Canopy Growth Corporation

Good morning. My name is Anas, and I'll be your conference operator today. I would like to welcome you to Canopy's Growth Third Quarter and Fiscal Year 2022 Financial Results Conference Call. At this time, all participants are in listen-only mode. I will now turn the call over to Tyler Burns, Director, Investor Relations. Tyler, you may begin the conference call.

Thank you, operator. Good morning. Thank you all for joining us today. On our call, we have Canopy Growth Chief Executive Officer David Klein and Chief Financial Officer Judy Hong. Before financial markets opened today, Canopy issued a news release announcing our fiscal results for the fourth quarter and full fiscal year ended March 31st, 2022. This news release is available on our website under the Investors tab and will be filed on EDGAR and CDAR. We have also posted a supplemental earnings presentation on our website. Before we begin, I would like to remind you that our discussion during this call will include forward-looking statements that are based on management's current views and assumptions, and that this discussion is qualified in its entirety by the cautionary note regarding forward-looking statements included at the end of this morning's news release. Please review today's earnings release and Canopy's reports, followed with the SEC and on CDAR, for various factors that could cause actual results to differ materially from projections. In addition, reconciliations between any non-GAAP measures to their closest reported GAAP measure are included in our earnings release. Please note that all financial information is provided in Canadian dollars unless otherwise noted. Following prepared remarks by David and Judy, we will conduct a question and answer session where we will first address questions upvoted by verified shareholders using the Say Technologies platform. Following that, we will take questions from analysts To ensure that we get to as many analyst questions as possible, we ask that they limit themselves to one question. With that, I will turn the call over to David. David, please go ahead.

