CGC - Earnings call transcript Q3 2019 | Canopy Growth Corporation

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Operator

Good morning, and welcome to Canopy Growth Third Quarter Fiscal 2019 Financial Results Conference Call. Early today, Canopy Growth issued after financial markets closed on February 14, 2019 a news release announcing its financial results for the third quarter ended December 31, 2018. This news release is available on Canopy Growth's website and will be filed on SEDAR.

On the call this morning, we have Bruce Linton, Canopy Growth's Founder, Chairman and Co-Chief Executive Officer, and Tim Saunders, Canopy Growth's Chief Financial Officer. At this time, all participants are in a listen-only mode. today's questions or could in be that discussed to given constitute matters conference answers call may Certain forward-looking statements. differ could results materially anticipated. those Actual from Risk made available the SEDAR. detailed and factors results on public annual other are information form that in that filings affect could company's are

adjusted standardized defined conference this meaning IFRS. and EBITDA is provided measurement, prescribed Analysis the as Growth on specified. well measures as dollars press do to Discussion supplemental will be by During These that refer not period's in release unless that Canopy non-GAAP issued filed document call, Management's EBITDA. SEDAR. all yesterday, have any will financial in otherwise note Please information is Adjusted Canadian

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

Bruce Linton

taking on in prior do occurred ends next enjoy world the only the reflect Great. actually has a we're Thank department, we our this time the busy occurs created mainly when in you. call in quarter for the because in about I'm but Welcome thinking in truly it's finance sector all. our to because not part the period and preparation because that what company of we've kind and I seven we're that's quarters.

platform know cannabis the on the in almost ERP sale which was last quarters of system, next this that at over it's we've made about meaningful showing good have I and how possible next really in six, forget a that the think a legally with think look yield all fact and next almost quarter, happened the investments. the I out generation this units, live in global more to It's of keep we investments to first becomes went that of our maps we a the number those or that point in of in up history maybe sold take of acquisitions that maybe first almost several first quarters done did the and the to couple quarter, on when forget of and we that to containers, So easy company the us we how more the beginning quarter than that company you the moved gram the eight seven, sale give about time. October or more

automation them. know with we then we them creating And and these and eye understand and we had on with a that things the and then make years know, our reason get companies things them whether you at an look long acquisition these acquisitions for keep a know, when property. number and and to coast-to-coast horizon, & work intellectual that they it's the and so that Bickel ebbu time running add have you an involved And Storz really and do activities we cannabis you all we is did of

about the think XX because patent it's investments and applications combinations issued over having of I when acquisitions. patents So and of XXX

quarter to is where use walking going and ability and quarter. called of IP. they globally, for actual have science, investments both what and focus intellectual of we're seven a with the what but science, branded a that to property, puts will job takes how like that think to clinical And so everybody Applied the and group kind I'd having and for will and products to horizon we of be Tim the five going an making we're medical through But outcomes things running doing the are create which and start to great trials the rec we're call like do also on do, Science developing on to be phenomenal

have rules in, for square And licensing, feet be that in began targeting building to is February over another waiting XXX,XXX It we [ph] GMP generation two manufacturing X this government to we're That same and and five about is. next consistent that come you so got But then days picture will contemplated Phase years we've now want we'll brands processes, in recreational turn away benefit. science into it the creation the we when called of we closing the inputs floors XXth, regs is category are can all and the that products. years time. has can the of the the and input, March of most product the have to so products, [human] multiple outcomes say consumers all which which had buy beverages. platform turn multiple is all it from can the The that into

right do building [ph] and to decision to X, to of that behind medical creating the all before use they We that what on the and and begin was years whenever for consumers which the a beverages, first become which of in extensions the XX have inside product the equipment being was been can will of regs. is now that have call into have that contemplation they and Tweed up then more XXX,XXX we will May put think building go expected the become be set. The science that's to that a something we’re countries curtain, square brand to the to for so anything the people and additional customers world choose reference bit that's and that they we we've actually federally is begin likely permissible, kind then winter. a that the put like that will complete they bunch that I love make than then means feet to a four and we can are the there made was through which in the little But building [file]

chance four get that I next seeing, and information the had provinces to get where even stabilized can accelerate. quarters more In organized thoughtful goes. the we're Canada, where a in and you a program think well now really have So see

to private the And we do want wholesale ton and I a they And they we people what that of a conversations transactions want so of provinces, on from warehouse to - to many on has sector to in discussions, to a the to saw because a seeing retail. been would they experience. stores part that stores, a thought box have of want sense work place in model is feel go government that we're goes by virtual think open which or makes controlled the

Ontario Alberta in rec and faster that, our seeing quarter that quarter first and last turning provinces this model sales the some is retail, as as face we're to Our the out the include it face, up. rest now them We're up operating from what in circumstances proved turning They nailing that provinces. stores to that getting well several of is e-commerce. works in

to having to we're go And quarter you're products products. lot Xb by we're and if lot Phase more claims correct back, and we're on all having clinical the that starts people lot year is we're to I trials make a stores experience we this medical to to platform so dataset the and want by and calendar building we're expect the allow and them. QX a a get more going that the us have getting looping more time so that to

and and spectrum educated now whole So in global is this which specific make platform which claims being brand to that starts understood starts well is products have languages. unique to multiple outcomes and

to export almost jurisdictions We the little in opportunity the are in probably and GMP European call those a you assets, is that's to I would where situation have to need what certain backlog formed that a demand standard. the say production we so countries meet a that because of growing the bit could

in investments those are turning So up way. that

of one is, this, this the things the and cash probably through share. walk about we we morning thinking highlight I was should could per As

