Releases Preliminary Results for the Second
Fiscal Quarter Ended December 31,
2019
- Aurora Cannabis Founder & CEO, Terry Booth, announces retirement and succession
plan and expansion of the Board of Directors
- Executive Chairman Michael
Singer has been appointed Interim CEO, effective
immediately; search for permanent successor underway
- Two new Independent Directors to join the Board for a
total of 10 directors, including 7 Independents
- Announces comprehensive transformation plan to
significantly reduce the Company's expense base, rationalize
capital expenditures, and better align its balance sheet with
current market conditions
- Secures credit facility amendments that remove EBITDA
ratio covenants and provide additional financial flexibility as
Aurora executes transformation plan
- Company provides select unaudited preliminary fiscal Q2
2020 financial results and updated outlook
- Aurora to host Conference Call at 5:00 p.m. Eastern Time
NYSE | TSX : ACB
EDMONTON, Feb. 6, 2020 /PRNewswire/ - Aurora Cannabis
Inc. (the "Company" or "Aurora") (NYSE | TSX: ACB), the Canadian
company defining the future of cannabis worldwide, today announced
a CEO succession and Board expansion; the latter of which is
detailed in a separate announcement released this afternoon. The
Company also announced a business transformation plan that better
aligns selling, general & administrative expenses, and capital
expenditures with current market conditions.
These combined changes are consistent with, and evidence of
Aurora's commitment to, achieving positive EBITDA and cash flow as
rapidly as possible, while still maintaining the ability to
capitalize on longer-term Canadian and global cannabis market
opportunities.
CEO Succession
Aurora CEO Terry Booth stated,
"Over the last seven years, Aurora has built an incredible platform
and a leading position in the global Cannabis industry. I am proud
and humbled to have led that journey with a deeply talented and
passionate team of employees. While there is still much work to be
done, the timing is right to announce my retirement with a
thoughtful succession plan in place and the immediate expansion of
the Board of Directors. These changes, along with the financial
transformation which we are undertaking, should clearly demonstrate
to investors that Aurora has the continuity, strategic direction
and leadership it needs to transition from its entrepreneurial
roots to an established organization well positioned to capitalize
on a global growth opportunity. In that spirit, and with my full
support, the Board of Directors has appointed Michael Singer as Interim CEO effective
immediately." Booth continued, "As part of the succession plan, I
will become a Senior Strategic Advisor to the Board and remain a
Director. Additionally, we're welcoming new independent members;
Lance Friedmann and Michael Detlefsen who bring a wealth of
strategic and hands-on consumer products industry experience to the
organization."
Michael Singer, Aurora's
Executive Chairman and Interim CEO stated, "I look forward to
serving as Interim CEO and executing on our short-term plans, which
include a rationalization of our cost structure, reduced capital
spending, and a more conservative and targeted approach to capital
deployment. These are necessary steps that reflect a fundamental
change in how we will operate the business going forward." Singer
continued, "On behalf of the Board of Directors, I want to thank
Terry for his leadership over the years. He's made an indelible
mark on the industry and left an enviable legacy in the form of
Aurora Cannabis and the potential that exists for the Company over
the coming decades. As one of the original cannabis visionaries,
Terry is an invaluable resource with deep industry knowledge that
we can leverage strategically. I look forward to having him
continue on as a Senior Strategic Advisor to our Board of
Directors."
Financial Transformation & Capital Position
Management today announced sweeping changes intended to
rationalize the cost structure and balance sheet going forward. The
Company believes this will better align the business financially
with the current realities of the cannabis market in Canada while maintaining a sustainable
platform for long-term growth.
These actions are expected to include significant and immediate
decreases in selling, general & administrative ("SG&A")
expenses and capital investment plans.
Selling, General & Administrative Expenses
It is the Company's intention to manage the business to an
SG&A range of $40 million to
$45 million per quarter by the end of
the fiscal fourth quarter of 2020, a significant decrease from the
preliminary fiscal second quarter 2020 range announced today. To do
this, management plans to focus the business on its core areas: 1)
Canadian consumer market; 2) Canadian medical market; 3)
established international medical markets; and 4) U.S. market
initiatives. Severance and other one-time charges related to
SG&A reductions are expected to range from $2 million to $4
million and will be largely incurred in the Company's fiscal
second and third quarters ending December
31, 2019 and March 31, 2020
respectively.
As part of the changes to operations, the Company has eliminated
close to 500 full-time equivalent staff across the company,
including approximately 25% of corporate positions. Additionally,
management is restructuring spending plans on information
technology projects, sales and marketing initiatives, travel &
entertainment, professional services, and other non-revenue
generating third-party costs which do not provide an immediate
impact on revenue.
Capital Expenditures
Aurora announced its intention to reduce capital expenditures
for the second half of fiscal 2020 to bring capital expenditures
below $100 million in total. Over the
past several weeks, Aurora management has undertaken a detailed
evaluation of all capital projects underway and made decisions with
respect to continuing or terminating further investment in each.
