Canopy Growth Corporation · TSX:WEED
Canopy Growth — Q3 2021 Earnings Presentation
30 slides from Canopy Growth's earnings presentation, Feb 9, 2021
Slide 1: Q3 2021 Earnings Presentation
CANOPY GROWTH Q3 2021 EARNINGS PRESENTATION February 9, 2021
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-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. Adjusted EBITDA is calculated as the reported net loss, adjusted to exclude income tax recovery (expense); other inc
Slide 4: Today's Speakers
TODAY’S SPEAKERS David Klein Mike Lee CEO EVP & CFO 4
Slide 5: Agenda
AGENDA v Key Takeaways v Progress Against Our Key Strategic Priorities v Medium-Term Financial Targets v Q3 2021 Financial Results Review v Q&A 5
Slide 6: Key Takeaways
KEY TAKEAWAYS ESTABLISHING A TRACK RECORD OF WINNING IN OUR CORE MARKETS • Continued to gain market share in the Canadian recreational business • Global medical sales grew at a double-digits rate year-over-year • US CBD business gained momentum on the back of a highly successful Martha Stewart CBD p
Slide 7: Improving Market Share in Canada
IMPROVING MARKET SHARE IN CANADA CANADIAN REC VALUE REC REC1 FLOWER2 FLOWER3 15.7% 30 19.2% 180 16.8% 310 Bps Bps Bps 1. Weighted $ share of Canadian rec market, Bps improvement Q3 2021 over Q2 2021* 2. Weighted $ share of Canadian rec flower market, Bps improvement Q3 2021 over Q2 2021* 3. $ share
Slide 8: Latest Canadian Product Innovation
LATEST CANADIAN PRODUCT INNOVATION Simple Stash Tweed CBD 28g bags Quatreau RTD Launched 4 new Softgels in market now New Twd. Beverages strains under the now in Strawberry Sativa launched in Tweed brand market Gummies Q3 2021 exclusively in Québec now in Ontario market 8
Slide 9: Driving US Growth
DRIVING US GROWTH National Direct-Store-Delivery Martha Stewart health and wellness (DSD) coverage for Ready-to- S&B vaporizer products CBD products are seeing strong Drink (RTD) beverages in place continued to see solid growth consumer demand, with the with Constellation's beer driven by strong con
Slide 10: Latest US Product Innovation
LATEST US PRODUCT INNOVATION Canopy Animal Health has been granted the right to S&B released display the Quality Seal from the NASC (National Animal 100 gold-plated Supplement Council) on CBD products for dogs Launched Martha commemorative edition Stewart CBD Volcano Classic vaporizers in SurityPro
Slide 11: Building a Cannabis and Hemp Powerhouse With Significant Optionality in the US
BUILDING A CANNABIS AND HEMP POWERHOUSE WITH SIGNIFICANT OPTIONALITY IN THE US UPON FEDERAL PERMISSIBILITY Invest in Scalable Brands Constellation Brands • Bring our THC brands into the US • Investment grade balance sheet market through Multi-State strength and access to banking Operator (“MSO”) lic
Slide 12: Medium-Term Financial Targets
MEDIUM-TERM FINANCIAL TARGETS 3-Year Targets (FY 2022 – FY 2024) Net Revenue • 40%-50% CAGR Adjusted EBITDA • Positive Adjusted EBITDA during the second half of FY 2022; • 20% Adjusted EBITDA Margin for the full year FY 2024 Cash Flow • Positive Operating Cash Flow for the full year FY 2023; • Posit
Slide 13: Drivers of the Path to Profitability
DRIVERS OF THE PATH TO PROFITABILITY Robust Top-Line Growth Gross Margin Improvement Operating Expense Reduction Disciplined Capital Allocation Profitability and Positive Free Cash Flow 13
Slide 14: Path to Achieving Profitability During FY 2022
PATH TO ACHIEVING PROFITABILITY DURING FY 2022 600 Highlights 500 • FY 2021 Adjusted EBITDA loss tied to ramp-up of new industry, R&D investments, and suboptimal cost 400 structure • Business growth driven by incremental 300 revenue • COGS improvement driven by program 200 of initiatives supported b
Slide 15: Revenue Growth Drivers
REVENUE GROWTH DRIVERS 40%-50% FY 2022 – FY 2024 CAGR Canada Cannabis Drivers: ❖ Canadian recreational market growth of 40% in FY 2022, 25%-30% CAGR from FY 2022 to FY 2024 ❖ CGC’s recreational sales growth to be driven by overall market growth and market share gains ❖ CGC’s medical sales growth to
Slide 16: Cost Savings Targets