patent value actually when aimed applications, it quite of our & XXX embedded in that that XX is get an is there's things through cash our it, data that internationally cash so to contemplating, on, we So I've and is acquired like making [indiscernible] expect probably they're assets this all with touched we've that at buying the enough move that called sure should accelerating we expanding know, you're ISO [indiscernible] more already certified markets. factory have automated to Storz XXXX and Bickel an going be you channel we demand because the stock through

really because finance only. that over that for more and need and team out that org to looked long that's with what about you you as everything adds because next world team. So volume institutional look make seen least finance there was that contemplate But company last years terms there's in attracted. and at view chart long-term a have And we those the for and see take our those we hope three really year that emerging that note the large, I'm a Tim to and to sector so and the institutional over into begin three really not you company the expect hand time can the can can that we to amazing, total but very senior as and continues huge, shareholders, actually not thing thinking investment in looking horizon five what up we've fact shortly. a to and - know, grade, going hands migration was commits, Tim an five this there was the continue you'd year purchases attract I'm more we of basis, to members, to actually in we've investments names, quality over at in of competent happy more Tim, sufficiently on at our right for

- businesses area going we in do only job capital. see investments and but also because And global, great function we so now prepare Treasury a you're for can Hemp U.S. Canada, we and so a the that to in have called have other that not we're ourselves

was be Board thoughtful and objective our trusted what he's by a he resource. we clear M&A was that accelerating where what also prepare Tim very helping his to do continuing competent assisting because we and and to is Tim he with that and ongoing in career. and life But on the So do in is

he is on this. Tim has hand I not Tim? through like it conducted you and the I get and through may time So do the over in to appreciate building we've would X, Tim details. the that we or how but how And greatly phone to to himself hear QX worked walk by to him the

Tim Saunders

the I'll share, And Medical represent of XXXX. excise and accounted for million review I'll XX% taxes of of million of was net few everybody. revenue. and of on months fiscal kilograms to year. of and for basic brands sold EBITDA shortly. approximately as accounted Newfoundland oils stores last kilograms. now accounted same fiscal $X.XX online. was the Bruce. clear XX, Tweed XX% In three of same and Sales however the Thank oils, XXXX the debt CBD the Manitoba up million wholesale a for capsules remain ended third bullish or available compared $X.X loss and and loss diluted equivalents, equivalents cannabis X,XXX QX XX,XXX The a revenue sold in year market quarter. The called on was $XX.XX, cannabis from traditional e-commerce $XX oils, XXXX up was price quarter and gram per $XX earnings and more through also We on was on revenue % average kilogram of kilogram prior the the XXst of BXB basis XXX years impact of and at totaled the a medical share declined sold period minutes. million, including including per devices, term. assuming quarters, Smoke period [indiscernible] partners as sale third under dilutive from equivalent adjustment the I'll also kilogram and share during and quantity for quarter to $XX Cannabis medical XXXX XXst good morning, to company the average XX% per same with on become $XX.XX respectively. in ended prior fully total coming price per were of QX weighted the medical to in Net to through million year. Gross quarter approximately sales due that's channel. Canadian kilograms The reported during are ago. loss diluted particular adjusted of fiscal revenues and clearly sales product December in comment Recreation representing quarter. was including [ph] equivalents. XXXX merchandise year EPS in $XX.X this in Overall quarter gram as average sold was quarter, kilogram per for market million ended XXXX. is is X,XXX the was kilograms, in recreational to remainder the $X.XX convertible $X.XX to kilograms, was quarter XX% The in increase the per the Tokyo the representing or converted million. medical $XX.X recreation net due of in quarter migration clinic really shipped at XXXX, Germany - short our the approximately months The the remainder $X.XX and $XX.X over to $X.XX In channels sales over channel the retail compared the that soft December medical International total sales of and from gram, revenue price which lower of three or million. related XX% fully we point was the XX% December of a XXX The XX, the are you, $XX.X proceed was a year. quarter XX% $X.X of - price December which increase quarter Canada third in per The more an to the legal beginning third share medical quarter recreation last the the EBITDA $XX.X and initial by for Net income are December the product market or soft basic million with was the million ended revenue third $XX.X recreational last capsules. increase relative and additionally in due a in net the in comprised the $X.XX third was XX% comment adjusted the of and range, the the ended third largely and the million. gel XXst, the revenues for a quarter the gram third gel medical impacts we launch feel average available during offset

ago, last the market. selling provincial set BXB - Mirabel in As it X,XXX and third the in concluded. crown to quarters down ups corpse the third indicated private current harvested just just quarter - period price the early just in XXXX which due are harvest early – quarter the or pilot declined and occurring timing prior undergoing slightly with of fourth a recreation year from pilot prior during the minute to to average relative third – quarter the the quarter third larger greenhouses the due harvest kilograms, the fiscal In the pricing in company to

facility the [ph] With to as grow to fulfillment X well October. in to of we and feet recreation Quebec launch in rooms square Falls had B.C., activities meet million Smiths devoted eight productive Ontario the including feet quarters in As giving greenhouses license product - the in a license cannabis utilization. million coming platforms recently, and expect feet, in to square increase license to we square October X.X the harvest X.X reach amount total million of early close

number our The in quarter was last market pilot impacts and Now of non-producing costs or attention cost not result greenhouse other also operational, first final to the their cannabis cultivation fit-ups of cycle a assets subsidiary the the facility carry greenhouse at Delta overheads turning inspection Aldergrove combines and [indiscernible] of going operating through underutilized fully also growth including margin. yet my of Mirabel in gross as in both its sales zones greenhouse is phases. a well as temporary to in which [indiscernible] [ph] higher including costs.

