CGC - Earnings call transcript Q1 2023 | Canopy Growth Corporation

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Operator

Good morning. My name is Grant, I will be your conference operator today. I would like to welcome you to Canopy Growth’s First Quarter Fiscal 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. I would like to turn the call over to Tyler Burns, Director of Investor Relations. the begin may you conference call. Tyler,

Tyler Burns

Thank our call, morning. Klein; Chief Hong. you Executive all On today. and Judy Officer, us joining Financial we David for Officer, Good have Chief Canopy’s;

today, financial for on tab news and the results quarter release Canopy Before available first and opened issued news SEDAR. our our our XXXX. release XX, June filed Investors on will EDGAR a ended is be fiscal announcing This under markets website

our website. posted a supplemental on earnings We have presentation also

of today’s Before would call that include and the based I by that Please this morning’s note this we differ forward-looking discussion forward-looking various SEDAR results regarding our cautionary news entirety current its that management’s to earnings filed the from are you begin, with discussion remind and to materially like in end is that review during Canopy’s SEC views reports will and cause this and actual factors for on projections. statements qualified included assumptions could the release release. at statements

addition, dollars measures information closest provided are Canadian GAAP measures all noted. otherwise earnings to in note is between non-GAAP our In reported included financial release. in their Please any unless reconciliations that

will question-and-answer David questions we and ask possible, we Following to that, To to to I analysts. as over questions prepared remarks from go by the we many themselves we turn will session, call please David. ahead. analyst get to conduct ensure will by that shareholders take Judy, question. platform, using that, will Technology’s we limit questions David, one With following a as verified where uploaded address first the Safe

David Klein

Canopy. short-term update on profitability joining against will you then on for our update our everyone, additional and we've and results, provide Today, Thank priorities QX our discuss outlook. in QX the you, Tyler. path progress our an provide I'll thank outlined our comments that including for Judy on call. strategic morning, Good an to

despite call, priorities: improved I QX, market portfolio, stabilization a cannabis conference positioned continued year. in profitability Canopy's world. initiatives is last to And in market on three performance, CPG Canopy. to this stabilized our And clear positive record segments of ecosystem possible. in our made in through core for our with to share margins Canada strategic our THC and quarterly One, BioSteel for headwind temporary we highlighted During all the three QX the our Two, we in US Canada, is our against share track as still & cannabis and three, in lead strides as of Starting growth part mix we've saw strengthen had to we on largest as continue Bickel of revenue we're ensure cash soon Storz achieve business, track Canadian a shift. and deliver Canopy revenue to

sales the quarter, a sales, for recreational of year. During our premium XX% up and from combined accounted last Canadian mainstream XX% BXB our

share strains Haze Jack new these the including Consumer infused response pre-rolls. helped quarter, consumer highlights provide to the to lead Bubble brands, Hash in to the flower our Hash flower, new XX% Bubble facility. Doja generated OG pre-rolls. of a our market Jack the XX saw our We're number scale to SKUs and input, in we flower response flower starting Smith THC me Doja with actively continued infused in segments, by XACRES In and grown under additional innovation. premium launching in connotes includes including Let core this love, This with quarter first supply Haze robust premium expected to combines one a similar new pre-roll launch Infused We with pre-rolls, our later strong response year. Deluxe to XACRES our from offerings Bubble flower Haze Falls production Hash demand our working expectations. that exceeded which increase pre-rolls, to Jack new that

out two to than pre-rolls to OCS market premium the power quarter in four-week supply to strong the initial helped increasing sold Doja weeks performance in with replenishing and Our in our its brand less supply. flower share we're This and X.X%. actively

Next, on mainstream brand's beverage for We're and strong flower pre-roll response the touching segment. and core flower, to generated consumer rebrand, which demand pre-roll, innovations. pleased our Tweed edible our the with has recent

to cake the the has enabled resurgence mainstream Tiger the and strains, performance. maintain overall New The share joint QX in and pre-roll to branded Kush of flower cake, Mints us market. of wedding Tweed brand's sweet flower brand launched positive contributed our

RTD our our share that XX market beverage demand been beverage QX. of of gained which also under beverage to one Tweed's RTD maintain number securing effort high-quality key X-milligram will backing space market during the the our key critical and increasing expanded and in Tweed Tea segment lineup. been also premiumization provincial the XX.X%. We've expanding of product deep few Deep strong established has months. on-the-ground the Tweed in component or Fizz to these brands, a XX pipeline, Iced presence. a has with for listings now markets. revamping Tea over has bring XX market THC share seen a products new us X-milligram and secured distribution Space beverages We Quebec, Alberta, Strong to Fizz Tweed under next An and are be strategy n XX-milligram in all help in multi-ear new QX, Another of available Tweed which beverage while with portfolio. Iced the we're And beverages in Ontario rank of range

