BioSteel filing immediately eliminates
significant cash burn for Canopy Growth and provides for an orderly
realization of value of BioSteel's assets through a sale
process
As the senior secured lender to BioSteel,
Canopy Growth expects to recover proceeds from the anticipated sale
process
Management reaffirms its expectation to
achieve positive Adjusted EBITDA in all remaining business units
exiting FY2024, as the Company focuses on driving growth in
its Canadian and U.S. cannabis businesses to position itself as an
industry leader in North
America
SMITHS
FALLS, ON, Sept. 14, 2023 /CNW/ - Canopy Growth
Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (NASDAQ:
CGC) today announced that it has ceased funding BioSteel Sports
Nutrition Inc. ("BioSteel") and that BioSteel has commenced
proceedings under the Companies' Creditors Arrangement Act
(the "CCAA") in the Ontario Superior Court of Justice (Commercial
List) ("CCAA Court") and will seek recognition of that proceeding
under Chapter 15 of the United States Bankruptcy Code to give full
force and effect to the orders made in the CCAA proceeding in
the United States, including a
stay of proceedings.
As part of its efforts to simplify its business and reduce cash
burn, Canopy Growth previously announced that it was reviewing
strategic options for the Company's BioSteel business unit,
including a potential sale of the business unit. BioSteel's
business was a significant drag on Canopy Growth's profitability
and cash flow, representing approximately 60% of the Company's Q1
FY2024 Adjusted EBITDA loss. The decision by BioSteel to seek
creditor protection means that Canopy Growth will limit the further
funding obligations in respect of the BioSteel business unit, which
is consistent with Canopy Growth's transformation to a simplified,
asset-light operating model and focus on its core cannabis
operations.
Canopy Growth's financial position is expected to be further
strengthened through the immediate removal of the cash expenditures
associated with funding the BioSteel business unit and the
potential cash proceeds from the orderly sale of BioSteel's assets.
Further, the Company anticipates the removal of the previously
identified material weakness related to the BioSteel business
segment upon disposition. In addition, with BioSteel's operating
loss and cash burn eliminated, Canopy Growth reiterates its
expectation to achieve positive Adjusted EBITDA across its
remaining business units exiting FY2024.
"Canopy Growth has marked yet another major milestone in our
transformation plan, as while BioSteel's business has shown
significant year-over-year revenue growth, and we believe the brand
remains an attractive asset, it does not align with Canopy Growth's
cannabis focused asset-light strategy. We have repeatedly
demonstrated that we will take decisive action to enhance our
profitability and ensure we are focused and positioned to be a
leader in the North American cannabis sector," said David Klein, Chief Executive Officer.
Recent Transformation Plan
Highlights
- Since July 1, 2023, reduction of
the Company's overall debt by approximately CAD $349 million, with further reductions totalling
approximately CAD $95 million
expected over the next two quarters1.
- Agreement to sell Hershey Drive facility for CAD $53 million. Upon the completion of the sale,
Canopy Growth will have sold a total of seven properties for an
aggregate gross amount of approximately CAD $155 million since April
1, 2023.
- Achieved cost reduction of CAD $47
million in Q1 FY2024, bringing total cost reductions to CAD
$172 million since the beginning of
FY2023.
- Management continues to expect restructuring initiatives
announced in FY2023 to deliver combined Selling, General &
Administrative Expense and Cost of Goods Sold reduction of CAD
$240 million to CAD $310 million by the end of FY2024.
- U.S. THC companies that are expected to be acquired by Canopy
USA, LLC ("Canopy USA") continue to demonstrate momentum,
strengthening and expanding their businesses and Canopy Growth
continues to work with regulators to advance its novel
structure.
BioSteel has obtained an initial order from the CCAA Court which
provides for, among other things: (i) a stay of proceedings in
favor of BioSteel and its two U.S. affiliates, BioSteel Sports
Nutrition USA LLC and BioSteel
Manufacturing LLC; and (ii) the appointment of KSV Restructuring
Inc. as monitor of BioSteel.
The CCAA process will allow the BioSteel business to maximize
the value of its assets through a court supervised sales process.
Canopy Growth remains BioSteel Canada's largest creditor and
shareholder and anticipates receiving its proportionate share of
any recoveries in the CCAA process.
_________________________________________
|
1 This
number assumes that the convertible debentures issued on July 14,
2023 with an aggregate principal amount of approximately $40.4MM
are settled by the Company in common shares, which settlement is
only possible in the event that shareholders of the Company approve
such issuance at a meeting of shareholders on September 25,
2023.
|
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 income (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; restructuring costs 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. Asset impairments related to periodic
changes to the Company's supply chain processes are not excluded
from Adjusted EBITDA given their occurrence through the normal
course of core operational activities.
About Canopy Growth
Canopy Growth is a leading North American cannabis and consumer
packaged goods ("CPG") company dedicated to unleashing the power of
cannabis to improve lives. Through an unwavering commitment to our
consumers, Canopy Growth delivers innovative products with a focus
on premium and mainstream cannabis brands including Doja, 7ACRES,
Tweed, and Deep Space. Canopy Growth's CPG portfolio features
targeted 24-hour skincare and wellness solutions from This Works,
gourmet wellness products by Martha Stewart CBD, and category
defining vaporizer technology made in Germany by Storz & Bickel.
