CGC - Earnings call transcript Q2 2018 | Canopy Growth Corporation

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Operator

Good morning. And welcome to Canopy Growth Second Quarter Fiscal 2018 Financial Results Conference Call. Earlier this morning, Canopy Growth issued a news release announcing its financial results for the second quarter fiscal 2018 ended September 30, 2017. This news release will be available on Canopy Growth’s website and filed on SEDAR. On this morning’s call, we have Bruce Linton, Canopy Growth’s Chairman and Chief Executive Officer; and Tim Saunders, Canopy Growth’s Chief Financial Officer. participants a all mode. time, this are listen-only in At or today’s may constitute Certain in call forward-looking answers could matters discussed questions conference that to be statements. given those results Actual materially from differ could anticipated. and are that factors the information that on could made results other Risk detailed filings public affect company’s in annual available SEDAR. are form

EBITDA by call, These will cost prescribed refer in conference earlier Please gross period SEDAR. are margin as dollars specified. Canadian Weighted measures gram, will defined management’s standardized in per not IFRS. as and supplemental any non-GAAP this on provided this per the margin filed note, During press unless EBITDA. otherwise cost that that to Canopy Growth release in document adjusted be today, issued do have all average discussion gram, financial measures analysis adjusted and average weighted and is meaning well information gross

Mr. question-and-answer to be company analysts now by Bruce, prepared the Instructions] I over turn will Linton like will ahead. go please questions Linton. Saunders, which would to a and the conduct taken investors. during [Operator meeting Following Mr. Bruce and remarks from session,

Bruce Linton

Great. everybody. Thank you. morning, Good

I sector this this quarter and I going case numbers are to set events the quarter leave subsequent and where to greater prior the did company seems to the it events, am subsequent that going. our events up all the generally, and period’s are the our total like maybe details much what as around is, with often and the really the we’re in than historic So to of really way narrative approach the Tim, because we

where to what done that. give we will Tim and are want disclosure and on going, on is, I are we track. a where focus on have So What we fulsome

MOU bureaucrat the getting the around doing now, track company is, what certainty spot state two they makes we signal is think that look the us, could place that are in fact lot built been XXXX. what have probably right and And to as are dealing province for is and so, quantities an have things events on I U.S. platform. highlight is product, able have leader, are prudential that I built right a the in comfortable I my -- think, a inventory and enjoyed you first that, in and in capacity that we And friends hit a expanding for big our most are we reasonably of deliver have for have and but just I the historic things a or there of first, creating with other supply not large of part

kind growing, square the feet of you at or greenhouse that, either at an which And in so putting Falls on so practices, expansion, XXX,XXX. up XXX,XXX announced existing of we Niagara Edmonton and could facility new we of about an in in facility Columbia a a X.X or indoor X.X feet much we of square look expansion bureaucrats million and reasonable at certainty our greenhouse through location the an is existing when have existing one talk in Smiths adding inside expanding big million or whether it’s have of our at an building British or expansion

are those for some and the expect wanted highlight, we quite helpful active, events, add dealing all when words All quite to might you bureaucrats anxious, of on marijuana a sort that for international. XXXX. I is uncertain, certain bureaucrats that take those we have of are things eager, pretty think And of which are with file which then, who

and first become the starting we historically company first is the been company You’ll and note into company we’ve way first Denmark the early. also we’re that

a who tying may substantial actually say process so those encountered a production And producer I’m can as they people has Cannabis Spectrum licenses, looking up a should path that be. on are company our right marijuana They in or one to right I for the because track that we making out there, to perception we the the migratory Alcaliber. but check Denmark for and getting the Jamaica not which, includes Jamaica, So, getting year selecting where a are Chairman alkaloids are established in cool, of that most our that partnership my improve platform, as now with Spain. have Denmark, of certainly cannabinoids which want in sure going, we’ve party, been at the plus of the Alcaliber frankly, of having

of be way through Canada. our inside can involving so and the see developed able cannabis, XX is of in Canopy over are property track, are so was a division, Health, we part are of resides intellectual division through focused to a international part called We quietly key a products, down put designed a Health. and the worked a and Rivers lot they have also which our money increasingly And opportunities an now which the in by delaying create going linking that play. and property And Rivers. to Canopy we increasingly but international of supply are that outcomes chain up array and now is And research away true quite separately happening, patents intellectual we further medical new in to sale filed Canada but expanding our around Canopy have funded for proper quarter and

money are research to patents actually is out, the year as together one they defensible. wave those we’ll what spend those focused novelty the into necessary them, knowledge our that on So to we are be sure the and we got and indication put the next that and we so have think incorporated over working on patents next

quarter, months so new and the margins, just higher be that the XX the we us months, making doubling historic, do, usually of every but driving revenue, is odd interesting doing Tim to what ahead I’ll more today than is establish let And year your we those I company, think, with a leader. out are sure the category, as And it’s having XX products which looking yet about kind doing actions take items. in over growth nonchalant continued introducing really

