Canopy Growth Corporation

Good afternoon. My name is Joelle. I will be your conference operator today. I would like to welcome you to Canopy Growth Second Quarter Fiscal Year 2024 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. Thank you.

Good afternoon and thank you for joining us today. On our call today, we have Canopy Growth's Chief Executive Officer, David Klein, and Chief Financial Officer, Judy Hong. After financial markets closed today, Canopy issued a news release announcing the financial results for our second quarter ended September 30th, 2023. The news release and financial statements have been filed under EDGAR and CDAR and will be available on our website under the Investors tab. Before we begin, I would like to remind you that our discussion during the 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 the news release issued today. Please review today's earnings release canopies reports filed 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 measures are included in our earnings release. Please note that all financial information is provided in Canadian dollars unless otherwise stated. Following prepared remarks by David and Judy, we will conduct a question and answer session where we will take questions from analysts to ensure that we get to as many questions as possible. We ask analysts to lift themselves to one question only. With that, I will turn the call over to David. David, please go ahead.

Good afternoon, and thank you for joining us to discuss Canopy Growth's second quarter fiscal 24 results. pleased to speak to the positive results we've reported today that have been achieved through the successful structural transformation of our business as well as the actions we've taken to strengthen canopy's balance sheet it should be evident the canopy of today looks fundamentally different than it did a year ago and we are proud of the results that this transformation is already delivering during the call today i will cover three topics first The completed transformation of Canopy to a simplified cannabis focused asset like business now anchored by strong fundamentals. Second, that building on this foundation, we are now focused on driving the growth of our core businesses supported by high quality products that are already resonating with consumers. And finally, I'll provide a brief update on our Canopy USA strategy and the continued advancement of this high potential ecosystem. Following my remarks, Judy will provide a review of our second quarter fiscal 24 results, including the actions taken to strengthen our financial position and improve liquidity. Let's begin with the transformation of our business through bold and decisive actions we've delivered on our commitment to transform canopy growth into a streamlined, cannabis focused asset like business. To recap, the core components of this transformation delivered include divesting our Canadian retail operations, consolidating our cultivation platform from 12 sites to two, centered at our purpose-built Kincardine and Kelowna facilities, and successfully moving to an adaptive third-party sourcing model for all cannabis beverages, edibles, vapes, and extracts, as well as ceasing the funding of BioSteel, which significantly reduced our cash burn and further simplified our overall business. These actions have resulted in a canopy that looks and operates fundamentally different than before. A canopy that is purpose-built for the markets and geographies of greatest opportunity. Today, almost 90% of our revenues come from cannabis or cannabis-adjacent categories. Simply put, canopy is more focused and agile than ever before. And while change is ever-present in this sector, it has not always yielded positive outcomes. This is why I'm especially pleased to note that our actions have led to a dramatic and measurable improvement in the financial performance of our business. Our Canadian business grew revenue for the third consecutive quarter while we cut our costs by nearly half and reduced our debt by a billion dollars. We have done the hard work to lay a firm foundation for sustainable growth. Next, I'll speak to our efforts to drive profitable growth in our core businesses. Our Canadian business has worked diligently to implement lasting enhancements to the quality of our cannabis flower. We have great flower in the market and it's being consistently well received by our consumers, retailers, and the boards. And every day we're finding ways to improve. Our team is passionate about enhancing every step of our cultivation and post-harvest processes, and we continue to up our game to meet and exceed consumer expectations. For those who haven't tried our flower lately, I invite you to go out and experience the incredible quality that our teams at Kincardine and Kelowna are delivering. Further demonstrating the positive reception that our products are receiving, Canopy reclaimed its place as the top three flower supplier in the BC cannabis stores during the second quarter of fiscal 24. This performance is a testament to the hard work and commitment of our Canadian team. In addition, having taken control of the distribution of our Juana Edibles brand in Canada towards the end of the quarter, we have a robust plan to return to the number one edibles brand in the country. Just this week, we relaunched the brand across Canada and are actively engaging with retailers as well as introducing new formulations that have already been successful in the United States. We've also made Wanna Gummies available to our registered medical cannabis patients in Canada through SpectrumTherapeutics.com to further meet demand for these quality products and drive incremental growth in our Canadian medical platform. In our global medical cannabis business, I'm pleased to report that our Australian team has delivered its 10th consecutive quarter of record revenue. In our other international markets, including Germany, Poland and the Czech Republic, we believe there's an opportunity for Canopy to grow share, leveraging the quality of the products that our Canadian platform is producing, ensuring consistent supply, enhanced routes to market and better consumer engagement. As an example, to capitalize on this opportunity, we are shipping five new flower skis cultivated in our newly EU GMP certified Kincardine facility to international markets during Q3. Finally, Storz & Bickel recently launched its new Venti Portable Vaporizer, a device that sets industry standards for portable performance, including adjustable airflow up to an industry-leading 20 liters per minute and a rapid 20-second heat up time. Storz & Bickel is now focused on following up the limited initial batch with broader commercial availability to meet the demand for this industry leading device, as well as preparing for holiday promotions, including Black Friday, which are expected to drive sales across the brand's product lineup. Finally, I'd like to speak briefly about our Canopy USA strategy. We believe Canopy USA provides investors a truly novel exposure to the continued rapid growth of the U.S. cannabis market. Importantly, this approach is informed by the lessons we've learned in Canada. We've embraced scalability and capital efficiency, which have resulted in our asset-light and wholesale-focused strategy. As we continue to work closely with the SEC to advance this novel structure, we have been in active discussions with the most recent communication indicating that there is more work to be done to enable us to deconsolidate the financials of Canopy USA. Meanwhile, we remain steadfast in our journey ahead. weighed by the continued advancement of Juana, Jetty and Acreage, who are demonstrating impressive growth. During the quarter, Juana executed two agreements for new state launches expected in Q1 of calendar 24. Jetty has introduced its award winning vape products in Colorado in coordination with Juana and achieved the number three market share position in the solventless vape cartridge category in the state just three months after launch. Acreage Leveraging their strategy for focusing on high potential markets like New York, New Jersey, Pennsylvania, and Ohio remains well positioned for further unlocks and has debuted its Super Flux craft cannabis brand in New Jersey. These advancements are complemented by this week's news that Ohio has voted to legalize cannabis for adult use. And congratulations to the people of Ohio and to the acreage team which is already well positioned in the state through their retail footprint of five stores. I'd also like to recognize Terrison, which cannot be on 17%, which reported its financial results today and generated over $82 million in revenue and over $24 million in adjusted EBITDA during the quarter. To summarize, canopy growth is streamlined, cannabis focused and asset light. We've demonstrated our resilience and strengthened our financial position. We've laid the foundation for profitable growth across each of our core businesses with a Canopy growth that is purpose-built for the markets and geographies of greatest opportunity. And we stand apart with our unique exposure to the ongoing expansion of the U.S. market through Canopy USA. I'm proud of the transformation that this team has delivered, and I'm more confident than ever in our ability to achieve North American cannabis leadership. With that, Judy will speak in further detail to our financial results.