- Net Revenue of $66.6
million, excluding provisions of $10.6 million
- Net Cannabis Revenue, excluding provisions, of
$63.2 million, In Line With Recent
Guidance
- Cash Cost to Produce Per Gram Sold of $0.88
- Successful Launch of Cannabis 2.0 Products Across
Canada
- Consumer Cannabis Net Revenue, excluding provisions,
Grows at 11% Over Prior Quarter
NYSE | TSX: ACB
EDMONTON, Feb. 13, 2020 /CNW/ - Aurora Cannabis Inc. (the
"Company" or "Aurora") (NYSE | TSX: ACB), the
Canadian company defining the future of cannabis worldwide,
announced today its financial and operational results for the
second quarter of fiscal 2020 ended December
31, 2019.
"Despite delivering modest growth in our core medical and
consumer business in Q2, we took immediate and deliberate actions
to align our Company to current market conditions," said
Michael Singer, Executive Chairman
and Interim CEO, Aurora Cannabis.
"As announced last week, being a profitable cannabis company for
our investors is the singular near-term focus for Aurora and we
have begun to implement a business transformation plan where we
intend to manage the business with a high degree of fiscal
discipline."
Second Quarter 2020 Highlights
(Unless otherwise stated, comparisons are made between Fiscal
Q2 2020 and Q1 2020 results and are in Canadian dollars)
- Cannabis net revenue of $63.2
million, excluding provisions, in Q2 2020 compared to
$70.8 million in Q1 2020:
-
- Canadian and international medical cannabis net revenue of
$27.4 million, with Canadian medical
net revenue sequentially flat at $25.6
million, and international medical net revenue down from
$5.0 million to $1.8 million due to a temporary sales
interruption
- Consumer cannabis net revenue, excluding provisions, of
$33.5 million was an increase of 11%
from $30.0 million in the previous
quarter. Including the $10.6 million
provision for returns and price adjustments for prior quarter
sales, reported consumer cannabis net revenues were $22.9 million. Also affecting Q2 consumer
cannabis net revenue was slower provincial ordering during the
quarter, a shift in the market to value brands (Aurora launched
"Daily Special" in early February
2020), and the industry-wide impact from the slow pace of
retail store licensing
- Wholesale bulk cannabis net revenues of $2.4 million, a decline from $10.3 million in the previous quarter, due to
overall volume declines and the wholesale of lower potency (priced)
product
- Production volume in fiscal Q2 was 30,691 kilograms, in-line
with previous expectations as Aurora realigned its cultivation
strategy to produce a greater amount of higher value and higher
potency strains
- Cash cost to produce per gram sold remained relatively
consistent at $0.88 per gram versus
$0.85 per gram last quarter – Aurora
intends to maintain this metric below $1.00 per gram
- Aurora's medical patient base remained relatively consistent at
90,307
- Successfully launched Cannabis 2.0 products with sales to
provincial distributors commencing on December 17, 2019
Subsequent Events & Business Transformation Plan
Subsequent to the quarter end, the Company made several
decisions designed to strategically transform its operations and
provide financial flexibility in response to a changing market and
regulatory environment, while supporting its long-term growth:
- Announced CEO succession plan and expansion of the Board of
Directors
- Executive Chairman Michael
Singer appointed Interim CEO, effective February 6, 2020; search for permanent successor
underway
- Two new Independent Directors joined the Board for a total of
10 directors, including 7 Independents
- Announced comprehensive transformation plan to significantly
reduce the Company's expense base, rationalize capital
expenditures, and better align its balance sheet with current
market conditions
- Secured credit facility amendments that remove EBITDA ratio
covenants and provided additional financial flexibility as Aurora
executes transformation plan
"The transformational actions we announced last week have
already positively impacted SG&A expense and we are confident
that our run-rate will be approximately $40
million - $45 million as we
exit the fiscal fourth quarter of 2020. This is a very
important step toward EBITDA profitability," said
Glen Ibbott, CFO. "In addition, our
credit facility was amended to provide greater flexibility to
Aurora. More specifically, Aurora chose to downsize the facility by
$96.5 million with the elimination of
undrawn term loan capacity, and further used $45 million of restricted cash to repay a portion
of the drawn term loan balance for the purpose of reducing leverage
and cash required for debt service."