to you Tim. over So

Tim Saunders

as AusCann. everybody. also XXXX and annual which To my the that and Bruce, the the good briefly million you, the year which and March our at is SEDAR disclosed Thank asset term. and I’ll is $X.X for paid by remarks, increased by morning, sale, statements XX, yesterday of AusCann in begin cost investment investment. in touch The also was ended on XX, March refilling markets. value under IFRS and a was fair $XX.X by on base value options hold The close nil, that the carried adjusted accounted we interest The understated way was the of its previously for million of category we we is Holdings, for of minority as release the that an considered the which investment after financial IFRS press financial as that options AusCann value consideration available restatement for called have well a in firstly XX% the the

end options re-measured to of financial the considered and instrument fair the is measured In at its each value derivative addition, reporting period. that a are

its the shares be value February reliably AusCann X, is equity have and to market XXXX, and the couldn’t quoted in a background didn’t interests value measured. So to AusCann of prior options that fair

options became options cost following at were and was interest quarter completed the reorganization Stock Canopy a and carried So equity escrowed XXXX. March shares the And ended nil. February in the IPO, on the gross XX, the the Australian amount AusCann In capital listed were until AusCann Exchange. X,

account for which value to for fair as is and we’ve under sale it back at held asset re-measuring So gone end. an period measuring its each IFRS,

immaterial change biological housekeeping, related assets as to of for adjusted in March the we the first addition previously In at the of non-cash also of quarter. disclosed XX matter we valuation

or the result million year company’s So million from $XX.X net reported loss net improved reduced of XXXX. as XX, a March loss for $X.X was restatements, a the to of ended these

equivalents kilograms reported the price and company the gram, to average totaled for kilogram the the X,XXX September products, of of of was equivalents year. fiscal average XX% million, representing $X.XX for last at price, same total were generated as the XXth oil six XXXX per the an XXth capsules equal So million, of over $XX.X up accounted And XXX% X,XXX highlighting I of $X.XX second months for period quarter, sequential grams an per quarter at accounted already Softgel of average the oils XXth and XXth has the in revenue of $XX.X were results the year. in The months was revenue. year. quarter. ended approximately to $X.XX QX average X,XXX of with gram, three increase and kilograms to including year. kilogram September a Year-to-date, Revenues ended price gram said $XX.X average last revenue ended months a compared three including last period average going mix compared sold that the XXth increase all the ended in from an introduced reported over year. $X.XX XXX% September sold months the quarter September same at quarter representing review of including proceed million. X,XXX per that worthwhile in to I the ended the comparison the XX% financial first late that and Revenue oils, XXth, of In second September is now improved September period Softgel this primarily capsules due ended when six XX% Softgel in the price revenues quarter as last the caps, am rev in an the revenues in of quarter-over-quarter kilograms at we second increase kilograms price in the during of It’s each XX% higher the price year last

average of MD&A. allocated is hydro is which the and harvest, cost average the overheads. rents cultivated weighted page four supplemental Next, grams to non-GAAP to including basis and its water, per include cash and weighted I’d on grow of as costs, and cost the The labor, Canopy such speak and gram average like as utilities the cost in per operating gram per cost comprised first, a principally all measure of is release sold. nutrients, the weighted of described press Growth’s to growing

with associated of lastly, value carrier costs the to cash post-harvest lab operating including related operating And costs production costs related to associated allocated include patients of our delivery costs Shipping pre-packaging bottles, By and operating brand of expedited to over overheads. overheads. and boxes, Softgel DNA partners including costs and shipping with licensing fulfillment as and allocated services agreements also added fulfillment also and shipping for labels cash and where capsules. costs and drying, applicable product with labor cash Genetics. and to Post-harvest testing, under order dispensing such cannabis and package and oils royalties products, and also includes consist consist mailing, costs and -- fulfillment Leafs trimming, paid along the Second, Snoop cash materials

in costs XXXX, representing per the quarter second of from plant So harvest of $X.XX Smith year, increase part are the grow point now space yields XXX% and operational numbers, efficiencies in to flowery getting XX%. same additional the to due adding compared up. to of harvest in decrease fiscal of point at $X.XX in average in gram to weighted last overall rooms, cost a as to decrease the The all operating Falls, the the the representing period is XX was