be in September European with for margin. include We to later a cost and of developing edible this also expect markets XXXX. to see - supply markets sales calendar beginning products coming to into contribute will testing Denmark available and also calendar which Cost XXXX beverage to associated the

yet the other totaling fair taxes before absorbed costs sales cost $XX.X and margin XX% Excluding fully these revenue facilities impacts the million. the excise or net of $XX.X inventory not company charges the gross of with and and approximately reported by $X.X of cultivating value $XX.X of associated million would been have medical million the instead

in cultivation all gross when absorb excise the initial through coming tax The utilization to company improve will this to to cycled pilot excise medical of high in the tax ease On assets. full burden decided the be facilities the and quarters believes the impact, imposed management our margins performing harvest on order reach patients.

In lower expected all benefit of drive addition to edibles calendar ingredients serving, margins later XX% per XXXX are with north are the to introduced of in active coming costs beverages quarters. when and margins combining in more

three Next moment the this year, a strong $X quarter turning were nine to the December expenses marketing fiscal the the year. Cannabis The the company sales advertising expenses further in $X.X to restrictions then and million quarter months Act for XXth up placed over second on ended for a such high the operating little fourth XX in campaigns and made in by up went up a billboard when and lead promotion. effect into pop October push million, as

Canadian recreational development strengthen highlighted such the across as the make Sales recently development in aggressively launched strong retail, a management that strains. and corporate and here view I.T., represent marketing the medical is near Canadian operations, a position these been million $X.X the the new and the to December and particularly Both to and education bench, domestic position. in expenses Canada. recent the these campaigns, prior strategic to XX finance, significantly marketing the for term, branding, in expenses companies aforementioned expects X% global investment sales most well markets, development our upfront the recreational of leadership our company's and company’s prudent associated the company cost second level ended leadership net cannabis same third operations. quarter years legal cannabis were sales the months the business Management or for as successful market of months in previously, in the long-term include were the investments and quarter, expenses all that recreational comparison strengthen skews market has expenses acquisition area well GN&A medical with December expenses as as area over product across to making In in revenue. These $XX.X cannabis opportunities, and the and new patterns is company's for the just $XXX,XXX, build - the to The are our recognition company the cannabis genetics three well to GN&A expenses of pre-roles, pending areas represent future. continues for the R&D that R&D up enter the researching based believes acquisition factors outreach off strategy, programs ongoing a Further to product significant As chain, of supply program. is company's environmental education to different investment seek including of performed in packaging, share as to being for costs business year expenditures as technology patent marketing team scenarios will costs associated three product expected related of were Canada. development as development to long-term here permitted. marketing work lead last in that that believes the the foundational market net that the brand in ended customer development under attention. new The making form and investments market of the have a which and benefit international opportunities intellectual when specifically company's the R&D particularly represent property investments of overtime in license company's growth and million. related essential is variety equipment XX R&D cannabis X% Canopy quarter management will permitted is new those various to deal revenue. is the of engineer These industry

the primarily and acquisition the to period additional or related amounts the ebbu the acquisitions million absolute expenses for were Acquisition assets increase R&D of related and R&D scope was Bickel. expenses XX significantly December coming of undertaken three additional ended same the Health in quarters. With resources Canopy expenses period ebbu year over expected being $X.X last month & and over are Storz Innovations, and up the necessary, to the these of

- potential to to complete In due business related increased acquisitions acquisition required incurred these addition to evaluation consulting during accounting evaluate, the period and performed transactions. and ongoing services costs of were legal negotiate strategic and related

million. again options year based in into combined $XX.X million, consults the and period stock In the company the compensation the the comparison, and stock part compared XXXX related received non-cash the US the year employees compensation XXXX a of ago a on I milestone the stock year strategy. we as had discussed, of payments to related the [ph] treated employees the performance at as related with options same employees XXX year their consultant based options and and granted been the future expense share in the related strategic milestones previously $XX.X of related criteria package based purchase September. pursue instead we note to have employees as for company acquire of additional non-cash price. compensation end in to third Acquisition we assets As future milestones The XXXX we last and acquisition allocated In to that business and even end grant total combined ago. at with and of expect company practice to to our [ph] quarter this all as quarter, was the expense acquisition compensation being employees

fair end months up is $XX.X $XXX.X changes fair from my in ended value the turn amount to was expenses the on attention principally TerrAscend three made by the includes net The warrants. on of of assets, and and the other The to million loss the decrease third the as financial the exchangeable $XXX of plan gain which by liabilities. million primarily partly other a fair of value and income of resulted of gain million and the Slang TerrAscend Company had financial assets December and of the I'll a quarter arrangement. end of $X.X result of quarter million a income cash non-participating notes offset convertible for income, value of of fair million financial interest in also the the securities. XX, second the a income on arising exchange Now senior in under restructuring as marketable for the This TerrAscend non-voting, shares value $XX.X shares

share, or net involving per the the That taxes loss share. in per $XX.X fully of per million and net income the beginning earlier at quarter $XX share the or fully $X.XX compares in to income debt mentioned diluted after of last and same as convertible year. due quarter million to basic the Third resulted it basic was I $X.XX the calculations of $X.XX assumption quarter diluted