Future capital allocation decisions will be scrutinized first and
foremost through a lens of optimizing near-term investor
returns.
Balance Sheet & Liquidity
Aurora has also announced a number of amendments to its secured
credit facilities which are designed to better align the Company's
balance sheet and cash flow expectations with current market
conditions and to provide financial flexibility over the near term.
These amendments include:
- Complete removal of all EBITDA ratio covenants, originally set
to commence in the period ending September
30, 2020
- Complete removal of fixed charge coverage ratio covenant
- Adjustment of the total funded debt-to-equity covenant to
0.20:1 commencing in fiscal third quarter 2020, from 0.25:1
currently
- Reduction of the total facility size available by $141.5 million
- Introduction of a new minimum liquidity covenant of
$35 million
- The introduction of a covenant requiring Aurora to achieve
positive EBITDA thresholds beginning in fiscal Q1 2021 that The
Company believes are consistent with today's announced changes
Glen Ibbott, Aurora's CFO stated,
"We are pleased to have reached an agreement with our syndicate of
banks to provide Aurora with additional financial flexibility
aligned with our focus on achieving near-term profitability and
providing the Company with options to refinance the facility at
maturity. I would like to thank our banking partners for their
continued support of Aurora."
Aurora announced that, given market current cannabis market
conditions and the slower than expected near-term industry growth,
it has undertaken a thorough review of all business operations and
concluded that certain assets and goodwill values as at
December 31, 2019 exceed current
fair-market valuations. As such, when Aurora formally reports its
fiscal second quarter 2020 results, it expects to report asset
impairment charges on certain intangible and property, plant and
equipment in a range of $190 million
to $225 million and write-downs of
goodwill in the range of $740 million
to $775 million. Following these
non-cash charges, Aurora expects to remain compliant with its
revised total debt-to-equity covenant going forward.
Glen Ibbott continued, "The
assets being impaired are predominantly associated with our
operations in South America and
Denmark, as our estimate of the
timeline for substantial growth extends in those markets. Our core
Canadian cannabis assets are not impacted by these non-cash asset
impairment charges." Ibbott concluded, "We believe that the
long-term opportunity for Aurora remains very compelling, despite a
slower than anticipated rate of industry growth in the near-term.
We also believe our approach to rationalizing the business and
conservatively improving our balance sheet positions Aurora in a
more stable position for sustainable growth going forward."
Aurora announced that its consolidated cash position was
$156 million, excluding $45 million of restricted cash as at December 31, 2019. This includes gross proceeds
raised under its US$400 million
At-the-Market ("ATM") financing program of approximately
US$245 million (or approximately
$325 million) to date in fiscal 2020.
As of today, the Company has remaining capacity under its current
ATM program of approximately $200
million. With the cost reduction and business transformation
initiatives announced today, the Company expects that utilization
of the ATM capacity will be sufficient to fund operations and
remaining required capital expenditures, to the points where
positive EBITDA and free cash flow are achieved.
Unaudited Preliminary Fiscal 2020 Second Quarter Financial
Results
Aurora today provided unaudited preliminary second quarter
fiscal 2020 financial results. The Company expects cannabis
revenues for the second quarter of fiscal 2020 of $62 million to $66
million, net of excise taxes. Aurora expects to record
provisions for returns, price reductions and future provisions of
approximately $12 million, almost all
of which relates to product sold in previous quarters. Therefore,
net cannabis revenues, after giving effect to these offsets, are
expected to be $50 million to
$54 million. These revenue
expectations reflect consistent quarter-over-quarter medical
revenues, a decrease in international revenues due to short-term
German supply interruptions, and much lower bulk sales. For the
second quarter, Aurora expects to report modest
quarter-over-quarter growth in consumer cannabis revenues prior to
applying these offsetting return and price reduction
allowances.
Cash cost to produce per gram of dried cannabis
sold(1) is expected to remain below $1.00, sales and marketing expenses are expected
to be between $28 million to
$32 million and general and
administrative expenses are expected to be between $70 million to $75
million.
The outlook for cannabis revenue for Aurora's fiscal third
quarter is expected to be impacted by the general industry
headwinds mentioned above, and as such will likely show little to
no growth relative to fiscal Q2's cannabis revenue of $62 million to $66
million, prior to the provisions for returns and price
reductions.
Aurora will announce its full second quarter fiscal 2020
financial results on February 13,
2020.
Aurora will host a conference call today at 5:00pm Eastern Time to discuss these updates.
CEO Succession & Business Transformation Plan Conference
Call
DATE: Today, Thursday, February 6,
2020
TIME: 5:00 p.m. Eastern Time |
3:00 p.m. Mountain Time
WEBCAST: http://public.viavid.com/index.php?id=138052
REPLAY: (844)-512-2921 or (412)-317-6671
PIN NUMBER: 13698974
Available until 11:59 p.m. Eastern Time
Thursday, February 20, 2020
(1)
|
Cash cost to produce
per gram of dried cannabis sold is a non-GAAP financial measure and
is not recognized, defined, or subject to standardized measurement
under IFRS. Aurora defines and reconciles the calculation to IFRS
in the Company's interim MD&A. Cash cost to produce per
gram of dried cannabis sold is calculated by taking the IFRS cost
of sales, excluding the effect of changes in the FV of biological
assets and inventory, and deducting depreciation, cannabis extract
conversion costs, cost of accessories, cost of products purchased
from other Licensed Producers that were sold, cost of sales from
non-cannabis producing subsidiaries, and post-production costs.