commercial our drive game this interactions during through launching, program. X,XXX call, education, ground recommendations. to Canada, facilitated last including product has higher education Since focused, our and we're knowledge over Budtender our on continuing Engagement in to invest in Budtender program primarily highlighted I Budtender As

in revenue innovation, Engagement growth are expected in help market. Our and Budtender rec Canadian to investment the distribution drive

revenue Co-Founders, growth for And RTD who million. this from high-potential to a transform June, to has as of expect Mike Jacobson we bring X,XXX the best-in-class experienced BioSteel role We're potential our growth. Initial in states. an for over record team and BioSteel organizations of XX Celenza will stores sports against joins we in business additional CPG welcoming Bruce, This began in of welcome notable brands. driving these BioSteel A Walmart the across to CADXX as a to was feel will has US. our the retailer progress Bruce the hydration brand the in BioSteel. wealth together Let's turn to BioSteel QX a the months. Bruce to builder truly growth coming the with BioSteel was market. and and led beverage beverages strategist stores RTD shipments shipments agreement pleased new Walmart also industry, the with highlight John be President. Cammalleri, the initial QX experience including responsible of of accelerating with to brand quarter

Another BioSteel players NHL platform. season. rights, a partnership fans NHL is off the provides positive in markets, NHL and fast product retailers. BioSteel time. the BioSteel priority and which driver ringside this distribution important distribution, NHL partner each the key is the BioSteel X,XXX beverage of awareness, five supply activation new engagement This partnership rights, growth are see XXXX-XXXX with will brand and critical the representing Beginning element season, with to for growing a We're a Players as be X,XXX games during in naming as this see league-wide the over of retail in with hydrating having partnership and community agreement the investment BioSteel BioSteel Association. We doors marketing multiyear official top discussions signed start agreements hydration several over with increasing retail to trial, with hydration additional to NHL sports chains in and

into as well in we in over as quarters. by With the expecting our sales sales velocity activations, see are increases driven a coming ongoing BioSteel significant brand retailers load-in to jump additional

& up Storz months innovation the the defend set consumer Bickel, the is growth with as the for will following, vaporizer Storz leading to Now, its believe continued year. & of The in global designed speaking & position work Storz coming coming Bickel loyal market to challenges the our brand's to excite we brand. Bickel effort over of allow to around third-party remainder team to premium

option in and to and strong rapid a North of unique hold Wana leading we've provide a ecosystem. cannabis brands into TerrAscend, a stake an the ownership majority THC soon These with as US Jetty our enable and Acreage brand-driven for the in foundation becoming US as acquire and company entry paid can America. us Holdings. our sizable THC ambition realize of We to market We agreements platform hold Looking the is to we extracts. to

markets, large our has of addressable business strong and and in $X US is to over gross in significant ecosystem York. to consolidated grow case Jetty, room within billion the Further, scaled THC Northeast, Wana, with generates including brand Our Acreage, New Jetty high-growth in the And with revenue as when states such beyond expand Jersey the nationally. opportunity the California as New margins.

with progress in their adjusted April solid positive brand, multiple flagship XX, Looking operations Acreage the Jersey increasing quarter Botanist, EBITDA. available to their team XXXX, Acreage, consecutive with the year-over-year, while in their New dispensaries cannabis they the delivered March consumers commenced XX% XXXX quarter made revenue of ended in for across now fifth state. recreational In

April consumers, succeed Puerto three we new desired highly We Wana of advancing the in. the states. York, capture in well-positioned saw a Spectrum including quality NPD that robust entering markets, with rec Acreage deliver began products Colorado market with with launch consumer monitor growth additional Rico states. markets products, Live and opening focused Arkansas is also new One in have new gummies exciting from of market. in ranking to the of innovation. pipeline and to the quickly to well looking and June, while also high consumers Rosin. footprint delivering Jana both against which resonated to competitive These developments need leading for is to New significant edible Wana continue see entered onboarding

as possible. to innovative look technology. soon a and consumers north border on products to Finally, the forward to vape brand-driven unique cannabis North with Jetty Jetty's our as market excited its vision the the to illustrate we're delighting as of actively brand working company, bringing Canadian be We American

primed and have effort THC ecosystem With capabilities expect continue coming grow. we've industry's backed US that strengthening positioning over summary, fast The the it growth. and that, American of footprint competitive premium our and operational growth to more branded In cannabis is I'll balanced strongest this categories to a We our built strengthen say footprint North for to over continue Judy. by months. to turn rapid about We're emphasizing to the company.