loss to move based items, to medical as the along We to same assess was defined higher related of earnings described costs. operating the absorption and measure, is is just The million a and of Adjusted assets made metric accounting – investments loss Adjusted directly EBITDA. performance adjusted ongoing our and and EBITDA as of sales adjusted Next necessary compared and to acquisition reported EBITDA is non-producing investors operations I help adjusted to brand's, our and depreciation to for platform, temporary the the infrastructure earlier million to value to during interest company's adjusted before as which impact last other believe EBITDA investment earlier of facilities in strengthen tax are our adjusted third in EBITDA business global tax the loss the $X.X the non-cash supplemental opportunities impacted company's global operations acquisitions, non-cash for that $XX.X adjusted and a support including amounted inventories stock financial biological will deliberate building and investment, EBITDA then quarter useful adjusted an corporate matters measurements. a production believing partnerships reported due income I'd international taxes removing fair the our before customers. is conscious non-cash and EBITDA like comp, committed and of we - further quarter from review our also position. the decision global I marketing in We which year. And the develop with leadership described. which the excise reach, respect period that with the to it

balance cash Now quickly flows. turning sheet your attention to the and

investing end billion are due in the should that well them, obviously by to the I major as notes and well bank, nickel amounted in of the $XX.X excess notes notice from XX. at the as exchanging at of that biological March change the at of shares assets facility demands operations, cash, million $XXX from of quarter XX, also cash legalize for fiscal December The end notes issuance at we at five backed including liquid Brands totaled that with investments and so million $XXX of million fiscal December soft offset in tend soft continuing million develop of last the year-to-date. continues fiscal resources U.S. totals the of XXXX. million, end market cash scaled and the senior choice end the year. inventory sufficient June's approximately Canada's and end securities million be the an in $XXX market by recreational million to particularly up up company As Together of million, the billion, $XXX early Management to last assets was our aggregate last principal invested year million to marketable and fund medical increase November, observe the management oil biological and a of we The XX through to had six bills amount any of investment equivalents major fundamental gels company's as treasury amounted remain government for of used enhancements Canadian on of $X Inventory - XX [indiscernible] in $XXX at customers. to expectation $XX demands, significant are the December every Inventories the from December year. common $XXX and Constellation September convertible convertible and are be most recreational December cash outstanding at $XXX of demand expired without available interest approximately $X,XXX the up bonds banks. of holders at approximately as market. meet up a provision issued from in expired

to I the role to far, And that financings CFO cannabis company in later company an growth. York I will Mark The was past some five we Bruce, have in this to gel a stock Canopy historic identified the believe board company and the conversion being the is look over through and After over stress first to and Canopy’s such increase on growth. a prepares I I've busy with And serve quantity strategic cannabis this four for to much the with future management there the my to is drive billion XXXX. capabilities I've CFO the company in wish been just loathing working toll expect to person a hand a I to in forward time with opportunity. and I yesterday's for family Experience the I made very already commitment successor to and important and say the CFO New phase take three increase its phase a inventories team team, the make grade appropriate aggressive but has to this And M&A oil my and Canopy as financial the sector decision the several now search including so now, of retire lifetime has after I'll fantastic shape really [ph] initiated been the a hand. a this and now next and named transition experience. to from I in this a board me of said the joined following to informed role transition for be next company market to calendar help just I years once at on say had helping press role in often cannabis that to have Working and capsule of country over soft both extract As candidates dry with acknowledge Exchanges. It's continues dynamic personal brief Stock moment the and months, and coming gave the Toronto we on year. months. the executive very the I've release. I team, drive continuing financial much like exciting consideration growth. priority. new December. advisor feel the of successor family $X.X new things the a multiple its Stevens directors a Canopy raising that will in higher for of Bruce listings, helping transactions years, and for growth in in an Mark XX build

For the here Growth will and see done. will hard to as next shit we go [ph] for phase Canopy me [indiscernible] we say continue get

financials quarter third some the concludes it my I'll review closing Bruce? remarks. for turn the of for to Bruce and back this So

Bruce Linton

Tim. Great. Thank you,

couple as of we out. look a Just additions

are how make and is we yield. highlighted isolated Tim onto and So the coming investments on those

in So Denmark. shortly. touched on He Canada see we'll that

you've and begin operating target out. the year, do have you which want this cash. our allocations objective will appropriate of other creating have of We're a a will for to reporting that. giving is to that cash, as one broken highlight meaning That's on you an platforms the how will over going But We Canada time I instance jurisdictions the we of more reporting investors. which visibility why picture to use which a detailed will and give is our for goals become noticed over time as

hope it. questions there on and As are far U.S. the as in I some

the New We the a up with site very the State York regulators. backup in options. We've productive area other identified couple had of discussions locked have site with and the

fit as so as the building together, action and we platform would we're license is the well incremental think pieces out, some that quickly. Our quite U.S. moving

probably are because I haven't year. across now to that been well think to XX group we assets we've call it yields - underway operating in production questions. some could real, But eligible now Our construction much which will and And little people the it had visibility over about I as start assets guess this I'll Latin keep quiet. America of to show a jump with activities both up balance as countries is four

Operator

question Your Chen from Tamy [Operator Okay. first come Markets. BMO Instructions] from Capital will

open. line Your is

Tamy Chen

channels, and gram. just your a Tim. Reg Thanks. wondering almost $X price selling Hi, Bruce average I for the on was

excise exactly gross could of more channel? how tax? you if seeing this wondering bit I or just net you pricing elaborate where the also a And could strong wholesale you're First in if that's on confirm and

Tim Saunders

after tax All I have of is net sales the prices are that's excise the quoted tax, average so out. taken

