Mr. David Klein reports

CANOPY GROWTH REPORTS FOURTH QUARTER AND FISCAL YEAR 2023 FINANCIAL RESULTS

Canopy Growth Corp. has released its financial results for the fourth quarter and fiscal year ended March 31, 2023, and has filed an annual report on Form 10-K, including the audited consolidated financial statements for the fiscal year ended March 31, 2023, and the unqualified report thereon of the company's independent registered public accounting firm. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

Highlights:

• In fiscal 2023, the company announced a series of comprehensive steps to align its Canadian cannabis operations and resources, including: (i) the divestiture of the company's national cannabis retail operations (completed in Q3 fiscal 2023); (ii) ceasing the sourcing of cannabis flower from the Mirabel, Que., facility (completed in Q4 fiscal 2023); (iii) exiting cannabis flower cultivation in the Smiths Falls, Ont., facility (expected to be completed in Q1 fiscal 2024); (iv) consolidating cultivation at its existing facilities in Kincardine, Ont., and Kelowna, B.C.; and (v) moving to an adaptive third party sourcing model for all cannabis beverages, edibles, vapes and extracts, which will enable the company to select and bring to market exciting and exclusive formats without the required investment in research and development and production footprint;
• Restructuring steps undertaken in fiscal 2023 reduced selling, general and administrative (SG&A) expenses and cost of goods sold (COGS) by a combined $125-million through the end of fiscal 2023;
• The company's fiscal 2023 net revenue decreased 21 per cent year over year to $403-million. When adjusting for the impact of the divestiture of C3 in Q4 fiscal 2022 and its Canadian retail business in Q3 fiscal 2023, revenues decreased 11 per cent in fiscal 2023 as compared with fiscal 2022;
• Canadian medical cannabis revenue in fiscal 2023 increased 6 per cent year over year and Q4 fiscal 2023 increased 8 per cent year over year in a declining market.;
• Enhanced flower quality drove resurgence of the company's mainstream Tweed brand to No. 9 spot in the Canadian adult-use market in Q4 fiscal 2023 up from No. 16 in prior year.
• Subsequent to quarter-end, the company entered into an agreement with Indiva Ltd. that gives Canopy Growth control of all distribution, marketing, and sales of industry leading Wana branded products in Canada. The addition of Wana branded gummies is expected to drive adjusted earnings before interest, taxes, depreciation and amortization improvement for the company's Canadian cannabis business and advance its path to leadership in the edibles category in Canada.

"Fiscal 2023 was a transformational year for Canopy Growth as we began to implement a comprehensive strategy to accelerate our path to profitability and position our business to realize the tremendous opportunities ahead. Our actions are already yielding results, and we expect to realize significant benefits from our cost-reduction program in fiscal 2024. Paired with continued progress in our Canopy USA strategy which enables a fast start, the company is well positioned as it strives towards its goal of long-term North American cannabis leadership," said David Klein, chief executive officer.

"Our actions throughout fiscal 2023 have streamlined the organization, reduced costs and eliminated a significant portion of Canopy Growth's debt. We recognize there is more work to be done, and we have several initiatives already under way to further reduce the operating cash burn in the businesses and improve our balance sheet, including facility divestitures that are anticipated to generate proceeds of up to $150-million in fiscal 2024," said Judy Hong, chief financial officer.

1 Unless otherwise indicated, market share data disclosed in this press release is calculated using the company's internal proprietary market share tool that utilizes point of sales data supplied by third-party data providers and government agencies.

BioSteel review and remedial actions

In connection with the preparation of the financial statements for the annual report on Form 10-K for the fiscal year ended March 31, 2023, the company identified certain trends in the BioSteel Sports Nutrition Inc. business unit. With the oversight of the audit committee, the company launched an internal review, together with independent external counsel and forensic accountants.

This review identified material misstatements in certain of the company's prior financial statements related to certain sales in the BioSteel business unit, particularly with respect to the timing and amount of revenue recognition. The review also identified material weaknesses in the company's internal control over financial reporting as of March 31, 2023. Over all, the correction resulted in a decrease of approximately $10-million in net revenue for fiscal 2022 or approximately 2 per cent of total net revenue for the company. For the nine months ended Dec. 31, 2022, the correction resulted in a decrease of approximately $14-million in net revenue or approximately 4 per cent of total consolidated revenue for the company.

As a result of the review, the company is continuing to implement several remedial actions, including management changes and appropriate personnel actions. The company is also considering all legal options that may be available in connection with the associated overpayment made in fiscal 2023 to the minority shareholders of BioSteel as a result of the overstatement of revenues.