Judy Hong

perspectives some much, review update an provide of on plan our to achieve three, this morning to you good and on our a comments very one, progress results; our our David, on profitability; everyone. path and two, my quarter provide focus Thank morning, outlook. brief I first on

savings QX We with April. also in start announced but to decline its revenue and improved just let's QX had began the sequentially of XX% generated net So representing our its the Canadian business ever, $XXX results. stabilized on as our EBITDA performance down to XXXX X% In initiative revenue. cannabis businesses, million, compared financial we BioSteel compared international prior QX, a strong that we fiscal execute best over a review adjusted of and year, from QX. our we cost margin revenue to Gross had quarter

Israel. in and prior our was Excluding X% as as stable QX by by negatively in beginning In QX our growth, bulk business In triple-digit improved Bickel to cannabis quarterly a partially offset Bickel Australia segment, in & international consumer recreational fiscal the net drive sales. to were to premiumization increased XXXX QX. vaporizers growth at decline CX, impacted in segment, cannabis Sales our the of compared headwinds. year-over-year Storz revenue to is impact by our revenue sales led quarter from business strong of QX showed record & Storz medical showed performance. divestiture few Canadian revenue a BioSteel strategy products compared during

lost financial primary the in the reestablish during and distributors ordering working first QX. to was which The facing devices our We're pause ordering challenges were in actively that US, caused patterns headwind QX. largest distributor to

slowing SMB's markets. key spending inflationary the consumer across The high environment second power headwind is current in

with Given more SMB's industries. sales moderate in in consistent the the with of felt high is a are ticket premium vaporizers, across Europe luxury associated and products we range North seeing which headwinds America, segment

was ongoing supply The challenges. third headwind

this past about the of & to has negatively and the QX. Storz margins related supply the spoken Bickel’s have This impacted chipset. difficulties in specifically We in

working be are teams components these and manufacturing and engineering for including procurement, solutions Our expect to suppliers, we alternate manageable. identify and this hard challenges, to

XX% Our sales products reported QX year growth. an driven margin the margin was improved in part was offset by X%. margin XX% by negative volume adjusted by a Storz ago, and lower Consumer mix BioSteel, positive shift segment's gross gross & driven negative at margins Bickel was gross as of was adjusted in to improvement gross performance X% our compared

provide I'd global inventory business. write-offs Our by I'll adjusted was to XX%, price gross EBITDA driven margin lower an period. product QX which cannabis efforts which inventory to savings performance provide have a payroll XXXX to gross and write-offs more like program. impact This later of from the SG&A million improved compression, and EBITDA and million. the margin in an benefit, profitability. non-cash improvement our details the cost stem from compared by XX% lower now on the on CADXX continued a to disposition the of be bit negative year prior Normalizing to would loss in improve expenses, Adjusted segment a of by $X our declines was underway output our the in amounted FY QX adjusted subsidy QX, update in in or the Canadian on. for impacted CX of

deeper in global the First, cannabis our segment both of gross gross XXXX. and margin into to compared cash adjusted QX margins, fiscal margin gross improved digging

in negative improvement mix margin Canadian to inventory non-cash is segment high-margin cash fiscal main benefits XX% our an depreciation cash one, cannabis versus improvement business. to to QX, recreational for and XXXX. Number the adjusted drivers. margin global our improve in from in gross towards positive two estimated subsidies, a when be costs charges, Specifically, products is attributable which continues is payroll The during gross the

to to flower As value we further our during the prior has net compared sales, deliberately XX% of value segment to XX% period. away from sales BXB total low-margin shifted in from year declined sales Number QX, two, the cost to savings have million over our in where is $XX of to our million delivering of cost next goods committed savings program driving sold, XX overall months. $XX we XX reductions

million fiscal half of $X offset supply the but for majority reductions, fiscal did activities efficient relating into achieve procurement while are Some looking and being expected by these higher second XXXX, over first of of to and we of and we to wage more of capture chain inflation fiscal primarily in more XXXX be in continue to And opportunities these the half XXXX, headcount savings savings plan the chain QX of to improvements. costs, supply additional are savings recognized savings.

from of We as expect improve fiscal driven margin on over our to significantly continued underway. cash XXXX, cost progress the premiumization by balance gross our the program strategy well as savings reduction

initiative quarter, to million key will is SG&A XX our undertaken where expect XX other that by SG&A expenses, The the $XX reduce to our that over expenses actions next we announced reducing $XXX million we last months. have we

X% in selling, the general For administrative – general expenses decreased year. administrative quarter first versus and prior

year-over-year decreased the for lower impact expenses was adjusting XXXX, first subsidy However, CX across from versus disposition businesses streamlined or in of we fiscal SG&A have our quarter our reduction XXXX headcount the SG&A significantly the our focus coming strategic in benefit, XX% $XX by business. further which and in of reduced of The and million basis. expenses payroll on QX our tightened are as a

our areas expect strategic addition, costs, key such drive growth that, professional insurance retail. year. and these and spending our IT at where declines investments note In increase increasing offset in BioSteel, being office we advertising are costs We'd marketing brand are fees by reductions velocity also in to throughout we some fees, of the awareness as and