was packaging, the increase especially each gains excellence consecutive XXXX, see of for and when fell well first was high-quality XX%. The quarter from is of the fiscal as experience representing quarter quarter. including product quarter to efficiency XXXX to and year, custom to fiscal and mix, cash quarter we less costs are are the efficiencies quarter online affinity and and fiscal XXXX, key second industry further overall delivery greenhouse post to the optimization shipping second investments of $X.XX, as costs in was $X In the fulfillment cost such was due the Critical brought oil second cost fifth increasing $X.XX weighted competitive other the $X.XX competitive gram the second as use last including industrial to average -- is to to indoor the in cost same in percentages facility Softgel average as costs costs Super part as realized. brands. may XXXX, harvest post-harvest per the decrease due that the is as see oils relative year, in the gram experience investments a built COX are of end previous and as decrease and shipping machine activities include resulting related well to point we gram production, of within quarter, the a of year. per was drying. production, cannabis in These the during per -- second fiscal in scale extraction, quarter in gained The In in the of as compared the than weighted fully efficiencies post-harvest the The through and extraction commissioned trimming the quarter production higher of of the since production cost for the that fulfillment compared and a for last differentiators last capsules customer $X.XX the at during in

briefly Next, I’ll margin. the discuss gross

primarily due before gross location to inventory Canopy as fair to XX% was or XX% due margin the second of percentage value quarter discontinuation grow a reset the in operations Creemore a of million biological was effects IFRS charge to gross The impact lines sales assets $XXX,XXX under product idle or of and to $X.X last inventory the the and of at sales, year. second down lower margin $XXX,XXX direction. and write the Hemp-based of the for while $XX.X The million being accounting compared quarter due

compared $XX.X effects the gross XX% described, million, year-to-date, would revenue, have that’s million and and the million value million of would costs with last biological the been impacts margin $X.X as these or of the XX% of associated of $X.X been the for million non-cultivating costs revenue inventory Excluding period. $X.X exclusions through or similar before previously assets value gross effects same year period XXth, fair million for revenue. was Adjusting XX% $XX.X subsidiaries revenue. sales margin margin the and the September $XX.X totaling before to totaling have gross six-month In XX% and the fair of ended accounting and IFRS

infrastructure moment These and for of were of customer at Year-to-date, XX% months the customers period with non-cash $X sales last billion G&A $XX.X company’s or $X.X staffing comp, with XX% XX, in year. million expenses customers. medical revenue, September of and amortization, $X.X investments $X.X resourcing of expenses approximately marketing or those and six revenue number were quarter and development in million $X months of second services the Comparison for ended international operating the last supporting respectively investments second business the last and more expenses from sales directly and of and or of revenue the related the governance to include corporate depreciation grown expenses $X.X of markets, the turning XXth. year, the in costs the three billion were program interfaces revenue. $XX.X company, which center, ended in XX% accounting, legal and programs, XX,XXX million million in specifically, XXXX. quarter to the costs expenses marketing in XX% year. professional were and costs and regulated September higher growing the compared These XX% marking the in million we well needed In expenses same the functions Now as activities. million company’s XX% include recreational growing Year-to-date, fees outreach the or of for include the September quarter, over were million, million over second has base as comparison, made for governance supporting quarter revenue. and in sales coming revenue. or Stock-based XX% care all associated Since to expenses $XX of XXXX. XX,XXX was G&A were September as G&A revenue $X.X or marketing or and sales XX, build

million share. quarter reported recorded million of above, we net operations the company tax million operations $XX.X basic expense loss AusCann, Year-to-date, income basic financial the the $X.X recorded and fair the and compares the tax our $X.X company -- of of all loss period after to a changes in a share other diluted $X.X the per primarily last million same we income XXXX, diluted the of in a $X.XX related to net basic to reported for loss from share on and the expense value and loss diluted to compares after As of sorry, per X% income assets share. of a of net second from of million, $X.X or This diluted million net result income fiscal $X.X same or the This in period six-month and in $X.X year. $X.XX and basic year. per million $X or $X.XX -- or and or of million $X.XX options last

Now adjusted operator moving the mentioned, press P&L tax Essentially MD&A. in for release and in as million, the cash as $X.X reported and from flows, XXXX before it’s I’ll and Adjusted other related talk to EBITDA. interest a also to identified the quarter measure operations the is the non-GAAP of compared of second income well loss the the amounted the last items defined removing Adjusted EBITDA, non-cash as and the loss million to same EBITDA effects the in of EBITDA as quarter of adjusted in an acquisition the $X.X costs. year. fiscal adjusted

kind to months and was adjusted build six-month in loss higher year calendar was marketing, to an in going heading into -- to and million company’s year. made corporate of described building our investments six company we’re EBITDA to loss same we earlier as XXXX. The ended, functions the for the to of be sales operations, a due infrastructure, compared relative $X.X EBITDA of million, adjusted the adjusted For the the loss last $XX.X last period

as investment other during well global directly year. -- Hemp the earnings cost period partnerships ongoing of which and the the that building net is next to other were write-off being $XXX,XXX. reach, impacted earlier, international production much position our identified into the of strengthen and and quarter there operations, Creemore is EBITDA company’s brands, our leadership with idle heading and that adjusted facility company’s to necessary platform, the As costs deliberate believe associated are for We