Additionally, Canopy Growth has taken decisive actions to sustain growth and improve profitability of BioSteel, including: (i) exiting all BioSteel international business; (ii) prioritizing resources toward the growing Canadian market; (iii) refining market strategy in the United States; (iv) changes to the BioSteel business, including cost reductions in warehousing, production, product sampling and overall staffing reductions; and (v) exploring additional options to further minimize operating cash burn.

Balance Sheet and Liquidity

The company ended fiscal 2023 with cash, cash equivalents and short-term investments of $783-million. Targeted actions that have been completed or are currently underway to further strengthen our balance sheet include:

Reduction of approximately $500-million in debt from Q2 fiscal 2023 to quarter-to-date in Q1 fiscal 2024, including the equitization of $267-million of the 4.25 per cent unsecured notes due in July 2023 (the "2023 Notes") and a paydown of USD$188-million of the senior secured term loan at $0.93 per dollar of debt, which has reduced annual interest payments by approximately $45-million;

Refinancing $100-million of the 2023 Notes held by Greenstar Canada Investment Limited Partnership, a wholly-owned subsidiary of Constellation Brands, Inc. ("CBI") in order to extend the maturity date to December 31, 2024. The company maintains its intention to negotiate an exchange to purchase the 2023 Notes held by CBI in exchange for shares prior to its maturity; and

Facility divestitures which are expected to generate proceeds of up to $150-million by the end of September 2023. In the first quarter, the company has already received proceeds of approximately $56-million in transactions that closed subsequent to March 31, 2023. Under provisions of the senior secured term loan agreement, 50 per cent of proceeds will be used to paydown outstanding amounts of the senior secured term loan.

Fiscal 2024 outlook and priorities

To advance its goal of becoming a leading premium cannabis branded company in North America, Canopy Growth will focus on the following in fiscal 2024:

• Achieving break-even to positive adjusted EBITDA in all of its businesses, with the exception of BioSteel, by end of fiscal 2024;
• Strengthening its balance sheet and improving liquidity; and
• Monitoring and supporting the creation of value in Canopy USA LLC (CUSA).

Business Highlights

• Transformation of Canadian cannabis operations to asset-light model and expected cost reductions are on track
  • Since FY2020, the company has closed 10 production sites in Canada and is on track to end production at its 1 Hershey Drive, Smiths Falls, Ontario facility by the end of Q1 fiscal 2024.
  • Cost reduction initiatives undertaken in fiscal 2023 are on track to reduce the company's headcount by over 1200 positions.
• During a year of significant business change and continued market fragmentation, Canopy Growth's Canadian cannabis business stabilized exiting fiscal 2023
  • The company's Canadian medical cannabis revenue in Q4 fiscal 2023 increased 8 per cent year-over-year in a declining market and Canadian adult-use cannabis Business-to-business revenue in Q4 fiscal 2023 increased slightly over Q3 fiscal 2023.
  • Canadian adult-use cannabis performance was aided by the resurgence of the company's mainstream Tweed brand. The resurgence was driven by strong consumer demand for new, high-quality Tweed Kush Mints and Tweed Tiger Cake flower and PRJ product offerings.
• fiscal 2024 focus on continued stabilization of Canadian adult-use cannabis business expected to be driven by new, high-quality flower and pre-rolled joints as well as a stronger edibles portfolio
  • Leveraging our experience with the resurgence of the Tweed brand in fiscal 2023, the company's focus on enhancing flower quality is expected to improve the competitive positioning of our premium Doja and 7ACRES branded product offerings.
  • Focused on reestablishing the growth of the Wana brand in the Canadian market and bringing Wana's innovation across the United States into the Canadian market, including, for instance, Wana's new passionfruit pineapple 1:1:1 (CBG/CBD/THC) gummy, a low dose product perfect for relaxing, which will soon be available in Ontario, BC, and Alberta.
• Focusing BioSteel in North America, advancing innovation at Storz & Bickel to drive growth
  • BioSteel is continuing to gain market share in Canada, including through its high visibility NHL partnerships and has reached an 11.2 per cent share of convenience and gas channel in Canada 7 in Q4 fiscal 2023, up from 3.4 per cent in the prior year. In fiscal 2024, the BioSteel business is focused on expanding distribution in the food, drug, and mass channels and club accounts across Canada.
  • BioSteel All-Commodity Volume in the U.S. of 37.7 per cent in Q4 fiscal 20238, up from 18.9 per cent in the prior year. The company is refining BioSteel's U.S. market strategy with a tighter geographical focus as well as sharper emphasis on the specialty retail channel.
  • Storz & Bickel has enhanced its U.S commercial strategy and is focused on driving improved growth with a planned launch of new Storz & Bickel vaporizers in fiscal 2024.
• CUSA strategy advancing and expected to accelerate entry into the U.S. cannabis market
  • Subsequent to quarter end, the company filed a revised proxy statement related to the company's strategy to accelerate entry into the U.S. cannabis market through its interest in CUSA and realize the opportunity of the world's largest cannabis market.
  • In order to ensure continued compliance with NASDAQ's listing rules, Canopy Growth has modified the structure of the company's interest in CUSA such that it is not expected to be required to consolidate the financial results of CUSA with the company's financial statements in accordance with generally accepted accounting principles in the United States.
  • The company is focused on concluding the regulatory review and filing a definitive proxy statement related to CUSA in order to finalize the date for the special meeting of shareholders to authorize the creation of a new class of non-voting exchangeable shares in the capital of the company (the "Exchangeable Shares").
• U.S. THC companies continue to strengthen and expand their businesses
  • Acreage9 reported Q1 fiscal 2023 revenue of USD $56-million. In Q1 fiscal 2023, Acreage began adult-use retail operations in Connecticut and secured approval to locate an adult-use dispensary in Pennsauken, New Jersey. Acreage anticipates commencing adult-use sales at the new Pennsauken location before the end of 2023.
  • In the three months ended March 31, 2023, Wana Brands10 launched 19 SKUs in 8 markets including the launch in Colorado of Wana Optimals Quick Calm, a groundbreaking product offering a calming, typically non-intoxicating cannabinoid-terpene blend for fast-acting relief from anxious feelings.
  • In the three months ended March 31, 2023, Jetty11 expanded to the state of New York with products offered at two New York City dispensaries, Housing Works Cannabis company and Union Square Travel Agency. Jetty also maintained its position as the #1 Solventless vape in California 12 in addition to fully staffing its California sales team to provide coverage of over 500 retail accounts.

