Provides update regarding Green Growth Brands
bid
Appoints Walter Robb and
David Hopkinson as independent
directors to Board of Directors
Net revenue of $73.6 million up 240%
from prior quarter and 617% from prior year period
Current annualized production capacity of 115,000 kilograms
LEAMINGTON, ON, April 15, 2019 /PRNewswire/ - Aphria Inc.
("Aphria" or the "Company") (TSX: APHA and NYSE:
APHA) today reported its results, for the third quarter and nine
months ended February 28, 2019. All
amounts are expressed in thousands of Canadian dollars, unless
otherwise noted and except for per gram, kilogram, kilogram
equivalents, and per share amounts.
"I am proud of the efforts of our over 1,000 employees worldwide
as we continue to position Aphria for future growth and success in
the global medical and adult-use cannabis industry," stated
Irwin D. Simon, Aphria's Chairman
and Interim Chief Executive Officer. "Our organization has
experienced significant change in a very short period of time which
was necessary to propel the Company forward. Our Board of
Directors and executive team will remain focused on the advancement
of Aphria's leadership position in the global cannabis industry and
we are pleased to have announced today the appointment of two new
independent directors. Aphria will continue to drive sustainable
long-term shareholder value by leveraging its strong brand
positioning, superior distribution model, product innovation,
industrial scale cultivation and automation, medical-use leadership
and strategic global platform."
Non-Cash Impairment Charge on LATAM Assets
The Ontario
Securities Commission requested as part of a continuous disclosure
review that the Company perform an impairment test on its LATAM
assets subsequent to the filing of the 2019 second quarter
financial statements. As a result of this impairment test conducted
by the Company, the Company determined that a $50 million non-cash impairment charge to the
carrying value of the LATAM assets was required. The basis
for this impairment arises from the Company's reassessment of the
discount rate and the financial forecasts for these entities as a
result of new financial information received from the financial
advisors to the Special Committee who reviewed the LATAM
transaction. This new financial information consisted of
lower gross margins and EBITDA margins used by the financial
advisor for the Special Committee and recent financial information
from the LATAM entities that showed higher than expected expenses.
As a result of this new information, Aphria determined that the
discount rate should be adjusted which resulted in the non-cash
impairment charge to the carrying value of the LATAM assets.
Key Operating Highlights
- Net revenue of $73.6 million up
240% from prior quarter and 617% from prior year
- Ended quarter with strong balance sheet and liquidity,
including $107.5 million of cash and
$27.2 million of liquid marketable
securities, to fund planned Canadian and International growth
- Special Committee concluded review and found that the
acquisition of LATAM assets was within an acceptable range, albeit
near the top of the range of observable valuation metrics; the
Company's investment in LATAM assets is approximately $225 million, after recording the aforementioned
non-cash impairment charge, which is approximately $30 million more than the original agreed
purchase price of approximately $195
million
- Announced early termination and liquidation of interests in
Liberty Health Sciences, Inc., in line with the Company's
commitment to enhanced corporate governance practices and strategic
priorities, while at the same time generating cash without dilution
to shareholders
- Signed license agreement with Manna Molecular Science to
develop state-of-the-art cannabis transdermal patches
- Signed an exclusive agreement with Toronto-based UNOapp Inc. to collaborate on
the development of technology and analytics solutions for
Canada's adult-use cannabis
industry
- Signed an exclusive agreement with the Colombian Medical
Federation, a national guild that oversees the ethical exercise of
the medical profession in Colombia, in order to jointly develop an
academic curriculum on the medicinal use of cannabis
- Signed LOI for exclusive supply agreement with Insumos Medicos,
S.A., a Paraguayan pharmaceutical manufacturing, import and
distribution company, to provide medical cannabis in Paraguay
- Signed LOI with the Argentinian state-owned Cannabis Avatãra
Sociedad del Estado to enter into a co-operation agreement
regarding the cultivation of cannabis that will expand the
Company's strategic Argentinian operations, subject to the issuance
of a cultivation license
- Announced the first transfer of plant cuttings from four of the
Company's cannabis strains to Denmark-based Schroll Medical as part of the
Company's previously announced strategic partnership
- Closed the acquisition of CC Pharma GmbH ("CC Pharma"), a
leading distributor of pharmaceutical products, including medical
cannabis, to more than 13,000 pharmacies throughout Germany and Europe
Subsequent Events
- Aphria One received Health Canada approval for Part IV and V
expansions, bringing the total annualized production capacity at
Aphria One to 110,000 kilograms and total Company capacity to
115,000 kilograms
- Introduced CannRelief, a CBD-Based nutraceutical and cosmetics
product line, for the German market distributed by the Company's
subsidiary, CC Pharma
- Awarded provisional approval in Germany for cannabis cultivation license,
including five lots each with a minimum annual capacity of 200
kilograms
Green Growth Brands Update
In a separate release issued today, the Company also announced
that it has entered into a series of transactions that will
accelerate the expiry date of the unsolicited offer launched by
Green Growth Brands Inc. and will provide up to an additional
$89.0 million of liquidity to the
Company without dilution to shareholders. Please refer to this
separate press release for the terms and conditions of this
transaction.