Canopy Growth has also established a comprehensive ecosystem to
realize the opportunities presented by the U.S. THC market through
its rights to Acreage Holdings, Inc., a vertically integrated
multi-state cannabis operator with principal operations in densely
populated states across the Northeast, as well as Wana Brands, a leading cannabis edible brand in
North America, and Jetty Extracts,
a California-based producer of
high-quality cannabis extracts and pioneer of clean vape
technology.
Beyond our world-class products, Canopy Growth is leading the
industry forward through a commitment to social equity, responsible
use, and community reinvestment—pioneering a future where cannabis
is understood and welcomed for its potential to help achieve
greater wellbeing and life enhancement.
For more information visit www.canopygrowth.com
References to information included on, or accessible through,
our website do not constitute incorporation by reference of the
information contained at or available through our website, and you
should not consider such information to be part of this press
release.
Notice Regarding Forward Looking
Statements
This news release contains "forward-looking statements" within
the meaning of the United States Private Securities Litigation
Reform Act of 1995 and "forward-looking information" within the
meaning of applicable Canadian securities legislation. Often, but
not always, forward-looking statements and information can be
identified by the use of words such as "plans", "expects" or "does
not expect", "is expected", "estimates", "intends", "anticipates"
or "does not anticipate", or "believes", or variations of such
words and phrases or state that certain actions, events or results
"may", "could", "would", "might" or "will" be taken, occur or be
achieved. Forward-looking statements or information involve known
and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company or
its subsidiaries to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking statements or information contained in this news
release. Examples of such statements and uncertainties include
statements with respect to BioSteel's intention to complete
proceedings under the CCAA; the outcome of the CCAA proceedings and
any potential recovery for its stakeholders, including Canopy
Growth; the impact on Canopy Growth's financial position, including
the potential cash proceeds from the sale of BioSteel's assets; the
anticipated removal of the previously identified material weakness
related to the BioSteel business segment; expectations regarding
the potential success of, and the costs and benefits associated
with the Company's transformation plan, including the completion of
the Company's sale of its Hershey facility; the assumption that the
convertible debentures issued on July 14,
2023 are settled in common shares of the Company; the
occurrence and outcome of the Company's restructuring initiatives
and Canopy USA's expected
acquisition of U.S. THC companies; segment and business focuses for
FY2024, including delivering positive Adjusted EBITDA exiting
FY2024 and expectations for other economic, business, and/or
competitive factors.
Risks, uncertainties and other factors involved with
forward-looking information could cause actual events, results,
performance, prospects and opportunities to differ materially from
those expressed or implied by such forward-looking information,
including BioSteel's ability to complete any future potential
transactions in connection with the CCAA proceedings and the terms
and conditions thereof; risks relating to the CCAA process,
including uncertainty of any residual value for BioSteel's
stakeholders under the CCAA process; negative operating cash flow;
uncertainty of additional financing; use of proceeds; volatility in
the price of the Company's common shares; inherent uncertainty
associated with projections; expectations regarding future
investment, growth and expansion of operations; regulatory and
licensing risks; changes in general economic, business and
political conditions, including changes in the financial and stock
markets and the impacts of increased rates of inflation; legal and
regulatory risks inherent in the cannabis industry, including the
global regulatory landscape and enforcement related to cannabis;
additional dilution; political risks and risks relating to
regulatory change; risks relating to anti-money laundering laws;
compliance with extensive government regulation and the
interpretation of various laws regulations and policies; public
opinion and perception of the cannabis industry; and such other
risks contained in the public filings of the Company filed with
Canadian securities regulators and available under the Company's
profile on SEDAR at www.sedar.com and with the Securities and
Exchange Commission through EDGAR at www.sec.gov/edgar, including
under the heading "Risk Factors" in the Company's annual report on
Form 10-K for the year ended March 31,
2023 and its subsequently filed quarterly reports on Form
10-Q.
In respect of the forward-looking statements and information,
the Company has provided such statements and information in
reliance on certain assumptions that they believe are reasonable at
this time. Although the Company believes that the assumptions and
factors used in preparing the forward-looking information or
forward-looking statements in this news release are reasonable,
undue reliance should not be placed on such information and no
assurance can be given that such events will occur in the disclosed
time frames or at all. Should one or more of the foregoing risks or
uncertainties materialize, or should assumptions underlying the
forward-looking information prove incorrect, actual results may
vary materially from those described herein as intended, planned,
anticipated, believed, estimated or expected. Although the Company
has attempted to identify important risks, uncertainties and
factors which could cause actual results to differ materially,
there may be others that cause results not to be as anticipated,
estimated or intended. The forward-looking information and
forward-looking statements included in this news release are made
as of the date of this news release and the Company does not
undertake any obligation to publicly update such forward-looking
information or forward-looking information to reflect new
information, subsequent events or otherwise unless required by
applicable securities laws.
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SOURCE Canopy Growth Corporation