Cash cost to produce per gram of dried cannabis sold is calculated
by taking cash cost to produce of dried cannabis sold divided by
total grams of dried cannabis sold in the period that were produced
by Aurora. Management believes these measures provide useful
information about the efficiency of production and fulfillment for
our core cannabis operations
|
About Aurora
Headquartered in Edmonton, Alberta,
Canada with sales and operations in 25 countries across five
continents, Aurora is one of the world's largest and leading
cannabis companies. Aurora is vertically integrated and
horizontally diversified across every key segment of the value
chain, from facility engineering and design to cannabis breeding
and genetics research, cannabis and hemp production, derivatives,
high value-add product development, home cultivation, wholesale and
retail distribution.
Highly differentiated from its peers, Aurora has established a
uniquely advanced, consistent and efficient production strategy,
based on purpose-built facilities that integrate leading-edge
technologies across all processes, defined by extensive automation
and customization, resulting in the massive scale production of
high-quality consistent product. Designed to be replicable and
scalable globally, our production facilities are designed to
produce cannabis at significant scale, with high quality,
industry-leading yields, and low-per gram production costs. Each of
Aurora's facilities is built to meet European Union Good
Manufacturing Practices ("EU GMP") standards. Certification has
been granted to Aurora's first production facility in Mountain View
County, the MedReleaf Markham facility, and its wholly owned
European medical cannabis distributor Aurora Deutschland. All
Aurora facilities are designed and built to the EU GMP
standard.
In addition to the Company's rapid organic growth and strong
execution on strategic M&A, which to date includes 17 wholly
owned subsidiary companies – MedReleaf, CanvasRX, Peloton
Pharmaceutical, Aurora Deutschland, H2 Biopharma, BC Northern
Lights, Larssen Greenhouses, CanniMed Therapeutics, Anandia,
HotHouse Consulting, MED Colombia, Agropro, Borela, ICC Labs,
Whistler, Chemi Pharmaceutical, and Hempco – Aurora is
distinguished by its reputation as a partner and employer of choice
in the global cannabis sector, having invested in and established
strategic partnerships with a range of leading innovators,
including: Radient Technologies Inc. (TSXV: RTI), Cann Group Ltd.
(ASX: CAN), Micron Waste Technologies Inc. (CSE: MWM), Choom
Holdings Inc. (CSE: CHOO), CTT Pharmaceuticals (OTCC: CTTH),
Alcanna Inc. (TSX: CLIQ), High Tide Inc. (CSE: HITI), EnWave
Corporation (TSXV: ENW), Capcium Inc. (private), and Evio Beauty
Group (private).
Aurora's Common Shares trade on the TSX and NYSE under the
symbol "ACB", and is a constituent of the S&P/TSX Composite
Index.
Forward Looking Statements
This news release includes statements containing certain
"forward-looking information" within the meaning of applicable
securities law ("forward-looking statements"). Forward-looking
statements are frequently characterized by words such as "plan",
"continue", "expect", "project", "intend", "believe", "anticipate",
"estimate", "may", "will", "potential", "proposed" and other
similar words, or statements that certain events or conditions
"may" or "will" occur. These forward-looking statements are only
predictions. Various assumptions were used in drawing the
conclusions or making the projections contained in the
forward-looking statements throughout this news release.
Forward-looking statements are based on the opinions, estimates and
assumptions of management in light of management's experience and
perception of historical trends, current conditions and expected
developments at the date the statements are made, such as current
and future market conditions, the current and future regulatory
environment and future approvals and permits. Forward-looking
statements are subject to a variety of risks, uncertainties and
other factors that management believes to be relevant and
reasonable in the circumstances could cause actual events, results,
level of activity, performance, prospects, opportunities or
achievements to differ materially from those projected in the
forward-looking statements, including general business and economic
conditions, changes in laws and regulations, product demand,
changes in prices of required commodities, competition and other
risks, uncertainties and factors set out under the heading "Risk
Factors" in the Company's annual information form dated
September 10, 2019 (the "AIF") and
filed with Canadian securities regulators available on the
Company's issuer profile on SEDAR at www.sedar.com. The Company
cautions that the list of risks, uncertainties and other factors
described in the AIF is not exhaustive and other factors could also
adversely affect its results. Readers are urged to consider the
risks, uncertainties and assumptions carefully in evaluating the
forward-looking statements and are cautioned not to place undue
reliance on such information. The Company is under no obligation,
and expressly disclaims any intention or obligation, to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as expressly
required by applicable securities laws.
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SOURCE Aurora Cannabis Inc.