Board of Directors Appointments
The Board appointed two new independent directors, effective
today. Walter Robb and David
Hopkinson will fill two of the three current director
vacancies.
Walter Robb is an investor,
mentor and advisor to next generation companies and as former
co-CEO of Whole Foods Market, he brings to Aphria a long and varied
entrepreneurial history ranging from natural food retailer to
farmer to consultant. Mr. Robb joined Whole Foods Market in 1991
and in 2010 was named co-CEO, at which time he joined the Whole
Foods Market Board of Directors. In 2017, he transitioned his
leadership focus to his role as a passionate advocate for greater
food access in underserved communities, serving as Chairman of the
Board for Whole Kids Foundation and Whole Cities Foundation. Mr.
Robb also serves on the Board of Directors for Union Square
Hospitality Group, The Container Store, FoodMaven, HeatGenie and
Apeel Sciences.
David Hopkinson serves as Real
Madrid Club de Futbol's ("Real Madrid") Global Head of
Partnerships. He joined Real Madrid in August 2018 and brings his 25 years of
professional sports sales, marketing and leadership experience to
Aphria. Mr. Hopkinson began his career in professional sports in
Toronto, Canada where he ascended
from an entry-level day one employee with the NBA's Toronto Raptors
to Chief Commercial Officer of MLSE, who are owners of the Raptors
as well as the NHL's Toronto Maple Leafs, MLS's Toronto FC, the
CFL's Toronto Argonauts and the NBA2K league's Raptors Uprising
Esports team. He also serves on the Chancellor's Advisory Committee
for McGill University in Montreal. In 2012, David was awarded the Queen
Elizabeth II Diamond Jubilee Medal in recognition of his
contributions to Canada.
Key Financial Highlights
Mr. Simon continued, "We continue to take decisive actions to
increase efficiency, including investing additional capital in
automation and packaging and adapting production to a new growing
method. While this contributed to an increase in our costs, we
expect higher future yields per square foot leading to stronger
results as we start fiscal year 2020. We believe the steps we have
taken will help fuel the growth of our strategic initiatives in
Canada and internationally to
generate long-term shareholder value."