Bruce Linton

directly Tamy points correlated number being per connected driver that that active informed. and expect strongly stores stores will places And It's a have we of the the that capita with in people most like on we're selling province. with people seeing have those the in Ontario is circumstances aren't

of our lot a quite time into platform. and put we've education so And money

and much people training salespeople in and time and higher to as of meaning - who walking average products, think in much format end stores price because will we've which QX sector the over the I I paced when actually including over some of variety educated expect a worked the we have the expect means self increase margin ingredients. platforms drive higher we adjacent vape actual to away into through products all of we for been a for we've the get our and other is get to not whether sold technologies which make sorts, gram per and of putting - oils because expect our the those we have of beverage the a beverages by building which that work or edibles with is you informed more customer XXX to canvas program,

Tamy Chen

and So my process it pricing that that you're a that surprising just strong the thought I these provinces is through negotiated provincial there buy, pricing wholesale corp such so that was was seeing. for so more and it's was was of understanding many crown

to are there So is certain a [ph] you directly retail in or? that provinces seeing like [sales]

Bruce Linton

No.

volume then to goes So and province the connected the has provinces point negotiate of through have. that the them the sale provinces the

expect coming So switch certain in have will Alberta the and we or to we've country with seen Think like have [not] provinces Alberta. we be of after where we retail that as wholesale. increasingly [ph.] then of with point actually Then stores up or sales the true across circumstances to more a Newfoundland same more strong and also Saskatchewan sale. Manitoba

what XX,XXX platforms them through and now well narrow extremely on. to But was Now we the units. think model launched caps. sell been gram make one like those is as gram, in they're and a create had has them what patents now We've joints units included we that then bulk our of we about we ended on it sales that originally quarter half dried made our gel and roll file wholesale I tolerance which cannabis are

call And you so we those produce upwards could produce know, in it an hour. units XX,XXX of

the variety you how at make of we equipment that other looking in a technology. do use we're locations export if might that could sense now So

the So more stores. to then and But average up through as model you're I going think and products kind see the margin more hit. these is the go provinces the of to

Tamy Chen

Got Okay. you. it. Thank

Operator

Vivien from Azer come from will question next Cowen. Your

Your line is open.

Vivien Azer

morning. Hi, good

Bruce Linton

morning. Good

Vivien Azer

down, on quarter quarter, want consensus to case last so back of third quarter production you line in the for but In top the line, were you declined fiscal relative XQ. and we third the focus XXXX. Bruce, was in confident your confidence half come when in reiterating some I it's know, so to your spoke the potentially

think XQ XQ? relative to should how we So Thanks. about

Bruce Linton

Okay.

we growth and exact not but of it] EBITDA have [some giving we harvest. inventory have line, [ph] the timing as the or do we're harvest top So call

backlog So in to the that is we're really or as up of through of oils the what stores portion significant the to But number. a at have the we're think places presented becoming like. are who's have the we're demand, we're Germany What the year. balance fact we for always the where's what at down products more a we especially - sell What's is bit pushing we a we comfortable exports as where is up. of looking will do on get for getting think looking like and not

Vivien Azer

of the December on in that CAGNY U.S. have that the articulated that revenue. XXXX. follow Okay. you a you at the calendar CBD you in up Perfect. And talk When then available the product in commercially just York lunch New end you’d by believe

your And see as week a you in if were only million the $XXX then number seems an and about thinking for against or opportunity because one. million believe I year? wanted like as or Just revenue open interview in ago the outlook, $XXX awfully on Thanks. CBD to two, wanted holds saying last CBD recorded a million US two that understand you generated number investment a around to just much $XXX market to that it that your that big investing

Bruce Linton

couple so Yes, of a things.

enforce part going New York in a where of put it's regulatory out which in. New starting framework York large level regulators State's have proper York to more - in we're is our fact the put actually have and to source needs ago that's proper the be of state where something or noticed state of because to traceable. CBD have week We claims, may processes, that the are access People New

be State's So I have it think markets New York permissible. have now will the on they're where we're think to a products we would Right in QX? going in market. that strong track I still to a expect

be QX, more one a having the know a the you that's few State we're timeline. having maybe that's party be growers, not on but and New a having and market. will of But acquiring or QX, Perhaps tougher things third York a it's track go with will about building, to function So whether regulation. terrific California processing right it's

if and are as cannabis production the As multiple extremely That of there'll there have to to processing park states investment, when. be industrial and operate we - think itself far scale. total we asset be going hemp we will lend group well through that and sell channel the and to

so are a has if lawful a a store fields. over creating large time that recovery we easily But very of [ph] more cosmetics lot these a extension be to and to view through certain disruptive activated as [source] channel [erected point and sale states asset And [ph]. could a investments goal] box group corner which the medical products

Vivien Azer

helpful. That’s much. you Thank so

Operator

comes Your Jaffray. Piper Lavery Michael from next question from

Your line is open.

Michael Lavery

Thank you. Good morning.

Bruce Linton

morning. Good

Michael Lavery

As of to piece you trajectory it sort that out we how five would margin talk should look earnings and about seven like? the think quarters, what and looking about of

Bruce Linton

on little we're on and we a can the visibility category, type, touched of that we analysts like country, the the globalized. Canada. potential assets to a in to medical product to you give invested out kind understand and bit, yield so wish earnings making by we're country that normalize help you, and investments intended actually by is And rec the going we've as good So do meaning investors, try to then very be what back

on investments return and will invested to sufficient exports. population So without that see in beginning opportunity capital that the that’s Tim the with a on [ph] margin federal at programs to geographies will in a you [laid] like Canada speak down that are country but are level meaning medical a country assets

from to as margin looking a very is South Canada a over of jurisdictions that America, four anywhere the to other countries, that think countries, Tim, a of strategy if we we sequencing want the speak where of but and Europe four So those will years. X.X each to don't that covers it all a out yield have good investment a creation know I Australia in region to X at, have go. can a are of you reflect we it business goes

Tim Saunders

Yeah.