and on me balance our sheet. few cash minutes now Let a flow spend

was of QX, one-time interest million. a and in payments from to Our our $XX of million outflow capital, payments was change to operations by which restructuring impacted significantly comprised QX $XXX in actions. This $X related includes a negative flow cash was at million severance negatively in working million, an $XXX free which cash CapEx which in year during QX came ago. compared lower of

our investment the CapEx through and million. reducing For to our cash range remain OpEx working be on the to now year XXXX. expect discipline focused through we management, in $XX million around tight XXXX, CapEx discipline, of continued We FY capital full burn $XX

an our overall of to quarter, transaction at by And due position the $XXX of of an the in balance debt million convertible July basis. end X.XX% has interest Turning obligations the exchange announced is the notes debt which reduced this and XX, reduced million. we first unsecured our sheet, save expected to $XX our annualized around cash on

$XXX in expenses increase we XXXX, tied of For but higher term the incorporating payments interest full LIBOR. loan million, at anticipate lower costs now interest year to interest the that's least on convert fiscal on the cash notes,

notes, convertible currently we'll options we've update once additional news several any have we're – the and remaining we secured reviewing, share. have Regarding we that to

billion remains at Our sheet $X.X end. quarter with of balance strong cash our

as billion capacity to as us, have additional base of We million. available US$XXX of shelf debt US$X well

We also look announced additional for expect opportunities to non-core assets. facility proceeds previously divest from sales of closures, and

Let provide me some outlook. on now our perspectives

continue growth our strategy savings CPG and & strong in will profile, growth and with Canada, in and in cash expect generation, We result premiumization Bickel premium initiatives that line Company. the in and BioSteel are cost margin time our free execution to of Storz branded revenue flow over

outlook. the of fiscal terms In of balance XXXX

gains expect we the builds in driving velocity. as growth strong quarter from in the sales increased team continued with first BioSteel higher the marketing on growth investments distribution First, and

premiumization to challenges to year-over-year Our and business to second actively Europe product as of medical created year. towards the performance, new some address growth, Storz with to of in Australia be expected sales sales BXB efforts. in the lumpy. it launches medical for and distributor markets, business Bickel, US distribution Canadian marketing the to headwinds economic weighted conditions is drive with to opportunistically international recreational Germany, show from benefits World in quarter the expected is working expected use are Rest growth & growth investments to we're and and improved innovation efforts show the joined half the And Israel first other while while and

Our away brands, regulatory and sales we key direct-to-ship in more continue US $X QX on with focus CBD accounts that than one-time we channel tighter half, our We we and the product XXXX a fiscal timing in benefit began From a phasing in in be standpoint, weighted the mid see continued from earnest did reflecting note US, await mix the which be business in emphasis growth against the back our e-comm million year-over-year do value revenue progress. won't in to of flower crude recurring. expect to Canada. that shipments to future as from will for new

you well continue generates profitable uploaded to platform question-and-answer David and prepared To Technologies. revenue high billion sustainable continue achieve when to question? profitability, to strategic expect investments by profitability the And XXXX Jetty address building opportunities. is of on quarter, our healthy are first growth conclusion, concludes business transition Tyler, first term. begin structure our business. EBITDA in towards remain we now as first Wana, in We'll our while were seen cost invest This profitability, in Q&A making take Acreage, US we've $X in key growth improvement track adjusted margin strategic year achieving we'll XXXX, consolidated please fiscal long the strong, growth with positive the deliver we that through any in investments we fiscal my with questions the BioSteel in towards to to as we developed in excluding We potential and improvement our our of comments. investor the In positioned session, work and being can with areas expectation while a show Second, year, take questions. also mentioned, Say advancing THC. on

Tyler Burns

to them? are how company? going What challenges address biggest the facing are And the you

Judy Hong

stems still I'll market, a really had developed differently anticipated. than take illicit has we I first challenges being differently from say, really the market would pretty Great. a Market we initially fragmentation, from fact the the that the than question. that really had standpoint, initially market component developed has expected. of it Canada sizable very

a both standpoint, had well the US from see that facilities, negatively I progress as of challenge has had slow THC, streamlined had, a continue And both We we CBD a Canada from those on a market. standpoint. anticipated. continuing our the Canadian some underutilization margins the third have lot border, also from we very of face from we've to lot been, sides would footprint that standpoint footprint regulatory hurdles and but say, large to more a really then which And the as saw a regulatory has we we a of impaired of global than we're

of goes we're it David addressing really I priorities how In that back to terms mentioned. think it, really the

underway When categories to starting comments terms on efforts of think from good We're products looking Canada, are are that and mainstream that premium getting new marketplace, First, to social at we're really focus on you in now. consumers media in high-margin the of has really we look some budtenders. really the and the bear been fruit. getting good we from feedback

effort we that of in think a do terms better of quarters. performance on-track progress not standpoint, From both border. hope in waiting. financial see really done sides realized in do that we're more we we're So, But we to the the that get regulatory being

we're our I we our built are earlier, investments improve that more from in then can. standpoint a US already underway very optimize savings a thirdly profitability. really and and ecosystem US PET as programs to really cost have savings And have soon that we working generate as said We cost strong as will

would cash over that our and anything you a to? margin of the expect we sequential seen You've course year. continue add on the improve would gross basis to David,

