Canopy Growth Corporation · TSX:WEED
Canopy Growth — Q4 FY2020 Earnings Presentation
31 slides from Canopy Growth's earnings presentation, May 29, 2020
Slide 1: FY 2020 Q4 and Full Year Earnings Presentation
CANOPY GROWTH FY 2020 Q4 and Full Year Earnings Presentation May 29th, 2020
Slide 2: Forward Looking Statement
FORWARD LOOKING STATEMENT This press release contains “forward-looking statements” within the meaning of applicable securities laws, which involve certain known and unknown risks and uncertainties. Forward-looking statements predict or describe our future operations, business plans, business and inv
Slide 3: Forward Looking Statement
FORWARD LOOKING STATEMENT 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 o
Slide 4: 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 5: Today's Presenters
TODAY’S PRESENTERS David Klein Mike Lee CEO EVP & CFO 5
Slide 6: Agenda
AGENDA v COVID-19: Priorities and Responses v Building Positive Momentum v Q4 FY20 and Full Year FY20 Financial Results v Strategic Update: Our Path Forward 6
Slide 7: COVID-19 Priorities and Responses
COVID-19 PRIORITIES AND RESPONSES Focus on the health and safety of our employees, business continuity, and supporting our communities through this crisis Our Employees Our Operations Our Communities Retail • Over 60% of global employees are currently • 90% of corporate-owned retail stores now • Don
Slide 8: Building Positive Momentum
BUILDING POSITIVE MOMENTUM New products continue to roll out globally, with a focus on CBD, vapes, and beverages RTD Beverages in JUJU Power 510 Battery Tokyo Smoke Luma First & Free This Works Tweed Houndstooth and Soda, and 510 Cartridges in Battery and CBD Creams in 24hr CBD Boosters1 Tweed Baker
Slide 9: Significant Progress in Right-Sizing Our Business
SIGNIFICANT PROGRESS IN RIGHT-SIZING OUR BUSINESS PRODUCTION ASSET-LIGHT APPROACH IN CANADIAN OPTIMIZATION SELECT INT’L MARKETS RESTRUCTURING • Reduced Canadian production • Transferred ownership of all • Significant reductions to the capacity by over 40% African operations to a local Canadian headc
Slide 10: Q4 FY20 and Full Year FY20 Results
Q4 FY20 AND FULL YEAR FY20 RESULTS 10
Slide 11: Q4 FY20 & FY20 Key Financial Highlights
Q4 FY20 & FY 20 KEY FINANCIAL HIGHLIGHTS Key Takeaways (CDN in millions) Q4 20 vs. Q3 20 vs. Q4 19 FY 20 vs. FY 19 v FY 2020 Net revenue grew 76% versus FY 2019 Gross Revenue 115 -15% 8% 440 73% v Net Revenue down 13% QoQ due to Net Revenue 108 -13% 15% 399 76% soft Canada Rec revenue v Adjusted (No
Slide 12: Revenue Performance by Segment
REVENUE PERFORMANCE BY SEGMENT v Canadian Recreational Revenue declined 28% from the prior quarter with B2B and B2C both down vs. Q3 20 v Canadian Medical sales remained consistent in Q4 20 vs Q3 20 v International Medical up double digits vs. Q3 20 driven by the strength in both C3 and Germany B2B
Slide 13: Revenue Performance by Format
REVENUE PERFORMANCE BY FORMAT Canada Recreational Sales by Format - Q420 Softgel, Oil & 2,0 Products 11% v Recreational Dry Bud down 29% in Q4 20 vs. Q3 20 v Softgel & Oil grew strongly during Q4 20, while 2.0 products contributed modestly Dry bud v In Global Medical, Softgel & Oil accounted for ove
Slide 14: Gross Margin Performance
GROSS MARGIN PERFORMANCE Quarterly Gross Margin Trend Drivers of Q4 FY20 Gross Margin Performance (+) Improvement in facility utilization 42% 31% 31% 20% 20% 5% 5% (+) Positive business mix – stronger contribution from 1Q20 2Q20 3Q20 4Q20 higher margin International Medical business (+) Continued co
Slide 15: SG&A Expense Trend
SG&A EXPENSE TREND Quarterly SG&A Expense Trend (C$ in `000s) SG&A Expense Type Trend (4Q20 vs. 3Q20, C$ in `000s) Total OpEx Total OpEx Ex-SBC 90,000 Q3 20 Q4 20 300,000 80,000 70,000 250,000 60,000 200,000 50,000 150,000 40,000 30,000 100,000 20,000 50,000 10,000 0 0 Q1 20 Q2 20 Q3 20 Q4 20 SALES
Slide 16: 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) Q1 20 Q2 20 Q3 20 Q4 20 Cash from Ops Capex 0 0 -20,000 -50,000 -100,000 -40,000 -150,000 -60,000 -200,000 -80,000 -250,000 -100,000 -300,000 -120,000 -350,000 -140,000 -400,000 -160,000 -450,00
Slide 17: COVID-19 Considerations
COVID-19 CONSIDERATIONS Expect 1Q FY20 sales and • Canada Rec B2B impacted by reduced traffic to physical retail stores due to social distancing. Ontario recently re-opened physical retail stores, after a temporary profitability to be negatively closure from the beginning of April through May 19th;