Thank you, Tyler, and good morning, everyone, and thanks for joining our call. Today, I'll outline Canopy's strategy and the foundation we've built over the past fiscal year, along with the key accomplishments in fiscal 22, which support our fiscal 23 priorities. Judy will then discuss Canopy's Q4 and fiscal 22 results and provide greater detail on our ongoing work to accelerate our path to profitability. In fiscal 22, we build a solid foundation for growth and clearly defined how Canopy will realize the massive opportunity ahead of us, not only as a company, but as part of a developing industry. Canopy's growth is a premium, Canopy growth is a premium branded North American cannabis company with a fairly simple strategy. We're focused on building beloved brands in markets and categories that will drive growth for the industry with strong routes to market that meet our consumers where they prefer to purchase, underpin with operational excellence. In fiscal 22, three distinct work streams were completed to build this foundation. First, we premiumized our cannabis branded portfolio in Canada. Second, we strengthened distribution of our high-performance CPG brands in the U.S., And third, we took concrete actions to build a competitive U.S. THC ecosystem. As it relates to premiumizing our Canadian cannabis brand portfolio, we maintained the number one market leadership position in premium flower in Canada. And through upgrades to our cultivation processes and facilities, we're consistently producing premium and mainstream flower with attributes that consumers demand. Our share of mainstream flower nearly doubled. a direct reflection of our focus on premium cultivation trickling down to our mainstream offerings. We bolstered our premium cannabis portfolio by expanding Doja, the best of the West Coast, into a truly national brand by bringing new flour, pre-rolled joint, and live resin vape products to consumers across Canada. Seven Acres continued to innovate and deliver industry-leading premium flour and infused pre-rolled joints, which we've highlighted through the Know to Grow series, providing an inside look at the talent, genetics, and grow techniques behind the brand and flower portfolio, highlighting the Seven Acres facility. In addition, we rebranded our iconic tweed brand, which coincided with new tweed flower and pre-rolled joints that have drawn very positive consumer feedback. The new look made formats and strains easier to identify for consumers, and new flower packaging was designed to preserve freshness. We're also ensuring Canopy has a strong roadmap of new genetics supported by exclusive breeding rights with top craft growers. We've taken best practices from the seven acres facility and implemented hang dry capabilities at our Smith Falls and Mirabelle sites, as well as upgraded feeding systems, air circulation, and humidity control in flower rooms. to consistently grow product with high THC and other in-demand attributes. In the face of a highly competitive Canadian adult use market, we extended our beverage portfolio with Deep Space Lime and Splashdown in Orange Orbit flavors and launched new Tweed Iced Tea and Tweed Fizz Seltzer beverage lines. Strong demand for these new beverages raised Tweed to the number one market share for under five milligram THC beverages, and Deep Space is the fastest growing and number two brand in the over five milligram THC category. We also introduced new gummies under the hero banners of Deep Space, Tweed, and Ace Valley, ranging from 2.5 milligrams to 10 milligrams with rapid onset. We're investing significant resources in our commercial ground game in Canada with higher education, our bud tender engagement program. Bud tenders are critical in guiding consumer purchase decisions. The goal of higher education is to strengthen our relationship with bud tenders through investments in educational resources and dedicated unboxing sessions. To date, we've had close to 4,000 bud tender interactions and have received valuable feedback from this important group. The second set of work we completed in fiscal 22 was the significant strides made to strengthen the distribution of our high-performance CPG brands in the U.S. We're continuing to see strong demand for Storz & Bickel's gold-standard vaporizers, including the new Volcano Onyx and Mighty Plus, which help propel Storz & Bickel to its 22nd consecutive year of revenue growth. Storz & Bickel vaporizers set the industry standard for quality and performance, with strong recognition among connoisseurs and mainstream consumers. In fact, the stores in Bic Almighty was recently highlighted by the New York Times for producing the best tasting vapors of any portable vaporizers they tested. BioSteel saw gains in distribution and sales velocity of the ready-to-drink products, which drove a 50% increase in revenue in fiscal 22 versus fiscal 21. We believe that this challenger brand is quickly turning into a winner as we watch members of Team BioSteel dominate in the playoffs, including Luka Doncic of the Dallas Mavericks, Connor McDavid of the Edmonton Oilers, and Andrew Wiggins with the Golden State Warriors. Lastly, I'm pleased to share the concrete actions completed in fiscal 22 that have built a competitive US THC ecosystem that will provide Canopy with turnkey entry into the US market. Canopy's model is fundamentally different from our competitive set, giving us unique positioning in the US with our THC assets that include Acreage, Juana Brands, Jetty Extracts, and a sizable ownership stake in TerraSend. I want to be clear. We aren't waiting for U.S. legalization to start extracting value from these assets. We've already paid for majority ownership positions in Juana and Jetty, with Acreage and TerraSend offering valuable routes to market. Critically, all these entities are already generating healthy profits. Our U.S. ecosystem has significant room to grow with footprints in large addressable markets. Acreage is well positioned to win in key northeast states such as New York, New Jersey, and Pennsylvania. In fact, both Acreage and Terrasend are benefiting from the recently opened adult-use cannabis market in New Jersey. We have a strong brand portfolio, including Juana, which is the number one cannabis edibles brand in North America. And Jetty, a top 10 cannabis brand in California and a top five brand in the vape category. As a leader in solventless vape technology, Jetty has proven itself in the highly competitive California cannabis market and is primed for rapid national expansion by leveraging Canopy's U.S. ecosystem. Jetty also gives us a critical route to market in California, which will pave the way for our high-impact Canadian brands, such as Deep Space in Tweed. And we're actively working to bring the Jetty brand and its innovative products to the Canadian market. We've seen the success that Juana, a highly respected premium U.S. brand, has had in Canada and look forward to bringing Jetty to consumers north of the border. When you add all these elements together, Canopy is amongst the top five cannabis players across North America. In fact, if you consider Canopy's annual revenue combined with the reported revenue of our USTHC ecosystem of acreage Juana and Jetty, Canopy would generate over a billion dollars in revenue with healthy margins. I firmly believe in the strength and competitive positioning in the US THC ecosystem we're building. Canopy's unique model is poised for rapid growth and emphasis on prioritized markets with fast-growing categories, strong brands, and a balanced operations footprint. Now I'd like to move to the strategic priorities that we focused on that we'll focus on in fiscal 23 that are designed to build on the foundation we built in fiscal 22. Priority one is to continue improving performance of our Canadian cannabis business and achieve profitability as soon as possible. Judy will outline our work on margin improvement as a core element of achieving positive EBITDA, but there are multiple aspects of this effort. We must continue to drive to win in premium categories which support higher margins. We also expect our pipeline of new products coming to market in fiscal 23 will strengthen our competitive positioning and, along with efforts to win the ground game with retailers, will drive market share gains. Our second priority is driving growth of our high-potential CPG brands. We will be making strategic investments in marketing and new product development for our high-growth CPG brands of Storz & Bickel and BioSteel. There's considerable runway for both brands, and investment will be to further build brand awareness and visibility amongst consumers and building a robust distribution pipeline. I'd like to reiterate that Storz & Bickel is already a $100 million brand with attractive margins. And BioSteel is the fastest growing sports hydration drink in North America. And our near-term aspiration is to grow the brand into a top five position as we significantly increase distribution through continued onboarding of major retailers. In USCBD, we await the regulatory unlock required to truly tap this category's potential, and we're adapting our approach by increasing focus on direct-to-consumer e-commerce retail model and select key account partners, an approach that is currently winning with our Martha Stewart CBD brand. While this narrower approach is likely to mean more measured growth for our USCBD business over the medium term, we remain optimistic that following the passage of clear regulations to support a national CBD market, our leading brands are positioned to win. Lastly, we're focused on further strengthening our USTHC ecosystem. We remain firm in our belief that investing in high-quality USTHC assets gets Canopy the competitive positioning that will enable us to win in the largest cannabis market in the world and create significant value over time. We've done this now and not waited for a number of reasons. We believe the components of our ecosystem are highly complementary. Most importantly, we have strong heritage brands that are highly scalable for the large East Coast recreational markets. Working together in the future, these companies will create synergies that will result in significant business growth for our ecosystem, meaning greater shareholder value generated for Canopy. Finally, we continue to benefit from our strategic relationship with Constellation Brands, by leveraging their experience and capabilities to support the continued advancement of our U.S. strategy, specifically in the areas of commercial sales, marketing, and operations. In summary, over the past year, we've taken decisive steps to focus Canopy, aligned our operations with market realities, and succeeded in premiumizing our brand offerings to meet the desires of our consumers and to match our vision for growth. Lastly, we've built and continue to strengthen what we feel is the industry's strongest, fully North American premium branded company. With that, I'll now turn it over to Judy.