David Klein

win, work continue to with Canada retail we're game, to a we at budtenders. refer feel mainstream you our -- premium our have few of can focus think and it building where that, continuing doing retailers were I and by we and brands key engaging where the we've well, No, add with Judy. I build we're to things been our few ground which sides out key we evidenced the Maybe would is a that areas on go-to-market border and both to is only on out need covered as the our what in as capabilities we

goes after this capabilities who brands through transition, and be with prepared good transition being actual. just capable transition need and of entire industry after strong we to people As strong route-to-market are

Tyler Burns

The not reform second the if cannabis pass your US, expect does federal this, do is question for in in from brand short platform technology top expand say term the and how to company fight globally? the you

David Klein

Yes.

look, doubt emphasis we it's in who access no So mind X/X -- US more to put in have today, today, discussed the the just refuses has federal of but already which market, that reality. Keep some on slowly there's government would still to format, is in evolving cannabis like. we that recognize as we Americans a that that than the location live

said, as not that putting aside, we're Judy waiting. So,

see permissibility We without most and world. continues and a portfolio that develop We've grow to continue market America across as in largest event. important assembled the the the US to strong North a

well history when and include expand Wana, and like Jetty, Bickel, brands take sales to globally. well shows out the tend Deep us premium to US that about And businesses American event. Canada. Space, Storz portfolio Jetty strong opportunities Acreage all North when which have brands offerings, like Wana to think XAcres, And expand to even calls, and grow the & across on DOJA, they and our, feasibility perform that our about can we businesses continue or you the think offerings their So, their and you prior do

here. continue So on our to building brand we focus that's why

in the loyalty. in grow to would I build to US, these maybe consumer news and that, of continue they geographies, the say permissibility good And continue absent terms can of is so, terms in brands federal offerings

as point With that at operator, very to in those from a in brands North So company we elsewhere prepared this we'll questions cannabis premium represents a bring be the we're queue. strong entity that, branded that those happy now in we'll all to take think then consolidated the and world. together take some America,

Operator

limit To one analysts ensure The Q&A to question. analysts as now that open. questions possible, are gets call requested efficient is many to as to themselves an

Your Zuanic first Pablo Please Cantor comes from go from Fitzgerald. question ahead.

Pablo Zuanic

question, talked a very written but Good you've about? you. or Thanks. Thank event David, has that permissibility the morning. constitute of passage SAFE straightforward triggering it's your simple event does

David Klein

Yeah.

you the get and before. with of Pablo, talked could us language there. this So right The I SAFE about passage have

remains to the exactly at be to where a I in we But entire can and few take soon legislation think try we've really it ecosystem. place our seen look to get bill, hard whatever final of with to language that alternatives. we're up what form really as of because the seen as ends going control possible

Operator

next Tamy Markets. Chen BMO go Please Capital ahead. Your from comes question from

Tamy Chen

me, Tamy. hear you it's Can

Tyler Burns

Tyler Burns I Tamy, think -- it's here.

next were from The you think I queue. in you. the next question Tamy. Thank

Tamy Chen

Yes.

Okay. Good of for guys morning can couple There's me SG&A. Hopefully, OpEx here. the everyone. a Question hear you or moving me. parts just on is

SG&A line? in that should fiscal is with respect pressures, investment forward the be improvement So Judy, inflationary Like to this should year probably How think going just because year-over-year, think we we mainly the for just entire this there about to to have you. decent we is think going also about BioSteel.

give noise overall anything to Thank bonus trend some the year? help You. how accruals compared fiscal SG&A understand to can with I think there's to also later you So might in last us the year? line respect employee

Judy Hong

Yeah, Tamy.

of I'll So that some I and the SG&A. take give you how would buckets about think

So all of the and But about making overhead, standpoint. our… expenses, Difficulty] point, buckets about three your investments the think a you when expenses marketing you think because and there's and we're think sales BioSteel to [Technical when from G&A when R&D you setting advertising that marketing some spending, aside about

Operator

for them back. second. appears Sorry dropped. interruption. hold I the It we One the will will host put call the and call on

David Klein

Hello.

Operator

that Sorry for interruption.

will as with go We ahead the planned. conference

David Klein

answered repeat to on have opportunity an by Ms. not Judy's Chen. please hear Apparently, respond. that us people you call Could Okay. the question was could the Tamy

the So, for up could for if we Judy, back question please?

