Generated $124 million Net Revenue, up from $76 million in Q2 2020

Excluding portfolio restructuring charges in Q2 2020, Net Revenue up 13%

Achieved Gross Margin of 34%

Total Operating Expenses down 14% versus the prior quarter

Adjusted EBITDA loss decreases to $92 million

SMITHS FALLS, ON, Feb. 14, 2020 /PRNewswire/ - Canopy Growth Corporation ("Canopy Growth" or the "Company") (TSX: WEED) (NYSE: CGC) today announced its financial results for the third quarter ended December 31, 2019. All financial information in this press release is reported in millions of Canadian dollars, unless otherwise indicated.

Third Quarter Fiscal 2020 Financial Summary



Gross revenue1 Net revenue Gross margin2 Adjusted EBITDA3 Free cash flow4 Reported $135.6 $123.8 34% $(91.7) $(359.6) % change vs. Q2 2020 15% 62% NM 41% 16% % change vs. Q3 2019 39% 49% 800 bps -23% -20%

1 Excludes the impact of other revenue adjustments in Q2 2020, which represent the Company's determination of returns and pricing adjustments. 2 Gross margin is before fair value impacts in cost of sale, and is a non-IFRS measure. See "Non-IFRS Measures" below. 3 Adjusted EBITDA is a non-IFRS measure. See "Non-IFRS Measures" below. 4 Free cash flow is defined as operating cash flow less capital expenditures, and is a non-IFRS measure. See "Non-IFRS Measures" below.

Third Quarter Fiscal 2020 Corporate Financial Highlights

Revenues : Reported Net Revenues increased 62% over Q2 2020, or 13% excluding the impact of portfolio restructuring charges. Gross Recreational B2B revenue increased 8% over prior quarter due, in part, to over 140 stores becoming active in the quarter and higher sales of premium dried flower and pre-roll joints. Our acquired businesses including Storz & Bickel and This Works also performed well, contributing to organic growth this quarter.

: Reported Net Revenues increased 62% over Q2 2020, or 13% excluding the impact of portfolio restructuring charges. Gross Recreational B2B revenue increased 8% over prior quarter due, in part, to over 140 stores becoming active in the quarter and higher sales of premium dried flower and pre-roll joints. Our acquired businesses including Storz & Bickel and This Works also performed well, contributing to organic growth this quarter. Gross margin : Gross margin before fair value impacts was 34%. Gross margin performance in quarter benefited from lower period costs due to higher facility utilization

: Gross margin before fair value impacts was 34%. Gross margin performance in quarter benefited from lower period costs due to higher facility utilization Operating expenses : Total operating expenses decreased 14% versus Q2 2020 primarily due to a $20 million reduction in G&A expenses and over $31 million lower stock-based compensation versus the prior quarter

: Total operating expenses decreased 14% versus Q2 2020 primarily due to a reduction in G&A expenses and over lower stock-based compensation versus the prior quarter Adjusted EBITDA : Adjusted EBITDA loss of $92 million , a $64 million narrower loss versus Q2 2020 driven by higher sales, improved gross margins and lower operating expenses

: Adjusted EBITDA loss of , a narrower loss versus Q2 2020 driven by higher sales, improved gross margins and lower operating expenses Cash Position: Gross cash balance was $2.3 billion , down from $2.7 billion in Q2 2020, reflecting the EBITDA loss, capital investments and M&A

Third Quarter Fiscal 2020 Business & Operational Highlights

Maintained leading market share in retail, at an estimated 22%, of the Canadian recreation market as we saw a strong demand for both premium and value priced dried flower and pre-rolled joints

Continued market share gains and increase in the number of patients, to over 76,700, in the Canadian medical cannabis market

Named David Klein as new Chief Executive Officer

as new Chief Executive Officer Completed first shipments of cannabis-infused edible chocolates and JUJU Power 510 batteries in December 2019

Storz & Bickel expanded product line with launch of Crafty+ vaporizer in November 2019

Announced initial line of First & Free Hemp-derived CBD products and began sales online through www.firstandfree.com, one quarter ahead of Q4 2020 target

"In Q3 we executed across Canada, in our international markets and in our strategic acquisitions to drive revenue growth," said David Klein, CEO. "We have a lot of work to do. We are eager to capitalize on the opportunity to create an unassailable position through a tight focus on the consumer and on critical markets."