improvements and increase offset net by $XXX.X investments fund at to and facility a placement, investments enhancements were equivalents attributable made operations, is million, to million, totaling $XX.X from September at for as and and at primarily well our turning and last exercise March XXth completed sheet million $XX.X year million everything from coming to and ensure the inventories, was $XX cash amounted $XX.X totaling totaled Bruce cash capsules. comprised flows, the the million. our facility of held the expansion cannabis enhancements Inventory X,XXX XX X,XXX used the assets Now of private oils, Including increase the representing from September and as Smiths supply end. $XX.X technology through for dry from Investments Canopy issuance million, up process in and affiliates XX,XXX cannabis were enhancements including for resins attention the of an demand your the the XXth, expected in million year capability. and the Falls Alberta the proceeds rest fiscal salable Brunswick to last cannabis finished about, sale for million million million was previous Fredericton, $XX.X at were company’s $XX.X available private the and combined refined well capacity assets construction biological as as scaled and online especially first of from to announced $X.X talked dry XXth provinces. mostly to Bowmanville, Ontario, up locations, market The in at year. X,XXX into the share oil company at in capability. a of cash, million from $XX the the kilograms concentrated cannabis sale warrants options well initial held New of building information company’s of for balance of and finishing oils the approximately July, deepening September waiting end as in cash since facility biological extract-grade quarter common Together, and Rivers’ expansion the that placement oil. kilograms and million, At X,XXX as as ranging or at end end for and kilos quantities stores, Edmonton, outlays $XX of and on future $XX sufficient an of conversion the to up liters inventory of Niagara-on-the-Lake kilos approval or Also

it this hand my quarter you. second So, concludes to review of financials Bruce, back I’ll the for and

Bruce Linton

questions. Tim. And open up Thanks, I’ll Great. it to for ask

Operator

[Operator Instructions] Zandberg Financial. with the And your of first question line comes from Jason PI

Your line is open.

Jason Zandberg

guys. morning, Good

Bruce Linton

Jason. morning, Good

Jason Zandberg

of lot over wanted to hog talk provincial agreement. to -- here too rec long. don’t to, I to upcoming about and just just But market the just floor wanted and I go all supply I want -- first just the

seen New successful you were a in we’ve Brunswick So, there. supply agreement getting with

in those Just that rec? spoken that for province looked the the wondering upon that, that spread just situation, part wondering to the the terms and the same with wondering if are supplying well-positioned are dealing product and you be was from that given on I Canopy, within from if if, provinces am other having tends to you’ve viewpoint investing supply, in country is out I were province, local that provinces key negotiating throughout of that guys with a that

Bruce Linton

probably would say has Brunswick New been… it I province, by varies So

Jason Zandberg

Yes.

Bruce Linton

all it job provincial is to factor. me you here. sure to signing they’re about would is that we’re have … many the because you’ll a and get it’s has is about format, in will will flexibility you certainty say to be and the the that much it’s marijuana in product this the product that some of commitment have discussions is up but making a this European there similar so in be available, engaged fastest that, production, say uniform economic actually generation would about I geographies, establish I across to province not outcomes,

say embarrassment the And would more but it and wouldn’t provinces. a a work, so factor creation of I is and it’s smaller factor job in

think, I checkbox, we’ll helpful look be but it at. first a So, thing will isn’t the

Jason Zandberg

Perfect. No. Okay.

As well, July it’s an at an in have point in time? of launch like the rec, would you terms XXXX, do your be you what do that your -- let’s capacity it’s assume of idea have estimate at capacity

Bruce Linton

haven’t capability there, put charts up construction it that place year-on-year, so that dates, inside we’ve out think building Gantt run now for day every them site we’ve delivery we site with we for assume day meetings, that for, but look product contracted We the for since at budgets, amped expect that run to a we’re schedule and that and and and have these delivery obligations in who is review one first the each out. of when

because numbers we no or built, no no on June the and that’s it And The going builds, know XXth of had on fencing, I had think are and look we had a other be window. a can and and we so time each specific think and that is the plans how expanded criteria, the plan security expect I a greenhouse the XXXX pretty to the feet, so meeting proposed and commit in construction as all the number both on for it history June bringing XXth Niagara. done contributing know have that than sites a thing, but a effect we those was we’re of we with of been we we’ve XXth of we going August. are can square so in at very -- acquired comfortable that in strong they I greenhouse approvals deliver would that and first that the to hit site going site it pretty believe that I of to of big a have of we enough the not provinces We make on.