Operator

question, your go please again. ahead Judy, with

Judy Hong

Yes.

around Tammy's addressing I'm questions FY OpEx So XXXX. in

I just XXXX. to think buckets in about Tammy, few a think -- highlights FY give wanted few and So, SG&A you I some to how a on

BioSteel. to to we aside your to setting advertising increases marketing relates expenses some because are So, point, have it going and as

look savings the benefit So, you expenses, R&D $XXX we overhead, when the XX million all and our our of look at announced, next to to SG&A. you expect at expenses, to buckets our do G&A cost over marketing three and million when our $XX we that our the selling benefit XX within months program

phasing the as FY the we through of some XXXX. go of accrue savings will Now,

So, benefit of the R&D, about savings But and we those announced, will I three not bucket when selling from in think the G&A, hit think to expect all the marketing, we of near-term. you and program. all savings that that cost the

is When moving consideration benefited the the longer subsidy be you we subsidy no from. on a of year-over-year will look have benefiting did After some that parts at the benefit G&A expenses. any other we have FY of that we payroll the QX, XXXX, Now, benefits basis.

the will get as last in we tougher then did the get accruals our comp did year. perspective. have we that So And bonus QX, from reversed meet targets

I normalizing some and that on and expenses comparison have a total overhead, we'll R&D for QX, even that be expect of down marketing being as selling not year-over-year of G&A expenses overall, terms year-over-year those favorable to do So a basis but in in from SG&A factors.

Tamy Chen

you. Thank

Operator

Cowen Vivien from ahead. from comes Please question next & go Your Co. Azer

Victor Ma

on measuring your the store seeing BioSteel the Thank – internal Azer. data. quarter Can results Vivien velocity we're On question. per Nielsen and in improvement for discuss on is are results up Ma this Victor you BioSteel, quarter for growth for expectations? you BioSteel, to the actually is the encouraging, taking the This how sales solid in this

David Klein

Yes, you cut out Victor.

you think were about velocity. talking I So

from shelf is once So grows that and has sales been yes, So seeing for something teams our with product a as by the awareness. as consumer that – execution right? velocity in-store we're bit, little execution benefits well it on the now

are not velocity. not we're are just in of yet, want entirely where yet, improvements believe the there but help activities we shooting in cycle. around us it's too the period-over-period to we where NHL because be seeing early We're we're signs sponsorship but those we encouraging. early But that's early that we're So awareness velocity are introduction we're additional like for. And will that but it's say hurdles -- to signs hit very probably that encouraging,

Operator

go comes Your from next ahead. Carter Please question Andrew from Stifel.

Andrew Carter

How into back you I your said kind kind us DTC, want this think how XX% zoom the and use the where And I Storz to I nine. early in want business shipments? which you up. it of Good I compare that confidence of I & quarter. morning. kind of distributors. on can the have Thanks. direct down back of Hey, be guess, distribution And gives visibility you much on, -- ask in kind of Bickel, what thanks. DTC the part help of to would is that does year, XX% over to grow know you consumer? understand the in

David Klein

Yes.

US – just had quarter time. We're talking, So in really we from. over the distributor had takeaway, confidence issues the seeing consumer which good will – the itself still the we I'm during comes and with some we remedy just expect

and really the we consumer hit -- year. to that market well of brand also so over will -- And resonate we incremental the innovation continues base, and the have with the its some course

actually try our little own It bit takes we're -- a profile, more, confidence longer to it gives more us just destiny what So control to bring of we that's general, -- & as work, onto to Storz longer in a a to. better Andrew, but Bickel and build. financial get you maybe platforms some activity our gives the doing that's

see or affecting this going our that activities the I benefits that's online BXB So year. business that's own on, don't but from work suspect we'll significant DXC

Operator

comes Your Aaron from Alliance from next go Global Partners. Please question Grey ahead.

Aaron Grey

the Good Hi. and morning for question. thank you

at as I because guys so by under indexing So certainly as about I vape well want flower talk a know more pre-rolls. for there from material amount. premium focused a pretty second, -- the looking your share, But are market you on to

anything vape in do acquire away that low And further from agreement away to on of the looking entrench too, back strategy this California. side? recent flower low-margin So to You more optionality vape, mentioned Jetty maybe especially there from why the -- share of the shifting yourself of in your part of shifting the seeing of margin? from to you're shifting kind to is away is also and kind losses that you're

how the market. you. vape you're within actually, So looking would Canadian -- hear love to on Thank at

David Klein

Yes.

