Canopy Growth Reports Fourth Quarter and Fiscal Year 2021 Financial Results

 
 

Achieves 37% revenue growth in FY 2021 with strong double-digit growth across both cannabis and other consumer products businesses

 

Improved supply chain execution and quality enhancements are leading to commercial success

 

Maintains #1 market share 1 of the total flower category in Canada ; recently announced acquisitions further solidify Canopy's leadership position in the Canadian recreational market

 

The U.S. ecosystem strategy continues to gain traction with focus to further capitalize on growth opportunities in the U.S.

 

Remains on track to achieve positive Adjusted EBITDA during the second half of FY 2022

 

  SMITHS FALLS, ON , June 1, 2021 /CNW/ - Canopy Growth Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (NASDAQ: CGC) today announces its financial results for the fourth quarter and Fiscal Year 2021 ended March 31, 2021.  All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

 

 

  Canopy Growth Corporation Logo (CNW Group/Canopy Growth Corporation) 

 
 

"During Fiscal 2021, Canopy Growth transformed into a CPG-modelled organization, reinforcing a foundation for sustained growth and long-term success. By leveraging consumer insights and innovation to deliver best-in-class products, Canopy Growth is positioned to achieve our goal of unleashing the power of cannabis to improve lives," said David Klein , CEO, Canopy Growth. "We are starting to see strong momentum across all of our key businesses and remain firmly focused on capitalizing on U.S. opportunities in Fiscal 2022."

 

"We made tremendous progress improving our supply chain and right-sizing our manufacturing footprint, bringing supply and demand into balance," added Mike Lee , CFO. "Our cost savings program is on track to deliver $150 - $200 million of savings within the next 18 months, and we remain committed to our path to profitability by the end of Fiscal 2022, while continuing to invest in an organization that is focused on insights, innovation and gaining momentum in the U.S. market."

 
 
  
 

  __________________________  

 
 

   1 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 a third-party data provider, government agencies and our own retail store operations across the country.  Tool captures point of sale data from an average of 29% of stores in Alberta, British Columbia, Saskatchewan, Manitoba and Newfoundland & Labrador, point of sale data from 100% of stores in New Brunswick, Nova Scotia and Prince Edward Island, as well as depletions and ecommerce sales data from the OCS.  

 
 
 

  Fourth Quarter Fiscal 2021 Financial Summary  

 
 
                     
 

   (in millions of Canadian dollars, unaudited)   

 
 

   Net revenue   

 
 

   Gross margin percentage   

 
 

   Adjusted gross margin percentage     2    

 
 

   Net loss   

 
 

   Adjusted EBITDA     3    

 
 

   Free cash flow     4    

 
 

   Reported   

 
 

  $148.4  

 
 

  7%  

 
 

  14%  

 
 

  $(616.7)  

 
 

  $(94.0)  

 
 

  $(124.4)  

 
 

  vs. Q4 2020  

 
 

  38%  

 
 

  NM  

 
 

  (2,800) bps  

 
 

  54%  

 
 

  8%  

 
 

  59%  

 
 
 

  Fiscal Year 2021 Financial Summary  

 
 
                     
 

   (in millions of Canadian dollars, unaudited)   

 
 

   Net revenue   

 
 

   Gross margin percentage   

 
 

   Adjusted gross margin percentage   5  

 
 

   Net loss   

 
 

   Adjusted EBITDA   

 
 

   Free cash flow   

 
 

   Reported   

 
 

  $546.6  

 
 

  12%  

 
 

  17%  

 
 

  $(1,670.8)  

 
 

  $(340.3)  

 
 

  $(630.2)  

 
 

  vs. Fiscal 2020  

 
 

  37%  

 
 

  2,000 bps  

 
 

  (900 bps)  

 
 

  (20%)  

 
 

  23%  

 
 

  57%  

 
 
 

  Fourth Quarter and Full Year Fiscal 2021 Corporate Financial Highlights  

 
  •   Revenues : Net revenue of $148 million in Q4 2021 was an increase of 38% versus Q4 2020. Net revenue increased 37% during FY 2021 over the prior year driven by double-digit growth across Canadian cannabis, international cannabis and other consumer products businesses. Total net cannabis revenue of $101 million in Q4 2021 and $379 million in FY 2021, represented an increase of 27% and 28% over Q4 2020 and the prior year, respectively.
  •  
  •   Gross margin : Reported gross margin in Q4 2021 was 7% as compared to negative 85% in Q4 2020. Adjusted gross margin, excluding $10.3 million in restructuring charges recorded in cost of goods sold, was 14% compared to 42% in Q4 2020 and was negatively impacted by lower production output, an unfavorable product mix in the Canadian recreational market and inventory charges in part due to the write-down of certain packaging inventory ahead of a transition to new cannabis packaging, partially offset by payroll subsidies received from the Canadian government in Q4 2021, pursuant to a COVID-19 relief program. FY 2021 reported gross margin was 12% compared to negative 8% in FY 2020. Adjusted gross margin, excluding $26 million in restructuring charges recorded in cost of goods sold, was 17% in FY 2021 versus 26% in FY 2020 and was impacted by lower production output and an unfavorable product mix, partially offset by payroll subsidies received from the Canadian government in FY 2021, pursuant to a COVID-19 relief program.
  •  
  •   Operating expenses : Total SG&A ("SG&A") expenses in Q4 2021 declined by 25% versus Q4 2020, driven by year-over-year reductions in Sales & Marketing, and Research and Development ("R&D") expenses. SG&A expenses declined by 17% in FY 2021 compared to FY 2020 driven by a 20% reduction in Sales & Marketing, a 22% reduction in General & Administrative ("G&A") and a 7% reduction in R&D expenses. Share-based compensation expenses decreased 76% over Q4 2020 and 72% over FY 2020.
  •  
  •   Net Loss: Net loss in Q4 2021 of $617 million , a $710 million narrower loss versus Q4 2020, was driven primarily by Other Expense totalling $367 million during Q4 2021 attributable to non-cash fair value changes of $292 million and impairment and restructuring charges of $75 million primarily related to changes to our Canadian operations that were announced on December 9, 2020 . The reported FY 2021 net loss of $1.7 billion , a $283 million wider loss versus FY 2020, was driven primarily by the year-over-year change in other income (expense), net, the reduction in the income tax recovery, and expected credit losses on financial assets and related charges, and partially offset by the year-over-year improvement in gross margin and reductions in selling, general and administrative expenses, share-based compensation expense, and asset impairment and restructuring charges.
  •  
  •   Adjusted EBITDA : Adjusted EBITDA loss in Q4 2021 was $94 million in Q4 2021, a $8 million narrower loss versus Q4 2020 driven by higher sales and lower operating expenses. The FY 2021 Adjusted EBITDA loss of $340 million , a $102 million narrower loss versus FY 2020 driven by higher sales and lower operating expenses.
  •  
  •   Cash Position : Cash and Short-term Investments amounted to $2.3 billion at March 31, 2021 , representing an increase of $0.3 billion from $1.98 billion at March 31, 2020 reflecting net proceeds from a $930 million ( US$750 million ) senior secured term loan announced on March 18, 2021 , partially offset by EBITDA losses and capital investments.
  •  
 
     
 

  ______________________________  

 
 

   2 Adjusted gross margin is a non-GAAP measure, and for Q4 2021 excludes restructuring costs of $10.3 million recorded in cost of goods sold (Q4 2020 - excludes (i) restructuring and other charges of $132.1 million related to the impact of restructuring actions; and (ii) $4.7 million related to the flow-through of inventory step-up associated with fiscal 2020 business combinations). See "Non-GAAP Measures".  

 
 

   3 Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures".  

 
 

   4 Free cash flow is a non-GAAP measure. See "Non-GAAP Measures".  

 
 

   5 Adjusted gross margin is a non-GAAP measure, and for Fiscal 2021 excludes restructuring costs of $26.0 million recorded in cost of goods sold, and $1.5 million related to the flow-through of inventory step-up associated with Fiscal 2020 business combinations (Fiscal 2020 - excludes charges of $136.8 million, as described above). See "Non-GAAP Measures".  