Following these facility changes, Aurora's current credit
facility and other debt outstanding includes:
- $50 million revolving facility,
of which $2 million was drawn as of
December 31, 2019
- $162 million of fully drawn
senior secured term loans
- US$345 million of senior
unsecured convertible debentures due February 2024
Q2 2020 Key Financial and Operational Metrics
($ thousands,
except Operational Results)
|
Q2
2020
|
Q1 2020
(4)
|
$
Change
|
%Change
|
Financial
Results
|
|
|
|
|
Total net
revenue(4)
|
$56,027
|
$75,245
|
($19,218)
|
(26)%
|
Cannabis net revenue
(1)(2a) (4)
|
$52,676
|
$70,776
|
($18,100)
|
(26)%
|
Canadian and
international medical cannabis net revenue
(1)(2a)
|
$27,386
|
$30,450
|
($3,064)
|
(10)%
|
Consumer cannabis net
revenue (1)(2a)
|
$22,906
|
$30,022
|
($7,116)
|
(24)%
|
Wholesale bulk
cannabis net revenue (1)(2a)
|
$2,384
|
$10,304
|
($7,920)
|
(77)%
|
Gross margin before
FV adjustments on cannabis net revenue
(1)(2b)
|
44%
|
58%
|
N/A
|
(14)%
|
Gross margin before
FV adjustments on medical cannabis net revenue
(1)(2b)
|
54%
|
63%
|
N/A
|
(9)%
|
Gross margin before
FV adjustments on consumer cannabis net revenue
(1)(2b)
|
32%
|
53%
|
N/A
|
(21)%
|
Gross margin before
FV adjustments on wholesale bulk cannabis net revenue
(1)(2b)
|
45%
|
58%
|
N/A
|
(13)%
|
Adjusted gross margin
before FV adjustments on cannabis net revenue
(1)(2b)
|
55%
|
67%
|
N/A
|
(12)%
|
Selling, general and
administration expense
|
$99,882
|
$81,132
|
$18,750
|
23%
|
|
|
|
|
|
Balance
Sheet
|
|
|
|
|
Working
capital
|
$415,936
|
$123,750
|
$292,186
|
236%
|
Cannabis inventory
and biological assets (1)(3)
|
$216,735
|
$178,748
|
$37,987
|
21%
|
Total
assets
|
$4,671,912
|
$5,606,799
|
($934,887)
|
(17)%
|
|
|
|
|
|
Operational
Results – Cannabis
|
|
|
|
|
Cash cost to produce
per gram sold (1)(2c)
|
$0.88
|
$0.85
|
$0.03
|
4%
|
Active registered
patients
|
90,307
|
91,116
|
(809)
|
(1)%
|
Average net selling
price of medical cannabis (1)
|
$7.99
|
$8.00
|
($0.01)
|
0%
|
Average net selling
price of consumer cannabis (1)
|
$4.76
|
$5.28
|
($0.52)
|
(10)%
|
Average net selling
price of wholesale bulk cannabis (1)
|
$1.90
|
$3.46
|
($1.56)
|
(45)%
|
Kilograms
produced
|
30,691
|
41,436
|
(10,745)
|
(26)%
|
Kilograms
sold
|
9,501
|
12,463
|
(2,962)
|
(24)%
|
(1)
|
|
These terms are
defined in the "Cautionary Statement Regarding Certain Non-GAAP
Performance Measures" section of the MD&A.
|
(2)
|
|
Refer to the
following sections in the MD&A for reconciliation of non-GAAP
measures to the IFRS equivalent measure:
|
|
a.
|
Refer to the
"Revenue" section in the MD&A for a reconciliation of
cannabis net revenue to the IFRS equivalent.
|
|
b.
|
Refer to the
"Gross Margin" section in the MD&A for reconciliation to
the IFRS equivalent.
|
|
c.
|
Refer to the "Cash
Cost of Sales of Dried Cannabis and Cash Cost to Produce Dried
Cannabis Sold – Aurora Produced Cannabis" section of the
MD&A for reconciliation to the IFRS equivalent.
|
(3)
|
|
Represents total
biological assets and cannabis inventory, exclusive of merchandise,
accessories, supplies and consumables.
