/R E P E A T -- Canopy Growth Corporation Reports Third Quarter Fiscal 2019 Financial Results: Gross Sales of $98M; Net Revenue hits record $83M/

• Cannabis shipments totaled 10,102 kilograms and kilogram equivalents.
• Net income of $74.9 million, including changes in fair values of financial liabilities included in Other Income.
• Closed the previously announced $5 billion investment by Constellation Brands Inc and began putting that capital to work for shareholders with key acquisitions of Storz & Bickel and the assets of ebbu Inc.
• Expanded to new markets including United Kingdom and Peru, and announced intention to establish operations in New York State, marking the Company's entry into the US hemp market.
• Intellectual property portfolio grew to 32 issued patents and over 140 patent applications, covering a range of target areas from technology to genetics to clinical formulations.

SMITHS FALLS, ON, Feb. 14, 2019 /PRNewswire/ - Canopy Growth Corporation (WEED.TO) (CGC) ("Canopy Growth" or "the Company") today released its consolidated financial results for the third quarter fiscal 2019 ended December 31, 2018.  All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

Management Commentary

"Our successful first full quarter with recreational sales in Canada reinforces our long held strategy of making meaningful investments early in order to secure market share," said Bruce Linton, Chairman & Co-CEO, Canopy Growth. "With a strong cash position, we added strategic assets and IP through acquisitions to accelerate the sophistication of our inputs with ebbu, and our consumer-facing outputs with Storz and Bickel."

"The Canadian recreational cannabis market will be dominated in the long term by businesses delivering excellent products and consumer experiences. Sales from the first wave of products and retail environments launched in the third quarter demonstrate that we are capturing consumers' attention."

Concluded Linton, "We have developed an unprecedented and unparalleled fully integrated platform at scale and will continue to expand by making strategic production investments in regions with federally permissible paths to market for our cannabis and hemp offerings. We believe this strategy will develop a significant and sustained return on invested capital over the long-term."

Product & Production Summary

Oils, including the Company's Softgel capsules, accounted for 33% of product revenue (reported net revenue excluding other revenue) in the three months ended December 31, 2018, up from 23% of product revenue in the same period last year, demonstrating an increased demand for value-added formats.  During the third quarter of fiscal 2019, approximately 30% and 42% of recreational and medical sales, respectively, were comprised of oils, including Softgel capsules.

To position Canopy Growth to supply the significant quantities of cannabis oil that the Company expects will be required to meet the needs of future value added products including vape pens and beverages, the Company took steps during the quarter to augment its owned current and planned extraction capacity by entering into extraction supply related agreements with Valens GroWorks Corp., Medipharm Labs Corp., and POS Holdings Inc. ("POS Holdings").  In addition, during the quarter, the Company completed the terms of a financing related agreement with POS Holdings to lock in dedicated extraction support to Canopy Growth.

In the transition from a "medical marijuana" business to a business producing clinically proven cannabinoid therapies, the Company experienced a decline in its Canadian medical market demand in the quarter. The decline may be attributed to the initial adjustment to the available legal recreational market which patients can also access.  Additionally, medical revenues reflected a migration to a tighter medical product range as well as elevating and re-focusing Spectrum Cannabis to a more pure medical/pharma focused brand proposition.

International medical revenues in the three months ended December 31, 2018, consisting primarily of sales in Germany, increased by 170 percent over the same quarter in the prior year to $2.7 million.

Other revenue for the quarter was $7.5 million, coming from partner clinic revenue, merchandise sales, and device sales by the Company's wholly-owned subsidiary Storz & Bickel following the close of its acquisition on December 6, 2018.

Canadian Regulated Adult Use Market – Cannabis Sales

The Company placed significant focus on shipping core products, backed by deep inventory levels, into physical retail store networks across the country.  In the face of strong product demand and overall sector supply shortages, the inventory levels have served to improve the availability of the Company's products on retail store shelves.  Also, at the end of the quarter, the Company began shipping value-added Softgel capsules and pre-rolled joint products in recreational channels across the country.

Canadian Regulated Adult Use Market – Retail Footprint

Canopy Growth finalized its acquisition of HIKU during the second quarter, adding the Tokyo Smoke retail channel to complement its Tweed banner stores. Offering two distinct customer experiences will allow the Company to appeal to various consumer demographics without saturating any single segment. Tokyo Smoke operates four corporate owned retail cannabis stores and an e-commerce platform in Manitoba. Tweed retail now has 10 corporate owned locations selling cannabis across Newfoundland & Labrador and Manitoba, plus a licensed store in Saskatchewan and an e-commerce presence in Manitoba and Nunavut. The Company plans to add, in provinces with private retail models, 20 additional Tweed stores and 20 additional Tokyo Smoke stores. In the province of Ontario, the company is exploring partnership opportunities to ensure consumers in that market can experience the distinct Tweed and Tokyo Smoke retail experiences while working within the provincial framework. 

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