 
 
 

  Fourth Quarter and Fiscal Year 2021 Business & Operational Highlights  

 
  •   Canopy Growth continues to build momentum across its key product lines in Canada :  
  •  
    •   In Flower, the Company maintained #1 market share in the total flower category in Canadian recreational market during Q4 2021, capturing over 19% share of the market. Twd. exited FY 2021 as the #1 flower brand in Canada , with the brand capturing 6 out of top 10 SKUs. During Q4 2021, the Company's premium flower brands combined to capture a leading 10.9% share of the premium flower segment in Canada . The Company launched its first Quebec -exclusive brand, Vert, supported by multiple Quebec -grown strains, Green Cush and Sour Kush, and Tweed lineage-strain named flower products in Ontario during Q4 2021.
    •  
    •   In Vapes, the Company strengthened its positioning in the Canadian vape market with the transition to 0.5 ml 510 cartridges during Q4 2021. The addition of Ace Valley vape products to the Company's portfolio allows Canopy to immediately capture the #3 market share for vapes in Canada and the #1 market share for all-in-one vapes in Q4 FY 2021.
    •  
    •   In Beverages, The Company launched a portfolio of THC beverages in the Canadian recreational cannabis market during FY 2021, capturing 35% dollar share of the total beverage category during the full year. Canopy Growth launched Quatreau CBD beverages in Canada in Q3 2021 and captured #1 market share in Canada since launch. In Q1 2022, Canopy has expanded its portfolio of THC beverages with Tweed Iced Tea beverages (available in lemon and raspberry flavors, both with 5 mg THC) now shipping.
    •  
    •   In Edibles, the Company launched Twd. Strawberry gummies in Ontario in Q4 2021 with nationwide distribution rolling out in Q1 2022.
    •  
    • The acquisition of Ace Valley and the planned acquisition of Supreme Cannabis are expected to solidify Canopy's leadership in the Canadian recreational market, with the pro-forma market share of 18.1 % in Q4 2021, based on Canopy's internal market share data.
    •  
  •   The U.S. business poised for significant growth with a strong foundation in place for both CBD and non-CBD products  
  •  
    • Canopy successfully launched a range of Martha Stewart health and wellness CBD products in the U.S., including gummies, softgels and oils, in FY 2021. Martha Stewart CBD products are already a top 9 brand among all CBD supplements in the food, drug and convenience-store channel, according to IRI data for the 4 weeks ended April 18, 2021 .
    •  
    • The Company launched Quatreau CBD beverages in the U.S. in Q4 2021 and became the first U.S. CBD beverage brand to sign with a major beverage distributor, Southern Glazer's Wine & Spirit.
    •  
    • BioSteel is gaining momentum in the U.S. market, leveraging the U.S. distribution agreements for its ready–to-drink (RTD) sports beverages. BioSteel RTD beverages are already a top-7 sports drink brand with only 3.6% ACV, according to the IRI data for the 13 weeks ended May 16, 2021 .
    •  
    • Storz & Bickel (S&B) vaporizer products concluded a strong year with 67% revenue growth year over year driven by expanded distribution and a strong consumer pull.
    •  
  •   Company on track to achieve positive Adjusted EBITDA during the second half of FY 2022 and strengthened balance sheet provides additional fuel for growth  
  •  
    • Implementation of supply chain optimization well underway with network optimization and complexity reduction initiatives expected to realize our previously stated cost savings of $150 million to $200 million by the end of the first half of FY 2023.
    •  
    • Right-sizing of our Canadian production footprint has improved cannabis supply and demand with the equivalent kilograms of cannabis sold in Q4 2021 exceeding kilograms harvested by over 40%.
    •  
    • Overall Inventory levels declined sequentially in Q4 2021 even as finished inventory increased in support of various new product launches.
    •  
    • Canopy strengthened its balance sheet by securing a US$750 million senior secured term loan, with an ability to raise an additional $500 million in debt.
    •  

  Fourth Quarter and Fiscal Year 2021 Financial and Operational Review  

 

  Revenue by Channel  

 

  
 

 
 
                                                                                                                                                                        
 

   (in millions of Canadian dollars, unaudited)   

 
 

   Q4 2021   

 
 

   Q4 2020   

 
 

   vs. Q4
2020
 
 

 
 
 

   FY2021   

 
 

   FY2020   

 
 

   vs. FY2020   

 
 
 
 
 
 
 
 
 
 

   Canadian recreational cannabis   

 

   net revenue   

 
 
 
 
 
 
 
 
 

  - Business to business[6]  

 
 

  $43.3  

 
 

  $30.9  

 
 

  40%  

 
 
 

  $163.6  

 
 

  $121.6  

 
 

  35%  

 
 

  - Business to consumer  

 
 

  $17.8  

 
 

  $13.0  

 
 

  37%  

 
 
 

  $66.0  

 
 

  $52.1  

 
 

  27%  

 
 
 

   $61.1   

 
 

   $43.9   

 
 

   39%   

 
 
 

   $229.6   

 
 

   $173.7   

 
 

   32%   

 
 

   Canadian medical cannabis   

 

   net revenue    [7]    

 
 

  $13.7  

 
 

  $13.6  

 
 

  1%  

 
 
 

  $55.5  

 
 

  $51.6  

 
 

  8%  

 
 
 

   $74.8   

 
 

   $57.5   

 
 

   30%   

 
 
 

   $285.1   

 
 

   $225.3   

 
 

   27%   

 
 

   International and other revenue   

 
 
 
 
 
 
 
 
 

  - C 3  

 
 

  $15.8  

 
 

  $16.2  

 
 

  (2%)  

 
 
 

  $62.3  

 
 

  $53.8  

 
 

  16%  

 
 

  - Other  

 
 

  $10.7  

 
 

  $5.8  

 
 

  84%  

 
 
 

  $31.3  

 
 

  $15.8  

 
 

  98%  

 
 
 

   $26.5   

 
 

   $22.0   

 
 

   20%   

 
 
 

   $93.6   

 
 

   $69.6   

 
 

   34%   

 
 

   Global cannabis net revenue   

 
 

   $101.3   

 
 

   $79.5   

 
 

   27%   

 
 
 

   $378.7   

 
 

   $294.9   

 
 

   28%   

 
 
 
 
 
 
 
 
 
 

   Other consumer products   

 
 
 
 
 
 
 
 
 

  - Storz & Bickel  

 
 

  $17.9  

 
 

  $11.8  

 
 

  52%  

 
 
 

  $81.0  

 
 

  $48.4  

 
 

  67%  

 
 

  - This Works  

 
 

  $8.5  

 
 

  $8.3  

 
 

  2%  

 
 
 

  $33.3  

 
 

  $24.7  

 
 

  35%  

 
 

  - Other  

 
 

  $20.7  

 
 

  $8.3  

 
 

  149%  

 
 
 

  $53.6  

 
 

  $30.8  

 
 

  74%  

 
 

   Other consumer products   

 

   revenue   

 
 

   $47.1   

 
 

   $28.4   

 
 

   66%   

 
 
 

   $167.9   

 
 

   $103.9   

 
 

   62%   

 
 
 
 
 
 
 
 
 
 

   Net revenue   

 
 

   $148.4   

 
 

   $107.9   

 
 

   38%   

 
 
 

   $546.6   

 
 

   $398.8   

 
 

   37%   

 
 
 
 
 
 

  This table has been recast to align with our new segment reporting. International and other revenue includes revenue from our international medical business and hemp-derived CBD business. Other consumer products includes revenue from Storz & Bickel, This Works, BioSteel, clinics, accessories and other ancillary businesses.  

 
 
 

 

 
 
  
 

  _______________________  

 
 

   6 Reflects excise taxes of $17.5 million and other revenue adjustments of $3.1 million for Q4 2021 (Q4 2020 - $5.8 million and $5.4 million, respectively), and excise taxes of $54.9 million and other revenue adjustments of $14.0 million for FY2021 (FY2020 - $35.6 million and $51.5 million, respectively).
7 Reflects excise taxes of $1.4 million for Q4 2021 (Q4 2020 - $1.3 million), and excise taxes of $5.6 million for FY2021 (FY2020 - $5.2 million).
 

 
 
 

  Revenue by Form  

 
 
                                                                                                                                                                                                 
 

   (in millions of Canadian dollars, unaudited)   

 
 

   Q4 2021   

 
 

   Q4 2020   

 
 

   vs. Q4
2020
 
 

 
 
 

   FY2021   

 
 

   FY2020   

 
 

   vs. FY2020   

 
 
 
 
 
 
 
 
 
 

   Canadian recreational cannabis   

 
 
 
 
 
 
 
 
 

  - Dry bud[8]  

 
 

  $67.9  

 
 

  $48.8  

 
 

  39%  

 
 
 

  $238.0  

 
 

  $238.1  

 
 

  -  

 
 

  - Oils and softgels8  

 
 

  $6.7  

 
 

  $5.2  

 
 

  29%  

 
 
 

  $28.8  

 
 

  $21.6  

 
 

  33%  

 
 

  - Beverages, edibles, topicals  

 

  and vapes  

 
 

  $7.1  

 
 

  $1.1  

 
 

  NM  

 
 
 

  $31.7  

 
 

  $1.1  

 
 

  NM  

 
 

  - Other revenue adjustments[9]  

 
 

  $(3.1)  

 
 

  $(5.4)  

 
 

  43%  

 
 
 

  $(14.0)  

 
 

  $(51.5)  

 
 

  73%  

 
 

  - Excise taxes  

 
 

  $(17.5)  

 
 

  $(5.8)  

 
 

  (202%)  

 
 
 

  $(54.9)  

 
 

  $(35.6)  

 
 

  (54%)  

 
 
 

   $61.1   

 
 

   $43.9   

 
 

   39%   

 
 
 

   $229.6   

 
 

   $173.7   

 
 

   32%   

 
 

   Medical cannabis and other   

 
 
 
 
 
 
 
 
 

  - Dry bud  

 
 

  $9.7  

 
 

  $11.1  

 
 

  (13%)  

 
 
 

  $40.5  

 
 

  $37.4  

 
 

  8%  

 
 

  - Oils and softgels  

 
 

  $25.5  

 
 

  $25.8  

 
 

  (1%)  

 
 
 

  $101.9  

 
 

  $89.0  

 
 

  14%  

 
 

  - Beverages, edibles, topicals  

 

  and vapes  

 
 

  $6.4  

 
 

  $-  

 
 

  NM  

 
 
 

  $12.3  

 
 

  $-  

 
 

  NM  

 
 

  - Excise taxes  

 
 

  $(1.4)  

 
 

  $(1.3)  

 
 

  (8%)  

 
 
 