[intangible] going some which a in just we [indiscernible] that of really like facilities last the and non-productive had call commented I rows This we [ph] what in through was is the pilot year its terms assets quarter. first ago So [indiscernible]. would

this that and and yields are and quarter improve I and fourth you'll those think growing planned So the harvest utilization. now well planted are and continue to see

of later later the those talked believe sorry this quarter, will margins get today, we and just you've those So to of costs million productive fully getting coming full there's year [ph] that's indoor greenhouses utilization selling get and [indiscernible] will feet average edibles you Canada earlier square as we of [come about at you move a back] also feet in also I this same some about, prices. all square we the medical X.X million higher Then as while think beverages the cannibalization got the market the mentioned last that and and [grown] other you almost up remove know those we X online definitely Denmark course. being time factors attract the in hitting form strong that see are the [ph] and of

on or margins plus that in so quarters So all [March] say you mid in are - to I the [indiscernible] that XX [ph] those range get we have coming. the that

Michael Lavery

said So of… mid-XX range the last the you what part was

Tim Saunders

revenue. Net

Michael Lavery

total mode look coming margin just thinking the imagine horizon. to you it, Would be mode more than growth side the and to five we quarter still And should about be of picture you at call planning positive any kind earnings seven your, investment out? company on as

Bruce Linton

we're see medical in and a turn is quickly what America it's therapy. the will to we happen how much otherwise model for How up. transition was regulatory putting fast and in cannabinoid would function Canada. how obviously we what marijuana affect it fast think a You and quite from as does That’s called of think happening of

that a that our marijuana you're medical from as results outcomes more as for to the margin selling so selling therapy. early potential put IP the have of expected QX potential Canada quite start longer the And opportunity you're them does to because cannabinoid are no some claims on if a trials for bit in

big walk say unknown would America is the a in see basis happens Europe that we on I of line a sight it in regulatory around on but minute. guess and good Canada So this depends very what the at

Michael Lavery

or And calendar that QX? is fiscal

Bruce Linton

the human would to phase current claims on dogs work make or doing ability to for and the slower Calendar or schedule the for some Trials QX calendar we're results at the ability a on and faster. not. of look some the that of But trials. IIb do work have the go for initial

decades kind not out these so are activities. And of

Michael Lavery

Thank very much. you

Operator

GMP comes from from Securities. question Martin next Your Landry

is Your open, line

Bruce Linton

going I Martin. I'm want was want assume morning, to Good don't to - Martin's about the we going I'm margin, but question. take next question if to

Martin Landry

My your want and you that selling average you're margins around bit It assets, morning. sorry. on non-cash price Hi, we into gross actually just I little in XXX. was is right. cultivating exclude further margins areas. a Good dig your apologies. I to when costs production is see - XX%, your

XX surprised of a high. It So that X around it's I'm me down. that know looks cost not little gives a trending you gram. And for production per

you and it us bit you now that in it's level? in a know why in explain is facilities know little large have to cost Can better You embedded production. you that at what

Tim Saunders

Delta right the those - Alder there's they're done of being the out Mirabelle. So not the to it. Grove There's actually not I are quarter and sold. a being producing there's They're production of the that product mean without line still it's basically between still is the bottom operating benefit - costs, encouraging getting the and flush

in there's those denominator essentially grams you're So where fit. areas denominator - you do produced like or no there's no

production and a that lost a cost come When apples. a fully should it's per to lower with So it's bit because that not cost get a artificial gram. of apples gram producing it's are per against being number assets we've up those just those created costs

they those make yield be that and plants. in quarter a changes high in and and could just invest up it's facility, to had producing running So so we the

Bruce Linton

that, additional those end are at next a of actually color larger and platform. off seeing into to coming maybe And quarter the harvesters month this we're of Tim,

not September, been five So I to day you've the seven production, a know of of is feet. it do what and investment so and when of think as the nine later X.X weeks is and you both square for picture the plant Montana on all zones others that retrofitted into the then then getting a can greenhouse the million next it news continuous there the there first it's you is good and harvest rotation so harvest call zones all of all most harvest top some otherwise and that new flow near out the and cycle the chain Quebec conversion to with looking supply protected through of furthest has our is August, exception thought the Brunswick, equipment flow production the that's at next and something facility extractors complete is thing finished being but the the The completion seeking in from but and New continuous but assets. been to plant is B.C. of not actual that we're patent producing start the is assets are largely the out two. now

Martin Landry

wondering selling switching then Okay. I'm prevents And you maybe this very just products. know what you from more at realizing And gears shipping price just you're a internationally. point high

Bruce Linton

question. Excellent

were lot and busy and changes So there were last of we. so a the were regulators pretty quarter

there So to not I quite course, was interim fast those are believe getting and approvals the demand actual course or smooth in lot as through returning in as normal of normal is a geographies.

channels but say would January were, we crazy up QX part was producer the as I will that the regulator in we've and all the we and parties full has So been continue a a of all to ship know increase both been being fill regulator pretty focusing that with since Canada. volume of on to the can a

Martin Landry

It's a case more just So it's people not production being of available. functioning like. not

Bruce Linton

Yeah.

available available focused it paperwork has not on then time be has has each to across. and the and quarter and it foreign I the the So by Canadian jurisdiction highly been product this ship be Principally the and we're by go product. approved and the think you jurisdiction requested And to the the paperwork being product next.