|
Three months
ended
|
Three months
ended
|
|
February 28,
2019
|
February 28,
2018
|
Net
revenue
|
$73,582
|
$10,267
|
Gross
profit
|
$17,295
|
$8,570
|
Adjusted gross profit
1
|
$13,366
|
$7,912
|
Adjusted gross margin
1
|
18.2%
|
77.1%
|
Net income
(loss)
|
($108,209)
|
$12,944
|
Adjusted EBITDA
1
|
($14,435)
|
$2,727
|
|
|
|
|
|
|
|
Q3-2019
|
Q2-2019
|
Net
revenue
|
$73,582
|
$21,668
|
Kilograms (or
kilogram equivalents) sold 1
|
2,636.5
|
3,408.9
|
Cash cost to produce
dried cannabis / gram 1
|
$1.48
|
$1.34
|
"All-in" cost of
goods sold / gram 1
|
$3.76
|
$2.60
|
Adjusted EBITDA from
Canadian Cannabis Operations 1
|
($13,804)
|
($6,073)
|
Cash and cash
equivalents & marketable securities
|
$134,736
|
$184,821
|
Working
capital
|
$131,278
|
$181,523
|
Capital and
intangible asset expenditures - wholly-owned subsidiaries
1
|
$29,016
|
$49,061
|
Net revenue for the three months ended February 28, 2019 was $73.6 million, compared to $21.7 million in the prior quarter and
$10.3 million in the same period last
year. Higher revenue in the quarter was driven by $57.6 million of distribution revenue from CC
Pharma and ABP. Net revenue includes over 1,329 kilogram
equivalents sold for the Canadian adult-use market and 1,274
kilogram equivalents for medical cannabis sales. The decrease in
cannabis revenue and kilograms sold compared to the prior quarter
was primarily related to supply shortages as the Company
transitioned growing methods during the late fall and early winter,
as well as temporary packaging and distribution challenges.
The average retail selling price of medical cannabis (exclusive
of wholesale), before excise tax, increased to $8.03 per gram in the quarter, compared to
$7.51 in the prior quarter, primarily
related to higher oil sales. The average selling price of adult-use
cannabis, before excise tax, declined to $5.14 per gram in the quarter, compared to
$6.32 per gram in the prior quarter
due to a shift to smaller package sizes to maximize SKU assortment
and shelf space for the Company's brands.
Adjusted gross profit for the third quarter was $13.4 million, with an adjusted gross margin of
18%, compared to $10.2 million with
an adjusted gross margin of 47% in the prior quarter. The decline
in adjusted gross margin was primarily due to the increase in
revenues from our distribution business which operates with lower
gross margins than our cannabis business. In addition, the Company
experienced a temporary increase in packaging and distribution
costs as the Company awaits the industrial scale and automation in
Part IV and Part V to become operational.
Selling, general and administrative costs in the quarter rose to
$106.6 million, from $27.5 million in the prior quarter and
$16.9 million in the prior year. The
increase was primarily due to the $50.0
million impairment for the LATAM acquisition, an increase in
non-cash share based compensation, and the inclusion of a full
quarter of LATAM and two months of CC Pharma.
Net loss for the third quarter of 2019 was $108.2 million or $0.43 per share, compared to net income of
$54.8 million or $0.22 per share in the prior quarter, and net
income of $12.9 million or
$0.08 per share for the same period
last year. The decrease in net income relates to non-cash
impairments of $58 million and
additional non-operating losses of $30
million. Excluding the aforementioned non-cash impairment
charges, adjusted net loss was $50.2
million, or $0.20 per
share.
Adjusted EBITDA loss from Canadian cannabis operations for
the third quarter was $13.8 million
compared to a loss of $6.1 million in
the prior quarter. The adjusted EBITDA loss from Aphria
International for the third quarter was $0.6 million compared to a loss of
$3.5 million in the prior quarter.
The increased adjusted EBITDA loss from Canadian cannabis
operations in the third quarter is primarily attributable to an
increase in general and administrative expenses to support the
Company's planned capacity expansions, as well as a higher overhead
costs related to supply shortages, and a temporary increase in
packaging and distribution costs for the adult-use market.
In this press release, reference is made to adjusted gross
profit, adjusted gross margin, adjusted net loss, adjusted EBITDA
loss from Canadian cannabis operations, adjusted EBITDA loss from
Aphria International, kilogram (or kilogram equivalents) sold, cash
costs to produce dried cannabis per gram, "all-in" costs to produce
dried cannabis per gram and investments in capital and intangible
assets – wholly-owned subsidiaries, which are not measures of
financial performance under International Financial Reporting
Standards. Definitions for all terms above can be found in the
Company's February 28, 2019
Management's Discussion and Analysis, filed on SEDAR and EDGAR.