We vape. you value kind look struggling we're really money So the make outlined it end -- economics, of unit when of to at we well, at actually.

from bit. pulled we've so, a back And that

California, using premium even end very some technology, their real is plans the the in data have in doing competitive that We you if well, Jetty around at Jetty market market. exciting which in super the see

So at but for get will excited Canada, ultimately Jetty. really we're be into by will the time into hands for led and take that. consumers' will be market it vape in about for us, end the bring future premium the Again, it us and to that

Judy Hong

against the internal Aaron, at standpoint, of looking We're targets. would we when look good think of and margins. our tracking can I And market strategy we or kind how at just we Yes. just market from again, where our make the share performance really expectations we're our segments add,

it's our of from So focus, the other production. we the really a pre-roll using margin I for some manufacturers when just flower of standpoint, premium share And joint, looking beverages mainstream vape contract segment cetera. the as edibles, premium speak the at and to we point market, make would are market some the also et of

better also resided that that indirect variable are pivot optimizing have more We that the costs if just our footprint structure, we models cost our of of some would to pursuing. we're didn't some in by reducing

then standpoint. our it think focus standpoint both margin share I the So market benefits and

Operator

from Your next from Please Mattson question Ladenburg. comes ahead. go Glenn

Glenn Mattson

kind else. their And longer illicit taking New market’s of with rain recently develop. that that the scrambled your highlighted have market kind question. you noted has become now York. having curious and how about that David, talked a taken for of Others lot to positioning, footprint everything market free in thing Thanks Hi. you was one assets, highlighted acreage the US especially and when you

what excited you And see you York background makes sense And can just so give market how Thanks. So, general? us on developing? in of just it? about a that New your you

David Klein

Yes.

in yes, -- permissibility to is yes, having really strong illicit a a we From a It's models. ton of a the market. by I cannabis partnering very been wait it to with in is and Look, a What it's about that think brands though, So in to is rec and Jetty frustrating. particular decades. bring would market Glenn, and doing for an it's lack direction Wana exist your adult-use good So, opportunities New talked TerrAscend. good big a can't market or the business, really that business into New continue and standpoint, unclear, we questioning plans Yorker, time permissibility like taking our say, really question as coming that because it and predictability I business so really and adjust for and into -- the York. And of Acreage bit it's market that right? challenges has

So, and like and think can really we that exactly would it's but I from we have brands already large than it's like, that still into that a would it's market. bring great we in everything it's as like taking have market the -- unfolding cannabis, assets we a market. We think else can longer we in through benefit we not Acreage

you'd that think the for add, Again, already lost So, we've to up -- timeframe Judy? the little we'd Anything that's a I really bell. basis excitement. move like but bit, the

Operator

from Your comes Canaccord from next Genuity. Bottomley question Matt

Matt Bottomley

Yes, good morning everyone.

half even Thanks. $X.X give XX billion? the the just range granularity at debt and reserves $XXX a say, us sitting about further remarks of of higher quarter, the next, come where from and comes cash will also prepared and cost-saving taking quarter. from. we And of just principle any reminder be how on third, maybe Q&A indication, But might So, some at what burn back a Can million a a step on if high-level initiatives this had of burn current quick you good in still that then the the give your think of a operations you level, cash in of months? your lot in a due much

Judy Hong

I'll Yes, that. take

question, for Matt. the thanks So

So we strong that's our on a start do balance $X.X balance the point that with reside sheet, still sheet. billion have let's still

for We we also to have markets into if believe needed. tap capital flexibility additional liquidity

think a a flexibility we in standpoint. from financial I are good So, position just

will possible expect through outflow. the that's initiatives generating cash we that that You're burn So, want quickly sure as right? make number discipline, OpEx that think, an forward. reducing savings we to right as standpoint, one, still free OpEx we are cash are going improvement burn we cost our the the EBITDA really And an cash do moderate from from driving standpoint I

second, sort cash the is expense of of, The payments. interest use

annualized where year go. $XXX is that said from on the rates term we earlier, loan expect some that currently converts, expense pay to interest And you million I repayment to roughly of get on this on. but we As annualized if at interest an savings we going are depending basis we look interest the incur have

it's obligation the an the a that got So, we from from standpoint. minimal growth CapEx to have do lot invested maintenance few years really modest. becoming think really a last very that is CapEx that's over standpoint. we've of and CapEx do been CapEx been down We very

continue look We that outlook rightsize CapEx million forward. million to will further have our reduced going this to and we $XX even to to year $XX

So about good standpoint. we where are pretty from CapEx feel a we

that about the together, it's of take that in think our I with reducing positive as talked EBITDA much you we adjusted 'XX, achieving that investments CapEx, and can of had when payment the all modest the exception We So, we've burn target we're and really the really still cash fiscal as we then sheet. the it's balance making are THC, on US incurring. XX and remain that notes interest our convertible of in July BioSteel

at we are that coming that before loan ample We and several term looking and we'll And we again addressing on we've got do July, be due. standpoint, term update options time from still forward. a for that to go have loan as

notes months. next maturity convertible a would the be that it's we manage the XX from to looking really standpoint, So, over