COST SAVINGS TARGETS $150-$200MM Cost Savings Expected in 12-18MOS COGS Savings Target (MM) SG&A Savings Target (MM) • Network optimization $50-$60 • Organization design efficiencies & Others $20-30 • SKU / Cultivar complexity $15 • Office space & facility optimization $10-20 • Operating model optim
Slide 17: Disciplined Capital Allocation
DISCIPLINED CAPITAL ALLOCATION Free Cash Flow Outlook: ❖ Positive Operating Cash Flow for the full year FY 2023 ❖ Positive Free Cash Flow for the full year FY 2024 CapEx Outlook: ❖ Below $200mm in FY 2021 & FY 2022 ❖ Key CapEx items in FY 2021 & FY 2022: SAP Implementation, US Advanced Manufacturing
Slide 18: Q3 2021 Financial Results
Q3 2021 FINANCIAL RESULTS 18
Slide 19: Tracking Our KPI
TRACKING OUR KPI Meeting or Exceeding Target Approaching Target Below Target Q4 2020 Q1 2021 Q2 2021 Q3 2021 • Canadian Recreational markets share up 30bps to 15.7% in Q3 2021 vs Q2 20216 WIN WITH CONSUMER #1 or #2 Market Share in Canada • Maintained a leading market share in Germany flower business
Slide 20: Q3 2021 Key Financial Highlights
Q3 2021 KEY FINANCIAL HIGHLIGHTS Key Takeaways (CDN in millions) Q3 2021 Q3 2020 vs. Q3 2020 • Net revenue increased 23% year-over- year, which includes $99mm in net Net Revenue $152.5 $123.8 23% cannabis revenue • Adjusted EBITDA loss narrowed to Adjusted Gross Margin 26% 31% (5pp) ($68.4mm) • Free
Slide 21: Revenue Performance by Segment
REVENUE PERFORMANCE BY SEGMENT Q3 2021 NET REVENUE MIX1 (CDN in millions) Q3 2021 Q3 2020 vs. Q3 2020 This Works Canadian Recreational Net Revenue 7% B2B $43.1 $43.0 NM Canada B2C $20.2 $15.2 33% Storz & Bickel Rec B2B 16% 28% $63.3 $58.2 9% Canadian Medical Net Revenue $14.0 $13.5 4% International
Slide 22: Revenue Performance by Format
Canadian Recreational Sales by Format – Q3 2021 REVENUE PERFORMANCE BY FORMAT Cannabis Oils & 2.0 Softgels 11% 9% (CDN in millions) Q3 2021 Q3 2020 vs. Q3 2020 Dry Bud Canadian Recreational Net Revenue 80% Dry Bud $66.2 $69.3 (4%) Oils and Softgels $7.3 $4.7 55% Cannabis 2.0 Products $9.6 $- NM Othe
Slide 23: Gross Margin Performance
GROSS MARGIN PERFORMANCE Quarterly Gross Margin Trend Drivers of Q3 2021 Gross Margin Performance 42% (-) Adjusted Gross Margins continue to be negatively 31% 31% 26% impacted by under absorption of fixed costs 19% 19% 16% 6% 7% Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 (+) Improvement relative to Q2
Slide 24: Opex Trend
OPEX TREND Quarterly OpEx Trend (C$ in `000s) OpEx as a Percentage of Net Sales (Q3 2020 vs. Q3 2021) 300,000 Total OpEx Total OpEx Ex-SBC 60% Q3 2020 Q3 2021 250,000 50% 200,000 40% 150,000 30% 100,000 20% 50,000 10% 0 0% Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 SALES AND R&D G&A SHARE-BASED D&A MAR
Slide 25: 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) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 $0 $0 -$50,000 -$20,000 -$100,000 -$40,000 -$150,000 -$200,000 -$60,000 -$250,000 -$80,000 -$300,000 -$350,000 -$1
Slide 26: Appendix
APPENDIX i CANOPY GROWTH, Comoe 26
Slide 27: Adjusted Gross Margin (Non-GAAP) Reconciliation
ADJUSTED GROSS MARGIN (NON-GAAP) RECONCILIATION Adjusted Gross Margin1 Reconciliation (Non-GAAP Measure) Three months ended December 31, (in thousands of Canadian dollars, unaudited) 2020 2019 Net revenue $152,528 $123,764 Gross margin, as reported 24,585 38,208 Adjustments to gross margin: Restruct
Slide 28: Adjusted EBITDA (Non-GAAP) Reconciliation
ADJUSTED EBITDA (NON-GAAP) RECONCILIATION Adjusted EBITDA1 Reconciliation (Non-GAAP Measure) Three months ended December 31, (in thousands of Canadian dollars, unaudited) 2020 2019 Net loss $(829,251) $(109,634) Income tax recovery (15,600) (27,448) Other (income) expense, net 290,567 (57,963) Loss
Slide 29: Free Cash Flow (Non-GAAP) Reconciliation
FREE CASH FLOW (NON-GAAP) RECONCILIATION Free Cash Flow Reconciliation1 Three months ended December 31, (in thousands of Canadian dollars, unaudited) 2020 2019 Net cash used in operating activities $(87,604) $(189,911) Purchases of and deposits on property, plant and equipment (47,782) (170,708) Fre
Slide 30: Thank You
THANK YOU i CANOPY GROWTH, inns ail Comoe sie Tope. @ TOKYO SMOKE “1 Spectrum Therapeutics 30