Mr. David Klein reports

CANOPY GROWTH REPORTS THIRD QUARTER FISCAL YEAR 2024 FINANCIAL RESULTS; ACHIEVES THIRD QUARTER OF SEQUENTIAL REVENUE GROWTH ACROSS CANADA CANNABIS BUSINESSES AND A RECORD QUARTER FOR MEDICAL SALES

Canopy Growth Corp. has released its financial results for the third quarter ended Dec. 31, 2023.

Highlights:

• Achieved consolidated gross margins of 36 per cent in Q3 fiscal year 2024, with Canada cannabis gross margins increasing to 28 per cent in Q3 FY 2024, up from negative 11 per cent in Q3 FY 2023.
• Excluding the impact of the divestiture of the Canada national retail business in Q3 FY 2023, Q3 FY 2024 consolidated net revenue grew by 6 per cent year-over-year. Delivered Q3 FY 2024 consolidated net revenue of $79-million, representing a decline of 7 per cent year-over-year.
• Rest-of-world cannabis revenue in Q3 FY 2024 increased 81 per cent year-over-year, led by continued strong growth in Australia, return to growth in Europe, driven by new products and improved sales execution, and lapping negative revenue impacts in non-core markets during the prior year.
• Storz & Bickel net revenue in Q3 FY 2024 increased 54 per cent sequentially, driven by strong sales of the new Venty portable vaporizer and traditionally strong seasonal sales, including the most successful Black Friday sales event in the brand's 20-year history.
• Free cash flow from continuing operations of negative $34-million in Q3 FY 2024, representing a 57-per-cent improvement year-over-year.
• Cash and short-term investments balance of $186-million as at Dec. 31, 2023. Reduced overall debt by $69-million during Q3 FY 2024.
• Management reaffirms expectation to achieve positive adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in each business unit exiting FY 2024.

"This is the dawn of a new era at Canopy Growth. We're singularly focused on cannabis and demonstrating growth across all of our business units. With our Canopy USA strategy now moving forward, we expect to be the first and only U.S.-listed company offering shareholders a unique opportunity to gain exposure to the fastest-growing cannabis market in the world," said David Klein, chief executive officer.

"Our Q3 FY 2024 results demonstrate the substantial improvement in profitability and reduction in cash burn compared to the previous year, as well as Q2 FY 2024. Our right-sized business is consistently delivering profitability improvements as well as sequential growth. These results, paired with our ongoing actions to strengthen Canopy Growth's balance sheet, reinforce our confidence in continued performance along this path for a sustainable, profitable future," said Judy Hong, chief financial officer.

Financial highlights:

• Canada adult-use cannabis business-to-business revenue increased 9 per cent year-over-year to $23-million in Q3 FY 2024, driven by growth in the large-format products of Tweed flower as well as the addition of the Wana brand edibles to the portfolio.
• Canadian medical cannabis generated record net revenue in Q3 FY 2024, with revenue increasing 11 per cent compared with the prior year, primarily attributable to an increase in the average size of medical orders placed by the company's customers. Canadian medical cannabis revenue increase was due largely to a shift in Canopy's customer mix and a larger assortment of cannabis product choices offered to its customers.
• Canada cannabis segment gross margins improved to 28 per cent in Q3 FY 2024, compared with negative 11 per cent in Q3 FY 2023, driven by lower excess and obsolete inventory charges, lower operating costs resulting from the cost reduction actions taken to date, and the opportunistic use of lower-cost inputs.
• Despite a decrease in revenues compared with Q3 FY 2023, Storz & Bickel net revenue in Q3 FY 2024 increased 54 per cent sequentially, driven by strong sales of the new Venty portable vaporizer and traditionally strong seasonal sales, including the brand's most successful Black Friday sales event to date. Gross margins improved to 51 per cent in Q3 FY 2024, compared with 45 per cent in Q3 FY 2023, driven primarily by lower input costs and a positive shift in product mix to higher-margin newly launched products.
• Selling, general and administrative expenses were $54-million in Q3 FY 2024, down from $90-million in Q3 FY 2023.
• Operating loss from continuing operations of $60-million in Q3 FY 2024, compared with a loss of $113-million in Q3 FY 2023. Adjusted EBITDA loss was $9-million in Q3 FY 2024, representing an improvement of 82 per cent compared with the $50-million adjusted EBTIDA loss in Q3 FY 2023, the narrowest loss since FY 2017, driven primarily by lower operating costs resulting from the cost-reduction actions taken to date.

Business highlights

Demand for quality products driving profitable growth of Canada cannabis business:

• The company held its ranking of top 3 supplier of cannabis flower in British Columbia and added over 900 points of distribution nationally for flower in Q3 FY 2024.
• The company's reintroduction of Wana-brand cannabis edibles in Q3 FY 2024 has re-established robust distribution nationally and returned distribution to growth in Ontario driven by key accounts. Wana brand cannabis gummies delivered top 3 and top 4 market share in British Columbia and Ontario, respectively.