David Klein

a assets and They have really remain liked. assets than used assets, thinking the it's don't the taking but and of our like are a we like reiterate And those records priorities evolve bet our our fair want around growing. of but placed I US those we we big kind US, broken about sound to profitable because financial on they're here, to a maybe and we amount excited those would overall statements in just show up like yet. -- longer on we bit cash

mainstream premium and activity and of rightsizing, we segments the US, we we to win focus, determined mainstream. footprint and Canada. and remain on in to the support burn SG&A premium bet means, absolutely the get we're it's to the premium focus in. doing cash we've can that mainstream going been the all really the we've got and have So, then And And stop on and around in that profitable

where right we And brand where and where to that to that consumer size believe love so the have investments we're the category right market. going on ourselves & -- burning we aspirations brand over have to that continue have we then growth Storz total focus the Canadian years, maybe the our we're BioSteel, changed we're in that go. a we we then beginning of think cash the that which profitable the drive surface in of and brands, we're just can beginning go. of very Bickel And for the see said behind in brand, could not returns the CPG several to the the can gone to is some scratch work Canada excited about get And and but our last business with profitable

that to I topics, not our we're very anybody those includes stopping cash three all spending of waking hours want much the which don't in So, burn on think almost Canada.

Operator

ahead. comes go Please Your next from CIBC. John question Zamparo from

John Zamparo

also over range, of wanted halfway at in burn, for positive cash the to high your savings get the your guide and end specifically, the year. you particular, there. EBITDA. even 'XX THC I be a aren't morning. million Good cost only you. touch it about US enough Presumably, F investments And significant in to $XXX Thank on would BioSteel

Thank looking to better understanding of you like mentioned costs cut, EBITDA you. would sales growth I to delta to to positive pathway that it F’XX. just get of So you're or get is a other year? profitability product Is to a but the more by for the

Judy Hong

we back levers. expecting are strategy, levers but the It's of in in. to we've are revenue benefit that really its what sales to the think growth. is And Yes. I got about higher growth categories three get that premiumization we go profitability. revenue participate all Profitable -- One, to premium I profitable

So that's one lever to achieve profitability.

a cost reduce an that side. the against looking track To additional in chain driver indirect that opportunities third in margin The second outlined the we our gross sight, optimize the to be and improvement, initiatives and point, feel further inflationary the some and the to footprint deliver into target. really SG&A particularly challenges. to really about period. million on expect we're on goods then your lever cost volatile. that savings already $XXX number of supply reduction our looking we've side good that's still more costs, productivity of expenses, is we're on $XX is And we The to really which that There's market million will is

to make team opportunities. as think are we and it's I on So be incumbent giving us challenging sure identifying really very upon agile identify everyone -- that in additional and being efficient even to our really and opportunities

a I committed is are profitability as additional three opportunities as we've macro as achieving that and cost of to from will ourselves said, challenge David got doing to make broader that I as but we the in levers, continue as So headwinds quickly that those facing really about possible, we're that some think think even we're to And standpoint. can. we with that that soon Canada sure

Operator

Lavery Your next question go Piper ahead. from Please comes Michael Sandler. from

Michael Lavery

morning. Good you. Thank

David Klein

Hi, Michael.

Judy Hong

morning. Good

Michael Lavery

BioSteel. on touch to wanted I

geographic? sense in give you there? You've of got take didn't? it what it common? distribution it or into US might West, stores. to is full Walmart. that or the East to us Is versus half get in it of stores And the X,XXX expansion opted to can That's Is they have what like just their the It's total; close a

David Klein

Michael, the I'm how stores in. -- selected actually not store sure -- Yeah, I selection the

I the we over announcement. about think the post get distribution brand throughout So growth back inbound to seeing that But retailer come lot coming that. we a uptake all And retailers is to we're And saw doesn't What switch from on start we're can the into good and it. just the feel seeing of good calls really maybe would seen it really we've that to in obviously we you season. -- of activation we until NHL happen excitement NHL I place, and the US.

velocity stay is to execute how underway I earlier, is us the done. having within we'll on the for Walmart, that key this on have But shelf the just that because the work as themselves, sure back not step around we to now. was come the that's in sure getting can to because said the listed actually think I election to you I'm stores it's ultimately question, first that's important make velocity

Operator

Klein your will the Ladies Please this today. for conference gentlemen, ahead. I turn concludes remarks. call to Mr. go call over closing for and

David Klein

again today. Thanks us joining for Thanks.

team additional a available day. reminder, to be As answer Relations Investor our the questions will throughout

Iced I encourage our one Galaxy. to a flower If Tea or guava you're and innovations Ale premium pre-roll Ginger or in Deep try great new Tweed of Space Canada, tasting you joint

If you're Enjoy being of BioSteel CBD. the us thanks you or beverage a I US, your to in the with RTD relaxed with encourage today. with once hydrate Martha Stewart rest some for again, And summer.

Canopy Growth (CGC) 5 Aug 222023 Q1 Earnings call transcript