"We delivered significant gross improvement in the third quarter driven by stronger revenues and higher capacity utilization. Actions taken earlier this year are expected to meaningfully reduce stock-based compensation in FY21, and we have started to implement tighter cost controls across the organization," said Mike Lee, EVP & CFO. "We plan to take further steps to reduce our costs and right-size our business to ensure that we can generate a healthy margin profile and cash generation in the coming years."

Third Quarter Fiscal 2020 Financial and Operational Review



Q3 2020 Q2 2020 % Change Q3 2019 % Change Canadian recreational cannabis









- Business to business1 $53.5 $49.4 8% $60.1 -11% - Business to consumer $15.2 $13.1 16% $11.5 32% Canadian medical cannabis $14.8 $14.1 5% $15.9 -7% Canadian cannabis $83.5 $76.6 9% $87.5 -5% International medical cannabis $18.7 $18.1 3% $2.7 593% Cannabis gross revenue excluding other revenue adjustments $102.2 $94.7 8% $90.2 13% Other revenue $33.4 $23.6 42% $7.5 345% Gross revenue excluding other revenue adjustments $135.6 $118.3 15% $97.7 39% Other revenue adjustments2 $- $32.7 -100% $- NM Excise taxes3 $11.8 $9.0 31% $14.7 -20% Net revenue $123.8 $76.6 62% $83.0 49%

1 Excludes the impact of other revenue adjustments. 2 Other revenue adjustments represent the Company's determination of returns and pricing adjustments. 3 Excise taxes is presented net of the impact from other revenue adjustments.

Canadian Cannabis

Recreational B2B sales increased 8% over Q2 2020, due to over 140 stores becoming active in the quarter and higher sales of premium dried flower and pre-roll joints

Recreational B2C sales increased 16% over prior quarter, due in part to an 11% increase in same store sales

Medical sales increased 5% over the prior quarter primarily attributable to the broadening of our brand and product offerings, including the availability of products from additional CraftGrow partners, as well as an increase in number of customers to over 76,700.

International Cannabis

C3 revenue increased 5% over Q2 2020

Germany cannabis sales higher than expected due to opportunistic sales into the German market to fill a supply gap that resulted from a regulatory enforced sales halt of cannabis products offered by another vendor

Strategic Acquisitions

Storz & Bickel vaporizer revenue increased 46% over Q2 2020 due to solid organic growth and seasonal sales

This Works revenue increased 42% over prior quarter due to strong organic growth

Third Quarter Fiscal 2020 Cannabis Product Revenue Highlights



Q3 2020 Q2 2020 % Change Q3 2019 % Change Canadian recreational - Business to business









Dry cannabis $55.8 $47.4 18% $39.3 42% Cannabis oil and softgels excluding other revenue adjustments $3.0 $2.0 50% $20.8 -86% Other revenue adjustments1 $(5.3) $(32.7) -84% $- NM

$53.5 $16.7 220% $60.1 -11% Canadian recreational - Business to consumer









Dry cannabis $13.5 $11.6 16% $10.9 24% Cannabis oil and softgels $1.7 $1.5 13% $0.6 183%

$15.2 $13.1 16% $11.5 32% Canadian medical









Dry cannabis $5.3 $5.5 -4% $8.1 -35% Cannabis oil and softgels $9.5 $8.6 10% $7.8 22%

$14.8 $14.1 5% $15.9 -7% International medical









Dry cannabis $3.9 $4.1 -5% $2.7 44% Cannabis oil and softgels $14.8 $14.0 6% $- NM