Strong demand for proven flower strains is driving growth in Canopy's rest-of-world medical cannabis business:

• Canopy Growth's Australian medical cannabis business has generated 12 straight quarters of revenue growth.
• Shipments of proven Canadian strains Kush Mints, Tiger Cake and OG Delux, and increased engagements with medical practitioners contributed to growth in the Australian and German medical cannabis markets in Q3 FY 2024.

Strong demand for new Storz & Bickel Venty portable vaporizer helped drive strong sequential revenue growth:

• Demand for the new Venty vaporizer, a device priced at the top of the range for comparable portable devices, has exceeded expectations, and a second production shift was added to help meet demand. In the critical holiday sales window of December, 2023, the Venty vaporizer was Storz & Bickel's best-selling device, selling approximately double the number of the next-highest-selling device.
• The Venty vaporizer has been positively reviewed by leading vape and vaporizer-related publications, and influencers.
• Black Friday sales were the most successful in Storz & Bickel's over 20-year history with device sales increasing 55 per cent over the number of devices sold during the prior-year's Black Friday event.

Advancing Canopy USA LLC strategy with special shareholder meeting scheduled for April 12, 2024:

• The company expects to file its definitive proxy statement with the U.S. Securities and Exchange Commission (SEC) on or about Feb. 13, 2024, and to host a special meeting of the company's shareholders on April 12, 2024. At the special meeting, shareholders will be asked to consider a special resolution authorizing an amendment to its articles of incorporation to, among other things, create a new class of non-voting, non-participating exchangeable shares in the capital of the company.
• Upon creation of the exchangeable shares, and Canopy USA's acquisition of U.S. THC (tetrahydrocannabinol) businesses, the company's investors are expected to have an opportunity to participate in the U.S. cannabis market through Canopy Growth's non-controlling interest in Canopy USA.

Third-quarter fiscal 2024 revenue review

The Q3 FY 2024 and Q3 FY 2023 financial results presented in this press release have been prepared in accordance with U.S. GAAP (generally accepted accounting principles).

Board of directors appointment

The company also announced that Robert L. Hanson has resigned from Canopy Growth's board of directors, effective as of Feb. 6, 2024. As part of the advancement of Canopy USA, and the expected departure of CBI (Constellation Brands Inc.) (as defined below) appointed board members following the creation of the exchangeable shares, Canopy Growth is pleased to announce the appointment of two new board members, Willy Kruh and Luc Mongeau, to the company's board, effective as of Feb. 7, 2024.

Mr. Kruh -- director, member of the audit committee

Mr. Kruh, CPA, CA, MBA, is a retired partner and global (and Canadian) chairman of consumer and retail at KPMG LLP, with over 35 years of experience. As a recognized and trusted, adviser, consultant and auditor, Mr. Kruh has been instrumental in shaping the financial landscape of leading consumer packaged goods (CPG), retail, food and beverage, and multinational corporations, offering strategic guidance and invaluable insights to industry leaders in North America and globally. Mr. Kruh brings wide-ranging financial, as well as consumer and retail industry, experience to the board.

Mr. Mongeau -- director, member of the corporate governance, compensation and nominating committee

Mr. Mongeau is a seasoned executive with over 25 years of experience spearheading multibillion-dollar CPG companies throughout North America, including Weston Foods, Mars and Mars Petcare. An established leader with a demonstrated record of marketing and sales agility, Mr. Mongeau has consistently delivered transformative growth and operational excellence in brand-led businesses. Mr. Mongeau brings his extensive experience in business transformation and strategic leadership to the board.

Webcast and conference call information

The company will host a conference call and audio webcast with Mr. Klein, CEO, and Ms. Hong, CFO, at 10 a.m. ET on Feb. 9, 2024.

Webcast information

A live audio webcast will be available on-line.

Replay information

A replay will be accessible by webcast until 11:59 p.m. ET on May 9, 2024, on-line.

About Canopy Growth Corp.

Canopy Growth is a leading North American cannabis and CPG company dedicated to unleashing the power of cannabis to improve lives. Through an unwavering commitment to its consumers, Canopy Growth delivers innovative products with a focus on premium and mainstream cannabis brands, including Doja, 7Acres, Tweed and Deep Space. Canopy Growth's CPG portfolio includes gourmet wellness products by Martha Stewart CBD, and category-defining vaporizer technology made in Germany by Storz & Bickel.

Canopy Growth has also established a comprehensive ecosystem to realize the opportunities presented by the United States tetrahydrocannabinol market through its rights to Acreage Holdings Inc., a vertically integrated, multistate 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 its world-class products, Canopy Growth 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.