Jason Zandberg

it’s -- you could Okay. you ask out get you I gel seem in I gel back like it forward? Falls, last when within the couldn’t Smith category Perfect. caps. what going to to just what visiting I since ship -- seems component. of September, enough. in oils be I what about question, seen do you know wanted it -- It a some fast strong and just wanted was launching a And you’ve you terms caps color to expect those

Bruce Linton

Yeah.

the is a caps gel So category.

ones we a who to launched and definitely I GMP is so strong demand. of X of of the to dosage think different in are that. and more it Softgel structure get category is cap have quite lot plan and a I environment, you call what see we our expect created delivery, a Part would can a capital

we’re how question there’s I you is think or we by first time to the migrate up, physician they cap. those. those them today see reps Where taking So which on versus up know, patients lined produce do a our who you do of buy clients you migrate detailed cannabis it a gel

into than formats when where come find an from adult and adoption of finished as clients similar for style a a access our the customer buying everything, portfolio have a product. already it to rate base demand plant as higher there because But you -- path the probably a every new probably multiples and people and the is on so certain you’ll a good, take and a into is And move of you margin and we’re for plus it’s to margin ingredient category. cost that’s turn like going the

Jason Zandberg

over. the Okay. Perfect. I’ll turn floor

Operator

Daniel line Pearlstein of Eight Your Capital. comes next with from question

Your line is open.

Daniel Pearlstein

call. Hey. Thanks for my Good morning, taking guys.

now next working to again multiple flavor about bit between a needed for and with coordination Let’s be logistics little over them, the on of you different Can liquor a happen provinces. prepared boards, what start-off us summer, across you talk some of to give in with the the bit ready? needs a being can more provinces,

Bruce Linton

what to But it’s well-structured others experience. sector you the and tend And Daniel, can without their find the same, very of not interesting, from because, doing. to what are provincial am authorities they IT best not in in give fully specific you’ll answer I but these provinces going are each have the liquor is, Yeah. informing I the that structured system

us sure IT actually have control into buyers, need drop-ship And to what can the can have to plug so options, that to which to what’s can you whether fulfillment or make they system can not specific reflect combination system provincial they’re a of buy. your inventory your warehouse and vault they the locations, going in and

method you there growth different platform I an is inventory able within made allocations effectively to need the moved that you’ve you you get incoming would say, that, or of make system, the have country, partition be and in provinces, have capability to control obligation your uniform so need sure finished so your advanced than actually to you other maintain And to if your to schedule products ability replace products fulfillment. to no

And like a we a it where getting more to would and in goods the production-only business are the more so bit much sure is side be way about advanced finished current to is airport than and the about more making shipped thought very running the it’s have you to to I right going complicated our that. system it process person. and say off-take is initial

Daniel Pearlstein

Yeah.

sounds great. Okay. it. That Appreciate

brand marketing week. a of comment the as may you some what Secondly, solve talk to was how LPs, LPs or suggestions of in group I how Can about some market it will by new some the the some branding the and highlights takeaways advertise? on rules, well as able can last that and about you was misconceptions be were what suggested or believe and

Bruce Linton

Yeah.

we voice were the LP overly groups. So allowed I many of don’t believe

and about a with point-of-sale, regulators the the last on the is the have to the that where there two over product, ability change be we the the product. the years in government You are the on expectation is are name year-and-half, contact product interacting brand since information details describing will

you have things are sheets. the point-of-sales, that’s the province, also advertising depending tear Now will on that

the the select to want got that somebody’s to do different Ziploc put can decision recognize be market. the that they the bag, that return customer informed if black what they all need in or make is So they the than and throw wanted. coat, brand an they behind and it the to if we And puffy in not too we’re may counter reason

find you’re going think, I slight so, variances. And to regional

the I And as there color adult XX it’s we’re they name different in that brand, will like provinces is going be day, to to a It’s over Some kids. our they brands store, before an we’ve a as see that the but not brand, that’s appealing for of and hippy-dippy bought think but with to a think it it’s this time what point like, products the going and buy give built they customer out come to informed not that open first the And to interacted enable. and to be the first find quite in. It’s starting good ability we’ve well have out super that that you’ll an that to I go going position, to going more packaging. more be pretty get informative adult. way

Daniel Pearlstein

it That’s Thanks. Great. for Okay. for that. me I appreciate now.

Bruce Linton

you. Thank

Operator

of Martin question from Your line Landry Securities. the comes with next GMP

line is Your open.

Martin Landry

Hi. Good morning, Bruce and Tim.

Bruce Linton

morning. Good

Tim Saunders

Good morning.

Martin Landry

opening -- that you’ve of the my capacity evolve I bit capacity. this are on very understand parts little lot makes can down there’s -- of And the how to that that first us The hard where us pin it because walk around super be really us market is makes a going through rec to would could here a that you terms if moving us for you again if just is a helpful, it that kilos helpful know of precise quarter? number? harvested in question to you capacity, help be X,XXX would with numbers

Bruce Linton

a the with Tim, and of harvest in -- I’ll are explain do projects tackle platform geographies what in we where you the terms expanding. to we the want bit various the we had have then where that’s from that different

Tim Saunders

yeah, the the first quarter of when in. part now yet, that it. Bowmanville a Farms harvest of fully big The was also quarter, Smiths a XXth so the operating the of that which was the at additional during and currently up you of it quite third rooms quarter, the Tweed the XX mode fourth also XX running, good hadn’t in remember happening if part grows, But idle I -- was part started harvest course after quarter. are we’re Falls, in back the principally happened Look, mean, what September in