  $(5.6)  

 
 

  $(5.2)  

 
 

  (8%)  

 
 
 

   $40.2   

 
 

   $35.6   

 
 

   13%   

 
 
 

   $149.1   

 
 

   $121.2   

 
 

   23%   

 
 

   Global cannabis net revenue   

 
 

   $101.3   

 
 

   $79.5   

 
 

   27%   

 
 
 

   $378.7   

 
 

   $294.9   

 
 

   28%   

 
 
 
 
 
 
 
 
 
 

   Other consumer products   

 
 
 
 
 
 
 
 
 

  - Storz & Bickel  

 
 

  $17.9  

 
 

  $11.8  

 
 

  52%  

 
 
 

  $81.0  

 
 

  $48.4  

 
 

  67%  

 
 

  - This Works  

 
 

  $8.5  

 
 

  $8.3  

 
 

  2%  

 
 
 

  $33.3  

 
 

  $24.7  

 
 

  35%  

 
 

  - Other  

 
 

  $20.7  

 
 

  $8.3  

 
 

  149%  

 
 
 

  $53.6  

 
 

  $30.8  

 
 

  74%  

 
 

   Other consumer products revenue   

 
 

   $47.1   

 
 

   $28.4   

 
 

   66%   

 
 
 

   $167.9   

 
 

   $103.9   

 
 

   62%   

 
 
 
 
 
 
 
 
 
 

   Net revenue   

 
 

   $148.4   

 
 

   $107.9   

 
 

   38%   

 
 
 

   $546.6   

 
 

   $398.8   

 
 

   37%   

 
 

  This table has been recast to align with our new segment reporting.  

 
 
 

  Canadian Cannabis  

 
  • Recreational B2B net sales in Q4 2021 increased 40% over prior year period due primarily to growth in the retail store network in Canada over the fiscal year and growth in value flower and sales of ingestible cannabis, cannabis extracts and cannabis topical products.
  •  
  • Recreational B2C net sales in Q4 2021 increased 37% versus Q4 2020 due primarily to growth in flower sales, the availability of vape, beverage and edible products and a higher number of corporate owned stores. The number of corporate owned stores increased over the comparison period by 11 to 33.
  •  
  • Canadian medical net revenue in Q4 2021 increased 1% from Q4 2020 driven primarily by a higher average order value in Q4 2021.
  •  

  International Cannabis  

 
  • C 3 revenue in Q4 2021 declined 2% year-over-year in part due to COVID-19 restrictions that have limited sales activities.
  •  
  • Other revenue in Q4 2021 increased 84% over the prior year period due to primarily to growth in U.S. CBD sales.
  •  
 
  
 

  ____________________________  

 
 

  8 Excludes the impact of other revenue adjustments.
9 Other revenue adjustments represent the Company's determination of returns and pricing adjustments and relate to the Canadian recreational business-to-business channel.
 

 
 
 

  Other Consumer Products  

 
  • S&B vaporizer revenue in Q4 2021 increased 52% over Q4 2020, benefitting from strengthened distribution in the U.S., strong consumer demand and a broader product portfolio.
  •  
  • This Works sales in Q4 2021 increased 2% over Q4 2020, benefitting from organic growth driven by e–commerce sales and sales of the Stress Check hand sanitizer launched in the UK and U.S. during fiscal 2021.
  •  
  • Other revenue in Q4 2021 increased 149% year-over-year due primarily to increased BioSteel sales in the U.S. that benefited from expanded distribution.
  •  

  Subsequent to Quarter-end  

 
  • Entered into a definitive agreement to acquire 100% of The Supreme Cannabis Company, Inc. ("Supreme Cannabis"), a transaction that combines Canopy's preeminent position with Supreme Cannabis' Top-10 position in Canada to create a pro forma Canadian recreational market share of 13.6%[10], including the 7ACRES brand holding Canada's number one premium flower brand position and Top-5 in pre-rolled joints[11]. Completion of the acquisition of Supreme transaction is subject to approval by Supreme Cannabis shareholders as well as certain court and regulatory approvals.
  •  
  • Acquired AV Cannabis Inc. ("Ace Valley"), a leading Cannabis brand in Ontario with a strong focus on ready-to-enjoy ("RTE") products and a loyal following of millennial and Gen-Z consumers, with the intent of leveraging the Canopy Growth's best-in-class national sales, marketing and distribution capabilities to expand the product portfolio and scale the brand across Canada .

    The fourth quarter fiscal 2021, fourth quarter fiscal 2020, fiscal year 2021 and fiscal year 2020 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 Mike Lee , CFO at 10:00 AM Eastern Time on June 1, 2021 .

 

  Webcast Information  

 

A live audio webcast will be available at:

 

  https://produceredition.webcasts.com/starthere.jsp?ei=1455554&tp_key=5f1698b420  

 

  Replay Information  

 

A replay will be accessible by webcast until 11:59 PM ET on August 30, 2021 at:

 

  https://produceredition.webcasts.com/starthere.jsp?ei=1455554&tp_key=5f1698b420  

 

  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 income (expense), net; loss on equity method investments; share-based compensation expense; depreciation and amortization expense; asset impairment and restructuring costs; expected credit losses on financial assets and related charges; restructuring and other charges 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-related costs. The Adjusted EBITDA reconciliation is presented within this news release and explained in the Company's Annual Report on Form 10-K to be filed with the SEC.

 
 
   
 

  ______________________________________  

 
 

   10 As per the press release issued by the Company on April 8, 2021, Source: Provincial Boards; Headset Note: This market share data differs from Canopy's internal market share data provided during Canopy's previous earnings calls due to different methodologies and time periods. Market share data represents 01-Oct-20 through latest available data: Provincial Board data for ON online, PEI, NS (27/28-Mar-21) and NB (17-Mar-21); and Headset data for ON retail (28-Feb-21) and AB, BC and SK (31-Mar-21).  

 
 

   11 As per the press release issued by the Company on April 8, 2021, Market share data represents 01-Oct-20 through latest available data: Provincial Board data for ON online, PEI, NS (27/28-Mar-21) and NB (17-Mar-21); and Headset data for ON retail (28-Feb-21) and AB, BC and SK (31-Mar-21).  

 
 
 

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 Company's Annual Report on Form 10-K 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.

 

 

 

  About Canopy Growth Corporation  

 

Canopy Growth (TSX:WEED,NASDAQ:CGC ) is a world-leading diversified cannabis and cannabinoid-based consumer product company, driven by a passion to improve lives, end prohibition, and strengthen communities by unleashing the full potential of cannabis. Leveraging consumer insights and innovation, we offer product varieties in high quality dried flower, oil, softgel capsule, infused beverage, edible, and topical formats, as well as vaporizer devices by Canopy Growth and industry-leader Storz & Bickel. Our global medical brand, Spectrum Therapeutics, sells a range of full-spectrum products using its colour-coded classification system and is a market leader in both Canada and Germany . Through our award-winning Tweed and Tokyo Smoke banners, we reach our adult-use consumers and have built a loyal following by focusing on top quality products and meaningful customer relationships. Canopy Growth has entered into the health and wellness consumer space in key markets including Canada , the United States , and Europe through BioSteel sports nutrition, and This Works skin and sleep solutions; and has introduced additional federally-permissible CBD products to the United States through our First & Free and Martha Stewart CBD brands. Canopy Growth has an established partnership with Fortune 500 alcohol leader Constellation Brands. For more information visit www.canopygrowth.com .

 

  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. 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:

 
  • the uncertainties associated with the COVID-19 pandemic, including our ability, and the ability of our suppliers and distributors, to effectively manage the restrictions, limitations and health issues presented by the COVID-19 pandemic, the ability to continue our production, distribution and sale of our products and the demand for and use of our products by consumers, disruptions to the global and local economies due to related stay-at-home orders, quarantine policies and restrictions on travel, trade and business operations and a reduction in discretionary consumer spending;
  •  
  • laws and regulations and any amendments thereto applicable to our business and the impact thereof, including uncertainty regarding the application of U.S. state and federal law to U.S. hemp (including CBD) products and the scope of any regulations by the U.S. Food and Drug Administration (the "FDA"), the U.S. Drug Enforcement Administration (the "DEA"), the U.S. Federal Trade Commission (the "FTC"), the U.S. Patent and Trademark Office (the "USPTO"), the U.S. Department of Agriculture (the "USDA") and any state equivalent regulatory agencies over U.S. hemp (including CBD) products;
  •  
  • expectations regarding the laws and regulations and any amendments thereto relating to the U.S. hemp industry in the U.S., including the promulgation of regulations for the U.S. hemp industry by the USDA and relevant state regulatory authorities;
  •  
  • expectations regarding the potential success of, and the costs and benefits associated with, our acquisitions, joint ventures, strategic alliances, equity investments and dispositions;
  •  
  • the amended plan of arrangement with Acreage Holdings, Inc, including the consummation of such acquisition;
  •  
  • the Supreme Cannabis transaction, including the timing of closing of the Supreme Cannabis transaction and the satisfaction or waiver of the conditions to closing the Supreme Cannabis transaction;
  •  
  • the grant, renewal and impact of any license or supplemental license to conduct activities with cannabis or any amendments thereof;
  •  
  • our international activities and joint venture interests, including required regulatory approvals and licensing, anticipated costs and timing, and expected impact;
  •  
  • our ability to successfully create and launch brands and further create, launch and scale cannabis-based products and U.S. hemp-derived consumer products in jurisdictions where such products are legal and that we currently operate in;
  •  
  • the benefits, viability, safety, efficacy, dosing and social acceptance of cannabis, including CBD and other cannabinoids;
  •  
  • the anticipated benefits and impact of the investments in us (the "CBI Group Investments") by Constellation Brands, Inc. and its affiliates (together, the "CBI Group");
  •  
  • the potential exercise of the warrants held by the CBI Group, pre-emptive rights and/or top-up rights in connection with the CBI Group Investments, including proceeds to us that may result therefrom or the potential conversion of notes held by the CBI Group in connection with the CBI Group Investments;
  •  
  • expectations regarding the use of proceeds of equity financings, including the proceeds from the CBI Group Investments;
  •  
  • the legalization of the use of cannabis for medical or recreational in jurisdictions outside of Canada , the related timing and impact thereof and our intentions to participate in such markets, if and when such use is legalized;
  •  
  • our ability to execute on our strategy and the anticipated benefits of such strategy;
  •  
  • the ongoing impact of the legalization of additional cannabis product types and forms for recreational use in Canada , including federal, provincial, territorial and municipal regulations pertaining thereto, the related timing and impact thereof and our intentions to participate in such markets;
  •  
  • the ongoing impact of developing provincial, territorial and municipal regulations pertaining to the sale and distribution of cannabis, the related timing and impact thereof, as well as the restrictions on federally regulated cannabis producers participating in certain retail markets and our intentions to participate in such markets to the extent permissible;
  •  
  • the timing and nature of legislative changes in the U.S. regarding the regulation of cannabis including THC;
  •  
  • the future performance of our business and operations;
  •  
  • our competitive advantages and business strategies;
  •  
  • the competitive conditions of the industry;
  •  
  • the expected growth in the number of customers using our products;
  •  
  • our ability or plans to identify, develop, commercialize or expand our technology and R&D initiatives in cannabinoids, or the success thereof;
  •  
  • expectations regarding revenues, expenses and anticipated cash needs;
  •  
  • expectations regarding cash flow, liquidity and sources of funding;
  •  
  • expectations regarding capital expenditures;
  •  
  • our ability to refinance debt as and when required on terms favorable to us and comply with covenants contained in our debt facilities and debt instruments;
  •  
  • the expansion of our production and manufacturing, the costs and timing associated therewith and the receipt of applicable production and sale licenses;
  •  
  • the expected growth in our growing, production and supply chain capacities;
  •  
  • expectations regarding the resolution of litigation and other legal and regulatory proceedings, reviews and investigations;
  •  
  • expectations with respect to future production costs;
  •  
  • expectations with respect to future sales and distribution channels and networks;
  •  
  • the expected methods to be used to distribute and sell our products;
  •  
  • our future product offerings;
  •  
  • the anticipated future gross margins of our operations;
  •  
  • accounting standards and estimates;
  •  
  • expectations regarding our distribution network;
  •  
  • expectations regarding the costs and benefits associated with our contracts and agreements with third parties, including under our third-party supply and manufacturing agreements; and
  •  
  • expectations on price changes in cannabis markets.
  •  

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; (xiii) our ability to continue to operate in light of the COVID-19 pandemic and the impact of the pandemic on demand for, and sales of, our products and our distribution channels; and (xiv) 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.

 

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 Securities and Exchange Commission (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, changes in laws, regulations and guidelines and our compliance with such laws, regulations and guidelines; the risk that the COVID-19 pandemic may disrupt our operations and those of our suppliers and distribution channels and negatively impact the demand for and use of our products; consumer demand for cannabis and U.S. hemp products; our limited operating history; the risks and uncertainty regarding future product development; our reliance on licenses issued by and contractual arrangements with various federal, state and provincial governmental authorities; 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; risks associated with jointly owned investments; risks relating to our current and future operations in emerging markets; future levels of revenues and the impact of increasing levels of competition; risks related to the protection and enforcement of our intellectual property rights; our ability to manage disruptions in credit markets or changes to our credit ratings; future levels of capital, environmental or maintenance expenditures, general and administrative and other expenses; the success or timing of completion of ongoing or anticipated capital or maintenance projects; business strategies, growth opportunities and expected investment; 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); 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, or threatened litigation or proceedings, on our business, financial condition, results of operations and cash flows; risks related to stock exchange restrictions; risks associated with divestment and restructuring; volatility in and/or degradation of general economic, market, industry or business conditions; our exposure to risks related to an agricultural business, including wholesale price volatility and variable product quality; third-party transportation risks; 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; the anticipated effects of actions of third parties such as competitors, activist investors or federal, state, provincial, territorial or local regulatory authorities, or self-regulatory organizations; changes in regulatory requirements in relation to our business and products; 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, 2021 . 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   

 

   CONSOLIDATED BALANCE SHEETS   

 

  (in thousands of Canadian dollars, except number of shares and per share data, unaudited)  

 
 
 
 
 
 
 
 
 

   March 31,   

 

   2021   

 
 
 

   March 31,   

 

   2020   

 
 

   ASSETS   

 
 

  Current assets:  

 
 
 
 
 
 

  Cash and cash equivalents  

 
 
 

  $1,154,653  

 
 
 

  $1,303,176  

 
 

  Short-term investments  

 
 
 

  1,144,563  

 
 
 

  673,323  

 
 

  Restricted short-term investments  

 
 
 

  11,332  

 
 
 

  21,539  

 
 

  Amounts receivable, net  

 
 
 

  92,435  

 
 
 

  90,155  

 
 

  Inventory  

 
 
 

  367,979  

 
 
 

  391,086  

 
 

  Prepaid expenses and other assets  

 
 
 

  67,232  

 
 
 

  85,094  

 
 

  Total current assets  

 
 
 

  2,838,194  

 
 
 

  2,564,373  

 
 

  Equity method investments  

 
 
 

  100  

 
 
 

  65,843  

 
 

  Other financial assets  

 
 
 

  708,167  

 
 
 

  249,253  

 
 

  Property, plant and equipment  

 
 
 

  1,074,537  

 
 
 

  1,524,803  

 
 

  Intangible assets  

 
 
 

  308,167  

 
 
 

  476,366  

 
 

  Goodwill  

 
 
 

  1,889,354  

 
 
 

  1,954,471  

 
 

  Other assets  

 
 
 

  4,961  

 
 
 

  22,636  

 
 

  Total assets  

 
 
 

  $6,823,480  

 
 
 

  $6,857,745  

 
 
 
 
 
 
 

   LIABILITIES AND SHAREHOLDERS' EQUITY   

 
 

  Current liabilities:  

 
 
 
 
 
 

  Accounts payable  

 
 
 

  $67,262  

 
 
 

  $123,393  

 
 

  Other accrued expenses and liabilities  

 
 
 

  100,813  

 
 
 

  64,994  

 
 

  Current portion of long-term debt  

 
 
 

  9,827  

 
 
 

  16,393  

 
 

  Other liabilities  

 
 
 

  106,428  

 
 
 

  215,809  

 
 

  Total current liabilities  

 
 
 

  284,330  

 
 
 

  420,589  

 
 

  Long-term debt  

 
 
 

  1,573,136  

 
 
 

  449,022  

 
 

  Deferred income tax liabilities  

 
 
 

  21,379  

 
 
 

  47,113  

 
 

  Liability arising from Acreage Arrangement  

 
 
 

  600,000  

 
 
 

  250,000  

 
 

  Warrant derivative liability  

 
 
 

  615,575  

 
 
 

  322,491  

 
 

  Other liabilities  

 
 
 

  107,240  

 
 
 

  190,660  

 
 

  Total liabilities  

 
 
 

  3,201,660  

 
 
 

  1,679,875  

 
 

  Commitments and contingencies (Note 34)  

 
 
 
 
 
 

  Redeemable noncontrolling interest  

 
 
 

  135,300  

 
 
 

  69,750  

 
 

  Canopy Growth Corporation shareholders' equity:  

 
 
 
 
 
 

  Common shares - $nil par value; Authorized - unlimited number of shares;
  Issued - 382,875,179 shares and 350,112,927 shares, respectively  

 
 
 

  7,168,557  

 
 
 

  6,373,544  

 
 

  Additional paid-in capital  

 
 
 

  2,415,650  

 
 
 

  2,615,155  

 
 

  Accumulated other comprehensive (loss) income  

 
 
 

  (34,240)  

 
 
 

  220,899  

 
 

  Deficit  

 
 
 

  (6,068,156)  

 
 
 

  (4,323,236)  

 
 

  Total Canopy Growth Corporation shareholders' equity  

 
 
 

  3,481,811  

 
 
 

  4,886,362  

 
 

  Noncontrolling interests  

 
 
 

  4,709  

 
 
 

  221,758  

 
 

  Total shareholders' equity  

 
 
 

  3,486,520  

 
 
 

  5,108,120  

 
 

  Total liabilities and shareholders' equity  

 
 
 

  $6,823,480  

 
 
 

  $6,857,745  

 
 
 

 

 

  Schedule 2  

 
 
                                                                                                                            
 

   CANOPY GROWTH CORPORATION   

 

   CONSOLIDATED STATEMENTS OF OPERATIONS   

 

  (in thousands of Canadian dollars, except number of shares and per share data, unaudited)  

 
 
 
 
 
 
 
 
 

   Three months ended March 31,   

 
 