|
(4)
|
|
Includes impact
of actual and expected product returns and price adjustments (three
and six months ended December 31, 2019 - $10.6 million; three and
six months ended December 31, 2018 - nil)
|
($
thousands)
|
Three months
ended
|
December 31,
2019
|
|
December 31,
2018
|
Net
revenue
|
56,027
|
|
54,178
|
|
Patient counseling
services
|
(695)
|
|
(2,334)
|
|
Analytical testing
services
|
(637)
|
|
(1,367)
|
|
Other cannabis
segment revenues (accessories, hemp, other)
|
(1,655)
|
|
(2,174)
|
|
Horizontally
integrated business revenue
|
(364)
|
|
(726)
|
|
Cannabis net
revenue
|
52,676
|
|
47,577
|
|
The table below outlines the breakdown of cannabis net revenue
between our medical, consumer and wholesale bulk markets, as well
as our dried cannabis and cannabis extracts for the three months
ended December 31, 2019 and September
30, 2019.
($
thousands)
|
Three months
ended
|
December 31,
2019
|
|
September 30,
2019
|
Medical cannabis
net revenue
|
|
|
|
Canada dried
cannabis
|
14,803
|
|
14,882
|
Canada cannabis
extracts (1)
|
10,791
|
|
10,606
|
International dried
cannabis
|
1,758
|
|
4,553
|
International
cannabis extracts (1)
|
34
|
|
409
|
Total medical
cannabis net revenue
|
27,386
|
|
30,450
|
|
|
|
|
Consumer cannabis
net revenue
|
|
|
|
Dried
cannabis
|
28,980
|
|
26,889
|
Cannabis extracts
(1)
|
4,491
|
|
3,133
|
Revenue provisions
(2)
|
(10,565)
|
|
-
|
Total consumer
cannabis net revenue
|
22,906
|
|
30,022
|
|
|
|
|
Wholesale bulk
cannabis net revenue
|
|
|
|
Dried
cannabis
|
2,352
|
|
7,432
|
Cannabis extracts
(1)
|
32
|
|
2,872
|
Wholesale bulk
cannabis net revenue
|
2,384
|
|
10,304
|
|
|
|
|
Total cannabis net
revenue
|
52,676
|
|
70,776
|
(1)
|
Cannabis extracts
revenue includes cannabis oils, capsules, softgels, sprays and
topical revenue.
|
(2)
|
Revenue provisions
consists of actual returns and price adjustments of $6.1 million
and a $4.5 million revenue provision for estimated future returns
and price adjustments
|
Consolidated net revenue, excluding provisions, was $66.6 million in Q2 2020 as compared to
$75.2 million in the prior quarter.
Medical cannabis net revenues decreased to $27.4 million in Q2 2020, down 10% over the prior
quarter due to a short-term permit issue in Germany (since resolved). Consumer cannabis
revenues were $33.5 million
($22.9 million net of provisions) in
Q2 2020. The provisions included in cannabis net revenues are
comprised of $6.1 million of actual
returns and price adjustments and a $4.5
million provision for future returns and price
adjustments.
Average net selling price of cannabis, including provisions,
decreased to $5.54 per gram over the
prior quarter of $5.68. This decrease
is attributable to the previously mentioned provision for returns
and price adjustments impacting Q2 2020 which did not affect Q1
2020, lower kilograms sold in Q2 versus Q1, and lower wholesale
bulk volume and pricing.
Gross margin before fair value adjustments on cannabis net
revenue, excluding provisions was 48% in Q2 2020, compared to 58%
in the prior quarter. Including the impact of the return and
price adjustment provisions, gross margin before fair value
adjustments on cannabis net revenue was 44%.
During Q2 2020, Aurora produced 30,691 kilograms of cannabis as
compared to 41,436 kilograms in the prior quarter. The 26% decrease
in production output was primarily due to previously announced
changes to cultivation strategies, including a pivot to high-value,
high-potency strains which are lower yielding. With continued
refinement of our cultivation techniques, we expect to achieve
quarterly harvest volumes leading to an average of 150,000 kgs
annually or better.
Q2 2020 SG&A increased by 23% to $99.9 million from the prior quarter. The
increase was primarily driven by a rise in salaries and benefits
due to targeted growth in corporate headcount and annual merit
increases, investments in educational marketing campaigns related
to the launch of Cannabis 2.0 products, and marketing initiatives
related to the launch of the Aurora Drift brand. On
February 6, 2020, Aurora announced
decisive action effective immediately to reduce SG&A expenses
from the Q2 2020 levels, and expects to manage the business with an
SG&A expense run-rate of between $40
million to $45 million per
quarter exiting Q4 2020 (June 30,
2020).