$18.7 $18.1 3% $2.7 593%

1 Other revenue adjustments represent the Company's determination of returns and pricing adjustments.

Third Quarter Fiscal 2020 Adjusted EBITDA



Q3 2020 Q2 2020 % Change Q3 2019 % Change Adjusted EBITDA1 $(91.7) $(155.7) 41% $(74.8) -23% Attributed as follows:









- Operations and corporate overhead $(44.4) $(109.0) 59% $(52.8) 16% - Strategic investments and business development $(39.1) $(36.2) -8% $(8.9) -339% - Non-operating or under-utilized facilities $(8.2) $(10.5) 22% $(13.1) 37%

1 Adjusted EBITDA is a non-IFRS measure. See "Non-IFRS Measures" below.

Non-IFRS Measures

Gross margin percentage, before fair value impacts in cost of sales, a non-IFRS measure, is a key operational metric that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. This measure is calculated as net revenue less inventory production costs expensed to cost of sales, divided by net revenue, and may be computed from the consolidated statements of operations presented within this news release.

Adjusted EBITDA, a non-IFRS measure, is a key operational metric that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Adjusted EBITDA is calculated as earnings before interest, tax, depreciation and amortization, share-based compensation expense, fair value changes and other non-cash items, and further adjusted to remove acquisition-related costs. The Company attributes Adjusted EBITDA to its operations and corporate overhead, strategic investments and business developments, and non-operating or under-utilized facilities. The Adjusted EBITDA reconciliation is presented within this news release and explained in Management's Discussion & Analysis under "Adjusted EBITDA (Non-IFRS Measure)", a copy of which will be filed on SEDAR.

Free Cash Flow, a non-IFRS measure, is a key operational metric that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. This measure is calculated as net cash provided by (used in) operating activities less purchases and deposits of property, plant and equipment.

Transition to U.S. GAAP Reporting

As part of our U.S. financial reporting requirements, Canopy Growth confirmed that, as of September 30, 2019, it no longer met the criteria for qualification as a foreign private issuer because (1) more than 50% of the outstanding voting securities are held by residents of the United States, and (2) the majority of Canopy Growth's directors are United States citizens.

Therefore, as of April 1, 2020 Canopy Growth will be considered a United States domestic issuer and a large accelerated filer. As a result of this change, as of April 1, 2020, Canopy Growth will be required to prepare its consolidated financial statements, including the Company's March 31, 2020 audited annual consolidated financial statements, in conformity with United States generally accounting principles, with such change being applied retrospectively. The extent of the impact of this change in accounting framework has not yet been quantified. Canopy Growth will also be required to provide an auditor attestation report under Section 404(b) of the Sarbanes-Oxley Act.

This press release is intended to be read in conjunction with the Company's Unaudited Condensed Interim Consolidated Financial Statements ("Financial Statements) and Management Discussion & Analysis ("MD&A) for the three and nine months ended December 31, 2019, which will be filed on SEDAR (www.sedar.com) and will be available at www.canopygrowth.com. The basis of financial reporting in the Financial Statements and MD&A is in thousands of Canadian dollars, unless otherwise indicated.

Webcast and Conference Call Information

The Company will host a conference call and audio webcast with David Klein, CEO and Mike Lee, CFO at 10:00 AM Eastern Time on February 14, 2020.

Webcast Information

A live audio webcast will be available at:

https://event.on24.com/wcc/r/2171215/8311836AC24F7988B042B4BB0FA5622A

Replay Information

A replay of the call will be accessible by webcast, until 11:59 PM ET on May 14, 2020, at

https://event.on24.com/wcc/r/2171215/8311836AC24F7988B042B4BB0FA5622A

About Canopy Growth Corporation

Canopy Growth (TSX:WEED,NYSE:CGC) is a world-leading diversified cannabis, hemp and cannabis device company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms, as well as medical devices through the Company's subsidiary, Storz & Bickel GMbH & Co. KG. From product and process innovation to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company one product, site and country at a time. The Company has operations in over a dozen countries across five continents.