7 Nielsen data 13-weeks ended April 1, 2023.

8 IRI data for the 13 weeks ended April 2, 2023.

9 Until such time as the rights to acquire Acreage are exercised, neither the company nor CUSA will have any direct or indirect economic or voting interests in Acreage, neither the company nor CUSA will directly or indirectly control Acreage, and each of the company, CUSA and Acreage will continue to operate independently of one another. The company holds non-voting and non-participating shares in CUSA that are exchangeable into common shares of CUSA. 10 Until such time as CUSA elects to exercise its rights to acquire Mountain High Products, LLC, Wana Wellness, LLC and The Cima Group, LLC (collectively, "Wana"), CUSA will have no direct or indirect economic or voting interests in Wana, CUSA will not directly or indirectly control Wana, and CUSA, on the one hand, and Wana, on the other hand, will continue to operate independently of one another. The company holds non-voting and non-participating shares in CUSA that are exchangeable into common shares of CUSA.

11 Until such time as CUSA elects to exercise its rights to acquire Lemurian, Inc. ("Jetty"), CUSA will have no direct or indirect economic or voting interests in Jetty, CUSA will not directly or indirectly control Jetty, and CUSA, on the one hand, and Jetty, on the other hand, will continue to operate independently of one another. The company holds non-voting and non-participating shares in CUSA that are exchangeable into common shares of CUSA.

12 Based on April 2023 BDS Analytics Inc. data.

Fourth quarter and fiscal 2023 financial summary

Revenues

Net revenue of $88-million in Q4 fiscal 2023 declined 14 per cent as compared with Q4 fiscal 2022 with the decrease primarily attributable to the divestitures of C3 Cannabinoid Compound company GmbH (C3) in the fourth quarter of fiscal 2022 and the Canadian business-to-consumer cannabis business in the third quarter of fiscal 2023, as well the impacts of increased competition in the Canadian adult-use cannabis market, and softer performance from Storz & Bickel and This Works. When adjusting for the impact of the divestiture of the Canadian retail business, Canadian cannabis revenues for the period decreased 8 per cent in Q4 fiscal 2023 as compared with Q4 fiscal 2022, and were stable compared with Q3 fiscal 2023.

Net revenue of $403-million in fiscal 2023 declined 21 per cent as compared with fiscal 2022. The decrease is primarily attributable to increased competition in the Canadian adult-use cannabis market, the divestitures of C3 and the Canadian business-to-consumer cannabis business, and softer performance from Storz & Bickel and This Works. These decreases were partially offset by growth of the BioSteel business in the Canadian market.