Conference Call
Aphria executives will host a conference call to discuss these
results today at 9:00 am ET. To
listen to the live call, dial (888) 231-8191 from Canada and the U.S. or (647) 427-7450 from
International locations and use the passcode 9475768. A telephone
replay will be available approximately two hours after the call
concludes through May 15, 2019. To
access the recording, dial (855) 859-2056 and use the passcode
9475768.
There will also be a simultaneous, live webcast available on the
Investors section of Aphria's website at aphria.ca. The webcast
will be archived for 30 days.
New Corporate Logo
Aphria introduced a new logo today to coincide the Company's
evolution from a licensed producer of medical cannabis in
Canada to a leading global
cannabis company. Aphria's mission is to be the premier global
cannabis company through an unrelenting commitment to our people,
the planet, product quality and innovation. As the Company embarks
on the next phase of its growth, the launch of this corporate brand
signifies Aphria's strategic focus on driving the transformation of
the cannabis industry. The Aphria tri-colour logo, which has been
in use since 2013, will continue to represent the Company's
flagship medical cannabis brand, Aphria, which has proudly
supported nearly 70,000 patients across Canada and in medical cannabis markets around
the world.
We Have A Good Thing Growing
About Aphria
Aphria is a leading global cannabis company driven by an
unrelenting commitment to our people, product quality and
innovation. Headquartered in Leamington,
Ontario – the greenhouse capital of Canada – Aphria has been setting the standard
for the low-cost production of high quality cannabis at scale,
grown in the most natural conditions possible. Focusing on untapped
opportunities and backed by the latest technologies, Aphria is
committed to bringing breakthrough innovation to the global
cannabis market. The Company's portfolio of brands is grounded in
expertly-researched consumer insights designed to meet the needs of
every consumer segment. Rooted in our founders' multi-generational
expertise in commercial agriculture, Aphria drives sustainable
long-term shareholder value through a diversified approach to
innovation, strategic partnerships and global expansion, with a
presence in more than 10 countries across 5 continents.
For more information, visit: aphria.ca
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: Certain
information in this news release constitutes forward-looking
statements under applicable securities laws. Any statements that
are contained in this news release that are not statements of
historical fact may be deemed to be forward-looking statements.
Forward looking statements are often identified by terms such as
"may", "should", "anticipate", "expect", "potential", "believe",
"intend" or the negative of these terms and similar expressions.
Forward-looking statements in this news release include, but are
not limited to, statements with respect to internal expectations,
estimated margins, expectations with respect to actual production
volumes, expectations for future growing capacity and costs, the
completion of any capital project or expansions, and expectations
with respect to future production costs. Forward-looking statements
necessarily involve known and unknown risks, including, without
limitation, risks associated with general economic conditions;
adverse industry events; marketing costs; loss of markets; future
legislative and regulatory developments involving cannabis;
inability to access sufficient capital from internal and external
sources, and/or inability to access sufficient capital on favorable
terms; the cannabis industry in Canada generally, income tax and regulatory
matters; the ability of Aphria to meet its liquidity requirements
to fund ongoing operations; the ability of Aphria to implement its
business strategies; competition; crop failure; currency and
interest rate fluctuations
Readers are cautioned that the foregoing list is not exhaustive
and should consider as other factors discussed under the heading
"Risk Factors" in Aphria's most recent Annual Information Form and
MD&A filed on SEDAR. Readers are further cautioned not to place
undue reliance on forward-looking statements as there can be no
assurance that the plans, intentions or expectations upon which
they are placed will occur. Such information, although considered
reasonable by management at the time of preparation, may prove to
be incorrect and actual results may differ materially from those
anticipated.
The 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
statements to reflect new information, subsequent events or
otherwise unless required by applicable securities laws.
Forward-looking statements contained in this news release are
expressly qualified by this cautionary statement.