The Company's medical division, Spectrum Therapeutics is proudly dedicated to educating healthcare practitioners, conducting robust clinical research, and furthering the public's understanding of cannabis, and has devoted millions of dollars toward cutting edge, commercializable research and IP development. Spectrum Therapeutics sells a range of full-spectrum products using its colour-coded classification Spectrum system as well as single cannabinoid Dronabinol under the brand Bionorica Ethics.

The Company operates retail stores across Canada under its award-winning Tweed and Tokyo Smoke banners. Tweed is a globally recognized cannabis brand which has built a large and loyal following by focusing on quality products and meaningful customer relationships.

From our historic public listing on the Toronto Stock Exchange and New York Stock Exchange to our continued international expansion, pride in advancing shareholder value through leadership is engrained in all we do at Canopy Growth. Canopy Growth has established partnerships with leading sector names including cannabis icons Snoop Dogg and Seth Rogen, breeding legends DNA Genetics and Green House Seeds, and Fortune 500 alcohol leader Constellation Brands, to name but a few. Canopy Growth operates eleven licensed cannabis production sites with over 5.2 million square feet of production capacity, including over one million square feet of GMP certified production space. For more information visit www.canopygrowth.com

Notice Regarding Forward Looking Statements

This news release contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation. Often, but not always, forward-looking statements and information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Canopy Growth or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements or information contained in this news release. Examples of such statements include statements with respect to the Company's expectations with respect to future harvests, the Company's expectation for additional finished inventory available for sale in future quarters, bringing CBD products to market by the end of fiscal 2020, the accelerated market expansion for Acreage, the anticipated benefits of the rebranding of Spectrum Therapeutics on the Company's market share, the potential opportunity for cannabis products in Europe and the anticipated Increase in Canadian and Danish product availability, the anticipated increased sales from Storz & Bickel, the expectation that facilities will be fully operational in the months ahead, the launch of new CBD consumer products and brands in fiscal 2020, the timing for implementation of the transaction with Acreage. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including changes in laws, regulations and guidelines; compliance with laws; international laws; operational, regulatory and other risks; execution of business strategy; management of growth; difficulty to forecast; reliance on licences; risks inherent in an agricultural business; contracts with provincial and territorial governments; constraints on marketing products; risks inherent in acquisitions and investments; expansion into foreign jurisdictions; governmental regulations; cannabis is a controlled substance in the United States; Farm Bill risks; assumptions as to the ability of the parties to receive, in a timely manner and on satisfactory terms, the necessary regulatory and court approvals for the transaction with Acreage; and such risks contained in the Company's management information circular of the Company dated May 17, 2019 and in the annual information form dated June 24, 2019 and filed with Canadian securities regulators and available on the Company's issuer profile on SEDAR at www.sedar.com. Readers are cautioned that the foregoing list of factors is not exhaustive. Although the Company believes that the assumptions and factors used in preparing the forward-looking information or forward-looking statements in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information and forward-looking statements included in this news release are made as of the date of this news release and the Company does not undertake an obligation to publicly update such forward-looking information or forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities laws.



CANOPY GROWTH CORPORATION CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION UNAUDITED December 31, March 31, (Expressed in CDN $000's) 2019 2019









Assets







Current assets







Cash and cash equivalents $ 1,561,664 $ 2,480,830 Marketable securities

705,921

2,034,133 Amounts receivable

108,822

106,974 Biological assets

59,107

78,975 Inventory

622,575

262,105 Prepaid expenses and other current assets

114,637

107,123



3,172,726

5,070,140









Investments in equity method investees

123,077

112,385 Other financial assets

351,952

363,427 Property, plant and equipment

1,725,333

1,096,340 Intangible assets

567,185

519,556 Goodwill

2,068,696

1,544,055 Other long-term assets

37,073

25,902











$ 8,046,042 $ 8,731,805









Liabilities







Current liabilities







Accounts payable and accrued liabilities $ 225,181 $ 226,533 Current portion of long-term debt