Gross Margin:

Reported gross margin in Q4 fiscal 2023 was (103 per cent) as compared with (166 per cent) in Q4 fiscal 2022. Excluding non-cash restructuring costs and inventory write-downs associated with the company's strategic changes recorded in COGS for a total of $75-million, adjusted gross margin was (18 per cent). Adjusted gross margin during Q4 fiscal 2023 was negatively impacted by higher inventory write-downs and charges relating to costs associated with certain contract manufacturing agreements that are not expected to recur past fiscal 2023 in the BioSteel business unit.

Reported gross margin in fiscal 2023 was (26 per cent) as compared with (40 per cent) in fiscal 2022. Excluding non-cash restructuring costs recorded in COGS of $90-million, adjusted gross margin was (3 per cent) in fiscal 2023. Adjusted gross margin during fiscal 2023 was negatively impacted by higher inventory write-downs and charges relating to costs associated with certain contract manufacturing agreements that are not expected to recur past fiscal 2023 in the BioSteel business unit.

Operating Expenses:

Total SG&A expenses in Q4 fiscal 2023 declined by 11 per cent as compared with Q4 fiscal 2022, driven by year-over-year decreases in general and administrative ("G&A"), research and development ("R&D") as well as depreciation and amortization expenses. These decreases were primarily due to the restructuring actions announced in April 2022 and February 2023. Partially offsetting these decreases were an increase in BioSteel sales and marketing expenses, relating to the activation of the National Hockey League ("NHL") partnership announced in July 2022 and other BioSteel sales and marketing activities, as well as acquisition-related costs. Excluding acquisition-related expenses, the impact of the disposition of C3 in the fourth quarter of fiscal 2022 and the disposition of the Canadian retail business in the Q3 fiscal 2023, as well as the COVID-19 relief program, total SG&A expenses decreased 13 per cent in Q4 fiscal 2023 compared with the prior year period.

Total SG&A expenses in fiscal 2023 declined by 3 per cent as compared with fiscal 2022, driven by year-over-year decreases in G&A, R&D as well as depreciation and amortization expenses. These decreases were primarily due to the restructuring actions announced in April 2022 and February 2023. Partially offsetting these decreases were an increase in BioSteel sales and marketing expenses, relating to the activation of the NHL partnership announced in July 2022 and other BioSteel sales and marketing activities, as well as acquisition-related costs. Excluding acquisition-related expenses, the impact of the disposition of C3 in the fourth quarter of fiscal 2022 and the disposition of the Canadian retail business in the third quarter of fiscal 2023, as well as the COVID-19 relief program, total SG&A expenses decreased 8 per cent in fiscal 2023 compared with the prior year.

Net loss

Net loss in Q4 fiscal 2023 was $648-million, which is a $59-million increase as compared with Q4 fiscal 2022, driven primarily by an increase in asset impairment and restructuring costs of $164-million partially offset by improved gross margins.

Net loss in fiscal 2023 was $3,310-million, which is a $2,979-million increase as compared with fiscal 2022, driven primarily by a $1,887-million increase in asset impairment and restructuring costs primarily related to goodwill impairment losses associated with the company's cannabis operations reporting unit, as well as a $1,219-million primarily related to the impact of non-cash fair value changes partially offset by improved gross margins.

Adjusted EBITDA

Adjusted EBITDA loss in Q4 fiscal 2023 was $96-million, a $36-million improvement in adjusted EBITDA loss as compared with Q4 fiscal 2022 primarily driven by the year-over-year improvement in gross margin and reduced operating expenses.

Adjusted EBITDA loss in fiscal 2023 was $350-million, a $76-million improvement in adjusted EBITDA loss as compared with fiscal 2022 primarily driven by the year-over-year improvement in gross margin and reduced operating expenses inclusive of the impact of a $64-million reduction in COVID-19 relief payments in fiscal 2023 as compared with fiscal 2022.

Free cash flow

Free cash flow in Q4 fiscal 2023 was an outflow of $143-million, a 13-per-cent increase in outflow as compared with Q4 fiscal 2022. Relative to Q4 fiscal 2022, the increase in outflow is due to the timing of certain payments in each period, and investments in growth initiatives at BioSteel and costs related to the formation of CUSA, partially offset by reduced capital expenditures and impacts of cost-reduction actions.

Free cash flow in fiscal 2023 was an outflow of $567-million, a 3-per-cent decrease in outflow as compared with fiscal 2022. Relative to fiscal 2022, the decrease in outflow is due to the timing of certain payments in each period, reduced capital expenditures and impacts of cost-reduction actions, partially offset investments in growth initiatives at BioSteel and costs related to the formation of CUSA.