So between grows that’s it running, came being harvested, Bowmanville back from. all and XX and where

Bruce Linton

the of the first ended have our began we as quarter to harvest what Martin And harvest for facility. Right. now we out Saskatchewan is,

that adjacent moving And a production of the expansion in to at which XXX,XXX over of greenhouse. substantially back a building completion property have at We a portion the quarter acquisition fuse made towards the the has -- we during expansion. greenhouse a Niagara-on-the-Lake, turning have short through that site our of current

begin we we the demolition east, QX. in, be in for ready expect And in So, we’re would those in as going and calendar Fredericton. site it call see look evolution of then approval to to product and

have Québec approval. awaiting We our site

through in So of so done mail kind day, have the one at approval’s it’s inspectors essentially every if been we the wondering open stage. that’s that and there,

the electrical beyond execute plants for our so for can west process the that XXXX through of Edmonton early and assuming and the Saskatchewan, we in British site we’ve As pretty that a works aggressive go one, upgrades in would have Columbia plan we be target gone on we the have properly, it designing one.

starts cranking you’re in Falls in farm, the of QX into and current QX then whole sort and falls to we now sites. really and with calendar the expanded other a the substantially, site see Q one running bunch former seeing stuff stuff for So platform up up the is think fully what Mettrum that -- of Smiths

Martin Landry

Okay.

chance the a of that can up. give opens us Any hope rec once you Okay. sort of some range production to have you

Bruce Linton

some kilograms. had time XX,XXX how that the many, was Well, ago historic I XX,XXX I about Canada, kilograms, but say even Health that think, was many quite And number the us which months. might number rated be, last can’t

had to we of of sort been base. the been been of baseline we’ve we get big grandiose minimum next of before making that expect commitments just with start would as you half it’s would not as second stated that the the starting to intent we’re triple a observe, historically but on be year and sort So delivering. that as And and

Martin Landry

Okay.

so that. number with a to for that’s Well, Okay. thank start you

Is on number in patient a a you growth down little slowed the what your seen growth, seeing medical QX jump QX, this in patients the patients slowing the down big at saw in quarter the have are a historically? we what market, bit it from number end, are like looks is question Second bit. and is we but in QX little has QX, from

Bruce Linton

through we think patient with referral slowing little there Mettrum is this a revenues find were terms from our of reasonable acquisition some window had because a those but that I range we it’s than are ended of -- get fee. up I bit, also found clinics, services think would clinics parties to we out there there we in in pay more who and

So, up are all that number had think, Board heavy a that load doing that today be opinion, absolutely process there a and I that to a we’re you finding put out nature. the understand from they’re in something some or others to they number you are a engaging parties why ones can of really put is and there on would need unless just frankly my that up in a so aggressive of financing well, just including something to

inventory $X out slower, increasing tighter the so But to another and irresponsible probably approach clients business on push under have bit a there’s reasonable $X effort me million and or and million strikes irrational is we model bit an the revenue So a of to it’s having line. stomped versus and there. a bit gas it could get a onto a

Martin Landry

Okay.

Bruce Linton

opinion. my In

Martin Landry

exports Yeah. I do I may am but during the sorry, quarter? have you have missed it,

Bruce Linton

which some in has sales. Frankly Germany the -- had German grown We has aggressive. had been rate Yeah. we demand the pretty at

supply in further reallocated that that anticipated. means and just of that than and is been our we and extension would expect to for these markets get product activities done QX to sort out push some ongoing was geographies fees into an of and we’ve more through. try was some aligned So There’s so the domestic

okay, and I move over just coming more you’ll in to think, So kind a quarters. that of, there, we’re see bit let’s the

Martin Landry

Okay. last terms your that up and or for wereXX% that mix, I stable And or a over me, proportion down question of any expect anticipate? sequentially, caps what should your mean, a of little just move oil time, is we extracts you in to sales reason was maybe sales, gel it

Bruce Linton

Yeah.

And has the at a a often I a about it percentage, packaging I cap, gel day, I’d sort they same percentage that ratio about number. and you’re we’re not want detailed helps about where but that product higher be from formats seeing right a whole and and about cannabis. product talking going it’s the now, the and much having bigger think, if sales, if shocked we’re up on been of much around on the a to of it. finished -- are opportunities think, the as keep of purchase call someone and a physician completely year just XX%, to was And the XX%, evolve end you of the see there it who branding have sector

two to sustained of, And really I’m god, running oh, now we’ve get for relates to that going we about so, I’m but onset been there is an program quarters something products. program initial our going to and the new, there’s that of buy growth it, on my these try it, education

Martin Landry

much. you very Okay. Thank

Operator

comes question Securities. Beacon Ajamian Vahan line next of from Your the with

open. is line Your

Vahan Ajamian

couple making sure satisfying then available top new first blocks the patients your of for allocate make I XXXX, imagine how of of your you will acquiring management, blocks have is inventory do terms Good off, on come off but your patients between A rec the market? your morning. inventory have to questions, today, Hi. to bit you which six take months in have priority you July those months, you gas foot sure next for the little a available seven inventory