 
 

   2021   

 
 
 

   2020   

 
 

  Revenue  

 
 
 

  $167,375  

 
 
 

  $115,068  

 
 

  Excise taxes  

 
 
 

  18,936  

 
 
 

  7,155  

 
 

  Net revenue  

 
 
 

  148,439  

 
 
 

  107,913  

 
 

  Cost of goods sold  

 
 
 

  138,639  

 
 
 

  199,738  

 
 

  Gross margin  

 
 
 

  9,800  

 
 
 

  (91,825)  

 
 

  Operating expenses:  

 
 
 
 
 
 

  Selling, general and administrative expenses  

 
 
 

  148,666  

 
 
 

  197,579  

 
 

  Share-based compensation  

 
 
 

  18,517  

 
 
 

  78,354  

 
 

  Expected credit losses on financial assets
  and related charges  

 
 
 

  1,000  

 
 
 

  -  

 
 

  Asset impairment and restructuring costs  

 
 
 

  74,819  

 
 
 

  623,266  

 
 

  Total operating expenses  

 
 
 

  243,002  

 
 
 

  899,199  

 
 

  Operating loss  

 
 
 

  (233,202)  

 
 
 

  (991,024)  

 
 

  Loss from equity method investments  

 
 
 

  (11,778)  

 
 
 

  (57,752)  

 
 

  Other income (expense), net  

 
 
 

  (366,770)  

 
 
 

  (376,295)  

 
 

  Loss before income taxes  

 
 
 

  (611,750)  

 
 
 

  (1,425,071)  

 
 

  Income tax (expense) recovery  

 
 
 

  (4,945)  

 
 
 

  98,666  

 
 

  Net loss  

 
 
 

  (616,695)  

 
 
 

  (1,326,405)  

 
 

  Net income (loss) attributable to noncontrolling interests and
  redeemable noncontrolling interest  

 
 
 

  83,283  

 
 
 

  (23,384)  

 
 

  Net loss attributable to Canopy Growth Corporation  

 
 
 

  $(699,978)  

 
 
 

  $(1,303,021)  

 
 
 
 
 
 
 

  Basic and diluted loss per share  

 
 
 

  $(1.85)  

 
 
 

  $(3.72)  

 
 

  Basic and diluted weighted average common shares outstanding  

 
 
 

  378,519,753  

 
 
 

  349,837,102  

 
 
 

 

 

  Schedule 3  

 
 
                                                                                                                            
 

   CANOPY GROWTH CORPORATION   

 

   CONSOLIDATED STATEMENTS OF OPERATIONS   

 

  (in thousands of Canadian dollars, except number of shares and per share data, unaudited)  

 
 
 
 
 
 
 
 
 

   Years ended March 31,   

 
 
 
 

   2021   

 
 
 

   2020   

 
 

  Revenue  

 
 
 

  $607,198  

 
 
 

  $439,626  

 
 

  Excise taxes  

 
 
 

  60,549  

 
 
 

  40,854  

 
 

  Net revenue  

 
 
 

  546,649  

 
 
 

  398,772  

 
 

  Cost of goods sold  

 
 
 

  479,689  

 
 
 

  430,456  

 
 

  Gross margin  

 
 
 

  66,960  

 
 
 

  (31,684)  

 
 

  Operating expenses:  

 
 
 
 
 
 

  Selling, general and administrative expenses  

 
 
 

  575,389  

 
 
 

  693,737  

 
 

  Share-based compensation  

 
 
 

  91,149  

 
 
 

  320,276  

 
 

  Expected credit losses on financial assets
  and related charges  

 
 
 

  109,480  

 
 
 

  -  

 
 

  Asset impairment and restructuring costs  

 
 
 

  534,398  

 
 
 

  623,266  

 
 

  Total operating expenses  

 
 
 

  1,310,416  

 
 
 

  1,637,279  

 
 

  Operating loss  

 
 
 

  (1,243,456)  

 
 
 

  (1,668,963)  

 
 

  Loss from equity method investments  

 
 
 

  (52,629)  

 
 
 

  (64,420)  

 
 

  Other income (expense), net  

 
 
 

  (387,876)  

 
 
 

  224,329  

 
 

  Loss before income taxes  

 
 
 

  (1,683,961)  

 
 
 

  (1,509,054)  

 
 

  Income tax recovery  

 
 
 

  13,141  

 
 
 

  121,614  

 
 

  Net loss  

 
 
 

  (1,670,820)  

 
 
 

  (1,387,440)  

 
 

  Net income (loss) attributable to noncontrolling interests and
  redeemable noncontrolling interest  

 
 
 

  74,100  

 
 
 

  (66,114)  

 
 

  Net loss attributable to Canopy Growth  

 

  Corporation  

 
 
 

  $(1,744,920)  

 
 
 

  $(1,321,326)  

 
 
 
 
 
 
 

  Basic and diluted loss per share  

 
 
 

  $(4.69)  

 
 
 

  $(3.80)  

 
 

  Basic and diluted weighted average common  

 

  shares outstanding  

 
 
 

  371,662,296  

 
 
 

  348,038,163  

 
 
 

 

 

  Schedule 4  

 
 
                                                                                                                                                                                                                                                              
 

   CANOPY GROWTH CORPORATION   

 

   CONSOLIDATED STATEMENTS OF CASH FLOWS   

 

  (in thousands of Canadian dollars, unaudited)  

 
 
 
 
 
 
 
 
 

   Years ended March 31,   

 
 
 
 

   2021   

 
 
 

   2020   

 
 

   Cash flows from operating activities:   

 
 
 
 
 
 

  Net loss  

 
 
 

  $(1,670,820)  

 
 
 

  $(1,387,440)  

 
 

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

 
 
 
 
 
 

  Depreciation of property, plant and equipment  

 
 
 

  70,914  

 
 
 

  73,716  

 
 

  Amortization of intangible assets  

 
 
 

  56,204  

 
 
 

  51,297  

 
 

  Share of loss on equity method investments  

 
 
 

  52,629  

 
 
 

  64,420  

 
 

  Share-based compensation  

 
 
 

  91,149  

 
 
 

  320,276  

 
 

  Asset impairment and restructuring costs  

 
 
 

  534,398  

 
 
 

  623,266  

 
 

  Expected credit losses on financial assets and related charges  

 
 
 

  109,480  

 
 
 

  -  

 
 

  Income tax recovery  

 
 
 

  (13,141)  

 
 
 

  (121,614)  

 
 

  Non-cash foreign currency  

 
 
 

  8,138  

 
 
 

  (2,012)  

 
 

  Interest paid  

 
 
 

  (25,649)  

 
 
 

  (25,472)  

 
 

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

 
 
 
 
 
 

  Amounts receivable  

 
 
 

  (11,994)  

 
 
 

  20,979  

 
 

  Prepaid expenses and other assets  

 
 
 

  77  

 
 
 

  (26,917)  

 
 

  Inventory  

 
 
 

  17,211  

 
 
 

  (177,091)  

 
 

  Accounts payable and accrued liabilities  

 
 
 

  (9,627)  

 
 
 

  (20,750)  

 
 

  Other, including non-cash fair value adjustments  

 
 
 

  325,302  

 
 
 

  (165,293)  

 
 

  Net cash used in operating activities  

 
 
 

  (465,729)  

 
 
 

  (772,635)  

 
 

   Cash flows from investing activities:   

 
 
 
 
 
 

  Purchases of and deposits on property, plant and equipment  

 
 
 

  (164,502)  

 
 
 

  (704,944)  

 
 

  Purchases of intangible assets  

 
 
 

  (9,639)  

 
 
 

  (16,957)  

 
 

  Proceeds on sale of property, plant and equipment  

 
 
 

  45,921  

 
 
 

  -  

 
 

  Proceeds on sale of intangible assets  

 
 
 

  18,337  

 
 
 

  -  

 
 

  (Purchases) redemption of short-term investments  

 
 
 

  (459,834)  

 
 
 

  1,427,482  

 
 

  Cash outflow on completion of RIV Arrangement  

 
 
 

  (152,801)  

 
 
 

  -  

 
 

  Sale of (investments in) equity method investments  

 
 
 

  7,000  

 
 
 

  (5,135)  

 
 

  Investments in other financial assets  

 
 
 

  (44,721)  

 
 
 

  (129,590)  

 
 

  Investment in Acreage Arrangement  

 
 
 

  (49,849)  

 
 
 

  (395,190)  

 
 

  Loan advanced to Acreage Hempco  

 
 
 

  (66,995)  

 
 
 

  -  

 
 

  Recovery of amounts related to construction financing  

 
 
 

  10,000  

 
 
 

  -  

 
 

  Payment of acquisition related liabilities  

 
 
 

  (16,897)  

 
 
 

  (24,482)  

 
 

  Net cash outflow on acquisition of noncontrolling interests  

 
 
 

  (125)  

 
 
 

  -  

 
 

  Net cash outflow on acquisition of subsidiaries  

 
 
 

  -  

 
 
 

  (498,838)  

 
 

  Net cash used in investing activities  

 
 
 

  (884,105)  

 
 
 

  (347,654)  

 
 

   Cash flows from financing activities:   

 
 
 
 
 
 

  Payment of share issue costs  

 
 
 

  (131)  

 
 
 

  -  

 
 

  Proceeds from issuance of shares by RIV Capital  

 
 
 

  1,380  

 
 
 