Cash position

Cash and short-term investments were $783-million at March 31, 2023, representing a decrease of $589-million from $1,372-million at March 31, 2022, reflecting the impact of cash used in operating activities, the first tranche of the term loan credit agreement repayment of $118-million, as well as cash used for acquisitions and investments, including the acquisition of the Verona, Va., manufacturing facility for the BioSteel business and a premium payment made to obtain an option to acquire Acreage Holdings Inc. ("Acreage") outstanding debt in connection with the formation of CUSA in October 2022. Partially offsetting these net outflows were net proceeds of $135-million from the issuance of USD$100-million in convertible debentures in February 2023. Debt amounted to $1,307-million at March 31, 2023, representing a decline of $194-million from $1,501-million at March 31, 2022. Subsequent to March 31, 2023, $127-million of debt owing under the credit facility was repaid at $0.93 cents on the dollar for $117-million, and $100-million of the 2023 Notes were settled through the issuance of a promissory note due at the end of the third quarter of FY2025.

Fourth Quarter fiscal 2023 Revenue Review13

Canada Cannabis

Adult-use business-to-business net revenue in Q4 fiscal 2023 decreased 16 per cent as compared with Q4 fiscal 2022 driven primarily by lower sales volumes, particularly in value-priced dried flower, resulting from both the strategic shift in our product portfolio and increased competition. These factors were partially offset by a more favorable product mix.

Adult-use business-to-consumer net revenue in Q4 fiscal 2023 decreased 100 per cent as compared with Q4 fiscal 2022 due to the disposition of all retail locations during Q3 fiscal 2023.

Medical net revenue in Q4 fiscal 2023 increased 8 per cent as compared with Q4 fiscal 2022 driven by growth in insured patient registrations and continued expansion of product offerings.

Rest-of-world Cannabis

Rest-of-world cannabis revenue in Q4 fiscal 2023 decreased 37 per cent over Q4 fiscal 2022 due primarily to the divestiture of C3, the impact of shipments to Israel in Q4 fiscal 2022, and a decline in our U.S. CBD business, partially offset by growth in the Australian market.

Excluding the impact of the divestiture of C3, rest-of-world cannabis net revenue decreased 19 per cent as compared with Q4 fiscal 2022.

Storz & Bickel

Storz & Bickel vaporizer revenue in Q4 fiscal 2023 decreased 28 per cent over Q4 fiscal 2022 due primarily to the continued trend of reductions in consumer spending as seen in the prior quarters of fiscal 2023 and again in Q4 fiscal 2023.

This Works

This Works sales in Q4 fiscal 2023 decreased 10 per cent over Q4 fiscal 2022 due in part to softer performance of certain product lines and the impact of foreign exchange rates.

The Q4 fiscal 2023, Q4 fiscal 2022, fiscal 2023 and fiscal 2022 financial results presented in this press release have been prepared in accordance with U.S. GAAP.

Webcast and Conference Call Information

The company will host a conference call and audio webcast with David Klein, CEO and Judy Hong, CFO at 5:30 PM Eastern Time on June 22, 2023.

Webcast Information

A live audio webcast will be available on-line.

Replay Information

A replay will be accessible by webcast until 11:59 PM Eastern Time on September 20, 2023 on-line.

About Canopy Growth Corporation

Canopy Growth Corporation ("Canopy") is a leading North American cannabis and CPG company dedicated to unleashing the power of cannabis to improve lives.

Through an unwavering commitment to our consumers, Canopy delivers innovative products with a focus on premium and mainstream cannabis brands including Doja, 7ACRES, Tweed, and Deep Space. Our CPG portfolio features sugar-free sports hydration brand BioSteel, targeted 24-hour skincare and wellness solutions from This Works, gourmet wellness products by Martha Stewart CBD, and category defining vaporizer technology made in Germany by Storz & Bickel.

Canopy has also established a comprehensive ecosystem to realize the opportunities presented by the U.S. THC market through its rights to Acreage Holdings, a vertically integrated multi-state cannabis operator with principal operations in densely populated states across the Northeast, as well as Wana Brands, a leading cannabis edible brand in North America, and Jetty Extracts, a California-based producer of high-quality cannabis extracts and pioneer of clean vape technology.

Beyond our world-class products, Canopy is leading the industry forward through a commitment to social equity, responsible use, and community reinvestment-pioneering a future where cannabis is understood and welcomed for its potential to help achieve greater well-being and life enhancement.

We seek Safe Harbor.