Adjusted EBITDA(1) loss was $80.2 million in Q2 2020 compared to $39.7 million in Q1 2020. The decline in adjusted
EBITDA loss is primarily due to the quarter over quarter decrease
in revenue (including provisions), an increase in production costs
relating to the ramp up for the legalization of Cannabis 2.0, and
the increase in SG&A expenses. Developing a profitable cannabis
company in the near term is extremely important to Aurora. While
the Company strongly believes the global market opportunity for
cannabis is robust, there is uncertainty in the timing of revenue
ramp-up in our core markets. Therefore, the Company has taken
action to materially reduce SG&A expenses focused on achieving
positive adjusted EBITDA.
Outlook
Consistent with Aurora's release dated February 6, 2020; the Company is bullish on the
long-term potential for the global cannabis opportunity. However,
due to several short-term factors, there is likely to be a slower
than previously expected rate of industry growth in the near-term.
The Company has outlined a number of fiscally responsible steps it
has already taken to realign its business operations to this
expected industry growth rate. Aurora reiterates its outlook for
fiscal third quarter that cannabis revenue will be impacted by
previously mentioned industry headwinds, and as such will likely
show modest to no growth relative to fiscal Q2's cannabis revenue,
excluding provisions, of approximately $65
million.
Footnote:
|
|
(1)
|
This term is defined
in the "Cautionary Statement Regarding Certain Non-GAAP Performance
Measures" section of this MD&A. Refer to the "Adjusted EBITDA"
section for reconciliation to the IFRS equivalent.
|
Conference Call
Aurora will host a conference call today, February 13,
2020, to discuss these results. Michael Singer, Executive
Chairman and Interim Chief Executive Officer, and Glen Ibbott, Chief Financial Officer will host
the call starting at 8:00 a.m. Eastern time. A question and
answer session will follow management's presentation.
DATE:
|
Thursday, February
13th, 2020
|
TIME:
|
8:00 a.m. Eastern
Time | 6:00 a.m. Mountain Time
|
WEBCAST:
|
http://public.viavid.com/index.php?id=138107
|
REPLAY:
|
(844) 512-2921 or
(412) 317-6671
Available until 11:59 p.m. Eastern Time Thursday, February 27,
2020
|
|
PIN
NUMBER:
|
13699134
|
DATE:
|
Thursday, February
13th, 2020
|
About Aurora
Aurora is a global leader in the cannabis industry serving both
the medical and consumer markets. Headquartered in Edmonton, Alberta, Aurora is a pioneer in
global cannabis dedicated to helping people improve their lives.
The Company's presence spans 25 countries across 5 continents with
a brand portfolio that includes Aurora, Aurora Drift, San Rafael
'71, Daily Special, AltaVie, MedReleaf, CanniMed, Whistler, and
ROAR Sports. Providing customers with innovative, high-quality
cannabis and hemp products, Aurora's brands continue to break
through as industry leaders in the medical, performance, wellness
and recreational markets wherever they are launched. For more
information, please visit our website at www.auroramj.com.
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 and Non-IFRS Industry
Measures
This news release makes reference to certain non-IFRS measures,
including certain industry metrics. These metrics and measures are
not recognized measures under IFRS do not have meanings prescribed
under IFRS and are as a result unlikely to be comparable to similar
measures presented by other companies. These measures are provided
as information complimentary to those IFRS measures by providing a
further understanding of our operating results from the perspective
of management. As such, these measures should not be considered in
isolation or in lieu of review of our financial information
reported under IFRS. This news release uses non-IFRS measures
including "cannabis net revenue", "Adjusted EBITDA", "cannabis
inventory and biological assets", "cash cost to produce per gram
sold", "average net selling price", and "SG&A". The foregoing
are commonly used operating measures in the industry but may be
calculated differently compared to other companies in the industry.
These non-IFRS measures, including the industry measures, are used
to provide investors with supplementary measures of our operating
performance that may not otherwise be apparent when relying solely
on IFRS metrics. Definitions of the non-IFRS measures can be found
in our financial statements, MD&A and this news release.
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.
Neither TSX nor its Regulation Services Provider (as that term
is defined in the policies of Toronto Stock Exchange) accepts
responsibility for the adequacy or accuracy of this release.
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SOURCE Aurora Cannabis Inc.