  1,172  

 
 

  Proceeds from exercise of stock options  

 
 
 

  156,897  

 
 
 

  41,413  

 
 

  Proceeds from exercise of warrants  

 
 
 

  245,186  

 
 
 

  446  

 
 

  Issuance of long-term debt  

 
 
 

  893,160  

 
 
 

  14,761  

 
 

  Payment of debt issue costs  

 
 
 

  (16,104)  

 
 
 

  -  

 
 

  Repayment of long-term debt  

 
 
 

  (15,619)  

 
 
 

  (114,953)  

 
 

  Net cash provided by (used in) financing activities  

 
 
 

  1,264,769  

 
 
 

  (57,161)  

 
 

  Effect of exchange rate changes on cash and cash equivalents  

 
 
 

  (63,458)  

 
 
 

  (204)  

 
 

  Net decrease in cash and cash equivalents  

 
 
 

  (148,523)  

 
 
 

  (1,177,654)  

 
 

  Cash and cash equivalents, beginning of period  

 
 
 

  1,303,176  

 
 
 

  2,480,830  

 
 

  Cash and cash equivalents, end of period  

 
 
 

  $1,154,653  

 
 
 

  $1,303,176  

 
 
 

 

 

  Schedule 5  

 
 
                                                                                                                      
 

   Adjusted Gross Margin 1 Reconciliation (Non-GAAP Measure)   

 
 
 
 

  Three months ended March 31,  

 
 

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

 
 
 

  2021  

 
 
 

  2020  

 
 

  Net revenue  

 
 
 

  $148,439  

 
 
 

  $107,913  

 
 
 
 
 
 
 

  Gross margin, as reported  

 
 
 

  9,800  

 
 
 

  (91,825)  

 
 

  Adjustments to gross margin:  

 
 
 
 
 
 

  Restructuring and other charges recorded   in cost of goods sold  

 
 
 

  10,348  

 
 
 

  132,089  

 
 

  Charges related to the flow-through of inventory  

 

  step-up on business combinations  

 
 
 

  -  

 
 
 

  4,687  

 
 

  Adjusted gross margin 1  

 
 
 

  $20,148  

 
 
 

  $44,951  

 
 
 
 
 
 
 

  Adjusted gross margin percentage 1  

 
 
 

  14%  

 
 
 

  42%  

 
 
 
 
 
 
 
 
 

  Years ended March 31,  

 
 

   (in thousands of Canadian dollars, unaudited)   

 
 
 

  2021  

 
 
 

  2020  

 
 

  Net revenue  

 
 
 

  $546,649  

 
 
 

  $398,772  

 
 
 
 
 
 
 

  Gross margin, as reported  

 
 
 

  66,960  

 
 
 

  (31,684)  

 
 

  Adjustments to gross margin:  

 
 
 
 
 
 

  Restructuring and other charges recorded   in cost of goods sold  

 
 
 

  25,985  

 
 
 

  132,089  

 
 

  Charges related to the flow-through of inventory  

 

  step-up on business combinations  

 
 
 

  1,494  

 
 
 

  4,687  

 
 

  Adjusted gross margin 1  

 
 
 

  $94,439  

 
 
 

  $105,092  

 
 
 
 
 
 
 

  Adjusted gross margin percentage 1  

 
 
 

  17%  

 
 
 

  26%  

 
 
 
 
 
 
 

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

 
 
 

 

 

  Schedule 6  

 
 
                                                                         
 

   Adjusted EBITDA    1   Reconciliation (Non-GAAP Measure)   

 
 
 
 
 
 
 
 

  Three months ended March 31,  

 
 

   (in thousands of Canadian dollars, unaudited)   

 
 
 

  2021  

 
 
 

  2020  

 
 

  Net loss  

 
 
 

  $(616,695)  

 
 
 

  $(1,326,405)  

 
 

  Income tax expense (recovery)  

 
 
 

  4,945  

 
 
 

  (98,666)  

 
 

  Other (income) expense, net  

 
 
 

  366,770  

 
 
 

  376,295  

 
 

  Loss on equity method investments  

 
 
 

  11,778  

 
 
 

  57,752  

 
 

  Share-based compensation 2  

 
 
 

  18,517  

 
 
 

  78,354  

 
 

  Acquisition-related costs  

 
 
 

  5,561  

 
 
 

  1,840  

 
 

  Depreciation and amortization 2  

 
 
 

  28,928  

 
 
 

  48,781  

 
 

  Asset impairment and restructuring costs  

 
 
 

  74,819  

 
 
 

  623,266  

 
 

  Expected credit losses on financial assets   and related charges  

 
 
 

  1,000  

 
 
 

  -  

 
 

  Restructuring and other charges recorded   in cost of goods sold  

 
 
 

  10,348  

 
 
 

  132,089  

 
 

  Charges related to the flow-through of inventory  

 

  step-up on business combinations  

 
 
 

  -  

 
 
 

  4,687  

 
 

  Adjusted EBITDA 1  

 
 
 

  $(94,029)  

 
 
 

  $(102,007)  

 
 
 

 

 
 
                                                                               
 
 
 

  Years ended March 31,  

 
 

   (in thousands of Canadian dollars, unaudited)   

 
 
 

  2021  

 
 
 

  2020  

 
 

  Net loss  

 
 
 

  $(1,670,820)  

 
 
 

  $(1,387,440)  

 
 

  Income tax recovery  

 
 
 

  (13,141)  

 
 
 

  (121,614)  

 
 

  Other (income) expense, net  

 
 
 

  387,876  

 
 
 

  (224,329)  

 
 

  Loss on equity method investments  

 
 
 

  52,629  

 
 
 

  64,420  

 
 

  Share-based compensation 2  

 
 
 

  91,149  

 
 
 

  320,276  

 
 

  Acquisition-related costs  

 
 
 

  13,522  

 
 
 

  20,840  

 
 

  Depreciation and amortization 2  

 
 
 

  127,118  

 
 
 

  125,013  

 
 

  Asset impairment and restructuring costs  

 
 
 

  534,398  

 
 
 

  623,266  

 
 

  Expected credit losses on financial assets   and related charges  

 
 
 

  109,480  

 
 
 

  -  

 
 

  Restructuring and other charges recorded   in cost of goods sold  

 
 
 

  25,985  

 
 
 

  132,089  

 
 

  Charges related to the flow-through of inventory  

 

  step-up on business combinations  

 
 
 

  1,494  

 
 
 

  4,687  

 
 

  Adjusted EBITDA 1  

 
 
 

  $(340,310)  

 
 
 

  $(442,792)  

 
 
 
 
 
 
 

   1 Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures".  

 
 

   2 From Consolidated Statements of Cash Flows.  

 
 
 
 
 
 
 

 

 

  Schedule 7  

 
 
                            
 

   Free Cash Flow 1 Reconciliation (Non-GAAP Measure)   

 
 
 
 
 
 
 
 

  Three months ended March 31,  

 
 

   (in thousands of Canadian dollars, unaudited)   

 
 
 

  2021  

 
 
 

  2020  

 
 

  Net cash used in operating activities  

 
 
 

  $(97,830)  

 
 
 

  $(210,639)  

 
 

  Purchases of and deposits on property, plant and equipment  

 
 
 

  (26,525)  

 
 
 

  (94,086)  

 
 

  Free cash flow 1  

 
 
 

  $(124,355)  

 
 
 

  $(304,725)  

 
 
 

 

 

 

 
 
                             
 
 
 

  Years ended March 31,  

 
 

   (in thousands of Canadian dollars, unaudited)   

 
 
 

  2021  

 
 
 

  2020  

 
 

  Net cash used in operating activities  

 
 
 

  $(465,729)  

 
 
 

  $(772,635)  

 
 

  Purchases of and deposits on property, plant and equipment  

 
 
 

  (164,502)  

 
 
 

  (704,944)  

 
 

  Free cash flow 1  

 
 
 

  $(630,231)  

 
 
 

  $(1,477,579)  

 
 
 
 
 
 
 

   1 Free cash flow is a non-GAAP measure. See "Non-GAAP Measures".  

 
 
 

 

 

  Schedule 8  

 
 
                                                                                                                                               
 

   Segmented Revenue by Channel   

 
 
 

  Three months ended  

 
 

   (in thousands of Canadian dollars, unaudited)   

 
 
 

  December 31, 2020  

 
 
 

  September 30, 2020  

 
 
 

  June 30, 2020  

 
 

  Canadian recreational cannabis net revenue  

 
 
 
 
 
 
 
 

  Business-to-business 1  

 
 
 

  $43,129  

 
 
 

  $42,223  

 
 
 

  $34,934  

 
 

  Business-to-consumer  

 
 
 

  20,224  

 
 
 

  18,709  

 
 
 

  9,330  

 
 
 
 

  63,353  

 
 
 

  60,932  

 
 
 

  44,264  

 
 

  Canadian medical cannabis net revenue 2  

 
 
 

  13,947  

 
 
 

  13,888  

 
 
 

  13,910  

 
 
 
 

  77,300  

 
 
 

  74,820  

 
 
 

  58,174  

 
 

  International and other revenue  

 
 
 
 
 
 
 
 

  C 3  

 
 
 

  17,642  

 
 
 

  13,556  

 
 
 

  15,369  

 
 

  Other  

 
 
 

  8,886  

 
 
 

  5,918  

 
 
 

  5,739  

 
 
 
 

  26,528  

 
 
 

  19,474  

 
 
 

  21,108  

 
 

  Global cannabis net revenue  

 
 
 

  103,828  

 
 
 

  94,294  

 
 
 

  79,282  

 
 
 
 
 
 
 
 
 

  Other consumer products  

 
 
 
 
 
 
 
 

  Storz & Bickel  

 
 
 

  24,147  

 
 
 

  21,836  

 
 
 

  17,120  

 
 

  This Works  

 
 
 

  10,907  

 
 
 

  7,833  

 
 
 

  6,049  

 
 

  Other  

 
 
 

  13,646  

 
 
 

  11,303  

 
 
 

  7,965  

 
 

  Other consumer products revenue  

 
 
 

  48,700  

 
 
 

  40,972  

 
 
 

  31,134  

 
 

  Net revenue  

 
 
 

  $152,528  

 
 
 

  $135,266  

 
 
 

  $110,416  

 
 
 
 
 
 
 
 
 
 
 
  
 

   1 Reflects excise taxes of $15,977 and other revenue adjustments, representing our determination of returns and pricing adjustments, of $3,750 for the three months ended December 31, 2020; excise taxes of $14,200 and other revenue adjustments of $3,750 for the three months ended September 30, 2020; and excise taxes of $7,246 and other revenue adjustments of $3,400 for the three months ended June 30, 2020.  