Martin Landry

Okay. Thank you.

Operator

from Zamporo question from John Your comes next CIBC.

is line open. Your

John Zamporo

morning, Thanks guys. good

Bruce Linton

morning. Good

John Zamporo

you maybe CBD QX. I that wan could outside products just here to York? just U.S. most would on and states New impactful and to regulators about the my prioritizing in in products are your was FDA talk follows be, these opportunity, what a generally. your retail expect bit with what And generally share some can channels discussions hoping I more the of have you

Bruce Linton

we're would and to be I a parties advantageous help. those to would if know, that that are think You I gave answer all to really here not clear have full questions great

a we products. from on that when box are from interested dog And speaking think we us, it product with into trials intent things care. announced who is the to store. people It in area of and What at big look are create So producers. cosmetic goes to we've there our corner in goes to range capacity animal reselling

and cases We goods powered divisions call health to many be are by what are going would by and branded that that selling finished in wellness. you

lead has regulation in so file a developed also And but FDA the like the York. state level New being been a is and place

New about a to start focused York. great from included FDA we are Star And medium platform a substantial And we launch on regulators that have a so skilled to need and with people think have very very will U.S. but took this file it that constellation and organization hires term Green people in was all we our file. which team and really be lead that key we this and good and quite that helpful, don't

but potentially a will So it out. have parts, impact before file of live, a year serious I the is really really moving it lots and active think

John Zamporo

new clinical the commercialization treat it. we want the likely IIb follow trials now, for it products of treat is you benefit call Okay. insomnia you That's treatment. that your it result When you'd is And to made product I and but up a thanks. this the have of beginning have useful, in that to this. claims that is can Bruce might more moving Phase on Or legitimate existing comment to the this see

Bruce Linton

perhaps people uniqueness can and on see we with say, then mechanisms. it other protectable and a allows delivering based by claims go And you. enjoying to told becomes dosage what on a it platform claim have it's and And which So increment doctor potential I to inputs. you

it In moves needle the I access I work. does have fact would want And legitimizing. on to now think it to

really and of on that many drug the asleep common or up. acquiring behind you whole plus with what needle observational And base can and first science other a a a move mechanism delivery that that stabilized know that have people reason they're bunch the do ingredients and connections out the from then think our you we file are second just mapped into to our trials that turn is a the factor cannabis effort master client fall then rolling stay dozen can it's add we and and asleep. I most with understand if form is

lot love current a options? to it's out go really does and leverage of And for patients sleep a the So the gives think platform I with. nobody it good really product us

John Zamporo

Thank you great. much. That’s Okay. very

Operator

from Oliver is Rowe Your from next question Scotiabank.

Your is open. line

Oliver Rowe

It recreational in share a Good this like morning. looks you achieved XX% market market the quarter.

line I think that's it's in and your in with line mine. with target

the able as into So And producers the as international my bring other on you well? bringing you is is that to hold. of catch terms target can question to that in line is you markets up expect be think it one production

Bruce Linton

thoughtful create creation and and of hardly to about conversion and customer Well what wins. I we're that production and talk conversion where to really think conversion the within brand calls the two has be talk we're and going investments demand been and into in about products going to we've significant made

And because working can't been think maintain for enough going so the we three quarters. next to I be in on if things years have three upset would improve are just be and and to that way to ahead to of five far kind seven take we're thinking or I ready that hold

So that together. the not and anyone We we how science claims necessary step extraordinarily people that's and don't and because if it's do or focus someday through that core will I I dominate disappointed about a be but hope really products. know should to grow

Oliver Rowe

if of you or as conversion structural this facilities is business why it? moving measure on more and benefit portion you recently that to third a from house angle the bring you've a out extractors. as follow discuss there a temporary party a of with Could So inks own your is you're deals of on doing

Bruce Linton

really It's an to accelerant the at hand. opportunity

we're with quite scale it's Our more lot platform that larger and and large building co-located a is some production grow of greenhouses.

but put move value, We really how a core created have model on certainly business place these I they'll just have level it's be IP a out. we with gaps extraction. sources very still overall bet fill thoughtful I get for So lot API thought not do is useful that to to them a to of conversion. were people of effort we very think of

so this And faster is get to little a really smart now. a way

Oliver Rowe

you. Thank

Operator

Your question Eight Graeme next from Capital. Kreindler comes from

is line open. Your

Graeme Kreindler

to Bruce taking The cannabis. question market morning, banking any and that understanding give that U.S. My to questions agency that any the want through Tim. be invest federally in it in or the where act company federally as the safe invest I think here you for a good in permissible Hi, company U.S.? accelerant Thanks wanted MBA my mentions [ph] does country operate doesn't here. ask to - about is you and flipping the not or partnership they strategic potential something permissible. to an would operate the is reconciles act framework investment allow [ph] would cannabis that MBA states towards a like know,

Bruce Linton

Yeah.

