($<-"%%( 37=$3(-1755$=3( DW,(W""36$'3(=7E5-1$;( "5=25$(25(61$(AR(75;(AC I2'36(g(I'$$ C6'$33D1$->(175;( DW,(4"'69"=2"( 375262[$'(=7E5-1$;(25(ABCB 25-=E;$3( 3"96?$=3/( M;;262"57=(4'";E-6(=25$3( "2=(;'"43/(75;( 75;($J475;$;( &";G(-'$7%3 ;236'2&E6
Slide 30: Achieve Profitable Growth and Build Shareholder Value
ACHIEVE PROFITABLE GROWTH AND BUILD SHAREHOLDER VALUE 30
Slide 31: Key Metrics to Assess Our Progress
KEY METRICS TO ASSESS OUR PROGRESS Are we winning with the consumer? Are we improving our execution? Key Metrics: Key Metrics: ü #1 or #2 dollar share in core markets ü Increase customer order fill rates ü Net sales growth year over year ü Reduce out of stock at retail Are we progressing towards pro
Slide 32: Q2 2021 Key Takeaways
Q2 2021 KEY TAKEAWAYS Momentum is building across our key businesses as our new strategy is coming to life • Strong growth and market share gains in our Canadian recreational business • Accelerating US growth by bringing our differentiated brands to market, and quickly expanding distribution • Maint
Slide 33: Tracking Our KPIs
TRACKING OUR KPI S$$625?("'(TJ-$$;25?(07'?$6 M44'"7-125?(07'?$6 W$=":(07'?$6 " !"#$%&#'()$*+&#($,-$)+($.&-&/,&-$ MY4WTWT MV4WTWV MW4WTWV #(0#(&),1-&2$%&#'()$3#(4$56$788$59*$,-$ e@A4e@ED41FABHILJ :7$787;$<*$:;$787;$= qQ("'(q.(S7'>$6(C17'$(25(D757;7 " >;$?&#'()$*+&#($,-$@(#%&-6$/#,(/$ qQ("'(q.(S7'>$6(
Slide 34: Target Sizable Reduction in SG&A Ratio Over Time
TARGET SIZABLE REDUCTION IN SG&A RATIO OVER TIME 180% 160% 140% Medium-term Target: 120% • Sales & Marketing: mid-teens as % of Sales 100% 80% • G&A: low-double-digits as % of Sales 60% 40% • R&D: mid-single-digits as % of Sales 20% 0% FY20 Q1 21 Q2 21 Target S&M G&A R&D D&A 34
Slide 35: Announced Cost Savings Program
ANNOUNCED COST SAVINGS PROGRAM Manage • Rationalize SKUs and cultivars Complexity • Specialize cultivars by site to increase yield and End-to-end review reduce complexity identified sizable cost savings Optimize Network and • Site rationalization / optimize extraction capacity Supporting SC Structur
Slide 36: Q2 2021 Key Financial Highlights
Q2 2021 KEY FINANCIAL HIGHLIGHTS Key Takeaways v Net revenue increased 77% year-over- (CDN in millions) Q2 21 Q2 20 vs. Q2 20 year, benefiting from favorable comparison, as Q2 2020 results included a Net Revenue $135.3 $76.6 77% $32.7 million charge for returns, return provisions and pricing allowan
Slide 37: Revenue Performance by Segment
REVENUE PERFORMANCE BY SEGMENT v Canadian rec revenue grew 12% YoY, adjusted for the charge, and 38% QoQ v Canadian medical net revenue increased 7% YoY, driven primarily by higher average order sizes v All other revenue increased by 60% on an organic basis, adjusting for the timing of the acquisiti
Slide 38: Revenue Performance by Format
Canadian Recreational Sales by Format – Q2 2021 REVENUE PERFORMANCE BY FORMAT Cannabis 2.0 Oils & 10% Softgels v Flower and pre-roll sales grew in Canadian rec business in Q2 2021 versus Q1 2021 9% v 2.0 products accounted for 10% of Canadian rec, and 8% of Canadian B2B rec revenue v In medical, oil
Slide 39: Gross Margin Performance
GROSS MARGIN PERFORMANCE Quarterly Gross Margin Trend Drivers of Q2 2021 Gross Margin Performance 42% (-) Negative impact from under-absorption of fixed 31% 31% costs due to lower production output, as well as higher 5% 5% 6% 7% 19% 19% period costs Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 (-) Unfavorable busi
Slide 40: OpEx Trend
OPEX TREND Quarterly OpEx Trend (C$ in `000s) OpEx as a Percentage of Net Sales (Q2 2020 vs. Q2 2021) 300,000 Total OpEx Total OpEx Ex-SBC 140% Q2 20 Q2 21 250,000 120% 100% 200,000 80% 150,000 60% 100,000 40% 50,000 20% 0 0% Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 SALES AND R&D G&A SHARE-BASED D&A MARKETING
Slide 41: Adjusted EBITDA and Free Cash Flow
ADJUSTED EBITDA AND FREE CASH FLOW Adjusted EBITDA Trend (C$ in `000s) Free Cash Flow Trend (C$ in `000s) Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 $0 $0 -$20,000 -$50,000 -$40,000 -$100,000 -$150,000 -$60,000 -$200,000 -$80,000 -$250,000 -$100,000 -$300,000 -$350,000 -$120,000 -$4
Slide 42: Thank You
THANK YOU 42