21,652

103,716 Other current liabilities

171,476

81,414



418,309

411,663









Long-term debt

536,107

842,259 Deferred tax liability

65,733

96,031 Share repurchase credit liability

1,301,322

- Other long-term liabilities

194,737

140,404













2,516,208

1,490,357









Shareholders' equity







Share capital

6,359,643

6,026,618 Other reserves

2,768,725

1,673,472 Accumulated other comprehensive income

(45,904)

28,630 Deficit

(3,826,095)

(777,087)









Equity attributable to Canopy Growth Corporation

5,256,369

6,951,633









Non-controlling interests

273,465

289,815









Total equity

5,529,834

7,241,448











$ 8,046,042 $ 8,731,805



CANOPY GROWTH CORPORATION CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018 UNAUDITED Three months ended Nine months ended

December 31, December 31, December 31, December 31, (Expressed in CDN $000's except share amounts) 2019 2018 2019 2018

(Restated - see note 2(d)) (Restated - see note 2(d))









Revenue $135,546 $97,703 $324,558 $146,946 Excise taxes 11,782 14,655 33,699 14,655









Net revenue 123,764 83,048 290,859 132,291









Inventory production costs expensed to cost of sales 81,953 61,329 241,456 90,358









Gross margin before the undernoted 41,811 21,719 49,403 41,933









Fair value changes in biological assets included in inventory sold and other charges 60,546 28,105 175,765 105,989 Unrealized gain on changes in fair value of biological assets (78,964) (22,267) (300,303) (90,500)









Gross margin 60,229 15,881 173,941 26,444









Sales and marketing 62,104 48,324 171,814 107,199 Research and development 20,795 5,264 41,191 7,964 General and administration 67,385 46,088 217,517 102,777 Acquisition-related costs 3,256 4,520 19,000 9,606 Share-based compensation expense 56,763 40,062 217,611 108,159 Share-based compensation expense related to acquisition milestones 4,916 23,849 24,311 81,674 Depreciation and amortization 16,530 5,015 42,953 11,640









Operating expenses 231,749 173,122 734,397 429,019









Loss from operations (171,520) (157,241) (560,456) (402,575)









Loss on extinguishment of warrants - - (1,176,350) - Other income (expense), net 24,903 233,142 (51,759) 54,445 Total other income (expense), net 24,903 233,142 (1,228,109) 54,445









(Loss) income before income taxes (146,617) 75,901 (1,788,565) (348,130)









Income tax recovery (expense) 22,451 (1,041) 8,611 1,398









Net (loss) income $(124,166) $74,860 $(1,779,954) $(346,732)









Net (loss) income attributable to:







Canopy Growth Corporation $(120,969) $67,582 $(1,778,208) $(349,831) Non-controlling interests (3,197) 7,278 (1,746) 3,099

$(124,166) $74,860 $(1,779,954) $(346,732)









(Loss) earnings per share, basic







Net (loss) income per share, basic: $(0.35) $0.22 $(5.13) $(1.45) Weighted average number of outstanding common shares: 348,530,622 303,281,549 346,877,660 241,806,351









Loss per share, diluted







Net loss per share, diluted: $(0.35) $(0.38) $(5.13) $(1.45) Weighted average number of outstanding common shares, diluted: 348,530,622 315,974,639 346,877,660 242,044,821



CANOPY GROWTH CORPORATION CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018 UNAUDITED

December 31,

December 31, (Expressed in CDN $000's)

2019

2018









Net inflow (outflow) of cash related to the following activities:

















Operating







Net loss $ (1,779,954) $ (346,732) Adjustments for:







Depreciation of property, plant and equipment

57,926

15,703 Amortization of intangible assets

26,680

7,869 Share of loss on equity investments

6,668

9,021 Fair value changes in biological assets included in inventory sold and other charges

175,765

105,989 Unrealized gain on changes in fair value of biological assets

(300,303)

(90,500) Share-based compensation

241,922

194,686 Other assets

-

(16,908) Loss on extinguishment of warrants

1,176,350

- Other income and expense

93,162

(44,476) Income tax recovery

(8,611)

(1,398) Non-cash foreign currency

(3,945)

1,394 Changes in non-cash operating working capital items

(233,918)

(129,547)









Net cash used in operating activities

(548,258)

(294,899)









Investing







Purchases and deposits of property, plant and equipment

(610,858)

(495,236) Purchases of intangible assets

(7,800)

(40,140) Redemption (purchase) of marketable securities, net

1,324,682

(802,247) Investments in equity method investees

(4,719)

(27,201) Investments in other financial assets

(46,647)

(74,071) Premium paid for Acreage Call Option

(395,190)

- Net cash outflow on acquisition of non-controlling interests

-

(1,996) Net cash outflow on acquisition of subsidiaries

(511,080)

(344,472) Payment of acquisition related liabilities

(29,837)

-









Net cash used in investing activities

(281,449)

(1,785,363)









Financing







Payment of share issue costs

(245)

(18,617) Proceeds from issuance of common shares and warrants

-

5,072,500 Proceeds from issuance of shares by Canopy Rivers

1,062

91,218 Proceeds from exercise of stock options

39,149

28,730 Proceeds from exercise of warrants

446

18,684 Issuance of long-term debt

10,268

600,000 Payment of long-term debt issue costs

-

(16,380) Payment of interest on long-term debt

(13,738)

- Repayment of lease obligations

(9,331)

(2,728) Repayment of long-term debt

(112,705)

(3,499)









Net cash (used) provided by financing activities

(85,094)

5,769,908









Effect of exchange rate changes on cash and cash equivalents

(4,365)

103,664









Net cash (outflow) inflow

(919,166)

3,793,310 Cash and cash equivalents, beginning of period

2,480,830

322,560









Cash and cash equivalents, end of period $ 1,561,664 $ 4,115,870

Adjusted EBITDA1 Non-IFRS Measure Three months ended (In CDN$000's) December 31, 2019 December 31, 2018









Adjusted EBITDA1 Reconciliation







Loss from operations - as reported $ (171,520) $ (157,241)









IFRS fair value accounting related to biological assets and inventory Fair value changes in biological assets included in inventory sold and other charges

60,546

28,105 Unrealized gain on changes in fair value of biological assets

(78,964)

(22,267)



(18,418)

5,838 Share-based compensation expense (per statements of cash flows)

61,679

64,179 Acquisition-related costs

3,256

4,520 Depreciation and amortization (per statements of cash flows)

33,342

7,890



98,277

76,589 Adjusted EBITDA $ (91,661) $ (74,814)







Nine months ended (In CDN$000's) December 31, 2019 December 31, 2018









Adjusted EBITDA1 Reconciliation







Loss from operations - as reported $ (560,456) $ (402,575)









IFRS fair value accounting related to biological assets and inventory Fair value changes in biological assets included in inventory sold and other charges

175,765

105,989 Unrealized gain on changes in fair value of biological assets

(300,303)

(90,500)



(124,538)

15,489 Share-based compensation expense (per statements of cash flows)

241,922

194,686 Acquisition-related costs

19,000

9,606 Depreciation and amortization (per statements of cash flows)

84,606

23,572



345,528

227,864 Adjusted EBITDA $ (339,466) $ (159,222)

1 Adjusted EBITDA is earnings before interest, tax, depreciation and amortization, share-based compensation expense, fair value changes and other non-cash items, and further adjusted to remove acquisition-related costs.

SOURCE Canopy Growth Corporation

Related Links

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