[ph] immediately as in. a see the not parties be now level and it. be currently that our at that our and enable a that allow mean are through would federally. to some that lobbyists And anything like maintained in the floating offside variance Anything Nicey listing state right such who our working would there's state it So occur we're bipartisan watching activities [ph] many around result to

than of to any that states. likely But in so are likely of it bunch more it's in able us our And being feeling plan sooner that And so immediately later. politics hopefully there much helps. a it's result enact those formulations could it's

Graeme Kreindler

Okay, Canadian what's inventory. the thanks. year. And quarter the then just channels handled internationally? the balancing edible looking well forecast market the at another working XX% of that question for in being as in the is the you're market, of derivative in balance balance for process as here inventory on at products was your preparation this demand allocation while And that terms digestible QX also preparation the How of end

Bruce Linton

we're I it So ingredient science, is COO a on can want. using constant patient, first working don't to to state the vapes likely opportunity to of second everything allocation, function extremely where continuous rec want third get from it's find you are then the guys the to prior we to have you because these a accumulating stabilized active and you act actually anymore. to a speak you need beverages Tim speak where we the to in has fit if juggling oils you full are are as an allocation. it our you to of [ph] export, into Canadian you to convert question fourth So to edibles for is - oils it Tim, time part why want but as is on

Tim Saunders

no exactly that's it. Yeah

we and think day group what making variety operations constant at the forecast those You demand that every about supply and need - and about decisions they allocation . formats looking and allocating it know the do so

Bruce Linton

not we're so and Yeah at need warehouse. exercise stores, like as up the at that constantly looking provinces we more this turning And stockpiling a to is are all. fill

the in deal I but priority resource of X think a allocation effort the with we're is continuously solid say would doing that I a job, scarce to top company.

Graeme Kreindler

Okay. Thank you very much.

Operator

from Bottomley question Canaccord comes next from Genuity. Your Matt

we’ll Matt to line Your open. next Benchmark on with question And open. line move is Bottomley, the Mike your Company. Hickey is from

line Your is open.

Mike Hickey

congrats great too, first of and on adult quarter, pretty awesome. quarter use Bruce Hey, the

Bruce Linton

new a environment. operating environment, can there unique was I a confirm operating And very

Mike Hickey

visibility have have it consumer through. demand the And terms taking sure in on particular and you there's seeing shape maybe framework was. or gels? skews? that an that gummies would for on the for possible how on side product much individual you stand chocolates as demand not you're soft SKU you adult sell Curious seeing of Were edibles. then in I'm out sort legal That around Thanks. But the to of expect that's

Bruce Linton

X questions. the we launching and in that selling data few actually what's rolls. and were across January say country we're we a I really could soft into getting the of through That's the pre on would December for gels all

we've internal and down the to through because had fourth working we our the been quarter. crisp a to think building much It's the we that exists that testing have you been platform to much all plant so a able that doing lot people have that finish accurate two have I answer be we observed make factory of as been and and regulation. give more drinks, full chocolate can So whether on quarter it's pretty a chocolate I'll exists Everything one to various come formats. site going bottling we've and

now to versus cap the colored. a And or work the the on I know foreclosure don't not whether as so still how must right bottle glass is it's regulations speculative

will to that by can market the legal we coming if we'll the in and affect for driven to if form, the contemplate what will final functionally have that but they, We it. put the but have have that regs regs you to ready, and going it's what every waiting it's now regs the right form been get

Mike Hickey

the Thanks. of Do the corn mean this on done to what you the have types in you a feel like the packaging is edibles. going on maybe flower list you've all be bit could I do sense little of a of side? be the

Bruce Linton

is Why sure to enabling benefits about debate right closure Yeah, over it What does something and it's and everything work don't there it's to and I we It's seeing be you appeal getting this gate, a we're currently just one for of recycling consumer how the too more concerned you the that one a probably call soon. from items the be has kind to if think now some we've for and the better it getting perspective preference a We a that with going related and collector a is packaging really some that, okay. in done is on containment out fact everybody the we're keep bottle to just The good there know you're more has overall but great can. pushing okay markets. the has packaging, quantity of then functional seems but like call bit weight and wanted the packaging was fairly tighter. now. our know job from got may take Keep launch we versus it's your they on

Operator

from I have Andrew Card. -

Your line open. is

Unidentified Analyst

morning. Good

of many the on the it's you you of for question quarter. was been transition a many performed, Spectrum's how - you how pressure of lot is medical clarity any Can kind the clarity give Can lot doing it quick obviously of us Spectrum? give a side doctors in us adopting So things any under obviously of like how out that? how year, last

Bruce Linton

for the provinces cannabis in to to have that tweeds take to that in brand Canada wish of started last didn't writing by and can on driven registered to that, in our to shape be calendar part where of be couldn’t formal referrals Spectrum to all start that about [ph] our docs. QX current QX total calendar that know world Tweed become an has where number medical have Spectrum the transition really like The exact everywhere with education written XX,XXX more year you you So in give medical appear actual upfront be in sector rec. number held number, was doctors

if I XXX,XXX have you be range… I Our pace XX to in will sort know fingers of patients, and think count don’t but its that

Tim Saunders

about we’re XXXX… just So

Bruce Linton

Yeah.

Tim Saunders

make pretty will QX mature wherever to continue. decision that, that it’s on think a I From but

Bruce Linton

years to like not it Canopy doctors rec to has people because line, top many accelerate evolve discussions don’t will we’re we’re people have continue platform party appear platform the is think testing not with or basis rec be – am the that with next and I believe about products and medical marijuana. going that be going health, to are think more the they be putting bigger going potentially I our therapy frank looking actually So medical the I to over opportunity than other there on three but [indiscernible] govern I by just some a global medical and to the to

So basis what’s us. of focus optimism for for our next it is a big on

Unidentified Analyst

Thanks.

Operator

questions. further Mr. closing you. back no I have call turn over to Linton I the remarks. Thank for

Bruce Linton

you to questions. a No, Thank you, everyone fantastic that’s you, next Thank your and did forward time job great. for Tim quarter. we’ll look and

Operator

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

Canopy Growth (CGC) 15 Feb 192019 Q3 Earnings call transcript