Slide 18: Strategy and Organizational Review Update
STRATEGY AND ORGANIZATIONAL REVIEW UPDATE 18
Slide 19: Strategic and Organizational Review Update
STRATEGIC AND ORGANIZATIONAL REVIEW UPDATE Key priorities we laid out last quarter… • Improve our connection with our consumers • Bring more focus and discipline to the Today, we lay organization out our Define a visible path to profitability and • positive cash flow path forward • Build credibility
Slide 20: Introducing the Strategy
INTRODUCING THE STRATEGY v Moving from a “be first” culture to a “be the best” culture, where growth is defined by revenue and market share, not headcount and capacity v Focused strategy with an operating model that is “fit for purpose” v A structure where roles are clear and decisions are moved clo
Slide 21: New Strategic Focus Already in Motion
NEW STRATEGIC FOCUS ALREADY IN MOTION v Designing a new operating model v Putting in place a new leadership structure v Rightsizing our business v Focus on three core markets – Canada, US, and Germany v Aligning to a consumer-first approach 21
Slide 22: Strategic Focus: How We'll Accomplish It
STRATEGIC FOCUS: HOW WE’LL ACCOMPLISH IT HIGH-LEVEL STRATEGY ADVANCING THE FULL SIZEABLE SHARE IN FOCUS EXECUTE PATH TO POTENTIAL OF CANNABIS CATEGORIES AND MARKETS PROFITABILITY HOW WE’LL ACCOMPLISH IT Consumer Focused and Quality Industry Centric Accountable Driven Leadership 22
Slide 23: Strategic Focus: Consumer Centric
STRATEGIC FOCUS: CONSUMER CENTRIC • World-Class Consumer Insights and Analytics • Coupled With Focused, Best-In-Industry Science and Product Development, and Innovation Organizations • Arms Sales Team with a Differentiated Branded Product Portfolio • Drives Sales Success Through Best-In-Class Execut
Slide 24: Strategic Focus: Focused and Accountable
STRATEGIC FOCUS: FOCUSED AND ACCOUNTABLE • Prioritize Activity on Highest-Potential Categories (Flower, Vape, Beverages, Edibles, Topicals, and Skincare) and Core Markets (Canada, US, Germany) • Resource and Asset-Light Approach on Incubator Markets and Emerging Categories • Industry Focus on Rec an
Slide 25: Strategic Focus: Quality Driven
STRATEGIC FOCUS: QUALITY DRIVEN • Approach Design Based on Value • Standards-Driven, Consistent Production • Deliver The Right Product, At The Right Time, At The Right Price, From The Right Facility • Balance of Flexibility and Scale Consumer Focused and Industry Quality Driven Centric Accountable L
Slide 26: Strategic Focus: Industry Leadership
STRATEGIC FOCUS: INDUSTRY LEADERSHIP • Spearhead The Next Phase of Industry Evolution • Proactively Shape How The Industry Evolves In Focus Markets • Pioneer Growing Good – Advocating for Change and Giving Back To Our Neighbors and Communities • Deliver On Responsibilities To Our Stakeholders Consum
Slide 27: Execute Path to Profitability
EXECUTE PATH TO PROFITABILITY v Expect FY 2021 to be a transition year v Plan to provide new financial targets during the 2H FY21 v Near-term Revenue opportunity is significant • Canada Rec market already over C$2.1bn in legal sales • US CBD market expected to be a US$10bn+ industry in the next few
Slide 28: Appendix
APPENDIX _ Ait CANOPY GROWTH ST Samos Spee, @ TOKYO SMOKE ste 7 Spectrum Therapeutics” 28
Slide 29: Adjusted Gross Margin Reconciliation (Non-GAAP)
Adjusted Gross Margin Reconciliation (Non-GAAP) Gross Margin - IFRS to US GAAP Differences Three months ended Year ended Mar 31, Dec 31 Sep 30, Jun 30, 2019 Mar 31, (in thousands of Canadian dollars, unaudited) 2020 2019 2019 2019 2020 Net revenue $ 107,913 $ 123,764 $ 76,613 $ 90,482 $ 398,772 Cost
Slide 30: Adjusted EBITDA Reconciliation (Non-GAAP)
Adjusted EBITDA Reconciliation (Non-GAAP) 1 Adjusted EBITDA Reconciliation (Non-GAAP Measure) Three months ended Year ended Mar 31, Dec 31 Sep 30, Jun 30, Mar 31, (in thousands of Canadian dollars, unaudited) 2020 2019 2019 2019 2020 Net loss $ (1,326,405) $ (109,634) $ 242,650 $ (194,051) $ (1,387,
Slide 31: Free Cash Flow (Non-GAAP) Reconciliation
Free Cash Flow (Non-GAAP) Reconciliation Free Cash Flow Reconciliation1 Three months ended March 31, March 31, (in thousands of Canadian dollars, unaudited) 2020 2019 Net cash provided by (used in) operating activities $ (210,639) $ (240,132) Purchases of and deposits on property, plant and equipmen