 
 

   2 Reflects excise taxes of $1,402 for the three months ended December 31, 2020; $1,362 for the three months ended September 30, 2020; and $1,426 for the three months ended June 30, 2020.  

 
 
 

 

 

  Schedule 9  

 
 
                                                                                                                                                                     
 

   Segmented Revenue by Form   

 
 
 

  Three months ended  

 
 

   (in thousands of Canadian dollars, unaudited)   

 
 
 

  December 31, 2020  

 
 
 

  September 30, 2020  

 
 
 

  June 30, 2020  

 
 

  Canadian recreational cannabis  

 
 
 
 
 
 
 
 

  Dry bud 1  

 
 
 

  $66,210  

 
 
 

  $63,895  

 
 
 

  $40,129  

 
 

  Oils and softgels 1  

 
 
 

  7,292  

 
 
 

  7,021  

 
 
 

  7,721  

 
 

  Beverages, edibles, topicals and vapes  

 
 
 

  9,578  

 
 
 

  7,966  

 
 
 

  7,060  

 
 

  Other revenue adjustments  

 
 
 

  (3,750)  

 
 
 

  (3,750)  

 
 
 

  (3,400)  

 
 

  Excise taxes  

 
 
 

  (15,977)  

 
 
 

  (14,200)  

 
 
 

  (7,246)  

 
 
 
 

  63,353  

 
 
 

  60,932  

 
 
 

  44,264  

 
 

  Medical cannabis and other  

 
 
 
 
 
 
 
 

  Dry bud  

 
 
 

  10,098  

 
 
 

  9,836  

 
 
 

  10,832  

 
 

  Oils and softgels  

 
 
 

  27,696  

 
 
 

  23,458  

 
 
 

  25,215  

 
 

  Beverages, edibles, topicals and vapes  

 
 
 

  4,083  

 
 
 

  1,430  

 
 
 

  397  

 
 

  Excise taxes  

 
 
 

  (1,402)  

 
 
 

  (1,362)  

 
 
 

  (1,426)  

 
 
 
 

  40,475  

 
 
 

  33,362  

 
 
 

  35,018  

 
 

  Global cannabis net revenue  

 
 
 

  103,828  

 
 
 

  94,294  

 
 
 

  79,282  

 
 
 
 
 
 
 
 
 

  Other consumer products  

 
 
 
 
 
 
 
 

  Storz & Bickel  

 
 
 

  24,147  

 
 
 

  21,836  

 
 
 

  17,120  

 
 

  This Works  

 
 
 

  10,907  

 
 
 

  7,833  

 
 
 

  6,049  

 
 

  Other  

 
 
 

  13,646  

 
 
 

  11,303  

 
 
 

  7,965  

 
 

  Other consumer products revenue  

 
 
 

  48,700  

 
 
 

  40,972  

 
 
 

  31,134  

 
 

  Net revenue  

 
 
 

  $152,528  

 
 
 

  $135,266  

 
 
 

  $110,416  

 
 
 
 
 
 
 
 
 

   1 Excludes the impact of other revenue adjustments.  

 
 
 

 

 

  Schedule 10 – Segmented Gross Margin Reconciliation  

 
 
                                                                                      
 
 
 

  Three months ended  

 
 

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

 
 

  December 31, 2020  

 
 
 

  September 30, 2020  

 
 
 

  June 30, 2020  

 
 

  Global cannabis segment  

 
 
 
 
 
 
 
 

  Net revenue  

 
 
 

  $103,828  

 
 
 

  $94,294  

 
 
 

  $79,282  

 
 

  Cost of goods sold  

 
 
 

  96,434  

 
 
 

  82,232  

 
 
 

  86,140  

 
 

  Gross margin  

 
 
 

  7,394  

 
 
 

  12,062  

 
 
 

  (6,858)  

 
 

  Gross margin percentage  

 
 
 

  7%  

 
 
 

  13%  

 
 
 

  (9%)  

 
 
 
 
 
 
 
 
 

  Other consumer products segment  

 
 
 
 
 
 
 
 

  Revenue  

 
 
 

  $48,700  

 
 
 

  $40,972  

 
 
 

  $31,134  

 
 

  Cost of goods sold  

 
 
 

  31,509  

 
 
 

  26,954  

 
 
 

  17,781  

 
 

  Gross margin  

 
 
 

  17,191  

 
 
 

  14,018  

 
 
 

  13,353  

 
 

  Gross margin percentage  

 
 
 

  35%  

 
 
 

  34%  

 
 
 

  43%  

 
 
 

 

 

  Schedule 11 – Segmented Adjusted Gross Margin Reconciliation (Non-GAAP Measure)  

 
 
                                                                                                                                                     
 
 
 

  Three months ended  

 
 

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

 
 

  December 31, 2020  

 
 
 

  September 30, 2020  

 
 
 

  June 30, 2020  

 
 

   Global cannabis segment   

 
 
 
 
 
 
 
 

  Net revenue  

 
 
 

  $103,828  

 
 
 

  $94,294  

 
 
 

  $79,282  

 
 
 
 
 
 
 
 
 

  Gross margin, as reported  

 
 
 

  7,394  

 
 
 

  12,062  

 
 
 

  (6,858)  

 
 

  Adjustments to gross margin:  

 
 
 
 
 
 
 
 

  Restructuring and other charges recorded
  in cost of goods sold  

 
 
 

  15,637  

 
 
 

  -  

 
 
 

  -  

 
 

  Adjusted gross margin 1  

 
 
 

  $23,031  

 
 
 

  $12,062  

 
 
 

  $(6,858)  

 
 
 
 
 
 
 
 
 

  Adjusted gross margin percentage 1  

 
 
 

  22%  

 
 
 

  13%  

 
 
 

  (9%)  

 
 
 
 
 
 
 
 
 

   Other consumer products segment   

 
 
 
 
 
 
 
 

  Revenue  

 
 
 

  $48,700  

 
 
 

  $40,972  

 
 
 

  $31,134  

 
 
 
 
 
 
 
 
 

  Gross margin, as reported  

 
 
 

  17,191  

 
 
 

  14,018  

 
 
 

  13,353  

 
 

  Adjustments to gross margin:  

 
 
 
 
 
 
 
 

  Charges related to the flow-through of inventory  

 

  step-up on business combinations  

 
 
 

  -  

 
 
 

  -  

 
 
 

  1,213  

 
 

  Adjusted gross margin 1  

 
 
 

  $17,191  

 
 
 

  $14,018  

 
 
 

  $14,566  

 
 
 
 
 
 
 
 
 

  Adjusted gross margin percentage 1  

 
 
 

  35%  

 
 
 

  34%  

 
 
 

  47%  

 
 
 
 
 
 
 
 
 
 
 
   
 

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

 
 
 
 
 

 

 
 
 

 Cision View original content to download multimedia: https://www.prnewswire.com/news-releases/canopy-growth-reports-fourth-quarter-and-fiscal-year-2021-financial-results-301302541.html  

 

SOURCE Canopy Growth Corporation

 

 

 

 Cision View original content to download multimedia: https://www.newswire.ca/en/releases/archive/June2021/01/c6738.html  

 
 

News Provided by Canada Newswire via QuoteMedia

The Conversation (0)
Closeup of lush green cannabis leaves.

Thailand Reverses Course on Cannabis, Moves to Recriminalize Amid Political Fallout

Thailand’s groundbreaking experiment with cannabis decriminalization is rapidly unraveling, with the government formally moving to reclassify the plant as a narcotic and ban recreational sales.

The decision has sent shockwaves through an industry once projected to be worth over US$1 billion.

The country’s Ministry of Public Health issued an order this week stating that cannabis only be sold with a medical prescription, effectively ending a short-lived era of liberal recreational access.

Keep reading...Show less
Cannabis leaf over map of Australia.

A State-by-State Guide to Cannabis in Australia

Australia federally legalised medicinal cannabis in 2016, and Australia's cannabis market has seen major growth since then.

Medical cannabis approvals were up by 120 percent in the first half of 2023 compared to the same period in 2022. Statista forecasts that Australian cannabis revenue will reach AU$3.73 billion in 2024 and grow at an annual rate of 3.22 percent, culminating in market volume worth AU$4.53 billion by 2029.