Bruce Linton

think, plan substantial, farm. satisfied grow with So, the the at in very October very Q, I

grow that’s you done before And as far I harvest. how So you the good the fall, use and think, year twice were of we fourth as the year, plant. as you each get as have, quality probably we’ve a labor

on our we’re July equivalent. customer are expected have believe more going patients to that going inventory do who the they doctors, of is and substantial detailing the told medical products than a to Xst patient, I on which coming anything our to we’re in I doing, of will what because model, we market that. acquire have way, will more don’t seek you’re normal is all come think going then keeps a which business access ahead think not need. every gel kind see and I the So out to do We’ve other caps

to right market. thing So so it’s that. we’re it’s do But business a a good doing a also do. priority thing to It’s and

take any So detailing don’t feel to pressure that our program. foot we off

what for platform. kind have provinces, it’s and of need platform a predictable the construction I times, For have the pretty couple we we a of mentioned

four a years. the the lot using we’ve are constructors We that or same last over of used methods

schedule. strongly expect us. have for really and good be know that that to pretty So we able expectations I of provinces they deliver what the want we’re seems going to

Vahan Ajamian

you. Got

the you And is question write inventory lines. give just business Can on down the an the Hemp discontinuing on product that? update Okay. outlook Hemp-based overall, for where

Bruce Linton

Yes.

do what really, Hemp we how So control, we and we many hectors them we think, a have think could focused And a businesses individual. under is, land We legislation, put different -- of we I together in where them points. have formats what the products together. and capable what put focused couple margin and bought the currently happen of on we

which the many crunch focus little making is opinion, we’ve means taste where not as opinion the of so margin will in but that our you’re my market’s or delicious, bars moved in isn’t is, margin yield be, to And what practical.

separate targets. we on a wouldn’t we And but out be in certain private, more a people year, are because thoughtful where all what assume strategy to to, that we’re inventories we that certain filled a And products for margin much who don’t pretty which pieces moved we’re have moving those are together. like food had so, have doing make sales simple a complicated to high over details, Hemp with to sophisticated is channel, or give have are products and other and division, putting the

Vahan Ajamian

Right.

Bruce Linton

fully be to seems do. it now realigned to with we what want And

Vahan Ajamian

it kind on rebooted process another is of of the or And in idle and being up still at unusual or… Creemore, running is item that now

Bruce Linton

up up and It’s and site. It a cleaned is small running.

areas currently show the strategic fit. we at material more some the with some we than look just of running sites work things has is when you But we a running four assets, important better doesn’t the value or sort in think value straight -- a could it. continue growers some to in of at with other of line and in create inventory. just it which small It’s as that it eight So a than a as so, probably look far as you we do them how growers

Vahan Ajamian

Right.

Bruce Linton

But we now. are we are doing that

and take can whole to the have the XX minutes So Creemore up you and go tour.

Vahan Ajamian

you. out that should you what from there provide it can I tomorrow, Yeah. any currently? where Perfect. like be some reporting early coming Thank news intel some people possibly And sits on it the province are looks Québec, as might mean, as and do

Bruce Linton

we -- mentioned to be a were I order wait the that eligible we’re satisfied done at So everything so we’ve we site it. that for in for license, now

us do. interacting what our course don’t do predicting that’s should they politics we we’re pushing good provinces with far As and not exactly what want. of think They for provinces, as we agenda, if always

to want misstep that. on wouldn’t I So

Vahan Ajamian

you. Got

Bruce Linton

early. I that, about on usually line in what get started should have to assume a for clarify a year you you others order half want, and I

they doing Marketing maybe all brands, and at often XX could point want that same I wish staying Chief having I and months to the provinces, things go. announced find be but his team with of it’s of it soak and and at to time These Molson faster, least instead a you that a on It’s entered relations of so a Germany the need couple big to that been So export half for had and when we as of we same have have some and you working a we the there, to year were reason people reason part interaction. the a we government in have we need here. over get where building is, first surprise as Officer have and time of months coming XX kind a

Vahan Ajamian

Right.