Condensed Interim
Consolidated Statements of Loss and Comprehensive Loss
|
(In Canadian
dollars)
|
(Unaudited)
|
|
|
For the
three months ended
February 28,
|
For the nine
months ended
February 28,
|
|
|
2019
|
2018
|
2019
|
2018
|
|
Revenue from cannabis
produced
|
$
17,862
|
$
10,267
|
$
52,816
|
$
24,891
|
|
Distribution
revenue
|
57,599
|
--
|
58,745
|
--
|
|
Other
revenue
|
545
|
--
|
2,261
|
--
|
|
Excise
taxes
|
(2,424)
|
--
|
(5,280)
|
--
|
Net
revenue
|
73,582
|
10,267
|
108,542
|
24,891
|
|
Production
costs
|
10,175
|
2,355
|
24,477
|
6,447
|
|
Cost of goods
purchased
|
49,745
|
--
|
50,856
|
--
|
|
Other costs of
sales
|
296
|
--
|
1,228
|
--
|
Gross profit
before fair value adjustments
|
13,366
|
7,912
|
31,981
|
18,444
|
|
Fair value adjustment
on sale of inventory
|
5,542
|
3,443
|
18,075
|
7,250
|
|
Fair value adjustment
on growth of biological assets
|
(9,471)
|
(4,101)
|
(23,136)
|
(11,481)
|
Gross
profit
|
17,295
|
8,570
|
37,042
|
22,675
|
Operating
expenses:
|
|
|
|
|
|
General and
administrative
|
22,434
|
2,794
|
43,561
|
6,502
|
|
Share-based
compensation
|
14,300
|
5,959
|
22,996
|
10,668
|
|
Selling, marketing
and promotion
|
6,948
|
2,991
|
20,025
|
7,758
|
|
Amortization
|
3,665
|
755
|
9,556
|
1,270
|
|
Research and
development
|
223
|
110
|
1,097
|
280
|
|
Impairment
|
58,039
|
--
|
58,039
|
--
|
|
Transaction
costs
|
942
|
4,253
|
2,930
|
4,253
|
|
|
106,551
|
16,862
|
158,204
|
30,731
|
Operating income
(loss)
|
(89,256)
|
(8,292)
|
(121,162)
|
(8,056)
|
|
Non-operating income
(loss)
|
(30,416)
|
25,308
|
89,304
|
50,635
|
Income (loss) before
income taxes (recovery)
|
(119,672)
|
17,016
|
(31,858)
|
42,579
|
Income taxes
(recovery)
|
(11,463)
|
4,072
|
401
|
8,139
|
Net income
(loss)
|
(108,209)
|
12,944
|
(32,259)
|
34,440
|
Other
comprehensive gain (loss)
|
|
|
|
|
|
Other comprehensive
gain (loss)
|
(61)
|
--
|
(61)
|
(801)
|
Net comprehensive
income (loss)
|
$
(108,270)
|
$
12,944
|
$
(32,320)
|
$
33,639
|
Total
comprehensive income (loss) is attributable to:
|
|
|
|
|
|
Shareholders of
Aphria Inc.
|
(107,886)
|
12,945
|
(31,529)
|
33,640
|
|
Non-controlling
interest
|
(384)
|
(1)
|
(791)
|
(1)
|
|
|
$
(108,270)
|
$
12,944
|
$
(32,320)
|
$
33,639
|
Weighted average
number of common shares - basic
|
250,149,598
|
161,120,698
|
240,106,147
|
147,274,372
|
Weighted average
number of common shares - diluted
|
250,149,598
|
167,494,603
|
240,106,147
|
153,189,773
|
Earnings (loss)
per share - basic
|
-$0.43
|
$
0.08
|
-$0.13
|
$
0.23
|
Earnings (loss)
per share - diluted
|
-$0.43
|
$
0.08
|
-$0.13
|
$
0.22
|
Condensed Interim
Consolidated Statements of Financial Position
|
|
(In Canadian
dollars)
|
|
|
|
|
|
|
|
|
February 28,
2019
|
May 31,
2018
|
Assets
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
107,502
|
$
59,737
|
|
Marketable
securities
|
27,234
|
45,062
|
|
Accounts
receivable
|
44,142
|
3,386
|
|
Other current
assets
|
24,615
|
14,384
|
|
Inventory
|
86,227
|
22,150