However, Australia’s cannabis industry is still young. Despite there being a strong case for a regulated market, which was outlined in a July 2024 report by the Penington Institute, recreational use is not legal and medical access remains limited and regulated.

Keep reading...Show less
Cannabis leaf on road marked with "2025," with sunlight in the background.

New Cannabis Consumption Trends, Regulatory Shifts Seen Driving Market in 2025

Understanding trends in the cannabis industry is paramount for investors eyeing a market with steady growth potential, but the landscape is complex as products and regulations continue to evolve.

Consumption habits are changing as edibles, vaping and THC beverages gain traction, especially among younger users, and cannabis companies are adapting their offerings to meet shifting demand.

Meanwhile, regulatory uncertainty, particularly surrounding the future of the US Farm Bill and state-level restrictions on hemp-derived cannabinoids, continues to challenge the market.

Despite these headwinds, production data and long-term growth forecasts suggest the cannabis industry remains on a promising — albeit turbulent — path. Read on for more on key trends to watch in 2025.

Consumption methods evolving post-legalization

Shifts in consumer behavior are reshaping markets across the board, and the cannabis industry is no exception.

While smoking remains the dominant method of cannabis consumption, a recent report from the Centers for Disease Control and Prevention highlights the growing popularity of edibles, vaping and dabbing.

The report notes that vaping and dabbing are particularly pronounced among younger adults.

A separate study published by the American Medical Association and funded in part by the Canadian Institutes of Health Research also points to how product preferences have changed among Canadian users since legalization in 2018.


The study indicates that while the use of flower, cannabis concentrates, oil, tinctures and topicals has decreased during that time, the use of vape cartridges, edibles and beverages has increased.

Edibles and beverages were legalized in Canada in late 2019, and Truss Beverage was one of the first players to introduce cannabis-infused drinks. Truss was a joint venture formed by Molson Coors Canada (TSX:TPX.A,TSX:TPX.B) and HEXO, a cannabis company that has since been acquired by Tilray Brands (TSX:TLRY,NASDAQ:TLRY).

In early 2020, Tilray launched a lineup of confectionery, wellness products and beverages through its subsidiary, High Park; Canopy Growth (TSX:WEED,NASDAQ:CGC) made a similar move. These companies gradually brought their products to the US as more states legalized cannabis for medical and/or recreational use.

Today, established cannabis brands typically offer edibles and beverages alongside their other products. Organigram Global (TSX:OGI,NASDAQ:OGI) is one of the newest US entrants, with its April acquisition of Collective Project providing immediate access to the US hemp-derived THC beverage market.

Growing awareness of health and wellness, potentially amplified by the pandemic-led adoption of health trackers, appears to be making an impact on the alcoholic beverage market.

A 2023 Gallup poll reveals a two decade decline in alcohol consumption, particularly among younger adults, suggesting a shift towards more health-conscious lifestyles within this demographic.

Craft beer production declined by 4 percent year-on-year in 2024, according to data collected by the Brewers Association. This marked the largest drop in the industry's history, excluding the pandemic. For small, independent craft breweries, 2024 marked the third consecutive year of declining production. A drop in the number of operating small breweries last year provides further evidence of this trend, with 501 closures in 2024 versus 434 openings.

Challenges in the alcohol market extend beyond the brewing industry, with the New York Times recently reporting the closure of a handful of nightclubs facing decreased alcohol sales alongside rising insurance and rent costs.

Meanwhile, cannabis lounges have been popping up across the US for the last several years. As of early 2025, several states had legalized or were in the process of implementing regulations for cannabis consumption lounges.

Hemp market growth despite regulatory uncertainty

The burgeoning hemp industry is another segment of the expanding cannabis market.

The legalization of industrial hemp — defined as cannabis with a THC concentration of 0.3 percent or less — through the 2018 Farm Bill led to initial investment and optimistic projections for CBD wellness products and various industrial applications. The sector’s rapid evolution also brought the rise of hemp-derived intoxicating cannabinoids, creating a market that presented both opportunities and complexities for participants.

However, after an initial boom, a lack of infrastructure and clearly defined regulations for CBD, as well as state-level variations and market oversupply, ultimately contributed to a quick retraction.

2024 was a pivotal year for the US hemp industry, as the hemp-related provisions of the 2018 Farm Bill — originally set to expire in September 2023, but extended to December 31, 2024 — created an urgent need to address critical issues like THC limits and the regulation of novel hemp-derived cannabinoids. A major point of contention was the proposed shift from defining hemp based on Delta-9 THC concentration (0.3 percent or less) to “total THC,” which includes THCA.

This change had the potential to significantly impact farmers and processors, as many hemp varieties that are compliant under the Delta-9 THC rule could exceed the 0.3 percent limit when THCA is included.

Various bills and amendments were proposed in 2024 as part of the Farm Bill discussions, each with different approaches to regulating hemp. Separate regulatory frameworks for industrial hemp and hemp grown for cannabinoids were suggested, and many states took their own action, leading to a patchwork of regulations and even outright bans.

Despite challenges, data from the US Department of Agriculture suggests signs of recovery.

The department's annual National Hemp Report from 2024 points to an 18 percent increase in industrial hemp production value between 2022 and 2023, with output growth seen in specific sectors like floral (18 percent), fiber (133 percent) and seed hemp (414 percent). The 2025 report from the Department of Agriculture indicates further expansion, with notable increases observed in both acreage (up 64 percent from 2023) and value (46 percent).

The 2024 Farm Bill ultimately did not pass, and right now the hemp industry is operating under a temporary extension of the 2018 Farm Bill under the American Relief Act of 2025, signed into law on December 21, 2024.

The 2018 Farm Bill is now set to expire on September 30, 2025.

While analysts for Markets and Markets project that the North American hemp industry will grow at a CAGR of 22.4 percent and ultimately reach a valuation of US$30.24 billion by 2029, the future of the industry will be heavily influenced by the outcome of the ongoing Farm Bill discussions.

US cannabis legalization remains stalled

Although there is clear demand for cannabis products, the now-defunct rescheduling process in the US is likely to continue casting a shadow of uncertainty over the industry's long-term trajectory.

Legal and procedural delays, including allegations of improper conduct and bias within the US Drug Enforcement Administration (DEA), led to hearing cancellations, and the new administration of US President Donald Trump has brought leadership changes to key agencies like the DEA and the Department of Justice.

Terry Cole, who Trump nominated to be DEA administrator on February 11, has a history of opposing cannabis legalization in the country. Similarly, Pam Bondi, Trump’s pick to lead the justice department, staunchly opposed a movement to legalize medical cannabis during her tenure as Florida’s attorney general.

While there have been bipartisan efforts in Congress to end federal cannabis prohibition and establish regulations for eventual legalization, the DEA’s actions and statements indicate a potential stall or reversal of progress.

In addition to that, new research is adding complexity to the debate.

A study published in the American Journal of Psychiatry this past March highlights an association between the use of high-potency cannabis strains and increased risks of psychosis, a factor that may not have been fully considered by the Department of Health and Human Services. As stronger cannabis strains become more widely available, a reassessment of their potential health risks may be required.

Investor takeaway

While the cannabis industry holds promise for growth and innovation, investors must remain acutely aware of the regulatory uncertainties and market volatility that will undoubtedly shape its trajectory in the years to come.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.

Person touching a cannabis plant; Australia map in flag colours.

ASX Cannabis Stocks: 10 Biggest Companies

While Australia has yet to legalise all forms of cannabis, the country is a growing medical cannabis and hemp market, with many companies manufacturing, researching and exporting the plant-based product.

Medical cannabis was federally legalised in 2016, and the export of cannabis from Australia was legalised in 2018. As for recreational use, the only state to legalise recreational use and possession so far is the Australian Capital Territory, which did so in 2020, but it did not establish a regulated recreational cannabis market.

The country's medical cannabis market has been steadily expanding in size and scope. A Penington Institute report shows that Australians spent approximately AU$400 million on medicinal cannabis in the first half of 2024, 72 percent higher than the AU$234 million they spent over the entirety of 2022.

Keep reading...Show less
Cannabis leaves, gavel.

Cannabis Round-Up: Rescheduling Faces New Roadblocks, SAFER Banking Act Gets Another Look

February 2025 was characterized by an evolving legislative landscape and important financial updates from major players.

These developments underscore the complex and dynamic nature of the sector as it continues to navigate legal, financial, and regulatory challenges while experiencing ongoing growth and evolution.

Discussions around cannabis rescheduling, changes in federal agency leadership, state-level legalization efforts, and financial reports from key companies all contributed to a month of notable activity in the cannabis space.

Keep reading...Show less
Cannabis leaves, US flag.

Cannabis Round-Up: Banking Reform and Rescheduling De-Prioritized as Trump Takes Office

As a new year began, the cannabis industry saw a range of impactful events in January.

Legal obstacles continued to impede progress on a once-promising attempt to reschedule cannabis in the US, and President Donald Trump's leadership choices for key agencies are diminishing hopes it can be accomplished.

Meanwhile, cannabis banking reform won't be discussed at Wednesday's (February 5) meeting of the Standing Senate Committee on Banking, Commerce and the Economy, and Congress seems in no rush to address it.

Keep reading...Show less

Latest Press Releases

Related News

×