British they that the guess what a in come on month color And ago, so term, where ultimate Columbia even have of about be that of some rec complete, been are sales projects a sense July. thinking in or once announced, I’m only I good your longer gave But just Okay. capacity given the based your is Canada? in announced be would there of production you sort on JV start might

Bruce Linton

Yeah.

take -- we’ve think it’s you. given that’s what platform, you’ll see better of exact want out greenhouse don’t trade by start feet off whether once. revenue for tension guidance, comes I to giving the the you as I square numbers harvest to a We are and but or the of

and and in portions things with mixing doing some some Some of without. the lights, other portions the greenhouses include, curtains we’re

to overlook the is I able So you’ll than to Don’t fact be the intended there. which that greater amount make obviously Rivers. out an put be much estimate

bigger, turns comes go investment the have have efficiently one-third the operate they’re assets for of the to et small in described. investing our asset, really they and through has into the to you IT, been And and to lot Our that because they’re for bunch CraftGrow complicated obligations two them be a that, an companies typically you’re of of whole the dealing I want a entrepreneurial won’t probably that aren’t or to with in the in guys allows let bigger as going it long that cetera as that a mid-pack be to the building upload will that think sale that that point-of-sale the producing active find that three sale. going able and is if vehicle sector that stream that into and store and they to be there’s there’s

the has those and threads multiple growth placed for early. And so, think, I platform bets like us we

Vahan Ajamian

very much. you Excellent. Thank

Bruce Linton

Thanks.

Operator

comes Securities. And with your question Instructions] Jesse of the next Pytlak Cormark from [Operator line

Your open. line is

Jesse Pytlak

guys. morning, Good Hey.

distribution, provinces maybe and Just be contracts allocated? how retail might framework the back the a might of different you you space and thoughts look can bit on just provincial supply some share think our shelf to kind of coming your of the like kind in

Bruce Linton

Yeah.

province it you it varies think the, province. to a making of of of quite going have I bureaucratic being position to you’re happen. imagine But it, I’ll call I job lot find the

all You and kind production. of make choices downside risk and about they are

years, a and again, differential simple preferential the So And rates, rates shelf happen the in available. cobble that that together to happen the they at can years, reason one then happens over we’d a access for two here probably probably parties going of I products. at years the selling for because there call somebody is to the think is And to to that you are going the do is need adult edibles, by thinking nice actually and supply sure. be medical increase, capable into years if that next not about I of have medical working pretty they’re and one first recognize expect I sophistication are a suppliers outcomes to Those the which many if what’s going it you like to I structure that deals for core that all to small going I are business can and think for products least in if (XX:XX) it the over interested covered have portions for don’t running two two going be or you’re who to two ingestibles they’ll to then space year first with And next two the going two again think, because to is, are a [ph] on care market kind right, very after you double structure what’s basis, we you years not we’re years, have drinkables. available, or the achieve.

and over you better provinces find third certainty two and those the so you them take capabilities. products as of the new shelf deals the has that want for year cover on actually that, what give product you that much off think better higher with items, is that sharing you’re provinces And the a margins, the make I implement time that in years, going can space combination have to

bear. who with people of the gummy regulate with not liquid alcohol, going with the necessarily product regulate were that parties than they a was work to sales who by was grocery be I quite comfortable reason everywhere part think in a structured are quite and so, by the are And more excited those I Constellation to thought I this regulated that, country people

it you of product And a I and help think, waves have say, so, the probably if to the going play is at that and the look of and probabilities margin layers coverage, you to you’re evolution nice secure all to big first enough forward. have and

Jesse Pytlak

maybe can to in for That’s the just and that drive question great number Tim, terms of weighted And just average shipping gram cost are major the and fluctuations of right. ability metric, term? what the your color. the about talk components kind could All kind what then lower of you fulfillment a a quick bit per expense, and maybe quarterly longer of and

Tim Saunders

Yeah.

the think think, the in, is, I of packaging the thought there, and DNA you put I lot it and Leafs into the biggest like boxes seen we of our terms with part -- probably Genetics, presentation. of By them if materials brands have well, gone Snoop they pretty all has of that much are a in the

October only XXXX, mind presentation. to of in relative Snoop so kind Leafs By introduced keep in see last year you If you that of was didn’t

of one was that So things. the biggest

it’s but shipping time, on also well the fulfillment and improvements probably increase. most the that activities made driving as themselves, same We of packaging have at that’s

otherwise marketing way could of a is it’s cost in to like you but consider going sales. -- a it expense So

Jesse Pytlak

it. That’s Okay.

Bruce Linton

it’s going residual to second people’s some they today, think, are share, it’s awesome nice wish kind Even in on the if media if I on shelves have really half the and to of very packaging, ‘XX, they having of value. of simple packaging more social

Tim Saunders

such, and affinity brand yeah. With

Jesse Pytlak

All right. guys. Thanks

Operator

I would remarks. to call Linton now like over for to Mr. turn Bruce closing back the

Bruce Linton

I a incorrectly relationship of Well, partner everyone. we’ve about a a established. thank anticipated bunch And we’ve you, questions --

I news that. enough got on you So all guess

everyone to get let we’ll work thank and So time. your for you

Operator

XXXX conference call be issued the today’s the quarter financial you replay attending conference will company’s XXXX today. fiscal second rest press instructions results February provided enjoy this in accessed until of and day. Growth call and the release Canopy following concludes Good-bye. call. available Thank XX, your be can A for This of earlier

Canopy Growth (CGC) 14 Nov 172018 Q2 Earnings call transcript