|
|
Biological
assets
|
7,261
|
7,331
|
|
Assets held for
sale
|
--
|
40,620
|
|
Current portion of
convertible notes receivable
|
11,500
|
1,942
|
|
|
|
|
308,481
|
194,612
|
|
Capital
assets
|
466,349
|
303,151
|
|
Intangible
assets
|
388,125
|
226,444
|
|
Convertible notes
receivable
|
18,542
|
16,129
|
|
Interest in equity
investees
|
9,604
|
4,966
|
|
Long-term
investments
|
125,325
|
46,028
|
|
Promissory notes
receivable
|
61,809
|
--
|
|
Goodwill
|
674,412
|
522,762
|
|
|
$
2,052,647
|
$
1,314,092
|
Liabilities
|
|
|
Current
liabilities
|
|
|
|
Accounts payable and
accrued liabilities
|
$
125,598
|
$
31,517
|
|
Income taxes
payable
|
1,568
|
3,584
|
|
Deferred
revenue
|
28,171
|
2,607
|
|
Current portion of
promissory note payable
|
489
|
610
|
|
Current portion of
long-term debt
|
14,612
|
2,140
|
|
Current portion of
option payment liability
|
6,765
|
--
|
|
Current portion of
derivative liability
|
--
|
3,396
|
|
|
177,203
|
43,854
|
Long-term
liabilities
|
|
|
|
Long-term
debt
|
62,279
|
28,337
|
|
Option payment
liability
|
14,277
|
--
|
|
Derivative
liability
|
--
|
9,055
|
|
Deferred tax
liability
|
86,452
|
59,253
|
|
|
340,211
|
140,499
|
Shareholders'
equity
|
|
|
|
Share
capital
|
1,653,191
|
1,113,981
|
|
Warrants
|
1,336
|
1,375
|
|
Share-based payment
reserve
|
33,218
|
22,006
|
|
Accumulated other
comprehensive loss
|
(61)
|
(801)
|
|
Non-controlling
interest
|
29,569
|
9,580
|
|
Retained earnings
(deficit)
|
(4,817)
|
27,452
|
|
|
1,712,436
|
1,173,593
|
|
|
$
2,052,647
|
$
1,314,092
|
|
For the three
months
ended
February 28,
|
For the nine
months ended
February 28,
|
2019
|
2018
|
2019
|
2018
|
|
Net income
(loss)
|
$
(108,209)
|
$
12,944
|
$
(32,259)
|
$
34,440
|
|
Income taxes
(recovery)
|
(11,463)
|
4,072
|
401
|
8,139
|
|
Non-operating
(income) loss
|
30,416
|
(25,308)
|
(89,304)
|
(50,635)
|
|
Amortization
|
5,469
|
1,465
|
14,329
|
2,869
|
|
Share-based
compensation
|
14,300
|
5,959
|
22,996
|
10,668
|
|
Fair value adjustment
on sale of inventory
|
5,542
|
3,443
|
18,075
|
7,250
|
|
Fair value adjustment
on growth of biological assets
|
(9,471)
|
(4,101)
|
(23,136)
|
(11,481)
|
|
Impairment
|
58,039
|
--
|
58,039
|
--
|
|
Transaction
costs
|
942
|
4,253
|
2,930
|
4,253
|
|
Adjusted EBITDA from
Aphria International
|
631
|
--
|
7,224
|
--
|
Adjusted EBITDA
from Canadian cannabis
|
|
|
|
|
operations
|
$
(13,804)
|
$
2,727
|
$
(20,705)
|
$
5,503
|
|
For the three
months ended
February 28,
|
For the nine
months ended
February 28,
|
2019
|
2018
|
2019
|
2018
|
Adjusted
EBITDA from Canadian cannabis operations
|
$
(13,804)
|
$
2,727
|
$
(20,705)
|
$
5,503
|
Adjusted
EBITDA from Aphria International
|
(631)
|
--
|
(7,224)
|
--
|
Adjusted
EBITDA
|
$
(14,435)
|
$
2,727
|
$
(27,929)
|
$
5,503
|
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multimedia:http://www.prnewswire.com/news-releases/aphria-announces-third-quarter-fiscal-2019-financial-results-300831827.html
SOURCE Aphria Inc.