Canopy Growth(US:CGC)2025-02-07 11:45PART I. FINANCIAL INFORMATION Financial Statements The unaudited condensed interim consolidated financial statements for the period ended December 31, 2024, reflect decreased assets, a net loss, and the alleviation of going concern doubts through strategic financial actions Condensed Interim Consolidated Balance Sheets As of December 31, 2024, total assets decreased to $1.16 billion, total liabilities significantly reduced to $572.7 million, and shareholders' equity increased to $591.5 million Consolidated Balance Sheet Highlights (in thousands of CAD) | Balance Sheet Item | Dec 31, 2024 | Mar 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $161,909 | $170,300 | | Total current assets | $341,085 | $371,180 | | Total assets | $1,164,219 | $1,300,330 | | Liabilities & Equity | | | | Total current liabilities | $97,016 | $234,715 | | Long-term debt | $438,404 | $493,294 | | Total liabilities | $572,744 | $799,823 | | Total shareholders' equity | $591,475 | $500,507 | Condensed Interim Consolidated Statements of Operations and Comprehensive Loss For Q3 2024, net revenue decreased 5% to $74.8 million, while net loss from continuing operations improved to $121.9 million, reflecting a similar trend for the nine-month period Q3 & Nine-Month Performance (in thousands of CAD, except per share data) | Metric | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $74,761 | $78,505 | $203,964 | $224,358 | | Gross margin | $24,098 | $28,226 | $68,967 | $65,414 | | Operating loss from continuing operations | $(23,822) | $(60,316) | $(98,873) | $(121,975) | | Net loss from continuing operations | $(121,896) | $(230,276) | $(382,637) | $(389,007) | | Basic and diluted loss per share (Continuing ops) | $(1.11) | $(2.78) | $(4.15) | $(5.56) | Condensed Interim Consolidated Statements of Cash Flows For the nine months ended December 31, 2024, net cash used in operating activities improved to $132.6 million, while financing activities provided $164.6 million, leading to a net decrease in cash Cash Flow Summary (Nine months ended Dec 31, in thousands of CAD) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(132,598) | $(259,891) | | Net cash (used in) provided by investing activities | $(46,787) | $202,106 | | Net cash provided by (used in) financing activities | $164,618 | $(473,524) | | Net decrease in cash and cash equivalents | $(8,391) | $(534,262) | Notes to the Condensed Interim Consolidated Financial Statements The notes detail accounting policies and significant events, including the alleviation of going concern doubts, deconsolidation of Canopy USA and BioSteel, and debt restructuring - Management concluded that substantial doubt about the Company's ability to continue as a going concern has been alleviated through balance sheet actions, cost-savings, and additional financing, including the ATM Program3133 - Canopy Growth deconsolidated Canopy USA's financial results on April 30, 2024, to comply with Nasdaq listing rules, derecognizing $384.7 million in net assets and recognizing an equity method investment and loan receivable545872 - The BioSteel business unit was placed under CCAA proceedings and deconsolidated effective September 14, 2023, with its results now classified as discontinued operations808182 - The company established an at-the-market (ATM) equity program in June 2024, selling 39.5 million common shares for gross proceeds of $256.0 million during the nine months ended December 31, 2024141142 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 FY2025 performance, noting a 5% net revenue decrease, reduced operating expenses, improved gross margin, and successful alleviation of going concern risk through strategic financial actions Results of Operations Q3 FY2025 net revenue decreased 5% to $74.8 million, driven by divestitures, while operating expenses dropped 46% and Adjusted EBITDA loss improved to $3.5 million Q3 FY2025 Net Revenue by Segment (in thousands of CAD) | Segment | Q3 2025 | Q3 2024 | % Change | | :--- | :--- | :--- | :--- | | Canadian adult-use cannabis | $21,153 | $23,490 | (10%) | | Canadian medical cannabis | $19,575 | $16,894 | 16% | | International markets cannabis | $12,024 | $10,527 | 14% | | Storz & Bickel | $22,009 | $18,453 | 19% | | This Works | $- | $8,165 | (100%) | | Total Net Revenue | $74,761 | $78,505 | (5%) | - Operating expenses for Q3 FY2025 decreased by 46% to $47.9 million from $88.5 million in Q3 FY2024, driven by a 96% reduction in asset impairment and restructuring losses and a 24% decrease in SG&A264 Adjusted EBITDA (Non-GAAP) Reconciliation (Q3, in thousands of CAD) | Line Item | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net loss from continuing operations | $(121,896) | $(230,276) | | Adjustments | $118,427 | $221,287 | | Adjusted EBITDA | $(3,469) | $(8,989) | Financial Liquidity and Capital Resources The company alleviated going concern doubts, reduced total debt to $441.6 million, and raised $256.0 million through its ATM program, improving free cash flow to a $140.3 million outflow - Management concluded that substantial doubt about the company's ability to continue as a going concern has been alleviated through balance sheet actions, including debt reduction and equity financing314316 - Total debt was reduced by $155.6 million, from $597.2 million on March 31, 2024, to $441.6 million on December 31, 2024333 - The company raised $256.0 million in gross proceeds from its ATM program and received $68.3 million from a convertible debenture exchange and subscription agreement in the nine months ended December 31, 2024314317328 Free Cash Flow (Non-GAAP, in thousands of CAD) | Period | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(132,598) | $(205,961) | | Purchases of PP&E | $(7,724) | $(3,200) | | Free cash flow | $(140,322) | $(209,161) | Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency exchange rates, interest rates, and equity prices, with hypothetical 10% USD and EUR changes impacting net assets by $9.4 million and $20.5 million respectively - A hypothetical 10% change in the U.S. dollar against the Canadian dollar would affect net assets by approximately $9.4 million358 - A hypothetical 10% change in the euro against the Canadian dollar would affect net assets by approximately $20.5 million358 - The company is exposed to equity price risk through its holdings of shares, warrants, options, and other financial assets and liabilities measured at fair value365 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of December 31, 2024, the company's disclosure controls and procedures are effective369 - No material changes to internal control over financial reporting occurred during the quarter370 PART II. OTHER INFORMATION Legal Proceedings The company is involved in ongoing legal proceedings, including dismissed U.S. class actions, ongoing Canadian class actions, and an SEC investigation related to BioSteel - A U.S. securities class action related to BioSteel was dismissed with prejudice, and the subsequent appeal was voluntarily dismissed and closed as of October 9, 2024375 - Putative class action lawsuits are ongoing in Ontario and British Columbia alleging misrepresentations in public disclosures377379 - The company is subject to an ongoing SEC investigation following its self-reporting of an internal review of BioSteel Canada's financial reporting matters381 Risk Factors A material risk factor concerns Acreage Holdings, Inc.'s going concern doubts, which could negatively impact Canopy USA's operations and Canopy Growth's US$106 million debt investment - Acreage Holdings, Inc.'s financial statements express substantial doubt about its ability to continue as a going concern, posing a significant risk to Canopy USA's business and Canopy Growth's U.S. strategy385 - Canopy Growth holds approximately US$106 million of Acreage's debt, subordinate to US$65 million owed to another lender, risking total loss if Acreage fails387388 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the period - No unregistered sales of equity securities occurred390 Defaults Upon Senior Securities No defaults upon senior securities occurred during the period - No defaults upon senior securities occurred391 Other Information No director or officer reported adopting or terminating a Rule 10b5-1 trading arrangement during the third quarter of fiscal 2025 - No director or officer reported adopting or terminating a Rule 10b5-1 trading arrangement during the quarter393 Exhibits The report includes various exhibits filed with the SEC, such as corporate governance documents, CEO employment agreement, and required certifications - Exhibits filed include corporate governance documents, an employment agreement for CEO Luc Mongeau, and required CEO/CFO certifications394